StoneCo Ltd. Q3 FY2025 Earnings Call

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's Third Quarter 2025 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. Before we begin the call, I advise you to review the disclaimer included in the press release and presentation, which outlines important information about forward-looking statements and non-IFRS financial measures. 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. Joining the call today is Stone's CEO, Pedro Zinner; the CFO and IRO, Mateus Scherer; the Strategy and Marketing Officer, Lia Matos; and the Head of IR, Roberta Noronha. I would now like to turn the conference over to your host, Pedro Zinner. Please proceed.

Thank you, operator, and good evening, everyone. I'd like to start with a brief update on our key performance metrics and our capital allocation strategy. In the third quarter, we continue to make solid progress toward our 2025 objectives, even in a more challenging macro environment. Our adjusted gross profit grew 15.2% year-to-date despite our ongoing share buyback program, which has had some impact on this metric. Meanwhile, for the first nine months of 2025, our adjusted basic EPS reached BRL 6.9 per share, up 37% year-to-date, keeping us well on track to meet our full-year target. Despite external headwinds, our team is performing with discipline and focus, delivering consistent value to our clients and shareholders. Turning to capital allocation. We have maintained a disciplined approach to returning capital to shareholders through our share buybacks. In the last 12 months, we have returned BRL 2.8 billion to shareholders, about 10% yield for the period. Building on the BRL 3 billion in excess capital we identified last year, I'm pleased to report that by the end of October, we had already returned 74% of that amount to investors. This underscores our commitment to return excess capital through buybacks or dividends when we don't have immediate value-accretive investment opportunities. Our goal remains the same, exercise financial prudence while maximizing long-term value creation for our clients and shareholders. With that, I'll now hand it over to Lia for a closer look at our quarterly numbers. Lia, please go ahead.

