Good evening, everyone. Thank you for standing by. Welcome to the StoneCo Second Quarter 2024 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Throughout this conference call, the company will be presenting non-IFRS financial information including adjusted net income and adjusted net cash. These are important financial measures for the company but are not financial measures as defined by IFRS. 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 everyone that today's discussion might include forward-looking statements. These forward-looking statements are not guarantees of future performances and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause results to differ materially from the company's expectations. Please refer to the forward-looking statements disclosure in the company's earnings press release. 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; our Chief Strategy and Marketing Officer, Lia Matos. Today, we will present our second quarter 2024 results and provide an updated outlook for our business. I will now pass it over to Pedro so he can share some highlights of our performance. Pedro?

Thank you, Roberta and good evening everyone. After reviewing our second quarter results and our performance at midyear, I am pleased with our progress across our strategic priorities and believe we are on schedule to meet our 2024 goals. In payments, we continue to win in the MSMB market and take more market share. Our client base grew 30% year-over-year. TPV grew 25% and current TPV increased over 17%. We are also executing on our pricing and bundling strategies to enhance client engagement as we discussed during our Investor Day. As a result, our MSMB take rates also continue to expand, increasing seven basis points year-over-year to reach 2.54%. We believe these strong results stem from our competitive advantages in distribution, superior service, and our growing ability to provide more comprehensive solutions to our clients. In banking, we are making similar progress. Our client base grew 62% year-over-year and client deposits increased 65% as our team continues to cross-sell effectively. We now have 2.7 million active banking clients and R$6.5 billion in deposits, which are approaching our 2024 targets. We have also started to pilot interest-bearing products such as time deposits, which I believe are being well received by our clients and could be an exciting new area for us. In Credit, we're also evolving well towards our goals even above set targets. Our total credit portfolio increased 32% quarter-over-quarter to reach R$712 million. Within that, our working capital portfolio grew over 28%, reaching R$682 million this quarter with strong quality as shown with our NPL over 90 days, remaining at 2.6%, very much in line with our expectations. I'm also excited about some new initiatives underway. Our specialized project desk, which is focused on addressing the opportunity within our larger SMB client base, successfully completed its first disbursement in this first quarter. And we finalized the structuring of our zero fast food product. This is a short-term address solution designed to address the immediate capital needs of our clients, which is set to launch in the third quarter. In our software business, we are making progress on our cross-sell initiatives and we are improving the quality mix of our business towards more recurring revenues. Total software and vertical software revenue growth remains modest, but we are seeing underlying signs of improvement. For example, we are getting better cross-sell traction in our gas station and retail verticals, and we generated stronger Card TPV growth from our software clients in priority verticals than our overall MSMB card TPV growth rates. We still have a lot of work to do in our software business over the long term, as I have mentioned, but I'm seeing some encouraging trends from our efforts. We have also maintained our focus on efficiency gains in the streamlining of administrative expenses, which decreased by 13% year-over-year. In the quarter, we achieved a 180 basis point reduction in administrative expenses as a percentage of revenues when compared to the second quarter of 2023. As a result of these positive developments, our adjusted basic EPS demonstrated strong growth reaching R$1.61. As I mentioned earlier, we remain committed to our business plan and the targets established during our Investor Day. In light of this commitment and considering short-term market fluctuations, we allocated capital to repurchase an additional 9.67 million shares, totaling R$724 million, bringing us closer to completing the R$1 billion share repurchase program announced in November 2023. Additionally, as part of our liability management strategy, we allocated $295 million to the tender offer for our 2028 bonds, achieving nearly 60% participation. In summary, I'm very satisfied with the trajectory of our results for the second quarter of 2024, and I have full confidence in our team's execution. Now, I'd like to pass the floor to Lia, who will discuss our second quarter of 2024 performance and strategic updates. Lia?

