StoneCo Ltd. (STNE) Earnings Call Transcript & Summary

Hello, everyone, and good morning. I hope you're all doing very well and are as excited as we are about the coming hours. My name is Roberta Noronha, and I'm the Head of IR at Stone. I have joined the company recently. It's been about 5 months, but IR is not new to me, and I'm really happy, and it's a pleasure to see some familiar face in the audience. The energy of this company was definitely a key factor in my decision to join. And I'm sure you're going to fill parts of this today. But before we get started, I would like to, or actually, I must go through some important disclaimers. Throughout Stone Investor Day, we will be presenting non-IFRS financial information, including adjusted net income and adjusted net cash. These are important financial measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information appear in our IR disclosure materials. Additionally, I would like to remind everyone that today's discussion may include forward-looking statements. Such statements are not guarantees of future performance and therefore, you should not put undue reliance on them. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from the company's expectations. Finally, many of the risks regarding the business are disclosed in our Form 20-F filed with the Securities and Exchange Commission. As a last remark, presentations and the video of Stone Investor Day will be available on our website a few hours after the event ends. With these disclaimers out of the way, let me show you the Stone team who's here today. Because it's our first Investor Day, we wanted you to have the chance to meet our management team as well as the executive leaders. Not all of them will be presenting, but they will be around during the breaks in case w you want to engage in conversations. In terms of the structure of the day we will have a total of 5 modules. In the first one, we have a company overview showing you how we got here and what are our future opportunities ahead. In the second module, we will deep dive into our MSMB segments, showing how we structure ourselves to serve our clients in their daily activities. In the third one, we will go through our technology, service and product platforms. Following, we will have a very practical view of our operations platform, which is a major advantage when attracting and enchanting clients. And finally, in the last module, we will translate all previous presentations in our financial outlook. We will have 2 breaks during the sessions, one after the segment deep dive and another one after the operations platform. Food will be available throughout the event, so you can help yourself at your convenience. We will not have a specific lunch break. And before we get started, some information on how we will address Q&A. As you can see, we'll have just one session at the end of the day. And we will have mics for the in-person audience who can also send written questions through the QR code that's printed and on your desk. Investors following the webcast, they can also send questions through the Q&A [ button ] in the platform. You don't need to wait the Q&A session to send the questions. They can be submitted in advance, and we will be collecting them during the events. Now, without any further ado, I would like to invite you all to watch our opening video. Thank you, please. [Presentation]

Good morning, everyone. It's Pleasure to be here today in the so-waited Investor Day. I think over the last quarterly results meeting, we kept saying that we're going to address the questions in our Investor Day meeting. So here we are today. It's a pleasure to be here. So first of all, welcome, and thank you for joining us today. On behalf of the entire team, I want to tell you that we appreciate you taking the time to spend a few hours with us to talk about Stone. Whether you're a shareholder, an analyst or a potential investor, we'll provide you with a deeper understanding of the company and explain why we are so excited for the future. As we begin to prepare for today, I ask myself what I wanted to accomplish. So I set some goals for myself and for the team. First, I want to share my perspectives on Stone after 8 months as CEO. Next, I want to give some insights into our strategic priorities and our long-term outlook. And finally, I want to talk about my goals to increase shareholder value. As some of you know, I joined the Board of Stone about a year ago. So I had the opportunity to get to know the company at a high level. After 8 months, my understanding of the company has increased significantly. A few things have surprised me more than I expected. Three things are better. As I got to know the organization from the bottom up, the first thing that really impressed me was the brain power in Stone. Unlike many companies in Brazil, the quality of people and thinking in this company is first class at every level, really the best of the best want to work at Stone. And I think this gives us a real competitive advantage. The next thing that really surprised me was the execution capabilities of the team. They really get things done quickly and always with the clients' best interest in their mind. So this type of organizational alignment is really rare. For example, in 2021, the company went through the perfect storm. The registry system failed, macro conditions got worse and Stone's credit portfolio was stressed. All this happened at the same time Stone was digesting Linx, its largest acquisition ever. What most people fail to recognize is how quickly the team adapted to the new reality. Profitability quickly recovered and we were able to keep growing. That's quite impressive, in my view. Finally, I was surprised by how much progress the company has made. Beyond payment -- diversifying beyond payments. This can be hard to see from the outside because only the tip of the iceberg has been shown up in our results so far. Over the next few years, I think the power of combining payments, banking, credit and software