Q4 2024 StoneCo Ltd Earnings Call
Speaker Change: Good evening everyone, thank you for standing by. Welcome to StoneCo's fourth quarter 2024 earnings conference call.
By now, everyone should have access to our earnings release.
Speaker Change: The company also posted a presentation to go along with its call.
Speaker Change: All material can be found online at investors.stone.co. Throughout this conference called the company will be presenting non-ISR as financial information, including adjusted net income, adjusted net cash, and adjusted basic EPS.
Speaker Change: 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: 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 rely on them. Thank you very much.
Speaker Change: These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the company's expectations. Please refer to the forward-looking statements disclosure in the company's earnings press release.
Speaker Change: In addition, many of the risks regarding the business are disclosed in the company's Form 20F file with the Securities and Exchange Commission, which is available at www.sec.gov
Speaker Change: In hindsight, I would like to highlight that the full conference call will last until 7.15pm VRT time by which time the company will take no further questions.
Speaker Change: Joining the call today is Stone CEO , Pedro Zinner, the CFO and IRO, Mateus Shedeth, the Strategy and Marketing Officer, Lia Matos, and the Head of IR, Roberta Noronha.
Speaker Change: I would now like to turn the conference over to your host, Pedro Zinner, please proceed. Thank you operator and good evening.
Speaker Change: As detailed in our annual shareholder letter, 2024 was a pivotal year of execution, marked by significant progress despite market challenges.
Speaker Change: We strengthen our position for sustainable growth, successfully executing our strategy, delivering exceptional client service and generating value for shareholders.
Speaker Change: Our key accomplishments reflect substantial progress across our three strategic priorities.
MSNB Market Leadership, Enhanced Client Engagement, Inscable Platform Grow
Speaker Change: This is clearly demonstrated by the achievements against our 2024 targets for MSNB card TPV, deposits, MSAB take rates, credit portfolio, adjusted administrative expenses, and adjusted net income.
Speaker Change: Exceeded expectations, reaching 454 billion highs at 22% year over year increase.
Speaker Change: Looking ahead to 2025, we are confident in our ability to continue outpacing market growth and expanding our share of the MSA payments market.
Speaker Change: Retail deposits close 2024 at $8 7 billion highs exceeding our seven beating highs guidance.
Speaker Change: This success reflects the strong performance of our bundled payments and banking offering.
Speaker Change: An increase in client engagement with our banking solutions.
Speaker Change: While this is a significant milestone.
Speaker Change: We view it as the initial phase of our strategy to establish stone accounts is the primary financial hub for our clients.
Speaker Change: As we enhance our value proposition with a comprehensive product ecosystem extending beyond payments with project retail deposit growth to outpace <unk> growth.
Speaker Change: In 2025, with a focus on key initiatives, including our investment products and workflow tools to further accelerate deposit growth.
Speaker Change: Our second priority enhancing client engagement.
Speaker Change: You had strong results beyond core monetization metrics like PPV and deposits.
Speaker Change: We achieved an MSA did take rate of 255% in 2024.
Speaker Change: <unk>, our 249% guidance.
Speaker Change: This success reflects not only disciplined pricing payments, but also the growing contribution from our banking and credit solutions.
Speaker Change: Our credit portfolio reached one 2 billion highs in 2020 for Cigna.
Speaker Change: Significantly exceed our 800 million target, while maintaining control risk and healthy profitability.
Speaker Change: Our nonperforming loans over 90 days remained at a controlled 361%.
These results highlight the success of how 2023 credits relaunch timber present, the key step in our strategic evolution towards becoming our clients' primary financial provider.
Speaker Change: Our third priority scalable platform growth.
Speaker Change: Chris on delivering continuously evolving value to clients profitability.
Speaker Change: This is reflected in our net income of $2 2 billion exceeding our $1 9 billion of <unk> guidance, despite macroeconomic headwinds and over 100 million highs negative impacts from accounting methodology changes for membership fees.
Speaker Change: This strong performance resulted from successful monetization ongoing efficiency improvements and the initial benefits of cost control initiatives.
Speaker Change: Evidenced by adjusted administrative expenses of 994 million higher compared to our 1.1 hundred 25 billion guidance.
Speaker Change: I am extremely pleased with our strong performance in 2024, and the progress we made executing our strategy.
Speaker Change: We remain focused on empowering our clients by simplifying their financial lives and providing the solutions they need.
Now I'll hand, it over to Linda to discuss our fourth quarter 2024 results and provide further strategic updates here.
Linda: Thank you Pedro and good evening everyone.
Linda: A closer look into our fourth quarter 24 results, we're pleased with our performance in the quarter.
Linda: We were able to deliver solid results, despite a less favorable macroeconomic environment towards the end of the year when yield curves trended upwards.
Linda: In spite of the scenario, we decided not to increase prices for our clients in the quarter given the important holiday season.
Linda: As you can see on slide four we posted strong bottom line results. Our adjusted EBIT grew 22% compared with the fourth quarter of 23, while adjusted net income grew 18% over the same period.
Linda: Adjusted net margin was 18, 4% in the quarter, one percentage point higher year over year.
Linda: As a result of the execution of share buybacks throughout 2024, our adjusted basic EPS growth exceeded net income growth, increasing 26% compared to the fourth quarter of 'twenty three.
Linda: These results as seen on slide five stemmed primarily from an 11% year over year increase in total revenues for the quarter, which resulted from active client base growth and higher monetization of clients among different client segments.
Linda: In addition to that we saw significant gains in efficiency, while we continue to invest for future growth.
Linda: As you can see on the right side of the slide we are now introducing gross profit as a key measure of our performance.
Linda: Most profit is measured as our revenues deducted by cost of services and financial expenses.
Linda: We believe this metric better represents the nature of our operation and our ability to monetize clients through multiple levers such as payments banking and credit.
Linda: On the cost side it considers the cost to fund our operation as well as a direct cost to serve our client base.
Linda: Our gross profit in the quarter reached $1 7 billion reais growing 13% year over year.
This growth ahead of revenue growth reflects a lower level of provision for loan losses, as well as a lower cost to fund our business.
Linda: Note that on a quarter over quarter basis, we started to be impacted by the higher yield curve.
Linda: While we had a hit in our financial expenses from higher rates in the fourth quarter, we understand the end of the year as a critical moment for our clients and thus we took the decision to not increase prices in the fourth quarter and wait for the beginning of the year instead.
Linda: On slide six we dig deeper in our financial services segment performance, starting with our payments business for Msnb's.
Linda: Our msnb payments active client base increased 19% year over year to $4 1 million clients.
Linda: This represents an acceleration and our addition of clients to 157000 from 108000 in the previous quarter.
Linda: Net adds performance in the quarter resulted from end of year campaigns, including Black Friday, while churn levels remained under control.
Linda: While we welcome this acceleration and believe it reflects the strength of our value proposition as well as excellent in distribution. We note that our focus continues to be to guarantee healthy unit economics in every cohort.
Linda: Our dynamic pricing strategy effective bundling and increase client engagement.
