Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the StoneCo Fourth 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 appears in today's press release. Finally, before we begin our formal remarks, I would like to remind you that today's discussion might include forward-looking statements. These forward-looking statements are not guarantees of future performances and therefore 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 CFO and Investor Relations Officer, Mateus Scherer; and our Chief Strategy and Marketing Officer, Lia Matos. Today, we will present our fourth-quarter 2023 results and provide an updated outlook for our business. I will now pass it over to Pedro, so he can share some highlights of our performance. Pedro?

Thank you, Roberta, and good evening everyone. As I have outlined in our Annual Shareholders Letter, after a year into my role as CEO, I have taken a deeper look at our Company, better spotting our strengths and areas of improvement. This journey has been revealing, as it has provided valuable lessons and enhanced my perspectives on the opportunities we face. Reflecting on the successful year we had, it is impressive how well our company performed. I'm not only referring to our strong financial performance but also acknowledging the strategic milestones that have strengthened our position in the market and paved the way for future growth, as we detailed in our Investor Day. In response to the initial insights and assessment in my role as CEO, in 2023, we have initiated several strategic adjustments to better position our business for the future. We have reorganized ourselves to deliver our solutions more effectively across different client segments from micro to medium businesses, tailoring our go-to-market approach to meet their unique needs. Our new organizational structure aligns with each client segment while it also strengthens key capabilities around engineering, product, marketing, and innovation, enhancing our ability to address client needs uniquely. We have sharpened our strategic focus around three strategic priorities, which we outlined in our Investor Day. These three priorities to win MSMBs, drive engagement with our clients, and scale through platforms help us to set key focus areas for the coming years. The first one, defining where our focus will be in terms of the software and financial services integration efforts. By focusing our execution around four priority verticals of retail, gas stations, food, and drug stores, we are increasing our competitive edge and opening a significant growth avenue for the future. Lia will present some initial encouraging results we achieved in the fourth quarter. The second one, to leverage the power of the combination of payments, banking, and software. There is a huge opportunity in our installed base to increase engagement with our solutions. As an example, today, only a fraction of our client base can be considered heavy users of our solutions. And there is substantial potential to improve our unit economics, as we continue to engage the bids. The results we saw in our Financial Services segment in the fourth quarter reflect the success of this strategy around payments and banking. The third one, the creation of the strong platform. Our rapid growth initially focused on development speed, sometimes at the expense of consistency and reusability. This resulted in multiple data platforms. But over the last year and a half, we've made a significant change. We've brought our technology teams together, streamlined how we work, and started to build a solid foundation that we all share, which is the strong platform. As we move forward, especially with new tech like artificial intelligence, we are setting ourselves up to generate new synergies and use our insights even more effectively to serve our clients. Our last strategic adjustment focuses on the implementation of cost management and spending controls. Recognizing the potential to unlock substantial operating leverage, we have embarked on initiatives aimed at enhancing profitability even further. Through sustainable cost optimization, we're setting the stage for more efficient and profitable operations. By implementing a shared-services center and zero-based budgeting, we are enhancing our financial discipline across the organization. While the opportunity is huge, we will seize it through a targeted approach, ensuring we do not overreach in our efforts. Before handing it over to Lia, I'd like to briefly talk about our 2023 results. Last year was a milestone for us, marking a complete rebound from the challenges faced in 2021. We closed the year with exceptional results, particularly in the fourth quarter when we made significant progress in our key strategic initiatives. We posted remarkable growth, achieving a notable increase in MSMB TPV, both annually with MSMB TPV increasing 21% to BRL350 billion. In the fourth quarter, there was acceleration from the previous period. Our banking services also recorded impressive growth, with deposits reaching BRL6.1 billion by the end of December, a significant increase from 2022. This growth not only reflects higher engagement but also a better conversion of TPV into deposits. Monetization improved substantially throughout the year, with MSMB take rates achieving 2.43%, up 22 basis points year-over-year. In the fourth quarter, we saw a slight decline of 6 basis points compared to the previous quarter, but that was already expected and was purely a result of seasonality. More importantly, we continued to advance in our credit solutions, reaching our working capital portfolio of BRL309 million by the end of the year, with very encouraging results regarding the health of the portfolio and NPLs strictly under control. Additionally, our integration efforts in the four prioritized verticals have just started to bear fruit, with participation in TPV from these software clients surpassing BRL20 billion in the year. The push to Scale Through Platforms yielded substantial operational leverage, boosting our EBT to BRL2 billion, an increase of 3.3 times over the previous year. This leap forward improved our EBT margin by more than 10 percentage points. Our adjusted net profit surged to BRL1.6 billion, up 3.8 times from the previous year. Our profitability also translated into cash generation, and we ended the year with an adjusted net cash position of BRL5.1 billion, even after significant investments in our credit portfolio and share buybacks. On a separate note, the Software segment faced challenges in 2023, particularly in non-strategic verticals where growth was lower. However, our efficiency initiatives already started showing results with EBITDA margins in 2023, improving by 1.9 percentage points to 16.4%. The fourth quarter recorded a dip due to one-off restructuring costs, but these moves are poised to generate savings in 2024. In summary, 2023 was a year of significant achievements and strategic advancements for us, and our fourth-quarter results position us well to deliver our 2024 and 2027 outlook. Now I would like to pass it over to Lia to discuss our fourth quarter 2023 performance and strategic updates. Lia?