will become more clear as the iceberg rises out of the water. I also realized that we have plenty of things that we need to work on. There is a lot of room for improvement. And I'm laser focused on addressing these issues. So let me give you a few examples. We need to sharpen our strategic focus. As I got to know the business better, I felt that we are trying to do too many things at the same time. You may even have seen that -- these signs from the outside. I don't want to limit our opportunities, but I have prioritized and refocused our efforts on fewer projects with better returns on investment and have emphasized a less is more mentality across the whole organization. Next, we need to become more efficient. We are better in some areas than others, and I think that's normal. But I believe that we can unlock significant operating leverage that will enable Stone to run faster and become even more profitable. And finally, in order to achieve our goals, we need to optimize our organizational structure, including our management, reporting and business processes. I have already begun to make some key changes. So for example, we have redesigned our go-to-market approach and our organizational structure to more effectively deliver our full suite of solutions to the MSMB client segment. We have also prioritized the integration of our software business. I have prioritized 4 key verticals in software, where we have a real competitive advantage: retail, gas station, food and pharma. I'm focused on embedding financial services into our software for these specific verticals and developing the best go-to-market strategy. We are also rolling out better cost management and spending controls across the whole organization. Step 1 was implementing our shared service center and our zero-based budgeting approach. And we are working on a number of other initiatives that we'll implement over the next few years. We have also decided to simplify and consolidate our technology platforms so that we grow more efficiently as a multiproduct company. Now I want to talk about where Stone is today. More specifically, what's our mission and how does our strategy support it? How are we serving our clients? What are our 2 competitive advantages? And what are the best growth opportunities to allocate capital to? So let's begin with our mission. Our mission is to serve the Brazilian entrepreneur, transforming their dreams into results. So for us, entrepreneur means micro, small, medium-sized business. We also have larger clients, but our core focus and strengths are in the MSMB segment. We serve our entrepreneurs by helping them save time and money, with end-to-end solutions that really combine financial services with software. And our solutions range from simple devices to more sophisticated vertical-specific applications. These solutions help our clients better manage and grow their business, turning their dreams into results. So after deconstructing the mission, I'm really pleased to see that the strategy does support and advance the mission, as I'm quite positive that you're going to see throughout the day as of today. Next, let me walk you through how we are positioned to serve our clients. We have organized ourselves around each client segment to increase our ability to serve and address their needs in a differentiated way. At the foundation of the pyramid, we serve micro merchants with our TON solution that is simple, easy to use and cost effective for our clients and for Stone. This has been a real success business, and we are going to keep investing here over the long term. In the middle of the pyramid, we are targeting small and medium-sized merchants with 2 different approaches. For smaller clients with simpler operations, we have the all-in Stone solution that combines our payments and banking services. For medium-sized clients with more mature operations, we have more comprehensive solutions that integrate our financial services with vertical-specific software to better meet their needs. And finally, at the top of the pyramid, we have large clients that require more tailor-made solutions. We will be opportunistic in here. But as we streamline the business, our core focus and investment going forward will be on the micro, small and medium client segments. The third element I evaluated was our competitive advantages, which I believe comes from the combination of 3 areas: distribution, service and software. The first is tech-enabled distribution. Our channels portfolio allow us to provide service differentiation at scale as we have the ability to dynamically choose the right channel to serve each client. To our hubs and other channels, we cover 99.7% of Brazil service GDP and over 5,000 cities. And more importantly, we have developed our own software, mobile apps and technology tools to empower our people to cover their territories in a smarter and more efficient way. Later today, Mateus will show you how powerful the application we developed Marco Polo is. Over time, we have also developed the ability to reach millions of clients beyond the hub, through our digital channels. This has enabled us to open new market venues and operate more efficiently at a lower client acquisition costs. And finally, we have built a network of more than 300 software distribution franchises across the country. These franchises leverage the vertical-specific expertise of our partners to sell our software and financial services more effectively. Our second key competitive advantage is superior service. Industry data show that we have the highest client service scores in the market. This is crucial in a market where merchants have been treated poorly by banks and legacy players. So for example, we can deliver our solutions to clients very fast, typically in 1 day to SMBs and 3 days to micro merchants. Once there are clients, we pick up their calls in under 5 seconds with the highest first call resolution rate. And as a result, we have consistently ranked #1 in client satisfaction in Brazil. And our third competitive