Thank you, Pedro, and good evening, everyone. As Pedro mentioned, we were pleased to see the progress across our strategic priorities and initiatives in the second quarter, which I think positions us well to meet our 2024 and long-term goals. As you can see on Slide 4, our consolidated revenues grew 8% year-over-year, mainly as a result of consistent TPV growth and higher client monetization. It is also important to remember that in the first quarter of '24, we changed our internal accounting methodology for membership fees revenues, deferring this revenue stream over the expected life of a merchant rather than recognizing it at the time of acquisition. This change reduced our reported revenue by around R$50 million in the second quarter. If we exclude this change, our total revenue growth would have been 10% in the quarter. Despite this effect, adjusted EBT increased 46% year-over-year. This was driven by the combination of our top line growth and the ongoing benefits of our financial and administrative expenses efficiencies. As a result, our adjusted net income increased 54% year-over-year, and now our adjusted basic EPS increased 57% year-over-year reaching R$1.61. Now, let's dive further into our financial services segment performance on Slides 5 to 9. Starting with payments on Slide 5, our MSMB client base increased 30% year-over-year reaching almost 3.9 million active clients. We generated a net addition of 184,000 clients during the quarter. On a year-over-year basis, this growth was impacted by the fact that we have caught up to the growth levels in the micro segment and on a quarter-over-quarter basis, our net additions were impacted by the growth over effect of higher net additions in the first quarter, which benefited from our sponsorship of a popular reality TV show in that period. As you will see on the pages that follow: Besides optimizing our commercial strategy for growth and market share gains, we're also putting a lot of focus on improving our payments in banking bundle offerings to new client cohorts, both in Ton and Stone. As you can see on Slide 6, this approach has resulted in more profitable TPV growth in market share gains in the MSMB segments. Before we dive deeper into our TPV performance in payments, I would like to point out that we have refined our disclosure of TPV due to the increasing relevance of PIX QR Codes in the market and in our transactional volumes. From now on, whenever we talk about TPV, we will refer to transactions settled through cards and PIX dynamic QR codes. When we talk about Card TPV, we will be referring to transactions settled with cards only. Now moving to take rate results. MSMB TPV increased 25% year-over-year as a result of a 17.4% year-over-year growth in MSMB Card TPV and a 2.6 fold increase in PIX QR code, which reached R$11.5 billion in the quarter. We achieved this strong growth while also increasing take rates by seven basis points year-over-year, which reached 2.54% as a result of higher credit and banking revenues and higher prepaid volumes partially offset by a lower duration from prepayment transactions. On Slide 7, let's shift to discuss our banking performance. Our banking active client base increased 62% year-over-year to 2.7 million active clients as a result of growth in both Ton and Stone payments client base with an increase in penetration of clients using banking and payments bundles. This growth in our client base also helped drive a 65% year-over-year increase in client deposits, which reached R$6.5 billion in the quarter, despite the sequential 8.1% growth in deposits. ARPAC decreased to R$25.7 per month, mainly as a result of lower average CDI in the period. Moving to Slide 8, let me give some highlights on our credit performance, our credit portfolio increased to R$712 million with the working capital portfolio alone increasing 28% sequentially to reach R$682 million in the quarter. The remainder of the portfolio is the result of the very initial results of our credit card products, both within Ton and Stone, because such cohorts are very early vintages. We highlight the credit quality metrics of our working capital loan product alone. NPLs increased slightly this quarter with NPLs between 15 and 90 days reaching 2.9% and NPLs over 90 days reaching 2.6%. As highlighted before, because these cohorts are also relatively new, the ratio of past due loans should continue to increase as they mature. Provision expenses for working capital expected losses were R$17 million in the period, decreasing significantly quarter-over-quarter. This reduction reflects the beginning of a conversion of provision levels to expected loss levels as the portfolio matures with provisions now representing 18% of the working capital portfolio down from 20% in previous quarters. Finally, to summarize the performance of our financial services segment, the second quarter was again marked by strong year-over-year TPV growth and the successful development of our banking and credit initiatives. These resulted in segment revenue of R$2.8 billion, an adjusted EBT of R$608 million in the quarter, up 11% and 53% respectively year-over-year, and an increase of 590 basis points in our adjusted EBT margin to reach 21.5%. Moving to Slide 10, let's talk about software performance and its strategic evolutions. Quarter-over-quarter, the Card TPV of clients that use both financial services and software solutions increased 8%, primarily driven by the gas station and retail verticals, which have been our priority focus since last year. This result has been mostly driven by the cross-selling efforts from our financial services specialist distribution team, cross-selling bundles to software clients. As Pedro mentioned, cross-sell volumes outperform growth of MSMB Card TPV in the quarter by almost a factor of two. We're happy with the execution of our cross-selling initiatives so far in 2024, but I believe we still have a lot of room to grow, particularly as we gear up to enable our link software channels to also sell software and financial services bundles. On Page 11, you can see the standalone performance of our vertical software business where we're seeing some improvements in the quality of our revenues. Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth offset by a decrease in non-recurring revenues in priority verticals. As a result, we believe the revenue quality of our priority verticals is improving with recurring revenue as a percentage of total revenues increasing by more than 450 basis points year-over-year. In Slide 12, we present the consolidated performance of software. As you can see, total software segment revenues reached R$384 million remaining flattish year-over-year, driven by the trends I just described in our vertical software business offset by slower growth in the enterprise business. Adjusted EBITDA in the software segment decreased to R$64 million in the quarter, down 4% year-over-year, and 3% quarter-over-quarter impacted by a non-recurring seven expense of R$3.2 million, and by our decision to focus on growing recurring versus non-recurring revenues, which has a negative impact in the short term, but should be accretive for the business in the long run. We continue our efforts to implement the software strategy that we presented in our Investor Day. While we're happy with our evolution in cross-selling initiatives in the gas station and retail verticals, we're still working and learning how to best enable our software distribution channels to sell financial services and software bundles via commercial incentives and systems integrations. We also continue to pursue efficiency initiatives and a more disciplined capital allocation approach within our software settings. Now, I want to pass it over to Mateus to discuss in more detail some of our key financial metrics. Mateus?

