Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the StoneCo Third Quarter 2023 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. Reconciliations 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 might 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 actual results to differ materially from the Company's expectations. 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. I would now like to turn the conference over to your host, Roberta Noronha, Head of Investor Relations at StoneCo. Please proceed.

Thank you, operator, and good evening, everyone. Joining me today on the call is our CEO, Pedro Zinner, our Chief Financial and Investor Relations Officer, Mateus Scherer, and our Chief Strategy and Marketing Officer, Lia Matos. Today, we will present our third quarter 2023 results, discuss some recent trends 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?

Thank you, Roberta, and good evening, everyone. Overall, I was very pleased with the results delivered and the improvement we made within the organization. As I did in the previous quarters, I want to begin by making a brief evaluation of our performance related to the priorities set for the quarter. In our first priority, to grow with efficiency, we once again had very positive results. Total revenue increased 25% year-over-year to reach R$3.1 billion, exceeding our guidance by 2%. Combined with top line improvement, adjusted EBT increased 3.3 times year-over-year, reaching R$545 million and surpassing our guidance by 16%. As a result, adjusted net income grew 4 times year-over-year to reach R$435 million, the highest bottom line figure in our history. Our second priority was to generate cash. Adjusted net cash increased by R$1.8 billion year-over-year and R$530 million quarter-over-quarter, reaching R$4.9 billion. Part of this excess cash was allocated in the repurchase program as approved by the Board in September 2023 and totaled R$300 million. In our third priority, to expand financial services business, MSMB TPV continued to grow consistently at a strong pace, increasing 20% year-over-year and more than twice the industry rate. Combined with this, we have also presented a healthy client base increase and an improvement in monetization. Our MSMB client base increased 42% year-over-year. We have a client net addition of 317,000 quarter-over-quarter, reaching almost 3.3 million merchants using our payment solutions. And at the same time, our MSMB take rate increased 28 basis points year-over-year to reach 2.49%. We have also evolved in our banking and credit solutions. Banking active clients increased to 1.9 million with R$4.5 billion in deposits, demonstrating the successful strategy on the development of our platform and client engagement with our solutions. And lastly, we have expanded our credit portfolio, reaching R$113 million in this quarter and concluded the testing of many features in line with our expectations. In our fourth priority, to evolve our software business, we continue to improve our results, focusing on increasing efficiency as we promised. Software revenues reached R$388 million with adjusted EBITDA increasing significantly to R$79 million, reaching a margin of 20.5%. This bottom line evolution is a result of our continuous focus on improving operational leverage and integration plans with StoneCo. Lastly, we have recently taken important steps towards building our fit-for-purpose organization. In October, we announced our new management structure to better align the Company around specific go-to-market strategies per client segment and to accelerate the integration of our software and financial solutions. We will further detail our strategic priorities in our Investor Day on November 15th, providing a better understanding on how the new organizational design will support us in executing our strategy. Before passing it over to Lia, I would like to say that I'm looking forward to meeting investors in our Investor Day in a few days from now. I believe it will be a great opportunity for us to share our views on the business and our long-term plans. Now, I'd like to pass it over to Lia to discuss our third quarter 2023 performance and strategic updates.

