Q2 2024 StoneCo Ltd Earnings Call

Speaker Change: Good evening, everyone. Thank you for standing by. Welcome to StoneCo's second quarter 2024 earnings conference call.

Operator: Welcome to StoneCo, Second Quarter, 2024, Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Throughout this conference call, the company will be presenting non-IFRS financial information, including adjusted net income and adjusted net cash. These are important financial measures for the company, but are not financial measures as defined by IFRS. Reconciliation of the company's non-IFRS financial information to the IFRS financial information appears in today's press release.

Speaker Change: By now, everyone should have access to our earnings release.

Speaker Change: The company also posted a presentation to go along with its call. All material can be found online at Investors.Stone.Co.

Speaker Change: Throughout this conference call, the company will be presenting non-IFRS financial information, including adjusted net income and adjusted net cash.

Speaker Change: These are important financial measures for the company, but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information appear in today's press release.

Operator: Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion may include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause results to differ materially from the company's expectations. Please refer to the forward-looking statements disclosure in the company's earnings press release.

Unknown Executive: Reconciliation of the company's non IFRS financial information to the IFRS financial information appeared in today's press release. [inaudible] Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion may include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause results to differ materially from the company's expectations.

Speaker Change: Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion may include forward-looking statements. These forward-looking statements are not guaranteed the future performance, and therefore, you should not put undue reliance on them.

Speaker Change: These statements are subject to numerous risks and uncertainties that could cause results to differ materially from the company's expectations. Please refer to the forward-looking statements disclosure in the company's earnings press release.

Unknown Executive: 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 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov.

Operator: In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov.

Speaker Change: In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov.

Roberta Noronha: I would now like to turn the conference over to your host, Roberta Noroya, Head of Investor Relations at StoneCo. Please proceed.

Roberta Noronha: I would now like to turn the conference over to your host, Roberta Noronha, Head of Investor Relations at StoneCo. Please proceed. Thank you, operators, and good evening, everyone. Joining me today at the call is our CEO, Pedro Zinner, our Chief Financial and Investment Relations Officer, Mateus Cher, and our Chief Strategy and Marketing Officer, Riema. Today, we will present our second quarter, 2022 results and provide an updated outlook for our business. I will now pass it over to Pedro so he can share some highlights of our performance. Pedro.

Speaker Change: I would now like to turn the conference over to your host, Roberta Noronha, Head of Investor Relations at Stone Co. Please proceed.

Roberta Noronha: Thank you, operator, and good evening, everyone.

Roberta Noronha: Thank you, Operator, and good evening, everyone. Joining me today on the call is our CEO, Pedro Zinner, our Chief Financial and Investment Relations Officer, Mateus Schwering, and our Chief Strategy and Marketing Officer, Lia Matos.

Roberta Noronha: Joining me today on the call is our CEO, Pedro Vina; our Chief Financial and Investor Relations Officer, Mattel Cher; and our Chief Strategy and Marketing Officer, Liam Arthur. Today, we will present our second quarter of 2024 results and provide an updated outlook for our business.

Speaker Change: Today, we will present our second quarter 2024 results and provide an updated outlook for our business. I will now pass it over to Pedro so he can share some highlights of our performance. Pedro.

Roberta Noronha: I will now pass it over to Pedro so he can share some highlights of our performance.

Pedro Vina: Pedro? Thank you, Roberta, and good evening, everyone. After reviewing our second quarter results and our performance at mid-year, I am pleased with our progress across our strategic priorities and believe we are all scheduled to meet our 2024 goals. In payments, we continue to win in the MS&D market and take more market share. Our client base grew 30% year-over-year, TPPV grew 25%, and card TPPV increased over 17%. We are also executing on our pricing and funding strategies to enhance climate and aging, as we discuss during our investor days. As a result, our MS&D take rates also continue to expand, increasing 7 basis points year-over-year to reach 2.54%.

Pedro Zinner: Thank you, Roberta, and good evening, everyone. After reviewing our second quarter results and our performance at mid-year, I am pleased with our progress across our strategic priorities and believe we are on schedule to meet our 2024 goal. In payments, we continue to win in the MS&D market and take more market share. Our client base grew 30% year over year, TPV grew 25%, and car TPV increased over 70%. We are also executing on our pricing and bundling strategies to enhance client engagement, as we discussed during our investment day. As a result, our MS&B stake rates also continue to expand, increasing seven basis points year over year to reach 2.54%.

Pedro: Thank you, Roberta, and good evening, everyone.

Pedro Zinner: We believe these strong results arrived from our competitive advantages in distribution, superior service, and our growing ability to provide more comprehensive solutions to our clients. In banking, we are making similar progress. [inaudible] Our client base grew 62% year-over-year and client deposits increased 65% as our team continues to cross-sell effectively. We now have 2.7 million active banking clients and 6.5 billion reais in deposits, which are approaching our 2024 target. We have also started to pilot interest bearing products such as time deposits, which I believe is being well received by our clients and could be an exciting new area for us. In credit, we're also evolving well towards our goals, even above Pythagoras. Our total credit portfolio increased 32% quarter over quarter to reach $712.5 million.

Pedro Zinner: After reviewing our second-quarter results and our performance at mid-year, I am pleased with our progress across our strategic priorities and believe we are on schedule to meet our 2024 goals.

Pedro Zinner: In payments, we continue to win in the MS&B market and take more market share.

Pedro Zinner: Our client base grew 30% year-over-year, TPV grew 25%, and CARB-TPV increased over 17%.

Pedro Zinner: We are also executing on our pricing and bundling strategies to enhance client engagement, as we discussed during our investor day.

Pedro Zinner: As a result, our MS&D take rates also continue to expand, increasing seven basis points year-over-year to reach 2.54%.

Pedro Vina: We believe these strong results arrive from our competitive advantages in distribution, superior service, and our growing ability to provide more comprehensive solutions to our clients.

Pedro Zinner: We believe these strong results arrive from our competitive advantages in distribution, superior service, and our growing ability to provide more comprehensive solutions to our clients.

Pedro Vina: In banking, we are making similar products. Our client base grew 62% year over year, and client deposits increased 65% as our team continues to cross-sell effectively. We now have 2.7 million active banking clients and 6.5 billion reais in deposits, which are approaching our 2024 targets. We have also started to pilot interest-varying projects, such as signed deposits, which I believe is being well received by our clients and could be an exciting new area for us. In credit, we're also evolving well towards our goals, even above set targets. Our total credit portfolio increased 32% part of over quarter to reach 712 million reais.

Pedro Zinner: In banking, we are making similar progress.

Pedro Zinner: Our client base grew 62% year-over-year, and client deposits increased 65% as our team continues to cross-sell effectively.

Pedro Zinner: We now have 2.7 million active banking clients and R$6.5 billion in deposits, which are approaching our 2024 targets.

Pedro Zinner: We have also started to pilot interest-bearing products, such as time deposits, which I believe is being well-received by our clients and could be an exciting new area for us.

Pedro Zinner: In credit, we're also evolving well towards our goals, even above set targets.

Pedro Zinner: Our total credit portfolio increased 32% quarter-over-quarter to reach 712 million reais.

Pedro Vina: Within that, our working capital portfolio grew over 28%, reaching 682 million reais this far. With strong qualities as shown with our NPL over 90 days, still at 2.6%, very much in line with our expectations.

Pedro Zinner: Within that, our working capital portfolio grew over 28%, reaching 682 million reais this quarter, with strong quality as shown with our NPL over 90 days still at 2.6%. Very much in line with our expectations. I'm also excited with some new initiatives underway, of a specialized credit desk, which is focused on addressing the opportunity within our larger SMB client base successfully completed its first disbursement this past quarter. And we finalized the structuring of our Giro Passo project. This is a short-term home address solution designed to address the immediate capital needs of our clients, which is set to launch in the third part. You know, I was so forbid.

Pedro Zinner: Within that, our working capital portfolio grew over 28 percent.

Speaker Change: Reaching 682 million reais this quarter, with strong quality, as shown with our NPL over 90 days, still at 2.6%, very much in line with our expectations.

Pedro Vina: I'm also excited with some new initiatives underway. Our specialized credit desk, which is focused on addressing the opportunity within our larger S&B client base, successfully completed its first disbursement this best quarter. We finalize the structuring of our GILP passive product. This is a short term overdressed solution designed to address the immediate capital needs of our clients, which is set to launch in the third part.

Speaker Change: I'm also excited with some new initiatives underway.

Speaker Change: Our Specialized Present Desk

Speaker Change: which is focused on addressing the opportunity within our larger SMB client base successfully completed its first disbursement this past quarter.

Speaker Change: And we finalized the structuring of our Giro Passu product. This is a short-term home address solution designed to address the immediate capital needs of our clients, which is set to launch in the third quarter.

Pedro Vina: In our software business, we are making progress on our cross-cell initiatives, and we are improving the quality meets of our business towards more recurring revenues. Total software and vertical software revenues both remain modest, but we see underlying signs of improving. For example, we are getting better cross-cell traction in our gas stations and retail verticals, and regenerated stronger cost-DPV growth from our software clients in priority verticals than our overall MF&D cost-DPV growth rate. We still have a lot of work to do in our software business over the long term, as I have mentioned, but I'm seeing some encouraging trends from our efforts.

Speaker Change: In our software business, we are making progress on our cross-sell initiatives.

Pedro Zinner: We're making progress on our cross-sell initiative, and we are improving the quality needs of our business towards more recurring revenue. However, total software and vertical software revenue growth remain modest. What we see underline signs of includes

Speaker Change: and we are improving the quality needs of our business towards more recurring revenues.

Speaker Change: Total software and vertical software revenue growth remain modest, but we are seeing underlying signs of improvement.

Pedro Zinner: For example, we're getting better cross-cell traction in our gas station and retail work. [inaudible] And we generated stronger CAR TPV growth from our software clients in priority verticals than our overall MS&D CAR TPV growth rate. We still have a lot of work to do in our software business over the long term, as I have mentioned, but I'm seeing some encouraging trends from our efforts. We have also maintained our focus on efficiency gains in the streamlining of administrative expenses, which decreased by 30% year-over-year.

Speaker Change: For example, we are getting better cross-cell traction in our gas station and retail verticals.

Speaker Change: And we generated stronger Card TPV growth from our software clients in priority verticals than our overall MS&B Card TPV growth rate.

Speaker Change: We still have a lot of work to do in our software business over the long term, as I have mentioned, but I'm seeing some encouraging trends from our efforts.

Pedro Vina: We have also maintained our focus on efficiency gains in the streamlining of what the administrative expense, which decreased by 30% year over year. In the quarter, we achieved the 180-based point reduction in administrative expenses as a percentage of revenues when compared to the second part of 2023. As a result of this positive developments, our adjusted basic EPS demonstrated strong growth, reaching 1.61 high. As I mentioned earlier, we remain committed to our business plan and the targets established during our yesterday. In light of this committing and considering short-term market situations, we are located capital to re-burches an additional 9.67 million shares, totaling 724 million highs, bringing us closer to completing the one billion highs share re-burched program announced in November 2023.

Speaker Change: We have also maintained our focus on efficiency gains in the streamlining of administrative expenses, which decreased by 13% year-over-year.

Pedro Zinner: In the quarter, we achieved a 180 base point reduction in administrative expenses as a percentage of revenues when compared to the second quarter of 2023. As a result of this positive development, our adjusted basic EPS demonstrated strong growth. Richie, 1.61 [inaudible] As I mentioned earlier, we remain committed to our business plan and the targets established during our invest day. In light of this committee and considering short-term market situations, we allocated capital to repurchase an additional 9.67 million shares. 13-724 meter high, bringing us closer to completing the one billion reais share repurchase program announced in November 2023.

Speaker Change: In the quarter we achieved a 180 base point reduction in administrative expenses as a percentage of revenues when compared to the second quarter of 2023.

Speaker Change: As a result of these positive developments, our Adjusted Basis EPS demonstrated strong growth, reaching 1.61 heads.

Speaker Change: As I mentioned earlier, we remain committed to our business plan and the targets established during our investor day.

Speaker Change: In light of this committee and considering short-term market situations, we allocated capital to repurchase an additional 9.67 million shares.

Speaker Change: totaling R$724 million, bringing us closer to completing the R$1 billion share repurchase program announced in November 2023.

Pedro Vina: Additionally, as part of our liability management strategy, we are located $295 million to the tender offer for our 2028 bonds, achieving nearly 60 percent participation. In summary, I'm very satisfied with the trajectory of our results for the second quarter of 2024. You know, I have full confidence in our team's execution.

Speaker Change: Additionally, as part of our liability management strategy, we allocated $295 million to the tender offer for our 2028 bonds, achieving nearly 60% participation.

Speaker Change: In summary, I'm very satisfied with the trajectory of our results for the second quarter of 2024, and I have full confidence in our team's execution.

Lia Matos: Now, I'd like to pass this module here, or we'll discuss our second file back to 1024 reforms and strategic updates.

Lia: Now, I'd like to pass the floor to Lia, who will discuss our second part of the 2024 reforms and strategic updates. Lia?

Lia Matos: Dear. Thank you, Pedro, and good evening, everyone. As Pedro mentioned, we were pleased to see the progress across our strategic priorities and initiatives in the second quarter, which I think positions us well to meet our 2024 and long-term goals. As you can see on slide four, our consolidated revenues grew 8 percent year over year, mainly as a result of consistent PPP growth and higher client monetization. It is also important to remember that in the first quarter of 2024, we changed our internal accounting methodology for membership fees revenue, deferring this revenue stream over the expected life of a merchant rather than recognizing it at the time of resolution.

Pedro Zinner: Additionally, as part of our liability management strategy, we allocated $295 million to the tender offer for our 2028 bonds, achieving nearly 60% participation. In summary, I'm very satisfied with the trajectory of our results for the second quarter of 2024, and I have full confidence in our team's execution. Now I'd like to pass the floor to Lia, who will discuss our second part of the 2024 performance and strategic update. John Coffey. Thank you, Pedro, and good evening, everyone.

Lia: Thank you, Pedro, and good evening, everyone. As Pedro mentioned, we were pleased to see the progress across our strategic priorities and initiatives in the second quarter, which I think positions us well to meet our 2024 and long-term goals.

Lia Matos: As Pedro mentioned, we were pleased to see the progress across our strategic priorities and initiatives in the second quarter, which I think positions as well to meet our 2024 and long term goals. As you can see on slide 4, our consolidated revenues grew 8% year over year, mainly as a result of consistent PVB growth and higher client monetization. It is also important to remember that in the first quarter of 2024, we changed our internal accounting methodology for membership fees revenue, deferring this revenue stream over the expected life of a merchant, rather than recognizing it at the time of acquisition. This change reduced our reported revenue by around 50 million Reais in the second quarter.

Lia: As you can see on slide four, our consolidated revenues grew 8% year over year, mainly as a result of consistent PPP growth and higher client monetization.

Lia: It is also important to remember that in the first quarter of 2024, we changed our internal accounting methodology for membership fees revenue, deferring this revenue stream over the expected life of a merchant, rather than recognizing it at the time of application.

Lia Matos: This change reduced our reported revenue by around 50 million reais in the second quarter. If we exclude this change, our total revenue growth would have been 10 percent in the quarter. Despite this effect, adjusted EBT increased 46 percent year over year. This was driven by the combination of our top-line growth and the ongoing benefits of our financial and administrative expensive decision teams. As a result, our adjusted net income increased 54 percent year over year, and our adjusted basic EPS increased 57 percent year over year, reaching 1.61 reais.

Lia: This change reduced our reported revenue by around 50 million Reais in the second quarter. If we exclude this change, our total revenue growth would have been 10% in the quarter.

Lia Matos: If we exclude this change, our total revenue growth would have been 10% in the quarter. Despite this effect, Adjusted EBT increased 46% here over here. This was driven by the combination of our top line growth and the ongoing benefits of our financial and administrative difficult decision. Thank you.

Lia: Despite this effect, adjusted EBT increased 46% year-over-year. This was driven by the combination of our top-line growth and the ongoing benefits of our financial and administrative expenses efficiencies.

Operator: Welcome to StoneCo, second quarter, 2024, Earnings Conference Call. By now, everyone should have access to our Earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Throughout this conference call, the company will be presenting non-IFRS financial information, including adjusted net income and adjusted net cash. These are important financial measures for the company, but are not financial measures as defined by IFRS.

Lia Matos: As a result, our adjusted net income increased 54% year-over-year, and our adjusted basic EPS increased 57% year-over-year, reaching R$1.61. Now let's dive further into our financial services segment performance on slide five to nine. Starting with payments on slide 5, our MS&B client base increased 30% year-over-year, reaching almost 3.9 million active clients. We generated a net addition of 184,000 clients during the quarter. On a year-over-year basis, this growth was impacted by the fact that we have caught up to the growth levels in the micro sediments.

Lia: As a result, our adjusted net income increased 54% year-over-year, and our adjusted basic EPS increased 57% year-over-year, reaching R$1.61.

Lia Matos: Now, let's back further into our financial services segment performance on slides five to nine. Starting with payments on slide five, our MSNB client base increased 30 percent year over year, reaching almost 3.9 million active clients. We generated a net addition of 184,000 clients during the quarter. On a year-over-year basis, this growth was impacted by the fact that we have caught up to the growth levels in the microcedomage. And on a quarter of a quarter basis, our net adds were impacted by the growth over effect of higher net adds in the first quarter, which benefited from our sponsorship of a popular reality T.D.

Lia: i

Lia: Now, let's dive further into our financial services segment performance on slides 5 to 9.

Operator: Reconciliation of the company's non-IFRS financial information to the IFRS financial information, appear in today's press release. Finally, before we begin our formal remarks, I would like to remind everyone that today's discussion may include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause results to differ materially from the company's expectations.

Lia: Starting with payments on Flight 5, our MS&B client base increased 30% year-over-year, reaching almost 3.9 million active clients. We generated a net addition of 184,000 clients during the quarter.

Lia: On a year-over-year basis, this growth was impacted by the fact that we have caught up to the growth levels in the micro-sediment.

Lia: And on a quarter-over-quarter basis, our net ads were impacted by the grow-over effect of higher net ads in the first quarter, which benefited from our sponsorship of a popular reality TV show in the period.

Operator: 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 20F filed with the Securities and Exchange Commission, which is available at www.scc.gov.

Lia Matos: show in the future. As you will see in the pages that follow, besides optimizing our commercial strategy for growth and market share gains, we're also putting a lot of focus on improving our payments and investing bundle offerings to new client cohorts, both in stone and stone. I would like to point out that we have refined our disclosure of TPP, due to the increasing relevance of fixed QR codes in the market and in our transactional volumes. From now on, whenever we talk about TPP, we will refer to transaction settled through cards and fixed dynamic QR codes.

Lia Matos: And on a quarter-over-quarter basis, our net ads were impacted by the grow-over effect of higher net ads in the first quarter, which benefited from our sponsorship of a popular reality TV show in the period. As you will see in the pages that follow, besides optimizing our commercial strategy for growth and market share gains, we're also putting a lot of focus on improving our payments and banking bundle offerings to new client cohorts, both in Stone and Stone.

Speaker Change: As you will see in the pages that follow, besides optimizing our commercial strategy for growth and market share gains, we're also putting a lot of focus on improving our payments and banking bundle offerings to new client cohorts, both in Stone and Stone.

Roberta Noronha: I would now like to turn the conference over to your host, Roberta Noroya, head of investor relations at StoneCo. Please proceed. Thank you, operator, and good evening, everyone.

Speaker Change: As you can see on slide 6, this approach has resulted in more profitable CPP growth and market share gains in the MS&B segment.

Roberta Noronha: Joining me today on the call is our CEO, Pedro Vina, our Chief Financial and Investor Relations Officer, Mattel Cher, and our Chief Strategy and Marketing Officer, Liam Arthur. Today, we will present our second quarter of 2024 results and provide an updated outlook for our business.

Lia Matos: As you can see on slide 6, this approach has resulted in more profitable CPP growth and market share gains in the MS&B segment. Before we dive deeper into our TPG performance and payments, I would like to point out that we have refined our disclosure of TPG due to the increasing relevance of fixed QR codes in the market and in our transactional volume. From now on, whenever we talk about CTC, we will refer to transactions settled through cards and big dynamic QR codes. Similarly, when we talk about Card TPC, we will be referring to transactions settled with cards only.

Speaker Change: Before we dive deeper into our TPG performance in Bayman, I would like to point out that we have refined our disclosure of TPT due to the increasing relevance of fixed QR code in the market and in our transactional buttons.

Speaker Change: From now on, whenever we talk about CPP, we will refer to transactions settled through cards and VIX dynamic QR codes.

Pedro Zina: I will now pass it over to Pedro so he can share some highlights of our performance. Pedro? Thank you, Roberta, and good evening, everyone.

Lia Matos: When we talk about card TPP, we will be referring to transactions settled with cards only. Now moving to bottom and sacred results, MSNB TPP increased 25% to over year as a result of a 17.4% year over year growth in MSNB card TPP, and a 2.6 fold increase in fixed QR codes, which reached 11.5 billion dollars in the quarter. We achieved this strong role while also increasing state rates by 7 basis points, 0 over year, which reached 2.54% as a result of higher credit and banking revenues and higher free paid bonds, partially offset by a lower duration from repayment transactions.

Speaker Change: When we talk about Card TPC, we will be referring to transactions settled with cards only.

Pedro Zina: After reviewing our second quarter results and our performance at mid-year, I am pleased with our progress across our strategic priorities and believe we are all scheduled to meet our 2024 goals. In payments, we continue to win in the MS&D market and take more market share. Our client base grew 30% year-over-year, TPPV grew 25%, and card TPPV increased over 17%. We are also executing on our pricing and funding strategies to enhance climate and aging as we discuss during our investor days.

Lia Matos: Now moving to volume and stake rate results, MSMB TPV increased 25% year-over-year as a result of a 17.4% year-over-year growth in MSMB part TPV and a 2.6-fold increase in fixed QR code revenue, which reached 11.5 billion Reais in the quarter. We achieved this strong growth while also increasing state rates by seven basis points year over year, which reached 2.54% as a result of higher credit and banking revenues and higher prepaid volumes, partially offset by a lower duration of prepayment transactions.

Speaker Change: Now moving to volume and stake rate results, MSMB TPV increased 25% year-over-year as a result of a 17.4% year-over-year growth in MSMB-powered TPV and a 2.6-fold increase in fixed QR codes, which reached 11.5 billion Reais in the quarter.

Pedro Zina: As a result, our MS&D take rates also continue to expand, increasing 7 base points year-over-year to reach 2.54%. We believe these strong results arrive from our competitive advantages in distribution, superior service, and our growing ability to provide more comprehensive solutions to our clients.

Speaker Change: We achieved this strong growth while also increasing safe rates by 7 basis points year-over-year, which reached 2.54% as a result of higher credit and banking revenues and higher prepaid volumes, partially offset by a lower duration from prepayment transactions.

Lia Matos: On slide 7, let's shift to discuss our banking performance. Our banking assets client base increased 62% year over year to 2.7 million active clients, as a result of growth in both Stone and Stone Payments client base, with an increase in penetration of clients using banking and payments bundles. This growth in our client base also helped drive the 65% year-over-year increase in client deposits, which reached 6.5 billion dollars in the quarter. Despite the sequential 8.1% growth in deposits, our tax decrease to 25.7 billion have its per month, mainly as a result of lower average CDI in the period.

Lia Matos: On slide 7, let's shift to discuss our banking performance. Our banking asset client base increased 62% year over year to 2.7 million active clients as a result of growth in both stone and stone payments client base with an increase in penetration of clients using banking and payments bundles. This growth in our client base also helped drive a 65% year-over-year increase in client deposits, which reached 6.5 billion AIs in the quarter. Despite the sequential 8.1% growth in deposits, RPEC decreased to 25.7 HB per month, mainly as a result of lower average CBI in the period.

Speaker Change: i

Speaker Change: On slide 7, let's shift to discuss our banking performance.

Speaker Change: Our banking active client base increased 62% year-over-year to 2.7 million active clients as a result of growth in both stones and stone payments client base with an increase in penetration of clients using banking and payments bundles.

Speaker Change: This growth in our client base also helped drive a 65% year-over-year increase in client deposits.

Speaker Change: which reached 6.5 billion AIs in the quarter. Despite the sequential 8.1% growth in deposits, RPEC decreased to 25.7 hertz per month, mainly as a result of lower average CBI in the period.

