StoneCo Aktie

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's First Quarter 2026 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with this 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. [Operator Instructions] Joining the call today is StoneCo's CEO, Mateus Schwening; the CFO and IRO, Diego Salgado; and the Head of IR, Roberta Noronha. I would now like to turn the conference over to Mateus. Please proceed.

Thank you, operator, and good evening, everyone. Let me begin with a broader view of our first quarter. The quarter was broadly consistent with the softer first half dynamics we had anticipated. Three dynamics shaped the quarter. First, a macro environment that continues to weigh on smaller merchants; second, typical first quarter seasonality; and third, a credit portfolio that continues to grow profitably, even though NPLs came in above our expectations.

All of this while we work to bring churn to healthier levels and reaccelerate TPV growth. Against that backdrop, we grew revenue, held adjusted gross profit broadly stable and continue to return significant capital to shareholders. More importantly, this quarter marks the beginning of a transition phase between the extraordinary capital distribution linked to the Linx divestiture and the operational momentum we expect to build through the second half. The work underway give us confidence in the trajectory ahead, and we remain fully focused on execution.

Now I want to spend a few minutes on what matters most heading into the rest of 2026, our capital allocation discipline, our operating priorities and our commitment to shareholder value. Let's turn to Slide 3, where we show our capital distribution to shareholders across the last couple of years with emphasis on what we have delivered so far in 2026. Year-to-date, we have distributed BRL 3.6 billion, representing a 27% distribution yield. This includes the extraordinary dividend paid on May 4 with proceeds from the Linx divestiture and approximately BRL 0.6 billion in ordinary share buybacks.

In addition, we still have at least another BRL 1.4 billion to be repurchased throughout this year. As we have consistently said, whenever value-accretive opportunities are not immediately available, excess capital gets returned to shareholders and the 27% yield year-to-date is a direct reflection of that commitment. Moving on, Slide 4 outlines our key priorities for the rest of 2026. On payments, our priority is to reaccelerate profitable TPV growth. To do that, we're focused on improving retention, managing churn more actively and simplifying the way we bring our broader set of solutions to clients.

As we deepened our understanding of the drivers behind the elevated churn observed towards the end of 2025, one important point became clear. The churn pressure is not broad-based. Our legacy customer base continues to perform in line with historical churn levels, reinforcing the strength of our core value proposition. Instead, the pressure has been more concentrated among clients onboarded during 2025, a period in which the company began offering a broader set of products.

As we expanded our offering into additional products such as instant settlements, investments and credit cards, our bundles and pricing architecture became more complex than they should have been. That created friction for some clients, and we are addressing it directly. We are now conducting a full review of our offerings, simplifying bundles and moving towards a cleaner and more transparent pricing structure.

The objective is not to chase volume at any cost. The objective is profitable TPV growth, supported by better retention and deeper relationship with clients who use more of our ecosystem. It is still too early to call a definitive trend, but the initial data is encouraging. TPV growth is improving in April. We are watching leading volume indicators closely, and they suggest that the actions we are taking are moving us in the right direction.

On credit, we're also being proactive and disciplined. Towards the end of last year, we saw our models beginning to perform below our expectations with first payment default rates increasing in newer cohorts. We responded quickly by adjusting pricing to preserve cohort profitability and by tightening our risk selection. Since then, we have implemented a set of model and policy changes and the early results are promising as first payment default rates are converging back to historical levels.

Looking ahead, our priority is not simply to grow credit, but to grow it with the right risk-adjusted returns. We will continue refining our underwriting models, pricing risk appropriately and diversifying the portfolio across products such as credit card, overdraft and secured working capital offerings. We have recently begun disbursing secured credit products, and we believe these offerings can help us expand access to credit, deepen our relationship with merchants and reduce the risk intensity of portfolio growth.

We're also committed to improving efficiency throughout the year. First quarter results were affected by higher provisions and certain one-off expenses, including severance costs in addition to the quarter's typical seasonal softness. As these factors normalize, we expect operating leverage to resume, supporting continued improvements in our cost structure through disciplined prioritization and AI-driven efficiencies as we progress through 2026 and beyond.

Finally, we're also focused on expanding the share of our clients using our full suite of solutions through our unified app, which we're progressively upgrading to address our merchants' needs across every financial workflow. Linked to that, we're making continuous investments in positioning our brands to reflect our evolution into a full-service financial partner.

Turning to Slide 5. Our adjusted gross profit was BRL 1.5 billion in the quarter and adjusted basic EPS was BRL 2.19 per share. Although interest rates may continue higher for longer, our full year 2026 guidance remains unchanged. We are on a trajectory that we believe is consistent with delivering within that range with performance weighted towards the second half as credit revenues continue to compound and the commercial initiatives we are executing begin to normalize retention rates.

Finally, beyond the quarterly numbers, I want to flag that what drives us every day is straightforward, building a financial platform that Brazilian entrepreneurs can rely on for their core financial needs. We're moving fast towards that goal, executing against it with focus and discipline. With that said, I will pass it over to Diego, who will go over our financial and operating results for the quarter.

Thank you, Mateus, and good evening, everyone. Let me start on Slide 6, where we present our main financial metrics for the quarter. Total revenue and income reached BRL 3.6 billion, up 6% year-over-year. This growth was primarily driven by the continued expansion of our credit revenues and healthy profitability in payments. These tailwinds more than offset the expected headwind from lower floating revenues from deposits, which we started using as funding source in early 2025 and reduced our revenue recognition with the benefit showing up as lower financial expenses.

Adjusted gross profit came in at BRL 1.5 billion, broadly stable year-over-year as revenue growth was offset mostly by higher provision for credit losses and increased operating costs. Gross profit margin contracted from 44.4% in the first quarter of 2025 to 41.6% this quarter, primarily reflecting the step-up in credit provisions, which we will further explore in this presentation. Adjusted net income increased 3% year-over-year and reached BRL 549 million in the quarter, but adjusted basic EPS grew over 4x faster, increasing 15% year-over-year, reaching BRL 2.19 per share. The EPS outperformance relative to net income was driven by the continued and consistent share buyback execution, reflecting our ongoing commitment to returning excess capital to our shareholders.

On Slide 7, I want to briefly explain a reporting change that we're introducing this quarter. As we advance in our strategy to become the primary financial partner for Brazilian merchants, we are consolidating our active client base definition into a single unified metric, merchants that have generated revenue during the past 30 days across any of our payments, banking or credit solutions. While payments are still usually our first contact point with merchants, we have a growing number of clients with whom our relationship starts with other business fronts and then evolves into a broader relationship.

As a result, we are discontinuing the separate disclosure of the micro, small and medium-sized payments active client base and banking active client base that we previously reported. Going forward, you will see one unified number. Under this new definition, our total active client base was 4.7 million clients in the first quarter 2026, up 13% year-over-year and 5% down sequentially. The sequential decline is largely a result of conscious actions to focus our efforts on a more engaged and revenue-generating client set.

We're also introducing average revenue per active client as a new key metric to track how effectively we are monetizing our client relationships. ARPAC was BRL 247 per month per client in the first quarter 2026, down 3% sequentially and 11% year-over-year. The sequential decline largely reflects first quarter seasonality, while year-over-year decrease reflects client mix effects. Now let's turn to Slide 8. On TPV, starting this quarter, we're simplifying our disclosure to focus on total TPV only. TPV was BRL 137 billion in the period, growing 3% year-over-year with PIX QR code volumes continuing to outperform card TPV.

This growth reflects the impacts of a more challenging macroeconomic environment for smaller merchants, the relative outperformance of digital sales where we have less exposure. And finally, the elevated churn levels identified last quarter and that are still affecting our performance while being slowly addressed. On the other hand, retail deposits reached BRL 10.1 billion at the quarter end, growing 22% year-over-year and declining 9% sequentially, reflecting typical first quarter seasonality.

A better read of the underlying trend is the average daily retail deposits, which grew 7% sequentially and 26% year-over-year, reinforcing the ongoing development of our banking franchise when normalized for end of quarter timing effects. On Slide 9, we present our credit portfolio evolution alongside its revenue and new trajectory. Our total credit portfolio reached BRL 3.2 billion, growing 14% sequentially. Merchant Solutions, composed mostly by our working capital offerings, reached BRL 2.9 billion, growing 13% quarter-over-quarter, while our credit card portfolio reached BRL 400 million, growing 23% sequentially.

Credit revenues kept their strong growth trajectory, both on a nominal and yield basis, reaching BRL 297 million in the quarter, up 25% sequentially and the portfolio yield reaching 3.3%, up from 3.1% in the fourth quarter and 2.6% 1 year ago. The growth in revenues reflects the expansion of the portfolio, but also the better risk-adjusted products and mix.

Now on Slide 10, we focus on credit quality and provision expenses. During the first quarter, our models for micro, small and medium-sized merchants on the automated desk lost efficiency, and we saw newer cohorts performing worse than historical average, leading to higher-than-expected delinquencies, a trend that seems to have affected the entire banking industry, but is more pronounced in our portfolio given the concentration that we have on the segment.

Our NPLs 15 to 90 days increased almost 60 basis points, driven mostly from the worst performance in the automated desk. The dedicated desk, while no longer the main driver of sequential movement, continued to contribute to an elevated baseline. NPLs over 90 days reached 7%, up from 5.2% in the prior quarter, but mostly as a carryover effect of select cases within the dedicated desk progressing into higher delinquency bands, along with the expected seasoning trajectory of our portfolio.

In response, we maintained a conservative provisioning approach with our coverage ratio standing at 229%. We have provisioned BRL 166 million in the first quarter for credit losses, driving our cost of risk to 21.9%. Moving forward, we expect that the combination of tighter underwriting policies on the dedicated desk and the deployment of new models to the automated desk push down cost of risk to lower level at a slow but steady pace. The early signs that we have arising from first payment defaults indicate the path. Looking at the March cohort, we see a clear improvement compared to January and February, returning to levels closer to our baseline. While this represents one data point, we see it as a positive early sign.

On Slide 11, our cost of services increased 420 basis points as a percentage of revenues year-over-year, driven primarily by higher provision for credit losses, as I just described. Excluding provisions, cost of services increased a more modest 60 basis points, reflecting severance costs related to the workforce reduction we executed at the end of the first quarter and higher D&A as several technology projects were completed and moved into production.

Financial expenses improved 150 basis points as a percentage of revenues year-over-year, reflecting the benefit of client deposits as a lower cost of funding source, which more than offset the impact of higher average CDI rate. As we keep developing our deposit franchise, deposits will increase its importance as a funding source.

As a result, we have been able to reduce our total cost of funding from 100% of CDI in early 2025 to approximately 87% more recently, a meaningful improvement that flows directly into our financial expenses. Admin expenses decreased 30 basis points, reflecting continued operating leverage in our support functions. Selling expenses decreased 50 basis points, driven by lower marketing and distribution channel spending as a percentage of revenues. Other expenses decreased 50 basis points, primarily due to lower share-based compensation, which was partially offset by certain intangible write-offs. Effective tax rate was 14.3% in the quarter, a reduction of 4.5 percentage points on a year-over-year basis. This reduction is mostly a reflection of the aggregated benefits from deferred tax assets.

Moving to Slide 12. We present our managerial capital position and return on equity. We're introducing this metric to provide greater transparency about our capital position on a quarterly basis. As a reminder, our capital ratio metric is based on the Brazilian Central Bank methodology for authorized entities, but we apply it to all StoneCo legal entities. Our capital ratio stood at 44% at the end of the first quarter, elevated by Lin's divestiture concluded in February.

Excluding Linx proceeds, which were returned to shareholders on May 4, our capital ratio would have been approximately 29%, still comfortably above our 17% internal hurdle. It is also worth noting that we still expect to buy back BRL 1.4 billion worth of shares until the end of the year as announced in our last earnings call.

Finally, our adjusted return on equity was 19% in the first quarter, up 40 basis points year-over-year, but down sequentially from 25% in the fourth quarter of 2025. The sequential decline reflects the recognition of BRL 1.2 billion in deferred tax assets related to the Linx goodwill amortization, which expanded our GAAP equity base and compressed the ratio by approximately 100 basis points.

Additionally, it is important to remember that the extraordinary dividend links payment will reduce our equity base starting on the second quarter and will have a positive impact in our ROE going forward. Therefore, to wrap it up and going back to Mateus's initial comments, we had a first quarter in which TPV was soft, but in line with what we expected.

And although it will be a longer journey, we believe we have the tools to further engage and retain our clients. In addition, we had a challenging backdrop on credit, but this is part of our learning journey as we build the business for the long term, and we remain highly confident that both credit and banking will be the main growth levers to our business in the coming years. With that, let's open it up for questions.

[Operator Instructions] Our first question comes from Daniel Vaz with Safra.

I was looking at again at your 2026 priorities on the payments. You said you're shifting focus from new sales to active base, right? So you're looking into your active base rather than new sales. And I wanted to understand how are you looking to improve the ARPAC, right? So when we see the ARPAC right now, it's down 11% year-over-year and the client base, they contract, right?

So can you help us frame what's the trajectory you want to go from here? Like when you go from a negative trajectory on ARPAC to a positive? Any quarter that you expect that to happen or any moment that you want to share with us? And the second related to that, what's the optimal number of clients that you want to work with since you're looking at your base? Does that mean that you're going to still have a net loss on your clients for the next quarters?

Daniel, Mateus here. Thanks for the question. So I think the question is generally around ARPAC. When we look around ARPAC, it has been decreasing mainly because of mix, not because of a deterioration in the monetization of our core client base. So just to give you a little bit more color, what we're seeing now is basically 2 opposing trends.

On one hand, we're now expanding our ecosystem more and more towards new products. And when we do that, we also have more clients using lower ARPAC solutions. Just to give you an example, if we were to look at the banking-only clients that we have, -- those clients are really valuable because they expand our relationship base and increase engagement with the ecosystem. But of course, their initial ARPAC is naturally lower than that of a client using payments or credit. So that's one trend that we have.