Thank you, Pedro, and good evening, everyone. We had important evolutions over the last year in our strategic priorities, while we continue to balance growth with profitability, which you can see on slide five. Compared with the fourth quarter of '22, our consolidated revenues grew by 20%, which combined with lower financial expenses led to an increase of almost 2.3 times in adjusted EBT. These factors combined with a lower effective tax rate resulted in adjusted net income increasing by almost three-fold year-over-year, with an adjusted net margin of 17.4%, up about 10 percentage points in the period. Taking a closer look at our Financial Services segment performance on slide six to 11. I will start on slide six with the performance of our payments business for MSMBs. Payments active client base increased 37% year-over-year, reaching almost 3.5 million active clients. Sequentially, this represented a net addition of 192,000 clients, lower compared to the previous quarters, mainly as a result of our strategic shift towards larger clients in the hubs and the fact that we have caught up to growth levels in the micro-segments. This growth in client base also resulted in healthy and profitable cohorts in all client tiers. As you'll see in the pages that follow and in line with our strategic priorities to win in the MSMB segment and to drive engagement with our solutions. Besides optimizing our commercial strategy for growth and market-share gains, we're also focusing on improving bundled offerings of payments and banking to new client cohorts, both in Ton and Stone, as well as driving further engagement with our solutions for more mature cohorts of clients. As I will show on slide seven, this approach has resulted in profitable TPV growth with market share gains in the MSMB segment versus the overall markets. MSMB TPV increased 20% year-over-year, growing more than twice the industry levels, considering Pix P2M volumes which were almost BRL8 billion in the quarter. MSMB TPV increased 25% year-over-year and an extra 5 percentage points of growth, when considering PIX P2M in our overall TPV. We achieved strong growth performance while also increasing take rates by 22 basis points year-over-year to 2.43%. Take rates were lower versus the third quarter due to the natural result of seasonality in the fourth quarter, which always presents higher debit volumes. We are continuously evolving our pricing and bundle strategy to achieve higher levels of engaged clients, helping them more with their jobs to be done. We believe the strong numbers are the result of our competitive advantages, around our distribution capabilities, superior service, and more and more the ability to offer more complete solutions to our clients. Now a quick update on our key accounts performance on slide eight. Key Accounts TPV decreased 17.6% year-over-year to BRL15 billion. As we have continued to deprioritize and offboard low-margin clients year-over-year, Key Accounts take rates increased 11 basis points as a result of the adjustments in our commercial policies and a mix shift within the segments. Now let's discuss our banking performance on slide nine. Banking active client base increased three-fold year-over-year to 2.1 million active clients. This evolution was a result of the launch of Super Conta Ton in the beginning of 2023 and the continued activation of banking for Stone clients through our bundle offers. The decrease in growth levels compared to the previous quarters is mainly due to the end of the migration of Ton clients to our full banking solution. This growth in client base was associated with a 52% year-over-year growth in deposits, which reached BRL6.1 billion in the quarter. This new level of deposits derived both from a positive cash-in level and engagement due to the effectiveness of our payments in banking bundles, and second, from a seasonal and calendar effect at the end of the quarter. As a result, ARPAC increased 11.4% quarter-over-quarter to BRL28.4 per month. Despite lower seasonality, this positive trend in client deposits is also seen throughout the first quarter of 2024. On slide 10, we'll talk about our credit performance. As you know, we've relaunched our working capital solution to SMBs in 2023 and have seen very positive initial results. In the fourth quarter of '23, we disbursed more than BRL230 million to around 7,000 clients, reaching a portfolio of BRL309 million, an increase of 2.7 times quarter-over-quarter. Loan-loss provision expenses totaled BRL39 million in the period, an increase of 2.1 times sequentially as we constitute provisions of 20% of our portfolio. Although we are taking a conservative approach, the performance of our vintages is above our expectations, with NPLs between 15 and 90 days of 1.96% and NPLs over 90 days of 0.29%. As we have highlighted before, this is a recently launched portfolio, so the ratio of past-due loans should increase as our portfolio matures. This year we will continue with disbursement without changing our diligence toward risk evaluation and close monitoring of market conditions. Beyond our working capital solution for SMBs, the principal driver of our portfolio growth, this year will also mark the launch of more credit solutions to our clients, such as credit cards and overdrafts. To summarize, the fourth quarter was again marked by above-industry TPV growth and higher take rates, resulting in financial services revenue growth of 24% year-over-year in the fourth quarter, reaching BRL2.9 billion. In turn, adjusted EBT reached BRL604 million with an adjusted EBT margin of 21%, an increase of more than 10 percentage points year-over-year. Moving to slide 12, let's talk about our software performance and strategic evolutions. Quarter-over-quarter MSMB TPV overlap between financial services and software clients increased 19.3%, almost twice the growth we had in our MSMB TPV in the same period. Among the four strategic verticals, this performance was mainly driven by gas stations. This relative performance illustrates our continued efforts and the first signs of success of our strategy to provide an end-to-end solution that combines management software, payments, and banking to our SMB clients. Going forward, we have listed three main priorities to drive growth and engagement in the four priority verticals. First, we're focusing on setting up our go-to-market strategy to scale our distribution model for combined software and financial services offerings. Second, we're enhancing the product value proposition to seize the opportunity in the four key strategic verticals with gas stations and retail being the main focus for 2024. Third, we're integrating the sales process to guarantee we maintain the superior levels of service our clients expect from us. There still is a huge opportunity for us to target within our software installed point base and to drive engagements with our bundled solutions, and this will be a key focus for the next few years. Moving to slide 13, Software segment revenues decreased 3.5% year-over-year to BRL363 million, as a result of lower revenues from the enterprise business, which was down 16% in the period. Sequentially, software revenues decreased 6.4% due to lower yields on cash and lower revenues from the enterprise business. As a result of this weaker top line, combined with one-time restructuring costs in the amount of BRL11.5 million, adjusted EBITDA decreased to BRL59 million in the quarter, with an adjusted EBITDA margin of 16.2% compared with 20.5% in the third quarter of '23. Excluding these restructuring costs, adjusted EBITDA margin would have been 19.3% in the fourth quarter. As we continue to focus on diligent cost-savings and process improvements in our Software segments, we expect margins to improve in 2024. As Pedro mentioned, the fourth quarter marked the closing of an important year of strategic advancements for our business. The combined evolution of our strategic priorities around winning, engagement, and scaling through platforms led to the strong results we have seen in the fourth quarter. Reinforcing what Pedro already said, I believe we're well positioned for a strong 2024 and 2027 outlook. Now, I want to pass it over to Mateus for him to discuss in more detail our key financial metrics. Mateus?

