Q4 2020 StoneCo Ltd Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by welcome to the standard company fourth quarter and fiscal year 2020 earnings Conference call.
Now everyone should have access to our earnings release. The company also posted a presentation to go along with its call all materials can be found at Www Dot stone Darko in a company in the Investor Relations section.
Throughout this conference call the company will be presenting though and I are a non I F. R. S financial information, including adjusted net income and adjusted free cash flow.
These are important financial measures for the company, but are not financial measures as defined by the I F. R. S.
Reconciliations of the company a non I got a forest financial information to the F. A R. S financial information appears in today's press release finally, before we begin our formal remarks I would like to remind everyone that today's discussion might include forward looking statements. These forward looking statements are not guaranteed a future performance and therefore, you should not put undue reliance on them.
These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the company's expectations. Please refer to the forward looking statements disclosure in the company's earnings press release.
In addition.
Many of the risks regarding the business are disclosed in the company's form 10, or 20-F filed with the Securities and Exchange Commission, which is available at D. A.
At Www Dot FCC Dot Gov. Please note that this event is being recorded.
I'd now like to turn the conference over to your host Rafael Martins Investor Relations Executive Officer at Stone. Please proceed sir.
Thank you operator, and good evening, everyone. Joining us here today, we have geography, our CEO Lia Matos, our CFO and Chief strategy Officer, and Marcelo <unk> our CFO.
Today, we will present, our operational and financial metrics for the fourth quarter and 2020 results I will pass it over to geography. So he can share with you. The main highlights of our performance jargon.
Thank you I'll hop IL and good evening, everyone. Thank you for joining US now a fourth quarter 'twenty 'twenty earnings call.
Before we dive into our 'twenty to 'twenty results I want to talk a little bit about a strategic direction and the moat of suncor.
As a client centric company, we are always trying to assess how we can help our a merchants to become better every day.
I believe our motors, a bulk empowering small and medium businesses to win for three important strategic steps two of which we are already executing well and a third one is becoming a new dream for das.
First we want to delight, our clients and gained a trust by offering a complete set of financial solutions from a world class technology and service, replacing their existing banking relationship and becoming the dominant financial provider of Smbs in Brazil, Our stone and Paganini teams are working hard.
To accomplish this goal every single day building, an amazing culture of talented people in client obsession.
Second we want to offer inked a price level workflow tools to empower our clients to better manage their business driving operational efficiency and connecting them to online channels. So they can sell more.
We started the second phase of the business almost two years ago, and we are happy to see great evolution of a routine towards this direction.
Investments, we made and the acquisition of links puts us in a unique strategic position to achieve this goal. We are working hard to make sure. The team achieved the same level of client satisfaction and disciplined execution, we were able to build installed in Fargo Army.
But that's a strategic step in this challenge we still have to tackle is to answer a very simple question, how can a drive more customers to our merchants how can we incentivize consumers to shop in our merchant base.
We can now start dreaming about asked me. This question and we know that day, it infrastructure user experience and technology integration between our businesses a key elements to make this happen.
Moving to a results 22, and he has been a near of Great achievement. Despite all the challenges imposed by the pandemic.
I believe we're balanced disciplined execution with important strategic steps continued to deliver a strong results. Our teams did a great job and today, we are bigger and much better than we were a year ago.
We continue to present strong profitable growth and long term value generation.
Moving on to the presentation I would like to start on page four with client based dynamics.
We have significantly scaled our client base in many fronts.
In payments, we posted on the fourth quarter a record quarterly net addition of clients and we keep increasing investments paving the way for a continued acceleration in 2021.
In fact, even with the negative impact brought by the Covid related Lockdowns, we reach at over 652000 active payments clients in 2000, 22.4 times 2018 levels.
On top of debt now without all almost 114000 clients in total our solution to micro merchants and we see very strong levels of growth in 'twenty or 'twenty one.
The number of clients with credit solutions grew to nearly 92000, almost four times 2019 figures and the numbers of open digital accounts surpassed 500008 fold. The number posted in 2019 with over 133000 clients using as the main set them.
And accounts.
Lastly, the number of software clients in our ecosystem grew to nearly 300 and a 90000 almost three times 2019 levels.
We have evolved with best in a convergence you're part of solutions in 2000 1910 per cent of our SMB acquiring clients using at least one other financial products offered by us.
At the end of 'twenty 'twenty debt number jumping to 34% with new cohorts presents even a higher numbers.
Besides that the percentage of clients using both on a software and payments solutions also increased from 22% from 2019 230 per cent in 'twenty Duane.
As Neal will discuss later in more detail. These trend is improving our unit economics on SMB clients, which is the reason why accelerating a client base is among our top priorities today.
We had a record addition of CP V and in a year, having added 81 billion of TPS in 'twenty 'twenty, a similar level to the total TPB processed in 2018.
In fact, the processed volume increased over 150% in just two years, despite COVID-19 impact in 2020.
While we are committed to fast growth and even though we are investing heavily in our business in 2020, our adjusted net income grew 12% with an adjusted net margin of 29%. Despite all COVID-19 related impact.
We have also reported our record adjusted free cash flow generation, which reached over 653 million in <unk> 'twenty 'twenty growth more than 57 per cent.
Finally, we were able to scale, while keeping a high customer service levels, achieving a first call resolution index of 94% and 91 per cent of the calls rated as excellent by our clients.
Total was created to provide the best in class service for its merchants.
Even with the business is growing fast and gaining scale with a additional solutions will never changed the commitment we have with pharma clients. We will work hard to keep providing the best customer experience our clients can get every single day.
With that said I would pass it over to Lisa to discuss our results in more detail Leah.
Thanks, Chad and good evening, everyone. Thanks for joining us today.
I want to give some highlights along our three main businesses Stone Park Army and our software business. Let me start first with the evolution of stone as shown on page five the business continues to accelerate and at the same time improve quality, we saw TPG growth in the hubs accelerate to 45% versus 40.
2% last quarter. Our hubs are also improving unit economics with higher TPG for clients than we had a year ago. Additionally, the productivity of the salespeople in the hubs reached its peak in the fourth quarter, while levels of churn reduced which helped the company achieved our highest ever net addition of clients in a single.
Quarter, almost 70000 clients.
We also want to highlight the continued evolution of our hubs performance as you can see on the graph on the bottom right, even our more mature hubs continue to present strong growth with number of clients continuously increasing while maintaining the number of salespeople per hub relatively flat since the beginning of 2018.
Moving on to page six we're happy to see the higher activation and engagement within our ADC platform. The graph on the left side of the page shows as a percentage of stone clients using an additional financial solution increased from 10% in 2019% to 34% in 2020 also the number.
A clients using at the same time payments banking and credit the so-called heavy users increased from nearly zero in 2000, 1912, a 5% of a famous client base in 2020.
As a graph in the middle of a page shows heavy users have a greatly improved the unit economics and our team continues to work hard to improve engagement. Our average revenue per client increases when they start to use additional features with heavy users reaching over two five times higher revenue than clients with payments only.