Thank you, Pedro, and good evening, everyone. Starting on Slide 4, we dive into our consolidated bottom line and return on equity results. We are pleased to see another quarter of consistent performance towards our goals despite a continued challenging macro environment. Our adjusted net income grew 18% year-over-year with a 13% increase in continuing operations. This performance was driven by three key factors. The first one relates to the successful adjustment to our pricing policy implemented earlier this year, which helped offset the impact of higher interest rates in the country. Second, the strategic use of client deposits as a funding source helped improve efficiency by lowering our average funding spreads. And third, a lower effective tax rate compared to the same period last year also contributed to the results. These effects were partially offset by our decision to more evenly distribute marketing expenses this year, which negatively affected the year-over-year comparison. Our adjusted basic EPS reached BRL 2.57 per share, growing 31% year-over-year. The above net income growth was supported by continued execution in our share buyback program. Regarding returns, our ROE continued to expand sequentially. Consolidated ROE expanded 8 percentage points year-over-year to 24%, while Financial Services ROE from continuing operations increased 4 percentage points over the same period to reach 33% in the quarter. Now let's detail our continuing operations top line performance on Slide 5. Total revenue and income grew 16% year-over-year, reaching BRL 3.6 billion, driven by continued solid execution in our core business. Importantly, this growth was achieved despite lower floating revenues as we began deploying client deposits as a funding alternative in our operations starting earlier this year. While this strategy naturally reduces floating revenues, it generates savings in financial expenses, reinforcing the strength of our funding model. Our adjusted gross profit from continuing operations was BRL 1.6 billion in the quarter, growing 12% year-over-year. This growth was largely aligned with TPV as higher revenues were partially offset by increased financial expenses driven by the higher CDI rates. On Slide 6, we highlight our operating metrics, beginning with our payments business for MSMBs. Our active client base grew 17% year-over-year, reaching 4.7 million clients, with 38% classified as heavy users, leveraging more than three of the solutions we offer. This demonstrates not only growth in scale but also engagement across our product ecosystem. MSMB TPV grew 11% year-over-year in the third quarter, reaching BRL 126 billion. Such growth comes from a combination of a 49% growth in PIX QR code volumes, which continues to outpace card TPV and capture share from debit transactions, and the 6% growth in card volumes. Compared to the previous quarter, the yearly growth showed a slight deceleration reflecting a more challenging macro environment and softer same-store sales among our clients, trends that are persisting in the fourth quarter, and we're monitoring carefully. On Slide 7, we highlight the performance of our banking operation. We're pleased to report continued growth in our active client base, which increased 22% year-over-year, reaching 3.5 million clients. This sustained expansion reflects both strong client acquisition and the evolution of our payments and banking bundle offers. Client deposits grew 32% year-over-year and 2% quarter-over-quarter, reaching BRL 9 billion during the period. While we observed a slight decline in our deposit base relative to MSMB TPV from 7.2% in the second quarter to 7.1% in the third quarter, this primarily reflects daily seasonality driven by clients' cash out obligations, and we saw a quick rebound on the days that followed. Viewed from another perspective, the average daily deposit base increased 40% year-over-year and 6% quarter-over-quarter, expanding relative to TPV. The composition of deposits in the quarter moved slightly towards more time deposits, which now accounts for 84% of total deposits, slightly up from 83% in the previous quarter. This growth underscores increased adoption of our investment solution, leading to a higher engagement with our banking features. Now turning to Slide 8, we review the evolution of our credit operation. In the quarter, we observed an acceleration in portfolio growth, combined with disciplined asset quality and in strict alignment with our risk appetite statement parameters. The total credit portfolio grew 27% sequentially, accelerating compared to the previous quarter and reaching BRL 2.3 billion. Of this, BRL 2.1 billion is attributable to our merchant solutions, primarily working capital financing for MSMBs, which grew 28% quarter-over-quarter. Additionally, just over BRL 200 million relates to credit cards, which increased 18% over the same period. Despite the acceleration in portfolio growth, our credit quality remains strong. NPLs 15 to 90 days reached 3.12%, while NPLs over 90 days stood at 5.03%. The rise in NPLs over 90 days reflects the natural maturation of the portfolio, whereas increase in NPLs 15 to 90 days was primarily due to specific client payment delays, which has already normalized in the fourth quarter. As you may recall, in the second quarter, we made a deliberate decision to increase coverage ratio levels in response to the weaker macro outlook. With no additional adjustments required this quarter, the coverage ratio declined slightly to 265%, yet remaining at a conservative level. Similarly, our cost of risk, which reflects provisions recorded during the quarter, decreased from 20.2% to 16.8% sequentially, staying within the expected mid-teens range and reflecting disciplined risk management. Following the provision adjustments in Q2, we implemented corresponding pricing changes. This ensures a disciplined balance between risk and return while supporting sustainable growth. As you can see in the slide, the average monthly credit rate was 2.9% in Q3, up from 2.7% in Q2. The metric is calculated by dividing the credit revenues by the average credit portfolio. However, the result is significantly impacted by product mix, as the inclusion of non-finance credit card portfolio and higher growth in specialized debt disbursements can dilute the rates. In summary, I'm pleased with how our company has evolved and remained resilient despite ongoing macroeconomic headwinds. We continue to execute with a focus on our clients, confident that there are multiple opportunities to help them grow further and manage their business in a more seamless and effective way. Now I want to pass it over to Mateus, who will discuss our financial performance in more detail. Mateus?

Thank you, Lia, and good evening, everyone. Let's discuss our adjusted consolidated P&L for continuing operations, which is shown on Slide 9. Our cost of services increased 12% year-over-year, decreasing 90 basis points as a percentage of revenues. This reduction reflects the combination of efficiency gains in logistics, lower transaction and technology costs, and lower provision for acquiring losses, which were partially offset by higher loan loss provisions in the period. Administrative expenses increased 7% year-over-year, resulting in a reduction of 50 basis points as a percentage of revenues, driven by continued operating leverage across our support functions. Selling expenses increased 21% year-over-year, increasing 50 basis points relative to revenues. This reflects a more evenly distributed marketing spend in 2025 compared to last year when they were skewed towards the first half of the year given the strong investments in sponsoring a specific reality show. Financial expenses increased 28% year-over-year, representing a 280 basis points increase as a percentage of revenues. This was largely due to a higher average CDI rate year-over-year, which was partially mitigated by increased use of client deposits as a lower cost funding source, which intensified since the end of the first quarter. Lastly, I would just like to remind you that the execution of our capital distribution strategy negatively affects our financial expenses. Other expenses increased 2% year-over-year and reduced 40 basis points relative to revenues, which was mainly due to an increase in gains related to the sale of POS. Our effective tax rate was 15.3% in the quarter, down from 18.6% in the third quarter of '24. The year-over-year decrease was primarily driven by an intragroup interest on equity operation and higher benefits from Lei do Bem. Moving to Slide 10. Our adjusted net cash position ended the quarter at BRL 3.5 billion, decreasing BRL 140 million sequentially despite BRL 465 million in share buybacks executed in the quarter. Excluding these buybacks, adjusted net cash would have increased by BRL 325 million. Once again, I want to thank you all for your time and continued support. Our focus remains on executing our strategy effectively and in a value-accretive manner while listening closely to our clients, meeting their needs and ultimately creating long-term value for our shareholders. With that said, we are now ready to open the call to questions.