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 BRL803 million, increasing 15% year-on-year and 3.8% per quarter. The cost of services was sequentially flattish as a percentage of revenues despite provisions for expected credit losses in the amount of BRL39 million realized in the first quarter, as we grow our credit book and higher investments in technology. Excluding provisions for expected credit losses, the cost of services would have decreased 50 basis points sequentially as a percentage of revenues, showing continued operational leverage. Administrative expenses decreased 6.5% year-on-year, leading to a 250 basis points reduction as a percentage of revenue when compared to the first quarter of 2022. Sequentially, administrative expenses increased 14%, up 70 basis points as a percentage of revenues, due to higher third-party service expenses combined with personal expenses, which are seasonally higher in the first quarter. As we have shared in our Investor Day, achieving efficiency in G&A will continue to be a priority going forward. We remain committed to our guidance of less than BRL1.125 million of administrative expenses for 2024, which implies a growth of less than 7% for the year. Selling expenses increased 2.6% quarter-on-quarter and remained flat as a percentage of revenues, despite higher provisions for variable compensation in the periods. Financial expenses decreased 10% quarter-on-quarter, down 430 basis points as a percentage of revenues. This evolution was a result of lower interest rates with the average CDI decreasing in the quarter, lower number of working days, a seasonal decline in the average duration of funding lines, and a lower average cash balance in the periods. Other expenses increased 47.6% sequentially and 120 basis points as a percentage of revenues, because of higher contingencies and tax provisions related to share-based compensation, as a result of the share price appreciation in the first quarter. Lastly, the adjusted effective tax rate reached 11.7% in the first quarter. The lower effective tax rate in the period was a result of higher utilization of tax benefits from R&D. By 2024, we continue to expect the effective tax rate to be between 20% to 25%. Turning to slide 15, our adjusted net cash position reached BRL5.1 billion, reflecting an increase of BRL1.6 billion year-on-year and BRL196 million for the quarter. The growth in adjusted net cash is especially notable as it came after the deployment of BRL290 on share buybacks within the quarter, while also continuing to deploy capital towards the expansion of our credit portfolio. Now, I would like to turn it back to Pedro.