Pedro Zina: In banking, we are making similar products. Our client base grew 62% year over year and client deposits increased 65% as our team continues to cross sell effectively. We now have 2.7 million active banking clients and 6.5 billion reais in deposits which are approaching our 2024 targets. We have also started to pilot interest varying projects, such as signed deposits, which I believe is being well received by our clients and could be an exciting new area for us.

Lia Matos: Moving to slide 8, let's get some highlights on our credit performance. Our credit portfolio increased 712 million in the eye, with the working capital portfolio alone, increasing 28% sequentially to reach 682 million in the quarter. The remainder of the portfolio is the result of the very initial result of our credit card products, both within Stone and Stone. Because such cohorts are very early advantages, with highlights on the page, the credit quality metrics of our working capital loan products alone. NPLs increased slightly this quarter, with NPLs between 15 and 90 days reaching 2.9%, and NPLs over 90 days reaching 2.6%.

Lia Matos: Our credit portfolio increased to R$712 million, with the working capital portfolio alone increasing 28% sequentially to reach R$682 million in the quarter. The remainder of the portfolio is the result of the very initial results of our credit card products, both within Tone and Stone. Because such cohorts are very early vintages, we highlight on this page only the credit quality metrics of our working capital loan product alone.

Speaker Change: Moving to slide 8, let me give some highlights on our credit performance.

Speaker Change: Our credit portfolio increased to 712 million reais, with the working capital portfolio alone increasing 28% sequentially, to reach 682 million reais in the quarter.

Speaker Change: The remainder of the portfolio is the result of the very initial results of our credit card products, both within Tone and Stone.

Pedro Zina: In credit, we're also evolving well towards our goals, even above set targets. Our total credit portfolio increased 32% part of over quarter to reach 712 million reais. Within that, our working capital portfolio grew over 28%, reaching 682 million reais this far. With strong qualities as shown with our NPL over 90 days, still at 2.6%, very much in line with our expectations.

Speaker Change: Because such cohorts are very early vintages, we highlight on the page the credit quality metrics of our working capital loan product alone.

Lia Matos: NPLs likely increased this quarter with NPLs between 15 and 90 days reaching 2.9%, and NPLs over 90 days reaching 2.6%. As highlighted before, because these cohorts are also relatively new, the ratio of past-due loans should continue to increase as they mature. Provision expenses for working capital expected losses were $17 million in the future.

Speaker Change: NPLs increased slightly this quarter, with NPLs between 15 and 90 days reaching 2.9% and NPLs over 90 days reaching 2.6%.

Lia Matos: As highlighted before, because these cohorts are also relatively new, the ratio of past loans should continue to increase as they mature. Provision expense for working capital-inspective losses, where 17 women may rise in the period, decreasing significantly quarter over quarter. This reduction reflects the beginning of a conversion of provision levels to expected loss levels as the portfolio returns, with provisions now representing 18% of the working capital portfolio, down from 20% in previous quarters.

Speaker Change: As highlighted before, because these cohorts are also relatively new, the ratio of past due loans should continue to increase as they mature.

Speaker Change: Provision expenses for working capital expected losses were $17 million in the period, decreasing significantly quarter over quarter.

Lia Matos: Decreasing significantly quarter over quarter. This reduction reflects the beginning of a conversion of provision levels to expected loss levels as the portfolio matures, with provisions now representing 18% of the working capital portfolio, down from 20% in previous quarters. Finally, to summarize the performance of our financial services segment, the second quarter was again marked by strong year-over-year GDP growth and the successful development of our banking and credit initiatives. These resulted in segment revenue of 2.8 billion Reais and adjusted EBT of 608 million Reais in the quarter of 11% and 53% respectively year over year and an increase of 590 basis points in our adjusted EBT margins to reach 21.5% Moving to slide 10, let's talk about software performance and its strategic evolution.

Pedro Zina: I'm also excited with some new initiatives underway. Our specialized credit desk, which is focused on addressing the opportunity within our larger S&B client base successfully completed its first disbursement this best quarter. We finalize the structuring of our GILP passive product. This is a short term overdressed solution designed to address the immediate capital needs of our clients, which is set to launch in the third part.

Speaker Change: This reduction reflects the beginning of a conversion of provision levels to expected loss levels as the portfolio returns, with provisions now representing 18% of the working capital portfolio, down from 20% in previous quarters.

Lia Matos: Finally, to summarize the performance of our financial service segment, the second quarter was again marked by strong year-over-year TDD growth and the successful development of our banking and credit initiatives. These resulted in segment revenue of 2.8 billion AIs in adjusted EBT of 608 million AIs of the quarter, of 11% and 53% respectively year-over-year, and an increase of 590 basis points in our adjusted EBT margins to reach 21.5%.

Speaker Change: Finally, to summarize the performance of our financial services segment, the second quarter was again marked by strong year-over-year TPP growth and the successful development of our banking and credit initiatives.

Pedro Zina: In our software business, we are making progress on our cross-cell initiatives, and we are improving the quality meets of our business towards more recurring revenues. Total software and vertical software revenues both remain modest, but we see underlying signs of improving. For example, we are getting better cross-cell traction in our gas stations and retail verticals, and regenerated stronger cost-DPV growth from our software clients in priority verticals than our overall MF&D cost-DPV growth rate. We still have a lot of work to do in our software business over the long term, as I have mentioned, but I'm seeing some encouraging trends from our efforts.

Speaker Change: These resulted in segment revenue of 2.8 billion Reais.

Speaker Change: and Adjusted EBT of $608.5M in the quarter.

Speaker Change: of 11% and 53% respectively year over year, and an increase of 590 basis points in our adjusted EBT margins to reach 21.5%.

Lia Matos: Moving to slide 10, let's talk about software performance and its strategic evolutions. Quarter over quarter, the card TDD of clients that choose both financial services and software solutions increased 8%, primarily driven by the gas station and retail vertical, which has been our priority focus since last year. This result has been mostly driven by the cross-selling efforts from our financial services specialist distribution team, cross-selling bundles to software platforms. As Fender mentioned, cross-sell volumes outperformed growth of MSNB, RTPG, and the quarter by almost the factor of two. We're happy with the execution of our cross-selling initiatives so far in 2024.

Speaker Change: Moving to slide 10, let's talk about software performance and its strategic evolutions.

Lia Matos: Quarter over quarter, the CAR TPV of clients that use both financial services and software solutions increased 8%, primarily driven by the gas station and retail verticals, which has been our priority focus since last year. This result has been mostly driven by the cross-selling efforts from our financial services specialist distribution team, cross-selling bundles to software clients. As Pedro mentioned, crop cell volumes outperformed growth of MS&B Carb TPG in the quarter by almost a factor of two.

Speaker Change: Quarter over quarter, the CAR TPP of clients that use both financial services and software solutions increased 8%, primarily driven by the gas station and retail verticals, which have been our priority focus since last year.

Speaker Change: This result has been mostly driven by the cross-selling efforts from our Financial Services Specialist Distribution Team, cross-selling bundles to software clients.

Pedro Zina: We have also maintained our focus on efficiency gains in the streamlining of what the administrative expense, which decreased by 30% year over year. In the quarter, we achieved the 180-based point reduction in administrative expenses as a percentage of revenues when compared to the second part of 2023. As a result of this positive developments, our adjusted basic EPS demonstrated strong growth reaching 1.61 high. As I mentioned earlier, we remain committed to our business plan and the targets established during our yesterday.

Speaker Change: As Pedro mentioned, cross-cell volumes outperformed growth of MS&B CAR-TPG in the quarter by almost a factor of two.

Lia Matos: We're happy with the execution of our cross-settlement initiative so far in 2024, but I believe we still have a lot of room to grow, particularly as we gear up to enable our linked software channels to also sell software and financial services bundles. On page 11, you can see the stand-alone performance of our vertical software business, where we're seeing some improvements in the quality of our resume, vertical software revenue grew 3% year over year due to an increase in recurring revenue growth offset by a decrease in non-recurring revenues in priority.

Speaker Change: We're happy with the execution of our cross-settlement initiative so far in 2024, but I believe we still have a lot of room to grow, particularly as we gear up to enable our linked software channels to also sell software and financial services bundles.

Lia Matos: But I believe we still have a lot of prone to growth, particularly as we gear up to enable our link software channels to also sell software and financial services bundles.

Lia Matos: On page 11, you can see the standalone performance of our vertical software business, where we're seeing some improvements in the quality of our revenues. Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth, offset by a decrease in non-recurring revenues in priority burden. As a result, it leaves a revenue quality of our priority burden, which is improving with recurring revenue as a percentage of total revenues, increasing by more than 400 and 60 basis points year-over-year.

Speaker Change: On page 11, you can see the stand-alone performance of our vertical software business, where we're seeing some improvements in the quality of our resumes.

Speaker Change: Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth offset by a decrease in non-recurring revenues in priority products.

Pedro Zina: In light of this committing and considering short-term market situations, we are located capital to re-burches an additional 9.67 million shares, totaling 724 million highs, bringing us closer to completing the one billion highs share re-burched program announced in November 2023. Additionally, as part of our liability management strategy, we are located $295 million to the tender offer for our 2028 bonds, achieving nearly 60 percent participation.

Lia Matos: As a result, we believe the revenue quality of our priority vehicles is improving, with recurring revenue as a percentage of total revenues increasing by more than 450 basis points year over year. In slide 12, we present the consolidated performance of SALT. As you can see, total software segment revenues reached 384 million reais, remaining flat as year over year, driven by the trend I just described in our vertical software business, offset by slower growth in the enterprise business.

Speaker Change: As a result, we believe the revenue quality of our priority vehicles is improving, with recurring revenue as a percentage of total revenues increasing by more than 450 basis points year-over-year.

Lia Matos: In slide 12, we present the consolidated performance of software. As you can see, total software segment revenues reached 384 million reais, remaining flat-ish year-over-year. Driven by the trends, I just described in our vertical software business, offset by slower growth in the enterprise business. Adjusted investment in the software segment decreased to 64 million reais in the quarter, down 4% year-over-year, and 3% quarter-reported, effected by a non-recurring seventh expense of 3.2 million reais, and by our decision to focus on growing recurring versus non-recurring revenues, which has a negative impact on the short term, but should be a credent for the business in the long run.

Speaker Change: In Slide 12, we present the Consolidated Performance of Software.

Speaker Change: As you can see, total software segment revenues reached $384 million, remaining flat-ish year-over-year, driven by the trend I just described in our vertical software business, offset by slower growth in the enterprise business.

Pedro Zina: In summary, I'm very satisfied with the trajectory of our results for the second quarter of 2024. You know, I have a full confidence in our team's execution.

Lia Matos: Adjusted EBITDA in the software segment decreased to 64 million Reais in the quarter, down 4% year over year, and 3% quarter over quarter, impacted by a non-recurring savings expense of 3.2 million Reais, and by our decision to focus on growing recurring versus non-recurring revenues, which has a negative impact in the short term, but should be accretive for the business in the long run.

Speaker Change: Adjusted at this end of the talk for seven minutes.

Speaker Change: Degrees to 64 million dollars in the quarter, down 4% year over year, and 3% quarter over quarter. Infected by a non-recurring 7% expense of 3.2 million reais, and by our decision to focus on growing your worries versus non-recurring revenue.

Lia Matos: Now, I'd like to pass this module here, or we'll discuss our second file back to 1024 reforms and strategic updates. Dear. Thank you, Pedro, and good evening, everyone. As Pedro mentioned, we were pleased to see the progress across our strategic priorities and initiatives in the second quarter, which I think positions as well to meet our 2024 and long-term goals. As you can see on slide four, our consolidated revenues grew 8 percent year over year, mainly as a result of consistent PPP growth and higher client monetization.

Speaker Change: which has a negative impact in the short term but should be accretive for the business in the long run.

Lia Matos: We continue our efforts to implement the software strategy that we presented in our Investor Days. While we're happy with our evolution in front selling initiatives in the gas station and retail verticals, we're still working and learning how to best enable our software distribution channels to sell financial services and software bundles, the commercial incentives and systems integration. We also continue to pursue efficiency initiatives and a more disciplined capital allocation approach within our software settings.

Lia Matos: We continue our efforts to implement the foster strategy that we presented in our investor data. While we're happy with our evolution in crop selling initiatives in the gas station and retail vertical, we're still working on learning how to best enable our software distribution channels to sell financial services and software bundles via commercial incentives and systems integration.

Speaker Change: We continue our efforts to implement the foster strategy that we presented in our Investor Day. While we're happy with our evolution in fraud-selling initiatives in the gas station and retail verticals,

Speaker Change: We're still working and learning how to best enable our software distribution channels to sell financial services and software bundles via commercial incentives and systems integrations.

Lia Matos: It is also important to remember that in the first quarter of 2024, we changed our internal accounting methodology for membership fees revenue, deferring this revenue stream over the expected life of a merchant rather than recognizing it at the time of resolution. This change reduced our reported revenue by around 50 million reais in the second quarter. If we exclude this change, our total revenue growth would have been 10 percent in the quarter.

Speaker Change: We also continue to pursue efficiency initiatives and a more disciplined capital allocation approach within our software settings.

Mateus Schwening: Now, I want to pass it over to Mateus to discuss in more detail some of our key financial metrics. Mateus? Thank you, Lia, and good evening, everyone.

Mateus Schwening: We also continue to pursue efficiency initiatives and a more disciplined capital allocation approach within our software settings. Now I want to pass it over to Mateus to discuss in more detail some of our key financial metrics. Mateus, Thank you, Lia, and good evening, everyone.

Speaker Change: Now I want to pass it over to Mateus to discuss in more detail some of our key financial metrics.

Speaker Change: Mateus

Mateus: Thank you, Lia, and good evening, everyone.

Mateus Schwening: I would like to begin on slide 13, where we discuss the part that will require your evolution of costs and expenses on just a base. Cost of services reaches 181 million reais, increasing by 22% year over year, and 4% quarter over quarter. Sequentially, cost of services as a percentage of revenues decreased by 10 basis points, primarily due to a reduction in low amount of provisions, which were reduced to 18 million reais this quarter, from 45 million reais in the first quarter of 24. This reduction reflects the beginning of the process of aligning our provision levels with expected credit losses as the first volume occurs, with provisions now representing 18% of the working capital portfolio.

Mateus Schwening: I would like to begin on slide 13, where we discuss the quarter-over-quarter evolution of costs and expenses on an adjusted basis. Cost of services reaches 841 million reais, increasing by 23% year over year and 4% quartet over quartet. Sequentially, Cost of Services as a Percentage of Revenues decreased by 10 basis points, primarily due to a reduction in LuaMod provision, which were reduced to 18 million reais this quarter from 45 million reais in the first quarter of 2014.

Mateus: I would like to begin on slide 13, where we discuss the quarter-over-quarter evolution of costs and expenses on an adjusted basis.

Lia Matos: Despite this effect, adjusted EBT increased 46 percent year over year. This was driven by the combination of our top-line growth and the ongoing benefits of our financial and administrative expensive decision teams. As a result, our adjusted net income increased 54 percent year over year, and our adjusted basic EPS increased 57 percent year over year, reaching 1.61 reais.

Mateus: Cost of services reaches R$841 million, increasing by 23% year-over-year and 4% quarter-over-quarter.

Mateus: Sequentially, cost of services as a percentage of revenues decreased by 10 basis points, primarily due to a reduction in loan loss provisions.

Mateus: which were reduced to 18 million reais this quarter from 45 million reais in the first quarter of 2014.

Mateus Schwening: This reduction reflects the beginning of the process of aligning our provision levels with expected credit losses as the portfolio matures, with provisions now representing 18% of the working capital portfolio. This decrease was offset by higher provision for losses in the quarter on our acquiring and banking solutions. Administrative expenses decreased by 13% year-over-year, resulting in a 180-basis-point reduction as a percentage of revenues compared to the second quarter of 2023.

Lia Matos: Now, let's back further into our financial services segment performance on slide five to nine. Starting with payments on slide five, our MSNB client base increased 30 percent year over year, reaching almost 3.9 million active clients. We generated a net addition of 184,000 clients during the quarter.

Mateus: This reduction reflects the beginning of the process of aligning our provision levels with expected credit losses as the portfolio matures.

Mateus: with provisions now representing 18% of the working capital portfolio.

Mateus Schwening: This decrease was offset by higher provision for losses in the quarter on our operating and banking solutions. Administrative expenses decreased by 13% year over year, resulting in a 180 basis point reduction as a percentage of revenues compared to the second quarter of 23. Sequentially, administrative expenses increased by 1.4%, but declined by 20 basis points as a percentage of revenues. This was reason by lower expenses in the software segment due to efficiency gains, as well as by the divest enough in 5 in the first quarter of 24, which eliminated expenses in the non-allocated segment. Setting expenses increases 27% year over year, and decreases 0.9% worth over quarter, now 80 basis points sequentially as a percentage of revenues.

Speaker Change: This decrease was offset by higher provision for losses in the quarter on our acquiring and banking solutions.

Speaker Change: Administrative expenses decreased by 13% year over year, resulting in a 180 basis point reduction as a percentage of revenues compared to the second quarter of 2023.

Lia Matos: On a year over year basis, this growth was impacted by the fact that we have caught up to the growth levels in the microcedomage. And on a quarter of a quarter basis, our net adds were impacted by the growth over effect of higher net adds in the first quarter, which benefited from our sponsorship of a popular reality T.D, show in the future. As you will see in the pages that follow, besides optimizing our commercial strategy for growth and market share gains, we're also putting a lot of focus on improving our payments and investing bundle offerings to new clients cohorts, both in stone and stone.

Mateus Schwening: Sequentially, administrative expenses increased by 1.4% but declined by 28 points as a percentage of revenue. This was driven by lower expenses in the software segment due to efficiency gains, as well as by the divestment of PMPAG in the first quarter of 2024, which eliminated expenses in the non-allocated segment. Setting expenses increased 27% year-over-year and decreased 0.9% quarter-over-quarter.

Speaker Change: Sequentially, administrative expenses increased by 1.4%, but declined by 28 points as a percentage of revenues.

Speaker Change: This was driven by lower expenses in the software segment due to efficiency gains, as well as by the divestment of PMPAG in the first quarter of 2024, which eliminated expenses in the non-allocated segment.

Speaker Change: Salient expenses increased 27% year-over-year and decreased 0.9% quarter-over-quarter, down 80 basis points sequentially as a percentage of revenues.

Mateus Schwening: Down 80 basis points sequentially as a percentage of revenue. This decrease is primarily due to a reduction of approximately R$26 million in marketing expenses related to the sponsorship of reality TV shows, like Lia mentioned. Partially obsessed by increased investments in sales teams. Looking ahead, we anticipate gradual dilution of selling expenses as these investments in sales teams mature. Financial expenses decreased 20% year over year and decreased 4.5% sequentially, leading to a 230 basis points reduction as a percentage of revenue.

Mateus Schwening: This decrease is primarily due to a reduction of approximately 26 million reais in marketing expenses related to the sponsorship of reality to be shown, like you mentioned, are actually offset by increasing investments in sales teams. Looking ahead, we anticipate gradual dilution of selling expenses as these investments in sales teams mature. Financial expenses decreased by 20% year over year, and decreases for and a half percent sequension, leading to a 230 basis point reduction as a percentage of revenues. This decrease was a result of lower average to the end of the period, a reduction in our funding spreads, and our decisions. This effects were partially obsessed by higher funding needs for our prevailing and predator variations, as well as by a higher number of working days in the quarter.

Lia: This decrease is primarily due to a reduction of approximately R$26 million in marketing expenses related to the sponsorship of reality TV shows, like Lia mentioned.

Lia Matos: I would like to point out that we have refined our disclosure of TPP, due to the increasing relevance of fixed QR codes in the market and in our transactional volumes. From now on, whenever we talk about TPP, we will refer to transaction settled through cards and fixed dynamic QR codes. When we talk about card TPP, we will be referring to transaction settled with cards only. Now moving to bottom and sacred results, MSNB TPP increased 25% to over year as a result of a 17.4% year over year growth in MSNB card TPP, and a 2.6 fold increase in fixed QR codes which reached 11.5 billion dollars in the quarter.

Speaker Change: Partially obsessed by increased investment in sales teams.

Speaker Change: Looking ahead, we anticipate gradual dilution of selling expenses as these investments in sales teams mature.

Speaker Change: Financial expenses decreased 20% year-over-year and decreased 4.5% sequentially, leading to a 230 basis points reduction as a percentage of revenues.

Mateus Schwening: This decrease was a result of lower average CDI in the period, a reduction in our funding spreads, and our decision to reinvest our cash generation towards the funding of our operations. These effects were partially offset by higher funding needs for off-grid payment and private operations, as well as by a higher number of working days in the park.

Speaker Change: This decrease was a result of lower average CDI in the period, a reduction in our funding spread, and our decision to reinvest our cash generation towards the funding of our operations.

Speaker Change: These effects were partially offset by higher funding needs for offeror payment and private operations, as well as by a higher number of working days in the quarter.

Mateus Schwening: Lastly, other expenses increased 26% year over year, and 80% sequentially, or 140 basis points as a percentage of prevalence. These variation was a result of marginalized levels of shared-based compensation expenses. As the first quarter of 24 included an all recurring positive impacts of 40.5 million reais from the net effect of the cancellation and new rents of incentive plans. Excluding the effects, other expenses net would have been flatish as a percentage of prevalence.

Mateus Schwening: Lastly, other expenses increased 26% year-over-year and 80% sequentially, or 140 basis points as a percentage of revenue. This variation was a result of more normalized levels of share-based compensation expenses. As the first quarter of 2024 included a non-recurring positive impact of R$40.5 million from the net effect of the cancellation and new grants of incentive plans. Excluding these effects, other expenses net would have been flattish as a percentage of revenue.

Lia Matos: We achieved this strong role while also increasing state rates by 7 basis 1, 0 over year, which reached 2.54% as a result of higher credit and banking revenues and higher free paid bonds, partially offset by a lower duration from repayment transactions.

Speaker Change: Lastly, all their expenses increased 26% year-over-year and 80% sequentially, or 140 basis points as a percentage of revenues.

Speaker Change: This variation was a result of more normalized levels of share-based compensation expenses, as the first quarter of 2024 included a non-recurring positive impact of R$40.5 million from the net effect of the cancellation and new grants of incentive plans.

Lia Matos: On slide 7, let's shift to discuss our banking performance. Our banking assets client base increased 62% year over year to 2.7 million active clients, as a result of growth in both stone and stone payments client base, with an increase in penetration of clients using banking and payments bundles. This growth in our client base also helped drive the 65% year over year increase in client deposits, which reached 6.5 billion dollars in the quarter.

Speaker Change: Excluding these effects, other expenses net would have been flattish as a percentage of revenues.

Mateus Schwening: During his life for a teen, our adjustment as cash position was 5.3 billion reais by the end of the quarter, reflecting an increase of almost one billion reais year over year, and 117 million reais for the quarter. We continue to live like that towards the expansion of our credit portfolio and executing on our share-by-back program in the amount of 237 million reais this quarter. As we mentioned, I would like to highlight that in July, we are located careful to reperchise an additional 9.6 million shares, amounting to 724 million reais, nearly completing the 1 billion reais buy-back per purchase program announced in November 2023.

Mateus Schwening: Turning to slide 14, our adjusted net cash position was R$5.3 billion by the end of the quarter, reflecting an increase of almost R$1 billion year-over-year and R$117 million for the quarter. We continue to deploy capital towards the expansion of our credit portfolio and execute on our share buyback program in the amount of 237 million reais this quarter. As Pedro mentioned, I would like to highlight that in July we allocated capital to repurchase an additional 9.6 million shares, amounting to R$724 million, nearly completing the R$1 billion buy-back-for-purchase program announced in November 2023.

Speaker Change: Turning to slide 14, our adjusted net cash position was R$5.3 billion by the end of the quarter, reflecting an increase of almost R$1 billion year-over-year and R$117 million for the quarter.

Speaker Change: We continue to deploy capital towards the expansion of our credit portfolio and executing on our share buyback program in the amount of 237 million reais this quarter.

Lia Matos: Despite the sequential 8.1% growth in deposits, our tax decrease to 25.7 billion have its per month, mainly as a result of lower average CDI in the period.