Thank you, Pedro, and good evening, everyone. As Pedro mentioned, we had an important evolution over the last years in terms of balancing growth and profitability, which you can see on slide 5. We increased consolidated revenues by 25% while improving our adjusted net margin by around 10 percentage points in a one-year period. As Mateus will detail further, this amazing margin improvement was a result of operational leverage across all main P&L lines. Moving to highlights of our Financial Services segment on page 6. In the third quarter of '23, revenue in this segment increased to R$2.7 billion, a 29% year-over-year growth, mainly driven by our consistent performance in the MSMB segment with above-industry MSMB TPV growth and higher take rates. This, coupled with operational leverage in costs and expenses, led to a 3.6 times increase in the segment’s adjusted EBT to reach R$485 million with a 17.7% EBT margin, an increase of 2.1 percentage points sequentially. Moving to slide 7, we will deep dive on our MSMB performance. MSMB payments client base increased 42% year-over-year to reach 3.3 million active clients. Sequentially, this represented a net addition of 317,000 clients driven by our continued investments in performance marketing combined with better levels of churn. Also, through strategic optimization of our Ton and Stone offerings across our sales channels, we continue to see positive trends in our client base across all tiers within the MSMB segment. We believe this approach is unique and has led us to profitable TPV growth, as I will show on the next page. On slide 8, we show that MSNB TPV increased 20% year-over-year, a growth twice above the industry, demonstrating our continued ability to win new clients due to our competitive advantages around distribution, service and our combined financial services offerings. This TPV performance was above our guidance of between R$87 billion and R$88 billion. Also, we were able to produce that growth while increasing our take rates by 28 basis points year-over-year and 1 basis point sequentially to 2.49%. The yearly take rate improvement was a result of our continued financial services offerings expansion, strong pricing execution and client mix. Now, on slide 9, I will briefly update you on our Key accounts performance. Key accounts TPV decreased 22.8% year-over-year and was stable sequentially to reach R$14.4 billion as we have continued to deprioritize and offboard low margin clients. Year-over-year, key accounts take rate increased 18 basis points as a result of the adjustment in our commercial policy and a mix shift within the segment. Now, let's shift to our banking performance on slide 10. Banking active client base increased 3.4 times year-over-year to 1.9 million active clients. This evolution was a result of the launch of Super Conta Ton in the first quarter of '23 and the continued activation of banking combined with acquiring solutions for Stone clients. The growth in banking active clients combined with an increase in engagement led deposits to reach R$4.5 billion in the quarter, a 51% year-over-year growth, which outpaced our MSMB TPV growth by 30 percentage points. Since TPV is the main source of cash and volumes to our banking solution, this relative performance is a strong illustration of our continued ability to improve engagement as we launch new features and offerings. In our upcoming Investor Day, we will give more color on how we are evolving our value proposition around our combined solutions for MSMBs. On slide 11, let me give a brief update on our credit offering. Until September, we reached a portfolio of R$113 million, a 6.1 times quarter-over-quarter increase. The performance of our vintages is above our expectations, with NPL 15 to 90 days of 0.4% and NPL over 90 days of virtually zero. I would like to note that this is a recently launched portfolio, so the ratio of past due loans should increase as our portfolio matures. We will gradually accelerate disbursements by extending the credit offering to a larger number of clients without changing our diligence towards risk assessment and close monitoring of market conditions. Lastly, this quarter, we have concluded the main improvements in our product features as we have finalized rebuilding our renegotiation process. Now on slide 12, we will discuss our Software segment. Software revenue increased 6% year-over-year to R$388 million, driven by the continued organic active store expansion in our core POS and ERP business, especially in the SMB segment. Software revenue growth decelerated compared to the previous quarters because of weaker performance of transactional revenues within our digital business, combined with lower average inflation, which affects price adjustments, especially in enterprise accounts contracts. Software segment adjusted EBITDA increased 50% year-over-year to reach R$79.4 million with a margin of 20.5%, an increase of 3.1 percentage points compared to the second quarter of '23. This strong figure was a result of higher revenue in the period and lower administrative expenses, especially as a result of more normalized levels of personnel expenses after a reduction in headcount in the second quarter of '23. On the strategic front, we have prioritized four verticals to focus to drive financial services and software bundles. During our Investor Day, we intend to share additional details about how we see this opportunity ahead. Now, I want to pass it over to Mateus for him to discuss some of our key financial metrics.