advantage is a comprehensive merchant platform that enable us to see data and understand our clients and serve them from a broader perspective in Brazil than anyone else. We can do this because we have a growing range of financial products and relationships that we are combining the leading software business in the market. So the combination of these 3 advantages in my view, it's very hard to replicate. Finally, I'd like to give you a high-level overview of our attractive opportunity ahead. We still have a big addressable market ahead of us. And we have only begun to scratch the surface. Our distribution model is far from saturation, even some of our most mature hubs are still growing at a very strong pace. As we mature in a given region, our distribution channels yield higher productivity and strong word-to-mouth unlocking additional TPV growth. Finally, we see a significant opportunity to grow clients through cross-selling between our financial services and software client base. Therefore, we see a very positive outlook for the future. We expect a 13% TPV CAGR from 2024 to 2027. Mateus will dive deeper into that in the finance section. We will monetize this TPV growth at an even higher rate. As I mentioned before, we are much more than just a payments company. As we scale our banking, credit and software solutions, we will continue to gain share in BRL 100 billion revenue pool in the market. We are already seeing very good traction in our banking product, and we're just getting started in creating software and financial services bundles. So for example, our heavy users, those that use more than 3 products generate on average 2.3x more revenue. Today, 21% of our SMB client base are heavy users, up from 14% we had a year ago. This client category is growing rapidly because many of our new clients are beginning this journey with us as a multi-product users. The combination of this trend plus our pricing discipline provides us a very positive outlook for the future. Again, as Mateus will dive deeper into this -- but we expect our MSMB take rate to increase more than 20 basis points between 2024 and 2027. We expect to generate even faster profit growth. Since we have already completed a significant investment phase across the business, I believe we can scale with limited incremental investment over the next 3 to 4 years. In addition, as we execute our new organization and cost management plan, I believe we'll be able to improve our operating efficiency. As a result, we expect a 31% CAGR on adjusted net income over the next 3 years. As part of my efforts to streamline our strategic focus, unlock operating efficiencies and implement a new organizational structure, I felt that we needed a simple way to organize and communicate our strategy. This is a simple visual, but I think it clearly captures what we want to do. So first, we want to focus on and win in the MSMB client segment. Secondly, after we win a client, we want to drive increased engagement. And thirdly, we want to scale our business and operations with minimal incremental costs. This strategy is really designed to generate better profit growth and increased cash flows. So from a shareholder perspective, I believe we are on the right path to create value to you. In fact, I think we are so convinced of this that I'm putting our money where our mouth is. And yesterday, we just announced an additional share buyback of BRL 1 billion. With that, I'm going to hand this over to Lia, who is going to walk you through our strategic priorities in more detail. I'll be here throughout the day to join in and participate in our sessions and answer any questions you might have during our Q&A session. Well, thank you very much, and I hope you all enjoy the day. Thank you.

Hello. Hello, hello. Can you hear me well? Good morning, everyone. I'm Lia. I lead Strategy & Marketing at Stone. I believe most of you know me, many familiar faces. I was on the team of the IPO, did all earnings calls since then, participated in many conferences. But for those of you who don't know me, I joined the company in 2015. And since then, my main focus has been to develop the strategy as we grew from a start-up to the full-fledged company that we are today. Now that Pedro has provided you with some high-level thoughts on our strategic evolution and priorities, I want to guide you all through more in-depth perspective, but I want to frame our strategic priorities in the context of our evolution until now. As we evolved over the past years, we became increasingly focused in prioritizing our strategic steps in 2 main dimensions: the client segments that we serve and the products that we offer. Our strategic choices were made for very specific reasons. For example, as I'm sure most familiar with Stone will know, we started by serving SMBs with a simple payment solution at attractive prices and with a very differentiated service model. We created our operational model to serve SMBs because we had the right technological assets, a very favorable regulatory environment and a large untapped opportunity. At each type of our evolution, we cemented the capabilities that enabled us to expand into adjacent markets, both by offering more solutions to the same clients and also by adapting our model to serve new client segments. Our set of strategic choices led us to the multiproduct, multisegment markets that we address today. Now I want to guide you through the steps of our strategic evolution, looking back at it with the benefit of hindsight. And I want to do it in a slightly more structured way, separating our strategy into 5 active evolution. While these don't include everything that actually happened throughout our evolution, they do provide an overview of all of the building blocks of what our company is today, and they give the necessary context for our priorities ahead. The beginning of our journey was to create a model to serve SMBs in a better way. In our Act 1, we built a strong foundational assets around distribution, operations and technology. This