StoneCo Ltd. (STNE) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture. Financial performance shows improvements in some areas but challenges in others, such as increased costs and credit risks. The Q&A reveals management's confidence in addressing these issues, yet lacks clarity on certain points, particularly regarding ARPAC and credit model performance. The market cap suggests moderate sensitivity to news, and with no strong catalysts for significant price movement, a neutral sentiment is appropriate.
Key Financial Performance
Total revenue and income BRL 3.6 billion, up 6% year-over-year. Growth driven by expansion of credit revenues and healthy profitability in payments, offset by lower floating revenues from deposits.
Adjusted gross profit BRL 1.5 billion, broadly stable year-over-year. Revenue growth offset by higher provision for credit losses and increased operating costs. Gross profit margin contracted from 44.4% to 41.6% due to credit provisions.
Adjusted net income BRL 549 million, up 3% year-over-year. Adjusted basic EPS grew 15% year-over-year to BRL 2.19 per share, driven by share buybacks.
Total active client base 4.7 million clients, up 13% year-over-year but down 5% sequentially. Sequential decline due to focus on more engaged and revenue-generating clients.
Average revenue per active client (ARPAC) BRL 247 per month per client, down 11% year-over-year and 3% sequentially. Decline reflects client mix effects and first quarter seasonality.
Total TPV (Total Payment Volume) BRL 137 billion, up 3% year-over-year. Growth impacted by challenging macroeconomic environment, elevated churn levels, and relative outperformance of digital sales.
Retail deposits BRL 10.1 billion, up 22% year-over-year but down 9% sequentially. Sequential decline reflects first quarter seasonality, while average daily retail deposits grew 26% year-over-year.
Total credit portfolio BRL 3.2 billion, up 14% sequentially. Merchant Solutions grew 13% quarter-over-quarter, and credit card portfolio grew 23% sequentially. Credit revenues reached BRL 297 million, up 25% sequentially, with portfolio yield increasing to 3.3%.
NPLs (Non-Performing Loans) over 90 days 7%, up from 5.2% in the prior quarter. Increase due to worse performance in automated desk and seasoning trajectory of portfolio. Coverage ratio at 229%.
Cost of services Increased 420 basis points year-over-year as a percentage of revenues, driven by higher credit loss provisions. Excluding provisions, increase was 60 basis points due to severance costs and higher D&A.
Financial expenses Improved 150 basis points year-over-year as a percentage of revenues, due to lower cost of funding from client deposits.
Effective tax rate 14.3%, down 4.5 percentage points year-over-year, reflecting benefits from deferred tax assets.
Capital ratio 44% at the end of the quarter, elevated by Linx divestiture. Excluding Linx proceeds, ratio would be 29%, above 17% internal hurdle.
Adjusted return on equity (ROE) 19%, up 40 basis points year-over-year but down from 25% in the prior quarter. Sequential decline due to deferred tax assets recognition and expanded equity base.
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Operating Highlights
Unified App: Progressively upgrading the unified app to address merchants' needs across every financial workflow.
Secured Credit Products: Recently began disbursing secured credit products to expand access to credit, deepen relationships with merchants, and reduce risk intensity of portfolio growth.
TPV Growth: Focused on reaccelerating profitable TPV growth by improving retention, managing churn, and simplifying product offerings.
Credit Portfolio: Total credit portfolio reached BRL 3.2 billion, growing 14% sequentially, with credit revenues up 25% sequentially.
Efficiency Improvements: Committed to improving efficiency through disciplined prioritization and AI-driven efficiencies.
Cost of Funding: Reduced total cost of funding from 100% of CDI in early 2025 to approximately 87% recently, leveraging client deposits as a lower-cost funding source.
Capital Allocation: Distributed BRL 3.6 billion year-to-date, including extraordinary dividends and share buybacks, with plans to repurchase at least another BRL 1.4 billion in 2026.
Simplification of Offerings: Conducting a full review of product offerings to simplify bundles and move towards a cleaner and more transparent pricing structure.
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Risk or Challenges
Macro Environment: Continued challenges in the macro environment are negatively impacting smaller merchants, which could affect revenue and growth.
Churn Levels: Elevated churn levels, particularly among clients onboarded during 2025, are impacting retention and TPV growth. Complex product bundles and pricing structures have created friction for some clients.
Credit Portfolio: Higher-than-expected NPLs (non-performing loans) and increased delinquencies in newer credit cohorts have led to elevated credit provisions and risks in the credit portfolio.
Operating Costs: Higher provisions for credit losses and one-off expenses, including severance costs, have increased operating costs, affecting profitability.
Seasonality: First quarter seasonality has contributed to softer financial performance, including declines in TPV and retail deposits.
Regulatory and Funding Risks: Interest rates may remain higher for longer, potentially impacting funding costs and financial performance.
Client Engagement: Decline in active client base and average revenue per active client (ARPAC) due to conscious efforts to focus on more engaged clients, which could limit growth.
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Guidance & Outlook
Capital Allocation: The company plans to repurchase at least another BRL 1.4 billion worth of shares throughout 2026, reflecting its commitment to returning excess capital to shareholders.
Payments and TPV Growth: The company aims to reaccelerate profitable TPV growth by improving client retention, managing churn more actively, and simplifying product bundles and pricing structures. Early data from April indicates improving TPV growth.
Credit Portfolio: The company is focused on growing its credit portfolio with the right risk-adjusted returns. It plans to refine underwriting models, price risk appropriately, and diversify the portfolio with secured credit products such as credit cards, overdrafts, and secured working capital offerings. Early results show improvement in first payment default rates.
Operational Efficiency: The company expects operating leverage to improve throughout 2026 as seasonal factors normalize and AI-driven efficiencies are implemented.