Thank you, Lia, and good evening everyone. I would like to begin on Slide 13, where we discuss the quarter-over-quarter evolution of costs and expenses on an adjusted basis. Cost of services reached R$831 million, increasing by 23% year-over-year and 4% quarter-over-quarter. Sequentially, cost of services as a percentage of revenues decreased by 10 basis points, primarily due to a reduction in low loss provisions, which were reduced to R$18 million this quarter from R$45 million in the first quarter of '24. This reduction reflects the beginning of the process of aligning our provision levels with expected credit losses as the portfolio matures with provisions now representing 18% of the working capital portfolio. This decrease was offset by a higher provision for losses in the quarter on our acquiring and banking solutions. Administrative expenses decreased by 13% year-over-year, resulting in a 180 basis point reduction as a percentage of revenues compared to the second quarter of '23. Sequentially, administrative expenses increased by 1.4%, but declined by 20 basis points as a percentage of revenues. This was driven by lower expenses in the software segments due to efficiency gains, as well as by the divestment of impact in the first quarter of '24, which eliminated expenses in the non-allocated segments. Selling expenses increased 27% year-over-year and decreased 0.9% quarter-over-quarter down 80 basis points sequentially as a percentage of revenues. This decrease is primarily due to a reduction of approximately R$26 million in marketing expenses related to the sponsorship of a reality TV show that Lia mentioned, partially offset by increasing investments in sales teams. Looking ahead, we anticipate gradual dilution of selling expenses as these investments in sales teams mature. Financial expenses decreased 20% year-over-year and decreased by 4.5% sequentially, leading to a 230 basis point reduction as a percentage of revenues. This decrease was a result of lower average CDI in the period, a reduction in our funding spreads, and our decision to reinvest for cash generation towards the funding of our operation. These effects were partially offset by higher funding needs for our repayment and credit operations, as well as by a higher number of working days in the quarter. Lastly, other expenses increased by 26% year-over-year and 80% sequentially, or 140 basis points as a percentage of revenues. This variation was a result of more normalized levels of share-based compensation expenses as the first quarter of '24 included a non-recurring positive impact of R$40.5 million from the net effect of the consolidation and new grants of incentive plans. Excluding this effect, other expenses net would have been flattish as a percentage of revenues. Turning to Slide 14, our adjusted net cash position was R$5.3 billion by the end of the quarter, reflecting an increase of almost R$1 billion year-over-year and R$117 million for the quarter. We continued to deploy capital towards the expansion of our credit portfolio and executing on our share buyback program in the amount of R$237 million this quarter. As Pedro mentioned, I would like to highlight that in July, we allocated capital to purchase an additional 9.6 million shares amounting to R$724 million, nearly completing the R$1 billion buyback repurchase program announced in November 2023. Additionally, we allocated $295 million in July to the tender offer for our 2028 bonds, which will further optimize our funding spreads as we move forward. Finally, let's move to Slide 15 to discuss our guidance. We are very pleased with our performance in the first half of the year. The profitability achieved in the first half of '24 has positioned us favorably to meet our full-year guidance, despite several headwinds. This includes a R$120 million reduction in revenues due to the changes in recognition of membership fee revenues, and a challenging microeconomic environment with a higher yield curve. In our banking credit solutions, which are key drivers for our long-term growth, we have exceeded initial expectations not only in volume but also in quality. This strong performance may put us on track to surpass our year-end guidance in these areas. From my perspective, the most challenging area so far has been our MSMB Card TPV. PIX QR Code penetration in the market and within our client base has been higher than we anticipated when setting our guidance in November of last year. This has affected our overall volume mix towards less Card TPV and more PIX QR Code TPV. Although this trend is positive for the business, it also means that current TPV is growing a little tighter within our expected range. We ended the first half '24 with 18% growth exactly in line with our guidance. Despite a more challenging comparable base in the second half of '24, we remain laser-focused on our efforts to meet this guidance. Overall, I believe our second quarter results are trending favorably, and we are on track to achieve our long-term goals. With that said, operator, can you please open the call up to questions?