enabled us to establish our footprint in the Brazilian payments market. In the next session, you're going to hear from this Mateus Biselli how our value proposition in the market was centered around offering a payment solution with a much superior service at attractive prices. And we delivered that to a unique distribution model that for the payments industry at the time was something completely new. To our hubs, we could take a very granular approach to most aspects of our execution from a hyper-local pricing to tapping regional pockets of growth with great precision and focus. Achieving this would not have been possible without a strong focus on technology, both on the product side with -- through our end-to-end payments platform, but perhaps most importantly, on the operations side with all client touch points being controlled by our systems and technology since day 1. Technology applied to operations was perhaps the most critical element that enables us to scale this initial model as quickly as we did. Natan, as Pedro mentioned, will show you in a later session how our operations technology has evolved to this date as it is a cornerstone of what makes our model special and possible. So I believe that nothing speaks better to the success of our business model than our ability to win new clients. We deployed our first hub in 2016 and at the time of our IPO, we were already serving 268,000 clients. Slightly over 2 years later, this number was almost 3x larger and revenue soon followed, almost doubling in the same period. In this first act, we set our foothold in Brazil with a proven business model and strong technological -- and strong foundational assets around technology and operations, and we began to look at extending our reach to expand our business even further, which led us to our second Act, our expansion into the micro merchant segment. In the next session, Lino will also tell you how we adapted the core elements of our SMB model to create a unique approach to serve the large segments of micro entrepreneurs in Brazil. This strategy had 2 core elements that made it successful. First, the TON value proposition targeted the specific needs of the micro merchant segments, with simple offers at attractive prices and a focus on leveraging technology to provide superior service. And second, a service model that was adapted to the economic reality of the segments, low cost to acquire and low cost to serve as critical elements to achieve attractive unit economics. Creating a unique strategy to serve micro merchants through TON enabled us to achieve a new level of scale. What this graph shows is an indexed evolution of the TON client base in the bars and a proxy to our acquisition costs in the line. Scaling TON with a tight control on acquisition costs, coupled with an intelligent set of self-service offerings was critical to achieve attractive unit economics here. So operating at scale in both the micro merchant and SMB segments meant that we were processing payments -- payment volumes also at a large scale. But a lot of these funds were being deposited and spent elsewhere, most often in the accounts that our clients had with the large incumbent banks. Since our IPO, we had begun to look at expanding our capabilities into banking because we understood that the foundational asset that we created meant that we could expand the ways in which we help our clients. Our banking strategy was based on a few important decisions. First, we built a banking infrastructure from scratch that allowed us to fully control the client experience end-to-end. Second, we integrated payments and banking into one single solution and started to price bundles to new clients that onboarded on to Stone. As we did that, we started to see a powerful monetization cycle be created once payments volumes converted into deposits in the clients' banking account. Because the main driver of growth here was pricing bundles to new clients, we are also able to scale our banking with minimal incremental acquisition costs. So our banking has also performed very well so far. Our client deposits have grown almost tenfold since we started scaling at the beginning of 2021 until today. Today, over 88% of new clients have been onboarded with a payments plus banking bundle since 2022, showing the power and attractiveness of this combination to our clients. And we see -- we still see a vast opportunity ahead. Perhaps the simplest way to measure the level of engagement that our clients have with our banking solution is to see how much of our clients' payment volumes gets converted into deposits in the banking accounts. This figure shown on the line on the graph has been steadily growing, reaching 5% in the third quarter of '23. But this still means that the money that gets settled from payments only stays in the accounts for about 4 days. So I want to give you a bit more color on the power of the payments and banking combination, and why we still see a lot of opportunity ahead. On this page, we show that clients using more than 3 products generate 2.3x more revenue than clients who use up to 3 products. While we're already able to engage 20% of our base at this level, there is still a significant majority of clients with an opportunity to improve engagement ahead. And we're taking the right steps in that direction, as you will hear from Rodrigo Cury in the sessions that follow. I want to just highlight on this page how we have been able to improve the percentage of engaged clients over time. As you can see on the bar chart on the left, the percentage of clients with more than 3 products is accelerating on each new cohorts due to both the evolution of our solutions and our better ability to price bundles to clients. Again, speaking to the power of our distribution capabilities, you can see on the chart on the right of the slide that we achieved this acceleration while maintaining stable acquisition costs over time. So having achieved the significant level of scale in the SMB space, enabled us to gain a much