Thank you, Lia, and good evening, everyone. I would like to begin on slide 13, where we discuss the quarter-on-quarter evolution of our costs and expenses on an adjusted basis. Cost of services reached R$773 million increasing 15.2% year-on-year and decreasing 220 basis points as a percentage of revenues due to operating leverage gains. Quarter-on-quarter, cost of services increased 12.9% and a 140 basis points as a percentage of revenues. The sequential increase in cost of services is explained by higher provision for losses and increased investments in technology and logistics as we continue to expand our business and client base. Administrative expenses decreased 3.3% year-on-year and 9.5% sequentially, leading to a 130 basis points reduction as a percentage of revenues when compared to the second quarter '23. This improvement can be attributed to more normalized levels of personnel expenses in our Software segment following a reduction in headcount in the second quarter of '23, combined with higher than usual provisions for variable compensation last quarter. I'm very happy to see that we are starting to collect the benefits of the initiatives we implemented more than a year ago around zero-based budgeting and integration of back office functions in our Software segment. Increasing efficiency in administrative expenses will continue to be a priority going forward, and we'll give additional details around that in the Investor Day. Selling expenses increased 7.5% quarter-on-quarter and 20 basis points as a percentage of revenues due to higher investments in our distribution channels, mainly with partner commissions combined with increased investments in performance marketing. Financial expenses decreased 1.4% quarter-on-quarter with a reduction of 260 basis points as a percentage of revenues, reaching 33.3%. This evolution was driven by lower interest rates in the period, coupled with our decision to reinvest our cash generation towards funding our operation and was slightly offset by quarterly TPV growth. Lastly, other expenses increased 11.8% sequentially and 20 basis points as a percentage of revenue as a result of normalized levels of share-based compensation expenses as in the second quarter '23, we incurred in a nonrecurring positive net effect of R$19.6 million. Moving to slide 14, our adjusted net cash increased by R$1.8 billion year-on-year and R$530 million in the quarter, reaching R$4.9 billion. This strong sequential increase is a result of our strong cash flow from operations as well as a sequential decrease in CapEx, as expected. As Pedro mentioned, given our strong cash flow generation and our long-term perspectives for the business, in September, our Board approved a share repurchase program of R$300 million, which was already fully executed. 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 and answers. Our first question comes from Tito Labarta from Goldman Sachs.

A couple questions, I guess, to start. Maybe good growth, on the TPV continuing to take market share there, it seems. Maybe can you give some color on, do you think you'll be able to continue to take share, particularly between the micro-merchant segments and SMB? Are you gaining more share? I imagine maybe a micro-merchant since it's smaller for you, but just, the different dynamics between the micro and the SMB. And also with the take rates beginning to stabilize there, how do you see the take rates evolving from here, particularly as rates start to come down? And then, if you can just give an update on sort of the regulatory environment, particularly talks of changes to interest free installments. There's also recently some news about not being able to potentially monetize PIX. Any thoughts you have on that given the ongoing discussions there? Thank you.

I'm going to take the first part and then pass it on to Pedro. So, a few thoughts regarding TPV growth, both ours and the industry. So, ABAC just released numbers for market growth this quarter, 9% growth in the quarter, and they continue to guide the year between 9% and 11%. So, this implies that TPV growth will be slightly higher in the market for the fourth quarter. Looking ahead, we expect industry growth to be slightly higher next year because we do see a recovery in credit card limits after delinquency reached the peak. And regarding your mention on PIX, more and more we see PIX P2M volumes as parts of the market, right, that's a volume that it is a payment method, which we enable our clients to accept, and it is a driver of TPV growth. If you consider our 20% TPV growth this quarter and you include in that number PIX P2M volumes, that growth would have been higher around 24%. So, we see this as a healthy level of growth. And I think regarding overall trends, Tito, we continue to gain share within the MSMB segment. We continue to allocate capital towards growth in both micro and SMB segments. And we do see positive trends in all client tiers. And we think this has to do with the elements of differentiation that we provide clients around the offers that we provide them, the service, the distribution model. So, it's really about a combination. And the overall message is we continue to gain share across the MSMB segment. Pedro, you want to take on the regulatory?

Thank you all for joining the call. There has been considerable discussion regarding interest rate caps on revolving loans, delinquency rates, and interest-free installments. I want to elaborate on this topic and share a few key points. Firstly, we believe that imposing limits on interest-free installments undermines the principle of free competition. Currently, any issuer has the ability to decide whether to limit, restrict, or increase the number of installments offered, and this is primarily an economic choice. For instance, during Black Friday this week, we observed that major issuers significantly increased the maximum number of installments available to make their offers more appealing. Secondly, contrary to some claims, strong empirical evidence shows no correlation between the number of installments and levels of delinquency. A study backed by the central bank utilized advanced empirical methods and analyzed over a million consumer purchase transactions, finding that, if anything, the relationship between interest-free installment transactions and delinquency rates is actually negative. This further supports our perspective that regulatory restrictions on interest-free installments are unwarranted. Additionally, it's crucial to highlight that any regulatory change that removes the option for merchants to offer installment payments in Brazil would have a significant negative impact on private consumption and the overall economy. According to the central bank, credit card transactions accounted for about 20% of the country’s GDP in 2022, with approximately half of that occurring in interest-free installments, illustrating the importance of this payment method for the country. For all these reasons, it is evident why we maintain our stance against any restrictions on interest-free transactions.