As we open new products, we have new avenues to onboard clients as well, and they tend to use these newer solutions, which have lower ARPAC. On the other hand, when you look at clients that use multiple products, for example, payments, banking and credit, their ARPAC is significantly higher than the company average. So short term, you have this negative pressure as you open up more avenues.

But longer term, this is a big opportunity for the company. So those are the trends. As for the second question around the optimal amount of clients, I think it aligns with the first piece of the answer, which is as we open these new layers and new products over time, they also become a new source of opportunity for us to onboard new clients that were previously not in our TAM. So in the end of the day, that expands the amount of clients that we can target longer term. So we're not seeing the roof on active client base as of now.

Daniel, adding to Matteo's comments, naturally, this is the first time that investors see this metric. It's the first time that we're reporting it. What we should be able to disclose in time, it's a vintage analysis for the ARPAC in which investors will be able to see this involvement, this increasing involvement from clients with us in time.

The reason why we're disclosing this is to unify how we look at clients -- as you know, previously, we reported different numbers for active clients in banking, active clients in payments, so on and so forth. The idea here is really to present to the market how we are looking at the client base and how we are really positioning ourselves and looking at the business more as a broader financial platform than a pure payment business.

Our next question comes from Kaio Da Prato with UBS.

I have a question on the credit business, please. First, we saw some pickup on your cost of risk this quarter and still some consumption of your coverage ratio. If you can please comment a little bit more on that. I would like to clarify if this is only on the dedicated desk or also on your automated working capital solution as well. And you showed the first payment default improving in March after tightening the underwriting. By the way, thanks for the data. But how should we read that? Would that mean a deceleration in the pace of growth of the book going forward? And on the cost of risk, also some improvement going forward? Or this is the new level that we should work with, please?

Thanks for the question, Kaio. I'll give some overview around credit in general and then pass it over to Diego to comment on the coverage and the cost of risk going forward. So first of all, on credit, I think there were 3 main drivers behind the increase in NPLs and therefore in provisions as well that we had in the quarter. The first thing that is important to keep in mind is that the broader market deteriorated within the quarter.

If you look at Central Bank data, it clearly shows that delinquency increased across the market in the first quarter as a whole. So part of what we're seeing reflects a tougher macro and credit environment in general. The second point, which we flagged in the presentation is that starting towards the end of the fourth quarter, we saw our models beginning to underperform, meaning that the actual delinquency that we saw was coming above our expectations. And the third point is that we did continue to see some isolated delinquency cases in the dedicated desk, but they are not the majority of what explains the sequential improvement. And given the larger ticket size in that portfolio, these individual cases, they can have some impact on the overall numbers.

Now in terms of how we address the problems, we are addressing this on several fronts. The first thing that we did proactively is to increase pricing throughout the second half of last year to preserve cohort profitability. And I think we also showed that in the presentation. The second thing was basically implementing a new set of models and credit policies, which are now in production. And this is what explains the early data from March with the first payment defaults converging back to the norm. And April data suggests we're moving in the right direction as well.

And the third thing, which is related to the dedicated desk, we did reduce the maximum ticket size in the dedicated desk to limit the impact of these outliers. And I think going forward, what we are beginning to do now is to move more and more towards disbursing secured working capital products as well, which should gradually increase the share of secured lending in the portfolio and improve the overall risk profile. So while the first quarter was clearly impacted, we believe we took the right actions. And then let me pass it over to Diego.

So Kaio, let me start first with your question on the coverage. When you have the chance to look at the numbers, you're going to see that the coverage for both Stage 1 and Stage 2 remained flattish. Actually, coverage for Stage 2 increased a bit and coverage for Stage 3 decreased a bit. The coverage for Stage 3 decreased a bit basically as a result of different collateral levels and different collateral enhancements that we have for certain places that went through Stage 3.

So basically, when you have a strong collateral for a client that is on Stage 3, the LGD, the loss given default may fluctuate, and that's what leads to this fluctuation in coverage. As to cost of risk, what's the level, how it should trend in time. As we've mentioned on the call, we expect cost of risk to decrease going back to mid- to high teens in time. It will take some time.

First, because some of these delinquencies, these early delinquencies that we've seen on the first quarter, they still have to flow through the P&L during the following months. So there's going to be a lag on those expenses during the following months. But most importantly, what we expect is that this combination that Mateus mentioned of both new underwriting standards, a reduction on the concentration of the dedicated desk and the new secured facilities that we've been deploying now for clients using some credit facilities from the Brazilian National Bank tend to have a positive impact in time, especially these new programs from the Brazilian National Development Bank that I've mentioned, they have multiple benefits. First, they require on one hand that we limit the yield that we charge from clients. But on the other hand, they enable a material reduction in risk given its nature. So that enable us both to increase the client base to whom we can extend credit. It makes us more competitive, and it's an inherent demand that we see in our client base.

Okay. This is a pretty comprehensive answer. Just a quick follow-up, the last part in terms of the pace of growth of the portfolio going forward, if this should be more at these levels or a little bit different because of this measure that you are taking or not?

No, it didn't change, Kaio, as we mentioned, the growth on the portfolio will not be linear. As we deploy new products, new models, expand to new publics, there may be short-term fluctuations. But we don't expect the overall decision to tighten the screws a bit on the underwriting process given the recent macro backdrop to affect long-term trends.

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

Before my question, I just have a quick follow-up on Kaio's previous question on credit. I understand the problem and how you decided to address that. But I would like to focus on why it happened. So what do you think it happened here? It was a concentration on sectors and segments that maybe -- they were riskier than you initially thought. Maybe it was a level of underwriting issues here or prices.

So rather than how you decided to address it and particularly about the underlying deterioration of the SME problem. I'm just trying to dig deeper here on why it happened. But my actual question here is on the guidance that you provided earlier. Since you provided it, what came different from what we expected in this first 4 or 5 months of the year, mainly credit or even TPV prices?

Antonio, thank you very much for the question. So what happened? As we mentioned on the call, this seems to have a trend that has affected the entire banking industry based on what we've seen so far in other banks results. Naturally, we have a larger concentration on that segment. We don't have other portfolios. We don't have other segments of the economy. Hence, -- this effect is more pronounced in our client base. That seems to be the effect. The overall macro environment in Brazil, delinquency from consumers and consumption in general suffering pressure affecting our clients.

It takes a while to see some of that data, as you have seen on the graph in which we've shown the first payment default and the other KPIs that we follow up on a daily basis. So although we've seen it, it takes a while to fix the challenge. It's a learning process to start with. Then there's a second effect, which is there is a seasonality for our clients on top line. You all know that. We know that for a fact. So although it was a little bit -- the impact was a little bit bigger than we expected, we should get used in seeing that dynamic going forward as part of the overall business.

Let me go to your question on the guidance. So naturally, the uptick that we had in expenses provisions during the first quarter wasn't really there on the guidance. It was a surprise. But I think it is something that we can accommodate within that guidance. We expect provision expenses to normalize throughout the year. As I've explained, there is -- there are a lot of moving parts that will lead to that normalization. In terms of TPV, TPV on the first quarter was soft, but in line with what we expected. So no surprises there. We expect TPV to grow faster on the second half of the year and therefore, contributing to gross profit and to net income.

Therefore, the big challenge or the big question mark becomes interest rates, right? So when we provide the guidance for 2026, we've mentioned that we were expecting interest rates to end the year at 12.5%. That number today is probably closer to 14%. And as you all know, every 100 basis points at Selic levels has an impact of roughly BRL 200 million to BRL 250 million in pretax earnings. So that effect to date is probably the most challenging point in our forecast or in our projections. I think today, we're probably closer to the bottom of the guidance that we provided. But there is still a long way to go. We have other levers to pull. It's going to be an interesting year.

Our next question comes from Renato Meloni with Autonomous Research.

I would like to stick with the guidance, right? And especially because we're seeing this general deterioration in asset quality, as you mentioned, right? So despite all the problems that you might have had, we saw this in other banks, and I think the perspectives are also deteriorating. The last call, you mentioned that the -- like one of the levers here was to grow credit. And do you think you still have space to continue growing credit into a credit cycle? And what -- in the previous question, you mentioned about these levers, what are the levers you can pull here to achieve at least the bottom of the guidance? And what gives you conviction you might get there?

Renato, thanks for the question. I'll start around credit and then Diego can complement on the guidance as a whole. But on credit, I think we've actually touched upon this on the presentation as well. If on one hand, we have a more challenging scenario macroeconomically speaking, than what we anticipated in the beginning of the year, I think it's also important to keep in mind that, first of all, our penetration within credit is still really small.

So while those macro challenges tend to affect us, we still have a very large base. And if we do a good job in terms of picking and choosing the right mix of clients, there is for sure, space to grow. And the second thing, I think Diego also mentioned on his previous answer, is the secured lending piece that was not really there when we initially planned for the year. So what we're seeing now is that we have more levers at our disposal to grow credit, not only the secured lending, which is for sure, a big one.

But also if you look at the product portfolio as a whole, we have more and more new offerings to offer to our clients like overdrafts, like the credit card product as well. So when we bundle that all together, if on one hand, we have a tough scenario from a macro standpoint. On the other hand, I think we have more options than we did in the past to build good value proposition to our clients. So that's where the confidence lies. As for the second part, I'll pass it over to Diego.

Yes. I will just add to Mateus's point. The good thing about a challenging credit backdrop is the fact that we are probably now seeing more -- we're seeing better clients now that didn't demand credit before, actually considering the possibility, and that creates a new growth possibility without necessarily increasing risk in any relevant form.

So there are still a lot of opportunities on the table. Going back to gross profit. So as I've mentioned, interest rates are still the main driver in addition to credit to make us get there or not. We have some levers still to pull on pricing depending on how quick we decide to pass over the recent interest rate cuts to the base or not, but it's going to be a super volatile year. I think everybody has been following what's going on with the economic environment and also with rates. And we are going to operate that environment in a very disciplined fashion on a daily basis.

Our next question comes from Neha Agarwala with HSBC.

On the credit product, I understand that you say that you have more credit product options now than you had previously, which will allow you to grow more. But doing more of secured working capital that should be a lower -- less profitable product than unsecured working capital in terms of how you price. Do you see that impacting the kind of profitability that you're expecting from the credit business for this year as well as for the coming 2, 3 years in your own budgeting? If you can just shed some light on that.

And my second question is, you mentioned volume acceleration in the second half. What are the key drivers that make you expect that we will see an acceleration? Is it more you expect a better macro? Or is it because of your initiatives to reduce the churn should enable you to grow a bit more on volumes?

Thank you for the question. So let me start on credit. So when we move into some of these government-backed programs, they demand lower rates. Some of them have actually captive rates, but the NII or the NIM is not necessarily lower because of the risk that it's both embedded in the profile of the product, considering the guarantees that we have from the NDS or because of the profile of the client.

On top of that, we are talking about better rated clients, the clients in which banks tend to be more competitive. And once we are able to deploy credit to those clients, we tend to be more competitive in not only gaining share in credit from banks, but also in gaining other services, including deposits and payments. So that's the first answer.

The second on TPV, the growth that we expect on the second half of the year has to do with the fact of lower churn above other variations. So naturally, we still expect to work better on the capital that we are deploying for new sales for new clients and so on. That's an ongoing process. But just by adjusting the churn levels on the client base, if we maintain the same investments on the distribution channels, then TPV tends to accelerate significantly.

Yes. Just to add on the churn piece, I think we're really focused on doing 3 things here. The first thing is that we are reviewing our product offerings and bundles end-to-end. The clear focus here is on simplification, transparency and doing that across all of the distribution channels that we have. Some of the offerings that are simpler, they have already been deployed. Others naturally require more work, especially when you have more products. And therefore, they should begin to contribute more meaningfully in the second half of the year.

The second thing that we did, and this connects to the focus on the client base instead of solely on new sales is adjusting the sales force incentives to better align origination with client retention and long-term value creation. And the third thing that we're focused is on really making targeted product and experience improvements. All of them aimed in reducing friction and improving the overall client journey.

So all of those actions, when we add them all up, they should start to yield more results in the second half of the year and therefore, accelerate TPV growth. So just to emphasize what Diego said, I don't think we're betting in the macro environment becoming better in the second half. I think it's more a matter of execution.

Our next question comes from Marcelo Mizrahi with Bradesco.

My question is regarding the credit again. So 2 questions. First one is how is the proportion or the participation of the centralized desk comparing to the total credit just when compared to in the outstanding credit. So how much it depends on the centralized desk. Just to think looking forward, the impact on the originations, not clear for me, why we will not see any impact if -- or after you guys are doing too many adjustments in terms of risk appetite, okay? So you are reducing the ticket or you are reducing the risk in the clients and you are increasing prices. So you are adjusting a little bit the risk appetite to maintain the profitability.

So definitely, in my view, I'm not clear for me why we will not see any impact on the outstanding credit. And the second one is regarding the automatized portfolio automatized credit. How is the -- if you can understand a little bit more how the delinquency ratio of this credit were or how can we compare the delinquency of both credits on this quarter? So if we are seeing any -- the same pace of deterioration on delinquency as we are seeing in the centralized.

Thank you for the question. So the dedicated desk today accounts for roughly 20% to 25% of our current portfolio. The decision that we have made on that front was basically to reduce the maximum ticket that would be -- that we were willing to extend to the clients on that front. So basically reducing our overall risk appetite in terms of size. And we have naturally also made the decision to reduce the risk appetite to lower-rated clients.

On the other hand, with the new secured lendings that we've just mentioned, we are actually able to be more competitive in clients, in large clients that we typically were not -- we were not to or that we were not willing to take the risk -- despite those clients had better ratings, the risk-adjusted returns were not necessarily the best that we had in the portfolio. But now considering the new BNDES facilities that we're being able to transfer or to offer to those clients, that P&L dynamic changes.

And if I may add, Diego, I think there is a third point here, which is actually model improvements as well. So I think we've mentioned this on the presentation, but we just deployed a new generation of models. And that, of course, over time, whenever we have those upgrades, they allow us to discriminate more the clients and somewhat increase the pool without increasing necessarily the risk.