Speaker Change: As Pedro mentioned, I would like to highlight that in July we allocated capital to repurchase an additional 9.6 million shares.

Lia Matos: Moving to slide 8, let's get some highlights on our credit performance. Our credit portfolio increased 712 million in the eye, with the working capital portfolio alone, increasing 28% sequentially to reach 682 million in the quarter. The remainder of the portfolio is the result of the very initial result of our credit card products, both within stone and stone.

Speaker Change: amounting to R$724 million, nearly completing the R$1 billion buy-back-for-purchase program announced in November 2023.

Mateus Schwening: Additionally, we are located 295 million dollars in July, so the standard offer for around 2028 months, which will further optimise our funding spread as we move forward.

Speaker Change: Additionally, we allocated $295 million in July to the standard offer for our 2028 bonds, which will further optimize our funding spreads as we move forward.

Mateus Schwening: Finally, let's move to his life 16 to discuss our earnings. We are very pleased with our performance in the first half of the year. The profitability achieved in the first half of 24 has positioned us favourably to meet our over-year guidance, despite several headwinds. This includes 120 million reais reduction in revenues, due to the changes in recognition of membership fee revenues, and a challenging macroeconomic environment with a higher yield curve. In our banking credit solutions, which are key drivers for our long-term growth, we have exceeded initial expectations, not only in volume, but also in quality.

Mateus Schwening: Additionally, we allocated $295 million in July to the standard offer for our 2028 bonds, which will further optimize our funding spreads as we move forward. Finally, let's move to slide 16 to discuss our guidance. We are very pleased with our performance in the first half of the year. The profitability achieved in the first half of 2024 has positioned us favorably to meet our full-year guidance, despite several headwinds. This includes a R$120 million reduction in revenues due to the changes in recognition of membership fee revenues and a challenging macroeconomic environment with a higher yield curve.

Lia Matos: Because such cohorts are very early advantages, with highlights on the page, the credit quality metrics of our working capital loan products alone. NPLs increased slightly this quarter, with NPLs between 15 and 90 days reaching 2.9% and NPLs over 90 days reaching 2.6%. As highlighted before, because these cohorts are also relatively new, the ratio of past loans should continue to increase as they mature. Provision expense for working capital-inspective losses, where 17 women may rise in the period, decreasing significantly quarter over quarter. This reduction reflects the beginning of a conversion of provision levels to expected loss levels as the portfolio returns, with provisions now representing 18% of the working capital portfolio, down from 20% in previous quarters.

Speaker Change: Finally, let's move to slide 16 to discuss our guidance.

Speaker Change: We are very pleased with our performance in the first half of the year. The profitability achieved in the first half of 2024 has positioned us favorably to meet our whole year guidance, despite several headwinds.

Speaker Change: This includes a R$120 million reduction in revenues due to the changes in recognition of membership fee revenues and a challenging macroeconomic environment with higher yield curves.

Mateus Schwening: In our banking and credit solutions, which are key drivers for our long term growth, we have exceeded initial expectations, not only in volume, but also in quality. This strong performance made Buddha on track to surpass our year-end guidance in this area.

Speaker Change: In our banking and credit solutions, which are key drivers for our long-term growth, we have exceeded initial expectations not only in volume but also in quality.

Mateus Schwening: This strong performance makes Buddha's contract surpass our year-end guidance in his areas. From my perspective, the most challenging area so far has been our MSNB transit fee. Big share cost penetration in the market and within our plant days has been higher than we anticipated when setting our guidance in November of last year. These has affected our overall volume meets towards less hearted PZ and more fixed share cost to PZ. Although this trend is positive for the business, it also means that current to PZ is growing a little tighter within our expected range. We ended the first half of 24 with 18% growth, exactly in line with our guidance.

Speaker Change: This strong performance made Buddhists on track to surpass our year-end guidance in these areas.

Mateus Schwening: From my perspective, the most challenging area so far has been our MSMB CRAN TPV. Fixed-care cost penetration in the market and within our client base has been higher than we anticipated when setting our guidance in November of last year. This has affected our overall volume mix towards less hard TPV and more thick-sphere-coated TPV.

Speaker Change: From my perspective, the most challenging area so far has been our MSMB CRAN TPV.

Speaker Change: Fixed-care cost penetration in the market and within our client base has been higher than we anticipated when setting our guidance in November of last year.

Lia Matos: Finally, to summarize the performance of our financial service segment, the second quarter was again marked by strong year-over-year TDD growth and the successful development of our banking and credit initiatives. These resulted in segment revenue of 2.8 billion AIs in adjusted EBT of 608 million AIs of the quarter, of 11% and 53% respectively year-over-year, and an increase of 590 base points in our adjusted EBT margins to reach 21.5%.

Speaker Change: This has affected our overall volume mix towards less hard TPV and more thick-square-core TPV.

Unknown Executive: Although this trend is positive for the business, it also means that currency PV is growing a little tighter within our expected range. We ended the first half of 2024 with 18% growth, exactly in line with our guide. Despite a more challenging comparable base in the second half of 24, we remain laser focused on our efforts to meet this guidance. Overall, I believe our second quarter results are trending favorably and we are on track to achieve our long-term goals.

Speaker Change: Although this trend is positive for the business, it also means that current EPV is growing a little tighter within our expected range.

Speaker Change: We ended the first half of 2024 with 18% growth, exactly in line with our guidance.

Mateus Schwening: Despite the mark challenging comparable raising the second half of 24, we remain later focused on our efforts to meet this guidance. Over all, I believe our second part of the results are training feverly and we are on track to achieve our long-term goals.

Jennifer: Despite a more challenging comparable base in the second half of 24, we remain laser focused on our efforts to meet this guidance.

Lia Matos: Moving to slide 10, let's talk about software performance and its strategic evolutions. Quarter over quarter, the card TDD of clients that choose both financial services and software solutions, increased 8%, primarily driven by the gas station and retail vertical, which has been our priority focus since last year. This result has been mostly driven by the cross-selling efforts from our financial services specialist distribution team, cross-selling bundles to software platforms. As Fender mentioned, cross-sell volumes outperformed growth of MSNB, RTPG, and the quarter, by almost the factor of two. We're happy with the execution of our cross-selling initiatives so far in 2024.

Speaker Change: Overall, I believe our second quarter results are trending favorably and we are on track to achieve our long-term goals.

Operator: With that said, operator can be a little bit of a call of professions.

Unknown Executive: With that said, operator, can you please open the call up to questions? Okay, at this time, we are going to open it up for questions. If you have a question, please feel free to contact me. Raid's Hand for Audience, We do ask that when you pose your question, that you pick up your head, to provide optimum sound quality. Caldwell, B.

Speaker Change: With that said, Operator, can you please open the call up to questions?

Operator: Okay, at this time we are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions. We do ask that when you pose your question, you pick up your headset to provide optimum sound quality. Please hold while we pull for questions.

Speaker Change: Okay, at this time we are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions. We do ask that when you pose your question that you pick up your headset to provide optimum sound quality.

Speaker Change: Please hold while we pull for questions.

Mario Pierry: Our first question comes from Mario Pierry with Bank of America. You can open your microphone.

Unknown Executive: Perfect. [inaudible] Our first question comes from Mario Pierry with Bank of America. You can open your mic.

Speaker Change: Our first question comes from Mario Pierry with Bank of America.

Speaker Change: You can open your microphone.

Mario Pierry: Hi, guys. Good afternoon. Congratulations on the results.

Mario Pierry: Hi, guys. Good afternoon. Congratulations on the result. Let me ask you a question about competition. How have you seen any changes in the competitive environment over the last? Three months, especially coming from maybe some of the incumbent banks and any changes at Cielo, because we did notice, right, that you you increase or you talked about making higher investments in say, in your sales team. Can you, you know, so like, I wanted to understand that a little bit better. Why?

Dr. Noron: Hi, guys. Good afternoon. Congratulations on the results. Good afternoon. Good afternoon. Good afternoon.

Mario Pierry: Let me ask you a question about competition. How have you seen any changes in the competitive environment? Over the last three months, especially coming from maybe some of the incumbent banks and any changes at Seattle? Because we did notice that you increase or you talked about making higher investments in your sales team. Can you, you know, so like I wanted to understand that a little bit better. Why, why are you investing sales team? Do you think like you have a disadvantage? You catch him up, or you see a more competitive environment? If you're seeing a competitive environment, if you can discuss like how you sing out, take rates trending.

Lia Matos: But I believe we still have a lot of prone to growth, particularly as we gear up to enable our link software channels to also sell software and financial services bundles. On page 11, you can see the standalone performance of our vertical software business, where we're seeing some improvements in the quality of our revenues. Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth, offset by a decrease in non-recurring revenues in priority burden. As a result, it leaves a revenue quality of our priority burden, which is improving with recurring revenue as a percentage of total revenues, increasing by more than 400 and 60 basis points year-over-year.

Speaker Change: Let me ask you a question about competition. How have you seen any changes in the competitive environment over the last...

Pedro Zinner: Why are you investing sales team? Do you think like you have a disadvantage? You're catching up? Or you're seeing a more competitive environment? And if you're seeing a competitive environment, if you can discuss like how you're seeing take rates trending? Thank you. Hi Mario, Pedro here.

Speaker Change: Three months.

Speaker Change: Especially coming from maybe some of the incumbent banks, any changes at Cielo?

Speaker Change: Because we did notice, right, that you increased or you talked about making higher investments in your sales team.

Speaker Change: Can you, you know, so like I wanted to understand that a little bit better. Why are you investing in a sales team? Do you think like you have a disadvantage, you're catching up or you're seeing a more competitive

Speaker Change: environment and if you're seeing a competitive environment if you can discuss like how you're seeing take rates trending. Thank you.

Lia Matos: In slide 12, we present the consolidated performance of software. As you can see, total software segment revenues reached 384 million reais, remaining flat-ish year-over-year. Driven by the trends, I just described in our vertical software business, offset by slower growth in the enterprise business.

Mario Pierry: Thank you.

Pedro Vina: Hi, Mario. Pedro here. Thank you for the question.

Pedro Zinner: Thank you for the question. I'll jump start it, and then I'll pass it over to Lia to make further comments. Well, on the pricing piece, I think the way we see it is it has become really a dynamic process within the company, meaning that we continuously evaluate the profitability of our cohorts, and we adjust prices accordingly. So in terms of the new interest rate environment and competition, I think we'll gradually incorporate the new curve and changes in the competition environment into our decision-making. And I think we should evaluate the economics of passing through the shifts to our clients. But I think there's a direction.

Speaker Change: i

Speaker Change: Hi Mario, Pedro here. Thank you for the question. I'll jump start and then I'll pass over to Lia to make further comments.

Pedro Vina: I'll jump start, and then I'll pass over to Leah to make further comments. Well, I think on the pricing piece. I think the way we see it is it has become really a dynamic process within the company, meaning that we continuously evaluate the profitability of our cohorts and we adjust prices accordingly. So, in terms of the new interest rate environment and competition, I think we gradually incorporate the new curve and changes in the competition environment in our decision making. And I think we evaluate the economics of passing through the shifts into our clients, but I think as a direction, I think we will continue to prioritize profitability and to price based on returns.

Lia: Well, I think on the pricing piece,

Lia: I think the way we see it is it has become really a dynamic process.

Lia Matos: Adjusted investment in the software segment decreased to 64 million reais in the quarter, down 4% year-over-year, and 3% quarter-reported, effected by a non-recurring seventh expense of 3.2 million reais, and by our decision to focus on growing recurring versus non-recurring revenues, which has a negative impact on the short-term, but should be a credent for the business in the long run. We continue our efforts to implement the software strategy that we presented in our investor days.

Lia: within the company, meaning that we continuously evaluate the profitability of our cohorts and we adjust prices accordingly.

Lia: So, in terms of the new interest rate environment and competition, I think we'll gradually incorporate the new yield curve and changes in the competition environment in our decision-making, and I think we'll evaluate the economics of passing through the shifts into our clients.

Speaker Change: I think there's a direction.

Pedro Zinner: I think we will continue to prioritize profitability and to price based on return. Still on the competition piece, I'm not going to address specifically on the Seattle piece, but I think the market has evolved a lot, and I think other players, have been behaving in a similar way. Right.

Speaker Change: I think we will continue to prioritize profitability and to price based on returns.

Pedro Vina: Still on the competition piece, I'm not going to address specifically on the sale of these, but I think the market has evolved a lot. And I think other players have been behaving in a similar way. Right.

Lia Matos: While we're happy with our evolution in front selling initiatives in the gas station and retail verticals, we're still working and learning how to best enable our software distribution channels to sell financial services and software bundles, the commercial incentives and systems integration. We also continue to pursue efficiency initiatives and a more disciplined capital allocation approach within our software settings.

Speaker Change: Still on the competition piece, I'm not going to address, I'm just going to the cello piece but I think the market has evolved a lot.

Speaker Change: and I think other players.

Speaker Change: have been behaving in a similar way, right? Just another point I wanted to highlight is is that more and more, we have more levers to price the relationship with clients through the bundles.

Pedro Vina: Just another point I wanted to highlight is that, more and more, we have more levers to price the relationship with clients who the bundles. As the core of our strategy between payments, banking, credit, and software. So I think to some extent, this, this is a kind of a hedge against short terms, interest rate dynamics and in some ways on the competition side.

Mateus Schwening: Now, I want to pass it over to Mateus to discuss in more detail some of our key financial metrics. Mateus? Thank you, Lia, and good evening, everyone.

Speaker Change: as the core of our strategy between payments, banking, credit, and software.

Speaker Change: So I think to some extent this this is a kind of a hedge.

Pedro Zinner: Just another point I wanted to highlight is, is that more and more we have more levers to price. The relationship with clients for the bundles, as the core of our strategy between payments, banking, credit and software. So, I think to some extent this is a kind of a hedge. Again, short-term interest rate dynamics, and in some ways on the competition side. I'll pass over to Lia to talk about, Hi Mario, Lia here.

Mateus Schwening: I would like to begin on slide 13, where we discuss the part that will require your evolution of costs and expenses on just a base. Cost of services reaches 181 million reais, increasing by 22% year over year, and 4% quartet over quarter. Sequentially, cost of services as a percentage of revenues decreased by 10 basis points, primarily due to a reduction in low amount of provisions, which were reduced to 18 million reais this quarter, from 45 million reais in the first quarter of 24.

Speaker Change: against short-term interest rate dynamics and, in some ways, on the competition side.

Lia Matos: I'll pass over to Lia to talk about the selling. Hi, Mario, Lia here. So, talking a little bit about dynamics around selling. I think there's two relevant dynamics to highlight. First is more of a short-term discussion, which is we've already seen a reduction in selling expenses as a percentage of revenue. As Mateus mentioned, due to 26 million in impact decrease given that we sponsored Big Brother Brazil in the first quarter. So, that's more of a short-term dynamics. And it's going to continue to sort of impact positive throughout the year.

Speaker Change: I'll pass it over to Lia to talk about...

Lia Matos: So talking a little bit about dynamics around selling. I think there's two relevant dynamics to highlight. First is more of a short-term discussion which is we've already seen a reduction in selling expenses as a percentage of revenue as Mateus mentioned due to 26 million impact decrease given that we sponsored Big Brother Brazil in the first quarter so that's more of a short-term dynamic and it's gonna continue to sort of impact positively throughout the year but longer term regarding selling we continue to invest and we talked about this especially scaling our specialist distribution as, We continue to move up to onboard larger S&Bs within the S&B segment.

Speaker Change: Hi Mario, Lia here. So, talking a little bit about dynamics around selling. I think there's two relevant dynamics to highlight. First is more of a short-term

Speaker Change: Discussion, which is we've already seen a reduction in selling expenses as a percentage of revenue as Mateus mentioned.

Mateus Schwening: This reduction reflects the beginning of the process of aligning our provision levels with expected credit losses as the first volume occurs, with provisions now representing 18% of the working capital portfolio. This decrease was offset by higher provision for losses in the quarter on our operating and banking solutions. Administrative expenses decreased by 13% year over year, resulting in a 180 basis point reduction as a percentage of revenues compared to the second quarter of 23. Sequentially, administrative expenses increased by 1.4%, but decline as by 20 basis points as a percentage of revenues.

Speaker Change: due to a 26 million impact decrease given that we sponsored Big Brother Brazil in the first quarter. So that's more of a short-term dynamics and it's going to continue to sort of impact positively throughout the year.

Lia Matos: But longer term regarding selling, we continue to invest. And we talked about this, especially scaling our specialist distribution as we continue to move up to onboard larger SMBs within the SMB segments. And as you know, there's a dynamic regarding our selling expenses in distribution, which is with front loads, right, investment in sales. So, there's a front load of OPEX, and the results will come as we continue to onboard those clients. So, we are going to see this impact for a few more quarters, but longer term, we do anticipate gradual dilution in those selling expenses as the sales force materials and we bring in more clients.

Speaker Change: But longer term, regarding selling, we continue to invest, and we talked about this, especially scaling our specialist distribution as we continue to move up to onboard larger SMBs within the SMB segments.

Lia Matos: And as you know, there's a dynamic regarding our selling expenses in distribution, which is with front load, right, investments in sales. So there's a front load of OPEX and the results will come as we continue to onboard those clients. So we are going to see this impact for a few more quarters, but longer term we do anticipate gradual dilution in those selling expenses as the sales force matures and we bring in more clients. If I may add, Mario, Mateus here.

Speaker Change: And as you know, there's a dynamic regarding our selling expenses in distribution, which is with front load, right, investments in sales, so there's a front load of OPEX, and the results will come as we continue to onboard those clients.

Mateus Schwening: This was reason by lower expenses in the software segment due to efficiency gains, as well as by the divest enough in 5 in the first quarter of 24, which eliminated expenses in the non-allocated segment. Setting expenses increases 27% year over year, and decreases 0.9% worth over quarter, now 80 basis points sequentially as a percentage of revenues. This decrease is primarily due to a reduction of approximately 26 million reais in marketing expenses related to the sponsorship of reality to be shown, like you mentioned, are actually offset by increasing investments in sales teams.

Speaker Change: So, we are going to see this impact for a few more quarters, but longer term, we do anticipate gradual dilution in those selling expenses as the sales force matures and we bring in more clients.

Mateus Schwening: And if I may add, Mateus here, I think in summary and the investments that we're doing in terms of hiring these specialists is not a reaction on any source in terms of reacting to the competitive environment in the short term. It's because we're basically seeing a huge opportunity to build market within SMBs with variable, very profitable type of clients, good unit economics. And our decision is much more of a bottom-up decision and not a reaction to anything that any player is doing.

Mateus Schwening: I think in summary, the investments that we're doing in terms of hiring these specialists is not a reaction on any sort in terms of reacting to the competitive environment in the short term. It's because we're basically seeing a huge opportunity to go up market within S&Ds with very profitable type of clients, good unit economics. And our decision is much more of a bottom-up decision and not a reaction to anything that any player is doing. Now that's clear. Can you just give us like a sense of the size of, you know, how many people are we talking about?

Mario: And if I may add, Mario, Mateus is here. I think in summary, the investments that we're doing in terms of hiring these specialists is not a reaction on any sort in terms of reacting to the competitive environment in the short term.

Mateus Schwening: Looking ahead, we anticipate gradual dilution of selling expenses as these investments in sales teams mature. Financial expenses decreased by 20% year over year, and decreases for and a half percent sequension, leading to a 230 basis point reduction as a percentage of revenues. This decrease was a result of lower average to the end of the period, a reduction in our funding spreads, and our decisions This effects were partially obsessed by higher funding needs for our prevailing and predator variations, as well as by a higher number of working days in the quarter.

Speaker Change: It's because we're basically seeing a huge opportunity to go upmarket within SMBs with very profitable type of clients, good unit economics and our decision is much more of a bottom-up decision and not a reaction to anything that any player is doing.

Mateus Schwening: Now, that's clear. Can you just give us like a sense of the size of how many people are we talking about? We don't disclose the breaks on Mario, but I think the way to see this is it's kind of proportional to the distribution of the, of the 10, right. When we talk about what we call medium clients, so the larger SMDs, naturally from a density perspective, they're less of them spread throughout the country, right. So we always kind of allocate sales teams in terms of the opportunity that we see locally in terms of the time.

Speaker Change: Now that's clear. Can you just give us like a sense of the size of, you know, how many people are we talking about?

Mateus Schwening: We don't disclose the breakdown, Mario, but I think the way to see this is it's kind of proportional to the distribution of the TAM, right? We have when we talk about what we call medium clients, so the larger SMBs, naturally from a density perspective, there are less of them spread throughout the country, right? So we always kind of allocate sales teams in terms of the opportunity that we see locally in terms of the TAM. And although there are less medium clients within a specific hub or within a specific region, these clients have very attractive economics, right? They have larger CPV.

Speaker Change: We don't disclose the breakdown, Mario, but I think the way to see this is it's kind of proportional to the distribution of the TAM, right?

Speaker Change: When we talk about what we call medium clients, so the larger SMBs, naturally from a density perspective, there are less of them spread throughout the country, right? So we always kind of allocate sales teams.

Mateus Schwening: Lastly, other expenses increased 26% year over year, and 80% sequentially, or 140 basis points as a percentage of prevalence. These variation was a result of marginalized levels of shared-based compensation expenses. As the first quarter of 24, included an all recurring positive impacts of 40.5 million reais from the net effect of the cancellation and new rents of incentive plans. Excluding the effects, other expenses net would have been flatish as a percentage of prevalence.

Speaker Change: in terms of the opportunity that we see locally in terms of the TAM.

Mateus Schwening: And although there are less medium clients within a specific hub or within a specific region, these clients have very attractive economics, right. They have larger CPV. There's a lot of opportunity to upsell credit. So we kind of see this from the perspective of the addressable market. And if you think about the overall sales force, specialists are a smaller percentage of that. And pretty much in line with, you know, the distribution of the addressable markets.

Speaker Change: And although there are less medium clients within a specific hub or within a specific region,

Speaker Change: These clients have very attractive economics, right? They have larger CPV, there's a lot of opportunity to upsell credit.

Mateus Schwening: There's a lot of opportunity to upsell credit. So, we kind of see this from the perspective of the addressable market, and if you think about the overall sales force, specialists are a smaller percentage of that, and pretty much in line with, you know, the distribution of the addressable market. Okay, thank you very much.

Speaker Change: We kind of see this from the perspective of the addressable market, and if you think about the overall sales force, specialists are a smaller percentage of that, and pretty much in line with, you know, the distribution of the addressable markets.

Mateus Schwening: During his life for a teen, our adjustment as cash position was 5.3 billion reais by the end of the quarter, reflecting an increase of almost one billion reais year over year, and 117 million reais for the quarter. We continue to live like that towards the expansion of our credit portfolio, and executing on our share-by-back program in the amount of 237 million reais this quarter. As we mentioned, I would like to highlight that in July, we are located careful to reperchise an additional 9.6 million shares, amounting to 724 million reais, nearly completing the 1 billion reais by-back per purchase program announced in November 2023. Additionally, we are located 295 million dollars in July, so the standard offer for around 2028 months, which will further optimise our funding spread as we move forward.

Mario Pierry: Okay, thank you very much.

Mario Pierry: Thanks, guys. Thanks, Mario.

Speaker Change: Okay, thank you very much. Thanks, guys.

Mario: Thanks, Mario.

Eduardo Rosman: Our next question comes from Eduardo Rosman with BTG.

Speaker Change: Our next question comes from Eduardo Rosma, with BTG.

Eduardo Rosman: You can open your microphone. Hi everyone, congrats on the numbers. I have two questions here. The first one is a follow-up to what I asked during the last conference call, and it's what about the software division, right?

Speaker Change: You can open your microphone.

Unknown Executive: Thanks, guys. Thank you. Our next question comes from Eduardo Rosman, and open your mic. Hi, hi everyone.

Eduardo Rosman: Congrats on the numbers. I have two questions here. The first one is a follow-up to what I asked during the last conference call. And it's what about the software division, right? Why not consider divesting from a least part of it given that the number of verticals likely to have synergies with stone is not that large. So that's the first one.

Pedro Zinner: And the second one is kind of a follow-up as well on the competitive front. We saw a big surge in the number of acquisitions in recent years. What do you think about this marketing in terms of consolidation? Do you see room for MNAs in the sector? So that would be the second question. Thanks a lot. Hi Rosman, Pedro here.

Eduardo Rosma: Hi, hi everyone, congrats on the numbers. I have two questions here.