The growth and quality of unit economics in our SMB business have made us confident to double down on our investments in 2020 one to further accelerate growth and increase your penetration on a growing addressable market of over 120 billion hasn't revenue now.
Now on page seven we discuss the evolution of our financial product beyond payments.
As Trevor mentioned in the fourth quarter of 2020, we reached more than half a million open digital accounts with over 133000 clients already using stone as their main settlement accounts. We also saw the total accounts balance increased 92% and the TPG of prepaid cards jumped 52.
Per cent against the third quarter.
Our credit portfolio reached one 5 billion has distributed among nearly 90000 clients with a healthy monthly returns ranging from 2% a two five per cent, we continue to enhance our credit scoring model provisioning and collection tools, especially as we experience a second wave of Covid in Brazil with a.
Lockdowns being imposed in some areas for this reason we are being even more selective wild disbursed a new credit. We have also started to manage new metrics such as risk adjusted return and risk adjusted return net of funding costs. These metrics better a factor in the portfolio profitability as they essentially reflect the total.
IRR for a series of cash flows at a different time frames.
During this quarter, we took a first step towards limiting our risk exposure by raising approximately 500 million highs in the domestic market through a P. J a.
Additionally, we expect to raise more funding for the project throughout the year, allowing us to keep growing this product fast while further limiting our credit exposure.
In addition to the great F&B results, we have seen a significant evolution in our solution from micro merchants on page eight we show the phones client base has reached 114000 clients and our net addition of clients already represents approximately 16% of the organic net adds of a leading player in this.
Markets, we see unit economics, improving with healthy take rates and TPG per clients combined with lower client acquisition costs, a key variable to succeed in this segment. Besides following stone's DNA from keeps differentiating itself from the segments by providing superior client service the level of <unk>.
Service perceived by the clients reached 87% with an upward trend at the end of the year.
Just one year in some already shows promising trends and we expect even a more improvements as we accelerate our investments in this new venture in 2020, one even though our focus is to invest in growth acceleration. The strong unit economics, we have seen indicates that Don might achieve breakeven already in the end of 2021.
Still related to tone, we decided to expand the scope of our media agreement with group, a global which was exclusive to tone to the whole stone co group, which gives us flexibility in terms of media allocation, we executed the flip of Globus ownership in stone to the stone co level. So we know long 100 per cent of.
We believe this structure is better aligned to generate bigger returns on media capital allocation, let's now move to page nine to our Fintech as a service platform per army.
While plenty plenty, we have seen substantial evolution in pogany with fourth quarter CTV growing approximately 80% year on year Pagani revenues from small businesses accelerated reaching 94% year on year a growth in the fourth quarter with take rates considerably higher than what we see in a stone hub operations.
Theyre components, a predominant small business economics, we like and we want to share with you.
First every day, we see new digital native merchants being born second our small clients grow while using our solutions. So we have more tickets from the same clients over time and pagan me offering is still heavily concentrated in gateway payments and anti fraud solutions with still low prepayment penetration and <unk>.
Analogy to drive more revenue per client as we evolve to banking and credit solutions, which we expect to start still in 2020 one the small business operations of Pogo Army is what really drives earnings growth and we believe this is the biggest profit pool opportunity for programming going forward.
On the other hand in the fourth quarter, we faced headwinds in revenue growth in key accounts, driven mostly by impacts from lower take rate levels, which had significant influence from the reduction in the Brazilian CDI interest rate from 5% in the fourth quarter of <unk> 19 to one 9% in the fourth quarter, a 20 <unk>.
As prepayments pricing for key accounts is usually a link to CDI and a reduction of share of wallet in some of our a key account clients.
The decline in take rates a pug Army key accounts was a main driver of overall take rate reduction in the company. Looking ahead, we are shifting pogany key accounts operations from a commoditized based on price relationship to a customized based on margin approach.
We always said key accounts operations bring volatility in terms of TPG and revenue growth, but has a small impact on our profitability.
Now moving on to page 10, I want to talk about a software business. The number of clients using our software solutions has reached nearly 390000 at the end of 2020, almost three times 2019 numbers and annualized pro forma revenue has surpassed 200 million has as of the fourth quarter with a 55 per cent.
Organic year on year growth demonstrating the ability of those solutions to drive adoption and monetization we offer our clients D O S and ERP solutions in different verticals, such as retail food health leisure and beauty among others as well a solutions, which help our clients to better connect with their customers and sell more.
Despite not being able to talk too much about links acquisition as it is still pending antitrust approval, we see that a combination of our software initiative and links will create a leading player in workflow tools for retail, adding strategic vertical presence in enterprise solutions that help clients to increase sales.
By connecting them to digital channels, we see great opportunities to further penetrate financial solutions into <unk> client base by migrating clients from Lynx pay hub to our platform. So we can increase the value proposition to those clients.
We remain very excited with the opportunities and then we.
We firmly believe that the combination of the two businesses will accelerate stones goal of empowering Brazilian merchants by offering enterprise level workflow tools to help them better manage their businesses drive operational efficiency and connect to online channel. So they can sell more in growth.
More than our results in positive influence in our industry, we're very committed to our country and happy to support society through tough times.
We think that the best way to improve our country's productivity in the long term is to have good investment in basic education and employability initiatives.
Besides a regular supports a basic education like Alpha lumen, a nonprofit school focused in empower and gifted children from vulnerable and low income families. We have started piloting professional qualification training aimed at improving employability. Those are the two social impact initiatives in which we will be focusing our.
Pension going forward.
In addition in 2020, we have donated 50 million a eyes to the construction of a COVID-19 vaccine factory and the construction of a temporary hospital and huge any of them as well as 26 million hasn't subsidies to our clients in order to help them navigate the challenges imposed by the pandemic.
With that said I will pass it over to her file who will discuss our financial results in more detail Hopper.
Thanks, Leah starting on slides 11, and 12, you can see the evolution. After a number of active payment clients PPV and revenue for the fourth quarter and full year 2020, despite the COVID-19 impacts our payment client base grew by 35, 7% this year, reaching $652 6000 clients X.
<unk> Dong and our TPG grew by 60% in the fourth quarter, reaching a total TPB of almost 210 billion reais in the full year.
We have also surpassed 1 billion reais of quarterly revenue for the first time with a revenue growing by 28% year on year. Despite a challenged us from COVID-19, and a headwinds from a lower CDI interest rate.
A key accounts take rate.
Our consolidated take rate excluding thrown a voucher in the quarter was $1 64 per cent 12 basis points lower than a previous quarter.
The lower figure is mainly due to seasonal effects, mainly a higher proportion of debit over credit and effect from revenues, which are unrelated to TPB, including subscription and credit revenues, which have a negative impact on take rate in the fourth quarters due to a strong volume seasonality.
In 2019, we saw a similar behavior in the fourth quarter, which take rates going down 11 basis points when compared to the previous quarter.
When compared to the fourth quarter of 2019 take rate, excluding Corona a offshore volumes was 16 basis points lower.
This difference is mainly explained by the lower take rates of key accounts and plug Army, which we already explained previously.