Pedro, if I may only add, I think Tito also asked about the prohibition of charges in any kind of PIX transactions. On that discussion, there were indeed some rumors about this discussion, but our understanding is that this debate didn't advance. And we think it's unlikely that any regulation will prohibit charges on PIX as a whole.

Perfect. Tito, you also inquired about take rates, which I neglected to address. Regarding take rates, we did not alter our pricing policy this quarter and have no plans to change it in the near future. The competitive landscape remains unchanged. In fact, we are observing more rational behavior across the market. Analyzing the take rate trends this quarter, we experienced a minor sequential improvement of 1 basis point, attributed to relatively stable prices and a small positive impact from the mix, although this was slightly counterbalanced by a higher debit mix. Therefore, we are not changing our pricing strategy at all, nor do we intend to do so.

Lia, maybe just one quick follow-up on that. Do you think the mix can continue to benefit the take rate from here, if you're growing more, say, micro than an SMB?

Yes, I think that is correct, Tito.

Congratulations on the quarter. It looks quite good. Let me ask you two questions. Regarding software, we saw a slowdown in revenue growth, with revenues increasing by 6% compared to 9%. However, EBITDA has risen by 50%. You mentioned some headcount reductions. Could you provide details on the size of these cuts? Do you expect to implement more, or have we already realized the full impact of these cost reductions? On the credit side, you mentioned increasing disbursements, totaling around R$100 million, which averages to about R$33,000 per client. Can you provide additional context? What types of clients are you targeting, as well as specific regions and characteristics? What interest rates are you applying to these loans? Additionally, how large do you anticipate this portfolio could grow within a year? Thank you.

Thank you, Mario, for the question. I'm going to take the first part on top line trends in software and then pass it over to Mateus to elaborate on margin evolution and credit. So, regarding top line growth, if we sort of double click on the drivers of software revenue evolution. First, we really are focusing on allocating capital to grow where we see the biggest opportunity, which is in the verticals that we have prioritized and within the MSMB segments. There, we're happy with the level of growth that we are seeing, and we remain optimistic with the opportunities that we have ahead. We will give more color on this in the Investor Day. The biggest detractors to growth in software are the transactional revenues in our digital business and the enterprise business itself. Let's remember that in the enterprise business specifically, we already have a very high market penetration. And our focus there is a lot more towards, driving efficiency and cash generation. And I want to also highlight that, yes, we do monitor top-line growth, and it is important for us. And we are allocating capital to grow where we see opportunity. But there is also a disproportional value to be captured in installed base of software clients. So, more and more, we are driving our execution towards providing software and financial services bundles and really capturing the financial services opportunities that exist within the software clients that we already have. And there is a very attractive opportunity in the priority verticals that we will have a chance to talk more about in the Investor Day within the MSMB segment, which is our focus. So that's a little bit on trends on top-line. Maybe Mateus can elaborate more on the efficiency side.

Yes. For sure. So regarding the margin evolution on software, you are correct. I think most of the evolution quarter-on-quarter came from more normalized levels of personal expenses in the Software segment. And I think this is related to something that we disclosed last quarter, which was basically reduction in headcount that had a negative impact on the second quarter of R$6.5 million in severance costs. And now we are basically collecting the benefits from this reduction. Now, when we look ahead, I think it's important to highlight that we still see additional room for improvements in software margins overall. It's not necessarily a 100% related to personnel expenses. But I think in general, we see more benefits to come from the integration between the two platforms. I think the second question regarding credits. So, you're also right. We scaled the portfolio from R$19 million in the second quarter to R$113 million this quarter. In terms of who we're focusing at this time, I think the offering is mostly focused on our SMB segment. So, when we look at that volume of around R$30,000 per operation. We're basically talking about around 1 month of the client's TPV. So it's still a very conservative approach. But regarding the evolution in terms of sizing of the portfolio and the rates that we're charging, I think the idea is to provide more color on the overall performance and strategy of the credit business on the Investor Day. So, I think we have to wait a little bit to give more details on that.

What contributed to the increase in debit share? Is it due to seasonality, an industry trend, or specific to your company? Additionally, is this expected to continue? I understand there's more debit in the fourth quarter, but I'm interested in understanding why debit was higher this time around.