greater understanding of the diverse realities within the segments. First, we always believed that for some profiles of clients, combining their financial services offerings with software could provide a stronger value proposition for them and a powerful economic benefits for our business. Second, we also knew that medium clients, the most sophisticated clients in these segments, were the most profitable, but also the mostly demanding in terms of the products and services. So our Act 4 was about evolving our model in order to create a winning strategy to serve medium clients within SMBs. And we did this first by building a specialized sales approach, layering a specialist sales organization in our hub footprint. In 2020, we acquired Linx, the leading retail software in Brazil. We wanted to penetrate its large installed base of clients with integrated software and financial services offerings. And we knew there was significant complementarity between the profile of clients of Linx and Stone. While Stone was very strong at serving smaller SMBs with its pure financial services offerings, Linx had a clear strength in the larger clients with its software offerings. So as Pedro mentioned, this acquisition took a long time to close, and it happened in a challenging time for our company. So this drove our decision to initially integrate all of our software operations under one segment and to pursue back-office integrations within the segment while keeping management and execution separate from our financial services operations. More recently, with the significant turnaround that the company underwent in 2022 and as part of our annual strategic revision, we have defined a clear strategic focus on integrating our financial services and software offerings in high potential verticals within the software business. On this page, I want to break down our software business in a way that materializes how we are approaching the software opportunity within our strategy. The verticals where we are prioritizing our execution towards capturing the financial services opportunity represents 48% of our overall revenues and grew 14% year-on-year in the third quarter of '23. Here, we're going to put a high emphasis on integrating all dimensions associated with combining software and financial services from the evolution of our go-to-market to alignment -- of incentives and product integrations. On the other hand, our enterprise business represents 20% of our overall software revenues. And our approach here will be to continue to manage the business for efficiency and cash generation, while our approach to financial service will be opportunistic. Lastly, 20% of our software revenues come from verticals that either do not have a relevant financial services opportunity or are not within our initial priorities. Our approach here will also be to manage for efficiency, cash generation and growth. So let me give you some color on why we have prioritized these 4 verticals to capture the financial services opportunity. They represent 64% of the total TPV pool of our installed software base, and 76% of the financial services revenue pool, due to better economics in the client base, which is significantly geared towards SMBs. To put these figures into context, currently, we have a TPV and SMBs of BRL 358 billion based on annualized third quarter figures. The priority verticals represent a potential TPV pool of BRL 236 billion, and we have only captured a small fraction of that opportunity. So it becomes clear that as we advance on this integration of these verticals, we open up a significant growth opportunity for our business by offering financial services bundled with software to this installed base of software clients. We're still in the very early days of executing on this strategy and our initial data shows encouraging results in terms of driving better unit economics. Clients that were early adopters of our integrated software and financial services solutions have shown a 2.5x better revenue profile, 2.1x more money in volumes from banking and 1.7x more money out transactions from banking. As we gear up to put increasing emphasis on expanding on this opportunity, we're very excited with these early signs. This leads me to the last and most recent act of our strategic evolution, our deployment of credit. We see credit as a massive opportunity to add shareholder value in the future. And over the last 18 months, we have gained confidence in our ability to capture it. We began to test credit in 2019, but due to a number of challenges and the difficult operating environment that we had during COVID, we did not perform well and we made the decision to shut the product down. This ultimately hurt our earnings at the time, but we recovered more than 100% of the total disbursement and more importantly, we had many learnings behind our mistakes. Since then, we've been working to completely revamp our credit operation based on a new team, new technology and a completely revamped product. As you will hear from Gregor Ilg in a few sessions ahead, this revamped product has greatly enhanced our value proposition to clients. And we have overstated that this is an area where we will be very careful while scaling to ensure that our growth can be in line with our risk appetite and according to market conditions. In the next session, you're going to hear a lot about how we're approaching the credit opportunity, both from our team, but also from clients testimonials themselves. Here, I just want to focus on the opportunity itself. If we consider all working capital loan products in the market, we estimate that the credit addressable opportunity amounts to BRL 54 billion already net of funding costs and credit losses. But perhaps the most exciting figure to us is the opportunity that already exists within our installed base, which is over BRL 12 billion. These numbers are representative of all client segments, but the majority is within MSMBs. Even if we take a conservative approach, these numbers make very clear how