Our first question comes from Kaio Prato with UBS.

I have two questions on my side, please. First, on your prepayment business, would you say that you are at the all-time high level of spreads in the business post the pricing adjustments now? And how do you see the sustainability of this level going forward, given the current competitive scenario and the potential beginning of the cycle? So, this is the first. And then my second, which is also linked. Looking forward, what do you think are the main drivers for earnings growth of the company apart from the policy rates that should be a clear support? So, what do you think should be the main source of growth? Is this an acceleration in credit growth? Is this efficiency or any other initiatives? You can help us understand what should be the drivers for 2026, given the slowdown also on TPV that we are seeing, except from the policy rates would be good.

We successfully managed to pass on the increase in interest rates, but I don't believe we are seeing the highest spreads historically. As for earnings growth drivers…

Kaio, can you hear us?

Now I can hear you, but I think we missed the answer.

Oh okay. Sorry, we just got noticed that you weren't hearing. I think maybe Mateus...

Can you hear me well?

Worth replaying the answer.

Yes. Now I can hear you. If you can repeat, please.

Okay. Sorry for that. Let me replay the answer. So, the first one around prepayments and pricing. I would not agree with you that we are at the all-time high spreads. I think when we look at the gross profit yield, so gross profit as a percentage of TPV, it is higher than it was in the past at 1.26% for the third Q '25 versus, for example, 1.21% in the beginning of '24. But that increase has been mostly due to the increased penetration of banking and credit over time and not a result of prices on prepayments on a stand-alone basis. And I think this is consistent with the overall strategy. I think what we did quite well was indeed to pass through the increase in interest rates that we saw in the country. But I wouldn't say it's all-time high. I think when we look at spreads, we think that they are at a healthy level. And then in terms of earnings growth levers for next year, I think we've been growing especially the credit portfolio in a pretty good pace according to the plan. But when you look at the contribution for credit in the P&L now in '25, it is still quite small because whenever we grow the portfolio, we upfront the provisions. Now as we go into 2026, I think probably credit is going to be of a larger contribution to the overall P&L, simply as a result of maturing the offering and having a much higher base to start with. And other than that, I think OpEx in general is something that we are paying special attention to given the weaker macro environment. So, we feel that there may be some levers in terms of OpEx management to boost earnings growth in 2026 as well.

Our next question comes from Guilherme Grespan with JP Morgan.

My question is about the payments total processing volume and the current environment. While this is a common topic in every call, we've noticed a slowdown in some volumes, and certain competitors are becoming more noticeable. For example, iFood is targeting a crucial segment of your customer base, which is restaurants. Additionally, BTG is launching acquiring services, and smaller companies like CloudWalk seem to be gaining visibility. So, I'm interested in your perspective on the competitive landscape within your segment. Are you observing any specific player being particularly aggressive? Also, how do you anticipate pricing trends evolving? It seems that the rate Kaio mentioned might have been delayed regarding the potential benefits from funding costs. I'm curious if you believe the spreads in your business will maintain their current levels or possibly increase over the next six months?

Thank you, Guilherme. I will begin by discussing market share and TPV dynamics before passing it to Mateus to share insights on pricing. We are still awaiting the official ABECS numbers, but we believe the third quarter should show roughly stable market share. In the second quarter, we experienced a notable market share loss due to our repricing decision, which we view as a one-time impact for that quarter. We anticipate some stabilization in the third quarter, and we want to emphasize that this decision ultimately benefited the business. Looking ahead, we foresee a gradual deceleration in TPV growth, primarily as a result of industry trends and a weaker macro environment, which we expect to affect our smaller clients more significantly. This summarizes our perspective on market share and TPV dynamics. Moving forward, we are confident in our ability to execute our plan consistently. As Mateus mentioned, we expect credit to become a key driver of profitability and growth. Our focus is not solely on gaining market share at any cost; instead, profitability is our priority. The way forward will not be just through pricing adjustments but by enhancing our value proposition, improving our product offerings, scaling credit, refining our bundling strategy, and ensuring we consistently attract clients across the segment in line with our strategic priorities.