Now, let's move to slides 13, and 14 to discuss our operating leverage and profitability.
In the fourth quarter of 'twenty, we have reached our highest historical adjusted net margin of 35, 7%, even with significant investments in our operations, which we will detail shortly.
In 2020, we saw a very peculiar dynamic with a COVID-19 impacts being strongly reflected especially into occasions first the financial expenses in the first quarter, when we decided to reinforce liquidity and second in our total costs and expenses in the second quarter when Lockdowns happens and we saw revenue growth a decelerating why.
We kept investing a new products and had a one off expenses related to a theme resizing in mid may.
After the first half of the year as you can see in the graph on page 13, we have regained operating leverage in our business. Our financial expenses also decreased as a percentage of revenue mainly due to lower base rates in Brazil.
This higher efficiency led our adjusted net margin to bounce back to pre COVID-19 levels in the second half of the year with a record quarterly adjusted net margin of a company in the fourth quarter.
Those factors above were partially offset by strong investments such as building our dawn operations hiring of technology team in different areas of the company, including plug Army and stone investments in customer service and logistics hiring a sales team software expansion and increasing marketing expenses.
Many of our investments appear in the form of opec's in our P&L and are already factored in our margins.
Now going over in more detail on each P&L line item on page 15, our cost of services reached $213 2 million or 21 three per cent, a total revenue and income in a quarter, increasing four nine percentage points when compared to last year.
This increase was mainly due to higher investment in our technology and customer service teams costs from our software solutions and higher transaction and deployment cost to support our operations.
When compared to the previous quarter cost of services as a percentage of revenue decreased one percentage point, primarily because of lower provisions and losses and lower deployment costs as a percentage of revenue at.
Administrative expenses were $122 5 million Reais or 12, 2%, a total revenue and income three percentage points higher than the prior year period, mostly due to higher third party services related to linked transaction and more expenses related to software solutions when compared to the third quarter of 2020.
Administrative expenses were 0.9 percentage points higher mostly due to the higher third party services, which were partially compensated by lower personnel expenses as a percentage of revenue.
Selling expenses were $139 9 million reais in a quarter or 14% a revenue broadly in line with a 13, 9% reported in the prior year period, despite higher investments in marketing, especially with Don.
Compared with a third quarter of 2020, we saw a one percentage point improvement mostly explained by lower personnel expenses as a percentage of revenue partially compensated by higher marketing investments.
Financial expenses were $64 2 million Reais, a decrease of 40% compared to the fourth quarter of 2019, mainly due to the lower CDI rates, which more than compensated the significantly higher volumes in the quarter.
Other operating expenses were $19 2 million reais in the fourth quarter of 2020, compared with $2 5 million Reais in the fourth quarter of 2019.
This difference is mainly related to donations, including a 10 million reais donations to support the construction of a factory for the prediction of COVID-19 vaccine higher share based compensation expenses, mostly related to the tax and social charges provisions in relation to the appreciation of our shares in a quarter and higher.
POS losses as a result of COVID-19 impact on F N B's.
Compared with a third quarter of 2020 other operating expenses were four four percentage points higher as a percentage of revenue explained by the same factors after a year over year comparison.
One thing that we would like to highlight is that in terms of social initiatives. We gave free extensions to our clients in an amount of 26 million Reais and we have donated a 15 million reais for the construction of a temporary or a hospital in a COVID-19 vaccine factory.
If we had adjusted the impact of those initiatives in our P&L, which we didn't our adjusted net income would be closer to 1 billion reais.
Finally, as shown on slide 16, we have been able to generate increasing adjusted free cash flow. Despite all the investments mentioned previously.
Also we have kept our diligence and capital allocation aiming at generating great returns.
Our adjusted free cash flow drew 86% in the fourth quarter compared to the fourth quarter of 19, two a $345 9 million reais, mainly due to higher net income and better working capital dynamics, reaching over $653 5 million reais in the full year.
Also during the year, we have spent 76 million reais and a repurchase of our own shares with an average price of $29 $65, which generate a very positive returns. Besides we have purchased $1 3 billion Reais in link shares in the open market at an average price of $36 five reais per share.
<unk>, which is below our offer approved in the shareholders' meeting.
Before I pass it over to Charles I would like to recall that during our IPO in 2018, we had two expectations over the medium term a total revenue and income growth above 40% with adjusted net margins between 30, and 35 per cent and even with a headwinds brought by the Covid pandemic, we are very proud of.
To say that we were able to exceed our expectations with revenues growing at a 45% CAGR in the last two years and adjusted net margins at 29% for the full year 2020, and 35, 7% in the fourth quarter, we expect to accelerate growth in 2021 now.
Now I would like to pass it over to geography. So he can wrap up our 2020 results.
Thanks Hopper before I talk about what we see it I had a bus I want to show on Slide 17, our assessment of what we did right and where we failed looking back at 2020.
We are very proud of so much shipments during the year force.
We experienced a solid team improvement, while keeping a strong culture one of our most valuable assets.
Also we saw grid evolution of strategy and execution of stone and plug the army with resorts pointing to an encouraging future prospect way beyond payments.
We were able to rapidly adapt to the new reality with Covid Lockdown as we kept a solid financial management of the company focusing on liquidity management and efficiency in operations and capital location brokerage, providing support to our clients seem and over a community.
We were able to balance strong growth and profitability at the same time.
Finally, we took a very important strategic step with the acquisition of links and the expansion of our ecosystem a software solutions and the moat of Suncorp.
More accretive than highlighting in the positive results is to understand our mistakes and where we failed. So we can learn and evolve.
To start we made a wrong decision regarding the level of resizing, the hubs and customer service operation as well as good a short toward investments to early in the first half of 2020.
Given the first both back of a client base. We can now say that it would have been better to hold overcapacity to serve better our clients into grow more rapidly during the second half of the year and given the results. We have seen in total we should have maintained investment during the first half.
In addition, we were slow in transition you are a key account strategy to a more customize a solution relationship we focus on margins. We kept a relationship based on a quieting price is longer than we should which is not a strategic to our future.
We were also was low in larger ABC platform in our all standards, we could have done faster.
Lastly, we believe that we could have a best in more initiatives for Digitization a retail in addition to the lease acquisition.
Now moving to slide 18, let me share some thoughts about what we expect for 2021 keeping in mind that my comments do not include any effect of links acquisition.
Waiting for regulatory approval.
Due to the improving unit economics from your C. We are aiming to accelerate on a net addition of clients and we expect to cross the Mark of 1 million clients in payments in 'twenty 'twenty. One excluding total we also expect strong growth rates in total on top of debt.
To support our growth, we will keep investing heavily in our operation, we expect to grow or a commercial and technology teams by at least 60% during the year continued to provide the best service of the industry why are we expand our product offering to more and more clients.
Also due to the increasing usage of additional projects for our clients take rates should go up throughout 2021, both a stone and plug army.
With that despite having larger scale, we expect a revenue growth to accelerate significantly from 'twenty to 'twenty levels due to the powerful combination of a bigger client base and increasing monetization per client.