relevant credit can become to our business if we execute it well. I just want to wrap up this deep dive into our evolution by bringing a few takeaways. First, if we take a step back and look at the revenue impact of all of our 5 acts together, you can see the powerful -- power -- the power and benefit of our approach. We've been able to evolve, expand and diversify our business, bringing new levers of growth as we cemented each new capability. Since our IPO, this led us to grow revenues at a compounding growth rate of 51%. And speaking to the power of our business model, as Mateus will detail later today, this growth was coupled with significant contribution margin improvement while maintaining acquisition costs under control. So up until now, our addressable markets, I showed it to you in pieces of equal sizes. However, that is not exactly the case, both because client segments have different opportunities, but also because of the different revenue potential of each product. When we plot these market pieces to scale, we see a big change happen. We can now envision that our MSMB market presents an opportunity of approximately BRL 100 billion in revenue when we add up payments, banking, credit and software, showing that we have not only diversified our opportunity but also expanded our addressable market by 8x since our beginning. I think we've come a long way since our early days, but we're still small in compared to our addressable opportunity. If we can execute our strategy diligently and consistently, there's still a lot of value to be created for our clients and for shareholders. So Pedro just talked to you about our competitive advantages and strategic priorities. Towards the end of today's session, Mateus will guide you through how our strategic priorities will translate into financial results in more detail. Before I hand the stage over to Mateus Biselli who's going to go through a deep dive of our SMB segment strategy, I want to recap our priorities with an emphasis on why we believe we can capture this large opportunity that we see ahead of us. So in the next sessions, I hope that we can provide more clarity on the essential elements that will enable us to achieve our first strategic priority, which is to win in the MSMB market. We've built over time a true distribution powerhouse that allows for multiple client segment reach. We have an attractive financial services opportunity in our installed base of software clients and the right assets and organizational alignment to capture that opportunity. And over time, as we have evolved our business, we have done so in a way that we have proven our ability to sustain the best service in the market. The combination of these elements will be key drivers of our ability to continue to win new clients and grow above the overall market, gaining market share. Beyond winning new clients and growing above the market, we believe we will be able to drive engagement in the future because as we evolve our product platforms and our ability to better price bundles to our clients, we expand the breadth of monetization levers. We have a huge opportunity to drive further engagement and monetization if we can scale working capital solutions in the appropriate way for our clients and for our business. And we can use software as a differentiator to achieve higher level of monetization and better lifetime values. Lastly, we will be able to increase returns in the future as we generate profitable growth by leveraging the intrinsic elements of our business model that will enable us to grow, as Pedro mentioned, with minimal incremental investments. So our foundational assets around distribution, logistics, client service are really platforms for future growth. Most of the investments have been already deployed and these investments will generate growth in the future. Our product and technology platforms will enable us to deliver multiple value propositions to different client segments through a single technological infrastructure. Through the remainder of the day, my colleagues will bring these points in life -- to life in their presentations and demonstrate the power of our unique model. I just want to close by making a quick reflection around culture. In the IPO, we talked a lot about culture and we made the decision today to focus on the evolution of our business and the priorities ahead, but make no mistake. This is a company of owners, and it's a company of team players. And everybody who's going to come on the stage today is representing a much larger team that is really passionate about every day working very hard to drive our mission forward. So thank you very much, and I want to call to the stage Mateus Biselli.

Good morning, everyone. My name is Mateus Biselli, I'm the leader of the SMB business at Stone. I have been with the company since 2013, spending the last 10 years, building our services for small and medium businesses. As Lia just mentioned, we've grown our payment business, expanded our banking capabilities and improved and invested in software solutions over the years. Now our big goal is to combine all these efforts together to do even better in the SMB world. So today, we're going to talk about our product vision, how we serve our clients and how we go to market. So the MSMB segment includes different types of clients with different needs. SMBs are typically store owners. They can have one or multiple locations. So they're not able to be at the store all the time. That's why they have to handle employees, they handle teams and they also handle store managers. This segment is the largest in terms of revenue pool opportunity. We have BRL 63 billion and 2.5 million potential clients. Over the years, we had the opportunity to deeply understand the clients' needs. So let me highlight them to you in 3 topics. The first one is that small business owners grapple with risks and costs, associated with running physical stores. They aim to boost sales through different channels and multiple payment solutions. Second, they