And if I may add and then talk also about pricing, I think you mentioned other new players or new entrants in the market. I think we've seen these kinds of movements before, players bringing new offerings or expanding their sales footprint. They tend to come in waves. At any given point in time, there's always someone trying something new in the market, and I think this is normal. That said, when you look at the actual economics behind these new players or new initiatives, it seems that overall players remain rational, and I don't see anyone pursuing growth at any cost. That said, when we talk about rate cuts, I think we've been vocal about this a couple of times, which is short term, for sure, there is a positive impact to us. Every 100 basis point cut in interest rates, there's a positive benefit of around BRL 200 million to BRL 250 million in EBT. But in terms of overall spreads, I don't think it's reasonable to assume that we're going to keep the benefit from interest rates long term. I think it's a matter of timing, how long we can keep these prices until we pass it through. So, I think the message here is, yes, there's going to be a positive impact in 2026 if rates go down. I don't think we should assume that we're going to be able to keep those spreads longer term. I think overall, the level of spreads are healthy in our view.

Our next question comes from Renato Meloni with Autonomous Research. It seems we are experiencing some technical difficulties with Renato. I will now turn to Eduardo Rosman with BTG.

My question, I think, would be to Pedro, right? Where do you believe the company stands in the organizational redesign, right? I think you've been highlighting over the last few quarters that the goal is to be like a stronger unified brand and product offering with a more kind of a team-oriented culture and trying to build like a truly kind of a customer-centric mindset. How do you feel about the progress so far on that front?

Thank you for the question, Rosman. I believe we have evolved significantly. As you pointed out, we transitioned from a siloed BU organization to a fully functional organization as we stand today. This transition is really aiding us in establishing our strategy from a bundled perspective and effectively delivering our bundle offerings to our clients in a way that benefits both them and the company. Overall, I think we are almost there. While we do have some pain points to address over time, we are heading in the right direction.

Our next question comes from Antonio Ruette with Bank of America.

I have two questions. First, regarding credit, you mentioned that your credit product is now more mature and should increasingly reflect in your financial results. Given your current portfolio, do you have a better estimate of your cost of risk, non-performing loans, and ideal coverage ratio now that you have a clearer picture of your portfolio? Secondly, regarding your revenue composition, your accounting statement shows that transaction revenues have declined by over 20%, while financial income revenues have increased by more than 30%. I recognize there is an allocation process between these two revenue streams related to prepayment and MDR. Ideally, we would look at both together, but if you were to separate them, what accounts for these changes? It would be helpful if you could elaborate on this.

Thanks for the question, Antonio. So, let's just start with credit first. In terms of cost of risk, I think the expectation is that they should remain in the mid-teens going forward. I think we've mentioned this before, but part of the impact that we saw in second Q '25 was retroactive, movement that we did due to macro and now it's normalized in third Q '25. That said, when we look ahead, we do expect cost of risk to stay above the levels we had in the first quarter of '25 due to the macro-driven updates we did in our credit models. So that's the expectation on that end. In terms of NPLs, I think the answer is actually dependent on the rate of growth for the portfolio. When we look at the expected credit losses that we have for the product, they should be in the very high singles or either very low double digits. When you look at the NPL metric, it now stands at around 5%. But the main reason for that is because we have still a lot of vintages that are not fully mature, right? The portfolio is still growing. So, as we mature, NPL over 90s, they should continue to grow probably towards that very high single-digit mark. But in terms of targets, I think we're not really targeting a level of cost of risk or a level of NPL metrics. I think what we're trying to maximize here is the NPV of the cohorts and especially the NPV of the client relationships. And I think a good point around that is that when you look at the interest rates that we charge for the product, we had an increase in the cost of risk in the past two quarters, but that increase was also followed by an increase in the interest rates that we're charging to our clients. And as long as we see this opportunity to make these kinds of trade-offs, we're happy to do as long as it increases the NPV for our client relationships. So that's on the credit piece. On the revenue side, I think you touched on the answer, which is these movements between transaction revenue and financial income is mostly a result of rebalancing between the two lines. Now that we have most of the volume from the company flowing through a single platform, we have a lot more flexibility in how we set up these bundles and how we allocate revenues internally. So, I know you asked us to try to segregate these lines. But when you look at the bundles that we're offering nowadays, there is no such thing. So, the client usually pays a single fee and embedded in that fee, we have the prepayment revenues and the transactional revenues. So honestly, I think the best way to look at it is looking at both lines combined.