Linda: I think it is important to remind everyone that net adds dynamics can vary quarter over quarter slightly above or below the average over several quarters.
Linda: Speaking of engagement, we saw yet again, an increase in our heavy user metric this quarter from 34% in the previous quarter to 37% in the fourth quarter.
Linda: We believe this is a result of both the effectiveness of our payments and banking bundle offers and on the launching of new solutions that are accretive over time.
Linda: MSNBC PV increased 21% year over year in the quarter, showing an acceleration compared to previous quarter growth of 20% driven by card TPG growth of 13%, while <unk> continued to grow at much higher rates as adoption continues to accelerate invisibly cannot.
Linda: <unk> debit volumes as well as cash.
Linda: <unk> continues to open new avenues of product development, such as recently implemented NFC capture while monetization remains accretive to our ecosystem.
Linda: In spite of the solid volume growth. We also saw encouraging trends in our take rates, which increased 11 basis points year over year with a soft reduction sequentially due to typical fourth quarter seasonality.
Linda: As I mentioned going forward, we will focus more on total gross profit as a better metric to reflect our monetization strategy.
Linda: <unk> through multiple monetization drivers and tradeoffs.
Linda: We believe that take rates are more limited and showing the whole picture given that we may decide on different balances between solutions <unk>.
Linda: Given a specific macro environments.
Linda: Also as we intend to use our deposits in a more relevant way to fund our operation, which is accretive to us this would impact take rates, while it would be neutral to gross profit.
Linda: We will however continue to disclose this metric and earnings materials, and we will adapt it to include fixed volumes in CTV when calculating take rate.
Linda: Moving on to slide seven we show our banking performance, we continue to see strong growth in our banking active client base, which increased 46% year over year to $3 1 million banking clients outgrowing the increase in our payments client base.
Linda: The combination of success in our bundle offers and continued engagement with our banking features led to a 42% increase in retail deposits or a strong 28% sequential increase boosted by seasonality, reaching $8 7 billion highs by yearend.
Linda: As expected deposits have been growing well above CPG, reaching six 8% of MSNBC television in the quarter compared with 6% in the third quarter of <unk> 24, and five 8% in the fourth quarter of 'twenty three.
Linda: Within retail deposits, we have seen a three six fold increase in time deposits, which reached 430 million. He is mostly related to our savings solution.
Linda: Although still small this solution has been a key driver of engagement, enabling our clients to save money for specific purposes, and therefore better organize their finances.
Linda: An important aspect to note is that from the remaining $8 3 billion has in deposits, we expect to convert a significant portion of it to time deposits by issuer certificate of deposits.
Linda: This will allow us to utilize such amounts towards funding of our operation.
Linda: As we pursue this strategy over the coming quarters, we expect to see a shift in our retail deposit mix from deposits from retail clients to on platform time deposits.
Linda: This shift will contribute to a better and more efficient capital structure, and we will significantly reduce the cost of fund our operation reducing financial expenses at the same time, we will no longer earn CDI on top of those deposits, which means we will experience a significant reduction in our floating revenues throughout.
The euro as well.
The effect will be an accretive outcome to our bottom line as we implement this strategy over time.
On slide eight I'm going to give some highlights of our credit performance.
Linda: The fourth quarter showed a trend of continuity versus previous quarters with positive results both in growth and in quality, our credit portfolio reached $1 2 billion, increasing 31% in the quarter.
Linda: This portfolio is comprised of $1 1 billion highs of merchant solutions.
Linda: Imposed in its majority of working capital solutions to Smbs.
Linda: And 114 million highs of credit card offerings to our clients mainly to micro clients.
Linda: Despite the more challenging macroeconomic scenario, we still see credit as an important avenue of growth.
Linda: Given the significant opportunity to support our clients through multiple credit offerings, where we still have limited presence.
Linda: Nevertheless, we remain aware of macro trends that may lead to an impact in future disbursements and performed.
Linda: Credit quality remains healthy with Npls 50 to 90 days of 247% and Npls over 90 days of 361% with increases being expected as a natural consequence of portfolio maturation.
Linda: Regarding provisions as we had been communicating over the past quarters, we have been gradually reducing the amount of working capital provisions, we hold compared with its respective portfolio balance.
Linda: When we relaunched the solution, we decided to over provision until we could have a clear view of multiple vintages performance and slowly converge those provisions to the actual expected loss levels the ratio of accumulated loan loss provision expenses over the working capital portfolio reached 12%.
Linda: In the quarter compared with the 14% in the third quarter and 20% a year ago give.
Linda: Given the current macroeconomic scenario and a conservative approach from our side. We believe this is an appropriate level to stabilize them at the moment.
Linda: As such we will now transition away from tracking this ratio to follow more widely used credit metrics.
Linda: Our coverage ratio currently stands at 331%, which.
Linda: Which is still at a high level for comparable credit players in the market.
To summarize on slide nine as a result of the performance highlights I. Just described our financial services segment grew revenues at 11% year over year to $3 2 billion highs within adjusted EBIT growth of 16%, reaching 700 million eyes.
Linda: And the 90 basis points margin increase to 21, 9% in the quarter.
Linda: The solid results of the year within the financial services segment, driven by the successful execution of our strategic priorities around when engage and scale led us to reach an ROE of 27% in 2024, five percentage points higher than in 2023.
Linda: Finally on slide 10, I will go through our software segment performance.
Linda: As you can see our execution on cross selling financial services to software clients has been yielding positive results. We have increased our CCTV overlap, 20% year over year compared with a 13% growth of overall Msnb car TPG for the same periods.
Linda: Sequentially, we grew CTV overlap two times higher than our Msnb car TPG growth, which.
Linda: Which gives us confidence to keep seeking this strategic Avenue our heads.
Linda: On a standalone basis software revenue grew 15% year over year in the quarter, mainly driven by a good performance in one of our portfolio companies had Colombia, Keith and the nonrecurring revenue of 8 million Reais.
Linda: Software adjusted EBITDA posted a strong 54% growth year over year reach.
Linda: Reaching an all time high margin since the acquisition of <unk> of 21, 6%.
Linda: This margin improvement was largely led by the combination of our strong revenue performance with our continued focus on gaining efficiencies in the operation.
Linda: As further maintenance, we're pleased with the 2024 results and remain committed and excited to bring more value to our clients throughout 2025 and to continue our journey towards reaching our long term targets and creating value for our shareholders now.
Speaker Change: Now I want to pass it over to Mark deals to give important updates on our software segment and discuss in more detail our overall financial performance.
Linda: Matos.
Mark: Thank you Leah and good evening everyone.
Mark: Before we dive into the financials on slide 11, I'd like to briefly update you on our software Division.
Mark: During our Investor day in November 2023, we outlined our software strategy.
Mark: Focus on growth any financial serves to FERC priority two birds.
Mark: In managing our other software assets for efficiency and cash generation.
Mark: As previously discussed while executing the cross those threat, Jim we achieved with breakthrough success, leveraging our financial services distribution channels, rather than relying on our software specific sales force.
Mark: Using our science led us to conclude that owning the software assets using essential for executing our across settings threat. The June although the strategy itself remains relevant.