Despite the heavy investments, we do not expect our adjusted net margin to be very different from what we saw in 'twenty 'twenty. We're always pursuing the long term value generation and we are investing to grow asbestos weekend. However, our business model allow us to generate strong operational leverage and even during times of massive investments we.
Back to observe a healthy margin.
We expect tax rates to be at similar levels as intuitive Duane.
To finalize the first part of our earnings call I would like to say that we were born at Wynn 12, with a clear purpose to help merchants to better manage their businesses and sell more by offering best in class services and products delivered by a talented team of hardworking people, who always put our class.
At the center of everything we do this is a commitment with all our stakeholders, our strong culture and client Centricity are the pillars that will support us in the exciting journey that we are just starting.
With that said operator, please open the call up to questions.
Thank you and we will now begin the question and answer session. If you'd like to ask a question. Please press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing a cute.
To withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble the roster.
And our first question will come from.
Thomas Peridot with BTG. Please go ahead.
Hi, good morning, everyone and thanks for the opportunity Firstly I would like to channel. If you could share how has been the two P. V. In this first quarter you usually give some color in the presentation, but this time, we didn't we didn't see anything so just trying to get a sense.
How you are looking at TPG take Creighton.
And the credit book in the in the first SKU.
And and also if you could give us a little bit more of a deal on one. These are revenue growth for 2021 can you you mentioned had a significant acceleration, but if you could change your bill is a.
A little bit what would be significant because revenues are growing at a 30, 30%.
40% this year and in 2019, we're growing much faster than that so do you expect a significant should be revenues doubling or a less than that or more than that if you could give us a bit more color.
It would be great. Thank you.
Hello, Thomas Juggled here speaking thank you for your questions. Let me start with the first question, which is about the first quarter dynamics. So I think that what I can say is that despite this new dynamics of restrictions that we have seen E. Commerce activities in March the company is performing well and we continue to make.
Grid investments in growth as we have said before a.
When you look to January and February we were pointing to growth acceleration both in top line and earnings mainly driven by the growth in client base and a take rate evolution.
We continue to have operating leverage it's due to this could you talk about March but from what we have learned a in the past we expect strong growth for 2020. One as we said so we are very confident in our business. When we think about revenue I would separate the conversation about threatening.
For a different parts. So first let's talk about the hubs as we have disclosed at the hubs is growing faster that we was first expecting at the beginning of the year, mainly because of two effects. We have the client base grow in fact fast and we have a new dynamics in terms of revenue per clients.
Because of the additional revenue that we have from a new products. So we are now disclosing more information about what we called heavy users and we expect the percentage of have user to grow over time. So we expect to continue to accelerate growth.
On the hubs when we talk about bug Army, there's basically two operations with two different dynamics you have the SMB and per gummy and you have the key accounts in the SMB basically we're growing at 94% rate that's for quarter and we expect to we expect to keep this level of growth for 2021 mainly because the market.
It's a big and every single day, you have more clients your claims grow with you.
Do you have the optionality to better manage risk operation to do more prepayments into branch graduate operations for those clients, which we still don't bring in a key accounts operation. There's a huge effect from the CDI because mainly the prepayments is index to the CDI. So that's why we saw some decrease but in the same way the cost of debt a prejudice.
Chris a too because our cost of funding has decreased so that's why we decided to.
Put more data for you to see the revenue adjusted by the cost of funding and in revenue I think that the pro forma revenue was growing but basically what we are more happy about is the organic growth. So I think that our initiatives in software is performing well and every day more we enhance our.
Management system to operate our software initiatives was the same level of discipline that we operate stone and plug army. So we're happy to see that in 2021 despite the trends that we can see now in March we really expect great levels of growth considerably bigger than what we have in 2020.
That we don't like to give too much guidance, but they can say that we are very.
Happy to see the level of growth that we expect for 'twenty to 'twenty one.
Yeah.
And Thomas Rafael here, a very much sure a high.
Hi, Thanks for the question just complementing what juggled just said a.
We gave a guidance of 1 million clients with represents a little over 50% increase compared to the client base of the end of this year 2020.
So a and of course as Jack said, we remain very excited with the revenue growth of a company for the full year and we see an acceleration within the year right. So I'd just like to add debt additional point to give more clarity.
Thank you.
Okay. Thank you very much.
And our next question will come from Tito <unk> with Goldman Sachs. Please go ahead.
Hi, Good evening, Thiago Lia and Rafael Thanks for the call a maybe following up a little bit on Tom's question on the revenue growth to think about I guess the T. P V.
So it was 10, 9%, excluding corona voucher, so given what you're saying so that should accelerate and should we think about that excluding the the corona a voucher is that the right way to think about it.
Yeah.
On the take rate, we see an upward trend I mean, do you think you're still below sort of pre COVID-19 levels.
When do you think you can well one can you get back to those pre COVID-19 level take rate and if so when do you think you would get back to that and then I guess last question just on the margin guide is that you're saying it's stable for the year is that a table for the full year of 2020, which was around 29% or stable with a fourth quarter.
That was at 35 per cent just to make sure I'm clear. Thank you.
Hi, Tito Rafael here. Thank you very much for the question. So regarding your first question of take rates, what we see as a when we look at our hubs operations. For example, we see an upward trend in the take rates there right and what we expect for 2021 is a continued expansion of revenue per client in the hubs.
So that of course has a positive effect in take rates and have been very direct to your question I think yes, we can reach the pre COVID-19 levels.
Take rate and surpass them actually a.
And what we see is a is an upward trend as we increase the percentage of have user have users. They are only 5% today of a payment client base, we usually see that take rate take rate going up a rig.
Regarding your second question, we mentioned for the full year. So it would be close to 30 per cent levels. We have seen a close to that in 2020, and we expect a very very strong growth in 2010, one we had a lot of investments and despite that a.
We do see a very very healthy margins and also we see a TPG growth accelerated.
Great Thanks, and just a.
Clarifying and a TPB growth accelerating debt that we should consider that 39% excluding corona voucher is accelerating from there.
Yes, that's correct.
Okay. So somewhere in a 40 plus percent range is reasonable.
Yeah.
Pardon me.
If we can move to next question operator. Please alright. Our next question will come from Brian <unk> Kumar with Evercore. Please go ahead.
Hi, Thanks for taking my question and it's good to see the a.
A record net adds in the quarter a.
Average spending per merchant that box doesn't only growing that only grew up.
Mid single digits in a corner and I'm just curious what was a driver of that and how could that look into 2020. One as you continue to add more smaller merchants.
Yeah.
Irina Thiago here speaking.
About your question, we have disclosed it on page five.
D expanding per merchant or the T. P V per client in the hub operation and basically the hub operations is focused on the SMB. So we don't have a wide difference in type of clients. So you were seeing debt. We now have a little bit bigger clients that we had before so its a 4% up keep EEV per client.
Why are we a growing fast or a client base, but this is basically only the smb's all D. C. P V and all the revenue that comes from Don is on top of that so it's a separate operation we manage it separately, yes. It has a a low expenditure per merchant, but has a bigger T.