Our next question comes from Marcelo Mizrahi with Bradesco BBI.

I have a question about the changes in credit stages. We've noticed in recent quarters, particularly the last one, an increase in the cure rate for Stage 2. Could you clarify what type of credit is categorized as Stage 2 and what causes it to return to Stage 1? I'm curious about the significant fluctuations in the stages over the past two quarters, which may be related to the type of credit. It's important for me to understand how you classify this credit, especially since we expect the company to grow substantially in the future.

Yes, for sure. Thanks for the question, Mizrahi. So, around Stage 2 and 3, especially, I think when you look at Stage 3, it's much simpler. So, most of the increase that we had in Stage 3 amounts from the balances overdue over 90 days. So that's pretty much the maturation of the portfolio. When it comes to Stage 2, I think we have two different factors here. The first is actually the maturation of the portfolio as well, but we also have the entry of some credit restrictions affecting a portion of clients in the market. So, for example, if a merchant defaults somewhere else, even if that merchant is not defaulting in our portfolio, we move that client to Stage 2. And this can create a lot of volatility between the stages because, as you know, credit restrictions in Brazil are quite volatile. So, that's the main explanation.

Our next question comes from Daniel Vaz with Safra.

Pedro, Lia, Mateus, just to go back to Lia's comment on the credit side, I think it was something about increasing the pricing, right? I just wanted to touch base on that and elaborate a bit more on what exactly this scenario refers to. I mean, should we interpret this repricing or upward pricing as a reflection of a somewhat riskier environment? And just to double-click on that, how sensitive have the clients been to these adjustments, right? So, I think when we see, for example, on the retail end, not a good comparison, but new bank has been like testing a lot pricing upwards, and we don't see too much elasticity on that. So, it will be good to hear on the elasticity of your product and how sensitive clients have been to these adjustments.

Thank you for the question. That's a valuable point. Credit is likely the product we launched most recently, so our approach to pricing it began with a cost-plus model. We are now evaluating client sensitivity and identifying optimal pricing. In the second and third quarters, as shown in Slide 8 of the earnings presentation, the average yield of our portfolio increased from 2.6% in the first quarter to 2.9% in the third quarter, despite a higher proportion of credit cards, which have no interest for certain segments. This improvement coincides with a more complex macro environment, but it isn't solely in response to those conditions. Our ability to increase prices is primarily due to our progress in refining the pricing strategy for this product. Similar to other successful players in the market, we are also discovering how to increase pricing with minimal customer sensitivity.

If I may follow up, have you just tested like way higher yields on the credit and to some group of clients, to a control group of clients? How have this test performed so far? If you could comment on that, it would be great as well.

Yes, I think we are early beginnings on the testing side. We avoided doing like huge spikes in prices because of selection bias on the cohorts. So, I think what we had here were gradual increases. But again, I think it's early beginnings in terms of actually figuring out how much the clients are willing to pay for the product. And I think there's more opportunity to come.

Our next question comes from Renato Meloni with Autonomous Research.

Can you guys hear me?

Yes.

Yes.

Sorry, I had an issue with my mic earlier. I wanted to ask on the COGS reduction, and you mentioned about the efficiency gains on logistics or transaction technology costs. So, I wonder if you could expand a little bit on those gains. And I'm trying to understand here if this is a one-off or you can still keep doing this and maybe what's a normalized level that you could see?

Thanks for the question, Renato. So, in terms of cost to serve, I think broadly speaking, when we look at the metric, excluding the credit provisions, we're starting to see signs of operational leverage, particularly in customer service, where the adoption of AI has been driving a lot of efficiency gains and in logistics, where scale is generating also meaningful cost benefits. In the quarter, specifically, we also benefited from lower transactional costs in tech and lower provisions for acquiring losses, which were partially offset by higher amortization of intangible as we are completing a lot of projects that were started in previous years. Now in terms of what is one-off or recurring, I think the only portion of cost to serve that is not recurring is the level of provisions for acquiring losses because they were positively impacted by a specific collection initiative in the quarter. And when we look ahead, we do expect more amortization of technological projects to come because we are completing many projects that were started a couple of quarters ago. So, this trend of elevated D&A should continue throughout the next year. So, I think the message in terms of cost of services overall, we are indeed seeing a lot of efficiency and operational leverage coming, but I wouldn't take the third quarter levels as a new normal.