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

Let me ask you about competition. Have you noticed any changes in the competitive landscape over the past three months, particularly from some of the traditional banks and any updates at CLO? We did observe that you're increasing investments in your sales team. I’d like to understand that better. Why are you investing in the sales team? Do you feel at a disadvantage, trying to catch up, or do you see a more competitive environment? If you are seeing increased competition, could you share how take rates are trending?

I’ll jump in first and then I’ll pass it over to Lia to make further comments. I think on the pricing piece, the way we see it is that it has become really a dynamic process within the company, meaning that we continuously evaluate the profitability of our cohorts and adjust prices accordingly. So in terms of the new interest rate environment and competition, I think we'll gradually incorporate the new yield curve and changes in the competition environment into our decision-making. As a direction, I think we'll continue to prioritize profitability and to price based on returns. Still on the competition side, and I’m not going to address specifics in that regard, but I think the market has evolved a lot and other players have been behaving in a similar way. Just another point I wanted to highlight is that we have more levers to price the relationship with clients through the bundles as the core of our strategy between payments, banking credit, and software. So, I think to some extent this provides a hedge against short-term interest rate dynamics and on the competition side. I’ll pass over to Lia to talk about selling.

So, talking a little bit about dynamics around selling, there are two relevant dynamics to highlight. First, we've already seen a reduction in selling expenses as a percentage of revenue, as Mateus mentioned, due to the R$26 million impact decrease because we sponsored Big Brother Brazil in the first quarter. So that's more of a short-term dynamic and it's going to continue to positively impact throughout the year. But longer-term, regarding selling, we continue to invest and we talked about this especially scaling our specialist distribution as we continue to move to onboard larger SMBs within the SMB segments. As we have a dynamic regarding selling expenses in distribution, we front-load investments in sales. So there's an upfront operation expense, and the results will come as we continue to onboard those clients. So we are going to see this impact for a few more quarters, but longer-term we do anticipate gradual dilution in those selling expenses as the salesforce matures and we bring in more clients.

If I may add, it’s Mateus here. I think in summary, the investments that we're doing in terms of hiring these specialists is not a reaction to any sort in terms of reacting to the competitive environment in the short term. It's because we're seeing a huge opportunity to go upmarket within SMBs with very profitable types of clients, good unit economics, and our decision is much more of a bottom-up decision and not a reaction to anything that any player is doing.

That's clear. Can you just give us a sense of the size of how many people are we talking about?

We don't disclose the breakdown, Mario, but I think the way to see this is it's kind of proportional to the distribution of the TAM you have. When we talk about what we call medium clients, the larger SMBs, naturally from a density perspective, there are less of them spread throughout the country. So we always kind of allocate sales teams in terms of the opportunity that we see locally in terms of the total addressable market. And although there are fewer medium clients within a specific hub or within a specific region, these clients have very attractive economics, they have larger TPV, and there's a lot of opportunities to upsell credit. So we see this from the perspective of the addressable market. If you think about the overall salesforce specialists, they represent a smaller percentage of that and pretty much align with the distribution of the addressable market.

Our next question comes from Eduardo Rosman with BTG.

Congrats on the numbers. I have two questions here. The first one is a follow-up to what I asked during the last conference call, and it’s about the software division. Why not consider divesting at least part of it given that the number of verticals likely to have synergies with Stone’s not that large? So that's the first one. And the second one is kind of a follow-up as well on the competitive front. We saw a big surge in the number of acquirers in recent years. What do you think about this market in terms of consolidation? Do you see room for M&A in the sector? So that would be the second question. Thanks a lot.

I think on the first one, we remain focused on executing the strategy we unveiled at our Investor Day. Our efforts are really concentrated on driving cross-sell in our priority verticals and improving overall business efficiencies. You can see that from the results that we presented. While we are pleased with the progress we made so far, we recognize that there is still work to be done on both fronts. Regarding the potential sale, I'd like to emphasize that we're not selling the asset. I think in some ways, there have been rumors, and what we said is that we continually evaluate all options to maximize value from our assets and allocate capital within the company. But our focus at this point is really on executing the strategy we have laid out. On the second question, could you please repeat?

Yes. No, it’s in terms of consolidation, right? We saw a big number of acquirers and payment companies coming to the market in recent years; many of them, naturally, they don't have probably the scale we do, and the ones linked to the big banks are becoming kind of a cost center. So how do you guys see the market evolving? Do you see room for consolidation?