They create dynamics when you see the per garden me operation than to spend the chip bergh climb a little bit TPG per client in the Smbs in part Jeremy did a considerably bigger than what you see in the stone and the take rates in the payment operations of plug Army has a bad in take rates. It's a bigger secret then do you have.
On the SMB operation in stone, so it's important to understand the dynamic of client base on those three separate operations. That's why we're increasing disclosure of both operation for everyone to understand the dynamic of client base in each one of those initiatives and on top of the dynamic of PPV.
<unk> per client in the hubs, we expect to have a better revenue per client in the hubs and what we have today because of the increasing solutions that we're offering to them today, we already have 20% of or a client base in a new a b C platform, we expect to increase the pace of migration of our client base.
And we're migrating the new process a failure to this new platform and we expect to have the launch of the registry a receivable in June and this is important because from that moment onwards, we will have the ability to offer a crowded and to offer prepayments.
Or the volumes based on the volume is that the clients process, maybe new either a.
Players and you can advanced a client base based on products that can not only payments based on the other projects. We have so that would be an important dynamic from 'twenty to 'twenty one.
That's very helpful and if I can slip two quick ones in there how could that take rate look if we do have a second round of Corona vouchers and secondly, if you can talk a little bit about the cadence for your net income margin for 2021 by quarter and then you know once a week what what is the timing.
For your sales force and technology investments that you expect to make a fear.
Hi, Irene a rafael here. So regarding your first question of Corona voucher volumes a.
It is difficult to estimate exactly but actually when we have the Corona Barker volume that take rates go down, but they are incremental to our margins and they add drops profit dollars rate. So we're usually when the volume from carnival share comes it its accretive to the company overall, despite you having a.
As molar take rate so if it happens that's why we have broken down in a in the results the volume off Corona viruses. So.
You can see a more the effect of take rates without the Corona voucher effect right now regarding your second part of the question. We don't see a lot of volatility in margins, we are already investing heavily.
At the beginning of the year and we will continue to invest along the year, usually you have a at the end of the year with a little higher margins due to more operating leverage in the fourth quarter, but not not big moves in the margins along the year.
Okay.
Thank you.
Thank you.
And our next question will come from Craig Maurer with Autonomous. Please go ahead.
Yeah, Hi, Thanks, and good evening.
I was hoping you could comment on the growth on the expansion of growth in the SMB credit business.
I know that you're moving to a net present value on accounting.
On a revenue stream.
And if you're moving if you were moving to accelerate originations through the year and youre going to NPV the revenue.
The revenue stream off of those loans.
We see a dramatic acceleration and financial income.
Financial revenue throughout the year.
Thanks.
Hi, Craig Rafael here, so a yet yeah, that's right the way we book the revenues the alright fair value as we have been disclosing a.
And it does have the disbursement effects. So basically when we have a disbursement we have the NPV of debt disbursement.
And when you look at debt the growth in our credit portfolio, you can pretty much calculate the NAV disbursements in the quarter. So.
And just remind that there's many clients that they have a rollover credits right. So we disbursed if the client pays down the loan they have additional disbursements overtime, so that that provides.
Some some.
Continuity to the credit revenue streams, despite a NPV calculation.
We see overall debt line.
Becoming more relevant as we add additional financial solutions in the SMB clients. So we expect a heavy users of SMB clients to increase over time, and we should see that revenue are going up.
Okay. Thanks.
Sorry, just Craig just to add some comments here a bulk to credit operations. So first we are not changing the way that we book dissipation. So we have exactly the same at the dollar since the beginning what we are doing here is that we are showing new operational metrics in order to help everyone to track dissipation So base.
It's a clear going forward, we will talk about the return the risk adjusted return because it shows the internal rate of return net of losses on the best way possible for the Halston imbalance and we're showing the risk adjusted return net of cost of funding for everyone to understand the internal rate of return.
Net of the funding process that we are undertaking now and we are showing the duration of the outstanding balance and we will show the outstanding balance and the outstanding balance net of the sales that we did to third party partners. So everybody will understand the size of the outstanding balance how much we have soaps risk adjusted return and Richard just a.
There was a net of cost of funding and the duration of the outstanding balance So I think that with these kpis.
Ever been can track the performance of our a credit solutions.
We are very.
A positive we're very happy to see the healthy level of returns and the growth of this balance I think it's a way that we are really helping our clients to have access to capital. So they can invest more in their operations to buy more goods.
To sell and at the same time it creates a positive take rate dynamics for the company.
The a b.
The duration on the loans is still roughly six to nine months correct.
Yes, the duration is eight months.
So okay. So.
The the balance that we see at the end of period actually underestimate the level of originations that are happening over the course of a full year correct.
Yes.
Okay. Thank you.
Thank you Craig.
And our next question will come from Mario Perry with Bank of America. Please go ahead.
A good evening everybody. Thank you for the opportunity to ask a question. Let me focus also on the the revenues and the take rates.
Yeah.
First question I have is when you talk about you know the take rate from the hub segment going up.
A part of this as you explained because you're adding new products, but if you can discuss a little bit the competitive dynamics in this segment. So if we were not you know if we're comparing apples to apples. What do you think is the evolution of your take rates on your hubs and my question is because right.
We're seeing we saw one of your competitors announced a.
Big move into the SMB segment also we note that a another competitor once the IPO later this year. So I was just wondering.
If we're going to see more competition in the us pressure on the take rate in the hub segment.
Second question related to the revenue was also if you you've disclosed here and thank you for that you'll take rates upon a two 2%.
And this seems to be lower than a year.
You're a competitor in the micro merchant segment.
In this for me seems.
A bit aggressive, especially considering that your T. P V is roughly a half.
Are you typically per clients here is roughly half a.
Of your main competitor. So if you can disclose a little bit above your current.
<unk> seen a strategy in this segment and finally also related to revenue.
On the credit segments here. Thank you for sharing ranked as one six to two 1%.
A return.
But I was wondering if rates in Brazil continued to go up.
A we've been talking about a number closer to 1.6, rather than a two point once a week if you could give us a sensitivity of your returns are.
If there's a leak rates continues to a goes up in Brazil.
<unk>.
Hello, Mauricio Thank you for the great questions juggle here.
So let me try to breakdown the answering pieces in here profile help me here, if I forget something so let's start on the dynamics of the hubs and the revenue per client and day, creating the hub.
So basically might a we don't see difference in terms of competitive environment on the SNB operations. He gets the same competitive environment is always what we saw if you compare the level of take rates on a payments only clients and if you compared 18 19 and 2020.
There was a small decrease in take rates on payments only clients basically because S. The basic rates in Brazil went down so prepayments rate went down a little bit this is a fix it.
Rates based type of operation was a competition has a the trend of bring a little bit down as the base rates, a Brazil was going down, but our than Amazon take races in the opposite direction. So our take rates are going up because of the penetration of additional products that we have so that's why we decided to disclose.
Through you in terms of a.
Unit economics, what's the take rate comparison, when you see payments plus banking and then the a b C have you is it a which is basically all the panamax or the banking activities in the credit activities in the payments clients.