Thank you, Mateus. To wrap it up, today we also announced a pivotal transition in our leadership. André Street, our Founder and Chairman has chosen to conclude his tenure on the Board, stepping aside from reelection at the forthcoming Annual General Meeting scheduled for April 2024. Similarly, Vice Chairman Conrado Engel and Board member Patricia Verderesi will not seek reelection, honoring their two-year commitment. Andre will remain connected to the company as a Reference Shareholder, bolstered by special protections outlined in the Shareholders' Agreement and Articles of Association, including the privilege to nominate the Chairman of the Board. This transition marks the culmination of a deliberate, multi-year effort led by Andre to professionalize management and enhance governance standards, a mission that was crystallized by our strong 2023 results and the robust, strategically aligned team now at the helm. The candidates recommended for the upcoming AGM will be Mauricio Luchetti as Chairman and Gilberto Caldart as Vice Chairman. Additionally, a new member will be indicated, Jose Alexandre Scheinkman. We have shared more details about the succession in a separate filing. We are committed to keeping alive the entrepreneurial spirit created by our founders. Our goal is to maintain high standards of governance as our company grows and continues to be a leader in entrepreneurship and client-centricity. With a committed shareholder like Andre, a great team, and a strong business, we are well set to continue to advance our mission forward. Before moving to Q&A, I would like to reinforce our guidance for 2024. For our growth metrics, we expect MSMB TPV to reach more than BRL412 billion, an increase of more than 18% compared with 2023, while we expect client deposits of more than BRL7 billion, increasing more than 14% year-over-year. For monetization, we expect our credit portfolio to surpass BRL800 million, increasing 2.6 times year-over-year with MSMB take rates higher than 2.49%, implying an increase of more than 4 basis points. Lastly, in efficiency, we expect adjusted net income to be higher than BRL1.9 billion, representing more than 22% year-over-year growth, with administrative expenses of less than BRL1,125 million, decreasing 7% compared with 2023. As we close 2023 and kick off 2024, I am more enthusiastic than ever about our business. There is growth ahead of us and we are closer to demonstrating our integrated capabilities. With that said, operator, can you please open the call up to questions?

At this time, we are going to open it up for questions and answers. Our first question comes from Mauricio Ricardo with Evercore. Mauricio, you can open your microphone.

Hi, this is Sheriq Sumar from Evercore ISI. I had a question on the Software business. Coming to slide 13, just wanted to get a sense as to how we should think about the potential benefits of the four key verticals heading into 2024, given that it just grew like 0.5 percentage point in the fourth quarter? And when can we expect the impact of the enterprise to decline, so that we can see a growth in the Software business from here? Thank you.

Hi, Sheriq. Lia here. Thank you for the question. So I'm going to kick off, talking a little bit about what we highlighted on page 14, which is regards to how we are advancing on our initiatives to cross-sell financial services into our software client base. So this page talks about the evolution of this strategic priority. And as we shared in the Investor Day last year, we selected those four key verticals because they represent the majority of the opportunity and financial services revenues with our installed client base. So we believe that in order to capture this opportunity, it's going to be essential for us to offer our clients better solutions that combine software and financial services. We can leverage the capabilities of our vast distribution footprint and sustain our service differentiation, which really is a cornerstone of our value proposition. So, in that regard, the main metric for success in this initiative is the TPV overlap between financial services and software. This metric reached BRL5.8 billion in the quarter, which represents sequential growth of 19%, so we compare this growth with the growth of our MSMB TPV overall. We can see that this growth is significantly higher than the sequential growth of MSMB TPVs. As long as we can continue to grow the financial services TPV overlap in our software client base above the growth of the overall client base, this means we are capturing additional value from this combination. So I think this captures the essence of what we talked about on this page. Maybe Mateus can give a bit more background on the revenue trends.

Yes, for sure. So I think you also touched upon the software revenues on a standalone basis, which we show on page 13. And here, I think especially on enterprise we had some negative effects on the quarter related to IAS 29, so hyperinflation especially in Argentina, that was a direct hit to top line. But I think, Lia, you've touched on the focus there, which is really not on the revenues for software standalone. Actually, the focus is really on improving that gross cross-sell metric for TPV. So again, yes, I think there can be some upside for enterprise software revenues in the future because there wasn't a one-off related to hyperinflation. But the focus is really not there.

Got it. Thank you. I just have one follow-up question. On the financial expenses, can you help us understand how we should think about the first quarter and even for 2024 as well, given the prospect of lower interest rates and the use of cash versus going for third-party funding? And also I know this might be a pretty small impact but what implications does the leap year have for the impact of an extra day in February? Like would that have an impact on the financial expenses? Thank you.

Sure. I will start with the first part and then I’ll ask you to repeat the second part you’ve got here a little bit. But just to start on financial expenses, I think the trends for 2024 are pretty much similar to what we saw in the quarter, which is that financial expenses should be driven by the changes in interest rates. As we have net interest rates reducing, this should be a positive impact for financial expenses. Cash generation, which I think is similar trends as the business evolves, it's cash generation, and we use part of this cash to fund payments and credit. This has a positive effect on financial expenses. Of course, this will be offset by TPV growth. But again, I think these are the same trends that we saw in the quarter itself and it should remain consistent throughout the year. Can you please repeat the second part of the question, Sheriq?

Yes. Sure. So, in your comments, you have said that there was a lower number of working days in the fourth quarter. But in the first quarter, you're going to see an extra working day because you have an additional day in the month of February. So I know the impact is going to be pretty small, but I just wanted to get a sense of how we should think about that?

Yeah. I think this was the smallest of the effects that we mentioned. So again, when we talk about one extra or lower extra during the quarter, it's about 3% impact maximum. So on the delta, right? So it's not material at all, I think.

Thank you so much. That's all from me.

Thank you, Sheriq.

Our next question from Eduardo Rosman with BTG. You can activate your microphone.