This is a market trend that isn't specifically related to us. Based on what we've observed from other companies' results, this has been a consistent trend in the market. We believe that credit delinquency continues to restrict credit limits on credit cards. We are optimistic that this trend will improve in the future.

And then, if I could squeeze it in on the buyback, you did the R$300 million very quickly. Do you kind of see that as the beginning of a process? Should we be looking out for more of these going forward?

Yes. So good question. Maybe taking a step back to give you some context on how we think about the topic. So, when I look at the third quarter results, we can see that the Company is generating strong cash flows. We generated R$530 million net cash in this quarter, even after increasing the credit portfolio and also even after investing for future growth. And as our business evolves, we do expect our profitability to continue to increase, and this should drive even more cash generation. So, I think the decision of how we're going to allocate this cash is becoming increasingly important for us. And if you look at the past few quarters, our decision was basically to reinvest most of this cash generation towards strengthening our capital structure. And when we look ahead, we still see a lot of room to reinvest in the business in general. So, even when we expand the credit business or the banking solutions, there's still room to move money towards debt. But whenever we feel there's a good opportunity to allocate excess cash, for example, towards repurchases, we're certainly going to evaluate this option. And, again, I think this is a common trend in the call, but we're going to share more details about our philosophy for capital allocation in the Investor Day, but it is an option that we are constantly evaluating here.

Hey, guys. Good evening. I hope the answer to my question is not that you talk about it in the Investor Day next week. But, can you please share, if you have plans to go full banking in your release and in our discussions? It seems that having this service become bigger and bigger to our client base makes sense at this point? You probably have above 2 million clients in the micro-merchant segment? So, going for banking wise and all makes sense.

Yes. So I think in terms of the banking license, we are in the process to obtain this license. We don't control the full roadmap, but I think we are in the last stages of the regulatory approval, and we should have access to the license soon. Now, when I think about what does that license allow us to do, I think it's mostly using the deposits that we have as another funding lever. In terms of the products, we're going to discuss a lot in the Investor Day the roadmap and how we're thinking about the banking product evolution. There's certainly a lot of potential there. But I think the license itself is not a restriction in our roadmap. It's more about enabling us to use the deposits going forward.

Hi. Congratulations on the results, and thank you for taking my questions. My first question is on CapEx. You saw a nice decline quarter-on-quarter in your CapEx. Despite strong jump in your net adds, could you give us some color as to how can you break down the net adds between SMB and long tail? And, is the CapEx trend that we saw in this quarter, should that be maintained? Should they continue without trend or this level, is what to expect in the coming quarters? And my second question is on Linx. Could you give us a sense of, what percentage of the Linx clients, Linx merchants are now using Stone acquiring? How, are you trying to cross-sell bundles to some of the large clients which came from Linx? So, some granularity on that would be helpful. Thank you so much.

Thank you, Neha. I will address the first question about CapEx, and then Lia can provide some insights regarding Linx. To start with CapEx, there are a few important points to mention. Typically, there are variations between cash outflow and the activation of property, plant, and equipment (PP&E). For instance, we might acquire PP&E and defer payment due to supplier negotiations or settle payments for prior period purchases. We provide extensive data on these dynamics in the financial statements, particularly in footnote 18.5. In this quarter, we recorded R$232 million in PP&E and intangible assets, while the actual cash outflow was R$176 million. Some of this quarter's additions will be paid in a future period. When considering the longer term, there is a notable trend in our CapEx management. For example, CapEx as a percentage of revenues has decreased from 7.9% in the first nine months of 2022 to 5.7% in the first nine months of 2023, largely due to the efficiencies we have been implementing in our logistics operations. While I won’t reveal too much now, we will share more details on this at Investor Day next week. Lia, over to you.