That's the rationale why we continue to drive take rates up because the level of offering we bring to our clients with a complete products with one single client experience.
Debt, we can take that phone call three five seconds now we a saw 90 per cent of the problems in the first call that we received from our clients. We are close to the calendar inside of Brazil, We have a pre first logistics. This level of client satisfaction that you can give it is difficult to replicate so we can drive client base and take rate.
It's up at the same time, so we're not worried with the SMB operations do you think that all the trends are.
In a right direction.
When we talk about the micro merchant initiative stone actually a very happy to see unit economics, and when we see the LTV to CAC Rojo ratio.
We wore incentivize us to invest more and you can see debt. We already have now 48 8000 net adds in a quarter, we expect to increase this.
We have to we expect high growth level in tone in 2021 as we will keep investing more and more we have now positive unit economics and the unit economics in January and February are actually going up so we will invest more and I think that this level of take rates in <unk>.
TPG per clients. They may peak sales, we expect to increase a little bit over time, but for the solutions. We have now in the operation we have a secret it makes sense.
And we will continue to invest more in pes operations, but it's only a micro merchant initiative that I think that this is a key difference in the way that we disclosure that we disclose or a metric. So you have the pure SMB operations within stone with a clear value proposition for our clients and all the unit economics, there and you have.
Here, a clear value proposition to micro merchants with its own unit economics. So we can understand pretty much the dynamics of the business and we are very happy with the growth.
Talking about the credit operation I don't think that the main components in terms of <unk>.
Risk adjusted return net of course, a fund this is the base rate in Brazil, I think that the main component is our ability to keep npls low those are the main component is when we think about returns and we are increasing a credit scoring methodology, we increasing or a tech knowledge in terms of understanding data and drive.
Our credit offering for the best type of clients, we have in our in our client base. So we expect to keep this level of returns. We think there are a healthy level of returns and we don't see the base rates of but it is a impacting too much this level, what we have to be focused.
Here is to control npls, while we grow the outstanding client base. So we can keep a healthy operation and we keep selling the client base to third party investors exactly as we do with prepayments.
Okay, and a very clear channel.
So a bit as long as that you're offering a are they I know, it's only eight months, but are they fixed rates or are they variable rates.
They have fixed rates.
They have fixed rates, but your funding is variable rate a CDI plus 4% I think you showed that.
Yes, but the durations a small and we have a growth in the outstanding balance in the rate and the pace that you're seeing so we have pricing decisions every single day. So we can adjust pricing based on cost of funding in npls on a very fast pace.
Alright, perfect and then when you talk about a 1.6 to two 1%.
Can you give us the evolution of debt ratio. How he has been behaving like a was a closer to more like 1.6 and went up to 2.1 or a where you're closer to it.
Are we at the midpoint.
Hi, Mike.
Well, we haven't actually when we look at a the.
Evolution of the credit solution, we have learned a lot and improves a lot our our accuracy. So if we look at older cohorts, we were lower than that if we look at newer cohorts. We're a.
I'll have a closer to the top of the range. So that's why we put a range there because as a business is growing fast.
We might see that violate a bit but what I can tell a is that we are improving.
The learnings that we have and we are getting better in a more accurate in the credit scoring.
Okay. Mario Thank you very much of a dish yeah might've just one additional comment I would say that we are using a range is because when you have this COVID-19 scenario that we have here in Brazil, and it seems that youre seeing its very difficult to be precise in our expectation in the short to medium term, but I would say that a round two.
Percent's a risk adjusted return net of cost of funding is a very healthy level.
And we expect to really increase the client base as we increase our ability to sell a dis.
These are outstanding balance to third party investors. So we just did the first movement in the fourth quarter. We are now in the process of getting a new rounds.
Between first quarter and a second quarter. This year. So we expect to see a big increase in the credit outstanding.
Our credit outstanding balance given the client base we have.
Right now it was very clear thank you very much.
Thank you might've been a next.
And our next question will come from Jeff Cantwell with Guggenheim Securities. Please go ahead.
Hey, Thank you and appreciate all the detail you would give us a new prepared remarks.
As you were talking about the revenue per harp volume.
Did you really seem to be working I was focusing on slide six and there were a couple of things there that stood out.
The 34 per cent of SMB clients are now using more than one financial solution and a five three per cent of Smbs are now a heavy users and a unit economics are clearly expecting so can you talk some more about that I know you had been but the reason I ask is because it looks like a massive revenue pool and you're about 3% penetrated at this point. So it appears like there's a lot of work you can continue.
To do that and keep driving more products into your client base.
And then maybe related to that.
Just curious what you think a non COVID-19.
A truly post pandemic year might look like maybe thinking further out it just seems to me like.
Some of your payment clients might be may be holding back on some of your own investments given all this macro uncertainty.
Just hoping you can just kind a give us your thoughts thinking a little further out in terms of how revenue per client can trend from here. Thanks.
Yeah.
Yeah.
Hello, Jeff Chuckled here speaking.
So Jeff I think to comment on the dynamics of the hubs.
Let me say this when we when we've begun a operation we were specializing in finding the right customers and getting search with the honor of debt.
Of that merchant to do the sales process of a payment solution.
And delivered the best in class surface that we could build here in Brazil, and we earned the trust of debt clients, who took a book of additional solutions than we built from the ground up the banking operation and the credit operations.
And we started to sell both banking and credit on separate as a news for our clients, we became confidence in our ability to really replace the existing relationship that they have with incumbent banks and we decided to create a new platform, which we just launched which is a D. A b C platform and through debt platform.
It's basically a matter of activating new products for the same clients. So we are increasing the conversion C O for a solutions because basically now we can sell to our clients based on payment all based on the banking activities and we can upsell payments and credit for that same client and we're seeing that the level of <unk>.
Gauge them enough declines going up and we just disclosing the number of clients did now saddled transactions from payments.
A related matters directly into into our a bank accounts.
So that's what's driving really the revenue per client up and yes, there's a massive revenue opportunity for us to address why we keep improving our ability to have heavy users inside of our client base. So the goal is to have a.
A massive part of where a client bases have users and we really want to replace the existing relationships that they have with incumbent banks.
If it wasn't for the Covid, yes, I think that the revenue per clients would be a little bit bigger than what you see here, but let me tell you that we're very happy to see the trends in take rates in the hubs and we will continue to invest on two fronts. We want a grower client base as fast as we can and at the same time, we'll keep.
Investing to upsell solutions into actavis clients into banking and credit.
Yeah, do you want to add to it.
Just if I can just complement a what chagal mentioned I think there's a.
Two a very important trend to highlight here I think number one as we continue to migrate onto the a b C platform and this is something that we are advancing quickly now out in 2020, one a 100% of new sales already happening onto that platform. What it means is that a client may initially.
Aside to use only acquiring solution and for example, a banking domiciled like travel mentioned a saddling the receivables from acquiring into this phone accounts that may be the first step right. But then over time this client that will activate more and more features and because.
All new on boardings are already happening onto the platform. This becomes a very strong avenue of growth.