Let me share our perspective on the competitive landscape regarding the number of participants, and then I will hand it over to Pedro for further insights. Overall, we have noticed fewer newcomers in the market over the past few years. This situation has been significantly more competitive in previous times. Different players are relevant in each market segment. In the micro sector, the competition is quite distinct. As we move up to small and medium businesses, the competition shifts, and we find ourselves primarily up against established companies. However, the general trend indicates that around five key players have consistently maintained their market share. While the group identified as "others" does see an increase in market share, it seems that the key players remain unchanged. Therefore, from a competitive dynamics viewpoint, I don't observe significant shifts. If anything, we are witnessing less vigorous entry of new players into the market lately. Pedro, would you like to add anything?

I don't believe that there are many other points to highlight; briefly, there are no big news regarding the competitive environment. It's been quite stable over the past couple of quarters, and no significant changes on this front.

Our next question comes from Neha Agarwala with HSBC.

On the OpEx side, the delivery so far has been quite strong despite some amount of expenses. Is there upside to your guidance? Could you have better costs, and that could drive your bottom line? Or are there any other costs or investments that you're looking to make that could weigh in on the second half of the year? My second question is on the credit book. The originations; I saw this score, the disbursements were slightly lower quarter-on-quarter. Any particular dynamics there? The NPL ratio is increasing as expected, but are you comfortable with the risk? If you can share more color about the uptake of the working capital? Is it directed more towards the SMBs, and any particular type of merchants who are more willing to take the loan or whom you are more willing to lend to, any color on the credit book would be very helpful.

I'll start by addressing the credit one and then we talk about OpEx. So regarding credit, in terms of quality, I think we're really happy with the performance of the portfolio, so no worries whatsoever. But in terms of growth, the message here is that when we think about growth in disbursement, it's not going to be linear over time. What we're doing now is basically making a series of experiments to test new criteria in the cohorts. Whenever the results from those tests are positive, we roll out new offerings to unlock a bigger wave of disbursement. That has been the behavior of the best quarter as well. When we look at the guidance, we guided for a portfolio above R$800 million by year-end; we're already with R$712 million in the first half of the year. So when we compare to our plan, even though the disbursement for this quarter was a little bit smaller than the previous one, we're above the initial plan. In terms of the economics of the product, we're becoming increasingly comfortable over time. I think the challenge and the opportunity now is that there is a lot to be done in terms of improving the conversion of their profit pool, but also increasing the percentage of clients to whom we extend a credit line as a result of those tests. Keep in mind that when we look at the product nowadays, it's still pretty much fully digital, with very low participation from the distribution channels, which is key in increasing conversion and penetration in the future. So that's pretty much the message around credit. On the OpEx side, I think we had good performance in the first half of the year, especially on the administrative expenses. When we look at administrative expenses, it's down 13% year-on-year in Q2, and we actually guided for growth. So it's becoming clearer that we're probably going to land with upside in that line. But more broadly, when we think about operational leverage looking ahead, the message is twofold. So within the operation, when we look at selling expenses and cost to serve specifically, we should continue to see operational leverage in the next quarter.

Our next question comes from Tiago Binsfeld with Goldman Sachs.

The first one is on PIX. I think you mentioned that has been an area of challenge, so I wonder how you see the evolution of the PIX agenda. We're following news of PIX type pay. We also see within the open banking agenda some initiatives, we not direct payments. So how are you preparing for those changes, and do you think there can be a meaningful impact on TPV? And I can ask my second question after that.

I believe that I was cutting a little bit. The whole question is around PIX dynamics, correct?

Yes, that's right, Lia.

Let me give an overview of PIX dynamics in terms of performance and then how we see the outlook regarding PIX. The first message is we continue to see strong growth from increased penetration of PIX QR code dynamic QR code, which is the PIX that we see as a payment method. That's been true both within our base and the market based on Central Bank figures. So that's been an evolution beyond our expectations at the beginning of the year. For us, this is net positive, as we've said many times before because, number one, we see PIX as being incremental to our overall volumes. If you look at electronics penetration and how that has evolved as a percentage of household consumption over the past year, we see that penetration of credit has remained stable, even slightly increasing year-on-year. While if you look at the sum of debit, plus PIX, plus PIX volumes, this has increased significantly. So from 25% around a year ago to around 33% today. This volume is taking, and there is a slight cannibalization of debit, but overall it's taking volume from cash. The reason why it's accretive for us is that we monetize this in line with net MDRs for debits, but it is accretive from the perspective of more engagement with our banking solutions and more cash in and more overall deposits. So, that's the big message around PIX performance so far. When we look ahead, I think there's a roadmap that we know that the Central Bank has put out. There's an evolution around PIX NFC, and our take on this is that this evolution opens up opportunities for us to improve client experience and to evolve our product development roadmap around the PIX rails.