Yes. Regarding net additions, we've been consistently investing in our hubs and distribution channels focused on small and medium businesses, as well as in performance marketing to promote growth in micro clients. Our spending in selling expenses for the hubs has been stable, while performance marketing can vary more from quarter to quarter. Nevertheless, these investments have been rewarding and allow us to continue to invest and grow. However, it's important to note that net additions are not a target in themselves; we focus on growth in total payment volume and increasing our share in the small and medium business segment, while maintaining disciplined pricing and healthy returns to ensure that this growth is also profitable. When it comes to software, we'll provide more details, but here's a bit of context. Approximately 60% of the total payment volume opportunity within our software client base comes from small and medium businesses, with the remaining 40% from enterprise or key accounts. This presents a considerable opportunity in payments, banking, and eventually credit in prioritized verticals. Our penetration in financial services within these areas is still low and we are just at the start of this journey. However, we are seeing very positive results, especially in our ability to provide a better value proposition by integrating software with financial services. A notable example is our recent efforts with gas stations to offer embedded software, payments, and banking solutions, which is significant for our Linx segment. Other verticals will also see this implementation. Furthermore, clients using these solutions not only drive our growth by increasing total payment volume and banking deposits, but they also present a better monetization opportunity compared to clients who only utilize financial services. We are excited about this journey and believe we have the right organizational structure to make progress, although it is still early days. We'll share more insights about our current status and long-term perspectives next Wednesday.

Your microphone is open.

I wanted to ask about the financial expense related to the fourth quarter. Considering that Brazil's inflation rate has decreased, how should we approach the balance of using cash compared to third-party deposits? Additionally, what other strategies can we implement to reduce overall expenses and enhance margins? I know you mentioned reducing headcount in the software business, but what other actions could you briefly outline for the fourth quarter and into 2024?

So maybe starting talking about financial expense. I think we've mentioned this in the past, but, we think over the medium term, our financial expense should be driven by three factors, basically. First one being the interest rates in the country, second one being the overall cash generation, and the third one being TPV growth. I think when we look at the evolution this quarter, the slight decrease that we had in financial expenses was basically a function of these three factors. So, in the third quarter, we saw CDI rates in Brazil reducing from 13.65% to 13.27% on average. Secondly, we basically decided to reinvest our cash generation towards funding the operation. And third, I think these two factors were slightly offset by the quarterly TPV growth. When we look forward, I think the perspective is to have some reduction in terms of the CDI rate. So, we're going to have that tailwind going forward. And the business, I think, like we mentioned, the earlier question continues to generate a lot of cash, so this should also contribute to the overall trends. I think the second question regarding overall costs and expenses, leverage for the Company. Something that we mentioned in the call, it's the general trends in terms of administrative expenses. I think it's something that we also highlighted a few quarters ago, but if you look at a long-term trend for this line, after the first quarter '22, we started implementing a lot of measures in the Company in terms of zero-based budgeting, implementation of shared services center, and also advancing the software integration. And I think this has led this line to decline in a nominal basis since the beginning of the year, declining from R$296 million first quarter last year to around R$240 million this quarter. And we still see room to improve this line as a percentage revenue going forward. I think the idea is to keep these expenses at control while we scale the business. But another very important trend when we look at cost to serve, I think we gain more than two percentage points in terms of margins in a yearly basis when we look at that line. And when we deep dive in this line, we're really seeing gains across all the main lines of the business, be it logistics, customer service, or losses, for example. I think the only different trends that we are starting to see and that it's important to highlight is that as we expand our credit book, we're booking the provision for losses upfront due to IFRS 9. So, in this quarter alone, as we expanded the book from R$19 million in the third quarter to R$113 million in this quarter, we're provisioning at 20% because we don't have enough data in our models to provision more aggressively. So, when you look at this effect alone, it impacted negatively our cost to serve by R$18 million, which is around 50 basis points as a percentage of revenue. So I think overall, when we look forward, the idea is to continue to gain efficiency in all the main lines, but we have to bear in mind that we're going to have this effect from credits as we scale this business.

I just wanted to double click on the previous question on the MSMB. Is there any particular vertical that you saw, any particular strength, or is it like prior to the holidays coming in, you had more people sign up for that. And what is the early read for fourth quarter? Like, are you seeing the same level of activity, or has it kind of slowed down?

Sheriq, you were dropping up a little bit. So if I didn't understand your question, please repeat it. I believe it was about net adds, correct?

That's right. I'm sorry about the background noise.

No, no. That's okay. So, I talked a little bit in a prior question that we had made, I believe around, net adds evolution. So, our main sort of objective function here is to continue to grow and gain share in a profitable way. So it is true that net adds may fluctuate from quarter-to-quarter, but that's going to be our driver. As long as we can continue to see opportunities to allocate investment in growth in a profitable way, we'll continue to do so. So, I think this is, more or less we can say in terms of color around net adds evolution. The metric that we like to track really closely is the evolution of our TPV and market share and that this TPV comes in at healthy level, providing the healthy levels of return.