Eduardo Rosma: The first one is a follow-up to what I asked during the last conference call and it's what about the software division, right? Why not consider divesting?

Eduardo Rosman: Why not consider it divesting from a least part of it to given that the number of verticals likely to have synergies with Stone is not that large, so that's the first one. And the second one is kind of a follow-up as well on the comparative front. We saw a big surge on the number of acquires in recent years. You know, what do you think about, you know, these marketing in terms of consolidation? Do you see room, you know, for M and A, you know, in the sector. So that would be the second question.

Speaker Change: from a least part of it, given that the number of verticals likely

Speaker Change: to have synergies with stones not that large, so that's the first one. And the second one is kind of a follow-up as well on the comparative front.

Speaker Change: We saw a big surge on the number of acquirers in recent years, you know, what do you think about, you know, these marketing in terms of consolidation? Do you see room, you know, for M&As, you know, in the sector? So that would be the second question. Thanks a lot.

Mateus Schwening: Finally, let's move to his life 16 to discuss our earnings. We are very pleased with our performance in the first half of the year. The profitability achieved in the first half of 24 has positioned us favourably to meet our over-year guidance, despite several headwinds. This includes 120 million reais reduction in revenues, due to the changes in recognition of membership fee revenues, and a challenging macroeconomic environment with a higher yield curve. In our banking credit solutions, which are key drivers for our long-term growth, we have exceeded initial expectations, not only in volume, but also in quality.

Eduardo Rosman: Thanks a lot.

Pedro Vina: Hi, Rosman, Pedro. Here, thank you for the question. On the first one, I think we remain focused on executing the strategy. We unveiled at our Investor Day. I think in software, our efforts really concentrated on driving cross health in our priority verticals and improving overall business efficiencies. And I think you can see that from the results that we presented. So, while we are pleased with the progress we made so far, I think we do recognize that there is still work to be done on both fronts, right?

Pedro Zinner: Thank you for the question. I think on the first one, I think we remain focused on executing the strategy we unveiled at our investor day. I think in software, our efforts are really concentrated on driving cross-sell in our priority verticals and improving overall business efficiency. And I think I think you can see that from the results that we presented. So while we are pleased with the progress we made so far, I think we do recognize that there is still work to be done on both fronts. Right.

Speaker Change: Hi, Rosman, Pedro here. Thank you for the question.

rosman: I think on the first one, I think we remain focused on executing the strategy we unveiled at our investor day.

Speaker Change: I think in software our efforts are really concentrated on driving cross-hell in our priority verticals and improving overall business efficiencies.

Speaker Change: And I think you can see that from the results that we presented. So while we are pleased with the progress we made so far, I think we do recognize that there is still work to be done on both fronts, right?

Mateus Schwening: This strong performance makes Buddha's contract surpass our year-end guidance in his areas. From my perspective, the most challenging area so far has been our MSNB transit fee. Big share cost penetration in the market and within our plant days has been higher than we anticipated when setting our guidance in November of last year. These has affected our overall volume meets towards less hearted PZ and more fixed share cost to PZ. Although this trend is positive for the business, it also means that current to PZ is growing a little tighter within our expected range.

Pedro Zinner: And regarding the potential sale. I'd like to emphasize that we're not selling the asset. I think in some ways, there have been some rumors.

Pedro Vina: And regarding the potential sale, I'd like to emphasize that we're not selling the asset. I think in some ways, there's been some rumors, and what we said is that we continually evaluate all options to maximize value from our assets. And really allocate capital within the company, but our focus at this point in time is really on executing the strategy. We have laid out.

Speaker Change: And regarding the potential sale.

Speaker Change: I'd like to emphasize that we're not selling the assets.

Pedro Zinner: And what we said is that we continually evaluate all options, to maximize value from our assets, and really allocate capital within the company. But our focus at this point in time is really on executing the strategy we have laid out. And on the second question, could you please apologize, but can you please repeat?

Speaker Change: I think in some ways there have been some rumors and what we said is that we continually evaluate all options.

Speaker Change: to maximize value from our assets.

Speaker Change: and really allocate capital within the company, but our focus at this point in time is really on executing the strategy we have laid out.

Eduardo Rosman: And on the second question, could you please apologize, but can you please repeat? Yes, no, it's in terms of the consolidation, right? We saw a big number of acquires and payment companies come into the market in recent years. Many of them actually don't have probably the scale. We do have the ones linked to the big banks, which are becoming kind of a cost center.

Speaker Change: And on the second question, could you please, I apologize, but can you please repeat?

Eduardo Rosman: Yes, yes. No, it's in terms of the consolidation, right? We saw like a big number of acquirers and payment companies, you know, coming to the market in recent years, you know, many of them naturally they don't have probably the scale, right? We do have the ones linked to the big banks, you know, which are becoming kind of a cost center, you know. So how do you guys see, you know, the market evolving? Do you see room for consolidation? Rosman, let me highlight our view on the competitive environment regarding number of players and then pass it over to Pedro to complete the answer.

Mateus Schwening: We ended the first half of 24 with 18% growth, exactly in line with our guidance. Despite the mark challenging comparable raising the second half of 24, we remain later focused on our efforts to meet this guidance. Over all, I believe our second part of the results are training feverly and we are on track to achieve our long-term goals.

Speaker Change: Yes, yes. No, it's in terms of, let's say, consolidation, right? You had, we saw like a big number of acquirers and payment companies, you know.

Speaker Change: coming to the market in recent years, you know, many of them naturally don't have, probably the scale, right? We do have the ones linked to the big banks, you know, which are becoming kind of a cost center. So how do you guys see, you know, the market evolving, do you see room for consolidation? One more.

Eduardo Rosman: So how do you guys see the market evolve into a room for consolidation?

Operator: With that said, operator can be a little bit of a call of professions. Okay, at this time we are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions. We do ask that when you pose your question, that you pick up your headset, to provide optimum sound quality. Please hold while we pull for questions.

Lia Matos: Awesome, let me highlight our view on the competitive environment regarding a number of players and then pass it over to Peter to complete the answer. So if anything, I think we see less players entering the markets over the last couple of years, right? I think this dynamic has been much more intense in the past. What we do see is different players being relevant within each segment of the market. So Michael, there's a very clear competitive landscape. I think this is differently. It's different as you move up. Naturally, we complete more with incumbents. But I think the overall trends of, you know, five key players, more or less playing out consistently in terms of market sure evolution.

Speaker Change: Let me highlight our view on the competitive environment regarding number of players and then pass it over to Pedro to complete the answer. So if anything, I think we see less players entering the market over the last couple of years, right? I think this dynamic has been much more intense in the past.

Mateus Schwening: So, if anything, I think we see less players entering the market over the last couple of years, right? I think this dynamic has been much more intense in the past. What we do see is different players being relevant within each segment of the market. So micro, there's a very clear competitive landscape. SMBs, it's different as you move up.

Pedro Zinner: What we do see is different players being relevant within each segment of the market. So micro, there's a very clear competitive landscape.

Mario Pierry: Our first question comes from Mario Pierry with Bank of America. You can open your microphone. Hi, guys. Good afternoon. Congratulations on the results. Let me ask your question about competition. How have you seen any changes in the competitive environment? Over the last three months, especially coming from maybe some of the incumbent banks and any changes at Seattle? Because we did notice that you increase or you talked about making higher investments in your sales team.

Pedro Zinner: S&Bs, it's different as you move up, naturally we compete more with incumbents, but I think the overall trends of, you know...

Mateus Schwening: Naturally, we compete more with incumbents, but I think the overall trends of, you know, five key players more or less playing out consistently in terms of market share evolution, I think that has kind of been consistent. And the group which ABEX calls other does gain share as a group. But I don't think that there's been a lot of difference in who those players are.

Pedro Zinner: Five key players, more or less, playing out consistently in terms of market revolution. I think that has kind of been consistent.

Lia Matos: I think that has kind of been consistent, and the group, which are back called other, does gain share the group, but I don't think that there's been a lot of difference in who those players are. Yeah, so I think from the competitive dynamics front, I don't think that we see a lot of change. If anything, we see less intense, like new entrance and new players coming into the market more recently.

Speaker Change: and the group which ABEX calls OTHER does gain share of the group.

Speaker Change: But I don't think that there's been a lot of difference in who those players are.

Mateus Schwening: Yeah, so from the competitive dynamics front, I don't think that we see a lot of change. If anything, we see less intense competition, like new entrants and new players coming into the market more recently. Pedro, do you want to complete?

Speaker Change: Um...

Speaker Change: Yeah, so I think from the competitive dynamics front, I don't think that we see a lot of change. If anything, we see less intense, like, new entrants and new players coming into the market more recently. Pedro, do you want to complete on that? No, I don't believe that there are many other points to highlight.

Mario Pierry: Can you, you know, so like I wanted to understand that a little bit better. Why, why are you investing sales team? Do you think like you have a disadvantage? You catch him up or you see a more competitive environment? If you're seeing a competitive environment, if you can discuss like how you sing out, take rates trending. Thank you.

Lia Matos: I don't know. I don't know if that many other points to highlight this; I agree with you. They're not really any big news regarding the competitive environment. I think it's been quite stable over the past. and a couple of quarters, and no big changes on this round.

Pedro Zinner: No, I don't believe that there are many other points to highlight. Just briefly, there's not really any big news regarding the competitive environment. I think it's been quite stable over the past couple of quarters and no big changes this round. Great, thanks a lot.

Speaker Change: I agree with you, there are not really any big news regarding the comparative environment. I think it's been quite stable over the past. Thank you very much.

Pedro Zina: Hi, Mario. Pedro here. Thank you for the question. I'll jump start and then I'll pass over to Leah to make further comments. Well, I think on the pricing piece. I think the way we see it is it has become really a dynamic process within the company, meaning that we we continuously evaluate the profitability of our cohorts and we adjust prices accordingly. So in terms of the new interest rate environment and competition, I think we gradually incorporate the new curve and changes in the competition environment in our decision making.

Speaker Change: A couple of quarters and no big changes on this round.

Eduardo Rosman: Great, thanks a lot.

Speaker Change: Great, thanks a lot.

Eduardo Rosman: Thanks, Hoffman. Thank you.

Unknown Executive: Thanks, Cosmo. Thank you. Our next question comes from Neha Agarwala with HSP, can open your. Hi, congratulations on the results and thank you for taking my question.

Neha Agarwala: Our next question comes from Neha Agarwala with HSBC. You can open your microphone. Hi, congratulations on the results, and thank you for taking my question. On the opposite side, the delivery so far has been quite strong. Despite some amount of expenses, is there an upside to your guidance? Could you have better costs than that could drive your bottom line? Are there any other costs or investments that you're looking to make that could weigh in on the second half of the year?

Speaker Change: Thank you very much. Thank you very much. Thank you very much.

Speaker Change: Our next question comes from Niha Agarwala with HSBC. You can open your microphone.

Niha Agarwala: Hi, congratulations on the results and thank you for taking my question.

Neha Agarwala: On the OPEC side, delivery so far has been quite strong despite some amount of expenses. Is there an upside to your guidance, could you have better costs and that would drive your bottom line, or are there any other costs or investments that you're looking to make that could weigh in on the second half of the year? And my second question is on the credit book. The originations I saw for this quarter's disbursements were slightly down for the quarter.

Speaker Change: On the OPEC side, the delivery so far has been quite strong despite some amount of expenses.

Niha Agarwala: Is there an upside to your guidance? Could you have better costs and that would drive your bottom line or are there any other costs or investments that you're looking to make that could weigh in on the second half of the year?

Pedro Zina: And I think we evaluate the economics of passing through the shifts into our clients, but I think as a direction, I think we will continue to prioritize profitability and to price based on returns. Still on the competition piece, I'm not going to address specifically on the sale of these, but I think the market has evolved a lot. And I think other players have been behaving in a similar way. Right. Just another point I wanted to highlight is, is that more and more, we have more levers to price the relationship with clients who the bundles.

Mateus Schwening: Any particular dynamics there? The NPL ratio is increasing as expected, but are you comfortable with the risk? If you can share more color about the uptake of the working capital, is it directed more towards the SMBs? Any particular type of merchant who is more willing to take the loan or whom you are more willing to lend to? Any color on the credit book would be very helpful.

Neha Agarwala: And my second question is on the credit book. The originations are for this quarter. This was mostly down for quarter. Any particular dynamics there. The NPL ratio is increasing as expected, but are you comfortable with the risk if you can share more color about the uptake of the working capital is directed more towards the SMBs, any particular type of merchants who are more willing to take the loan or whom you are more willing to lend to? Any color on the credit book would be very helpful.

Speaker Change: And my second question is on the credit book. The originations I saw this for the disbursements were slightly downpours on water. Any particular dynamics there?

Speaker Change: The NPR ratio is increasing as expected, but are you comfortable with the risk? If you can share more color about the uptake of the working capital, is it directed more towards the SMBs?

Speaker Change: Any particular type of merchants who are more willing to take the loan, or whom you are more willing to lend to, any color on the credit book would be very helpful.

Pedro Zina: As the core of our strategy between payments, banking credit and software. So I think to some extent, this, this is a kind of a hedge against short terms, interest rate dynamics and in some ways on the competition side.

Neha Agarwala: Thanks for the question.

Mateus Schwening: Thanks for the question, Neha. Mateus here. I'll start by addressing the credit one and then we'll talk about all. So regarding credit, in terms of quality, I think we're really happy with the performance of the portfolio, so no worries whatsoever. But in terms of growth, I think the message here is that when we think about the growth and disbursements, it's not going to be linear over time. What we're doing now is that basically we're making a series of experiments to test new criteria in the cohort. And whenever the results from those tests are positive.

Neha Agarwala: I'll start by addressing the credit one, and then we talk about topics. So, regarding credit in terms of quality, I think we're really happy with the performance of the portfolio, so no worries whatsoever. But in terms of growth, I think the message here is that when we think about the growth in these merchants, it's not going to be linear over time. What we're doing now is that basically what we're making a series of experiments to test new criteria in the cohorts. And whenever the results from those tests are positive, we will allow to new offerings, and then we unlock a bigger wave of this birthment that has been the behavior of the best part as well.

Speaker Change: Thanks for the question, Mateus here. I'll start by addressing the credit one and then we'll talk about topics.

Noronha: So regarding credit, in terms of quality, I think we're really happy with the performance of tempered volumes, so Noronha is whatsoever.

Lia Matos: I'll pass over to Lia to talk about the selling.

Speaker Change: But in terms of growth, I think the message here is that when we think about the growth and disbursement, it's not going to be linear over time.

Lia Matos: Hi, Mario, Lia here. So, talking a little bit about dynamics around selling. I think there's two relevant dynamics to highlight. First is more of a short term discussion, which is we've already seen a reduction in selling expenses as a percentage of revenue. As Mateus mentioned, due to 26 million in impact decrease given that we sponsored big brother Brazil in the first quarter. So, that's more of a short term dynamics. And it's going to continue to sort of impact positive throughout the year.

Speaker Change: What we're doing now is that basically we're making a series of experiments to test new criteria in the cohorts.

Speaker Change: And whenever the results from those tests are positive...

Mateus Schwening: We roll out new offerings and then we unlock a bigger wave of disbursement. That has been the behavior of the past quarters as well. And when we look at the guidance, we guided for a portfolio above 800 million by the year-end, we're already with 712 million the first half of the year. So actually, when we compare to our plan, even though the disbursement for this quarter was a little bit smaller than the previous one, we're actually above the initial plan.

Speaker Change: We roll out new offerings and then we unlock a bigger wave of disbursement. That has been the behavior of the past quarters as well.

Neha Agarwala: And when we look at the guidance, we guided for a portfolio above 800 million by the year ends. We're already with 712 million, the first half of the year. So actually, when we compare to our plan, even though the disbursement for this part of us is a little bit smaller than the previous one, we're actually above the initial plan. And that said, when we look ahead, I'd say in terms of the economics of the product, we're becoming increasingly comfortable over time. I think the challenge and the opportunity now is that there is a lot to be done in terms of improving the conversion of the appropriate pool, but also increasing the percentage of clients to which we extend a credit line as a result of those tests.

Speaker Change: And when we look at the guidance, we guided for a portfolio above 800 million by the year-end. We're already with 712 million the first half of the year.

Mateus Schwening: But longer term regarding selling, we continue to invest. And we talked about this especially scaling our specialist distribution as we continue to move up to onboard larger SMBs within the SMB segments. And as you know, there's a dynamic regarding our selling expenses in distribution, which is with front loads, right, investment in sales. So, there's a front load of OPEX and the results will come as we continue to onboard those clients. So, we are going to see this impact for a few more quarters, but longer term, we do anticipate gradual dilution in those selling expenses as the sales force materials and we bring in more clients.

Speaker Change: So actually when we compare to our plan, even though the disbursement for this quarter was a little bit smaller than the previous one, we're actually above the initial plan.

Mateus Schwening: And that said, when we look ahead, I'd say in terms of the economics of the product, we're becoming increasingly comfortable over time. I think the challenge and the opportunity now are that there is a lot to be done in terms of improving the conversion of the approved pool and also increasing the percentage of clients to which we extend credit lines as a result of those tests. Keep in mind that when we look at the product nowadays, it's still pretty much fully digital, so with very low participation from the distribution channels, which is key in terms of increasing conversion and penetration in the future. So, that's pretty much the message around credit. On the OPEC side,

Speaker Change: And that said, when we look ahead, I'd say in terms of the economics of the product, we're becoming increasingly comfortable over time.

Speaker Change: I think the challenge and the opportunity now is that there is a lot to be done in terms of improving the conversion of the approved pool, but also increasing the percentage of clients to which we extend a credit line as a result of those tests.

Neha Agarwala: Keep in mind that when we look at the product nowadays, it's still pretty much fully digital. So with very low participation from the distribution channels, which is key in terms of increasing conversion and penetration in the future.

Speaker Change: Keep in mind that when we look at the product nowadays, it's still pretty much fully digital, so with very low participation from the distribution channels, which is key in terms of increasing conversion and penetration in the future.

Mateus Schwening: And if I may add, Mateus here, I think in summary and the investments that we're doing in terms of hiring these specialists is not a reaction on any source in terms of reacting to the competitive environment in the short term. It's because we're basically seeing a huge opportunity to build market within SMBs with variable, very profitable type of clients, good unit economics. And our decision is much more of a bottom-up decision and not a reaction to anything that any player is doing.

Neha Agarwala: So that's pretty much the message around credits. And on the other side, I think we're correct. We had a good performance in the first half of the year. Euroneer, especially on the administrative expenses. When we look at administrative expenses, it's down 13% a year on year when we look at the second queue. We guided actually for a growth, right? So it's becoming market year that we're probably going to land with up signs in that line.

Speaker Change: So that's pretty much the message around credits.

Mateus Schwening: I think you are correct, we had a good performance in the first half of the year, especially in the administrative expenses. When we look at administrative expenses, they're down 13% year-on-year when we look at the second queue. We guide it for our growth, right?

Speaker Change: On the OPEC side,

Speaker Change: I think you are correct. We had a good performance in the first half of the year.

Speaker Change: especially on the administrative expenses.

Speaker Change: When we look at administrative expenses it's down 13% year-on-year when we look at the second Q. We guide it actually for our growth, right?

Mateus Schwening: So it's becoming more clear that we're probably going to land with upside in that line. But more broadly, when we think about operational leverage looking ahead, I think the message here is twofold. So within the operation, when you look at selling expenses and cost to serve specifically, I think we should continue to see operational leverage in the next quarter. So there's still work to be done there. We're probably also going to see tax rates converging more towards the bottom of the range that we provided, the 20 to 25% range.

Speaker Change: So it's becoming market year that we're probably going to land with upside in that line.

Neha Agarwala: But more broadly, when we think about operational leverage, looking ahead, I think the message here is twofold. So within the operation, when we look at selling expenses and costs to serve, specifically, I think we should continue to see operational leverage in the next quarter. So there's fewer to be done there. We're probably also going to see tax rates conversion mark towards the bottom of the range that we provided that went into 25% range. I think the place where it's going to become more challenging the second half is probably going to be financial expenses, simply given to the fact that interest rates are expected to increase in the second half versus decreasing the first half.

Mario Pierry: Now, that's clear. Can you just give us like a sense of the size of how many people are we talking about? We don't disclose the breaks on Mario, but I think the way to see this is it's kind of proportional to the distribution of the, of the 10, right. When we talk about what we call medium clients, so the larger SMDs, naturally from a density perspective, they're less of them spread throughout the country, right.

Speaker Change: But more broadly, when we think about operational leverage looking ahead, I think the message here is twofold.

Speaker Change: So within the operation, when we look at sending expenses and costs to serve, specifically, I think we should continue to see operational leverage in the next quarter, so there's still work to be done there. [inaudible]

Speaker Change: We're probably also going to see tax rates converging more towards the bottom of the range that we provided, the 20 to 25 percent range.

Mateus Schwening: I think the place where it's going to become more challenging in the second half is probably going to be financial expenses. Simply given to the fact that interest rates are expected to increase in the second half versus decreasing in the first half.

Speaker Change: I think the place where it's going to become more challenging in the second half is probably going to be financial expenses, simply given to the fact that interest rates are expected to increase in the second half versus decreasing in the first half.

Mario Pierry: So we always kind of allocate sales teams in terms of the opportunity that we see locally in terms of the time. And although there are less medium clients within a specific hub or within a specific region, these clients are have very attractive economics, right. They have larger CPV. There's a lot of opportunity to upsell credit. So we kind of see this from the perspective of the addressable market. And if you think about the overall sales force, specialists are a smaller percentage of that. And pretty much in line with, you know, the distribution of the addressable markets.

Neha Agarwala: And we also did a sizable buyback, right, which is a creative when we look at EPS over time, but has a short-term negative impact to the panel. So those are pretty much the main movements that we see going ahead.

Mateus Schwening: And we also did a sizable buyback, right, which is a creative when you look at EPS over time, but has a short-term negative impact to the P&L. So those are pretty much the main movements that we see going ahead. Very helpful. Thank you so much. Our next question comes from Tiago Binsfeld with Goldman Sachs, and Open Air Microsoft Office Word Document MSWordDoc Word. Document.8, Hi, everyone.

Speaker Change: And we also did a sizable buyback, right, which is a creative when you look at EPS over time, but has a short-term negative impact to the P&L. So those are pretty much the main movements that we see going ahead.

Neha Agarwala: Very helpful. Thank you so much.

Speaker Change: Very helpful, thank you so much.

Tiago Binsfeld: Our next question comes from Thiago Beansfeld with Goldman Sachs. You can open your microphone. Hi, everyone. Thank you for taking questions.

Speaker Change: Our next question comes from Tiago Binsfeldt with Goldman Sachs.

Mario Pierry: Okay, thank you very much. Thanks guys. Thanks, Mario.

Speaker Change: You can open your microphone. Thank you very much.

Tiago Binsfeld: Thank you for taking questions. The first one is on information that has been an area of challenge. So I wonder how you see the evolution of the PICC agenda. We're following news of PICC set today.

Tiago Binsfeld: The first one is on the information that he has been an area of challenge. So I wonder how you see the evolution of the agenda will fall in use of things that today we also see within the open bank and agenda some initiatives we know direct payment. So are you preparing for those changes, and there can be a meaningful impact to TV, and I can ask my second question after that. Thank you.

Tiago Binsfeldt: I have everyone. Thank you for taking questions. The first one is on peak. I think you mentioned that this has been an area of challenge. Thank you very much.

Eduardo Rosman: Our next question comes from Eduardo Rosman with BTG. You can open your microphone. Hi everyone, congrats on the numbers. I have two questions here. The first one is a follow-up to what I asked during the last conference call and it's it's what about the software division, right? Why not consider it divesting from a least part of it to given that the number of verticals likely to have synergies with stone is not that large, so that's the first one.

Tiago Binsfeldt: So I wonder how you see the evolution of the PICC agenda. We're following news of PICC set to pay. We also see within the open banking agenda some initiatives with no direct payment.

Tiago Binsfeld: We also see within the open banking agenda some, Initiatives do not direct payment. So how are you preparing for those changes? And do you think there can be a meaningful impact to CTV? And I can ask my second question after that. Hi Shabo, I believe it was chopping a little bit, the whole question is around peak dynamics, correct? Yeah, that's right, Lia.