Hi, everyone. I have two questions. The first is about your credit business. You're currently reporting your results on an accrual basis and booking upfront provisions, which seems reasonable. However, you're still using a cost-of-risk of 20%, while you anticipate actual losses will be below 10%. I'm trying to understand how much time you need to adjust to this lower cost of risk, or when we might expect to see a convergence between your cost of risk and actual losses. The second question relates to the stock being down 10% in the aftermarket. My impression is that the numbers were strong, so I'm curious about what might be driving the sell-off. Many investors are inquiring about a departure, so I would like to know more about this individual's role over the last 12 to 24 months. He is still an important partner for the company, but his economic stake has diminished. If you could provide more insight into the changes in the Board, it might help clarify the sell-off, which, given the results, seems puzzling. Thank you.

Hey, Rosman. Mateus here. I will start with the credit piece and then hand it over to Pedro to talk about the governance changes. Regarding credit, you're totally right. So we're booking credits on an accrual basis and we're using the expected credit losses of 20% until we have more confidence in the models themselves. The migration for a risk-based approach will occur throughout this year, so it probably will be gradual. So we're going to start to converge the provisioning models towards our risk models. And then maybe, I think it's also worthwhile to provide an update on how we're seeing NPLs as well, which touches upon your comment about the 10% versus the 20% expected loss levels. So this quarter we started to report NPLs. As you can see, 90 days NPLs are still really low at 0.24, and NPLs from 15 to 90 days are still at 2%. Of course, this metric is affected by the speed of growth of the portfolio, and that's why the numbers are so low. Even when you look at the cohort data, our over 30 remains roughly at the same level that we disclosed in Investor Day, in the 2% to 4% area. So I think you're right about that point, that overall when we look at the numbers, that continues to put us on the right track to land at an expected loss below the 10% level. But again, it is still really soon and we're taking a cautious approach here. So the migration will be gradual over time. Then maybe Pedro, if you want to comment about the governance.

Yes. Hi, Rosman. I think what I'll try to do, I think it's hard to talk about rational or irrational reactions on the investor side. I think I'll try to be a little bit pragmatic in terms of changes we had at the Board and how we see this as we move ahead. I think Andre's transition is kind of a natural step in the company's journey. Over the past two years or so, the company has been professionalizing its Board of Directors, bringing a mix of technical expertise, industry, and company knowledge, right? I think I was even part of this changing process a couple of years ago. Two years ago I joined the Board in April. I think 2022 was a year of a turnaround and I think 2023 we presented very solid results. We have a strong management team and a clear strategy as we move ahead. Andre played a key role in terms of changing the governance and setting the directions as we move ahead. He felt it was the right time to make the transition, right? The important point here to highlight is that despite him stepping back from his formal role, he remains a reference shareholder of the company. Addressing the question, he holds as of today roughly 7% of the economic value for the company and a voting power of roughly 37%. I think another point which is worth highlighting is safeguards regarding the company's shareholders agreement and articles of association that are held by Andre. The first one is that as long as he holds at least 15% of the voting rights, he can indicate a Board member. The other safeguard which builds on that is that while he holds more than 25% of the voting rights, he decides who is the Chairman among the Board members. In summary, Andre is still very committed to the company as a reference shareholder. He played an important role in terms of changing the governance and setting the directions as we move ahead.

No, thanks a lot Pedro for the thorough answer. Thanks a lot, Mateus as well.

Thank you, Rosman.

Thank you.

Our next question is from Mario Pierry with Bank of America. You can activate your microphone.

Hi guys, thanks for taking my question. Let me ask you two questions as well. The first one is you recently acquired a Financiera license that should help your funding costs going forward. Have you seen any benefits of that so far? Also, if we look at your deposit base, strong growth. Can you explain to us better what drove this growth? Is it because all of your clients now have a banking account with you, or what percentage of your clients already have a banking account? And maybe that's why you're seeing the benefits. And can you just remind us if you continue not to remunerate these deposits? And then the second question is related to your tax rate. We saw an effective tax rate of only 11%. Can you remind us what is the effective tax rate that you are forecasting on your guidance for the year? So when you talk about net income, adjusted net income of more than BRL1.9 billion, are you assuming that tax rate should stay around the current levels, or should we see a more normalized tax rate, which I think has been running closer to 20%? Thank you.

Hi, Mario, thank you for the questions. I will start with the tax rate piece and then hand it over to Lia to talk about banking. So in terms of the tax rates, I think the main driver for the lower tax rates in the quarter was that we were able to maximize the usage of tax benefits associated with research and development programs. Just to give some perspective here, even though our company as a whole has been profitable for many years, some of our entities where we had significant R&D expenses were not. We have been working hard to ensure that we improve profitability, not only at the consolidated level but also in those main legal entities. As a result of this effort, we were able to revert accounting losses at some of our subsidiaries in the fourth quarter and increase the usage of legal tax benefits, which was really concentrated in the first quarter of 2023. As we move ahead, the level of tax benefits utilization across the year will not materially change, but the benefits should be more spread out throughout the year. So when we look ahead in terms of tax rates, we continue to expect the tax rate to be between 20% to 25%, which is what we guided during the Investor Day, and that's what is embedded in the guidance we provided.