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

Good question. The two main metrics to look out for, which are in line with the two pieces of the strategy we communicated on Investor Day, number one: how we are evolving in cross-selling financial services to linked clients. We disclose the metric of TPV overlap. TPV is of course only one part of the story because, as we get better at cross-selling financial services to software clients, we want to advance on the banking and on the credit opportunity. But for now, tracking this TPV overlap is an indicator of our traction regarding this part of the strategy. The second big message that we brought out is the opportunity to increase efficiency within the software segments. Monitoring margin evolution is an important aspect of this naturally. We discussed margin behavior this quarter. There was a one-off effect from restructuring costs, but in the long run, we continue to see opportunities to improve margins within the software segment.

Our next question comes from Kaio Da Prato with UBS.

I have two on my side please, mostly related to your cash. The first one is in terms of the tender offer of your bond. Should we expect the usage of own cash for this operation? And also given your current cash generation, or should we expect the issuance of a new bond with probably lower cost? By the end of the day, when we think about your P&L in the 3Q, and in the upcoming quarters, what type of impacts could we expect as we probably see savings related to the interest rates; and also a potential tax shield for the remainder of the bond that was not bought? If you could help us walk through the impacts, that would be good, please. The second one, also looking at your cash generation, just would like to understand what could be the next steps here. Where could we see the usage of cash, if it could go more to repayment or credit products? And if you plan to open a new buyback program as you almost completed the one announced last year in August.

Thank you, Kaio. Mateus here. First, let's talk about the tender of the bonds. The buyback of the bonds itself had a neutral impact in terms of financial expenses upfront. But when we look ahead, there is indeed a relevant saving going ahead because first we saw debt that was running at CDI plus 3%, which is the bond. For other loans in our balance sheet that are going to be running at much lower spreads. To the first part of your question in terms of the balance sheet itself, we're basically swapping the bonds with other debt instruments. It's not going to be a bond issuance. They run at a much lower spread. Besides the savings in terms of having lower financial expenses on these new debt instruments, we now also have the tax shield on the financial expenses that were associated with the bonds, both because these new issuances are happening onshore. And also because in the tender offer of the bonds, we included a provision to switch the debt holder of the bonds to a local entity. So when you add that together, you have a positive impact on the P&L moving ahead. The second part of the question is what we're going to do in terms of cash generation going forward. First in terms of opening a new buyback plan, we still view buybacks as very attractive capital allocation, especially considering that we are outperforming the expectations outlined in the initial plan in the Investor Day. However, when we consider additional share buybacks, we need to also remain mindful that our business is growing very fast and we have several new avenues for future growth that may require additional capital. So, in short, we haven't made a decision on whether we're going to announce a new buyback program in the second half or not, but it's certainly something that we will evaluate and provide updates in the coming quarter. In terms of uses for the cash that we're generating, when we look at the capital structure for the company, we think we are in a strong position. The company had a net cash position of around R$5 billion prior to the buybacks. Even after purchasing around R$1 billion in the first half plus July, the company should still increase its suggested net cash position simply given the cash flow generation from the business has been really strong. When we consider what we are going to do with that cash generation, the message is that we continuously evaluate the best use of capital in order to maximize shareholder returns. We feel that if there’s an opportunity for buybacks, given how discounted the companies are versus our plan, we can do so. What we need to balance here again is the opportunity for the company to grow and to deploy capital in the business itself. Our industry is huge, and we want to ensure that we have the firepower to pursue the opportunities we have, especially within credit.

Our next question comes from Jorge Kuri with Morgan Stanley.

Congrats on the numbers. I wanted to ask, go back, I'm sorry to the question about selling expenses. I know, you're looking at it on a quarter-on-quarter basis, but given the investments in people and how long they take to yield results, I think it's just better to look at them on a year-on-year basis. Your marketing expenses are up 27% year-on-year, and for a revenue growth of 8% year-on-year. So that's 3x revenues and relative to TPV is around 2x TPV. I went back and looked at that relationship last year, and it's not necessarily getting any better. So I wanted to ask to what extent maybe the business is getting more competitive and maybe it's not getting more competitive on prices, but just getting more competitive on the ability and the productivity of the infrastructure that you need to generate revenues because there are just more and more companies looking for the same pool of clients. So if you can just give us a little bit more confidence in why we're going to see a reversal of this negative trend. My second question is on your banking ARPAC, which was down 13% quarter-on-quarter, even though your loan book has really exploded, it's up like many fall year on year 35%, I think quarter-on-quarter, and rates were lower on the float, meaningfully lower if you look at it on a year-on-year basis. But on a quarter-on-quarter basis, average rates were only about 5% lower. So can you just walk us through why your banking ARPAC was down 13% quarter-on-quarter?