And I think a good example of that, if you look at the March cohort, which is the one that we flagged that had performed actual lower first payment default rate -- if you look at the FDIC data, March was one of the months within the quarter with the highest disbursement as well. So I think that shows that you don't necessarily have a one-to-one correlation between tightening the risk appetite profiles versus the disbursement levels because like Diego said, we have more products, we have better models and so on and so forth. And...

I missed -- can you repeat the second part of your question again, Mizrahi, please?

Okay. It's how we compare the deterioration of -- on the delinquency ratios on the central dedicated desk.

The dedicated desk and the automated desk -- that's very hard to compare because of the size of the ticket -- of the different size of the tickets, right? So remember that on the dedicated desk, we have tickets that go up to BRL 500,000. And on the -- sorry, on the automated desk up to BRL 500,000 and on the dedicated gas above BRL 500,000, in some cases, reaching a few million reals.

So whenever you have a specific delinquency case on the dedicated desk like we had, for example, in March, one client for BRL 2 billion or BRL 3 billion, if I'm not mistaken, that files for judicial recovery that creates a bigger asymmetry on the ratios of the 2 portfolios.

Our next question comes from Tiago Binsfeld with Goldman Sachs.

We wanted to understand a little bit your strategy on deposits. So there was a decline sequentially quarter-on-quarter with the penetration over TPV also staying stable. Is this mostly a function of seasonality or is it also affected by the churn dynamics you were discussing? Can you discuss a little bit more how you expect both penetration and overall deposit growth to perform for the rest of the year?

Tiago, thank you very much for the question. So again, long story short, seasonality -- that's what explains the fluctuation quarter-over-quarter. How do we move forward from here? We've been mentioning that we've been investing a lot in getting other transactional flows from our clients.

So how do we get other forms of money in that doesn't include only TPV or core TPV whatsoever. And that has to do with how we enable clients to sell more, use more of our platform and then engage on the platform once that cash is in-house, right? So whenever we build a workflow tool that enables a client to sell more using the app and delivering to a client a payment link, that's one form of increasing money in and increasing deposits. Then once that money is in-house, how we help the client to better manage that money. It's how we make that money stays longer with us, increase the duration of the deposits and then grow at a healthy pace.

Our next question comes from Arnaud Shirazi with Citi.

My question is related to transaction activities in general. We see a strong decrease on a yearly basis, while it's very clear to us that it's going to financial income, mostly through prepayment product. So what should we expect in the future of transaction activity revenue line in general? Should we see further pressure it or sometime we're going to see a bottom -- what's behind the decision?

So Arnaud, thank you very much for the question. Nothing different than what happened during the previous quarters. We've always mentioned that we look at the client overall relationship and the way we allocate the pricing to the client, whether through financial revenues or through MDRs or through the sale of the POS or through the fee on the account that really doesn't matter to us is how we better price it to clients. So fluctuations within those lines tend to occur, but nothing really special. It's really about the best way of interacting and selling to the client, the services that we provide.

Our next question comes from Ricardo Buchpiguel with BTG.

I have just a follow-up on the deposit question. Can you provide more details on what we should expect in terms of deposit growth and also cost of funding on deposits for the remaining of the year? And also to what extent that could be an important lever to offset the higher interest rate scenario that could be unfolding both by reducing the sensitivity to interest rates and also by adding more ARPAC to the following quarters?

So Ricardo, thank you very much for the question. Yes, increasing deposits is the best way to naturally hedge interest rate fluctuations. As you know, today, we have a very strong exposure in interest rates because we have materially more assets at a fixed rate than the liabilities that we have. Hence, the exposure. So whenever we go to the market on the wholesale market and have to fund, we always fund new facilities at CDI plus a given spread.

And when we get new deposits from clients, new demand deposits from clients, we usually pay very close to 0% on those deposits. So that's an important lever, not only to reduce the overall cost of funding, but also to reduce our exposure to interest rate fluctuations.

That said, the profile of the clients that we have or slightly different than the overall economy, not necessarily all of our clients have large cash available on their accounts. But that's an evolution. As I was answering to Tiago before, it's something that we've been investing a lot in enhancing those levers, improving the engagement and getting that money for a longer period in our accounts.

We are showing no further questions. I would now like to hand the floor back to Stone's team for closing remarks.

Thank you all for coming. We remain focused on our execution, and we see you on the next call.

This concludes today's presentation. You may now disconnect, and have a nice evening.

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's Fourth Quarter and Fiscal Year 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. [Operator Instructions]

Joining the call today is StoneCo's former CEO, Pedro Zinner; the incoming CEO, Mateus Scherer; the CFO and IRO, Diego Salgado; and the Head of IR, Roberta Noronha.

I would now like to turn the conference over to Pedro Zinner.

Thank you, operator, and good evening, everyone. This call marks the conclusion of my journey as CEO of Stone and the beginning of a new chapter as I transition leadership to Mateus. During my tenure, we chose to fight complexity directly, simplifying the business, sharpening our focus on payments, banking and credit and building a more resilient and scalable platform for long-term growth.

In 2025, that meant selling our software assets, Linx to TOTVS for more than BRL 3 billion, not because it was a bad business, but because it set outside the intersection where our competitive advantages live. It also meant expanding our credit book prudently, launching products like TapStone and Payment Links with the 0 (sic) [ T+0 ] settlement, unifying our technology stack and deploying AI where it reduces cost and improves quality. Adjusted EPS grew 34% year-over-year. Return on equity expanded 26% in the fourth quarter of '25, and we closed the year with a robust net cash position.

I'm deeply proud of the team and what we have built together. I would also like to sincerely thank our investors for their continued trust, partnership and support throughout this journey. From a new future role as Non-Executive Chairman of the Board, I remain fully committed to supporting Stone's continued evolution and long-term vision, thinking like an owner, protecting what we have built and contributing to what comes next.

I have complete confidence in Mateus' leadership. He has been one of the architects of Stone's transformation, helping restore discipline, simplify the business and focus the organization on what truly matters. He brings clarity of direction, analytical rigor and the right sense of urgency to accelerate execution and continue elevating what matters most, delivering value to our clients and building intrinsic value per share.

With that, I'll hand it over to Mateus, your new CEO, who will walk you through our fourth quarter and full year 2025 results.

Thank you, Pedro, and good evening, everyone. Before getting into the results, I want to thank Pedro for his leadership and commitment to Stone over the past years. It has been a privilege to work alongside him, and I'm honored to step into this role as we continue building Stone as the financial partner for entrepreneurs across Brazil.

Now turning to Slide 3. We highlight our full year performance relative to the guidance we provided at the beginning of the year. Despite a challenging macroeconomic environment, we delivered solid results while remaining fully committed to our capital allocation framework and to returning excess capital to shareholders. Our adjusted gross profit reached BRL 6.319 billion, an increase of 13.5% year-over-year. Importantly, when factoring the BRL 1.8 billion in share repurchases executed in the second half of the year, which had an estimated BRL 60 million impact on gross profit, our adjusted gross profit would have reached BRL 6.379 billion, slightly above our guidance of BRL 6.375 billion.

Adjusted basic EPS came in at BRL 9.71 per share, representing a 34% year-over-year growth and exceeding the BRL 9.60 per share guidance, reflecting disciplined operational execution and a consistent focus on capital efficiency. On capital allocation, 1 year ago, we identified a position of BRL 3 billion in excess capital. True to our commitment, we distributed the full BRL 3 billion over the course of the year, representing a 15% yield. We remain disciplined in our capital allocation strategy, and we'll continue returning capital to shareholders whenever we do not identify immediate value-accretive opportunities.

Moving to Slide 4. We will now examine our consolidated profitability and return on equity. Our fourth quarter adjusted net income increased 10% year-over-year, driven by 12% growth in continuing operations. These results demonstrate the resilience of our model in a macro environment that continues to weigh more meaningfully on smaller merchants alongside a competitive and dynamic market. Adjusted basic EPS was BRL 2.87, up 27% year-over-year, benefiting from both net income growth and the impact of share repurchases. On returns, our consolidated ROE continued to expand, increasing by 6 percentage points year-over-year to 26%, reflecting ongoing improvements in profitability and capital efficiency.

Moving to Slide 5. We highlight the top line performance of our continuing operations. Total revenue and income increased 13% year-over-year to BRL 3.7 billion, reflecting mid-single-digit TPV growth, combined with disciplined pricing. Credit continues to scale and is becoming a more meaningful contributor to revenue, further strengthening our position as the financial partner of choice for MSMB clients. In the fourth quarter, adjusted gross profit from continuing operations grew 9% year-over-year to BRL 1.7 billion. Revenue growth was the primary driver, partially offset by higher credit provisions as we continue to scale our loan portfolio. We see this as a natural step in expanding our credit business and further diversifying our revenue streams to build a more resilient earnings profile. We will discuss portfolio performance and credit dynamics in more detail later in the presentation.

Turning to Slide 6, we present our key operating metrics, starting with MSMB payments. Our client base increased 15% year-over-year, reaching 4.7 million clients at year-end. Out of those, 41% are classified as heavy users, up from 38% in the previous quarter. This trend reinforces our strategy of deepening client engagement beyond payments as we seek to build a more comprehensive and long-lasting financial relationship with our clients. MSMB TPV growth decelerated to 5.3% year-over-year, driven by 3 factors.

First, the macro environment continues to weigh on smaller clients. Second, digital native merchants are performing better than brick-and-mortar businesses, a segment where we have greater exposure. And third, our operational performance in the fourth quarter fell short of our internal expectations with slightly higher churn and softer gross client additions than planned. We're not standing still. We are implementing a series of commercial initiatives and gross additions have already shown a clear improvement. Our focus is now shifting towards churn management by deepening client relationships and ramping up bundled offerings to increase share of wallet and improve retention over time.

Turning to Slide 7, we highlight the performance of our banking operations. Our banking active client base increased 21% year-over-year, reaching 3.7 million clients, reflecting continued progress in bundling payments and banking into a more integrated value proposition. Client deposits grew 27% year-over-year and 23% quarter-over-quarter, totaling BRL 11.1 billion at year-end. Notably, deposits expanded significantly faster than MSMB TPV with penetration over MSMB TPV increasing from 6.8% in the fourth quarter of '24 and 7.1% last quarter to 8.2% in the fourth quarter of '25.

This outperformance reinforces that we are on the right track with our banking strategy, deepening engagement and capturing a larger share of our clients' financial flows within our ecosystem. Of the BRL 11.1 billion in deposits, 86% were time deposits in the quarter compared to 84% in the previous quarter. This shift reflects higher adoption of our investment products and increases in the portion of deposits eligible for our cash sweep strategy, contributing to lower funding costs and supporting profitability.

Turning to Slide 8. We review the evolution of our credit operations. Our portfolio reached BRL 2.8 billion in the quarter, growing 23% sequentially. Of this total, BRL 2.5 billion relates to merchant solutions, primarily our MSMB working capital offering, which also expanded 23% quarter-over-quarter. The remaining BRL 300 million corresponds to our credit card portfolio, which grew 30% sequentially from a smaller base. Credit continues to gain relevance in our results. In the fourth quarter of '25, credit revenues reached BRL 238 million, up 33% sequentially, while provisions totaled BRL 110 million, increasing 27%. As provisions are recognized upfront and revenues are accrued over time, continued portfolio growth should translate into a stronger earnings contribution going forward.

Since relaunching our credit operations, we have prioritized disciplined scaling and tight portfolio oversight. Within MSMB working capital, we operate 2 distinct models: a fully digital approach for smaller merchants, resulting in granular and diversified exposures and a more analytical desk-based approach for large SMBs with higher average ticket sizes and a more concentrated position.

In terms of asset quality, we remain aligned with our risk appetite. NPL 15 to 90 days increased to 4.43%, primarily reflecting payment delays from a limited number of higher ticket clients within the specialized desk. NPLs above 90 days stood at 5.21% compared to 5.03% in the prior quarter, consistent with normal portfolio seasoning. Our coverage ratio remained stable at 264% and cost of risk was approximately 17% in the quarter.

We have also continued refining our pricing framework, balancing client sensitivity with risk-adjusted returns. This has allowed us to improve spreads while maintaining disciplined and sustainable growth. As a result, our average monthly credit yield calculated as credit revenue over the average portfolio reached 3.1% compared to 2.9% in the third quarter of '25, despite mix effects from the specialized desk and noninterest-bearing credit card balances.

To wrap up and before I hand over to Diego, I want to thank the team for their resilience and dedication in delivering a solid performance despite a challenging year. I'm truly honored to lead the company into its next chapter, continuing to execute our strategy with energy and passion as we strive to be the leading financial services provider for entrepreneurs in Brazil.

With that, I'll hand it over to Diego, our new CFO, who will take you through our financial performance in more detail, along with updates on capital allocation and guidance. Diego?

Thank you, Mateus, and good evening, everyone. It's a pleasure to speak with you today for the first time as CFO. I'm honored to take this responsibility. You have my commitment to keep elevating our financial discipline and to hold a high bar on execution.

Now I'll begin by reviewing our adjusted consolidated P&L for continuing operations for the fourth quarter, as shown on Slide 9. Our cost of services increased 23%, rising 200 bps as a percentage of revenues. This increase was driven by higher loan loss provisions during the quarter, mostly driven by the growth of our credit portfolio. Financial expenses increased 12%, a reduction of 30 basis points as a percentage of revenues. This was primarily driven by the use of low-cost demand deposits as funding source, which helped offset the impact of higher average CDI rate compared to the prior year period.

Admin expenses also increased 12%, a small decrease as a percentage of revenues, reflecting ongoing efforts to gain leverage across our support functions. Selling expenses increased 16%, a 40 bps increase as a percentage of revenues. This reflects a more evenly distributed market spending in 2025 compared with 2024 when expenses were weighted towards the first half of the year due to a significant investment in a specific reality show.