Yeah. So Mario, just to give you some color on the questions regarding banking, right? So in terms of the strong results in deposits that we saw, these results were mainly a consequence of two main factors. First is that we continue to put significant efforts around bundling payments and banking. We talked a lot about this in the Investor Day, right? So payments, TPV becomes a relevant cash-in to clients that use banking as a domicile. That was an important driver in increase in deposits, but also our ability to continue to engage more and more clients with our banking solutions. Of course, the fourth quarter has seasonality in deposits, so there is a seasonality effect there. But we continue to see the same very positive trends throughout the first quarter of 2024. With regards to your question about the Financiera license, we provided a lot of color on this in the Investor Day, right? There's a roadmap ahead of us in terms of banking this year. Investment products are a part of our roadmap, and we are testing this product to our clients. Our focus is really that we develop a roadmap that prioritizes the main jobs to be done for our clients. So investment is a part of that roadmap, and we will be giving more color on this throughout 2024.

Thanks. Lia, just let me ask you then on the banking domicile what percentage of your clients today have a banking account?

Today, Mario, around 50% of our clients have a banking domicile. Of course, there has been a significant shift towards 2023 when we migrated all of our Ton clients to the full banking solution. But we continue to drive payments and banking bundles to new sales as well as upsell banking to current clients in the base.

Okay. And then just confirm that you are not remunerating these deposits and you do not plan on remunerating them, correct?

So you're correct in the sense that deposits currently we do not pass through any of the floats. But of course, as soon as we decide to scale investment products, that may change, but too early to give any more specifics about that.

Okay. Thank you very much.

Our guidance that we gave in the Investor Day for the level of deposits of 2024 considers that we do not pass through any of the interests to clients.

Our next question is from Tiago Binsfeld with Goldman Sachs. You can activate your microphone.

Hi everyone. Thanks for taking my question. I have just one on expenses. When we look at your guidance growing below 7% in 2024, what do you think are the main challenges and opportunities here? And especially thinking that third-party services and personnel picked up this quarter. Are there any new trends to read from these two lines, but more broadly, we would appreciate any color you can give on expenses in 2024. Thank you.

Hey, Tiago, thank you for the question, Mateus here. So I'll first address the fourth quarter and then talk about 2024. In regards to the first quarter, administrative expenses are seasonally higher in this quarter, and this is mostly a result of two drivers. The first one is generally variable compensation because we provision variable compensation according to the expected EBT of each quarter. Naturally, the fourth quarter has a higher result and drives more variable compensation. But also, we have a concentration of more corporate events in the quarter, and that drives a lot of the third-party expenses. So I wouldn't read too much into the trends for the quarter. I think that's seasonally expected. Now when it comes to the guidance, we guided 1.125 million in 2024, this implies a growth slightly below 7% when we compare to the numbers we closed in 2023. Here, I think you had basically two drivers. On one end, we've been doing a lot of efforts to implement zero basic budgeting and shared services centers throughout the company. When we talk about these two processes, the main driver behind them is really unifying processes throughout the company that either because we grew too fast or because we have the software segment not integrated yet, we may have duplicate processes for some corporate functions. On the other hand, we still need to invest more, especially in the financial services segments as we're bringing more capability to the company and improving the processes as a whole. So I think the 7% figure in terms of growth is really the net effect of these two trends. On one hand, seeking efficiency and implementing these initiatives. On the other hand, continuing to invest in what we feel we need to deliver our plans.

Thank you, Mateus. It's very clear.

Our next question is from Neha Agarwala with HSBC. You can activate your microphone.

Hi, congratulations on the results, and thank you for taking my question. Just a quick one on volume growth for '24, the guidance remains strong after the good year in 2023. How are you seeing the competition evolve given that most of your competitors are focusing on the SMB segment? You mentioned that you maintain your benchmark status in the SMB segment, but are you seeing a bit more competition from the competitors, both in terms of price aggressiveness as well as adding new sales force on the street? Is that putting pressure on the volumes? So any color on that would be very helpful. Thank you so much.

Hi, Neha, Lia here. Thank you for your question. I'm going to start talking a little bit about TPV trends in the guidance and then give some color on the competition. I think regarding TPV, nothing really new in terms of the dynamics that we're seeing. Abex released recently their outlook for market growth in 2024. When you contrast that with our guidance for 2024 of BRL412 billion in MSMB TPV, this implies that we will continue to grow more or less twice the market rate of growth, which means we will continue to gain share in the MSMB segment versus the overall market. We remain committed to this guidance. In terms of competition, nothing really new regarding the competitive environment. Based on the fourth quarter results, we can see that we're starting to experience benefits from reduction in interest rates with financial expenses as a percentage of revenue decreasing 4.3 percentage points. This is consistent with what we have been saying over time, that in the short to medium term, the competitive environment is much more rational and stable, and players will benefit from a decrease in interest rates. In terms of competitive dynamics, overall, this is pretty much what we see, a rational market; not too much new to say about that.