Mark: As a result of this shift in how we execute.
Mark: A larger share of the economics from the cross sale is now being recognized within our financial services segment.
Mark: Other than this softer cash generating units.
Mark: Additionally, recent standalone organic growth trends in the software business prompt us to lower our growth expectations for this segment.
Mark: These factors along with from our challenging macroeconomic environments.
Mark: Led us to recognize a goodwill impairment charge of $3 6 billion reais for the softer cash generating units.
Mark: This impairment is a noncash accounting adjustments and has been excluded from our adjusted financial results.
Mark: Regarding our ongoing assessment of strategic alternatives for the software assets we have.
Mark: Have received and reviewed several proposals from interested parties.
Mark: However, as of now none have met our assessment of the intrinsic value of the assets.
Mark: Thus, we will continue maximizing the value of the asset.
Mark: In executing our growth strategy as we have done to date.
Mark: Now, let's turn to slide 12, and explore the quarter over quarter evolution of our costs and expenses on an adjusted basis.
Mark: Cost of services increased 10% year over year and 2% sequentially.
Mark: Leading to a 130 basis points sequential reduction as a percentage of revenues.
Mark: This improvement was primarily driven by operational efficiencies and customer support and logistics and lower provisions and losses.
Mark: So the reversal of a provision that did not materialize.
Mark: These benefits were partially offset by higher loan loss provisions related to the growth of our credit products.
Mark: Administrative expenses decreased 2% year over year, and increased 6% quarter over quarter, resulting in a sequential reduction of 10 basis points as a percentage of revenues.
Mark: This reduction reflects operational leverage achieved in the periods.
Mark: Selling expenses rose by 21% year over year and 9% sequentially.
Increasing 30 basis points as a percentage of revenues.
Mark: The arrival, primarily due to increased investments in our specialist sales team.
Mark: Partially offset by reduced marketing expenses.
Mark: We continually assess growth opportunities and remain committed to investing where it's fair to accretive.
Mark: Financial expenses increased 10% year over year, and FERC, some percent sequentially or 160 basis points as a percentage of revenue.
Mark: This sequential increase was primarily driven by the higher yield curve in the quarter.
Mark: We expect to ramp up the usage of our deposit funding for our operation throughout the year, which will enable us to further diversify our liability management, while continuing to reduce our average funding spreads.
Mark: Our other expenses line decreased by 24% year over year, but remained relatively stable sequentially.
Mark: <unk> revenues grew other expenses as a percentage of revenue declined by 20 basis points.
Mark: Our effective tax rate was 14, 5% in the quarter down notably from 20% in Q3.
Mark: This reduction was driven primarily by gains from entities abroad.
Mark: Including the full effect from the partial repurchase of our bonds.
Mark: And the transfer of the remaining portion to a local entity, which allowed us to benefit from the tech shoots on associated interest expenses.
Mark: Additionally, we benefited from tax incentives under Labour beam, which typically peak in the first quarter.
Mark: Turning now to slide 13.
Mark: Adjusted net cash position of $4 7 billion at quarter ends.
Mark: Presenting a sequential decrease of zero point youll be in arrears.
Mark: This decline primarily reflects our ongoing share repurchase activity.
Mark: We have an active <unk> buyback program.
Mark: <unk> 608 million Reais or $10 9 million shares were repurchased in the first quarter of 2024.
Mark: For the full year.
Mark: Adjusted net cash decreased by just 0.3 billion. Despite $1 6 billion Reais in total share repurchase during for Anthony for covering both our current and previous buyback programs.
Mark: Excluding share repurchase activity and the capital we allocated in our credit product. We would have generated $1 9 billion just to net cash for the year.
Mark: Before I open the lines I would like to discuss two additional topics.
Mark: The first on slide 14 concerns of our approach to capital allocation.
Mark: Throughout the past year, we conducted a comprehensive review of our capital structure.
Mark: Noting the creation of appropriate there and model to assess our excess capital position based on three key pillars.
Mark: First pillar focuses on our capitalization ratio.
Mark: Considering our business trajectory and rapid growth.
Mark: We've decided to maintain a minimum common capital ratio at suncor equal to 20% of our risk weighted assets, though this level could be reassessed overtime.
Mark: The second pillar addresses our credit ratings.
Mark: Given the nature of our operations maintaining credit rating metrics are aligned with our banking peers. These are things should.
Mark: Therefore, we have set specific kpis to monitor regularly ensuring we maintain at least a recurring global ratings, which are constraining by discovering reed.
Mark: The third pillar revolves around our adjusted net cash position.
Mark: We have historically emphasized net cash as a critical indicator of our business capitalization and have accordingly chosen to maintain a positive net cash balance.
Mark: Based on this dealers, we estimate that as of December 31st we had an excess capital of over attribute in Reais.
Mark: We expect to return capital to shareholders over time when value accretive growth opportunities are not immediately available.
Mark: Notably this amount is already net of the $1 6 billion Reais distributed in 2024 through our share buyback programs and does not account for any potential capital release from strategic discussions regarding our software division.
Mark: Finally, turning to slide 15, I'd like to discuss our guidance.
Mark: At our Investor Day in November 2023, we provided short and long term guidance metrics.
Mark: Which help investors clearly understand our strategic direction and enabled transparent tracking of our progress.
Mark: In 2024, we delivered strong results across these metrics reinforcing our confidence in achieving our 2027.
Mark: Now given the ongoing evolution and increased maturity of our business, we have made certain adjustments to better align our metrics with recent industry dynamics and our increased focus on capital structure, while maintaining our strategic priorities.
Mark: For 2025, we have simplified our guidance through two key financial indicators that best reflect our business performance.
Mark: The first indicator.
<unk> gross profits captures the consolidated execution of our strategy across our various products and services.
Mark: Adjusted basic EPS incorporate both our capacity to grow efficiently and benefits from the optimization of our capital structure.
Mark: This simplified guidance approach enhances our flexibility, while maintaining disciplined tracking of our core value drivers.
Mark: As for our long term outlook, our 2027 guidance maintains our original projections for a review of deposits and credit portfolio.
Mark: However, we have adjusted our MSNBC TBD metric to MSNBC PV shrink.
Mark: To include fixed volumes, reflecting industry developments and the importance of <unk> following its widespread adoption in the markets.
Mark: Additionally, we were pleased our M SMB take rate guidance with gross profits.
Mark: Gross profit as previously explained.
Mark: For our revenues minus cost of services and financial expenses, capturing the true economics of our business.
Mark: It also accounts for lower floating revenue, resulting from increased use of deposits. This funding, which despite lowering the decrease remains accretive to our bottom line due to reduced funding costs.
Mark: Lastly, we replace it our adjusted administrative expenses and adjusted net income guidance with adjusted basic EPS.
Mark: As EPS effectively captures our overall bottom line performance, while allowing greater flexibility in capital allocation decisions.
Mark: For 2025 on Slide 16, we expect adjusted gross profit above 705 billion and adjusted basic EPS above $8, six <unk> per share, reflecting year over year growth of 14% and 18% respectively.