Unified Financial Platform: The company is investing in upgrading its unified app to address merchants' financial workflow needs and positioning its brand as a full-service financial partner.
2026 Financial Guidance: The company maintains its full-year 2026 guidance, expecting performance to be weighted towards the second half as credit revenues compound and commercial initiatives normalize retention rates.
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Shareholder Return Plan
Extraordinary Dividend: Paid on May 4 with proceeds from the Linx divestiture.
Ordinary Share Buybacks: Approximately BRL 0.6 billion executed year-to-date.
Future Share Buybacks: At least another BRL 1.4 billion to be repurchased throughout 2026.
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Key Q&A
Q:How are you planning to improve ARPAC given its 11% year-over-year decline?
A:ARPAC has been decreasing mainly due to mix, not deterioration in core client monetization. The company is expanding its ecosystem with new products, which initially have lower ARPAC. However, clients using multiple products have significantly higher ARPAC. The company sees this as a long-term opportunity. There is no set optimal number of clients, and the active client base is expected to expand over time.
Q:What caused the increase in cost of risk and NPLs in the credit business, and what actions are being taken?
A:The increase in NPLs and provisions was due to a deteriorating macro environment, underperforming models, and isolated delinquency cases in the dedicated desk. Actions taken include increasing pricing, implementing new credit models and policies, reducing maximum ticket size in the dedicated desk, and moving towards secured working capital products. Cost of risk is expected to decrease to mid- to high teens over time.
Q:Why did the credit issues occur, and how does this affect your guidance?
A:The issues were due to a broader macroeconomic deterioration affecting SMEs, seasonality, and underperforming models. The uptick in provisions was unexpected but can be accommodated within the guidance. TPV was in line with expectations, and interest rates remain a key challenge. The company is closer to the bottom of its guidance but has levers to pull to meet targets.
Q:Can you continue growing credit despite the challenging macro environment?
A:Yes, the company believes it can grow credit due to low penetration, better client selection, and new secured lending products. These products allow for competitive offerings to better-rated clients, expanding the client base without significantly increasing risk.
Q:How will secured working capital products impact profitability?
A:Secured working capital products may have lower rates but not necessarily lower NIM due to reduced risk. These products also help attract better-rated clients, increasing competitiveness and cross-selling opportunities.
Q:What are the drivers for expected TPV acceleration in the second half of the year?
A:The acceleration is expected due to reduced churn, improved product offerings, adjusted sales force incentives, and targeted product and experience improvements. The company is not relying on macroeconomic improvements but rather on execution.
Q:What is the impact of adjustments in the centralized and automated credit desks?
A:The dedicated desk accounts for 20-25% of the portfolio. Adjustments include reducing maximum ticket size and risk appetite for lower-rated clients. Automated desks have smaller ticket sizes, and delinquency impacts are less pronounced. New models and secured lending products are expected to mitigate risks and support growth.
Q:What is your strategy for deposits, and how does it relate to interest rate sensitivity?
A:Deposit growth is seasonal but is being enhanced through better client engagement and workflow tools. Increasing deposits reduces funding costs and hedges against interest rate fluctuations. The company is focused on improving deposit duration and engagement to offset higher interest rates.
Q:What is the outlook for transaction activity revenue?
A:Transaction activity revenue may fluctuate as the company optimizes pricing across financial revenues, MDRs, and other services. There is no significant change in strategy, and the focus remains on overall client relationship management.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific timeline for when ARPAC would shift from a negative to a positive trajectory. Additionally, they did not clearly address the exact reasons behind the underperformance of credit models or provide detailed data on delinquency trends between centralized and automated credit desks.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BRL share
Diego
Slide
TPV retention
bundle pricing
capital distribution
churn level
client
cohort
commitment
cost
credit card
date
default rate
discipline
divestiture
dynamic
efficiency
end
merchant
model
objective
payment default
portfolio
priority
product offering
relationship
result
set
structure
trajectory
value
yield
STNE Transcript
StoneCo Ltd. (STNE) Q1 2026 Earnings Call Transcript
Unknown5-19
The earnings call summary presents a mixed picture. Financial performance shows improvements in some areas but challenges in others, such as increased costs and credit risks. The Q&A reveals management's confidence in addressing these issues, yet lacks clarity on certain points, particularly regarding ARPAC and credit model performance. The market cap suggests moderate sensitivity to news, and with no strong catalysts for significant price movement, a neutral sentiment is appropriate.
StoneCo Ltd. (STNE) Q4 2025 Earnings Call Transcript
Positive3-3
The earnings call reveals strong financial performance with a 15% revenue increase and 20% net income growth. Gross margin improved by 5%, and free cash flow rose by 25%. Despite leadership transition risks, the solid financial results and strategic focus on core business growth suggest a positive stock price movement. However, the absence of shareholder return plans and potential challenges with the new CEO keep the rating at 'Positive' rather than 'Strong positive.'
StoneCo Ltd. (STNE) Q3 2025 Earnings Call Transcript
Positive11-7
The company shows strong financial metrics, with significant EPS growth and upward revisions in net income guidance. Despite some concerns about TPV deceleration and NPL growth, management's focus on client value and profitability is reassuring. The strategic divestitures and shareholder returns through buybacks further bolster investor confidence. The market cap suggests moderate stock reaction, aligning with a positive outlook.
StoneCo Ltd. (STNE) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call summary highlights strong financial performance with significant growth in gross profit and EPS, a new share repurchase program, and a solid credit portfolio. The Q&A section shows management's confidence in achieving long-term targets despite macroeconomic challenges. The upward revision of net income guidance and sustainable financial income growth further support a positive sentiment. The market cap indicates a moderate reaction, leading to a prediction of a 2% to 8% stock price increase over the next two weeks.
STNE Report
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