Other expenses decreased 27% year-over-year or 100 basis points as a percentage of revenues, a result of lower share-based compensation expenses in the quarter. Our effective tax rate was 10.3% in the quarter, down from 13.7% in the fourth quarter of 2024. The year-over-year decrease was driven primarily by higher benefits from Lei do Bem.

Moving to Slide 10. Our adjusted net cash position closed the quarter at BRL 2.6 billion, down BRL 930 million sequentially. This reduction stems primarily from the BRL 1.3 billion in share repurchases during the fourth quarter. Excluding these buybacks, adjusted net cash would have increased by nearly BRL 350 million. Now let's review our capital allocation in more details, distinguishing between recurring operational generation and the extraordinary proceeds from the Linx transaction.

Starting with operational excess on Slide 11. As you may recall from last year's call, our framework is guided by 3 strict hurdles that define excess capital, maintaining a minimal core equity ratio for the consolidated entity, the maintenance of certain global ratings and maintaining an adjusted net cash position above 0. This year, we have refined our core equity ratio hurdle. First, we have enhanced our methodology to better align it with the Brazilian Central Bank standards for the treatment of all the deferred tax assets that we have, regardless of which legal entity holds it. Consequently, we felt more comfortable to reduce the capital hurdle from 20% to 17%. These adjustments mostly offset each other.

Our policy is very straightforward. Upon the approval of our annual budget and financial statements in the absence of additional immediate value-accretive opportunities, excess capital is returned to shareholders. Following our 2025 performance, we have generated excess capital of just over BRL 2 billion, which the Board approved for distribution via share repurchases during 2026. As a reminder, we already have an open repurchase program of the same amount announced on December 22, which will be used for distribution.

Now turning to Slide 12. We detail the extraordinary distribution from the Linx sale. On February 27, we received the proceeds from the sale and closed the deal. This divestment releases slightly over BRL 3 billion in capital, which will be returned to shareholders in 2026. However, given the recent closing, we expect to approve this specific distribution during a Board meeting in April with a market announcement to follow.

Finally, let's move to Slide 13, where we present our guidance for 2026 and 2027 for continuing operations. Starting with 2026, we expect adjusted gross profit to range between BRL 6.6 billion and BRL 7 billion. Adjusted basic EPS is expected to be between BRL 10.8 and BRL 11.4 per share. The guidance for both KPIs considers the capital distribution that we have already announced of BRL 2 billion to be fully returned through buybacks during 2026, but doesn't include the proceeds from Linx.

Regarding 2027, we are no longer providing operational KPI guidance and keeping it consistent to 2026. Therefore, we expect adjusted gross profit to range between BRL 7.2 billion and BRL 8.3 billion. Adjusted basic EPS is projected between BRL 11.8 and BRL 13.4. In those numbers, we are not considering yet any additional capital distribution. We will adjust this in the beginning of 2027 when we disclose 2026 full year earnings. Also important to keep in mind that for the guidance, we assume an effective tax rate in the mid-teens range.

To close, we started this journey with a simple belief that Brazilian merchants deserve a better financial partner, and that conviction hasn't changed. For 2026 and 2027, our priorities are clear: continued earnings expansion, a credit business that scales on our terms and capital returned to shareholders, including the extraordinary links distribution.

Operator, we are ready for questions.

Now we will begin the Q&A session with Mateus Scherer, CEO; Diego Salgado, CFO; and Roberta Noronha, Head of Investor Relations.

[Operator Instructions] Our first question comes from Guilherme Grespan with JPMorgan.

Just one on the guidance itself, clarification plus a follow-up. Share count, if I understood correctly, I should work with 248 million by the end of '25, right, which is the end share count. Then if I assume that you're going to buy back BRL 2 billion in the year and you're going to meet your expectation, assuming current screen price, it means that I should work with roughly 225 million for 2026. Then I should work with a flat share count for '27. I just want to confirm that the rationale makes sense here. Because then my question is, if that's true, your earnings in 2027, it's growing 8% year-over-year, which is almost half of gross profit of 14%. Just wanted to confirm what is driving this delta between gross profit growth and earnings growth?

Guilherme Grespan, thanks for the question. Mateus here. So I'll first clarify a few things on the capital distributions because there are indeed a lot of moving pieces. And then I'll hand it over to Diego to clarify the 2026 question.

So just to clarify, when we look at the guidance for '26 and '27, the guidance does not include any impact from a potential distribution of Linx, neither on the P&L nor on the share count. So just to make it clear, if Linx were to be distributed via dividends, there would be no impact on our EPS guidance. But if we were to distribute that value through share repurchase instead, there would be potential upside to EPS due to the reduction in share count.

Now regarding the ordinary capital distributions, which I think were your question. For 2026, we have decided to execute distributions through buyback, like Diego has said. And this impact is already embedded in the EPS guidance, which means that the guidance assumes that shares are repurchased throughout the year at an estimated average price. For '27, since we have not yet defined the mechanism for capital distribution, the guidance was constructed under the assumption that capital is retained and reinvested in the business. So depending on the eventual allocation decision, particularly if we opt for buybacks, there could be incremental upside to EPS relative to the current guidance.

So that's the general overview. I'll hand it over to Diego to address the 2026 part.

So Guilherme, let me walk you through a bit of the growth numbers for 2026. So basically, we're guiding to a growth on gross profit between 4% and 11%. That has to do with a softer growth of TPV of mid-single digits throughout the year, being compensated in terms of margin expansions and impact on P&L by both banking and credit. But naturally, that comes with the cost from the credit business, which is charged upfront, as you know.

Then on EPS, what you're looking at a growth between 17% and 24%, which, as Mateus mentioned, has to do basically with the fact that we are considering only the BRL 2 billion buybacks. If we were to use the Linx distribution to buybacks, that number would have grown significantly on one hand. If not, then EPS doesn't grow between 17% and 24% as we mentioned, but total shareholders' return would be massively impacted.

That's clear. But just the second point of the question, like if we assume, all else equal, no further distributions, earnings would be growing much less than gross profit, right, in '27 specifically? Just want to get your view on why this happens, if there is any headwind that I'm missing here?

Guilherme Grespan, I don't think it's massively below. So like Diego said, gross profit would grow between 4% and 11% on the guidance. When you do the assumptions that close to the current market prices for the buybacks throughout the year, what you get is that adjusted net income would grow between 3% and 9%. So it's slightly below. And the reason for that embedded in the guidance is because we continue to invest in selling expenses, which are partly offset by G&A expenses in general, but it's not a massive gap. I think it's a very small gap.

That's clear. Yes, the gap widens a little bit in '27. That's why I ask. It's clear.

Yes. Naturally, when building a 2027 guidance, we tend to look for a little bit more of a leeway, especially on the bottom of the range, Guilherme.

Our next question comes from Ricardo Buchpiguel with BTG.

I understand that one of the priorities for Stone today is to accelerate the banking and credit initiatives. However, although Stone has been advancing on this front, many of the merchants still see the company more as a payment provider as a POS machine than necessarily as a bank. In this regard, I want to understand how do you plan to change this perception among your merchants? And would the possibility of obtaining a banking license and being able to have a bank in your name will help on this direction?

Thanks for the question. Mateus here. So on the license front, I don't think having the license is actually a big constraint on our plans. We already have a full product road map, and we are evolving on the banking and credit features with the license that we have in place.

That said, I think you hit the nail on the question, which is when we look back at 2025, I think we had a massive improvement in terms of how many products we have and what we launched. I think there is still a huge effort in terms of how we bundle those products and also, like you mentioned, in how the clients perceive our offering. And when we look into 2026, part of the selling expenses and the marketing investments that we're doing throughout the year is on how we reposition the company to be perceived for the clients as not only a POS provider, but much more than that. And I think we have a plan in place to address that point.

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

So 2 quick things on my side. So first on the guidance, if you could just explore which Selic rate did you use for that? And the second one on credit. If you could dig a little bit deeper on your operating numbers for the fourth quarter. We saw an increase in write-offs for both working capital and also credit cards, same on NPLs while maintaining an elevated cost of risk. So what you're seeing there and what are your expectations going forward? If you could give a little bit of color since you no longer have the guidance for operating metrics.

Antonio, this is Diego. So basically, we're assuming Selic at low 12% by the end of 2026 and high 11% for 2027. That's what's behind the guidance number. On the credit side, basically, what you have is the result of a portfolio that keeps growing into different publics and different products, but also getting more mature, especially on the core product for the digital credit offerings that we have. So let me try to walk you through a bit of some of those moving parts.

As we expand the public to which we are offering credit, naturally, we tend to extend credit to a little bit more riskier clients. We charge proportionately to that higher risk but that comes with a cost on the risk side, which is what you see in terms of cost of risk on the balance sheet and naturally provisions upfront. Also, as we deploy other short-term capital offerings to those clients, you also have a similar effect. On the other hand, as the core business gets a little bit more mature, we keep on learning with the products. You're going to see additional write-offs. You're going to see growing NPLs just as the natural process of our credit portfolio.

Yes. If I may add, Diego, 2 points in the NPLs as well that you mentioned. I think when you look at the trends in NPLs, we have 2 factors in place. So the NPLs 15 to 90 days were impacted by a few cases on the specialized desk, which tends to add some volatility to that number in the short run. And the NPLs 90 days are basically just the process of maturation of the portfolio. So as the growth rate for the portfolio is declining on a percentage basis, it's natural that the NPLs over 90 days will increase over time, and that's something that we already had anticipated in the past.

The only point that I would emphasize that Diego mentioned is, again, even though we look closely to the cost of risk metrics and the NPL metrics, it's important to analyze that metric alongside the rates that we're charging. And when you look at the movements of the portfolio over the past quarters, you have a pretty consistent trend of increasing the average yield of the portfolio at the same time where the cost of risk remains in the mid-teens. So that in the long run should increase the contribution of credit to the company, and it's something important to keep in mind.

Our next question comes from Neha Agarwala with HSBC.

If we can touch a bit upon the volume growth. I think you mentioned during the remarks, you expect about single-digit TPV growth. And I understand your focus on profitability. But could you break down a bit in terms of what kind of volumes are you giving up? What is behind this expected growth? And is competition playing a role because we see some players among the incumbents like Cielo ramping up their operations, which might have -- which might make it more competitive. And also at the bottom of the pyramid, you have players like Pagar.me who are being more active. So how do you see competition playing out in the volume growth expectations that you have?

Yes. Thanks for the question. So around first, the competitive environment, I think overall, the message has not changed. So when we look at the players, the market in general has remained rational from a pricing standpoint. We're not observing behavior that suggests competitors using growth at any cost or engaging in structurally unsustainable pricing. What we did see throughout the second half of last year was some players expanding their offerings and strengthening their sales footprint, but this is a natural movement in the industry. It tends to come in waves.

Now in terms of the TPV growth itself, when we look back at our performance, there are clearly 3 trends playing at the same time. The first one is that since the third Q of last year, we've been operating in a more challenging macro environment, which has put pressure on TPV growth. The second one, which we mentioned in the call is that within the market itself, we saw digital merchants performing better than brick-and-mortar recently. And this mix shift creates a temporary headwind for our TPV given our focus on brick-and-mortar and SMBs. And the third one is that in the fourth Q, we experienced higher-than-expected churn and softer new client acquisition, which weighted on TPV growth as we head into this year.

These factors, they are more internal than external. It's less about competition and more about execution. And to that end, on the commercial side, we've already made meaningful progress in addressing the onboarding dynamics. And when we look at the new sales productivity recently, it has improved significantly. And now what we're doing is basically turning our attention to deepening engagement with our existing base, both in terms of share of wallet and in terms of retention, where we see clear room to improve and have specific initiatives underway.

So when we put that all together, for the first Q of the year, this factor should result in the TPV growth roughly flattish year-over-year. And then as we move through the year, we expect a stronger second half as our bundle and the cross-sell initiatives gain traction. And that's what's composed into the guidance of mid-single-digit TPV growth for the year.

If I may ask on that, there's no -- do you see any reason to believe why going forward, the brick-and-mortar sales are going to be -- going to pick up? I mean it could pick up more with the overall economy, but not much more than that. Is there any way that you could participate in a profitable manner on the online side? Or anything that you could do, any optionalities that you see to improve the volume growth as the macro improves?

That's a good question, Neha. So on the second part of the question on how we can participate, the digital volumes tends to be more concentrated on marketplace where the economics are smaller than the overall economics for MSMBs. That said, we did launch the new Payment Links product late last year. And it's fairly common for MSMBs in Brazil to sell through WhatsApp, and then they can use our payments links, which improved a lot. So that's one of the initiatives behind the plan.

The second question, sorry, if you could repeat?

No. I mean I was just asking how in the long term, like you could increase your volume growth more than just mid-single digit? Because I mean one thing you mentioned is participating in digital volumes. So I wanted to understand, without losing focus on profitability, how can you continue to gain volume growth? Or is this a business that we should think -- should grow at mid-single digit?

I think a lot is related to execution. So like we said when we talked about the TPV on the second half of last year, the trends that we're seeing now are still weighted by a relatively rough macroeconomic environment, plus a number of initiatives from the operational side that could improve. So I think what we are embedded in this mid-single-digit growth for the year is us solving the operational needs. But I think if the macro improves, it can be a tailwind for TPV growth in the future as well.

The only other thing that I would say is that even though there is a space to reaccelerate TPV growth medium term, I think it's also important to keep in mind that the biggest jackpot or the biggest price is also in terms of how we engage in banking and credit within the ecosystem. So on one hand, we have this drag from digital transactions and from the macro. On the other hand, I think when you look at the execution of banking and credit, we're trending well, but the opportunity is very, very big. So that's where the focus is.

Our next question comes from Kaio Prato with UBS.

I have 2 on my side, please. First, on the credit business, just to double check if you are discontinuing your guidance on portfolio for 2027 or not? And if so, what has changed?