Mark: These EPS calculation.
Mark: A share count of 279 5 million shares taking into account the repurchase of $33 5 million shares since our Investor day.
Mark: Moving to slide 17, our updated guidance for 2027 projects MSNBC PV, surpassing 670 billion Reais.
Mark: Implying that 2024% to 2027% CAGR above 14%.
Mark: Adjusted gross profit is expected to exceed $10 2 million reais translating to a CAGR of over 18%.
Adjusted basic EPS is expected to exceed 15 <unk> per share representing a CAGR of over 27%.
Mark: Notably despite aggressive share repurchase or implicit adjusted net profit guidance remains at $4 3 billion reais, indicating and upgrades in our regional implicit guidance for EPS.
Mark: To wrap up I would like to pass it over to Pedro for some final remarks.
Pedro Zinner: Thank you Matteo.
Pedro Zinner: Finally on slide 18, I'd like to knowledge, our consistent track record of delivering strong results over recent years.
Pedro Zinner: Over the past two years, we have repeatedly exceeded market consensus and delivered on our commitments, reflecting disciplined execution and strategic clarity.
Pedro Zinner: Moving forward our goal remains clear.
Pedro Zinner: Maximizing long term increasing business value growth measured on a per share basis, rather than merely emphasizing overall company size or scale.
Pedro Zinner: As we conclude 2024 and.
Pedro Zinner: 2025, we recognize potential macroeconomic challenges, but remains firmly committed to delivering sustainable long term value creation.
Our strategy remains focused on disciplined execution, and prudent capital allocation and enhancing increasing business value per share.
Pedro Zinner: We deeply appreciate the trust support and partnership from our shareholders as we navigate this journey together.
Pedro Zinner: The road ahead is further opportunity.
Pedro Zinner: We are more determined than ever to drive sustainable growth and lasting success.
Pedro Zinner: With that said, we are now ready to open the call for questions.
Pedro Zinner: Okay. At this time, we are going to open it up for questions and answers. If you have a question. Please read it down into Q&A section or click on raise hand for audio questions.
I would like to highlight that questions will be answered up to 715 P. M BRT.
Pedro Zinner: Analysts there is still on the waiting line will have their questions addressed by the IR team.
Pedro Zinner: Also keep in mind. The two questions are allowed per analyst. Please.
Pedro Zinner: Please remember that your company's name should be visible for your question to be taken we.
Pedro Zinner: We do ask that when you pose your question that you pick up your headset to provide optimal sound quality.
Pedro Zinner: <unk> hold while we poll for questions.
Eduardo: Our first question comes from Eduardo asthma with BTG.
Eduardo: Hi, Hi, everyone. Congrats on the numbers two questions here. The first one on your banking solution. If you could share with US why do you think you are outperforming right performing really well and where do you see room for further improvement.
Eduardo: And the second question is on the capital structure right Whats your view on dividends right given the very big excess capital in the ongoing share buyback program why not distribute dividends as well thanks.
Speaker Change: Hi, Hoffman Lia here. Thank you for the question I'm going to take the first one and then pass it over to <unk>. So I think overall message on banking is the following as we said in the Investor Day, we continue to see deposits grow ahead of PPV right.
Eduardo: And.
Eduardo: The message behind this is that.
Eduardo: Deposit growth ahead of PPV because clients further engage with our banking solution and this is mainly driven by two factors number one is our success in bundling payments and banking, which is something that is done over the last years, and we're getting increasingly better at <unk> and <unk>.
Eduardo: Also as we evolve on the banking roadmap and develop more solutions our clients further engage with the platform. So.
Eduardo: The way you want to understand is is pretty much we've captured most of the value associated with cashin, because we take most of the cash in of the clients towards CTV, but that becomes deposit in the banking accounts, but also.
Eduardo: So as we develop more and more solutions.
Eduardo: Deposit stay for longer and we see a trend a positive trend regarding deposits naturally in the fourth quarter, there was a seasonal impact in deposits.
Eduardo: Because of the holiday season, right that's natural to expect.
Eduardo: Some of that seasonality has sort of been reversed in the fourth.
Eduardo: First quarter, but the overall trend has not so the overall trend continues to be that deposits grow ahead of PPV.
Eduardo: And also that's implied by our long term guidance right. We continue to expect deposits to grow ahead of PPV as we further develop the banking solution. The development is really around resolving.
Eduardo: Incrementally workflow needs of our clients right. So we launched a simplified payroll solution, we're evolving a lot on that on that payroll solution. This year.
Eduardo: We launched different investment products for our clients to save with different purposes.
Eduardo: And I think the roadmap has a lot to come still and we expect this trend to continue so pass it over to David for the next question. Thank you. Thank you rosman for the question.
Eduardo: I think the first point that I think we have to recognize that.
Eduardo: We have moved a lot in terms of providing transparency in terms of how we allocate capital within the company.
Eduardo: Recall that.
Eduardo: That was part of our commitment in our last call to provide you some visibility in terms of our framework.
Eduardo: And I think in some ways I think we evolved a lot.
Eduardo: Sure.
Eduardo: Just as a reference I think over the past 12 months.
Eduardo: We have already returned more than 2 billion in terms of share buybacks right. So this really.
Eduardo: Trades, both I think our commitment in terms of returning capital to shareholders.
Eduardo: And our actually our ability to execute this distribution efficiently when we deem appropriate.
Eduardo: However, having said that I think at this this time.
Eduardo: We're not committing to a specific targets in terms of.
Eduardo: How are you.
Eduardo: You're going to allocate capital in terms of distribution I think it's going to be through dividends or buybacks.
Eduardo: We do expect to provide you some more visibility.
Eduardo: Over the next quarters or so.
Eduardo: And if I may ask.
Eduardo: You have your husband.
Speaker Change: I think the main message is that we see this as a journey. So step one was basically defining the amount of excess capital that we have I think we have a clear framework for that.
Eduardo: Step two is defining how much how fast and which instruments, we are going to use to give.
Speaker Change: This capital with shareholders.
Speaker Change: But something to bear in mind is that we still have an active buyback program for which we have executed.
Speaker Change: And to the end of February of around $1 1 billion. So we.
Speaker Change: <unk> with $900 million available to be booked.
Speaker Change: <unk> under the program.
Speaker Change: We still have some room under the program before we need to make a second decision in terms of the instruments that are going to use so its under discussion and it's an evolution process.
Speaker Change: Oh, great Super clear, Thanks, a lot and congrats again.
Hassan: Thanks Hassan.
Hassan: Our next question comes from Mario <unk> with Bank of America.
Mario: Hey, guys.
Mario: Thanks for taking my question and congratulations on the quarter, Let me ask you two questions as well.
Mario: You guys made comments that you did not increase prices in the fourth quarter, but that you started repricing in the first quarter.
Can you give us a little bit more color, how you're seeing this this price increase is going through.
Mario: What level of price increases or we're talking about is it for your entire client base.
Mario: And the impact so far in the quarter right like we're almost at the end of the first quarter.
Mario: Just trying to get a sense of the size of this price increases and if you plan on keeping increasing prices throughout the year.