Super helpful. Thank you so much, Lia.

Next question from Renato Meloni with Autonomous Research. You can activate your microphone.

Hi, everyone. Thanks for the space here to ask a question. So first on take rates, I was wondering if you can give me some more granularity on the decline in 4Q. How much comes from seasonality, and how much is coming from the shift in client mix? And then what’s the expectation on how that's going to behave throughout 2024? My second question is a follow-up on financial expenses. The sequential decline, I think it's a little bit more than we expected, given the declining rates. So, I wonder if there is another factor here at play? And then if you have some ratio that could help us estimate this for the year. Thank you.

Hi, Renato. I will start with the take rate piece and then move to financial expenses. Regarding take rates, the vast majority of the decline was a result of a mix, credit versus debit. We also noticed a slight client mix change, but this time around it was the opposite effect, with Stone TPV gaining relevance over Ton's TPV in the quarter, which was a different trend than the previous quarters. This likely offset the increased contribution from banking and credits, which is growing above the pace of payments overall. So in general take rate, I think the vast majority is purely seasonality, and that's why we remain committed to the guidance that we provided, and it was pretty much in line with what we expected. Now, in terms of financial expenses, you are right that this quarter there is a second minor effect. This is related to the mix between sale of receivables versus total debt outstanding. But again, we've always mentioned in the past that from quarter to quarter, you can have small effects related to the mix of receivables versus debt. But this is not material when we look at the numbers. I think when we compose the reduction in CDI, the lower amount of working days, and the lower average cash balance in the period, you got pretty close to where financial expenses should land. So again, when we look at 2024, I think it's safe to forecast based on these drivers alone and forget about these small variations due to the mix of funding lines that we use.

That's very clear. Thank you.

Next question from John Coffey with Barclays. You can activate your microphone.

Great, thank you very much. I said two questions which are sort of tied to some of the questions that Lia had. So given that the silica has been declining over time and you benefit from that and you haven't really seen any irrational behavior in the market just yet. I'm just wondering at a very high level, is there a way to think about what has to happen in order for you to start becoming more aggressive on pricing? Is it generally like one key competitor makes a significant change to pricing or you start to see this more broadly over the market? The second question is, as far as the TPV guidance for 2024, is there any kind of view you can give us on the cadence of that growth on a quarter-to-quarter basis? That's it. Thank you.

Thank you, John. I'll take the TPV question and then pass it over to Mateus. So I think loan yields in terms of the cadence of TPV, our TPV growth dynamics have been pretty consistent. The important thing to look out for is the guidance for the year overall, so I think not much to say beyond that. Of course, the seasonality that tend to be pretty consistent. Mateus, you want to go ahead?

Yes. And in regards to sensitivity of changes in pricing due to the changes in interest rates, we have to talk about the dynamics of pricing within each segment. When we look at Micro, we mostly address Micro through our brand TON. The dynamics in terms of pricing is one-off public prices. The prices on the websites today are very similar to pricing projected for all the main players. Why is that important? With public pricing, whenever you make a move, it's a very expensive move because your clients can call you and request to see public prices. We don't think there is an incentive for any player to make a move in the short term. Of course, longer-term, if rates really go down significantly, a smaller player has incentives to reduce prices and then the others will likely follow suit over time, but we don't see that happening in the short to medium term. In the SMB, the pricing is done on an individual basis. In Brazil, it's common to have, let's say, two drugstores in the same neighborhood, same size with two very different pricing profiles. If any player wants to be aggressive in SMB, there is no such thing as being aggressive for the whole base. The behavioral occurs in the new sales, and it takes a while for the whole base to recycle and have the effects on the P&L. So, we don't see any likelihood of having a negative impact regarding interest rates in terms of pricing. But longer-term, the strategy we presented at the Investor Day is really not about increasing these present payments. All the increases we provided for take rates in 2027 can be attributed to the higher engagement of our banking solutions and the rollout of new products, especially credits. In the short to medium term, we believe the benefits of all interest rates will flow through the P&L. Longer term, the focus is really on improving engagement with the new solutions.

Great. Thank you.

Next question from Yuri Fernandes with JPMorgan. You can activate your microphone. I believe he dropped out of the queue. Can we pass to the next question? Sure. Next question from Kyle Washington with Greenwich Capital. You can activate your microphone. Let's move to the next person in the queue. Next question from Daniel with Unrivaled Investing. You can activate your microphone.

Hi there. Can you hear me?

Yeah, we can hear you.

Thank you for taking my question, and I want to express my appreciation for the excellent job you have done in communicating the strategy and providing the presentation materials. I also really value the long-form letter from Pedro Zinner this quarter and hope to see more in the future. My name is Daniel from Unrivaled Investing. I have two questions. The first one is about capital allocation. I have found your commentary on your value proposition and your confidence in continuing to grow faster than the underlying market very insightful. However, I sense a disconnect between your strong value proposition and Wall Street's current pricing, with the stock trading at a low-teens earnings multiple. I would have liked to see a buyback last year. That’s my first question, and I can ask the second one later. Thank you.