Speaker Change: So how are you preparing for those changes and do you think there can be a meaningful impact to CTV? And I can ask my second question after that. Thank you.

Lia Matos: Hi, Thiago. I believe that it was chopping a little bit.

Speaker Change: Hi Shabo, I believe it was a chopping a little bit. The whole question is around peak dynamics, correct?

Lia Matos: The whole question is around fixed dynamics. Correct. Yeah, that's right, Leah. Perfect. So let me give an overview of fixed dynamics in terms of the performance and then how we see the outlook regarding big. So I think the first message is we continue to see strong growth from increased penetration of peak QR code. The dynamic QR code, which is the peak that we see as a payment method, right. That's been through both within our base and the market based on central bank figures. So that's been an evolution beyond our expectations. At the beginning of the year.

Eduardo Rosman: And the second one is kind of a follow-up as well on the comparative front. We saw a big surge on the number of acquires in recent years, you know, what do you think about, you know, these marketing in terms of consolidation, do you see room, you know, for M and age, you know, in the sector. So that would be the second question. Thanks a lot.

Shabo: Yeah, that's right, Lia.

Lia Matos: Perfect. So let me give an overview of PICS dynamics in terms of the performance and then how we see the outlook regarding PICS. I think the first message is we continue to see a strong growth from increased penetration of PIX QR code, dynamic QR code, which is the PIX that we see as a payment method, right? That's been true both within our base and the market based on central bank figures. So that's been an evolution beyond our expectations at the beginning of the year.

Speaker Change: Perfect, so let me give an overview of PICS dynamics in terms of the performance and then how we see the outlook regarding PICS.

Speaker Change: I think the first message is we continue to see a strong growth from increased penetration of PICS QR codes, dynamic QR codes, which is the PICS that we see as a payment method, right? That's been true both within our base and the market based on central bank.

Pedro Zina: Hi, Rosman, Pedro. Here, thank you for the question. On the first one, I think we remain focused on executing the strategy. We unveiled at our investor day. I think in software, our efforts really concentrated on driving cross health in our priority verticals and improving overall business efficiencies. And I think you can see that from the results that we presented. So while we are pleased with the progress we made so far, I think we do recognize that there is still work to be done on both fronts, right?

Speaker Change: figures, so that's been a

Speaker Change: In evolution, beyond our expectations,

Lia Matos: So PIX penetration is now higher than we initially expected. I think for us, this is a net positive, right? As we said many times before, because number one, we see PIX as being incremental to our overall volume.

Lia Matos: So fixed penetration is now higher than we initially expected. I think for us, this is a net positive, right as we said many times before because number one, we see peaks as being incremental for overall volumes. So if you look at the overall, I think the way to illustrate this is the following: if you look at electronic penetration and how that has evolved as a percentage of household consumption over the past year. We see that penetration of credit has more or less rooming stable, even slightly increasing year on year. While if you look at the sum of debit plus fixed plus pre-paid volumes, this has increased significantly, right.

Speaker Change: at the beginning of the year. So peaks penetration is now higher than we initially expected. I think for us, this is a net positive, right? As we've said many times before, because

Speaker Change: Number one, we see peaks as being incremental to our overall volumes.

Lia Matos: So, if you look at the overall, I think the way to illustrate this is a follow, if you look at electronic penetration and how that has evolved as a percentage of household consumption over the past year, we see that penetration of credit has more or less rooming stable, even slightly increasing year on year, while if you look at the sum of debit plus big plus pre-paid volumes, this has increased significantly, right? From 25% around the year ago, around 33% today, so what this means to us is that this volume is taking, there is a flight cannibalization of debit, but overall it's taking volume from cash, so the reason why it's accreted for us is because we monetize this in line with net MDRs for debit, but it is accreted from the perspective of more engagements with our banking solutions, and naturally more cash in and more overall deposits, so kind of, that's kind of the big message, which around fixed performance so far.

Speaker Change: So if you look at the overall, I think the way to illustrate this is the following, if you look at electronics penetration and how that has evolved as a percentage of household consumption over the past year, we see that

Pedro Zina: And regarding the potential sale, I'd like to emphasize that we're not selling the asset. I think in some ways, there's been some rumors and what we said is that we continually evaluate all options to maximize value from our assets. And really allocate capital within the company, but our focus at this point in time is really on executing the strategy. We have laid out.

Speaker Change: Penetration of credit has more or less remained stable, even slightly increasing year on year.

Speaker Change: While if you look at the sum of debit plus fixed plus prepaid volumes this has increased significantly right from 25% around a year ago to around 33% today so what this means to us is that

Lia Matos: From 25% around the year ago to around 33% today. So what this means to us is that this volume is taking, there is a slight cannibalization of debit, but overall is taking volume from cash. So the reason why it's a creative for us is because we monetize this in line with met MDRs for debit, but it is a creative from the perspective of more engagement with our banking solutions and naturally more cash in and more overall deposits.

Lia Matos: And on the second question, could you please apologize, but can you please repeat? Yes, no, it's in terms of the consolidation, right? We saw a big number of acquires and payment companies come into the market in recent years. Many of them actually don't have probably the scale. We do have the ones linked to the big banks, which are becoming kind of a cost center. So how do you guys see the market evolve into a room for consolidation?

Speaker Change: This volume is taking, there is a slight cannibalization of debit, but overall it's taking volume from cash. So the reason why it's secretive for us is because we monetize this in line with net MDRs for debit.

Speaker Change: But it is appreciative from the perspective of more engagement with our banking solutions.

Speaker Change: and naturally more cash in and more overall deposits. So kind of, that's kind of the big message around fixed performance so far. When we look ahead, I think there's a roadmap right that we know that the central bank has put out. There's an evolution around fixed NSC.

Lia Matos: So, kind of that's kind of the big message around fixed performance so far.

Lia Matos: When we look ahead, I think there's a roadmap crisis we know that the central bank has put out, there's an evolution around fixed NFC, I guess our take on this is the following. All of this evolution opens up opportunities for us to improve client experience, for us to evolve our product development roadmap around the PIX rails. So there's a lot that we have already developed on PIX rails, and there's a lot that we will continue to do.

Lia Matos: When we look ahead, I think there's a roadmap, right, that we know that the central bank has put out. There's an evolution around fixed NFC, and I guess I take on this as the following. All of this evolution opens up opportunities for us to improve client experience, for us to evolve our product development roadmap around the big trails. So there are a lot of there's a lot that we have already developed on big trails. And there's a lot that we will continue to do. We think that big NFC may accelerate the cannibalization of that volume as I just described.

Lia Matos: Awesome, let me highlight our view on the competitive environment regarding a number of players and then pass it over to Peter to complete the answer. So if anything, I think we see less players entering the markets over the last couple of years, right? I think this dynamic has been much more intense in the past. What we do see is different players being relevant within each segment of the market. So Michael, there's a very clear competitive landscape.

Speaker Change: and...

Speaker Change: I guess our take on this is the following, all of this evolution opens up opportunities for us to improve client experience.

Speaker Change: for us to evolve our product development roadmap around the PICS rails. So, there's a lot that we have already developed on PICS rails and there's a lot that we will continue to do.

Lia Matos: We think that PIX NFC may accelerate the cannibalization of debit volumes, as I just described, because it's gonna greatly improve the user experience, right, around paying through PIX. But as I just said, I think this is a creative for us. And our mission here is to make sure that we stay ahead of the central bank roadmap, kind of anticipating how we can turn this regulatory evolution into better products and better solutions for our clients.

Lia Matos: I think this is differently. It's different as you move up. Naturally, we complete more with incumbents. But I think the overall trends of, you know, five key players, more or less playing out consistently in terms of market sure evolution. I think that has kind of been consistent and the group, which are back called other does gain share the group, but I don't think that there's been a lot of difference in who those players are.

Speaker Change: We think that BIX NFC may accelerate the cannibalization of debit volumes, as I just described.

Lia Matos: We can improve the user experience around being through big. But, as I just said, I think this is a reason for us. And our mission here is to make sure that we stay ahead of the central bank roadmap, kind of anticipating how we can turn this regulatory evolution into better products and better solutions for our clients.

Speaker Change: because it's going to greatly improve the user experience right around paying through PIX.

Speaker Change: But as I just said, I think this is a creature for us.

Speaker Change: And our mission here is to make sure that we stay ahead of the central bank's road map, kind of anticipating how we can turn, you know, this regulatory evolution into better products and better solutions for our clients. I think the same is true regarding open banking.

Lia Matos: Naturally, we expect that with more access to data and an ability to create better product experiences, we can also gain from that by giving better experiences and solutions to our clients. So I think that's the overall message. Thank you, Lia.

Lia Matos: I think the same is true regarding open banking. Naturally, we expect that with more access to data and an ability to create better product experience, we can also gain from that by giving better experience and solutions to our clients. So I think that's the overall message.

Lia Matos: Yeah, so I think from the competitive dynamics front, I don't think that we see a lot of change. If anything, we see less intense, like new entrance and new players coming into the market more recently. I don't know. I don't know if that many other points to highlight this, I agree with you. They're not really any big news regarding the competitive environment.

Speaker Change: Naturally, we expect that with more access to data and an ability to create better product experience, we can also gain from that by giving better experience and solutions to our clients. So I think that's the overall message.

Lia Matos: Thank you, Julia. It's helpful color.

Tiago Binsfeld: And if I may, a second question on software, just to follow up, what do you think are the main KPIs we should follow if execution is going according to plan? I think in the past, you may have provided some guidance on margins in that segment. If you could provide an update on that as well would be helpful. Thank you.

Lia Matos: And if I may, a second question on software, just to follow up, what do you think are the main KPIs we should follow? If execution is going according to plan, I think in the past, you may have provided some guidance on margins in that segment, which could provide an update on that as well would be helpful. Thank you. Sure. So good question. So I think the two main metrics for sort of to look out for, which are in line with the two pieces of the strategy that we communicated in the investor day, is number one, how we are evolving in cross-selling financial services to links clients.

Speaker Change: Thank you, Lia. It's helpful color. And if I may a second question on software, just to follow up, what do you think are the main KPIs? We should follow, if execution is going according to plan.

Lia Matos: I think it's been quite stable over the past, and a couple of quarters, and no big changes on this round.

Speaker Change: I think in the past you may have provided some guidance on margins in that segment if you could provide an update on that as well would be helpful. Thank you.

Eduardo Rosman: Great, thanks a lot. Thanks, Hoffman.

Operator: Thank you.

Lia Matos: So good question. So I think the two main metrics for sort of to look out for, which are in line with the two pieces of the strategy that we communicated in the investor day is number one, how we are evolving in cross-selling financial services to Lynx clients. So we disclosed the metric of TPV overlap. TPV is, of course, only one part of the story, right?

Neha Agarwala: Our next question comes from Neha Agarwala with HSBC. You can open your microphone. Hi, congratulations on the results and thank you for taking my question. On the opposite side, the delivery so far has been quite strong. Despite some amount of expenses, is there an upside to your guidance? Could you have better costs than that could drive your bottom line? Are there any other costs or investments that you're looking to make that could weigh in on the second half of the year?

Charles: Sure, Charles.

Speaker Change: Good question. So I think the

Speaker Change: Two main metrics for sort of to look out for which are in line with the

Speaker Change: Soomit

Speaker Change #100: Species of the strategy that we communicated in the investor day is number one how we are evolving in cross-selling financial services to links clients. [inaudible]

Lia Matos: So we disclose the metric of TPV overlap. TPV is, of course, only one part of the story, right? Because, as we get better at cross-selling financial services to software clients, we also want to advance on the banking and on the credit opportunity. But for now, sort of tracking this TPV overlap is an indicator of our traction regarding this part of the strategy. And I think the second big message that we brought out is the opportunity to increase efficiency within the software segments. And so monitoring margin evolution is an important aspect of this, naturally. We did talk about margin behavior this quarter.

Speaker Change #101: So, we disclosed the metric of PPV overlap.

Speaker Change #101: TPV is, of course, only one part of the story, right, because as we get better at cross-selling financial services to software clients, we also want to advance on the banking and on the credit opportunity, but for now, sort of tracking this TPV overlap is an indicator of our traction regarding this part of the strategy.

Lia Matos: Because as we get better at cross-selling financial services to software clients, we also want to advance on the banking and on the credit opportunity. But for now, sort of tracking this TPV overlap is an indicator of our traction regarding this part of the strategy. And I think the second big message that we brought out is the opportunity to increase efficiency within the software segment. And so monitoring margin evolution is an important aspect of this, naturally.

Neha Agarwala: And my second question is on the credit book. The originations are for this quarter. This was mostly down for quarter. Any particular dynamics there. The NPL ratio is increasing as expected, but are you comfortable with the risk if you can share more color about the uptake of the working capital is directed more towards the SMBs, any particular type of merchants who are more willing to take the loan or whom you are more willing to lend to any color on on the credit book would be very helpful. Thanks for the question.

Speaker Change #101: And I think the second big message that we brought out is the opportunity to

Speaker Change #101: Increase efficiency within the software segment.

Speaker Change #101: And so monitoring margin evolution is an important aspect of this, naturally. We did talk about margin behavior this quarter. There was a one-off effect from restructuring costs.

Lia Matos: We did talk about margin behavior this quarter. There was a one-off effect from restructuring costs. But in the long run, we continue to see opportunity to improve margins within the software segment. So I think that's kind of the main thing. There are so many things to track. Great. Thank you so much.

Lia Matos: There was a one-off effect from restructuring costs. But in the long run, we continue to see still opportunity to improve margins within the software segments. So I think those are the, that's kind of the main those two main things to track.

Speaker Change #101: But in the long run, we continue to see still opportunity to improve margins within the software segment. So I think those are the, that's kind of the main, those two main things to track.

Pedro Zina: I'll start by addressing the credit one and then we talk about topics. So regarding credit in terms of quality, I think we're really happy with the performance of the portfolio, so no worries whatsoever. But in terms of growth, I think the message here is that when we think about the growth in these merchants, it's not going to be linear over time. What we're doing now is that basically what we're making a series of experiments to test new criteria in the cohorts.

Lia Matos: Great.

Kaya Prattu: Thank you so much. Our next question.

Speaker Change #102: Great, thank you so much.

Unknown Executive: Thank you, Chai. Our next question comes from Kaio Prato with UBS. You can open your... Hey, everyone.

Kaya Prattu: So sorry. Our next question comes from Kaya Prattu with UBS. You can open your microphone. Hey everyone, good evening. Thanks for the opportunity for extra questions. I have two on my side. Please mostly related to your cash. The first one is in terms of the tender offer of your bones. Should we expect the usage of own cash for the preparation and also given your credit cash generation, or should we expect the insurance of a new bond with probably lower cost. And by the end of the day, when we think about your PNL in the third gear and incoming quarters, what type of impacts could we expect as we will probably see savings related to the interest rates.

John: Thank you, John.

Pedro Zina: And whenever the results from those tests are positive, we will allow to new offerings and then we unlock a bigger wave of this birthment that has been the behavior of the best part as well. And when we look at the guidance, we guided for a portfolio above 800 million by the year ends, we're already with 712 million, the first half of the year. So actually when we compare to our plan, even though the disbursement for this part of us a little bit smaller than the previous one, we're actually above the initial plan.

Speaker Change #104: Our next question comes from Caio Prato with UBS.

Speaker Change #105: You can open your microphone.

Speaker Change #105: [inaudible]

Kaio Prato: Good evening. Thanks for the opportunity for expert questions. I have two on my side, please, mostly related to your cash. The first one is in terms of the tender offer of your bond, should we expect the usage of own cash for this operation and also given your current cash generation, or should we expect the insurance of a new bond with probably lower cost? And by the end of the day, when we think about your P&L in the third queue and in the upcoming quarters, what type of impacts could we expect, as we will probably see savings related to the interest rate and also a potential tax cut for the reminder of the bond that was not bought? If you could help us walk through the impacts, would be good, please.

Caio Prato: Hey, everyone. Good evening. Thanks for the opportunity for expert questions. I have two on my side, please, mostly related to your cache.

Caio Prato: The first one is in terms of the tender offer of your bond. Should we expect the usage of owned cash for this operation and also given your current cash generation? Or should we expect the issuance of a new bond with probably lower cost?

Speaker Change #107: And by the end of the day, when we think about your P&L in the third queue and in the upcoming quarters, what type of impacts could we expect?

Pedro Zina: And that said, when we look ahead, I'd say in terms of the economics of the product, we're becoming increasingly comfortable over time. I think the challenge and the opportunity now is that there is a lot to be done in terms of improving the conversion of the appropriate pool, but also increasing the percentage of clients to which we extend a credit line as a result of those tests. Keep in mind that when we look at the product nowadays, it's still pretty much fully digital. So with very low participation from the distribution channels, which is key in terms of increasing conversion and penetration in the future.

Speaker Change #108: as we will probably see savings related to the interest rates.

Kaya Prattu: And also a potential tax suit for the reminder of the bond that was not bought.

Speaker Change #109: and also a potential text for the reminder of the bond that was not bought. If you could help us walk through the impacts would be good, please.

Kaya Prattu: If you could help us walk through the impacts, would be good please.

Mateus Schwening: And the second one, also looking at your cash generation, just would like to understand what could be the next steps here? Where could we see the usage of cash, if it could go more to repayment or credit products? And if you plan to open a new buyback program as you almost completed the one announced last year in August. Thank you. Thank you, Kaio. Mateus, here.

Mateus Schwening: And the second one also looking at your cash generation, just would like to understand what could be the next steps here. Where could we see the usage of cash if it could go more for payment or credit products. And if you plan to open a new buyback program, as you almost completely still want to announce the last year in August. Thank you.

Speaker Change #110: And the second one, also looking at your cash generation, just would like to understand what could be the next steps here. Where could we see the usage of cash? If it could go more to repayment or credit products?

Speaker Change #111: And if you plan to open a new by-backed program as you almost completed the one announced the last year in August . Thank you.

Mateus Schwening: Thank you, Kaio. Mateus here. So, first let's talk about the tender of the bones. In terms of incorrect to the P&L, the buyback of the bones itself has a neutral impact in terms of financial expenses upfront. But when we look ahead, there's indeed a relevant savings going ahead because first we swapped that was running at CDI plus 3%, which is the bones for other loans in our balance sheets that are going to be which much lower spreads. So, to the first part of your question, in terms of the balance sheet itself, we're basically swapping the bones with other dead instruments.

Mateus Schwening: So that's pretty much the message around credits. And on the other side, I think we're correct. We had a good performance in the first half of the year. Euroneer, especially on the administrative expenses. When we look at administrative expenses, it's down 13% a year on year when we look at the second queue. We guided actually for a growth, right? So it's becoming market year that we're probably going to land with up signs in that line.

Mateus Schwening: So first, let's talk about the tender of the bones. In terms of impact to the P&L, the buyback of the bonds itself has a neutral impact in terms of financial expenses up front. But when we look ahead, there's indeed a relevant savings going ahead, because first, we saw a debt that was running at CDI plus 3%, which is the bond for other loans in our balance sheets that are going to be with much lower spread.

Kai Matos: Thank you, Kaio. Mateus here. So, first let's talk about the standard of the bonds. In terms of impact to the P&L, the buyback of the bonds itself has a neutral impact in terms of financial expenses up front.

Kai Matos: But when you look ahead, there's indeed a relevant savings going ahead because first

Speaker Change #113: We saw a debt that was running at CDI plus 3%, which is the bond, for other loans in our balance sheets that are going to be with much lower spreads.

Mateus Schwening: But more broadly, when we think about operational leverage, looking ahead, I think the message here is two folds. So within the operation, when we look at selling expenses and costs to serve, specifically, I think we should continue to see operational leverage in the next quarter. So there's fewer to be done there. We're probably also going to see tax rates conversion mark towards the bottom of the range that we provided that went into 25% range.

Mateus Schwening: So, to the first part of your question, in terms of the balance sheet itself, we're basically swapping the bonds with other debt instruments, it's not going to be a bond issuance, and they run at a much lower spread. And like you mentioned, besides the savings in terms of having lower financial expenses on this new debt instrument, We now also have the tax shield on the financial expenses that were associated with the bond, both because these new issuances are happening onshore and also because in the tender offer of the bonds we included a provision to switch the debt holder of the bonds to a local entity.

Speaker Change #114: So, to the first part of your question, in terms of the balance sheet itself, we're basically swapping the bonds with other debt instruments, it's not going to be a bond issuance, and they run at a much lower spread.

Mateus Schwening: It's not going to be a bond issue, and they run at a much lower spread. And like you mentioned, besides the savings in terms of having lower financial expenses on these new dead instruments, we now also have the tech shoes on the financial expenses that were associated with the bones. Both because these new issues are happening on shore. And also because in the tender offer of the bones, we included a provision to switch the dead holder of the bones to a local entity. So, when you add that together, you have a positive impact to the P&L moving ahead.

Speaker Change #115: And like you mentioned, besides the savings in terms of having lower financial expenses on these new debt instruments,

Speaker Change #115: We now also have the tech shield on the financial expenses that were associated with the bonds.

Mateus Schwening: I think the place where it's going to become more challenging the second half is probably going to be financial expenses simply given to the fact that interest rates are expected to increase in second half versus decreasing the first half. And we also did a sizable buyback, right, which is a creative when we look at EPS over time, but has a short term negative impact to the panel.

Speaker Change #115: Both because these new issuances are happening onshore and also because in the tender offer of the bonds we included a provision to switch the debt holder of the bonds to a local entity.

Mateus Schwening: So those are pretty much the main movements that we see going ahead.

Mateus Schwening: So when you add that together, you have a positive impact to the P&L moving ahead. The second part of the question I think was around what we're going to do in terms of the cash generation going forward, right? Right, and if you plan to open a nearby bank program as well.

Speaker Change #115: So, when you add that together, you have a positive impact to the P&L moving ahead.

Mateus Schwening: The second part of the question I think was around what we're going to do in terms of the cash generation going forward, right? Right. And if you plan to open a new buyback problem as well. Yeah. So, first in terms of the opening a new buyback plan, we still view buybacks as very attractive capital allocation, especially considering that we are, in our view, outperforming the expectations outlined in the initial plan in the investor day. But when we consider additional share buybacks, we need to also remain mindful that our business is growing very fast. And we have a lot of new avenues for future growth that may require additional capital.

Speaker Change #115: The second part of the question I think was around what we're going to do in terms of the cash generation going forward, right?

Speaker Change #116: Bright, and if you plan to open a new bike program as well.

Mateus Schwening: Yeah, so first, in terms of the opening a new buyback plan. We still view Buybacks as a very attractive capital allocation, especially considering that we are, in our view, outperforming the expectations outlined in the initial plan in Investor Day. But when we consider additional share buybacks, we need to also remain mindful that our business is growing very fast.

Neha Agarwala: Very helpful. Thank you so much.

Speaker Change #117: Yeah, so first in terms of opening a new buyback plan. [inaudible]

Thiago Binsfeld: Our next question comes from Thiago Beansfeld with Goldman Sachs. You can open your microphone. Hi, everyone. Thank you for taking questions. The first one is on the information that he has been an area of challenge. So I wonder how you see the evolution of the agenda will fall in use of things that today we also see within the open bank and agenda some initiatives we know direct payment. So are you preparing for those changes and there can be a meaningful impact to TV and I can ask my second question after that. Thank you. Hi, Thiago. I believe that it was chopping a little bit. The whole question is around fixed dynamics. Correct. Yeah, that's right, Leah. Perfect.

Speaker Change #117: We still view Buybacks as a very attractive capital allocation, especially considering that we are, in our view, outperforming the expectations outlined in the initial plan in the investor day.

Speaker Change #117: But when we consider additional share buybacks, we need to also remain mindful that our business is growing very fast and we have a lot of new avenues for future growth that may require additional capital.

Mateus Schwening: And we have a lot of new avenues for future growth that may require additional capital. So, in short, I think we haven't yet made a decision on whether we're going to announce a new buyback program for the second half or not. But it's certainly something that we will evaluate and provide updates on in the coming quarters. Now, in terms of uses for the cache that we're generating. When you look at the capital structure for the company, we think we are in a very good and strong position. The company had a net cash position of around R$5 billion prior to the buyback.

Mateus Schwening: So, in short, I think we haven't yet made the decision on whether we're going to announce a new buyback program in the second half or not. But it's certainly something that we will evaluate and provide updates on in the coming quarters.