I'll start from the last question and then we'll talk about selling. In terms of the banking ARPAC, the revenues from credits are not included in the banking ARPAC. It's basically the transactional banking revenues plus loading. The main driver that explains why banking ARPAC went down quarter-on-quarter is mainly CDI. CDI actually went down 6.9% quarter-on-quarter, and that pretty much covers the gap. Now in terms of selling, maybe we'll start with the dynamics that we expect as a percentage of revenues, and then Lia can add on your piece about the relationship between selling and competition.

So, Jorge, we've talked a few times about this. In general terms, we kind of agree with you on the assessment of how the acquiring industry will evolve regarding growth. The big message is that we're going to see less growth in the industry when we think about acquiring specifically over the next five years than we saw in the last five years. But we see competitive dynamics playing out a little bit differently from what you mentioned. The first important message is, as we emphasized in the Investor Day, there’s still a lot of room for us to grow in financial services beyond payments. We've seen a clear trend where all players are offering more complete solutions, and this is not something exclusive to Stone. The overall industry has moved away from fewer player acquiring to more complete financial solutions offerings. Given that we have a large opportunity to improve monetization beyond payments and penetrate more on banking and on credit, this is how we see the investments in selling that we make because this will drive better returns on our investments in selling in the long term. The second piece revolves around what we've observed in recent quarters within acquiring. We believe that the trend will continue to be one where players focus their growth within specific niches of the markets, be those specific tiers of clients or specific regions. Incumbents as a group gaining more share in the key account space, even though they are losing share as a group. So overall, we expect the industry growth to be lower, but we will continue to evolve our operating model, and we've talked about specialized salesforce as one example. We continue to ensure that we can stay ahead and really understand where these pockets of growth are, and we will maintain our focus on serving MSMBs and gaining share within that segment.

Our next question comes from Gustavo Schroden with Bradesco BBI.

Congrats on the numbers, and thanks for taking my question. Most of my questions were answered, but I'd like to explore a little bit about your guidance. It seems to me that it is a little bit conservative at this point because if you analyze, for example, the TPV, it is running very healthily, and I’m assuming that there is seasonality in the fourth quarter that may be easily above this 18% growth deposit, which is also growing very fast. The credit portfolio take rate is above 2.49% as you expected. And net income is running, also assuming the seasonality in the fourth quarter, running to be above R$1.9 billion for the year. So why are you still keeping this R$1.9 billion as a minimum? Do you think that it is a conservative approach? Should we indeed expect something above R$2.1 billion for the year? That would be reasonable; that’s my question.

Hi, Gustavo, Pedro here. Thank you for the question. I think, I'll try to provide the whole concept. I think we emphasized in our Investor Day, we transition to a policy of providing annual guidance unless there is a significant change in the business or in the macro environment. I don't believe that we anticipate revisiting our guidance by mid-year. The numbers we provided for the year set a floor for our key indicators. For most of these, we are indeed seeing more positive trends. I think you're right. We do expect to exceed our targets, but I think it's part of the game. The only metric that might prove more challenging is really Card TPV as we are witnessing stronger growth in PIX transactions, which were not included in the TPV metric we provided for guidance despite being monetized in line with net MDRs for debit transactions. PIX QR Code penetration in the market within our client base has been higher than we anticipated when we set our guidance in November last year, affecting our overall volume mix towards less Card TPV and more PIX QR Code TPV. However, in general terms, we’re keeping our guidance as I mentioned before.

Very clear. And just to follow up here, your point about Card TPV and the PIX potential impacts and interest rates. Anything that you see here that could change or could impact their guidance now that we have a different environment or different expectations for rates? Anything that you could comment here would be great.

When you think about interest rates, they're going to be a drag on the second half. In the first half, the expectation was that interest rates would decrease; when we look now, they're expected to increase in the second half. However, we need to keep in mind that when we did the Investor Day and provided the guidance in November, the interest rate curve was not that low as well. So there is a negative headwind, but it's not material enough to change the guidance.

Our next question comes from Yuri Fernandes with JP Morgan.

Quick one about Rio Grande do Sul. I think this was a topic you discussed in the past quarter. You were giving grace periods, like subscription free for some clients. Any impact to this quarter? What was the final number here, and how Rio Grande do Sul, how your earnings would have behaved? That's the first one. And a second one on, I think I already explored a lot of the bank initiatives, but just on the pause, it’s I know you're testing these remuneration for deposits to put these on your release. If you can provide more color on timing, what you plan to do, the risks of cannibalization of your deposit free of yield nowadays. So just some color on the remuneration of deposit strategy here.