And second, if I may follow up on your expenses and overall operating leverage. If you can walk us through your investment plans towards 2026 and 2027, what kind of investments are we talking about? What should we expect in terms of leverage, not only for '26, but also '27? Not sure on why we shouldn't see some leverage for '27, especially in a momentum where when we are discussing a lot about potential efficiency gains to come from AI and other tech development. So it would be interesting to hear from you, especially, as probably in this guidance, we are not considering any relevant pickup in TPV for 2027.

So let's start with your question on operational guidance for credit. Yes, we discontinued the operational guidance metrics that we had basically because it made sense back in 2023 when we launched the 2027 guidance. At the time, you may remember, we had virtually no credit portfolio, a much smaller balance of deposits, and we wanted to build that bridge between 2023 and 2027. Truth is if you look today at the numbers that we have, we are probably ahead of the plan in terms of credit portfolio and deposits behind the plan in terms of TPV.

Naturally, we feel comfortable based on the guidance that we're delivering that we will deliver the plan ultimately, but with a different mix. And that's why it didn't make sense any longer to continue providing specific guidance on the operational KPIs. That said, if we switch to expenses, you should expect expenses -- selling expenses -- selling and marketing expenses still growing in 2026 as a percentage of total revenues. A lot of it has to do with this new positioning that we've been talking about and other growth initiatives that we've been putting in place. So the dedicated desk in credit, it's naturally one of the things that it's new in the company. It's bringing portfolio, it's bringing top line and has an impact on 2026.

For 2027, what you have on the guidance, it's still a similar trend. That said, I wouldn't be surprised as the overall market develops and especially as AI has been developed, as you just mentioned, that the mix should -- could be potentially different in 2027. There is a lot of new initiatives going on, on the company in terms of gaining efficiency, you should not expect large one-off actions. It should be more of a long-term practice that we will emphasize not only in 2026, but 2027 onwards. And those things are naturally still not reflected in that guidance number because it's -- everything is too new, and we're all learning it.

Yes. Diego, if I may complement on one point. I think Kaio mentioned AI in the question. And it's really true that over the past 6 months, we've seen a meaningful acceleration in practical application of AI, not only in the company, but I think in the world as a whole. When I think long term, we do believe that AI agents will meaningfully improve productivity of several processes, including processes that historically in the company required large operational structures. But I think it's too soon to estimate those impacts. So when you look at the guidance for 2027, we're not including huge benefits from AI, even though we're doing all the effort to capture them over time.

Our next question comes from Tito Labarta with Goldman Sachs.

I guess just going back on the 2027 guidance, kind of just backing into a net income number, assuming that roughly 225 million shares, it's BRL 2.7 billion to BRL 3 billion. And when you initially issued the guidance, and I know it was a different environment then the net income was above BRL 4.3 billion. And I know you -- so Linx, but Linx didn't necessarily contribute that much to earnings.

But just -- I guess the question is, what is the big difference today aside from slower TPV, I mean which obviously we can see that. But I think there was always some implied expectation that take rate for payments would come down with maybe the uplift coming from credit. I mean you just said that credit, you can potentially still deliver on that, and we saw very good growth over the last year.

But what do you think is the biggest difference from when you initially gave the guidance to what you're seeing now and why it's so much lower? And I guess along those lines, Mateus, congrats on you moving to CEO. What would you say is your biggest priority now as you step into that role?

So let me try to help you reconcile the numbers. So there are 3 big movements affecting the 2027 guidance. The first 2 effects are Linx divestments and the repurchases executed in 2025 and expected for 2026. These 2 movements combined have an effect of a little bit over BRL 2 billion in gross profit and BRL 1.3 billion in nominal net income. So these 2 effects would adjust our guidance from BRL 15 per share to BRL 13 per share. Therefore, at the top of the range of our new guidance, we are within the previous plan and guidance.

On the lower range of the guidance, what you have is the inclusion of a number that reflects the short-term headwinds that we are currently facing. The execution on the newer verticals, particularly in credit and banking, continue to evolve positively, as we've mentioned, but TPV performance has been softer than we initially anticipated. So that's a bit of the dynamic that you see. So the revision is primarily driven by the portfolio changes and the capital allocation decisions, along with a more conservative view on near-term TPV trends rather than a deterioration in the core strategic initiatives.

And going to the second part of the question, Tito, around priorities. Let me start by saying the following. So I've been in the company for a while now, what is now, 11 years. And while a lot has evolved over that period, in terms of strategic direction, I think we've always had a pretty clear target, which is we built these very strong distribution channels. We serve our clients with passion, and we want to leverage that relationship to become the primary financial services platform for SMBs in Brazil. So I think in terms of vision, it remains unchanged.

What we're doing now is really sharpening our execution to become more agile, and we're doing that by focusing on 3 priorities. The first one around payments. I think we've mentioned this a couple of times throughout the Q&A. But we're now at a stage where we've reached a leadership position in our core segments. And at this scale, the game evolves. So while onboarding new clients remains important, developing the capability to deepen the relationship with them through better engagement through cross-sell and retention is now as important, and that's priority #1.

Second, when we think about banking and credit, we've built a solid foundation over the past 3 years. We're seeing encouraging results when you look at the portfolio and the deposit evolution, but we are very early relative to the opportunity ahead of us. So acceleration this execution on credit and banking while preserving the risk discipline that has defined the approach is priority #2.

And the third one, I think Diego has touched on this topic as well. But when we look at what is happening in the world recently with the transformation underway in AI, we see substantial room to drive further productivity gains across the organization and to be more efficient in general. So efficiency is priority #3. So when we put that all together, again, I think it's much more about raising the bar on execution and trying to become a more agile organization than it is about shifting the direction of the company.

Okay. No, that's very helpful. And maybe just to touch on that second point, Mateus, with AI, and this isn't completely comparable, right? But we saw one of the payment peers in the U.S. reduce their employee base almost in half. Just how do you think about your position in terms of -- I'm not asking if you're going to cut employees or not, but just in terms of the employee base that you have, is it like sort of the right level? Do you -- is there more productivity there? I mean do you need to grow more? How do you think about your positioning given these potential efficiencies in AI and sort of what you have today?

That's a good question, Tito. So in terms of AI, over the past 6 months, we've seen meaningful acceleration in the application of AI across the company. We touched upon that in the earnings release as well. But when we think about our approach in the topic, it has been very deliberate. So we are really intentionally avoiding the temptation to launch dozens of disconnected pilots with no clear path to scale or without measurable economic impact. And instead, what we're doing is twofold.

So first, we're focused on the core. Within the core, we have dedicated teams redesigning how we operate in key areas like customer service, the sales process, the hubs or even in risk. And I think we had a first successful example of this application within customer service, where we implemented AI agents to handle the first level interactions, and we had huge efficiencies there.

The second front is really around AI enablement, which is making sure that everyone in the company has the modern AI tools available to use within their day-to-day. And when we democratize the access, we allow the teams to experiment and improve their workflows. And on the other hand, we centrally monitor the usage and then we establish the best practices to capture the efficiencies later. Now it's hard to talk about actual impacts or estimates at this time. I think the one thing that we're certain is that over time, we can massively improve productivity in the company by embedding AI. I think the how and how much is still too early to talk. But for sure, we're going to pursue those things over the medium term.

Our next question comes from Renato Meloni with Autonomous Research.

I would like to explore the guidance a bit more. And going back to your comments, Mateus, in the last call, you said that you still expected to see some expansion in the gross profit yield. And thinking back in light of lower rates, I was assuming that would be some price maintenance. At the same time, you're getting lower funding costs. But during the call today, I'm left with the impression that you're assuming the entire expansion is going to come from credit.

So I'm curious what are your expectations here for the year given this scenario of low TPV growth and more churn, if you expect to pass through lower funding costs and monetize on the credit side? And then also within this, if you could just mention a little bit of the trajectory here of gross profit throughout 2026.

Yes. So Renato, nothing really changed in terms of the pricing dynamics in payments. We still believe the price levels that we've been putting on the market are healthy. And as Mateus mentioned before, we don't see anything being crazy being done or executed by competitors. That said, what we've always told is that once interest rates start coming down, we should benefit in the short term from tailwinds associated with the reduction on financial expenses and that in time, those reductions should be passed on not only to new sales, but also to the client base. So that's what we currently have in our model, and we don't see that changing in the short term.

When talking about the mix between TPV yield, TPV growth and gross profit margins, what I've been telling for quite some time now is really that gross profit margin should continue to expand based on the expansion of the other 2 main products, credit and banking and that the ROE from payments on a stand-alone basis in the long term should continue to decline. Spreads should continue to decline on the long term, but are still super healthy.

Perfect. So then in terms of trajectory, assuming that we get the first cuts around the second half, you get 1 quarter of expansion there on the payment side? And how long does it take to pass through the benefit to clients?

Yes. Well, that's a tricky question, Renato. And naturally, that has to do with pace of sales, but also with churn levels. We monitor those 2 things on a daily basis. And based on the performance of those KPIs, we try to hold those spreads for as long as possible, but naturally tend to pass it through as competition enhances.

Our next question comes from Daniel Vaz with Safra.

I'll go back to the operating expenses -- sorry, can you hear me?

Now we can.

Yes. Okay. And I'm trying to connect your higher OpEx or selling expenses to your main strategy to develop a more complete bundle and a more competitive environment in terms of rates or your competitors being more aggressive on taking market shares. So am I looking for your higher OpEx as a defensive strategy? I mean are you trying to maintain your market share or maybe you're looking at increased growth on OpEx and selling expenses for any way to your attacking strategy?

Maybe we're looking at here trying to get a sense of are you defending, trying to create a bundle? Are you attacking, trying to look at different opportunities here, trying to figure it out what's the main goal for your '26, '27. I know you already talked about in the past that market share is a consequence, but I'm looking at your -- is it more defensive or attack? It's good to hear from you.

Thanks for the question, Daniel. I think we have 2 different dynamics when we look at the short term versus when we look ahead. So short term, when we look at the selling expenses for the fourth quarter, what happened was that we had higher turnover in the third Q. And therefore, we have hired more in the fourth Q to replace that turnover, and that's why selling expenses increased primarily.

Now when we look ahead, I think the reason why we're not being vocal about seeking too much efficiency in the short run in selling expenses is because we still think we need to invest heavily in terms of repositioning the company, not only as a payment provider, but as a provider of financial services as a whole. That will require capital, of course. But on the other hand, I think those investments should yield continued growth on the credit and banking operations as we move ahead.

So again, I think we have 2 different dynamics. Short term is about hiring salespeople. Longer term, I think it's about this repositioning of the company to offer more bundles.

And maybe a follow-up. On these bundles, I guess in the past, we have tried to see the Payments segment as more linked to the U.S. or any developed market software model kind of trying to upsell products for a service kind of revenue. But I don't know, maybe correct me if I'm wrong, but the Brazilian pay point here is working capital, and I think credit is the way how you monetize and how you maybe increase loyalty through your client base. Are you looking again into the service model? Has it changed any way the clients require or any specific needs from them you see?

That's a very good question. So I think we're rolling out a lot of features within our banking that we call workflow tools. So it's basically helping our clients to manage their businesses on their day-to-day operations. But I don't think the goal here is really to monetize those tools through service fees, but rather to have more lifetime value because clients become more stickier.

In terms of monetization, the reality is that when we look at the country and the market, most of the TAM is around holding deposits and underwriting credit. What I would only complement that you said, you talked about working capital loans. I think there are one specific part of the credit value proposition. There are plenty of other products within credit, which we have launched and that we are developing.

They are still very small, but they can be a lot bigger than they currently are, like overdraft, like the credit card operation itself and so on and so forth. So again, we're not giving up in terms of developing those workflow tools, but in terms of monetization, it's around financial services.

Our next question comes from Jamie Friedman.

Mateus, in your prepared remarks, you had referenced improving execution, especially on the boarding and the inputs that would go into volume. I was hoping you could elaborate on what some of those execution initiatives may be at [ propo ] volume.

Yes, for sure, Jamie. So I think we have 2 different dynamics, one related to new onboardings and the other ones related to churn. In terms of new onboarding, it's basically a full review that we did of our offerings and the go-to-market approach of each distribution channel. I think those initiatives have already been implemented, and we're starting to see the results. In terms of churn, what I would say is that historically, our focus as a company was heavily skewed towards optimizing the sales engine with a lot less emphasis on deepening engagement and systematically nurturing our existing client base.

As we have scaled and the competitive landscape has evolved as well. Excellence in terms of retention and client relationship has become pretty important. So what we're doing now, broadly speaking, is basically implementing a new company-wide initiative focused on delivering highly customized bundles at a much more granular level. So again, it's basically about segmentation and personalization of offerings, which has become a lot more important now.

Okay. Perfect. And then a question about credit. So in terms of Slide 8, the one that shows the NPL and coverage ratios, and you may have alluded to this or it may be in the footnotes, but can you unpack what you're seeing in terms of credit between the working capital portfolio and the other dimensions of lending? And I apologize if it's in these footnotes, I just -- but that would be my question, how you're -- what you're observing about overall credit performance by product line?

So Jamie, the more mature product, which is the working capital solution, it's converging well towards expected losses, margins and so forth. That said, we've been seeing the possibility to increase margins on that product, and it's something that we are executing on a monthly basis.

On the short-dated products, especially on credit cards, you probably noticed an uptick on the volumes in the fourth quarter. That said, it's probably one of the products in which we probably have a bigger opportunity in 2026 when compared to 2025. There is still a lot to learn in terms of the credit underwriting of that product and also in other short-term facilities to riskier clients, but it is a focus of the firm for 2026. And then on the longer-dated products, we haven't launched anything yet. It's also something that is within our expectations for 2026, and that should provide a bigger support for the dedicated desk.

We currently have a medium-term product for the dedicated desk. As you know, the dedicated desk is focused on slightly larger clients, not necessarily credit card businesses. And that's a bit of the portfolio that is slightly more volatile because of the concentration on the portfolio. And as we scale the 3 products and launch these additional features for that client base, you should see the portfolio maturing slowly going forward.