Speaker Change #117: So in short, I think we haven't yet made a decision on whether we're going to announce a new buyback program on second half or not, but it's certainly something that we will evaluate and provide updates on the coming quarters.

Mateus Schwening: Now, in terms of uses for the cash that we're generating, when we look at the capital structure for the company, we think we are in a very good and strong position. The company has a net cash position of around 5 billion reais prior to the buybacks. And if even after we're chasing around 1 billion reais in this first half of July, the company should still increase. It suggests that the cash position simply gives an effect that the cash flow generation from the business has been really strong. And in terms of what we're going to do with that cash generation, I think the message is pretty much the same.

Speaker Change #117: Now, in terms of uses for the cache that we're generating

Lia Matos: So let me give an overview of fixed dynamics in terms of the performance and then how we see the outlook regarding big so I think the first message is we continue to see strong growth from increased penetration of peak QR code. The dynamic QR code, which is the peak that we see as a payment method, right. That's been through both within our base and the market based on central bank figures. So that's been an evolution beyond our expectations.

Speaker Change #118: When you look at the capital structure for the company, we think we are in a very good and strong position. The company had a net cash position of around 5 billion reais prior to the buybacks.

Mateus Schwening: And if even after repurchasing around 1 billion reais in this first half of July, the company should still increase its adjusted net cash position. Simply given the fact that the cash flow generation from the business has been really strong. And in terms of what we're going to do with that cash generation, I think the message is pretty much the same. We continuously evaluate the best use of capital in order to maximize shareholder returns.

Speaker Change #118: and even after repurchasing around one billion reais in this first half of July , the company should still increase, it suggests an end cash position, simply given the fact that the cash flow generation from the business has been really strong.

Lia Matos: At the beginning of the year. So fixed penetration is now higher than we initially expected. I think for us, this is a net positive right as we said many times before because number one, we see peaks as being incremental for overall volumes. So if you look at the overall, I think the way to illustrate this is a following if you look at electronic penetration and how that has evolved as a percentage of household consumption over the past year.

Speaker Change #119: And in terms of what we're going to do with that cash generation, I think the message is pretty much the same.

Mateus Schwening: We continue to evaluate the best use of capital in order to maximize your holder returns. We feel that if there is an opportunity to buy back shares, even how discounted the company is versus our plan, we can do so. What we need to balance here, again, is the opportunity for the company to grow and to deploy capital in the business itself. When we look at our industry, it's a huge industry. And we want to ensure that we have the fire power to pursue the opportunities that we have, especially within credits. So that's pretty much the message here.

Speaker Change #120: We continuously evaluate the best use of capital in order to maximize shareholder returns.

Mateus Schwening: We feel that if there is an opportunity to buy back shares given how discounted the company is versus our plan, we can do so. But what we need to balance here, again, is the opportunity for the company to grow and to deploy capital in the business itself. When you look at our industry, I think it's a huge industry, and we want to ensure that we have the firepower to pursue the opportunities that we have, especially within credit. So that's pretty much the message here. Okay, Mateus, this is clear. Thank you very much.

Speaker Change #120: We feel that if there is an opportunity to buy back shares, given how discounted the company is versus our plan, we can do so.

Speaker Change #120: What we need to balance here, again, is the opportunity for the company to grow and to deploy capital in the business itself.

Lia Matos: We see that penetration of credit has more or less rooming stable, even slightly increasing year on year. While if you look at the sum of debit plus fixed plus pre-paid volumes, this has increased significantly, right. From 25% around the year ago to around 33% today. So what this means to us is that this volume is taking there is a slight cannibalization of debit but overall is taking volume from cash. So the reason why it's a creative for us is because we monetize this in line with met MDRs for debit but it is a creative from the perspective of more engagement with our banking solutions and naturally more cash in and more overall deposits. So kind of that's kind of the big message around fixed performance so far.

Speaker Change #120: When you look at our industry, I think it's a huge industry and we want to ensure that we have the firepower to pursue the opportunities that we have, especially within credit. So that's pretty much the message here.

Mateus Schwening: Okay, Mateus, this is clear. Thank you very much.

Speaker Change #120: i

Speaker Change #120: Okay, Mateus, this is clear. Thank you very much.

Jorge Kuri: Thank you. Our next question comes from Jorge Kuri with Morgan Stanley. You can open your microphone.

Unknown Executive: Thank you. Our next ques- Jorge Kuri with Morgan Stanley. You can open your. Hi, everyone.

Mateus: Thank you. Thank you.

Speaker Change #121: Our next question comes from Jorge Kuri with Morgan Stanley . You can open your microphone.

Jorge Kuri: Hi, everyone. Congrats on the numbers. I wanted to go back. I'm sorry to the question about selling expenses. And I know you're looking at it on a quarter or quarter basis, but given the investments in people and how long they take to take results, I think it's just better to look at them on a year and year basis. But your marketing expenses are all 27% year-on-year. And for a revenue growth of 8% year and year, so that's 3x revenues and relative to TPV is around 2x TPV. And so I went back and looked at that relationship last year, and it's not necessarily heading any better.

Jorge Kuri: Congrats on the numbers. I wanted to ask, go back, I'm sorry, to the, to the question about selling expenses. And for the, and I know you're looking at it on a quarter on quarter basis, but you know, given the investments in, in people and how long they take to take results, I think it's just better to look at them on a year on year basis. But your marketing expenses are all, 27% year-on-year, and for a revenue growth of... 8% year-on-year so that's 3x revenues and relative to TPV is around 2x TPV. And so I went back and look at that relationship, you know, last year, and it's not necessarily getting any better.

Speaker Change #122: Hi everyone, congrats on the numbers. I wanted to ask, go back, I'm sorry, to the question about selling expenses.

Speaker Change #123: and for for for the

Speaker Change #124: And I know you're looking at it on a quarter-on-quarter basis, but given the investments in people and how long they take to take results, I think it's just better to look at them on a year-on-year basis. But your marketing expenses are all...

Lia Matos: When we look ahead, I think there's a there's a roadmap right that we know that the central bank has put out. There's an evolution around fixed NFC and I guess I take on this as the following. All of this evolution opens up opportunities for us to improve client experience, for us to evolve our product development roadmap around the big trails. So there are a lot of there's a lot that we have already developed on big trails.

Speaker Change #125: 27% year-on-year and for a revenue growth of 8% year-on-year so that's 3x revenues and relative to TPV is around 2x TPV.

Jorge Kuri: So I wanted to go back and ask, you know, to what extent maybe the business is getting more competitive, and maybe it's not getting more competitive on prices, but it's just getting more competitive on the ability, and the productivity of the infrastructure that you need in order to generate revenues, because there are just more and more companies looking for the same pool of clients. So if you can just give us a little bit more confidence about why we're going to see a reversal of this negative trend. And then my second question is on you.

Speaker Change #126: And so I went back and looked at that relationship, you know, last year, and it's not necessarily getting any better, so I wanted to go back and ask, you know, to what extent

Lia Matos: And there's a lot that we will continue to do. We think that big NFC may accelerate the cannibalization of that that volume as I just described. We can improve the user experience around being through big. But as I just said, I think this is a reason for us. And our mission here is to make sure that we stay ahead of the central bank roadmap, kind of anticipating how we can turn this regulatory evolution into better products and better solutions for our clients.

Jorge Kuri: So I wanted to go back and ask, to what extent, maybe the business is getting more competitive and maybe it's not getting more competitive on prices, but it's just getting more competitive on the ability on the productivity of the infrastructure that you need in order to generate revenues. Because there's just more and more companies looking for the same pool of clients.

Speaker Change #127: You know, maybe the business is getting more competitive, and maybe it's not getting more competitive on prices, but it's just getting more competitive on the ability, on the productivity of the infrastructure that you need in order to generate revenues, because there's just more and more

Speaker Change #128: So if you can just give us a little bit more confidence on why we're gonna see a reversal of this negative trend? And then my second question is on your...

Jorge Kuri: So if you can just give us a little bit more confidence on why we're going to see a reversal of these negative trends.

Lia Matos: I think the same is true regarding open banking. Naturally, we expect that with more access to data and an ability to create better product experience, we can also also gain from that by giving better experience and solutions to our clients. So I think that's the overall message. Thank you, Julia. It's helpful color.

Mateus Schwening: And then my second question is on your bank in our pack, which was down 13% quarter and quarter, even though your loan book has really exploded. It's up like, you know, many fall year and years, 35% that in quarter and quarter and rates were lower on the float, meaningfully lower if you look at it on a year and year basis, but on a quarter basis average rates were only like 5% lower. So can you just walk us through why your bank in our pack was down 13% quarter.

Mateus Schwening: Banking R-PAC, which, was down 13% quarter on quarter. Even though your loan book has really exploded, right? It's up like, you know, many fold year on year, 35%, I think, quarter on quarter. Rates were lower on the float, meaningfully lower. If you look at it on a year-on-year basis, but on a quarter-on-quarter basis, average rates were only like 5% lower. So, can you just walk us through why your banking ARPAC was down 13% quarter-on-quarter? Thanks. Yes, Jorge. So I'll start from the last question and then we'll talk about selling. In terms of the banking RPEC, the revenues from credits are not included in the banking RPEC.

Speaker Change #129: banking RPAC which was down 13% quarter-on-quarter even though your loan book has really exploded, right? It's up like, you know, manyfold year-on-year, 35% I think quarter-on-quarter and

Lia Matos: And if I may a second question on software, just to follow up, what do you think are the main KPIs we should follow? If execution is going according to plan, I think in the past, you may have provided some guidance on margins in that segment, which could provide an update on that as well would be helpful. Thank you. Sure. So good question. So I think the two main metrics for sort of to look out for which are in line with the two pieces of the strategy that we communicated in the investor day is number one, how we are evolving in cross selling financial services to links clients.

Speaker Change #130: Rates were lower on the float, meaningfully lower if you look at it on a year-to-year basis, but on a quarter-to-quarter basis, average rates were only like 5% lower. So can you just walk us through why your banking backpack was down 13% according to order? Thanks.

Mateus Schwening: Thanks. Yes. So I'll start from the last question, and then we'll talk about selling in terms of the banking our pack. The revenues from credits are not included in the banking our pack. It's basically this transactional banking revenues plus loading. So the main driver that it explains why banking our pack went down quarter on quarter is mainly CDI. So CDI actually went down 6.9% quarter on quarter, and that's pretty much covers the gap.

Mateus Schwening: It's basically the transactional banking revenues plus loading. So the main driver that explains why banking RPEC went down quarter-on-quarter is mainly CDI. So CDI actually went down 6.9% quarter-on-quarter, and that pretty much covers the gap. Now, in terms of serenity.

Speaker Change #131: Yes, Jorge. So I'll start from the last question and then we'll talk about selling. In terms of the banking RPEC, the revenues from credits are not included in the banking RPEC?

Speaker Change #132: It's basically the transactional banking revenues plus loading.

Lia Matos: So we disclose the metric of TPV overlap. TPV is, of course, only one part of the story, right? Because as we get better at cross selling financial services to software clients, we also want to advance on the banking and on the credit opportunity. But for now, sort of tracking this TPV overlap is an indicator of our traction regarding this part of the strategy. And I think the second big message that we brought out is the opportunity to increase efficiency within the software segments.

Speaker Change #133: So the main driver that explains why banking RPEC went down quarter-on-quarter is mainly CDI. So CDI actually went down 6.9% quarter-on-quarter, and that pretty much covers the gap.

Mateus Schwening: Now, in terms of strategy, maybe for your broader, is there any reason why the credit revenues are not included in the banking enterprise? Yeah, the way that we see the business, we look at credits on a stand-alone piece, and then when we talk about banking on our segmentation and reporting, we decided to own includes the floating and transactional piece, so it's basically a decision on how it disclosed the numbers. Thanks. And also, what I just saw compliments Mateus down from this. Remember that we extend credit to only a small amount of clients, whereas we have a very high penetration of banking, right?

Speaker Change #134: Now, in terms of certainly, maybe before you go, is there any reason why the credit revenues are not included in the banking?

Mateus Schwening: Maybe before you go, is there any reason why the credit revenues are not included in the banking act? Yeah, the way that we see the business, we look at credit on a standalone piece. And then when we talk about banking on our segmentation and reporting, we decided to only include the floating and transactional piece. So it's basically a decision on how we disclose the numbers. You got it.

Speaker Change #135: Yeah, the way that we see the business, we look at credit on a stand-alone piece, and then when we talk about banking on our segmentation and reporting, we decided to only include the floating and transactional piece. So it's basically a decision on how we disclose the numbers.

Lia Matos: And so monitoring margin evolution is an important aspect of this naturally. We did talk about margin behavior this quarter. There was an one off effect from restructuring costs. But in the long run, we continue to see still opportunity to improve margins within the software segments. So I think those are the, that's kind of the main those two main things to track.

Lia Matos: Great. Thank you so much.

Speaker Change #136: Got it. Thanks.

Mateus Schwening: Thanks. And also, Jorge, just to compliment Mateus' answer on this. Remember that we extend credit to only a small amount of clients, whereas we have a very high penetration of banking, right? So if we were to include credit revenues in our RPAC, there would be a huge sort of average effect because you're diluting this small cohort of clients that have credit in a big banking base, right? So it doesn't make sense to us to include for that reason.

Operator: Our next question. So sorry.

Speaker Change #136: And also, Jorge, just to compliment Mateus' answer on this...

Jorge: Remember that we extend credit to only a small amount of clients where...

Jorge: We have a very high penetration of banking, so if we were to include credit revenues in our RPAC there would be a huge

Mateus Schwening: So if we were to include credit revenues in our R-PAC, there would be a huge sort of average effect because you're diluting this small cohort of clients that has credit in a big banking base, right? So it doesn't make sense to us to include for that reason.

Matos: average effect because you're diluting this small cohort of clients that have credit in a big banking base, right? So it doesn't make sense to us to include for that reason. So maybe Mateus is on selling.

Lia Matos: So maybe Mateus on selling. Yep. So on selling, maybe I'll start with the dynamics that we expect as a percentage of revenues, and then Lia can add on your piece about the relationship between selling and competition. So, in terms of the selling expenses, the way we see it... Given the nature of the business, there is a lag between upfront investments in sales teams and the resulting benefits, and the same is true for marketing. So every time that we either hire a new sales team or do a marketing campaign, we get the OPEX upfront.

Kaio Prato: Our next question comes from Kaya Prattu with UBS. You can open your microphone. Hey everyone, good evening. Thanks for the opportunity for extra questions. I have two on my side. Please mostly related to your cash. The first one is in terms of the tender offer of your bones. Should we expect the usage of own cash for the preparation and also given your credit cash generation or should we expect the insurance of a new bond with probably lower cost.

Mateus Schwening: So maybe Mateus on selling?

Mateus Schwening: Yep. So on selling, maybe we'll start with the dynamics that we expect as a percentage of revenues, and then Leah can add on your piece about the relationship between selling and competition. So, in terms of the selling expenses, the way we see it, given the nature of the business, there's a lag between upfront investments in sales teams and the resulting benefits, and the same is true for marketing. So every time that we either hire a new sales team or do a marketing campaign, we get the OPEX upfront, and then it generates an increase in sales over time, and it takes time to build this new portfolio of clients and to dilute selling as a percentage of revenues, given the recurring nature of the business.

Matos: Yapu.

Speaker Change #139: So, on selling, maybe I'll start with the dynamics that we expect as a percentage of revenues, and then Lia can add on your piece about the relationship between selling and competition.

Mateus Schwening: And then it generates an increase in sales over time and it takes time to build this new portfolio of clients and to dilute selling as a percentage of revenues. Given the recurring nature of the business, so it's a different dynamic from a transactional business where you really get the revenues at the same time that you spend the money. The way that we see, we did an increase in investment in the first Q due to Big Brother Brazil, and also because we're building out the specialist sales force. So it's true that when you look at the annual comparison for setting expenses, it increases.

Speaker Change #140: So, in terms of the selling expenses, the way we see it,

Speaker Change #141: Given the nature of the business, there is a lag between upfront investments in sales teams and the resulting benefits, and the same is true for marketing.

Speaker Change #142: So every time that we either hire a new sales team or do a marketing campaign, we get the OPEX upfront.

Kaio Prato: And by the end of the day, when we think about your PNL in the third gear and incoming quarters, what type of impacts could we expect as we will probably see savings related to the interest rates. And also a potential tax suit for the reminder of the bond that was not bought. If you could help us walk through the impacts would be good please. And the second one also looking at your cash generation just would like to understand what could be the next steps here.

Speaker Change #142: And then it generates an increase in sales over time and it takes time to build this new portfolio of clients and to dilute selling as a percentage of revenues.

Mateus Schwening: So it's a different dynamic from transactional business where you really get the revenues at the same time that you spend the money. The way that we see, we did an increase in investments in the first queue, due to Big Brother Brazil, and also because we're building out the specialist sales force. So it's true that when you look at the annual comparison for selling expenses, it increases, but I think the reason why we're really confident that we're going to see dilution in the coming quarters is because it's already happening. So when you look at the first queue, selling was 17.2% as a percentage of revenues; second queue, it's down to 16.4, and as we mature the investments in the sales personnel that we hired, we're looking at the productivity and the numbers that are coming from those investments. We're confident that we're going to produce the bigger client base, the bigger TPD, and then the dilution will follow.

Speaker Change #142: Given the recurring nature of the business, so it's a different dynamic from a transactional business where you really get the revenues at the same time that you spend the money.

Speaker Change #142: The way that we see, we did an increase in investment in the first Q due to Big Brother Brazil and also because we're building out the specialist sales for us.

Kaio Prato: Where could we see the usage of cash if it could go more for payment or credit products. And if you plan to open a new buyback program as you almost completely still want to announce the last year in August. Thank you.

Speaker Change #143: So it's true that when you look at the annual comparison for setting expenses, it increases?

Mateus Schwening: But I think the reason why we're really confident that we're going to see dilution in the coming quarters is because it's already happening. So when you look at the first Q, selling was 17.2% as a percentage of revenues. Second queue, it's down to 16.4.

Mateus Schwening: Thank you, Kaio, Mateus here. So, first let's talk about the tender of the bones. In terms of incorrect to the P&L, the buyback of the bones itself has a neutral impact in terms of financial expenses upfront. But when we look ahead, there's indeed a relevant savings going ahead because first we swapped that was running at CDI plus 3%, which is the bones for other loans in our balance sheets that are going to be which much lower spreads.

Speaker Change #143: But I think the reason why we're really confident that we're going to see dilution in the coming quarters is because it's already happening. So when you look at the first Q, selling was 17.2% as a percentage of revenues.

Mateus Schwening: So, to the first part of your question, in terms of the balance sheet itself, we're basically swapping the bones with other dead instruments. It's not going to be a bond issue and they run at a much lower spread. And like you mentioned, besides the savings in terms of having lower financial expenses on these new dead instruments, we now also have the tech shoes on the financial expenses that were associated with the bones.

Speaker Change #143: Second cue, it's down to 16.4

Mateus Schwening: And as we mature the investments in the sales personnel that we hired, we're looking at the productivity and the numbers that are coming from those investments. We're confident that we're going to produce the bigger client base, the bigger TPD, and then the dilution will follow. Lia, do you want to add on the relationship versus the competitive environment? Sure.

Speaker Change #144: And as we mature the investments in the sales personnel that we hired, we're looking at the productivity and the numbers that are coming from those investments. We're confident that we're going to produce the bigger client base, the bigger TPD, and then the dilution will follow.

Lia Matos: The other one has added on the relationship with the competitive environment. Sure. So, Jorge, we've talked a few times about this, right? So I think in general terms, we kind of agree with you on the assessment of how the acquiring industry will evolve regarding growth, right? So big messages, we're going to see less growth in the industries when we think about acquiring specifically over the next five years, and we've gotten the last five years. I think we see competitive dynamics play out a little bit differently from what you mentioned. So the number of first important messages, as we emphasize in the investor day, and since then, there's still a lot of room for us to grow in financial services beyond payments.

Lia: Lia, do you want to add on the relationship with the competitive environment? Sure!

Lia Matos: So Jorge, we've talked a few times about this, right? So I think in general terms, we kind of agree with you on the assessment of how the acquiring industry will evolve regarding growth, right? So big message is we're gonna see less growth in the industry when we think about acquiring specifically over the next five years than we've gotten in the last five years. But I think we see competitive dynamics play out a little bit differently from what you mentioned.

Lia: So, Jorge, we've talked a few times about this, right, so I think in general terms we kind of agree with you on the assessment of how the acquiring industry will evolve regarding growth, right, so big message is we're going to see less growth in the industry.

Jorge: When we think about acquiring specifically over the next five years and we've gotten the last five years.

Speaker Change #145: But I think we see competitive dynamics play out a little bit differently from what you mentioned. So, first important message is, as we emphasized in the investor day,

Mateus Schwening: Both because these new issues are happening on shore. And also because in the tender offer of the bones, we included a provision to switch the dead holder of the bones to a local entity. So, when you add that together, you have a positive impact to the P&L moving ahead.

Lia Matos: So I think the first important message is, as we emphasized on investor day and since then, there's still a lot of room for us to grow in financial services beyond payment. And we've seen a clear trend around all players offering more complete solutions, right. So this is not something exclusive to Stone.

Speaker Change #145: And since then, there's still a lot of room for us to grow in financial services beyond payment.

Lia Matos: I think the overall industry has moved away from fewer player acquiring to more complete financial solutions offering. And given that we still have a large opportunity to improve monetization beyond payments and penetrate more on banking and on credit, this is how we see the investments in selling that we make, right? So this will drive better returns on our investments in selling in the long term. So that's how we see the equation.

Lia Matos: And we've seen a clear trend around all players offering more complete solutions, right? So this is not something exclusive to Stone. I think the overall industry has moved away from pure play acquiring to more complete financial solutions offerings. And given that we still have a large opportunity to improve monetization beyond payments and penetrate more on banking and on credit, this is how we see the investments in selling that we make, right? So this will drive better returns on our investments in selling in the long term. So that's how that's how we see the equations. I think the second piece of the answer revolves around what we've already talked about as well, which is, as we have observed in recent quarters, within acquiring what we believe is that the trend will continue to be one where players focus their growth within specific niches of the market, be those specific tiers of clients or specific regions.

Speaker Change #146: And we've seen a clear trend around all players offering more complete solutions, right? So this is not something exclusive to Stone. I think the overall industry has moved away from fewer player acquiring to more complete financial solutions offering.

Mateus Schwening: The second part of the question I think was around what we're going to do in terms of the cash generation going forward, right? Right. And if you plan to open a new buyback problem as well. Yeah. So, first in terms of the opening a new buyback plan, we still view buybacks as very attractive capital allocation, especially considering that we are in our view outperforming the expectations outlined in the initial plan in the investor day.

Speaker Change #146: And given that we still have a large opportunity to improve monetization beyond payments and penetrate more on banking and on credit

Speaker Change #146: This is how we see the investments in selling that we make, right? So this will drive better returns on our investments in selling in the long term. So that's how we see the equation.

Lia Matos: I think the second piece of the answer revolves around what we've already talked about as well, which is, as we have observed in recent quarters, within acquiring, what we believe is that the trend will continue to be one where players focus their growth within specific niches of the market, be those specific tiers of clients or specific regions. So, for example, incumbents as a group gaining more share in the key account space, even though as a group incumbents are losing share. Also, you know, dynamics where we see regional pockets of growth and regional competitive dynamics playing out.

Speaker Change #146: I think the second piece of the answer revolves around what we've already talked about as well.

Mateus Schwening: But when we consider additional share buybacks, we need to also remain mindful that our business is growing very fast. And we have a lot of new avenues for future growth that may require additional capital. So, in short, I think we haven't yet made the decision on whether we're going to announce a new buyback program on second half or not. But it's certainly something that we will evaluate and provide updates on the coming quarters.

Speaker Change #146: which is, as we have observed in recent quarters,

Speaker Change #146: Within acquiring, what we believe is that the trend will continue to be one where players focus their growth within specific niches of the market, be those specific tiers of clients or specific regions. So, for example, incumbents as a group.

Lia Matos: So, for example, incumbents as a group gaining more share in the key account space, even though, as a group, incumbents are losing share. Also, you know, dynamics where we see regional pockets of growth and regional competitive dynamics playing out. So, I think that the message is yes; in an industry that grows less in the future, we have to be better and better at assessing where the pockets of growth are. But as we continue to evolve our operating model, and we talked about specialist sales force as one example of this, but it's not the only one.