I’ll kick off with the Rio Grande do Sul question. I'm happy to say that the impact was smaller than we initially anticipated. I think this is really thanks to the swift recovery of TPV in the affected region. So good news on that side. Overall, we really experienced a negative impact of approximately R$150 million on our TPV, with ballpark numbers around R$10 million on our overall results. Just a quick note that this impact was not only due to the TPV reduction, but also because of the series of actions that we took to support our clients during this critical time when they most needed us. I’ll pass it over to Mateus.

In terms of the remuneration of deposits, we're still testing. We've started to disclose on the balance sheet the amounts that we have with time deposits with merchants. It's really immaterial yet. We’re basically still testing to ensure that we don't cannibalize the economics of the current banking offering. In terms of timing, I think that during the next quarters, we'll gradually extend the pilots to a larger base, but it should only start to make a difference in the balance sheet and in the results next year. I think we shouldn't expect anything big for 2024 on that front.

Our next question comes from Renato Meloni with Autonomous Research.

My first one is related to the credit portfolio. Given the large success that you had so far, and looking at the guidance, I think it’d be interesting to explore what went well and what was ahead of your expectations here. Also, if you could maybe provide some KPI or a way to look at the growth for the upcoming years up to the 2027 guidance you provided. My second question is somewhat related to this, but it's about financial expenses. You've been able to keep them relatively low by using a lot of your own cash generation. But then going back to your comments on the large growth opportunities that you have and potential cash usage; do you see financial expenses growing further? If that's the case, is there a timeline you expect for that to happen?

First, on the financial expenses piece. I think, even after the share buyback of R$1 billion, when you look at the adjusted net cash generation for the company, we will still be in a position where we continue to generate cash. Unless we have an additional decision to allocate capital elsewhere, we will keep reinvesting, and it will continue to positively affect our financial expenses. That said, when we look, especially at the dynamics of the second half of this year, the big factor that is going to change is really the effect of interest rates. In the first half, interest rates decreased significantly and that naturally helped financial expenses. In the second half, I think the expectation now is that they will probably increase. So that’s the main dynamic there. Regarding the credits, I'll kick off talking a little bit about what went right versus what we went wrong, and then pass it over to Lia for the future. When I look at the economics of the credit product, we’re becoming increasingly confident in its profitability. I think that's an area where we were cautious initially; given the results we had in the first wave. The core offering of credit within SMBs is performing well, and we're becoming more comfortable. That’s why, when you look at the provisions, it has started to come down, right, from the 20% levels to 18%, and over time it will continue to converge towards our models. The R$700 million portfolio where the vast majority is within what we call the core offering around SMBs is performing well. Of course, we’re running a series of tests on micro, different profiles within SMBs, different credit ratings, and this is a continuous effort where we really test and learn a lot. But net-net, the main message is that we're optimistic around the product's economics. In terms of challenges and opportunities moving ahead, distribution is really a place where we have a lot to improve and there's a huge opportunity because our current offering is primarily digital with very low participation from distribution channels, which is key in terms of increasing conversion and penetration in the future.

I think I would like to add to the perspectives on the longer-term guidance regarding the credit portfolio. When we consider this long-term guidance, it's not restricted to what Mateus is calling the core offer, which is working capital loans for SMBs. There's an extensive roadmap around other credit solutions, and we talked about products we have started to pilot, like credit cards for both Ton and Stone and the overdraft product within SMBs. There’s a significant opportunity to build more relevant capabilities that will enable us to expand the product offering and the types of credit solutions we offer our clients. We’re confident with the guidance for this year and the long-term guidance.

Our next question comes from Gabriel Gusan with Citi.

One quick question about peer-to-merchant fixed pricing. Are you guys seeing any pressure so far? Do you envision seeing pressure in the rates that you're charging? You are saying something similar to debit levels. We hear from competition too, but we understand that the economics on that probably make it better than the debit with less cost associated with that. So anything you can share on that?

In terms of pricing, PIX P2M, we basically price it in line with debit net MDRs. It depends on the client tier; prices will be lower for bigger merchants, and higher for smaller merchants. Essentially, that's the message. It's a win-win for us and our clients because they pay less, we gain the same, and it’s accretive to our banking engagement. There's a clear value add around offering PIX Dynamic QR code because it greatly facilitates our client's ability to reconcile this as a payment method. We don’t see any pressure on pricing, and that’s kind of the dynamics.

There are no questions at this time. This concludes the question-and-answer session. Questions that were not answered will be addressed later by the StoneCo team. I will now turn over to Pedro Zinner, CEO at StoneCo for final considerations.

Well, I just want to thank you all for participating in the call and I hope to see you again in the next quarter. Thank you.

This concludes StoneCo presentation. You may now disconnect.