also deal with a lot of complexity and use time consuming and inefficient tools. They really want to simplify their back office tasks to focus more on sales. And third, they need timely and fair priced capital to operate. They also need health, managing excess capital when available. In response to these challenges, over the past 18 months, we've been reshaping our product vision. We want Stone to allow our clients to sell, manage and run their business more efficiently. Now let's explore each aspect of our value proposition. Our first priority is to make sure our clients never miss a sale to help. We offer various payment methods and reconciliation for in-store and online sales. To offer more time and business control, we provide a merchant-driven banking account that centralizes all funds. We're developing tools like business credit cards, payroll and reports. And we help more mature SMBs, integrate Stone with their POS and ERP system. More recently, we started to roll out solutions to provide clients with money when they need it. We also offer ways to improve business turnover, and we will help them with automatic savings. What sets us apart is that we offer a complete business and -- a complete business to an ecosystem and will support the client's financial needs and workflows. We're presenting Stone to the market in 2 different ways. The first, our primary method addresses common issues to our Stone suite, so our app, our portal or POS. This approach is tailored for small businesses who are typically less mature and simplifies operations coming with bundled pricing. Now let's watch a video to delve deeper into this initial approach. [Presentation]

So you listening to me, right? Okay. So as you saw from the video, Stone's core value proposition is delivered as a horizontal strategy, allowing our clients to choose a single provider with high-quality service level and a bundled pricing. In the technology platform section, [ João ], Marcus and my colleagues will further explain to you how the product works. Now let's talk about the second way that we will approach the market. The acquisition of Linx gave us another way to help businesses. Stone Embedded is a vertical approach that creates a unified value proposition, integrating financial services and software. As you already know, we prioritized 4 verticals, being retail gas stations, food and pharma, and we also integrate third-party software. Stone is known in the market for our high quality, high service level. And we aim to achieve this by establishing operational synchronicity between both Linx and Stone's, service and distribution channels. We believe this approach is better suited for medium clients, who are usually more mature and have moved to [indiscernible] locations. Again, let's watch another video. [Presentation]

So as you could see in the video, adopting a specialized strategy allow us to address industry-specific pain points. The distinct solutions we're building will serve as a strong differentiator. So we get it, time is money. Our goal is to help our clients save both all in one app. We see our solutions in 2 layers, the financial layer and the workflow layer. Here, you can see the client's financial layer when they handle money coming in and going out, check on balances and make the most their key financial decisions. We aim for a complete financial service solution. We want to help clients save money, save time, feel more secure and make better financial choices. We uniquely connect this financial layer with key client workflows. Clients want to run their business, not use a bank. As we help them through technology, be it directly with the Stone app or with integrated software. This is our power of combining. Now let's talk about another important part of what makes Stone unique, our operational model. As you may recall from our IPO, we call this the Stone model. From the beginning, we aim to delight clients in every touch point. From -- for this, we have teams, sales, logistics and client service. The sales team is everywhere in Brazil. They help us reach our clients in every part of the country, be it physically or digitally. Logistics team is quick to fix or set up things, getting our POS devices to the client in the next business day. And our customer and our client service team is available 24/7, answer calls in under 5 seconds, and resolves 93% of issues in that first call. Each of these interactions totaling over 1 million each month are opportunities for us to make our clients happier and also learn about how we can improve our products, services and offerings. Later today, on the operations section, Natan will further explain how we apply technology to continue to make our clients happy and gain efficiency. From the get-go, we recognize how we reach our clients as a powerful advantage. Picture this, over 14 million clients scatter across Brazil, which is a fast nation. Our mission, tailor our reach while being cost effectively. That's where our distribution network comes into play, composed of 3 pillars: first, digital channels, think targeted ads, online tools and campaigns, allowing us to efficiently connect with our clients at scale. Next, our proximity channels. Here, it's all about personal service and creating strong client relationships. And third, our strategic partnerships. They help us reach even further, connecting with parts specific parts of the market and client groups. Over the years, we've evolved our hubs operations and diversified our channels using different types to pair our reach to our clients. So let's dive into how these channels work across Brazil. [Presentation]

So to quickly recap, we will continue to grow because our product vision and execution is unique. We are the leaders of service in our industry, and we have powerful distribution networks. Mateus will further detail to you, hope this goes to insightful financial metrics. Next, Lino will talk to you about our clients and about our strategy in the micro segment. Thank you, or as we see in Brazil.