Our next question comes from Neha Agarwala with HSBC.

Congratulations on the results. A quick one on asset quality. I think in your opening remarks, you mentioned there was one particular case regarding nonpayment or delay in payments. Could you elaborate on that? What happened? And my second question is on the volumes. I think Lia mentioned that we expect deceleration in volume growth in the coming quarters. For the MSMB segment, we are already at 11% year-on-year for this quarter. What do you mean by deceleration in the coming year? Should we expect something like 8%, 9% or it could go lower than that? Any color about the level in the next two, three quarters would be very helpful.

Thanks for the question. I will start with the asset quality and then Lia can add on the TPV side. So, on the asset quality, I think it's quite simple. We had a specific issue with a client in the specialized desk, which delayed a couple of days, but it's already normalized. This was not a big case. So, we're talking around 40 basis points of the NPL 15 to 90 days. So, if you do the math, it's around between BRL 2 million and BRL 4 million, so a very small low one. But again, I think the main message here is that it affected the NPL 15, 90 days in the quarter, but it has already been addressed.

Good. Neha, just complementing on the question regarding TPV dynamics and what to say looking ahead, right? It's hard to pinpoint a number, but the general trend and what we've been monitoring and what we've been seeing is growth which is slightly above the industry growth. The general trend of deceleration is mostly driven by the industry, right? We are seeing this year more specific macro impact to our client base, but we expect that to soften throughout next year. But in general, I think what we can say is industry deceleration as we've been vocal about for several quarters already and our growth sustaining above the industry with slight market share gain in the long run. So, I think that's the overall trend that we can talk about. Pinpointing whether it's 11%, whether it's more or less, I think it's a little bit more difficult. Our perspectives on industry growth for next year is on high single digits, low double digits, but hard to pinpoint specific figures. We prefer to wait and see how the year will close out.

Our next question comes from Gustavo Schroden with Citi.

I apologize for bringing up the topic of interest rates again, but I've noticed changes in the expectations for interest rates next year. It seems like the easing cycle might be less significant than previously anticipated, especially considering the Central Bank's minutes from yesterday. My question is about how everyone is planning for Stone under the assumption of low interest rates next year. However, if we take into account that the average interest rates could be slightly higher than this year, I would like to know how sensitive Stone's funding costs are to these average interest rates for next year. We've seen you raising prices, and Lia mentioned the increased interest rates for small and medium-sized businesses. In this scenario of higher average interest rates, how should we consider funding costs and pricing for next year?

Thanks for the question, Gustavo. So first of all, in terms of the actual environment, I don't think we have a strong view. So we set up the operation in a way that we respond to the changes that we have in interest rates. We don't spend a lot of time trying to forecast the scenario. But indeed, if you were to look at the scenario now, there is a small decline embedded in the yield curve. And our sensitivity to that decline is that for every 100 basis points reduction in interest rates, all else being equal, so meaning no price reductions, we have a positive impact in our pretax earnings of around BRL 200 million and BRL 250 million. Now in terms of what's actually going to happen, I think our intention and our desire is to keep our time. So we tend to pass it through to clients, but there is kind of a lag every time interest rates decline. But like I said a couple of answers ago, long term, when you look at the actual gross profit yield that we're having on the payment side, we think it's in a very healthy level. So I don't think it's reasonable to assume that we're going to keep it long term. As for the trend for financial expenses, again, I think it's very dependent on the level of interest rates. So we're going to see the scenario and adjust accordingly.

Great, Mateus. Just let me do a follow-up here because you said the sensitivity that you mentioned for each 100 basis point decrease, it is for, I mean, end of period interest rates or average interest rates?

It is for average. So whenever we have an average decline of 100 basis points, then we will have the impact for the full year.

Our next question comes from Tito Labarta with Goldman Sachs.