Mario: And then my second question is related to your guidance.
Mario: Surprised that you're guiding them basic EPS, rather than fully diluted EPS I do think that most investors look.
Mario: On a fully diluted basis. So just wanted to understand from your view why why guide basic rather than fully diluted and if you can give us just remind us of the difference in the share count between basic and fully diluted thank you.
Speaker Change: Hi, Mario a pivotal figure here. Thank you for the question.
Mario: Try to address the first one.
Speaker Change: Materials feel free to jump in at any point in time.
Speaker Change: So I think since the significant upward shift that we've seen in the yield curve.
Speaker Change: By the end of the fourth quarter of 2024.
Speaker Change: Proactively actually executed substantial repricing initiatives.
At the beginning of the first part of 'twenty five I think you highlighted.
Speaker Change: Part of this.
Speaker Change: Statements in the call.
Speaker Change: That we didn't start in the last part of last year.
Speaker Change: And I think over the recent months.
Speaker Change: We have effectively completed the re pricing across our illegible stone client base.
Speaker Change: We are now actually actively progressing with our top clients.
Speaker Change: And I think we aim to finalize these adjustments over the upcoming months.
Speaker Change: I think what we might say is our repricing strategy has.
Speaker Change: Proving effective.
Speaker Change: We are seeing record low churn.
Speaker Change: Our repricing waves.
Speaker Change: So.
Speaker Change: And another point to highlight is I think we are pleased to see the broader industry aligning around profitability rather than prioritizing volume growth alone.
Speaker Change: So this is in line with what we've been saying over the past quarters in terms of.
Speaker Change: The rationale in terms of the competitive landscape.
Speaker Change: And what we've been advocating for over the past.
Speaker Change: Year or so.
Speaker Change: And multifamily Ed in terms of the extent of the repricing.
Speaker Change: In terms of the size of the adjustments with basically fairly brief.
Speaker Change: Adjustments looking at the yield curve projections for the need of the year.
Speaker Change: Which were approximately 15%.
Speaker Change: And in terms of how many clients, we reprised would basically only excluded booth claims we engage with multiple solutions and that remain.
Speaker Change: Profitable despite the higher funding costs, even by the rising interest rates. So it wasn't extensive repricing lease.
Speaker Change: And in terms of whether we're going to reassess and do more waves throughout the year I think by June.
Speaker Change: We will reassess the market conditions, and then determine if additional repricing action are needed.
Speaker Change: <unk>.
Speaker Change: So the first question regarding regarding the pricing.
Speaker Change: The second question I think was around the decision to guide.
Speaker Change: Basic EPS instead of David Loeb.
Speaker Change: So first of all I think it's a great question, it's something that we debated internally.
Really extensively.
Speaker Change: I think the decision that was made to guidance basic EPS. This year had two key reasons in mind.
Speaker Change: The first reason.
Speaker Change: When you look at the accounting rules governing the diluted share counts.
Speaker Change: And introduce a lot of volatility in the calculation.
Speaker Change: Just to give a few examples.
Speaker Change: Depending on the share price levels. The performance share units from the turnaround plan may or may not be included in the diluted share count in a binary every week.
Speaker Change: Or a second example, given that we had and they have various accounting loss in the quarter as a result of the impairment.
The diluted is equal to the basic share count in the quarter and we thought that this year just created some complexity.
Speaker Change: Second reason is that as you well.
Speaker Change: No we do not adjust share based compensation expenses at all.
Speaker Change: Flew through the P&L.
Speaker Change: If we were to use the diluted share count into the denominator as well.
Speaker Change: We feel that this would result in some degree of double counting.
Speaker Change: Given these factors we believe that basic EPS. This year is the better metric that was basically the decision.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Let me ask then two follow ups on this.
Speaker Change: Program that you said that you have right.
Speaker Change: The turnaround plan and the share count could could either be zero or a number based on share price performance can you remind us of the size of how many shares were you talking about.
Speaker Change: And then.
Speaker Change: On the repricing when when should we see the full benefits of this repricing that you did.
Speaker Change: At the beginning of the quarter is this going to be already fully evident in second quarter results or is this more in the third quarter.
Speaker Change: How do your prices compare to your peers. Today are you just catching up to the level of your peers or are you pricing above your peers. Thank you.
Speaker Change: Yeah for sure. So in terms of the size of the program we have in the footnote 24.
Speaker Change: If you look at the PSU instruments by the end of the year.
Speaker Change: $5 9 million shares outstanding the program, but again, you'll have the full details in the footnotes there and.
Speaker Change: And in terms of the full effect of the repricing waves in the P&L.
Speaker Change: Most of the largely the full effect will be silicon to the second quarter. There is still some wheatstone through the quarter, but they are smaller in size.
Speaker Change: And how how do you compare to your peers now.
Speaker Change: Oh, sorry, I forgot that one.
Speaker Change: I think the message and I think bill touched upon this.
Speaker Change: <unk> industry is repricing in passing through the increasing interest rates.
Speaker Change: So we feel that with the movements that we did in terms of pricing.
Speaker Change: Basically everyone, though has very similar prices across the industry.
Speaker Change: It's basically a dynamic of catching up to do.
Speaker Change: <unk> interest rates and often increasing spreads risky.
Speaker Change: Okay. Thank you very much.
Tito: Our next question comes from Tito <unk> with Goldman Sachs.
Speaker Change: Hi, Good evening, Thank you for the call and taking my question two questions.
Speaker Change: One just following up on the guidance on the EPS.
Speaker Change: With the guidance that you gave is based on the share buyback that you've done but as you mentioned, Mike there you still have about another $900 million.
Speaker Change: That you could do.
Speaker Change: So.
Speaker Change: Does that mean that there can be and I mean, I know the guidance is above eight six but if you could bond buybacks that would imply the EPS will be higher and just to make sure I understood.
Speaker Change: Could you bought back around 6% of the shares roughly so that would imply net income growing around 11% and then the rest is sort of coming from the share buybacks.
Speaker Change: My math is correct.
Speaker Change: And then my second question on the sale of the software business right I understand you haven't received an offer that you think meet your intrinsic value.
Speaker Change: I guess one.
Speaker Change: Are there still potential offers out there is there a chance that you can still sell it or do you think this is off the table at this point just so I understand.
Speaker Change: Is that still a possibility of being so good luck. Thank you.
Speaker Change: Thanks for the questions I'll take the first one and then pass it over to Peter for the second one.
Speaker Change: In terms of the EPS guidance I think you are spot on.
Speaker Change: So when you look at the implicit guidance for net income in 2025 is two point of our vision.
Speaker Change: So this reflects an adjusted net income Roe of approximately 9%.
Speaker Change: While the ETF guidance exceeds 18% range.
Speaker Change: The difference here is primarily driven by the share buybacks executed since 2003.
Speaker Change: And apart from this basically reflects the operational expectations and does not factor in any additional share buybacks, whether from existing or new programs.
Speaker Change: That said.