Thanks for the question, Daniel. So I think in regards to capital allocation, you're spot on. When you look at the cash generation of the company, it has been consistently generating cash. The first part we generated cash despite BRL300 million in buybacks and also deploying capital in credits. That's why at the end of the day, we approved and announced a new BRL1 billion buyback plan during Investor Day. The only question here is that we're planning the execution of this buyback, and we have to be mindful because, when you look at the guidance, especially for the credit book, BRL5.5 billion is a sizable increase versus what we have now. But it's really small when compared to the overall credit markets in Brazil. The only thing we need to be mindful about with capital allocation longer term is that if we get it right in terms of the credit, there is potentially a lot more to be done in terms of deploying credit there, and we want to have this optionality in maintaining a really strong balance sheet. So again, in general terms, we're aligning on doing the buyback plan. It's just a matter of planning the execution. Longer-term, we need to be mindful about the credit book.

Got it. That's very helpful. It seems that the buyback may not be fully utilized if you're considering the underlying credit book and the significant growth potential there in the coming years. That's the main takeaway. Regarding the second part of the question, do you foresee a scenario where the software segment, which hasn't performed as well as the financial segment, starts to improve and accelerate in the future? Is there a point where it could demonstrate a strong value proposition, growing significantly faster than the overall industry, where you could confidently say that the value proposition is compelling and that's why we will succeed? Thank you.

Yeah, so I'm going to take this question. I think, Daniel, so in terms of the growth prospects for software, as Mateus said at the beginning, right? I think there is a bit of a mixed bag when we talk about the software business standalone. In the Investor Day, we communicated the software business fragmented into three buckets. Number one, the four key priority verticals. Number two, the enterprise business. And number three, the other software assets that we have not prioritized in terms of cross-sell of financial services at this point. In the first bucket, those core priority verticals, there's a lot that we're doing to drive the integration of software and financial services. We have set three key priorities there, and we believe there is a vast opportunity for us to continue to grow. Naturally, this growth will come from two drivers. First, our ability to penetrate Financial Services into the current software base. And second, as we improve our go-to-market, improve our sales processes, and enhance our value propositions around products, we expect to also continue to drive growth in standalone software revenues. For the bucket that we haven't prioritized regarding the other verticals and other software assets, that still has a healthy growth, and we see it continuing to grow at healthy levels going forward. The dynamics in the enterprise business is a little different because we already have a pretty large market share there, so I think we can expect less growth from the enterprise business going forward. It's hard to talk about one single answer in terms of the software business; it's really those three main buckets that I have just mentioned. Mateus, maybe you can talk a little bit about margin evolution.

Yeah, for sure. We touched upon this in the Investor Day and also in the answer about administrative expenses. When it comes to efficiency in the software as a standalone segment, there is a lot to be done in terms of implementing a shared services center and also the zero-based budgeting process. 2023 is the first year we ran ZBB, but it was mostly focused on the Financial Services segments. We're now rolling it out for the software segments as well. That's why we guided that when you look at EBITDA margins for the software segments, we reached mid-teens in 2023, and we should be significantly above the 20% threshold for 2024. Most of that will most likely be driven by efficiency in OpEx and loss from the top line of the software standalone, like Lia said.

Great. Thank you very much.

Thank you, Daniel.

Next question from Jorge Kuri with Morgan Stanley. You can activate your microphone.

Hi, everyone, thanks for taking my questions. I have two questions. The first one is regarding your non-performing loan ratio on slide 10. How do you define non-performing? Is it based on the total outstanding loan amount or just the missed installments? Then I'll move on to my second question. Thank you.

Thank you for the question. Kuri, for the first one, in the slide 10, we measured the full amount of the loan. And then in note 6.6.1, you have also the information regarding the amount of only the installment that was passed through. We have both information, but in this slide this is the full amount of the loan.

Thank you very much. My second question is about the news on Andre Street. I appreciate the update on those shares, which I understand represent around 7% of economic values. With this announcement, are there any changes to the existing lockup on those shares? Can he, if he chooses to, sell all of the shares at any time? Or is there some sort of lock-up agreement? Additionally, will there be a non-compete agreement with Mr. Street related to this move?

Hi, this is Pedro. Regarding your first question, I don't think there are any changes on the second point. Our non-compete is actually being defined, and it will state that he cannot engage in any business that competes with Stone's main activities in Brazil. This non-compete should be finalized before the Annual General Meeting, which is expected to take place on April 23. You will find more details in the documents for the AGM.

Thank you, and that's very clear. But just to clarify the first part, when you said there are no changes, it means that he doesn't have any lockup on his shares?

That's right. Correct.

Okay. Got it. Thank you very much.

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 everyone for participating in the call. As I mentioned in the letter, I appreciate the value of our shareholders. Hope to see you again next quarter. Thank you very much.

This concludes today's presentation. Thank you for participating.