There are no more questions at this time. This concludes the question-and-answer session. I would like to pass the word back to Mateus Scherer for final considerations.

Thank you all for your support, and we'll see you in the second Q.

This concludes today's presentation. You may now disconnect.

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. [Operator Instructions] 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 9 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 3 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 operation’s 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 3 of the solutions we offer. This demonstrates not only growth in the scale, but also the 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 delay, 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 nonfinance 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 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 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.

[Operator Instructions] Our first question comes from Kaio Prato with UBS.

I have 2 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.

[Audio Gap]

overall gross profit. But in terms of pricing specifically, I think what we did successfully was to pass through the increase in interest rates, but I don't think we are at the all-time high spreads. The second question around earnings growth levers…

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 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 going to be on the payments TPV and environment. I know this is basically a common question in every call, but we have been seeing a deceleration on part of the volumes, and we see some players starting to come up more hitting the tape. To mention a few, we have iFood going after, I think, a very important part of your base, which is restaurants. We have BTG launching [ acquiring ]. We have smaller players such as CloudWalk also appear a little bit more. So, my question to you is how you're sensing the competitive environment in your base, if you're feeling is there any specific player being an aggressor here? And how do you see the pricing trends going forward? Because the rate that Kaio mentioned, I think it's been postponed a little bit, the potential tailwind coming from the funding cost. So, I wonder just to check if you see any environment for the spreads in the business to stay where they are or even increase in the next 6 months?

Thank you, Guilherme. Let me start maybe elaborating a little bit on market share and TPV dynamics and then pass it over to Mateus to talk a little bit about thoughts on pricing. So -- we still have to wait for the official ABECS numbers, right? But in our view, the third quarter should be roughly stable in terms of market share. In the second quarter, we did see a bigger market share loss as a result of our decision to reprice, as we've said before. This was sort of a onetime effect as we see it, in the quarter. We expect this to stabilize somewhat in the third quarter. And we reinstate that this decision was accretive overall for the business. That said, when we look ahead in terms of TPV growth, we continue to see gradual deceleration, and this is primarily a reflection of industry dynamics, meaning industry itself decelerating, but also a weaker macro environment, which we expect to impact more the smaller clients within our base, right? So, I think that's the message regarding market share and TPV dynamics. But looking ahead, we remain confident in our ability to continue to evolve in our plan consistently, like Mateus mentioned, more and more, we expect credit to be a driver of profitability and growth looking forward. And we're not with the sole purpose of pursuing market share at any cost. So, profitability remains our priority. And the path forward is not -- it's not simply through pricing adjustments, right? It should be through enhancing our value proposition to clients, evolving on our product offerings, scaling credit, evolving on our bundling strategy and really making sure that we can consistently win clients within the segment overall, in line with our strategic priority.

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 2026 if rates goes 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. [Technical Difficulty] I believe we are having some technical issues with Renato. I'm going to go with 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?

Rosman, thank you for the question. I think this is -- I think we evolved a lot. I think as you mentioned, we made a big shift from a kind of a BU organization, very much silo-centric in some ways to a fully functional organization as we have as of today, right? I think this is really helping us in terms of setting the strategy from a bundle perspective and how we actually put this bundle offering into our clients in the best way for them and for the company. So, I think in a nutshell, I think we are almost there. I think there are some pain points that we have to adjust over time. But in a nutshell, I think we are in the right direction.

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

So, I have 2 questions on my side. So, first on credit, you mentioned that now your credit product is more mature and it should start to represent more on your P&L. So, if you look at your portfolio today, do you have a better estimate on what should be your cost of risk, your NPL and your ideal coverage ratio now that you have a better sense of what your portfolio should be? Also, I have a second question on your revenue composition. If you look at your accounting statement, you can see like revenues for transactions declining over 20% and revenues for the financial income growing more than 30%. I understand here that there is an allocation that you can do between these 2 revenues in terms of prepayment and MDR. But -- and the ideal answer here would be -- would look at both together. But if you were to split, what would explain the movements? If you could go through them, it would be great.

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 2 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 2 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 regarding the changes on the stages of the credit. We saw in the last quarters, especially in this last one, the cure of the Stage 2, Stage 2, a higher amount. So can you guys please explain a little bit the concept of what's the kind of the credit that is classified at Stage 2 that are the ones that come back to Stage 1. So why we were seeing such a lot of changes on the stages in the last 2 quarters? And probably it's because of the type of the credit. So just to understand how do you guys classify this credit? You know that -- we know that looking forward, the company will grow a lot. So, it's very important to understand.

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 2 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 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.

Daniel, Mateus here. Thanks for the question. So, I think that's actually a great point, which is I think credit is probably the product that we started the latest. So naturally, when we think around pricing credit, it started as a cost-plus model, and we are now starting to test real sensitivity from our clients and test the right pricing point. So I think what we did in second Q and third Q, if you look at Slide 8 from the earnings presentation, the average yield of the portfolio increased from 2.6% in the first Q to 2.9% in the third Q, even though we have a higher mix of credit cards in the portfolio, which have no interest right for the part that is on [indiscernible]. And I think that happens at the same time that the macro environment is becoming more complex, but it's not a response from the macro environment. I think the reason why we've been able to price upwards is mostly because we are maturing on the overall pricing process for the product. And I think like you mentioned, other players were successful in terms of increasing pricing without too many sensitivity from the customers. And I think we're figuring out the same thing on our side.

If I may follow up, have you just tested like way higher yields on the credit and to some group of clients, to 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 to do 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 in 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 more and more completing a lot of 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 service, 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 2, 3 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's already -- 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.

Sorry to insist about the interest rates topic, but I think that we've seen changes regarding the expectations for interest rates next year. So maybe the easing cycle should be less pronounced than before expected, right? So especially assuming yesterday's minutes from the Central Bank. So, my question here is that you are -- I mean, I think that everybody here is modeling and thinking on Stone assuming this low interest rates next year. But if you take into consideration that the average interest rates next year should be also even slightly above this year. So my question is how sensitive is Stone funding costs to this average interest rates for next year? So again, we've seen you increasing prices. Lia mentioned about the higher interest rates for SMBs. And so my point here is, in this scenario of a higher average interest rates, how should we think the funding costs and prices 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 on your gross profit, right? I mean you're still on track to deliver your guidance for the year, but it has been decelerating. Given some of the questions on slower TPV growth, rates are stable, you're mostly done repricing, should we expect the gross profit to continue to decelerate a bit from here, at least all else equal, just given the trends in the industry? Should we expect any positive seasonality in 4Q? And we did see a bit of a jump in your loan book this quarter. Like at what point do you think you could get to where the loan book is enough that it starts to boost that gross profit, right? I think it's still -- it's growing fast, but from a low base, right? So just to think about the evolution of gross profit given where we are today and when that can maybe inflect and maybe grow faster 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 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 something 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 time period, 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 indicator 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.

Thank you, Pedro.

Yes, so on the effective tax rate, I think 2 messages here. So yes, we are indeed operating below the 20% mark that we provided at the long-term guidance. And if you look at the 4Q, usually 4Q tends to be lower than third Q because of seasonality and also we have more [ lead ] demand in the last quarter. But longer term, if we're thinking about the effective tax rate for 2026 and onwards, I think it's still too early to provide a precise view as there are too many moving pieces. I think you have also seen the number of proposed changes that are being discussed through provisional measures and draft bills. But that said, when we take everything into account, we continue to believe that the effective tax rate should land in mid- to high teens over time. More specific than that, I think we still need more visibility on how the proposed changes will ultimately unfold. But that's the perspective we have at this moment.

Okay. So mid- to high teens without seeing if there's any changes, right?

Yes, I think mid- to high teens broadly, then whether it's going to be mid or high, I think it's dependent on the changes.

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.

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's Second 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. In hindsight, I would like to highlight that the company is restricting the number of questions to 2 per analyst.

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. To begin, before diving into our second quarter performance, I want to briefly discuss our recently announced software divestitures and how this strategic move aligns with our future direction.

As many of you may recall from our Investor Day in 2023, we outlined our total addressable market across payments, banking, credit and software, roughly BRL 100 billion revenue opportunity. Our core focus remains on serving Brazil's more than 14 million micro, small and medium-sized business by providing solutions that meet their evolving needs and support their daily operations. We are now pursuing this mission with a much more focused approach and greater discipline in capital allocation.

By sharpening our focus on financial services, we continue to target over 90% of that substantial TAM. It's important to note that our current share in this combined market is still very small, which indicates significant room for growth ahead. While software will remain part of our broader ecosystem, we now view it as a more of a value-added layer, one with low capital requirements rather than a core offering. This strategic shift allow us to concentrate our efforts and resources on the areas of greatest long-term value and impact for our MSMB clients and ultimately, for our shareholders. We believe this sharper focus position us well to capture future growth opportunities in our core markets.

Now moving to Slide 4. Let me provide more detail on the divestments. The first and most significant transaction is the sale of Linx to TOTVS. As you know, we agreed to sell this group of software businesses for an enterprise value of BRL 3.05 billion. In addition, we will receive the net cash position of these assets currently estimated at BRL 360 million plus any cash generated between signing and closing of the deal. Notably, the BRL 3.8 billion in goodwill from our original Linx acquisition in 2021 will remain with us, and we expect to amortize that goodwill over the next 8 years, providing additional value beyond the sale price.

Payment for the Linx assets will be made in cash at closing, which is pending regulatory approvals, including from CADE, the Brazilian antitrust authority. There are no earnouts associated with this deal. In a separate transaction, we have also sold SimplesVet, a veterinary ERP software company to PetLove for an enterprise value of BRL 140 million plus the net cash position of BRL 15 million, totaling BRL 155 million. This deal was approved by CADE and closed in July with a payment in cash, a portion already paid and the remainder to be paid over 3 installments. There are no earnouts on this deal either.

Regarding our remaining software assets, our approach is straightforward. We are evaluating our assets individually. The goal is to determine whether each one should be fully integrated into our core fintech ecosystem to enhance existing solutions and product differentiation or whether it's better to let it operate independently while we assess its long-term strategic fit.

We will allocate the proceeds from these divestitures in line with our capital allocation framework we have outlined. Essentially, if we do not identify immediate value-accretive growth opportunities, we intend to return this excess capital to our shareholders. We truly believe these transactions represent a significant strategic step and will be accretive to our company. Consider that the total value unlocked from these sales, combining the transaction proceeds and the goodwill retention benefit is over BRL 4 billion, roughly 25% of our current market capitalization.

Yet for the first half of 2025, these software assets accounted for only about 8% of our revenues and 5% of our consolidated bottom line. By divesting them, we have unlocked substantial capital and most importantly, refocus our energy on our highest growth, most profitable segments. We are confident that this sharper focus will allow us to drive greater shareholder value in the years to come.

Before I hand over to Lia to discuss the quarterly results, let me first walk you through some important updates to our reporting and 2025 guidance in Slide 6. Following the sale of our software assets, we are now reporting discontinued operations as a single line item above consolidated net income. As a result, we are shifting our forward-looking metrics to better reflect the core of our ongoing business.

Starting with gross profit. Our guidance now reflects only continuing operations. We have also updated our assumptions to incorporate year-to-date performance and the impact of share repurchases executed since our original guidance in February. Our updated gross profit guidance now implies over 14.5% year-over-year growth, surpassing BRL 6.3 billion.

Turning to EPS. We continue to guide on a consolidated basis, including discontinued operations. Here, the update is more substantial. We have increased our expected EPS growth from 18% to 32% year-over-year, a 14 percentage point upgrade. This reflects both the impact of share buybacks and stronger-than-anticipated net income performance so far this year. To put it simply, even after incorporating a lower share count, we are still revising our implied adjusted net income guidance upward from BRL 2.4 billion to BRL 2.6 billion based on the prospects we've seen for the business.

These updates also reflect our strong confidence in the company and in our team's ability to execute. In that context, we remain fully committed to returning the BRL 3 billion in excess capital generated in 2024 back to shareholders. I'm pleased to report that by the end of June, we had already returned 41% of that amount through share buybacks, about BRL 2.6 billion over the last 12 months.

With that, I'll now turn the call over to Lia for a deeper dive into our quarterly numbers. Lia, please go ahead.

Thank you, Pedro, and good evening, everyone. Diving into our second quarter '25 results, we're very pleased to see that despite the challenging macroeconomic scenario with higher interest rates and signs of economic deceleration, we have successfully executed on our strategy, evolving the multiple ways in which we help our clients while delivering solid results.

Moving to Slide 7. Let's take a look at our bottom line results and ROEs, which are reported on a consolidated basis, including both continuing and discontinued operations.

Our adjusted net income accelerated to a 27% year-over-year increase, reaching BRL 631 million. The majority of this growth came from our financial services operation, which saw an impressive 21% growth over the same period. The strong performance is a direct result of some key factors, notably our successful pricing adjustments in a higher interest rate environment, the growing use of deposits as a low-cost funding source for operation and the lower effective tax rate.

Our adjusted basic EPS reached BRL 2.33 per share, representing a 45% year-over-year increase. Beyond the solid net income performance, the increase was further strengthened by our share repurchase program in which we bought back almost 42 million shares over the last 12 months.

Finally, ROEs continued to expand. Our Financial Services segment ROE achieved 30% and our consolidated ROE reached 22%. Both of these figures grew by 3 percentage points sequentially and showed even more significant growth on a year-over-year basis.

Now let's dive deeper into our top line performance, focusing on our continued operations. Revenues from continuing operations grew 20% year-over-year to BRL 3.5 billion, given continued solid execution in our core business. This increase was primarily driven by our repricing initiatives, even while negatively impacted by a reduction in floating revenues resulting from the use of client deposits as a source of funding. To clarify, as we transform these deposits into time deposits to fund our operations, we stopped recognizing floating revenue. As we explained previously, this shift is more than compensated by the significant reduction in our financial expenses, given the much lower cost of funding related to deposits compared to other funding alternatives.