Speaker Change: As we move forward again, if market conditions are favorable we will continue repurchasing shares under the current program, which could represent an additional upside to the guidance. So I think you are you're right in your points.
Speaker Change: Hi.
Speaker Change: Well regarding the.
Speaker Change: Yes, the software asset.
Speaker Change: First of all just wanted to highlight.
Speaker Change: I think I tried to.
Speaker Change: To make this crystal clear in some ways in the letter to the shareholders.
Speaker Change: So we've been following.
Speaker Change: Disciplined approach in terms of our decisions regarding our software assets right. So despite changes in interest rates and despite receiving many office.
Speaker Change: Over the past quarter or so.
Speaker Change: We didn't receive any offer that actually met our established intrinsic value for the specific asset.
So while we will continue on and what we will do is really.
Speaker Change: We're going to stick in part to the strategy, we defined vacuum hour.
Speaker Change: Investor Day, So we will continue cross selling financial services to our software clients.
Speaker Change: The focus in terms of maximum maximizing value.
Speaker Change: The asset on a standalone basis, I think the big difference from the past is really that.
Speaker Change: We have actually.
Speaker Change: Uh huh.
Speaker Change: Implemented all the synergies required to manage this asset appropriately and we have set the right governance in place to really ensure that the owning the asset is not a distraction to the core strategy of the company.
Speaker Change: Okay. Thanks for that bedroom.
Speaker Change: So sorry, just to follow up because I don't I don't know if my question was more is there is a possibility of they are still being sold or do you think you sort of exhausted. The offer then likelihood it is that it's not felt at this point.
Speaker Change: I think at this point that what we will do is really focus on the execution and maximizing value for the asset.
Speaker Change: Okay great.
Okay makes sense and maybe just to help us think about what that intrinsic value might be just a simplistic calculation here yet.
Speaker Change: About $6 3 billion Reais for links.
Speaker Change: If I remember correctly, and we wrote off around $3 5 billion I don't know if that was all 100% links.
Speaker Change: But that would leave maybe $2 7 billion is that.
Speaker Change: A ballpark number that kind of makes sense for what that intrinsic value could be.
Speaker Change: Okay.
Speaker Change: And should the materials here. So I don't think we're gonna commented specifically on what we see is intrinsic value but.
Speaker Change: As a reference point, if you look at the impairment line Youre going to see the the equity for the software segment.
Speaker Change: Impairment is our own <unk> or the software segment as a whole.
Speaker Change: And of course, when you are talking about any potential transaction that are under consideration besides increasing value of the asset bresee rent, including the commercial agreements and so on and so forth.
Speaker Change: As a reference I think that's the best number that you have.
Speaker Change: Available.
Speaker Change: Okay. That's helpful. Thanks, a lot guys. Thank you Patrick.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Danielle <unk> with SASSA.
Danielle: Hi, everyone. Good evening and congrats on the results.
Speaker Change: Presentation.
Speaker Change: First I'd like to hear more about Lee's comments on funding I think at some point as you mentioned there will be a meaningful change in float revenue, but that should be Aps.
EPS accretive over time.
Speaker Change: There are more details on this rollout and Simon and.
Speaker Change: The entire base will be migrated.
Speaker Change: What will be done.
Speaker Change: The details here, but it will be very helpful to hear about it if there is any clear indication.
Speaker Change: Of what levels of spread over CIO or percentage of CDI.
Speaker Change: To accommodate as cost of funding.
Speaker Change: Second question following up on capital.
Speaker Change: I think.
Speaker Change: At some point you will arrive on an optimal level of ROE. So there won't be enough organic capital to support future growth and possibly continue with future buybacks.
Speaker Change: How far do you think your.
Speaker Change: Your from this situation and what's the current scenario that you expected this to happen in 2027 guidance really northstar start to it.
Speaker Change: Thank you.
Speaker Change: Hi, Ben earlier here I'm going to take the first part of the question then Matthews These AD and continuing to the second question regarding the rollout. We expect this rollout to happen incrementally throughout the year or no more specific information regarding that but it's going to.
Speaker Change: Ah happen throughout this year.
Speaker Change: Like I already said and to address your question, we anticipate a positive impact so just talking directionally about it this.
Speaker Change: This impact comes from a shift between financial lines, obviously, so specifically, while we will lose financial income from the photo on our deposits. This will be offset by a reduction in our funding cost.
Speaker Change: And there will be a positive impact as we benefit from lower taxes by having less float revenue.
Speaker Change: And then the spread between our funding costs and CDI as receipts switched these funding sources for <unk>.
Speaker Change: Actually this is the fact, so this shift is going to be accretive to our P&L and we expect to roll it out throughout the year.
Speaker Change: Just to give some more color here.
Speaker Change: So in terms of the rollout what we're doing right now is what we call our cash sweeping strategy.
Speaker Change: Which is basically using the deposits that we already have.
Speaker Change: And please as a funding source, which we didn't do.
Speaker Change: Because you don't have the licenses.
Speaker Change: As we do that we.
Speaker Change: We expect a significant increase in the time deposits line within our retail deposits line with virtually zero cost.
Speaker Change: And then over time after we do discuss sweep.
Speaker Change: Of course, we include other time deposits products, which mercury was really related to investment products to the beef.
Speaker Change: And then as this is skus.
Speaker Change: This will lead to a gradual increase in the average cost of the deposit base.
Speaker Change: Again, I think we're going to start to give some figures on these numbers Lindsay become relevant for the moment being I think it's more around using the deposits that we already have in place with virtually zero growth.
Speaker Change: Yeah.
Speaker Change: The second question is equals related to them.
Speaker Change: To excess capital and how we see the funding of organic growth if I got that right.
Speaker Change: So when we think about the framework that we've put in place.
Speaker Change: We believe it already takes into account the capital that is needed to fund the growth of between $2 7 billion.
Speaker Change: So if you look at the hurdles that we implemented for example for the first pillar, which is the regulatory capital.
Speaker Change: Talking about the 20% hurdle, which is fairly high and we feel that these oriented takes into account not only the current blend that we have in place, but also potential optionality in terms of growing <unk> and so on and so forth.
Speaker Change: So the 3 billion figure with you, it's really an excess in terms of capital that we have and the discussion is more around how are we going to return the capital back to shareholders in the most efficient we believe.
Speaker Change: If I fully answered your question on this point Daniel.
Speaker Change: Yes, yes, I think it did and if I may if I may follow up on maybe Pedro to ask his view about the company structure size I mean, many of your competitors were expanding the sales force a year ago, which contributed to a worsening of efficiency.
Speaker Change: Across the industry, but now a year later, we see some of them too.
Speaker Change: <unk> dental Bryan so.
Speaker Change: I mean any deals on.
Speaker Change: When do you expect that business to have better room to economies of scale, because so far I think the first two years. It was like more sales force more.
Speaker Change: Aggressiveness and between competition and now we see some reversion of the trend so very very helpful to hear about if a good visuals.
Speaker Change: Well. Thank you for the question Danielle I think it's.
Speaker Change: Well, what we've tried to highlight this over the past I'll also calls I think there is a maturity process in terms of productivity of our sales force as we move ahead.