In terms of selling more and beyond payments solutions, right and I think mentioned and I wanted to just mention one aspect of this you're a question related to the Covid dynamics of our merchants I think there was one there's one behavior that happened last year when the crisis hit for the first time that we did see this mortality rates right and then when you.
You look at the evolution of our growth you will see that impact and that happened when the crisis hit at that time.
There was a.
Clients the merchants, but we see and that are active today are those merchants that were resilient and debt overcame. This crisis moment. So we expect that the level of that same impact to be much much smaller the merchants that are active that are active now a much more resilient as an effect of what happened and I think that's a a third.
Horton comment is we see a very important trend in in consumers a.
By moral line. So we're seeing a very we're very positive and we're very excited about the opportunities and continuing to grow small client base within total army and just wanted to make those highlights because I think they're very important.
Leah just one more comment.
Alright, so Jeff just one more one more common tier one dynamic, which you will be very important to see here is the registry of receivables because our credit product is based on data. So in order to offer a credit to our clients who have to see usage.
In a data for a certain period of time and then we are inclined to do is to give credits based on a the.
The level of information, we have in debt steady flows of payments right, but once you have the registry receivable and who have the open banking a infrastructure of Central Bank. Evolving then you can access information if you're a client give you to give credit based on what they have in terms of.
Volume indifferent.
Payment methods electronic payment methods and with the Lockwood receivable, we can replicate the same risk type of operations that you have from premium clients. A we expect to increase our ability to offer credit from the same level of risk that we offered to day tour, a client base and that should be very accretive for us in the other.
Hand, another first to do this we have to increase our ability to sell the credit outstanding balance because we don't want a cure we do on a carry too much risk in our balance sheet. So that's why we are executing on those two fronts to have more axis of data from our clients in the register a receivable in open banking for a six or help on that front and in.
The other hands to sell the client the credit outstanding balance to the market to get funding to keep growing.
Balance that we have.
That makes perfect sense. Thank you for all the color I appreciate it.
Thank you very much Jeff.
And our next question will come from Victor <unk> with Bradesco BBA. Please go ahead.
Where do you think everyone a.
So thank you for taking my question.
So I have only one simple question here, it's about the NPS in the past you guys brought to US a lot of information about the quality of customer service, bringing some data about the NPS, a stone and how good it was trending and.
In the last few quarters, we havent been seen anymore. The NPS figures. So I just wanted to check with you guys. If you plan to to bring us again.
From the reasons why not disclose the NPS because it was a in.
In order of a few one important part of the.
The investment case, right, having a better or above yours a custom.
<unk> service that we still believe that you guys have but because of that we just wanted to double check why not disclosing anymore.
NPS figures, thanks a lot.
Hi, a shadow thank very much for a question a good question no worse in terms of NPS, we are always increasing the level of disclosure to make everyone understand a more the dynamics of the business. We are disclosing here the first quarter resolution rate and the level of service. They continue the same and actually we are now answering our clients.
<unk> needs faster than we were before so the average a waiting time on customer service was in the past around five to 676 seconds and generally in February a debt decreased to 435.
Seconds and actually we are now adding more self service.
Type of relationship through the new platform for our clients. So no worry regarding npls I think that as we said before our commitment towards client satisfaction, our commitment towards serving the smbs in Brazil is the biggest commitment we have a keep focusing on that and I think that the level of service that we offer to our clients can.
<unk> to be the same and we expect to have even happier clients. When we have more products to them. So no worries regarding NPS.
Okay. Thank you guys.
And our next question will come from Jamie Friedman with Susquehanna. Please go ahead.
Hi.
Thank you for taking my question a layer in your prepared remarks, you mentioned.
That you're buying in consolidating the Globo partnership I was just wondering with the.
Logic was in consolidated net now and.
If theres any financial implications that we should consider when we're we're trying to model that Raphael.
Yeah, I think a thank you for the question a the logic. We explained is a we think that there's we will have much better return on this media allocation. If we can look at the scope of this beyond just stone I think theres a lot of value to be created a.
If we think more broadly within <unk> and.
Within the group within stone within tone within Pug Army. So that's a very important.
A reason and rationale for for this move I think class eight you want to comment on a modeling.
Yeah, Leo look can I add some comments here Thiago speaking.
Great question. So I think the first I would like to say that when we see the growth a stone the improvement in unit economics that we have a very happy day now we own a 100 per cent of the business and we can bring more seen there just do a operation a stone and storm. So I think that debt was a very good movement. It is accretive deal and a.
We are happy with debt and the second is debt does Lia said the main rationale here is to maximize return in capital location in media by extending this relationship to a stone cool we can use debt partnership for all the brands both a stone so Ann.
And plug army. So the way that we can manage investment through different channels, I think that maximize value for stone maximize value for a tone and for Sean could you and as well maximize a.
Value for Grupo Global So we just flip up the shares in a.
Market a transaction and we're very happy day now we can bring more synergies between don't install with tone being a product of stone.
And we can allocate capital a media with better returns those are the two rationales.
James We're all clear on a year just complementing debt the yeah to your question. So we already consolidated zone right. So you don't see any back there in top line you will see a different a noncontrolling interest in our net income as you don't have the minority stake there.
And as we mentioned in a release you will see that debt. We issued one 3 million shares for that transaction, so that should increase a little bit hour hour and a number of basic and diluted shares.
Got it perfect I'll drop back into the queue. Thank you very much.
Thank you.
And our next question will come from Niihau Agarwalla with HSBC. Please go ahead.
Good evening, everyone and thank you for taking my question a Duke.
Two quick questions first on credit book.
You mentioned that you're going to a broader credit book very strongly this year. So what is your comfort level that.
Yeah currently at one 5 billion.
Could you Devin.
A size of the loan book and play in 'twenty one.
Oh, sorry, it's a new client I'll go a everything looks from the credit a book goes to your financial income what.
Would it be possible kept down yeah. It's.
Financial income into what is from prepayments and a lot of from a cabinet operation. So that a we have a better view of holiday is that a bargain.
My second question is on a on Costco.
You will continue to do.
Walking a business by hiring more people.
It was more from the good.
Can you give them a person that already accounted for in your Opex in the fourth quarter should we expect a bigger part of them to be down from 41, and a would you do a I also looking to open more hub during.
During the quarter.
Thank you so much.
Thanks, Nina Rafael here, so regarding your first part of a question.
We still see opportunity to increase multiple times the credit portfolio rate as we have mentioned previously so despite being conservative in a in.
In the credit disbursements, we think that there's a huge potential here and we still see a big potential to increase a.
That debt portfolio multiple times so.
And in terms of revenue, we our financial income it's around 50% of a revenue when you look in our P&L.
We don't break down debt the numbers theyre in credit and other types of financial income, especially because we manage the relationship with clients and an LTV basis as we have mentioned in the past with a M D R's and prepayments so.
It's really a it's being accretive for revenue we are managing this a on.
On a combined basis take rates in LTV, and we should see that revenue.
Increasing over time, so when you look a despite that when you look a year over year debt transaction revenue grew even faster than the financial income. So the business continues to grow overall, it's not sort of dependent on that or that revenue to grow.