My question is about your gross profit. You're still on track to meet your guidance for the year, but it has been slowing down. Considering the slower TPV growth, stable rates, and the completion of repricing, should we anticipate that gross profit will continue to decelerate, assuming other factors remain constant, given the industry trends? Are we expecting any positive seasonality in the fourth quarter? Additionally, we've noticed an increase in your loan book this quarter. When do you think the loan book will be substantial enough to positively impact gross profit? It’s growing quickly, but from a low starting point. I'm trying to understand the evolution of gross profit in light of our current situation and when it might accelerate from here.

Tito, thanks for the question. So, I think when you look at the gross profit yield, usually 4Q is seasonally lower because we have more debit and PIX transactions in the mix, which tend to have a lower take rate on the payment side. But I think in general, when we look long term, I think the expectation is that payment spreads, they are at a healthy place. So, we don't see a lot of pressure, but also not a lot of upside in that part of the business. I think what's going to be the defining factor for '26 on that end is actually the interest rate movements that we just discussed. But other than that, I think the expectation is indeed that banking and credit will continue to grow at a faster pace than the TPV growth. And then over time, that should be accretive to gross profit yields. In terms of the credit that you asked, I think we are already starting to see the signs of a bigger contribution in the P&L. So, if you look at the revenue jump versus the delta in provisions that we had between the second Q and the third Q, it was already significant. Of course, when you look at gross profit as a whole, it is still a very small factor. But I think it has already started, and I think it gets more significant throughout 2026.

Thanks Mateus. That's helpful. And yes, I understand the negative seasonality on the gross profit yield, but you should also have some positive seasonality on volumes. So net-net, I mean, not asking for guidance, but just a little bit how that could potentially impact gross profit in 4Q?

Yes. I think when you look at gross profit on a nominal basis, then the seasonality in the first Q is positive for sure. I think when you look at the yields, then you have a negative seasonality because of the mix. But overall, I think if you're thinking about nominal terms, then the seasonality for the first Q is positive.

Our next question comes from Pedro Leduc with Itaú.

Congrats on the results. Two quick questions. I know you guys have lifted the 2027 guidance once you did the Linx deal. I know it's not in the presentation here. But wondering if you plan on reinstating it at some point, maybe with the 4Q release, if it's '27, maybe it's another period of time? It seems like you're tracking for this year extremely well and for most of the 2027 figures as well. But just trying to get a sense if you guys plan on reinstating it, if it's in the same timeframe, same inflows. And then the second question, kind of tying up to this one as well. In that previous '27 slide, you talked about a 20% effective tax rate. You're running at 15%. In the meanwhile, we're having changes in taxation for several of the Brazilian entities. Just trying to get a sense from you how we can think about this income tax rate maybe next year and then thinking whenever you guys plan on releasing a longer-term guidance.

Pedro, Pedro here. I'll address the first part of the question, then I'll turn it over to Mateus. I think it's true that TPV performance has been more challenging than we initially anticipated back in 2023. And I think, as Lia mentioned, partly, I think it's due to the macro environment, which is worse than we initially expected. But we want to see how the year will close out first before we can talk more concretely about 2027 guidance revision, right? So, in fact, we plan to adjust gross profit indicators to reflect only continuing operations. And we may take the opportunity for a more comprehensive review of 2027 guidance when we do that. But that said, I think it's important to note that when we look at the long-term plan as a whole, our execution remains broadly on track with the credit book, deposit base and the overall profitability, I think we are on the right track since we established back in 2023. I'll hand it over to Mateus.

Yes, regarding the effective tax rate, I have two main points. First, we are currently operating below the 20% mark we set as long-term guidance. Additionally, in the fourth quarter, we usually see a lower rate compared to the third quarter due to seasonality and higher demand in the last quarter. However, looking ahead to 2026 and beyond, it's still premature to provide a detailed outlook given the various changes that could occur. We are aware of the proposed modifications being discussed in provisional measures and draft bills. Nonetheless, we believe that the effective tax rate will settle in the mid- to high teens over time. For more specific guidance, we need more clarity on how these proposed changes will develop. That is our current outlook.

The question-and-answer session is now closed. We would like to hand the floor back to Pedro Zinner for closing remarks.

Well, thank you all for participating in the call and for the questions made. And I'm looking forward with the team to see you in our full year-end results in March next year. Okay. Thank you.

Stone's conference call is now closed. We thank you for your participation and wish you a good evening.