I would like to ask on taxes here. It was lower this quarter, you mentioned more revenues coming from entities abroad among other things. What are those results coming from abroad? I'm asking this because we see some peers booking, having some FIDCs abroad. So just would like to check if that's the case for you also. And on taxes, what should we think about this line? Should we remain low? What is your view here? Thank you.

So regarding taxes, we mentioned in the past that we see our normalized tax rate has been between 20% to 25%. But over the past few quarters, we were operating closer to 27%. So I think what happened in the third quarter is that we basically reverted back to what we see as the normalized trend for the business. What's also worth mentioning here is that in this quarter, we had a one-off effect also in taxes related to the recognization of deferred tax assets in the amount of R$23.5 million as we reverted losses in some subsidiaries that had accumulated tax credits related to losses during previous periods. I think the footnote 7.1 and 7.3 of the financial statements bring more detail on this topic. So, the first part of the question, we basically see when we look ahead, the effective tax rate continue to be within the 20% to 25% level. As for the second part of the question, we do have a part of our FIDCs offshore as we are a Cayman entity, and this, indeed, contributes to a bit of our tax rates. But when we look at the general trend, I think our tax rate is not unusual when we compare to all the benchmarks.

Can you share how much is FIDCs abroad and how much are local based?

I think we do have this disclosure in footnote 7.1 until 7.3. But, basically, when you show the profits on offshore entities, it's all related to FIDCs.

I noticed a new detail in your press release regarding PIX TPV of R$5.5 billion, which accounts for about 5% of your total TPV. Could you share some insights on where you're observing these PIX volumes, including specific sectors or types of merchants? Additionally, could the PIX volumes be contributing to the increased take rate? From what I gather, PIX TPV is excluded from your overall TPV figures, yet the revenues generated from PIX are included.

Hi, John. So yes. Giving a little bit more color on PIX, more and more, we believe it is important to provide visibility to the impact of PIX because it is becoming more and more significant. So I think, big message is on where it's relevant. So PIX P2M is more relevant in the SMB space. Why is that so? Because, PIX P2M is essentially a payment method that our clients need to reconcile just as any other payment method. So, the capture method that we offer in PIX P2M is a dynamic QR code that the transaction can be reconciled in the dashboard. So, that for larger SMBs, more sophisticated clients that have multiple SKUs that's important. And, that's a monetization driver for us, like you mentioned. You are correct that because we don't consider PIX P2M TPV in the overall TPV, that this does have a slightly accretive impact on take rates. So we see PIX as an important driver of overall market growth going forward. The way that we look at it is overall household consumption and mix by payment method. And we do see PIX P2M taking away not only from cash, but from growth in debit volumes itself. For us, this is sort of net neutral because we monetize PIX P2M in line with debit net MDRs, but for our clients, it's much better. Because for our clients, they get money settled instantaneously and they do not pay interchange. We think there is evolution to happen around the UX and the user experience, it's not fantastic yet because for example, PIX NFC doesn't exist. But, as product, usage and functionality evolves and the central bank is likely pointing that roadmap forward in the next years, PIX will become more and more relevant. And for us, we've said this many times before, more and more we see PIX as an opportunity and a way in which we can leverage the PIX rails to develop new products, new offerings to our clients. So to us, the message is that we see this as a positive trend.

I have a follow-up regarding take rates. As we look ahead to the next quarter and beyond, could you provide context on the competitive factors that might impact take rates, the transition to smaller merchants that could influence them positively, and the seasonal trends, particularly in Q4 when debit transactions typically increase in Brazil? I'm interested in understanding the potential pressures on your take rates moving forward.

Sure, John. I think, aside from the short-term fluctuations in debit versus credit that have seasonal effects, we always expect a higher debit mix in the fourth quarter. Overall, we continue to execute our pricing strategy as planned and have no intention of changing our pricing discipline. We are seeing more new monetization drivers, not just with PIX but across our banking solutions as well. As we evolve our banking offerings, we have more opportunities to monetize our client relationships, which is a positive trend for our overall take rates moving forward. I don’t anticipate significant changes in mix shifts because the growth pace, when looking at longer time horizons, remains stable across tiers. The main trends we are focusing on are pricing, execution, and the increasing monetization opportunities from banking and other solutions.