And regarding your third part of the question of the cost as we mentioned in a release, we expect to increase our sales force and technology team by at least 60%. This year. So a huge and we have already started a hiring.
Higher <unk> in the first quarter, we are investing since the beginning of the year, we have learned in the past a.
Debt, we have to invest so we can accelerate along a year and that's what we are doing so a I would say that.
But the costs should should should increase as our investments a bill within the year, so not a specific quarter debt, we invest more or less.
Have a canada momentum new hubs.
Yes, Neal Hot Thiago here speaking thank you for the great questions. Yes, we will continue to grow a hub operation both by having new locations in a by creating density in the locations. We are in in terms of the the the way, we think about a strategy and pricing.
We will always look to revenues per clients. So we are increasing revenue per clients on a hub operation, but the way that we manage our solutions in tumors of monthly subscription M. D ours the level of prepayments, we use and the level of credit us with two different price.
<unk> in two different operations. He has the margins in the credit products are a little bit bigger than the prepayments, but you have to manage in a way debt. It's best for your clients. So you have to see segments size location. It's deferred so what we are doing is from maximizing pricing strategy in a way that we can.
Drive more revenue per client without diminished NPS. So if you try to push too much take rates you can have an impact on NPS and the perception of the clients. So I think that we are being very assertive in the way that we decide pricing based on many metrics that we decide one once we made.
The onboarding of the client so was our site sales people put all the data of the clients with dinner a app within 35 seconds and 40 seconds, we have to come back with a price based on the Kpis that you're seeing in the upsell that we'd do a projects are based on the data and activation of the prop.
<unk>, we have so the goal is to maximize revenue revenue per client in a way that the clients use it as the best way for them not to hurt the perception of service not too hard T. N P. S.
Thank you so much.
Thank you Neil.
And our next question will come from geared a grasp on with J P. Morgan. Please go ahead.
Hey, good evening, everyone. Thanks for opening for questions.
Just two on my side first just a refresh meals and peaks we have been a foremost life on the initiative.
From the data from a central bank.
It seems the detraction on people to motion.
Is low, but I want to confirm a few how how the initiative has been back a few stone.
And yet you're a refreshed views each if you believe this is a risk either to the positive or to the negative in the short term.
And just a second question on stock based compensation.
If you believe it's fair to assume that this quarter. This 40 to 50 million level per quarter.
As a reasonable in 2021.
Given a degrees a little BP and the net.
Intellectual to required us thank you.
Hi, Glenn a rafael here, so I will start answering your second part of the question. So a G.
Just to highlight that in this quarter, we had some effect of share a mark to market of our shares so when when they our shares increase you have the taxes related to share based compensation, we have to mark them to market. So you have a significant effect that this quarter.
And going forward. So that's why going forward, we expect a little last net.
But of course, we do expect a new brands and a share based compensation to be there, but we had that one.
One off effect in the fourth quarter.
<unk> chuckled here speaking just adding some comments when we think a per share based compensation remember debt before our IPO, we have reserved a pool.
To incentivize our partner here in the company and we're still using debt pool that we have reserved pre IPO and we used to have space to incentivize a young talents in the company's flow sync that we are doing well on that front and that's why we are just that we said prior to our <unk>.
IPO and you continue to show all the adjustments on a separate note. So once we have the the day needs two to provide a more share based compensation that we have previously a separated from the IPO. Then we will not debt just you will see debt in the P&L was a regular expense.
Right. So that's what we have disclosed it before we continue with the same trends and we have the same strategic direction that we said before the biggest change a figure four quarters.
Oh, how flow said is a both a mark to market in the text part of the share based compensation.
In terms of peaks and that's a very great question with Poc's that pyxis too not relevant yet in the payment methods in our merchant base. So we see the peaks is gaining traction in terms of replacing wire transfer with when you compare peaks as a payment method from consumers to merchants in our operation It is too.
A very mall is still 0.1% of the debit volume, but we see net decrease of peaks actually better than the net take rates of the debit transaction. So we still have to see.
The information that it can sell use debt by today, if you compare the volume of peaks to the volume a debit transaction.
So a 0.1% nor a client base.
Super clear thank you.
Thank you very much gilead.
And once again, if you'd like to ask a question. Please press Star then one our next question will come from Marco Calvi with Ito BBA. Please go ahead.
Hi, Good evening, everyone. Just a quick question from my end it was clear during the call day negative effect revenue associated with the company focusing more on it's more of a client's impact got it.
Therefore from my understanding revenues being a prepayments.
From key accounts dropped materially.
That being said how does that reconcile with the TPG growth in the quarter of course, it was a very positive figure, but the growth rates was a slightly below on a yearly basis compared to what we saw in the third quarter. So fair to say that from a client segmentation standpoint.
This lowered growth.
He came from key accounts and if so what is the rationale behind it.
Hi, Mark with Jaguar here speaking, let me try to answer your question, let's focus on the Progamete operations. So we gave you some information here in order for you to reconsider the dynamics. So the overall CPD per gummy grew 80%.
On a year by year comparison in the fourth quarter and you can see that on a revenue perspective, the small business operation grew 94% why are the key accounts revenue decreased 10%, mainly because of the <unk> impact. If you were just a Cta impact then you see almost day margin of the key accounts.
<unk> increased by 36% in the quarter, bringing the overall growth of programming net of cost of funding at 46%. So you can see that he has the growth in terms of CTV. In this small business are considerably higher than the growth of CTV in the key accounts and what we are changed.
The way that we address key accounts needs here is that we don't want to have more of those type of relationship based on payments only where clients are creating competition in BT for a five different players at the same time for a commodity type of payment relationship really want a deep relationship based on the.
Weighty, our ability to have better conversion rates, our ability to provide chargeback disputes. The fraud prevention. We are now moving our banking as a service operation for simple for a key accounts. So we have customized it relationship based on revenue and not only based on volume, but he has.
There's there was a decrease in terms of growth in the key accounts of per gummy, but that key accounts operation brings volatility to top line. When you have top line adjusted by the cost of funds decreased a lot the level of volatility, but there is no impact to the overall earnings of the company. That's why we decided.
To increase the level of disclosure.
So how healthy the operations in stone SMB and in total micro merchant the digital a small pieces of pork army in the software operation and a show exactly the dynamics and the volatility that the key accounts brought in the program. Your operations and you can see the difference in take rates of both.
The small businesses and a key accounts compare to the average hub debt I think that people know better. So I think that with this level of disclosure you can understand more dynamic way.
And do you have more share of wallet of some clients, who have coronavirus volume dynamic changed right. So because of this type of volatility we decided to increase disclosure so everybody can understand the trends.
Great.
Clear thank you.
Thank you very much muscle.
And this will conclude our question and answer session I would like to turn the conference back over to your host today for any closing remarks.
Hi, everyone Thiago here.
Would just like to say a big thank you for all our shareholders and to support to give us to us and a big Thank Q2 or a team that has provided an amazing work this quarter and let's continue to work every single day more towards our clients and see you next quarter. Thank you everyone Bye bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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