Speaker Change #146: Gaining more share in the key account space, even though, as a group, incumbents are losing share. Also, you know, dynamics where we see regional pockets of growth and regional competitive dynamics playing out.

Mateus Schwening: Now, in terms of uses for the cash that we're generating, when we look at the capital structure for the company, we think we are in a very good and strong position. The company has a net cash position of around 5 billion reais prior to the buybacks. And if even after we're chasing around 1 billion reais in this first half of July, the company should still increase. It suggests that that cash position simply gives an effect that the cash flow generation from the business has been really strong.

Lia Matos: So I think that the message is yes in an industry that grows less in the future we have to be better and better at assessing where the pockets of growth are but as we continue to evolve our operating model and we talked about specialist sales force as one example of this but it's not the only one, we continue to make sure that we can stay ahead and really understand where these pockets of growth are within our focus which is serving MS&Bs and continue to grow and gain share within MS&Bs. So I think as a result of these two factors future growth rates in acquire will be lower overall and this is already implied in our TPV long-term guidance that we gave in the investor day just to remember we talked about 13% CAGR in terms of acquiring TPV towards 2027 so this is built into a dynamic of what we understand the industry of evolution to be but our focus is a lot more on growth as a result of more monetization coming from the clients that we onboard to our ecosystem. Thanks. Thanks for that detailed answer. Thank you, Horhead. Our next question comes from Gustavo Schroding with Bradesco BBI. You can open your microphone.

Speaker Change #146: So, I think that the message is, yes, in an industry that grows less in the future, we have to be better and better at assessing where the pockets of growth are.

Speaker Change #146: But as we continue to evolve our operating model, and we talked about specialist sales force as one example of this, but it's not the only one.

Lia Matos: We continue to make sure that we can stay ahead and we can understand where these pockets of growth are within our focus, which is serving MSNDs and continues to grow and gain share within MSND. So, I think as a result of these two factors, future growth rates in a fire will be lower overall, and this is already implied in our TV long-term guidance that we gave in the investor day. Just to remember, we talked about 13% keger in terms of acquiring TPV towards 2027. So, this is built into a dynamic of what we understand the industry and the evolution to be.

Speaker Change #146: We continue to make sure that we can stay ahead and really understand where these pockets of growth are within our focus, which is serving MS&Bs and continue to grow and gain share within MS&Bs.

Mateus Schwening: And in terms of what we're going to do with that cash generation, I think the message is pretty much the same. We continue to evaluate the best use of capital in order to maximize your holder returns. We feel that if there is an opportunity to buy back shares, even how discounted the company is versus our plan, we can do so. What we need to balance here, again, is the opportunity for the company to grow and to deploy capital in the business itself.

Speaker Change #146: I think as a result of these two factors...

Speaker Change #146: Um...

Speaker Change #147: Future growth rates in Acquire will be lower overall, and this is already implied in our TPV long-term guidance that we gave in the Investor Day. Just to remember, we talked about 13% CAGR in terms of acquiring TPV towards 2027. So this is built into a dynamic of what we understand the industry evolution to be.

Lia Matos: But our focus is a lot more on growth as a result of more monetization coming from the clients that we onboard to our equal system. Thanks.

Mateus Schwening: When we look at our industry, it's a huge industry. And we want to ensure that we have the fire power to pursue the opportunities that we have, especially within credits. So that's pretty much the message here.

Speaker Change #147: But our focus is a lot more on growth as a result of more monetization coming from the clients that we onboard to our ecosystem.

Lia Matos: Thanks for that detail.

Gustavo Schroden: I will answer. Thank you, Jorge.

Speaker Change #148: Thanks, thanks for that detailed answer.

Mateus Schwening: Okay, Mateus, this is clear. Thank you very much. Thank you.

Jorge: Thank you, Jorge.

Gustavo Schroden: Our next question comes from Gustave Schroding with Bradesco BBI. You can open your microphone. Hi, good afternoon, and congrats on the numbers, and thanks for taking my question. Most of my questions were answered, but I'd like to explore a little bit your guidance.

Speaker Change #149: Our next question comes from Gustavo Schroding with Bradesco BBI.

Jorge Kuri: Our next question comes from Jorge Kuri with Morgan Stanley. You can open your microphone. Hi, everyone, congrats on the numbers. I wanted to go back, I'm sorry, to the question about selling expenses. And I know you're looking at it on a quarter or quarter basis, but given the investments in people and how long they take to take results, I think it's just better to look at them on a year and year basis.

Speaker Change #150: You can open your microphone.

Gustavo Schroding: Hi, good afternoon, and congratulations on the numbers and thanks for taking my question. Most of my questions were answered, but I'd like to explore a little bit your guidance. It seems to me that it is a little bit conservative at this point, because if you analyze, for example, the TPV, it is running very healthy, and I'm assuming that there is seasonality in the fourth quarter, maybe that will be, I mean, easily above this 18% growth.

Gustavo Schroding: Hi, good afternoon and congrats on the numbers and thanks for taking my question. Most of my questions were answered, but I'd like to explore a little bit your guidance.

Gustavo Schroden: It seems to me that it is a little bit conservative at this point because it finalized the, for example, the TPV. It is running. Very healthy in assuming that there is a seasonality in the fourth quarter, maybe that will be, I mean, easily above this 18% growth. Depositives also growing very fast, credit portfolio, take rate is above the 2.49% as you expected. Well, an income is running, also assuming the seasonality in the fourth quarter is running to be above this 1.9 billion highs for the year. So, why are you, you are still like keeping this 1.9 as a minimum?

Gustavo Schroding: It seems to me that it is a little bit conservative at this point because if you analyze the, for example, the TPV, it is running.

Gustavo Schroding: very healthy. I'm assuming that there is a seasonality in the fourth quarter maybe that will be, I mean, easily above this 18 percent.

Jorge Kuri: But your marketing expenses are all 27% year and year. And for a revenue growth of 8% year and year, so that's 3x revenues and relative to TPV is around 2x TPV. And so I went back and looked at that relationship last year and it's not necessarily heading any better. So I wanted to go back and ask, to what extent, maybe the business is getting more competitive and maybe it's not getting more competitive on prices, but it's just getting more competitive on the ability on the productivity of the infrastructure that you need in order to generate revenues.

Gustavo Schroding: growth. Deposit is also growing very fast. Credit portfolio take rate is above the 2.49% as you expected.

Gustavo Schroding: Deposit is also growing very fast. Credit portfolio take rate is above the 2.49%, as you expected. Well, net income is running, also assuming the seasonality in the fourth quarter is running to be above this 1.9 billion reais for the year. So why are you still keeping this 1.9 as a minimum?

Speaker Change #152: Well, net income is running, also assuming the seasonality in the fourth quarter is running to be above this 1.9 billion reais for the year. So why are you still keeping this 1.9 as a minimum?

Gustavo Schroden: Do you think that it is a conservative approach? Should we indeed expect something above to be done, or 2.1 billion highs for the year that that will be reasonable? That's my question.

Speaker Change #153: Do you think that it is a conservative approach? Should we indeed expect something above 2 billion or 2.1 billion reais for the year? That would be reasonable. That's my question. Thank you.

Gustavo Schroden: Thank you.

Gustavo Schroden: Hi Gustavo, Peter here. Thank you for the question. I think I'll try to provide the whole concept. And I think we emphasize, you know, our investor day. I think we transition to a policy of providing annual guidance, right? So unless there is an extremely material change in the business or in the macro environment, I don't believe that we anticipate revisiting our guidance by mid-year. So when we look at the numbers, I think the guidance, as you mentioned, the guidance provided for the year, they are kind of a set. They set the floor for our key indicators.

Pedro Zinner: Do you think that it is a conservative approach? Should we indeed expect something above 2 billion or 2.1 billion reais for the year? That would be reasonable. That's my question. Thank you. Hi Gustavo, Pedro here.

Speaker Change #153: Hi Gustavo, Pedro here. Thank you for the question.

Jorge Kuri: Because there's just more and more companies looking for the same pool of clients. So if you can just give us a little bit more confidence on why we're going to see a reversal of these negative trends. And then my second question is on your bank in our pack, which was down 13% quarter and quarter, even though your loan book has really exploded. It's up like, you know, many fall year and years, 35% that in quarter and quarter and rates were lower on the float, meaningfully lower if you look at it on a year and year basis, but on a quarter basis average rates were only like 5% lower. So can you just walk us through why your bank in our pack was down 13% quarter. Thanks. Yes.

Speaker Change #154: I think I'll try to provide the whole concept.

Pedro Zinner: Thank you for the question. I think I'll try to provide the whole concept. And I think we emphasize in our investor day, I think we transition to a policy of providing annual guidance, right? So unless there is an extremely material change in the business or in the macro environment. I don't believe that we anticipate revisiting our guidance by mid-year. So, and also, when we look at the numbers, I think the guidance, as you mentioned, the guidance provided for the year. They're kind of a set.

Speaker Change #155: And I think we emphasize in our investor day, I think we transition to a policy of providing annual guidance, right?

Speaker Change #155: So, unless there is an extremely material change in the business or in the macro environment,

Speaker Change #155: I don't believe that we anticipate revisiting our guidance by mid-year.

Speaker Change #156: So, and also when we look at the numbers, I think the guidance, as you mentioned, the guidance provided for the year, they're kind of a set, they set the floor for our key indicators. So for most of these, we are indeed seeing more positive trends. I think you're right.

Pedro Zinner: They set the floor for our key indicators. So for most of these, we are indeed seeing more positive trends. I think you're right. And we do expect to exceed our target. But I think it's it's part of the game.

Pedro Vina: So, for most of these where I did see more positive trends, I think you're right. And we do expect to exceed our targets, but I think it's part of the game. So the only metric, as you mentioned, that may prove more challenging is really caught TV, as we're really witnessing a stronger growth in peak transactions, which were not included in the TV metric we provided for guidance. Despite being monetized in live with net MDRs for debit transactions. So peak QR code penetration in the market in within our client base has been higher than we anticipated when we set our guidance in November last year.

Speaker Change #156: and we do expect to exceed our targets.

Speaker Change #157: But I think it's part of the game.

Pedro Zinner: So the only metric, as you mentioned, that may prove more challenging is really CAR-TPV, is we're really witnessing a stronger growth in peak transactions, which were not included in the TPV metric we provided for guidance. Despite being monetized in line with net MDRs for debit transactions. So PICS QR code penetration in the market and within our client base has been higher than we anticipated when we set our guidance in November last year.

Speaker Change #157: So the only metric, as you mentioned, that may prove more challenging is really car TPV, as we are really witnessing a stronger growth in peak transactions, which were not included in the TPV metric we provided for guidance.

Mateus Schwening: So I'll start from the last question and then we'll talk about selling in terms of the banking our pack, the revenues from credits are not included in the banking our pack. It's basically this transactional banking revenues plus loading. So the main driver that it explains why banking our pack went down quarter on quarter is mainly CDI. So CDI actually went down 6.9% quarter on quarter and that's pretty much covers the gap.

Speaker Change #157: despite being monetized in line with net MDRs for debit transactions.

Speaker Change #157: So, PICS QR code penetration in the market and within our client base has been higher than we anticipated when we set our guidance in November last year.

Pedro Vina: So this would affect our overall one mix to it less cut TV specifically on debit and more on peak peaks QR code. But, in general terms, I think we're keeping the guidance as I mentioned before.

Mateus Schwening: Now, in terms of strategy, maybe for your broader, is there any reason why the credit revenues are not included in the banking enterprise? Yeah, the way that we see the business, we look at credits on a stand-alone piece, and then when we talk about banking on our segmentation and reporting, we decided to own includes the floating and transactional piece, so it's basically a decision on how it disclosed the numbers. Thanks. And also, what I just saw, compliments Mateus down from this, remember that we extend credit to only a small amount of clients, whereas we have a very high penetration of banking, right?

Pedro Zinner: So this would affect our overall volume mix to address CAR TPV, specifically on debit and more on peaks QR code. But in general terms, I think we're keeping the guidance, as I mentioned before. Okay, very clear.

Speaker Change #157: So this would affect our overall volume mix to address CAR-TPV, specifically on debit, and more on PICS QR code.

Speaker Change #157: But in general terms, I think we're keeping the guidance as I mentioned before.

Pedro Vina: Okay, very clear, and just a follow-up here, very clear your point about the card TV and the peaks of potential impact and about interest rates.

Gustavo Schroding: And just to follow up here, very clear your point about the CAR TPV and the peaks of potential impacts, and about interest rates. So anything that you see here that could change or could impact our guidance as now we have a different environment or different expectations for rates, anything that you could comment here would be great. Salo, Mateus here.

Speaker Change #158: Okay, very clear, and just follow up here, very clear your point about the current PV and the peaks, potential impacts, and about interest rates. So, anything that you see here that could change or put impact or guidance, as now we have a different environment or different expectations for rates. Anything that you could comment here would be great, thank you.

Mateus Schwening: So anything that you see here that could change or could impact our guidance as now we have a different environment for different expectations for rates, anything that you could comment here would be great. Thank you. What's our materials here? So when you think about interest rates, they are going to be a drag on the second half. Again, first half, I think the expectation was that interest rates would decrease. When you look now, they are expected to increase in the second half. But we need to keep in mind that when we did the investor day and provided the guidance in November, the interest rate curve was not that low as well.

Mateus Schwening: So when we think about interest rates, there are going to be a drag on second half. Again, first half, I think the expectation was that interest rates would decrease. When you look now, they are expected to increase on the second half.

Mateus: Gustavo, Mateus here. So when we think about increase rates, there are going to be a drag on second half.

Mateus Schwening: So if we were to include credit revenues in our R-PAC, there would be a huge sort of average effect because you're diluting this small cohort of clients that has credit in a big banking base, right? So it doesn't make sense to us to include for that reason.

Speaker Change #159: Again, first half I think the expectation was that interest rates would decrease. When you look now, they are expected to increase on the second half.

Mateus Schwening: But we need to keep in mind that when we did things yesterday and provided guidance in November, the interest rate curve was not that low as well. So there is a negative headwind there, but it's not really material and not enough to change the guidance. Okay, very clear. Thank you very much.

Mateus Schwening: So maybe Mateus on selling? Yep.

Speaker Change #160: But we need to keep in mind that when we did the Investor Day and provided the guidance in November , the interest rate curve was not that low as well, so there is a negative headwind there, but it's not really material and not enough to change the guidance.

Lia Matos: So on selling, maybe we'll start with the dynamics that we expect as a percentage of revenues, and then Leah can add on your piece about the relationship between selling and competition. So in terms of the selling expenses, the way we see it, given the nature of the business, there's a lag between upfront investments in sales teams and the resulting benefits, and the same is true for marketing. So every time that we either hire a new sales team or do a marketing campaign, we get the OPEX upfront, and then it generates an increase in sales over time, and it takes time to build this new portfolio of clients and to dilute selling as a percentage of revenues, given the recurring nature of the business.

Mateus Schwening: So there is a negative headwind there, but it's not really material and not enough to change the guidance. Okay, very clear.

Mateus Schwening: Thank you very much.

Speaker Change #161: Okay, very clear. Thank you very much.

Speaker Change #161: i

Yuri Fernandes: Our next question comes from You Defend and Just with JP Morgan.

Unknown Executive: Our next ques- from Yuri Fernandes with JP Maurer, guys, thank you and congrats again. A quick one on Rio Grande do Sul, I think this was a topic to discuss in the past quarter, you're giving grace periods like subscription free for some clients, And in fact, this is quite like, what was the final number here and how, you know, if we exclude Rio Grande do Sul, how your earnings would have behaved? That's the first one.

Speaker Change #162: Our next question comes from Yuri Fernandes with JP Morgan.

Yuri Fernandes: Hi guys, thank you, and congrats again. Quick one on Rio Grande do Sul. I think this was a topic to discuss in the past quarter. You were giving grace periods like description free for some clients. Any impact to this part like what was the final number here and how you know this was to the Rio Grande do Sul. How your earnings would have behaved. That's the first one.

Yuri Fernandes: Hey guys, thank you and congrats again. Quick one on Rio Grande do Sul. I think this was a topic we discussed in the past quarter. You were giving grace periods, like subscription-free for some clients.

Yuri Fernandes: And in fact, it is quite like, what was the final number here and how, you know, how your earnings would have behaved? That's the first one. And a second one on, I think Lia already explored a lot, the bank initiative, but just on deposits.

Lia Matos: So it's a different dynamic from transactional business where you really get the revenues at the same time that you spend the money. The way that we see, we did an increase in investments in the first queue, due to Big Brother Brazil, and also because we're building out the specialist sales force. So it's true that when you look at the annual comparison for selling expenses, it increases, but I think the reason why we're really confident that we're going to see dilution in the coming quarters is because it's already happening.

Mateus Schwening: And a second one on I think Leah already explore a lot the bank initiatives, but just on the positive. I know your testing is you know, remuneration for deposits to put this on your, you know, the pilot test is on your release. If you can provide more color on timing, what you plan to do. And the risks of cannibalization of your deposit free of you know free of the use nowadays. So just some color on the remuneration of the positive strategies here.

Speaker Change #164: I know your testing is, you know, remuneration for deposits to put these on your, you know, the pilot test is on your release.

Speaker Change #165: If you can provide more color on timing, what you plan to do, the risks of cannibalization of your deposit free of yields nowadays. So just some color on the remuneration of deposit strategy here. Thank you.

Lia Matos: So when you look at the first queue, selling was 17.2% as a percentage of revenues, second queue, it's down to 16.4, and as we mature the investments in the sales personnel that we hired, we're looking at the productivity and the numbers that are coming from those investments, we're confident that we're going to produce the Biger client base, the bigger TPD, and then the dilution will follow.

Mateus Schwening: Thank you.

Pedro Vina: Hi, Pedro speaking. I'll kick off with the Rio Grande do Sul question. Well, I'm happy to say that the impact was smaller than we initially anticipated. And I think this is really thanks to the sweet recovery of TPV in the affected region. So good news on that side. But overall, we really experienced a negative impact of approximately 150 million highs on our TPV in ballpark numbers around that 10 million highs on our overall results. And just a quick note that this impact was not only due to the TPV reduction, but also because of the series of actions that we really took to support our clients during this critical time when they most needed us.

Speaker Change #165: i

Yuri Fernandes: And a second one on, I think Lia already explored a lot, the bank initiatives, but just on deposits, I know you're testing these, you know, remuneration for deposits, you put these on your, you know, the pilot test is on your release. You can provide more color on timing, what you plan to do, the risks of cannibalization of your deposit free of, you know, free of yields nowadays. So just some color on the remuneration of deposit strategy here. Thank you. Hi, Pedro speaking. I'll kick off with the Rio Grande do Sul question.

Speaker Change #165: Hi, Pedro speaking. I'll kick off with the Rio Grande do Sul question.

Pedro Zinner: Well, I'm happy to say that the impact was smaller than we initially anticipated. And I think this is really thanks to the swift recovery of TPV in the affected region. So good news on that side. But overall, we really experienced a negative impact of approximately 150 million reais, on our TPV, in ballpark numbers around 10 million eyes on our overall result.

Speaker Change #166: Well, I'm happy to say that the impact was smaller than we initially anticipated.

Speaker Change #166: And I think this is really thanks to the swift recovery of TPV in the affected region. So good news on that side. But overall, we really experienced a negative impact of approximately 150 million reais on our TPV.

Lia Matos: The other one has added on the relationship with the competitive environment. Sure. So, Jorge, we've talked a few times about this, right? So I think in general terms, we kind of agree with you on the assessment of how the acquiring industry will evolve regarding growth, right? So big messages, we're going to see less growth in the industries when we think about acquiring specifically over the next five years, and we've gotten the last five years.

Speaker Change #166: in ballpark numbers around 10 million eyes on our overall results.

Pedro Zinner: And just a quick note that this impact was not only due to the TPV reduction, but also because of the series of actions that we really took to support our clients, during this critical time when they most needed, and I'll pass it over to Mateus. Yeah, in terms of the remuneration of deposit. We're still testing. I think we started to disclose on the battle sheet the amounts that we have with time deposits with merchants. We're going to see that's really immaterial yet.

Speaker Change #166: And just a quick note that this impact was not only due to the TPP view reduction, but also because of the fears of actions that we really took to support our clients during this critical time when they most needed this.

Lia Matos: I think we see competitive dynamics play out a little bit differently from what you mentioned. So the number of first important messages as we emphasize in the investor day and since then, there's still a lot of room for us to grow in financial services beyond payments. And we've seen a clear trend around all players offering more complete solutions, right? So this is not something exclusive to Stone. I think the overall industry has moved away from pure play acquiring to more complete financial solutions offerings.

Mateus Schwening: And I'll pass it over to Mateus.

Lia Matos: And given that we still have a large opportunity to improve monetization beyond payments and penetrate more on banking and on credit, this is how we see the investments in selling that we make, right? So this will drive better returns on our investments in selling in the long term. So that's how that's how we see the equations. I think the second piece of the answer revolves around what we've already talked about as well, which is as we have observed in recent quarters, within acquiring what we believe is that the trend will continue to be one where players focus their growth within specific niches of the market, be those specific tiers of clients or specific regions.

Mateus Schwening: Yeah, in terms of the remuneration of deposits, we're still testing. I think we started to disclose on the balance sheet the amounts that we have with time deposits with merchants. We're going to see that's really immaterial yet.

Mateus: And I'll pass it over to Mateus. Yeah, in terms of the remuneration of deposits, we're still testing. I think we started to disclose on the balance sheet the amounts that we have with time deposits with merchants. We're going to see that it's really immaterial, yes.

Mateus Schwening: And we're basically still testing to ensure that we don't cannibalize the economics of the current banking offering. So, in terms of time, I think that during the next quarters, will gradually extend the pilot to our database. But it should only start to make a difference in the balance sheet and in the results next year. I think we shouldn't expect anything big for 2024 on that front.

Mateus: And we're basically still testing to ensure that we don't cannibalize the economics of the current banking offering. So in terms of timing, I think that during the next quarters, we'll gradually extend the pilots to a larger base.

Mateus Schwening: And we're basically still testing to ensure that we don't cannibalize the economics of the current banking offering. So in terms of timing, I think that during the next quarters, we'll gradually extend the pilots to a larger base, but it should only start to make a difference in the balance sheets and in the results next year. I think we shouldn't expect anything big for 2024 on that front. No, super clear, Mateus.

Speaker Change #167: But it should only start to make a difference in the balance sheet and in the results next year. I think we shouldn't expect anything big for 2024 on that front.

Mateus Schwening: No, super clear, Mateus. Thank you also, Pedro.

Speaker Change #167: It was super clear, Mateus. Thank you also, Pedro.

Pedro Zinner: Thank you.

Henata Miloni: Our next question comes from Henata Miloni with Autonomous Research. Hi, everyone. Thanks here for the question. So this one is related to the credit portfolio given the large success. They've you had so far and look at the guidance. I think it's been interesting to explore the well, well, and what was ahead of your expectation here. And also if you could maybe provide some some KPI or some way to look at the growth for the upcoming years up to the 2027. 2027 guidance that you provide.

Mateus Schwening: Thank you also, Pedro. Thank you. Our next question comes from Renato Meloni with Altena. Hi, everyone.

Pedro Zinner: Our next question comes from Renato Meloni with Autonomous Research.

Renato Meloni: Thanks here for the questions. So this one is related to the credit portfolio, given the large success that you had so far and look at the guidance. I think it'd be interesting to explore a bit what went well and what was ahead of your expectation here, and also if you could maybe provide some some KPI or some way to look at the growth for the upcoming years up to the 2027, 2027 guidance that you provided.

Hinata Miloni: Hi everyone. Thanks here for the questions. So this one is related to the credit portfolio, given the large success that you had so far and look at the guidance. I think it would be interesting to explore a bit what went well and what was ahead of your expectation here.

Lia Matos: So, for example, incumbents as a group gaining more share in the key account space, even though as a group incumbents are losing share. Also, you know, dynamics where we see regional pockets of growth and regional competitive dynamics playing out. So, I think that the message is yes, in an industry that grows less in the future, we have to be better and better at assessing where the pockets of growth are. But as we continue to evolve our operating model and we talked about specialist sales force as one example of this, but it's not the only one.

Speaker Change #169: and also if you could maybe provide some some KPI or some way to look at the growth for the upcoming years up to the 2027.