Adjusted gross profit from continuing operations reached BRL 1.6 billion this quarter, a year-over-year growth of 14%, broadly in line with guidance implied growth. It's useful to compare our gross profit growth with TPV growth because this highlights the multiple ways in which we monetize our relationship with clients in an efficient way. In the second quarter, gross profit grew ahead of TPV by 2 percentage points, mainly driven by our continued pricing discipline, more client engagement and a more efficient funding strategy.

In Slide 9, we will discuss our payments operation for MSMBs. Our payments active client base grew 17% year-over-year to reach 4.5 million clients. Out of those, 38% are considered as heavy users, meaning they utilize more than 3 of our different solutions. Our MSMB TPV grew 12% year-over-year in the quarter to BRL 122 billion. This growth results from 2 key trends: first, a 59% growth in MSMB PIX QR Code volumes, which continues to gain share over traditional debit card transactions; and second, a 6.4% year-over-year growth in card TPV.

Two main factors drove the TPV growth deceleration this quarter. First, this was an expected reflection of our repricing initiatives. Second, we saw a reduction in our clients' same-store sales, which were impacted by a tougher macroeconomic environment in a quarter with more holidays. As we look ahead, we will continue to keep a close eye on the macroeconomic environment. We anticipate that the second half of the year will continue to face a tougher environment, but MSMB TPV growth should stabilize at low double-digits in the period.

In Slide 10, let's move to our banking performance. We're very pleased with the continued growth in our client base and their increased engagement with our banking solutions, which is ultimately reflected by a larger balance of deposits. Our active banking client base grew 23% year-over-year, reaching 3.3 million clients. Client deposits also grew significantly, up 36% year-over-year or 7% quarter-over-quarter. We're very encouraged by this growth, and it's almost 3x higher than our MSMB TPV growth on a sequential basis, meaning that our clients are shifting from using mainly our payment solution to relying on Stone as their end-to-end provider of financial services and workflow tools.

Regarding deposits, as we mentioned last quarter, we have been strategically shifting our deposit mix towards a higher concentration of time deposits. This includes both the investment solutions we offer our clients, which have been performing well as well as our cash sweep strategy, a valuable funding source for our own operations. The most significant shift happened late in the first quarter, which means we saw a more complete impact to our P&L in the second quarter. Currently, 83% of our total deposits are already considered as time deposits.

Now let's turn to Slide 11, where we'll give some color on our credit product evolution. The main highlight here is that we continue to grow consistently while keeping our credit quality indicators healthy. Our credit portfolio grew 25% sequentially to BRL 1.8 billion. Of this total, BRL 1.6 billion refers to our merchant solutions comprised mainly of working capital to MSMBs, where disbursements increased significantly by 41% on a quarter-over-quarter basis. The remaining BRL 192 million refers to our credit card portfolio, which grew 19% sequentially.

We monitor credit quality very closely and continue to see steady, healthy NPL levels. Our 15- to 90-day NPL has been relatively stable, decreasing 10 basis points sequentially, while our over 90-day NPL increased by 10 basis points. This is a smaller increase than in the past, reflecting our accelerated disbursements this quarter.

Despite the healthy NPL levels, we saw a significant increase in our provisions for expected losses this quarter from BRL 34 million in the first quarter to BRL 82 million in the second quarter. This increase was driven by 3 main factors. First, by the continued expansion of our credit portfolio, supported by a very strong sequential increase in working capital disbursements. Second, an increased mix towards limit-based offerings such as overdraft and credit cards. Most importantly, despite our stable asset quality as evidenced by our consistent NPL performance, we made a deliberate decision to increase coverage levels in light of a weaker macro-outlook.

As a result, our coverage ratio increased from 256% in the first quarter to 280% in the second quarter. This higher level of provisions also pushed our cost of risk metric, which is based on the provision for the current quarter to a level of 20%, up from 10% in the first quarter. However, if we were to exclude our decision to take a more conservative approach given the weaker macro environment, our cost of risk would have been 13.5% in the period.

All in all, I'm very pleased with our quarterly performance, even amid a more challenging macro environment. It highlights the strength of our execution and our continued commitment to our priorities and the guidance we've laid out to the market. We continue to work hard to evolve our business towards fulfilling our mission to become the preferred partner when our clients think of financial services and tools that help them better manage their business and grow. While doing this, we maintain a steadfast commitment to generating value to our shareholders.

Now I want to pass it over to Mateus to discuss our more detailed financial performance. Mateus?

Thank you, Lia, and good evening, everyone. Before we dive into the numbers, I'd like to highlight a few important changes we've made to our financial reporting. As Pedro mentioned, our P&L now focuses exclusively on continuing operations, with discontinued operations presented separately as a single line item above consolidated net income. To maintain comparability, we've adjusted past figures to align with this new approach.

On the balance sheet, discontinued operations are now represented by single line items within current assets and current liabilities, while prior periods remain as originally reported. Our cash flow statement remains on a consolidated basis, meaning our adjusted net cash metric still reflects cash generated by both continuing and discontinued operations. As a quick note, all updated figures for '24 and '25, reflecting these changes are available in the spreadsheet posted on our website.

Now let's discuss our adjusted consolidated P&L for continuing operations. Cost of services increased 22% year-over-year or 40 basis points as a percentage of revenues due to higher provisions for expected credit losses, as Lia highlighted earlier. This was partially offset by lower payments and banking provisions as a percentage of revenue and operating leverage in key areas of our operation, especially in technology and customer support.

Administrative expenses increased 12% 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 17% year-over-year, but decreased 40 basis points relative to revenues, reflecting stronger operating leverage in marketing spend.

Financial expenses increased 29% year-over-year, representing a 210 basis points increase as a percentage of revenues. This was largely due to a higher average CDI rate compared to the lower rates seen in the second quarter of last year. Importantly, this impact was partially mitigated by increased use of client deposits as a lower cost funding source.

Other expenses increased 12% year-over-year, but declined 20 basis points relative to revenues, benefiting from a one-time disposal of PP&E, partially offset by higher share-based compensation, mostly driven by higher share price in the period. Our effective tax rate was 15% in the quarter, down from 22.5% in 2Q '24. The year-over-year decrease was driven primarily by higher benefits from Lei do Bem.

Moving to Slide 13. Our adjusted net cash position ended the quarter at BRL 3.7 billion, a sequential decrease of just BRL 118 million despite executing share repurchases totaling almost BRL 400 million during the quarter. Excluding these buybacks and the present value adjustments to accounts receivable from card issuers, which flows through other comprehensive income, adjusted net cash would have increased by nearly BRL 400 million.

Before we move on to questions, I'd like to thank you all for your time and continued support. We keep fully committed to our strategy, and our focus remains on disciplined execution and creating sustainable long-term value for both our clients and shareholders.

With that said, we are now ready to open the call up to questions.

[Operator Instructions] Our first question comes from Tito Labarta with Goldman Sachs.

Congratulations on the strong results. I have 2 questions, if I can. Just first, how do you think -- I know Pedro, you mentioned you will revise the 2027 guidance after Linx is done. But just thinking operationally in payments, given the slower growth environment that we're seeing for TPV. How comfortable do you feel about being able to deliver that 2027 guidance? And maybe more specifically, how are you thinking about TPV growth both in cards and PIX? And if that's lower than expected, can you still deliver on the guidance?

And then my second question, just on the Linx sale. Can you give an update just on -- what should we expect for timing? And is the plan to return all of the BRL 3 billion in capital to investors? Or do you have any color on what the plan is for the cash that you'll get from the sale of Linx?

Tito, Lia here. Thank you for the question. I'm going to take the question regarding guidance for 2027 and then pass it over to Mateus to take the second question. So I think regarding 2027 guidance and your specific question on TPV, we're monitoring this TPV dynamics closely given what we're seeing in the macro environment this year and also sort of the short-term impact in TPV that we had from repricings in the first quarter. When we laid out our 14% TPV CAGR throughout 2027, the assumption really was a combination of a modest market share gain and an industry growth in the low teens.

So while we remain really confident in our ability to continue to win clients and gain share within the segment in the long run, overall market growth has been softer than expected, and that does introduce some risk to our 2027 TPV outlook. But that said, regarding us looking at only from the perspective of TPV, it's important to emphasize really that TPV growth and share gains is not a sole focus. Rather, it really should be a consequence of our ability to evolve our business and the value proposition that we bring to clients in the long run. And TPV is one dimension of a bigger plan in which we're performing really well.

So we continue to advance in extending our offers beyond payments to become a complete financial provider for our clients, which is highlighted by the evolution that we see this quarter in credit, in banking and ultimately in profitability. So on the profitability side, when we think about the combination of multiple monetization drivers, our cost discipline and capital allocation, including share buybacks, we're driving stronger-than-expected results, and we're really confident in delivering those long-term targets. So I think the message on TPV is we need to monitor. But from the overall plan, we're really confident with the long-term guidance.

Yes. And regarding the second question around excess capital position and use of proceeds from the deal, I think maybe it's worthwhile to give a broader overview on the topic. So as you may remember, we ended last year with a little over BRL 3 billion in excess capital. In the first half of this year, we executed about BRL 1.2 billion in buybacks. And when we compute the excess capital position of the 2Q '25, we actually ended the quarter with BRL 2.4 billion in excess capital, excluding the assets available for sale. So we generated a little over BRL 600 million in excess capital in the first half of this year.

Again, if we were to include the net asset value from discontinued operations this quarter, we would be sitting at close to BRL 6 billion in excess capital as of today. Of course, when we look ahead, there is still a long road until the deal actually closing. And throughout this period, we're going to be both generating additional excess capital, but also executing on the buybacks that we have approved. So in terms of actual use of proceeds and clarity on timing, we're basically going to provide that upon the closing of the transaction. But like Pedro mentioned in the presentation, in the absence of new opportunities available, the commitment and the idea is to return the capital back to shareholders.

Okay. No, that's great. And Lia, just to clarify your comments, so there could be some downside risk on the TPV. But on the other metrics, which perhaps are more important, you still feel comfortable on that outlook, even if TPV growth is lower. Correct?

Perfect. That's correct, Tito.

Our next question comes from Gustavo Schroden with Citi.

Congrats on the conclusion of the deal. Indeed, we could see that the continued operations generate more value than before. So my question is, I'm trying to understand how sustainable is this financial income growth because we've seen that so far, the strategy to diversify and to focus in on banking business, it is paying off and it is offsetting these weaker transaction activities. So my question is, is it sustainable to -- I mean, to continue to see this financial income offsetting and sustaining this higher level of gross profit generation?

And my second question is you showed that the ROE would be around 30% considering the continued operations. So do you think that this is the level that we should see the company delivering of ROE. So do you think that the 30% is a good number for us? I know that it's not an official guidance, but just an indication of what would be the sustainable ROE in the coming years?

Thanks for the questions, Gustavo. So maybe I'll start and then Lia or Pedro may add. So the first question regarding financial income, I think towards the end of your question, you actually got the answer, which is we're looking more and more towards gross profit generation rather than the individual line items on a stand-alone basis. And when we look at the gross profit growth with our updated guidance, we're basically guiding for a growth of 14.5% for the year.

I think, Lia, mentioned in the presentation that when we look at TPV MSMB, we're actually seeing growth at about low double-digits. So this gap between the low double-digits of TPV growth and the 14.5% growth for gross profit is the result of the continued engagement with the other products that we have and also the price discipline that we've been showing throughout the year. So I think what the message here is that we're comfortable with that level of growth. Of course, when you look at the individual lines, it's going to become harder and harder to forecast because we have a lot of mix movements with the usage of deposits and so on and so forth.

And in your second point about the ROE, indeed, when you look at the financial services platform, we are already delivering the 30% ROEs. The only caveat here is that this 30% ROE is including the excess capital position that we still have. So in a way, we have kind of a drag in these numbers. So what I would say looking ahead is that probably the 30% number is on the lower bound.

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

Congrats on the results. Let me ask you 2 questions as well then. When do you expect this Linx transaction to be closed? And why are you already showing the figures without Linx? Like I understand that you want to make it clear, but this might be a transaction that only closes next year. So just wanted to understand what are you thinking about timing and why to do it now?

And the second question is related to the price hikes, right? You did your price hikes at the beginning of the year. Are you still raising prices? Or are you done? Is the full benefit of the price hikes already reflected on take rates? And do you think that these price hikes led to a slowdown in volumes? Because, again, right, you show card volumes growing only 6% year-on-year. This is just slightly above inflation. So I'm thinking maybe you were too aggressive in your price hikes and you lost some market share. How do you think about that?

Mario, thanks for the questions. So I'll take the first one and then pass it over to Lia to talk about pricing versus TPV as well. In regards first to the timing of the transaction, we are very confident in the outcome of the process. But as you know, the timing of the approval is hard to predict because in the end of the day, it's largely outside of our control. What we know is that according to the legislation, we have a maximum period of 330 days for antitrust approval. And we believe that given the high complementarity of the operations between Linx and TOTVS, this approval could be concluded faster. But again, giving a specific timeline is not something that we can do at this stage.

But then connecting to the second piece of the question, which is why we are reporting continued versus discontinued operation, we have no choice of doing otherwise. So according to IFRS, whenever we make the decision to sell the assets and there is a reasonable expectation to be done in at least 12 months, we need to reclassify those assets as held for sale. So we're basically following the rule here. Lia?

Yes. So Mario, regarding your question around prices and if there are additional price hikes. So let me talk about pricing and TPV dynamics in general. Regarding pricing, the biggest repricing waves were, in fact, in the first quarter. I would say that in terms of the interest rate hikes that we saw, all the repricing has been done to adjust for that.

Beyond those repricings that were done in the first quarter, what will happen is normal course of business, right? We always have a dynamic repricing strategy. So when we price a client according to a specific TPV or a specific offering commitment, there may be repricings in the future depending on that -- how that client behaves, but that's incremental, and that's always been part of the day-to-day of the business.