First question, I was just wondering as we head into 4Q, how should we be thinking about the seasonality aspects, and are there any abnormalities to this quarter as compared to previous years?

So no big news, I think, as usual, fourth quarter tends to have a better TPV performance, because of the Christmas and Black Friday. So nothing new on that regard.

I think, the message around the speed of rollout is the same as we have said regarding credit. We're being conservative in terms of the speed at which we scale. We remain attentive to the macro environment. So I think no different message as to our overall strategy in credits. We will take our time to scale at the speed that our risk appetite allows us to and we will remain observant of the macro environment.

Good evening, and congratulations on the strong results. Good progress here. I just wanted to ask, well, the first one is, philosophically, how are you thinking about guidance? There's been years in the evolution where you guide. There are some that you don't. So we're just wondering where your mind is now about your approach to guidance?

Yes. For sure, Jamie. So we mentioned this in the previous call. Up until the last quarter, we were following the policy of giving quarterly guidance. And we're no longer providing this kind of guidance. But starting on the Investor Day, the idea is to give guidance on a few metrics on a longer-term perspective. So, we're going to share figures for 2024, but also provide a perspective on 2027 for the business, so that you can have a longer-term outlook for the business as a whole.

And then, if I could just have one follow-up. With regard to the PIX, can you see if those are the, like prepaid PIX, or are you seeing volumes for PIX parcelado as well at this point? Any color on that would be helpful.

No. We do not see, any relevance from PIX parcelado at this point. We do know that some players are putting a lot of investments around PIX parcelado. But for us, it's a payment method that it's mostly taking away from, like I said, cash and the growth of debit.

I have two questions here quickly please. Looking to your stake rates and breaking it down, looks like the increase came mainly from financial revenue. So just would like to understand what were the moving parts here if you increased the penetration of prepayment during the third quarter for any specific segment if there was any change in prices? Because you mentioned, in your press release the effect of adjustments in commercial policy, so just would like to double click here. Or if this is only related, to the mix shift, and I mean, on a Q-on-Q perspective as year-over-year, it's clear the effects of prices. And moreover, if I may, looking to the net take rates of your financial revenues, net of banking deposit effects, and financial expenses, it actually expanded a lot, also Q-on-Q, suggesting that you also used more of your own cash to fund the prepayment business. So I know that you talked a bit about that in one of the questions before, but just would like to confirm if that indeed happened, why did you decide to use it, and what should we expect going forward as well? Thank you.

So maybe starting from the last question. Indeed, our net take rates, when we look net of financial expenses increased a lot on a q-on-q. But I think it's less related to the decision of using more of our cash towards funding and more related to the fact that interest rates started to decline in Brazil in general, and we're not passing that through to clients. So, it's more about discipline in pricing and less about capital structure movements. Now, the second part to the question, we did not make any big changes in our pricing policy in the quarter. So, when you look at the take rate evolution quarter-on-quarter, it's mostly about mix shift, a little bit towards micro. And, also, this was slightly offset by debit mix, like Lia mentioned. But I think what's worth mentioning is that when we think about pricing, we price for our clients as a whole and not by revenue line or revenue stream. So from time to time, we can see some rebalance in terms of how much we monetize in each lever, be it financial income or transactional revenues, for example. So, I wouldn't read too much into those kinds of changes. I would track the take rates in general as a whole.

Thanks very much for the chance to ask questions. So, you reported once again a net cash position to about R$3.7 billion in cash. You used some of the liquidity to repurchase R$300 million of your shares in November. You're also starting slowly to grow your credit or loan book. My question is why not use some of these liquidity to buy back some of your 2020 bonds at R$0.80? Thanks.

So great question. Indeed, in our view, when you look at our bonds, they are trading at levels that don't reflect the Company's credit worthiness, honestly. And therefore, buying back bonds is indeed a plausible option to allocate capital that we constantly evaluate. However, when you think about capital allocation, we think capital allocation is about choices. So, in our view, given the current environment and the current prices, buying back shares offers greater return to shareholders when compared to buying back the bonds. So, that's why we're focused on that option right now.

There are no questions at this time. This concludes the question-and-answer session. I will now turn over to Pedro Zinner, CEO at StoneCo for final considerations.

Well, thank you very much to all of you for participating on the call. And I hope to see you all in our Investor Day meeting next Wednesday. Thank you very much.