Speaker Change: One of the key competitive advantages we have is really on the distribution channels. I think we tried to highlight that are also in the investor day.
Speaker Change: And it takes time to mature.
Speaker Change: Having said that I think.
Speaker Change: More and more we're going to rely on our.
Speaker Change: Operation.
Speaker Change: Technology driven.
Speaker Change: Operational distribution.
Speaker Change: Platform.
Speaker Change: And I think this will leverage and improve more.
Speaker Change: Improve efficiency as we move ahead.
Speaker Change: Over the next years I don't see this happening in the short term I don't believe were going to see big changes in terms of I think your question is more driven to say as expenses related to <unk>.
Speaker Change: So revenues in some ways I think there'll be a.
Speaker Change: They are going to be flat in 2025, but that we're going to improve efficiency over time.
Speaker Change: For more technology, driven platform I don't believe that our competitors are doing that.
Speaker Change: So I think it's a different strategy in some ways.
Speaker Change: That's the way we're positioned to set ourselves up until 2020.
Speaker Change: Yeah.
Danielle if I if I can just complement what bill referred maybe separating in kind of three time horizons right talking about the fourth quarter and in the year and then longer term.
Speaker Change: In the fourth quarter, we saw selling expenses increased sequentially as a percentage of revenues primarily due to ongoing investments in our sales force, especially the specialist sales force, which is number one.
Speaker Change: Really critical in terms of.
Speaker Change: <unk>.
Speaker Change: The pyramid as we call. It so we have seen significant growth in what we call larger SMB clients.
Speaker Change: Our specialist sales force are critical also for the cross selling initiatives to sell financial services to software client installed client base.
Speaker Change: And naturally also it is critical on the credit side as well because more and more.
Speaker Change: We are implementing.
Speaker Change: Implementing direct distribution to scale on the credit side.
Speaker Change: So that was more the rationale for how selling behavior on the fourth quarter throughout this year, we expect mild dilution and selling expenses relevant relative to revenues.
Speaker Change: As <unk> mentioned theres not going to be we shouldnt expect a big shift shorter term I think over the longer term as schedule highlighted we will see greater dilution naturally as the operation matures.
Speaker Change: And those scale efficiencies materialize as you mentioned.
Speaker Change: But also we're very optimistic and I think in some sense ahead of the game in terms of how we think about technology applied to our operation I think our operations technology platform has been a pillar of our of the differentiation of our business model since day, one but we're we're.
Speaker Change: Looking very hard to stay ahead, and making sure that for example weekend.
Speaker Change: Better leverage Gen AI.
Speaker Change: And more data to be more and more in fact effective on how we approach distribution so that should all contribute to.
Speaker Change: Selling that greater dilution over time.
Speaker Change: Thanks, again, guys and congrats.
Speaker Change: Our next question come from Hey, Napa, Merlot, and me with Autonomous research.
Speaker Change: Everyone. Thanks for the call thanks for taking the questions here.
Speaker Change: First just a quick follow up on the deposit side and.
Speaker Change: Just wanted to know if long term you have Amy Ah.
Speaker Change: Our ratio of where deposits can stabilize as a percentage of TPP I think that'll be helpful. And my question is on the credit side. So horse O. How is there a risk appetite this year, particularly given the potential credit cycle that we might enter in Brazil.
Speaker Change: And then secondly, given all the initiatives that you have how youre seeing and the changes that are private payroll lending.
Speaker Change: <unk> in Brazil, how do you see this opportunity and are you planning to explore it. Thank you.
Speaker Change: Yeah.
Lia: Hi, and outdoor Lia here. So let me just start with the question around deposits I think that math is easy to work out when you take all of our long term when you consider our long term guidance for deposits and PPV. The general the general trend is where I talked about at the beginning of the call right. We continue to expect.
Lia: Deposits grow to grow ahead of TPG growth that is implied in the long term guidance. When you consider deposits growth growth versus TPG growth and as much as we talk about engagements and we talk about heavy user metric.
Lia: And how we are evolving on the banking roldan roadmap ultimately, we see the ratio between deposits of CTV as the best way to see how we're further engaging our clients with our banking solution. So that can be worked backwards from the long term guidance on deposit.
Lia: And TBD and then to talk about credit I'll pass it over to Pedro.
Speaker Change: I'll kick off and macros can complement me.
Speaker Change: As we move ahead, so I think at the end of last year we.
Speaker Change: We have actually proactively adjusted our credit models to reflect evolving.
Speaker Change: I think as you all know more challenging macroeconomic environment.
Speaker Change: So this led to a moderate increase in provisioning levels, which have now stabilized at around 12% of our portfolio.
Speaker Change: Additionally.
Speaker Change: We also continuously adjusting the pricing of new disbursement to better reflect this.
Speaker Change: Changing.
Speaker Change: Macroeconomic and market conditions.
Speaker Change: So having said that in terms of growth I.
Speaker Change: I think we are closely closely monitoring our cohort performances and daily Amortizations.
Speaker Change: Our future is actually unique to our product.
Speaker Change: And we're still I think we feel that there is room to grow the portfolio in 2025 gig.
Speaker Change: Given the low penetration of our credit products within our client base and the scaling of new offerings, such as credit cards, and our overdraft solution.
Speaker Change: I don't know if metals wants to add any point, Patrick just a big compliment I think the math.
Speaker Change: Message here.
Speaker Change: With return to complete the full and so.
Speaker Change: I think we're being trying to be really cautious in terms of the macro environment. So we have.
Speaker Change: Many controls and monitoring of the amortization and the health of the portfolio.
Speaker Change: But at the same time, we need to keep in mind that the BS you reduce more so when you think about the penetration of the product in the base. We are in the early beginnings, we have just resumed dor.
Speaker Change: A couple of quarters ago.
So different than maybe other players I think there's still room to grow Wyoming. This cautious approach for the portfolio as a whole. So that's that's the message here.
Speaker Change: I think there's a last one on payroll maybe do you want to take that one yeah. I think just a quickie on the discussion around regulation around payroll loans naturally we are monitoring it closely I think for us it's.
Speaker Change: Uh huh.
Speaker Change: It is.
Speaker Change: Beginning stages right as we think about how we can deploy this as an opportunity naturally within our ecosystem as we launch our payroll solution.
Speaker Change: So smbs that becomes a natural expansion, but it's very early to say anything more specific than that.
Speaker Change: Yes.
Speaker Change: Thank you and then as as the regulation evolves do you.
Speaker Change: Plan to explore this further.
Speaker Change: And even like try to get customers from from other.
Speaker Change: Competitors.
Speaker Change: The focus will still be within your base.
Speaker Change: I think it's early to say and as I think you will be giving more clarity on this as we evolve.
Speaker Change: Okay. Thank you very much.
Speaker Change: Our next question comes from <unk> <unk> with J P. Morgan.
Speaker Change: Hey, everyone and congrats on the quarter I have one on the capital position.
Speaker Change: Just trying to.
Speaker Change: Like I use your framework too.
Speaker Change: On these.
Speaker Change: Usually for Big suite, we look to loan growth rate as the <unk> growth.