But maybe taking a broader look at TPV dynamics. The repricings sort of had a one-time kind of short-term impact on TPV growth. We talked about this in the first quarter. So as much as we understand these repricing waves as having been very successful, even seeing like churn levels below our expectations, some level of churn is always expected, right, given the dimension of these repricing waves that happened in the first quarter. And really, those repricing waves were, just to be clear, extremely related to the interest rate increase. So we don't think that, that was excessive. It was actually what we had to do in terms of a discipline -- in terms of financial discipline.

But overall TPV dynamics, I think, was also very impacted by the macro. And when we look at granular data from TPV at the client level and when we look at same-store sales across different segments, what we see is that market growth this year has been very uneven. So when we look at different client tiers, right? Larger clients have generally performed better, while SMBs and especially micro merchants have faced more challenges when we look at a same-store sales TPV growth, which is expected given the higher interest rates. Typically, they will affect smaller clients and less structured businesses first.

So the TPV dynamics relates to both the macro and the one-time short-term impact from the repricings. And as far as interest rates remain at the levels that they are, we don't expect further big repricing waves this year.

That's clear. And let me -- just one thing. In your remarks, you mentioned that you expect MSMB volumes or TPV to stabilize at low double-digits for the remainder of the year. Can you discuss what was the evolution of TPV growth throughout the quarter? Because my understanding, right, talking to other players and to the banks in Brazil, everybody is expecting a weaker economy in second half of the year. What are you seeing that makes you confident that you can maintain this low double-digit growth?

Yes, that's a good point, Mario. I think there's some room when we talk about double-digit growth because growth in this Q was actually 12%, right? So you have some room for a couple of percentage points there. But answering your question, we did indeed see the growth slowing down throughout the quarter. But when we look at more recent data, it's consistent with this double-digit growth. So that's why we are confident on these dynamics. The other thing that I would point out is that 4Q and 3Q last year, we have somewhat easier comps as well. So that helps with the dynamics.

Our next question comes from Daniel Vaz with Safra.

Congrats on the results. Also I want to touch base on the TPV growth that has been slowing down, and we already discussed that in the call. But on the positive side, your gross profit remains resilient and supported by high customer engagement or penetration of the other financial services, right? So you revised your net income upwards by approximately BRL 200 million. So I wanted to touch base and understand to what extent this is driven only by stronger-than-expected top line. And in my numbers here, I can see a good cash generation. So the other financial income is growing well as well. So you're doing buybacks while generating cash. So is it only top line driven? Or is there any other meaningful contribution for operating expenses or cost to serve or any tax rate thing that we should know about?

Thanks for the question, Daniel. So when we compare the implied growth for adjusted net income versus the growth for gross profit, you can see that adjusted net income implied in the guidance is growing at 18% and gross profit is actually growing 14.5%. So the reason behind those 2 lines is basically 2 main dynamics. The first one is indeed related to effective tax rate. So in the beginning of the year, we guided around 20% as a benchmark for the year. But given the strong performance in the first half and our updated expectations, we now believe that we can land below that mark with second half tracking closer to the 2Q levels. So that's one point.

And the second point, in the beginning of the year, we also anticipated selling expenses to grow faster than gross profit. But what we're actually seeing now is a healthier trend on that front. So those 2 lines are the main reason why adjusted net income growth outpaces the growth in gross profit. Other than that, I think you touched upon the 2 main drivers on the gross profit side is around pricing plus engagement with new products and as well the buyback execution for sure.

If I could just follow-up on your selling expenses commentary. What do you attribute that to? Is it you're seeing less of competition there or you're having to do less of a marketing expenses? Is there any, for example, Big Brother thing that you used to do a lot very harsh in the first half of the year. Can you elaborate more on the selling part?

Yes. So Daniel, just quickly on selling expenses, operational leverage. This quarter, it had to do with operational leverage and marketing expenses. And we do expect less of an impact, right, in those marketing expenses as we have concluded Big Brother Brasil, and we still have to plan ahead how that's going to go, but we do expect this leverage to continue.

I think in general, because selling expenses is something that has received a lot of attention over the past quarters, and we feel it's somewhat misunderstood, maybe it's worth highlighting a couple overlooked aspects on selling expense dynamics. First, I think it's important to highlight that our investments in sales, particularly in expanding our sales force is really focused on acquiring new clients and generating incremental TPV, right? That sounds kind of obvious, but it's important to remember that each new cohort brings in new TPV that compounds over time.

Naturally, as the installed base grows, the rate of TPV growth slows, but the absolute value generated, so the absolute incremental TPV continues to increase as our sales force matures and scales. That's a mathematical reality. In other words, lower TPV growth does not mean that sales investment isn't working. We're actually building a larger base that monetizes over time, and which incrementally dilutes those selling expenses.

Second, let's remember that we don't invest in selling solely to grow TPV. We invest in selling to grow revenues and ultimately profitability. So to the point that on your initial question and what Mateus just mentioned, TPV starts a monetization cycle, which extends beyond payments to banking and credit. These dynamics is also why selling expenses as a percentage of revenue is expected to trend downwards in the long term, and we're starting to see this effect this quarter.

So it's important to highlight that we remain disciplined in growing our sales force, and we do believe there is room for efficiency gains in a few dimensions, such as marketing, as I just mentioned, and eventually efficiency gains in some specific channels. But the message that we want to stick with is that we're not optimizing for TPV growth alone. We're optimizing for profitable growth and long-term value creation.

Our next question comes from Neha Agarwala with HSBC.

Congratulations on the results. Just quickly on the lending side of the business. We saw good growth this quarter. What should we expect for the remainder of the year given that you're a bit more cautious on the macro side? Should we expect strong growth? Which lines would you be focusing more on? And then if you could also talk about the cost of risk, you increased it to around 20% level this quarter. Should we expect that going forward as the run rate for the credit business?

Neha, thanks for the questions. So I'll probably start with cost of risk, and then we can talk about growth as well. So in regards to cost of risk, I think we've mentioned this in the presentation as well. There are basically 3 drivers when we look at the quarter. The first 2 drivers will continue, which are the growth of the disbursements and also more and more the growth of other products, especially the credit cards. But if we only account for these elements, the cost of risk would actually be around 13.5%. The remainder has to do with a cautious approach towards the macro environment. And of course, that tends to be one-time. So when we look ahead, I think we should look closer to the 13.5% or maybe mid-teens, but we're not expecting the 20% levels.

And then the second question around the growth of the portfolio. I think this is a message that we like to always emphasize. The growth of the credit book is not linear at all in our trajectory because we continuously do a lot of tests, test and learning with our approach. And whenever we feel confident about those tests, then we tend to scale disbursements in a nonlinear fashion. So indeed, when we look at the 2Q, the disbursements grew about 41% in the working capital loans. But if we were to look at the 1Q '25, the disbursements were actually flattish versus the fourth quarter of '24. So I wouldn't read too much in the growth of disbursements that we had in the second quarter. This is not a view of the macro environment or nothing of the sort. What we think about growth is that the penetration of working capital loans in the base is still low. So there is a lot of space to grow, but we're basically following the trajectory that we originally planned, nothing new on that regard.

Can you also talk a bit about the features, how things are going? What is the response you're getting from the merchants? How has the payback been on the loans that you've given out so far? Any color on how the progress has been so far would be very helpful.

Yes, Lia here. So on your question regarding the overall credit strategy evolution, I think we continue to focus like we said last quarter on maybe I would separate in 2 big dimensions. So when we talk about working capital solutions, which is the majority of the portfolio, as much as we continue to invest in digital distribution, we're sort of learning and scaling our ability to scale on the larger clients through specialist distribution. I think that's a focus for us.

On the shorter duration types of products, it's relatively less mature, right? We're still learning and growing more cautiously, I would say. I think one thing that the team is very focused on is on the credit building itself. So how do we enable clients that don't necessarily have an initial offering to build sort of this credit limit over time. And hopefully, longer-term, what we expect this to enable us to achieve is some sort of credit offer to the majority of the clients in the base, naturally within our risk appetite, but this credit building process will enable us to expand the ways in which we scale. So I think the message is really consistent, nothing very different. And yes, we're happy with the evolution.

Our next question comes from Marcelo Mizrahi with Bradesco BBI.

Congratulations for the results. Regarding about the credit again, so I understand so the strategy and the message, but really the amount of money that was disbursed in this quarter was the highest since you guys started this strategy. So just want to understand more. So even this view that to be more conservative in terms of provision and cost of risk, why the volumes were so higher than the last quarters. So that's any different product or any different type of clients that you guys are starting to develop and to give credit. So just please give me some idea here to understand the strategy looking forward.

[ Sure, Miz. ] Mateus here. So again, there wasn't any specific event driving the BRL 620 million in disbursements this quarter. So no new features or no new products. I think the message here is maybe to look at a longer window. So the credit operation continues to grow, but it's not linear at all. If we were to look at the past quarters, not only the 1Q, but also last year, there are quarters in which disbursement tends to become flat because we're either testing new offerings or the results from a given hypothesis are not yet validated, but then that tends to follow a bigger growth in the subsequent quarters. I think that's pretty much what happened.

And probably the best way to look at it is actually the disbursements from the 1Q '25 were lower. I don't think the 2Q were bigger. That's probably the best way to think about it. And then the question on how that connects with the view of increasing provision amidst the weaker or the more uncertain macro environment. I think here, it's more of a cautious decision. So when we look at the actual portfolio performance, we're not seeing material changes. You can see that the delinquency levels remain stable, NPL 15 to 90 days actually decreasing a little bit, NPL over 90 days flattish. But we did observe some softening in our client same-store sales, which we mentioned affected the TPV growth. So in light of that signal, we decided to strengthen the provisioning to ensure that we are appropriately covered even if the broader environment remains under pressure.

And the second thing that I think is also worth highlighting here, what we've been doing since the beginning of the year is also to increase the prices of the new cohorts that we are disbursing. So if you were to look at the average rate for the portfolio towards the end of last year, it was closer to 3% per month. Now it's trending actually closer to 4% per month. So even despite the higher cost of risk, when we look at the actual profitability of the new cohorts, they're still tracking really well, and that's what gives us comfort to continue to scale and continue to improve the product as well. So those are the main thinking about here.

Looking forward, there is any guidance to give us to think about cost of risk. So it's more the level is 20% in the next quarters or lower than that?

No, I think the 20%, we think is a one-off. So probably the best way to think about cost of risk moving forward is on the mid-teens, so closer to the 13.5% to 15% range, which again embeds the growth of the portfolio, but we shouldn't continue to add layers of protection for the macro environment as we move ahead.

Our next question comes from Renato Meloni with Autonomous Research.

Congrats on the results. So I wanted to explore a bit competitive environment in the second half of the year. I mean you already mentioned that you don't expect to increase prices. But I'm wondering, even if you continue to optimize your cost of funding, if you could offer more competitive prices as the economy slows down. And then if you can expand this even a bit further to 2026 when there are some rate cuts expected, what do you think is going to be your strategy there when rates start to come down?

So I think -- Renato, Lia here. So on your question -- so I think regarding the first part of your question -- sorry, the first part of your question was about, can you repeat Renato?

Yes, the competitive environment in the second half...

Competitive, yes. So I think we don't expect any news on the competitive environment. We see a very rational competitive environment. And to be really honest, we price very much based on the bundling and the offerings that we offer our clients and based on our return hurdles. That's been our philosophy since we implemented these repricing strategy way back in 2022. So we don't expect to change that, and we don't see any changes in the competitive dynamics at all.

I think long-term, if interest rates go down, that mindset won't change. Of course, what will happen is there will be a bigger gap potentially between repricings between -- sorry, pricings being applied to new sales versus the spreads of clients within the base. So there may be kind of competitive adjustments that will happen once that dynamic takes place. But that competitive adjustment will be a slower one, right, because the base is the base, nobody is expected to change the repricings of the base downwards. So I think that there will be a readjustment, a reequilibrium that may be reached, but that's going to be kind of a multi-year process in our view. So that's how we see the overall dynamics.

Perfect. That's clear. So for the second half year, pretty much stable prices and gaining some share.

Yes. So nothing different than what we already said in terms of TPV dynamics and repricing strategy.

Our next question comes from Eduardo Rosman with BTG.

I have 2 questions here regarding competition as well. The first one is about PIX. I think Itau recently, they launched an initiative focused on small businesses, where I think among other things, they announced 3 PIX transactions, right, for our clients using the POS of [ hedge, ] right? So how do you see that? And if you see other players doing the same?

And the second one would be about the deposits, right? You've been growing pretty well here, and I think this is relevant for your profitability. How do you see competition evolving for deposits? Do you see any pressure for higher remuneration?

Hi, Rosman. Lia, here. So regarding your first question around competitive dynamics and some players implementing no charges on PIX, I think those offers, they really come and go. In our view, PIX is one monetization driver among many depending on what sort of is the overall offer to a specific profile of clients, we do sometimes offer PIX for free, depending on what the overall economics of that client is. I think the message is that as we evolve our banking road map and our overall Stone road map really, right, the more features that we have to bundle, the more we can play with those levers. So I think this is really a dynamic process.

And the better -- the more features we have in terms of to respond to this dynamic process, the better. So I think the message that we want to bring across when we talk about the overall road map is really it's about 2 things, right? Evolving and launching the new features that really addresses our clients' needs and the more features we have, the more bundles we can create. This is sort of a virtuous cycle that at the end of the day reflects in our ability to win clients and bring TPV within the ecosystem. But then more importantly, to really engage, right, make sure that our clients engage with our ecosystem overall. And ultimately, that will reflect in deposits growth.

So I think deposits growth comes from multiple drivers. Every new feature that we launch is another reason for the client to operate within our ecosystem, and there is a pretty extensive road map ahead in terms of how we address more needs of those clients to operate more within the Stone ecosystem.

The Q&A session is now over. I would like to hand the floor back to StoneCo team for their concluding remarks.

Well, thank you all for participating in the call, and see you in the next quarter. Thank you.

StoneCo conference call is now closed. We thank you for your participation and wish you a nice day.