Renato Meloni: My second question is somewhat related to this, but it's about financial expenses. You'll be able to keep them relatively low by using a lot of your own cash generation, but then, going back to your comments on the large growth opportunities that you have and the potential cash usage of that, do you see financial expenses growing further?

Speaker Change #170: My second question is somewhat related to this, but it's about financial expenses.

Mateus Schwening: My second question is somewhat related to this, but it's about financial expenses. You'll be able to keep them relatively low by using a lot of your own cash generation. But then, going back to your comments on the large growth opportunities that you have. And the potential potential cash users of that, do you see financial expenses growing further, and then if that's the case, is there a timeline they expect for that to happen.

Speaker Change #171: You've been able to keep them relatively low by using a lot of your own cash generation, but then going back to your comments on the large growth opportunities that you have.

Speaker Change #172: and the potential cash usage of that. Do you see financial expenses growing further? And then if that's the case, if it's there a timeline they expect for that to happen. Thank you.

Mateus Schwening: And then if that's the case, if it's there a timeline they expect for that to happen? Thank you. Thank you, Renato.

Lia Matos: We continue to make sure that we can stay ahead and we can understand where these pockets of growth are within our focus, which is serving MSNDs and continues to grow and gain share within MSND. So, I think as a result of these two factors, future growth rates in a fire will be lower overall, and this is already implied in our TV long term guidance that we gave in the investor day. Just to remember, we talked about 13% keger in terms of acquiring TPV towards 2027.

Mateus Schwening: Thank you. So when you look at the adjusted cash generation for the company, I think we're still going to be in a position where we continue to generate cash. And naturally, unless we have an additional decision to locate capital elsewhere, we're going to keep investing, and it's going to continue to be a positive effect on our financial expenses. That said, when we look especially for the dynamics of the second half of this year, I think the big factor that is going to change is really the effect of interest rates. When we look at the first half, interest rates decreased substantially, and that naturally helps financial expenses.

Mateus Schwening: So first on the financial expenses piece. I think, like I said, even after the share buyback of R$1 billion, when you look at the adjusted net cash generation for the company, I think we're still going to be in a position where we continue to generate cash. And naturally, unless we have an additional decision to allocate capital elsewhere, we're going to keep reinvesting, and it's going to continue to have a positive effect on our financial expenses.

Speaker Change #173: Thank you, Renato. So, first on the financial expenses piece, I think, like I said, even after the share buyback of R$1 billion, when you look at the adjusted net cash generation for the company, I think we're still going to be in a position where we continue to generate cash.

Speaker Change #173: And naturally, unless we have an additional decision to allocate capital elsewhere, we're going to keep reinvesting and it's going to continue to be a positive effect on our financial expenses.

Lia Matos: So, this is built into a dynamic of what we understand the industry and the evolution to be. But our focus is a lot more on growth as a result of more monetization coming from the clients that we onboard to our equal system.

Mateus Schwening: That said, when we look especially for the dynamics of the second half of this year, I think the big factor that is going to change is really the effect of interest rates. When you look at the first half, interest rates decreased substantially and that naturally helps financial expenses. Second half, I think the expectation now is that it's probably going to increase. So I think that's the main dynamic there, interest rates, in terms of the other dynamics, reinvesting cash generation, and also spreads. I think they're trending really well.

Jorge Kuri: Thanks. Thanks for that detail.

Speaker Change #173: That said, when we look especially for the dynamics of the second half of this year, I think the big factor that is going to change is really the effect of interest rates.

Operator: I will answer. Thank you, Jorge.

Speaker Change #173: When you look at the first half, interest rates decreased substantially, and that naturally helps financial expenses.

Gustavo Schroden: Our next question comes from Gustave Schroding with Bradesco BBI. You can open your microphone. Hi, good afternoon and congrats on the numbers and thanks for taking my question. Most of my questions were answered, but I'd like to explore a little bit your guidance. It seems to me that it is a little bit conservative at this point because it finalized the, for example, the TPV. It is running. Very healthy in assuming that there is a seasonality in the fourth quarter, maybe that will be, I mean, easily above this 18% growth.

Mateus Schwening: Second half, I think the expectation now is that it's probably going to increase. So I think that's the main dynamic there: interest rates in terms of the other dynamics.

Speaker Change #173: Second half, I think the expectation now is that it's probably going to increase.

Speaker Change #173: So, I think that's the main dynamic there, interest rates, in terms of the other dynamics, reinvesting cash generation, and also spreads, I think they are trending really well.

Pedro Vina: In terms of the credits, I'll kick start talking a little bit about what went right versus what went wrong, and then pass it over to Leo to talk about the future. So, like I mentioned in the beginning, I think when we look at the economics of the credit product, we're really becoming increasingly confident. With the profitability of the product, I think that's an area where we were really cautious at the beginning, given the results that we had in the first wave. So I would say that when we look at the core offering that we have of credits within assemblies, it's really training well, and we're becoming more and more comfortable.

Mateus Schwening: Now, in terms of credit, I'll start talking a little bit about what went right versus what went wrong, and then pass it over to Lia to talk about the future. So, like I mentioned in the beginning, I think when you look at the economics of the credit product, we're really becoming increasingly confident with the profitability of the product. I think that's an area where we were really cautious at the beginning, given the results that we had in the first wave. So I would say that when you look at the core offering that we have of credit within SMBs. It's really trending well, and we're becoming more and more comfortable.

Speaker Change #173: Now, in terms of the credits, I'll kickstart talking a little bit about what went right versus what went wrong, and then pass it over to Lia to talk about the future.

Mateus Schwening: That's why when you look at the provisions as well, it has started to come down, right? From the 20% levels to 18, and over time, it's going to continue to converge towards our model. I think we've mentioned this a few times, but when you look at the portfolio, the 700-meter portfolio, the vast majority of that portfolio is really on what we call this core offering around SMBs. But of course, embedded in this number, we're running a series of tests.

Lia: So like I mentioned in the beginning, I think when you look at the economics of the credit product, we're really becoming increasingly confident with the profitability of the product.

Gustavo Schroden: Depositives also growing very fast, credit portfolio, take rate is above the 2.49% as you expected. Well, an income is running also assuming the seasonality in the fourth quarter is running to be above this 1.9 billion highs for the year. So, why are you, you are still like keeping this 1.9 as a minimum?

Lia: I think that's an area where we were really cautious at the beginning, given the results that we had in the first wave.

Lia: So I would say that when you look at the core offering that we have of credits within Ascendiz

Lia: It's really trending well, and we're becoming more and more comfortable, that's why when you look at the provisions as well, it has started to come down, right, from the 20% levels to 18, and over time it's going to continue to converge towards our models.

Pedro Vina: That's why, when we look at the provisions as well. It has started to come down right from the 20% levels to 18, and over time it's going to continue to converge towards our models. I think we've mentioned this a few times, but when you look at the portfolio, the 700 medium portfolio, the vast majority of that portfolio is really on what we call this core offering around assemblies. But of course, embedding this number, we're running a series of tests. So we're running tests on micro tests on different profiles within assemblies, different kinds of credit ratings.

Pedro Zina: Do you think that it is a conservative approach should we indeed expect something above to be done or 2.1 billion highs for the year that that will be reasonable? That's my question. Thank you. Hi Gustavo, Peter here. Thank you for the question. I think I'll try to provide the whole concept. And I think we emphasize, you know, our investor day, I think we transition to a policy of providing annual guidance, right?

Lia: I think we've mentioned this a few times, but when you look at the portfolio, the 700 meter portfolio, the vast majority of that portfolio is really on what we call this core offering around SMBs,

Mateus Schwening: So we're running tests on micro, tests on different profiles within SMBs, different kinds of credit rating. And this is a continuous effort where we really test and learn a lot. There are many mistakes that we did, many things that we got right.

Lia: But of course, embedded in this number, we're running a series of tests. So, we're running tests on micro, tests on different profiles within SMBs, different kinds of credit ratings.

Pedro Zina: So unless there is an extremely material change in the business or in the macro environment, I don't believe that we anticipate revisiting our guidance by mid-year. So when we look at the numbers, I think the guidance, as you mentioned, the guidance provided for the year, they are kind of a set. They set the floor for our key indicators. So for most of these where I did see more positive trends, I think you're right.

Pedro Vina: And this is a continuous effort where we really test and learn a lot. There are many mistakes that we did, many things that we got right, but I would say that net net the main message here is that we're really optimistic around the economics of the product in terms of challenges and opportunities moving ahead. I think in terms of distribution, it's really a place where we have a lot to improve, and there's a huge opportunity. Because, like I said, when we look at the offering nowadays, it's still pretty much for the digital, so very low participation from distribution channels.

Lia: And this is a continuous effort where we really test and learn a lot. There are many mistakes that we did, many things that we got right, but I would say that net-net, the main message here is that we're really optimistic around the economics of the product.

Lia Matos: But I would say that net net, the main message here is that we're really optimistic around the economics of the product. In terms of challenges and opportunities moving ahead. I think in terms of distribution, it's really a place where we have a lot to improve and there's a huge opportunity because like I said, when we look at the offering nowadays, So, I think perhaps I'll have to just add a little bit on our perspectives on the longer term guidance, right, regarding the credit portfolio. Naturally, when we consider this long-term guidance, it's not restricted to what Mateus is calling the core offer, which is working capital loans for SMBs. So, there's an extensive roadmap around other credit solutions.

Lia: In terms of challenges and opportunities moving ahead,

Lia: I think in terms of distribution, it's really a place where we have a lot of improve and there's a huge opportunity because like I said, when we look at the offering nowadays. Thank you very much.

Pedro Zina: And we do expect to exceed our targets, but I think it's it's part of the game. So the only metric as you mentioned that may prove more challenging is really caught TV as we're really witnessing a stronger growth in peak transactions, which were not included in the TV metric we provided for guidance. Despite being monetized in live with net MDRs for debit transactions. So peak QR code penetration in the market in within our client base has been higher than we anticipated when we set our guidance in November last year.

Lia: It's still pretty much fully digital, so very low participation from distribution channels.

Pedro Zina: So this would affect our overall one mix to it less cut TV specifically on debit and more on peak peaks QR code. But in general terms, I think we're keeping the guidance as I mentioned before. Okay, very clear and just a follow up here, very clear your point about the card TV and the peaks of potential impact and about interest rates.

Pedro Vina: And it's probably going to be key to increase conversion and penetration in the future and their core growth of portfolio.

Lia: And this is probably going to be key to increase conversion and penetration in the future and therefore grow the portfolio.

Lia Matos: So I think perhaps not just to add a little bit on our perspectives on the longer term guidance, right, regarding the credit portfolio. Naturally, when we consider this long-term guidance, it's not restricted to what material is calling the core offer, which is working capital loans for SMBs. So there's an extensive roadmap around other credit solutions. We talked about some products that we have started to pilot, so credit cards for both phone and phone. The GIFFASCY product within SMBs, which is kind of an overdraft solution. So the message is there's a big opportunity. We have work to do in terms of building more relevant capabilities that will enable us to expand the product offering, so the types of credit solutions that we offer are clients.

Lia: I don't know if you want to add, Lia. No, I think perhaps I have to just to add a little bit on our perspectives on the longer-term guidance, right, regarding the credit portfolio.

Lia: Naturally, when we consider this long-term guidance, it's not restricted to what Mateus is calling the core offer, which is working capital loans for SMBs.

Lia: So, there's an extensive roadmap around other credit solutions. We talked about...

Lia: Some products that we have started to pilot, so credit cards for both stone and stone. The Girofacil product within SMBs, which is kind of an overdraft solution.

Lia Matos: We talked about some products that we have started to pilot, so credit cards for both Stone and Stone, the Girofacil product within SMBs, which is kind of an overdraft solution. So, the message is there's a big opportunity. We have work to do in terms of building more relevant capabilities that will enable us to expand the product offering, so the types of credit solutions that we offer our clients, but we're confident with the guidance this year and the long-term guidance as well. Thank you. Thanks a lot.

Speaker Change #174: So the message is there's a big opportunity, we have work to do in terms of building more relevant capabilities that will enable us to expand the product offerings, so the types of credit solutions that we offer our clients.

Mateus Schwening: So anything that you see here that could change or could impact our guidance as now we have a different environment for different expectations for rates, anything that you could comment here would be great. Thank you. What's our materials here? So when you think about interest rates, they are going to be a drag on second half. Again, first half, I think the expectation was that interest rates would decrease when you look now they are expected to increase on the second half.

Lia Matos: But we're confident with the guidance this year in the long-term guidance as well.

Speaker Change #174: But we're confident with the guidance this year and the long-term guidance as well.

Henata Miloni: Thank you.

Unknown Executive: Our next question comes from Gabriel Gusan. Hey guys, good evening. One quick question about peer-to-merchant PIX pricing. Have you guys seen any pressure so far?

Gabriel Gusso: Our next question comes from Gabriel Gusso with Sici. Hey guys, good evening. One quick question of all peer-to-mershend, you guys have seen any pressure so far, or do you envision seeing pressure in the rates that you're charging? You're seeing something similar to that levels, we hear from competition too.

Speaker Change #174: Thanks a lot.

Speaker Change #175: Hey guys, good evening. One quick question about peer commerce.

Mateus Schwening: But we need to keep in mind that when we did the investor day and provided the guidance in November, the interest rate curve was not that low as well. So there is a negative headwind there, but it's not really material and not enough to change the guidance. Okay, very clear.

Gabriel Gusan: Do you anticipate seeing pressure on the rates that you're charging? You were saying something similar to debit levels we hear from competition too. But we do understand that the economics on that probably might be better than debit with less costs associated with that. So anything you could share on that front? Thank you. Hi Gabriel here.

Speaker Change #176: PICS pricing. You guys seeing any pressure so far? Do you envision seeing pressure in the rate that you're charging? You're saying something similar to debit levels we hear from competition too. But we do understand that economics on that probably might be better than the debit plus cost associated to that. So anything to share on that front? Thank you.

Gustavo Schroden: Thank you very much.

Gabriel Gusso: Let me do understand that economics on that probably went better than the debit, but that's false, that's what she added to that, so anything you could share on that from. Thank you.

Mateus Schwening: Hi, W, I'm here. So, in terms of pricing six p2m, basically we're pricing in line with debit net MDRs. It naturally depends on the client's tier, so prices will be lower for bigger merchants, higher for smaller merchants. But essentially, I think that's the message. It's naturally a win-win for us and for our clients, because they pay less; we gain the same, and it's secretive to our banking engagement. I think that's the message, so there's a value add around offering fixed secure dynamic QR codes, because it greatly facilitates our client's ability to reconcile this as a payment method.

Gabriel Gusan: So in terms of pricing P2M, basically, we price it in line with DebitNet MDR. It naturally depends on the client, so prices will be lower for bigger merchants, higher for smaller merchants, but essentially, I think that's the message. It's naturally a win-win, right, for us and for our clients because they pay less, we gain the same, and it's secretive to our banking engagement. And I think that's the message. So there's a value added around offering PIX dynamic QR codes, right, because it greatly facilitates our clients' ability to reconcile this as a payment method. If they were to use sort of a P2P type PIX transfer, that would be a challenge, and that's very relevant within SMBs.

Speaker Change #176: Hi, Gabriela here. So, in terms of pricing P2M, basically we price it in line with DebitNet MDR.

Henata Miloni: Our next question comes from you defend and just with JP Morgan. Hi guys, thank you and congrats again. Quick one on Rio Grande do Sul. I think this was a topic to discuss in the past quarter. You were giving grace periods like description free for some clients. Any impact to this part like what what was the final number here and how you know this was to the Rio Grande do Sul. How your earnings would have behaved.

Speaker Change #177: It naturally depends on the client's tier, so prices will be lower for bigger merchants, higher for smaller merchants, but essentially I think that's the message. It's naturally a win-win, right, for us and for our clients, because they pay less, we gain the same, and it's secretive to our banking engagements.

Speaker Change #177: And I think that's the message. So there's a value-add around offering fixed dynamic QR codes, right? Because

Henata Miloni: That's the first one. And a second one on I think Leah already explore a lot the bank initiatives, but just on the positive. I know your testing is you know, remuneration for deposits to put this on your, you know, the pilot test is on your on your release. If you can provide the more color on timing, what you plan to do. And the risks of cannibalization of your deposit free of you know free of the use nowadays. So just some color on the remuneration of the positive strategies here. Thank you.

Speaker Change #177: It greatly facilitates our clients' ability to reconcile this as a payment method. If they were to use sort of a P2P type PICS transfer, that would be a challenge and that's very relevant within SMBs.

Mateus Schwening: If they were to use sort of a P2P type, fixed transfer, that would be a challenge, and that's very relevant within SMBs. So there's a clear value add around this offer, and we don't see any pressure on pricing, and that's kind of the dynamics. Thank you.

Gabriel Gusan: So there's a clear value add around this offer, and we don't see, you know, any pressure on pricing, and that's kind of the dynamics. Thank you. Thank you, Gabrielle. There are no questions at this time. The question in this...

Speaker Change #177: So there's a clear value-add around this offer.

Speaker Change #177: and we don't see, you know, any pressure on pricing and that's kind of the dynamics.

Operator: Thank you, Gabriel. There are no questions at this time.

Unknown Executive: Questions that were not answered will be addressed later by... I will now turn over to Pedro Zinner, CEO at... For Final Consideration, Well, I just want to thank you all for participating in the call, and I hope to see you again in the next quarter. Thank you. This concludes StoneCo's presentation; you may now disconnect.

Gabrielle: Thank you, Gabrielle.

Pedro Zina: Hi, Pedro speaking, I'll kick off with the Rio Grande do Sul question. Well, I'm happy to say that the impact was smaller than we initially anticipated. And I think this is really thanks to the sweet recovery of TPV in the affected region. So good news on that side. But overall, we really experienced a negative impact of approximately 150 million highs on our TPV in ballpark numbers around that 10 million highs on our overall results.

Pedro Vina: This concludes the question and answer session. Questions that were not answered will be addressed later by the Stone Co. team.

Pedro Zinner: There are no questions at this time. This concludes the question and answer session. Questions that were not answered will be addressed later by the StoneCo team. I will now turn over to Pedro Zinner, CEO at StoneCo for final considerations. Questions?

Pedro Zina: And just a quick note that this impact was not only due to the TPV reduction, but also because of the series of actions that we really took to support our clients during this critical time when they most needed us.

Pedro Vina: I will now turn over to Pedro Ziner, CEO at Stone Co, for final considerations. Well, I just want to thank you all for participating in the call, and I hope to see you again in the next quarter. Thank you.

Pedro Zinner: Well, I just want to thank you all for participating in the call and I hope to see you again in the next quarter. Thank you.

Operator: This concludes Stone Co presentation. You may now disconnect.

Speaker Change #179: This concludes Stone Co. presentation. You may now disconnect.

Mateus Schwening: And I'll pass it over to Mateus. Yeah, in terms of the remuneration of deposits, we're still testing. I think we started to disclose on the balance sheet the amounts that we have with time deposits with merchants. We're going to see that's really immaterial yet. And we're basically still testing to ensure that we don't cannibalize the economics of the current banking offering. So in terms of time, I think that during the next quarters will gradually extend the pilot to our database.

Operator: Good bye.

Mateus Schwening: But it should only start to make a difference in the balance sheet and in the results next year. I think we shouldn't expect anything big for 2024 on that front. No, super clear Mateus. Thank you also, Pedro. Thank you.

Henata Miloni: Our next question comes from Henata Miloni with autonomous research.

Henata Miloni: Hi, everyone. Thanks here for the question. So this one is related to the credit portfolio given the large success. They've you had so far and look at the guidance. I think it's been interesting to explore the well, well, and what was ahead of your expectation here. And also if you could maybe provide some some KPI or some way to look at the growth for the upcoming years up to the 2027. 2027 guidance that you provide.

Mateus Schwening: My second question is somewhat related to this, but it's about financial expenses. You'll be able to keep them relatively low by using a lot of your own cash generation. But then going back to your comments on the large growth opportunities that you have. And the potential potential cash users of that, do you see financial expenses growing further and then if that's the case, if it's there a timeline they expect for that to happen.

Mateus Schwening: Thank you. So when you look at the adjusted cash generation for the company, I think we're still going to be in a position where we continue to generate cash. And naturally, unless we have an additional decision to locate capital elsewhere, we're going to keep investing and it's going to continue to be a positive effect on our financial expenses. That said, when we look especially for the dynamics of the second half of this year, I think the big factor that is going to change is really the effect of interest rates.

Mateus Schwening: When we look at the first half interest rates decreased substantially, and that naturally helps financial expenses. Second half, I think the expectation now is that it's probably going to increase. So I think that's the main dynamic there interest rates in terms of the other dynamics.

Pedro Zina: In terms of the credits, I'll kick start talking a little bit about what went right versus what went wrong, and then pass it over to Leo to talk about the future. So like I mentioned in the beginning, I think when we look at the economics of the credit product, we're really becoming increasingly confident. With the profitability of the product, I think that's an area where we were really cautious at the beginning, given the results that we had in the first wave.

Pedro Zina: So I would say that when we look at the core offering that we have of credits within assemblies, it's really training well and we're becoming more and more comfortable. That's why when we look at the provisions as well. It has started to come down right from the 20% levels to 18 and over time it's going to continue to converge towards our models. I think we've mentioned this a few times, but when you look at the portfolio, the 700 medium portfolio, the vast majority of that portfolio is really on what we call this core offering around assemblies.

Pedro Zina: But of course embedding this number, we're running a series of tests. So we're running tests on micro tests on different profiles within assemblies, different kinds of credit ratings. And this is a continuous effort where we really test and learn a lot that are many mistakes that we did many things that we got right, but I would say that net net the main message here is that we're really optimistic around the economics of the product in terms of challenges and opportunities moving ahead.

Lia Matos: I think in terms of distribution, it's really a place where we have a lot to improve and there's a huge opportunity. Because like I said, when we look at the offering nowadays, it's still pretty much for the digital, so very low participation from distribution channels. And it's probably going to be key to increase conversion and penetration in the future and their core growth of portfolio.

Lia Matos: So I think perhaps not just to add a little bit on our perspectives on the longer term guidance, right, regarding the credit portfolio. Naturally, when we consider this long term guidance, it's not restricted to what material is calling the core offer, which is working capital loans for SMBs. So there's an extensive roadmap around other credit solutions. We talked about some products that we have started to pilot, so credit cards for both phone and phone.

Lia Matos: The GIFFASCY product within SMBs, which is kind of an overdraft solution. So the message is there's a big opportunity. We have work to do in terms of building more relevant capabilities that will enable us to expand the product offering, so the types of credit solutions that we offer are clients. But we're confident with the guidance this year in the long term guidance as well.

Henata Miloni: Thank you. Thanks, Emma.

Gabriel Gusso: Our next question comes from Gabriel Gusso with Sici. Hey guys, good evening. One quick question of all peer-to-mershend, you guys have seen any pressure so far, or do you envision seeing pressure in the rates that you're charging, you're seeing something similar to that that levels, we hear from competition too.

Gabriel Gusso: Let me do understand that economics on that probably went better than the debit, but that's false, that's what she added to that, so anything you could share on that from. Thank you. Hi, W, I'm here. So in terms of pricing six p2m, basically we're pricing in line with debit net MDRs. It naturally depends on the client's tier, so prices will be lower for bigger merchants, higher for smaller merchants, but essentially I think that's the message.

Gabriel Gusso: It's naturally a win-win for us and for our clients, because they pay less, we gain the same and it's secretive to our banking engagement. I think that's the message, so there's a value add around offering fixed secure dynamic QR codes, because it greatly facilitates our client's ability to reconcile this as a payment method. If they were to use sort of a p2p type, fixed transfer, that would be a challenge, and that's very relevant within SMBs.

Gabriel Gusso: So there's a clear value add around this offer, and we don't see any pressure on pricing, and that's kind of the dynamics. Thank you. Thank you, Gabriel. There are no questions at this time. This concludes the question and answer session. Questions that were not answered will be addressed later by the Stone Co team.

Pedro Zina: I will now turn over to Pedro Ziner, CEO at Stone Co for final considerations. Well, I just want to thank you all for participating in the call, and I hope to see you again in the next quarter. Thank you.

Pedro Zina: This concludes Stone Co presentation.

Operator: You may now disconnect.

Operator: Good bye.