Speaker Change: On your case, I guess <unk>, maybe the best best proxy right. When we go to <unk> and we break it down is by credit the Mark we see payments is it still the main component.
Speaker Change: And we do see your T. P V X peaks growing year round, and then a low teens rate and when we go through your <unk>.
Speaker Change: Really depends how we adjust it but if you do a some kind of tangible ROE for for you remove all the intangibles, we see store in printing 30% to 35%.
Speaker Change: Things are always right. So it's a pretty nice.
Speaker Change: Return the question I have is.
Speaker Change: If the math makes sense you know what you are growing your <unk> around 12% 13%.
Speaker Change: And you are printing those 35% tangible ROE is and I think you also reported like the financial unit, our OE Aw on your release.
Speaker Change: Does it make sense to think like your excess capital generations are all like 60, 65, 70% and if that's the case is this a good proxy for your payout or buybacks kind of potential just trying to.
Speaker Change: Get to this number because the 20% core capital it's beautiful.
Speaker Change: Our capital component has so many moving parts right on operational risk phase out so for payments, we have so many moving parts on how we calculate our capital debt.
Speaker Change: I'm trying to think about that easier framework collect just trying as that's like we do for banks, who know like what is the <unk> growth versus you are are we potentially and why do I try to do this exercise I get to those numbers and then just want to make.
Speaker Change: Sure I'm not missing anything thank you.
Speaker Change: Hey, Thanks for the question motto here.
Speaker Change: So I think it's a great question and great rationale there.
Speaker Change: I'd say is the following.
Speaker Change: We have to divide here short versus longer term. So when you look short term I think you've answered part of the question, which is we still have a lot of regulation changes in terms of how we calculate arent I believe we have the <unk>, the new relations and so forth.
Speaker Change: Shorter term I think this rule of thumb does not necessarily work.
Speaker Change: <unk> my future is going to be pretty close to the final answer off the model.
Speaker Change: But the second point that is important to me than me.
Speaker Change: Maybe differently than <unk>.
Speaker Change: More mature peers.
Speaker Change: We need to keep in mind that our older viewers into framework. So it's not only around regulatory capital. We also have the ratings the credit rating components.
Speaker Change: The adjusted net cash.
Speaker Change: Adjusted net cash at the end of the day.
Of the three theaters, because we report the number and the figure by the end of the year. It was FERC 7 billion. So clearly it was not the constraints.
Speaker Change: Credit ratings, you have to go through a little bit more math to get to the number but if you look at the.
Speaker Change: Our credit rating agencies, we use Moody's and S&P.
Speaker Change: They disclosed the Criterias for financial companies. So you can pretty easily met.
Speaker Change: The metrics that they use.
Speaker Change: For our growing global ratings and then we're done.
Speaker Change: In terms of how much capital we have in excess for the dealer.
Speaker Change: I think putting all together now of these numerous restrictive constraints easing deep deregulatory capital, but I just want to be mindful as well as your project forwards.
Speaker Change: On a given year, maybe the credit rating can also play a role.
Speaker Change: No no.
Speaker Change: Thanks, very much Martin if I may just a quick second one just on the buybacks what should expect with the shares like our go to cancel those shares are going to use those shares to for the SBC like what is the delta coming here for for those Treasury shares. Thank you.
Speaker Change: Yes, so we're still finishing the valuation with the most likely scenario is that most of the shares that are going to be cancelled.
Speaker Change: And we are going to use some of them to issue share based compensation. So it's both.
Speaker Change: Oh, Okay no. Thank you very much and congrats again.
Albert: Thank you Albert.
Speaker Change: Our next question comes from Jamie Friedman with Susquehanna.
Jamie Friedman: Hi, good evening and congratulations on the strong finish to last year.
Speaker Change: I had two questions I'll just ask them upfront.
Speaker Change: Lee with regard to the software growth of 15% it was a reacceleration, but I thought in your prepared remarks.
Speaker Change: You may have alluded to coming from a partner or and then you have the financial attachment strategy.
Speaker Change:
Speaker Change: So.
Speaker Change: So I was just trying to get the clarification on that and then if I could ask so pedro in the shareholder letter.
Speaker Change: It's a very fair.
Speaker Change: The letter.
Speaker Change: But I wanted to ask actually about navigating the AI landscape.
Speaker Change: And I guess, you have a lot of metrics in here.
Speaker Change: Penetrating with AI and customer service interactions et cetera, how do you think about the efficiencies that youre delivering relative to this type of automation. Thank you.
Speaker Change: Hi, Jamie Lia here, so I'm going to take your first question and then pass it over to Pedro.
Pedro Zinner: So regarding software revenue growth.
Pedro Zinner: In the software segment, specifically, we had a nonrecurring effect in the amount of 8 million thats not uncommon when we think about the dynamics of our enterprise software clients.
Pedro Zinner: And Additionally, there was one specific company within the software portfolio heckling are key the.
Pedro Zinner: It's had a good performance in the quarter, so that kind of explains the over the specific revenue trend in the quarter, but if we think more broadly about it. So we're not guiding on specific figures for our software segment, but as a general trend I think what we do.
Pedro Zinner: Can expect is that organic growth should continue to be in line with recent trends.
Pedro Zinner: And we still have some opportunities to improve margins within the business. So to think about you know margins more aligned with what we saw in the fourth quarter. That's that's kind of a good way to think about trends.
Gabriel: And the software segment, so I'll pass it over to Gabriel forgot your second question.
Pedro Zinner: Hello, Thank you for the question in some ways.
Pedro Zinner: Actually provided dancing.
Pedro Zinner: I think.
Pedro Zinner: What we've done so far are really really quick wins in terms of how we use predictive models and Jen AI.
Pedro Zinner: Into our operations. So it's for me, it's really very vertical wins that are quick wins that we can put in place.
Pedro Zinner: To optimize results.
Speaker Change: I think the challenge, we have and that's not only to ourselves but to the industry as a whole is how we use <unk> to actually disrupt our own model and improve our business model as we move ahead.
Pedro Zinner: I tried to address part of this when we talked about.
Speaker Change: So he was distributions in the channels.
Speaker Change: That we have established as of today I think this is this is where the big change might come from and whoever.
Takes the first step.
Speaker Change: We will take the lead in terms of new industry dynamics, and how we're going to move ahead.
So that's a long.
Speaker Change: And so to say it's really.
Speaker Change: Short term efficiency gains and I think what we're preparing is really for the infinite game as we move ahead.
Speaker Change: Why the big changes will come.
Speaker Change: Okay. Thank you both.
Thank you.
Speaker Change: This concludes the question and answer session I will now turn over to Pedro Zinner CEO at stone call for final considerations.
Speaker Change: Well thank you.
Speaker Change: You all very much for participating the call.
Speaker Change: I think the company presented strong results in 2024.
Speaker Change: We are.
Speaker Change: Really looking forward for 2025 and the coming years. Thank.
Speaker Change: Thank you very much.
This does concludes today's presentation you may disconnect now and have a nice evening.
Speaker Change: [music].