Thank you, Mateus. Good morning, everyone. My name is Victor Lino, and I'm the leader of the Micro Segment here at Stone. I have been with Stone since 2017 and had a privilege to be part of the team who developed Stone, our brand to me in this segment. Today, I'm excited to give you more color on our strategy going forward, specifically talking about who the client is, the solutions we offer and our go-to-market strategy. In this segment, the client is the business and is always you need to make a living. Operating informally and without physical stores or employees, they rely on themselves to get the job done. They also mix their personal and business finances and are very keen on technology. As you can see on this slide, this segment is very significant, both in terms of number of merchants around 12 million in Brazil and a revenue pool of more than BRL 33 billion. In order to address this big opportunity, we adapt the strong value proposition to the specific needs of these clients and the challenge involved in this segment. We have, in our strong DNA, the devotion to provide the best service. So our primary focus was on keeping this obsession, but on a much higher scale. To achieve it, we created a digital first distribution and client experience. All of this was made to provide what the micro merchants value the most, low-cost, simplicity and digital proximity. For us, low cost means that our clients can have access to payments and banking solutions with the best prices in the market. Simplicity is at the core of our solutions, so our clients can start selling in less than 5 minutes. Our user-friendly interface makes Stone intuitive and easy to use. Evidence of this -- good experience is that our top of the industry score of 4.9 in the Apple App Store. And finally, digital proximity means that our clients can have fast and efficient access to us whenever they need. This commitment to solve our clients' problems in a fast and efficient way has played a significant role to our leadership [indiscernible], a Brazilian customer review website. I'll now share to you a short video, so you can hear directly from who matters, the client. [Presentation]

As you all heard, our clients need simple and practical solutions that address both the individual and business needs. And we are building just that. We also choose to help them sell in person or through digital channels, using POS, Pix, Payment Link or even their own [ self-one ]. So with this, they never lose a sale. Our simple and intuitive app empowers our clients to efficiently control and use their money for both personal and business needs. The clients can download the app, create an account and sell in less than 5 minutes. They also have access to the money every day, including on weekends. In the end of the day, what truly matter to us is the feedback from our clients about how our platform empowers them to take control of their finances and brings them one step closer to achieving their dreams. Finally, our micro go-to-market strategy is built around our most cost-efficient channels, allowing for rapid scaling with low CAC. As Lia showed, we reached a significant client base and lowered our acquisition costs in a very short period. We also have a broad portfolio of digital channels that enable clients to reach out when it's most convenient for them with our quick setup process, again, they can start making sales in less than 5 minutes. As our client base grew, we've leveraged our strong relationship with our clients to establish a member get member program, enhancing their motivation to recommend us to their friends and to their neighbors. Our next video give you more color on how we distribute our services to these clients. [Presentation]

All in all, our commitment to provide micro merchants in Brazil with simple practical and affordable solutions that empower them to succeed. Our path going forward is crystal clear as we continue to approach this segment pragmatically and scale our offering with minimal incremental costs. Our clear strategy and our strong culture of execution will drive superior client satisfaction that will result in continued market share gains with increasing profitability. Thank you, everyone, and I'll pass it over to Lia to recap our segment's strategic priorities. Lia?

So we're going to end the segment module soon. I just want to do a quick bridge back of what you have just heard to our strategic priorities and help compare a little bit how they translate to micro and SMB segments. So first, we're deeply committed to winning in the SMB markets through a unique distribution capability and using attractive bundles to combine financial services and software. Second, we do expect to drive engagement as we broaden our financial services solution portfolio and roll out our software and financial services integrations. We will do so while scaling through our platforms, leveraging our foundational assets and our technology platform to scale with decreasing incremental investments. And I hope that you've had a chance to materialize. These priorities are accomplished, taking into the account the specificities and different realities of each client segment. So let me walk you through quickly how we win, engage and scale in each of our client segments. Within SMBs, we're going to win by serving clients, mainly with our Stone suites with its horizontal and embedded value propositions and with differentiated service. Here, a key to winning is our proximity channels with the granular approach to pricing and local competitive dynamics. We will help our clients through a full suite of merchant-driven solutions. In contrast, in micro, we will win with our TON solution, which offers simplicity, attractive prices in a digital-first service model. Digital channels are paramount to ensure that this equation works both for us and for our clients. Here, our offer is mainly entrepreneur-driven, helping entrepreneurs both with their business and their personal lives. Our engagement equation for SMBs rests on driving bundles with payments and banking as an entry point for more product penetration in the future. We're scaling credit with a completely revamped credit product, and we will use software as a differentiator, especially in more mature clients within the segment. In micro, our engagement starts with a simple entry solution that is easy and intuitive to use. As clients grow, they naturally seek more mature solutions and increase engagements. We will scale banking through a value proposition that connects the entrepreneurs business and their personal life needs. Finally, we're going to explore the best options to address this segment's working capital needs in a way that is in line with our risk appetite because we know that our clients value it a lot. Finally, let's talk about our 2 scaling machines. In SMB, we will leverage our massive client distribution footprint to our hyper-local distribution, our last mile logistics and human touch client service. Our operations will continue to scale with intelligence and automation through the use of our best-in-class operations technology. And we will develop and implement new features leveraging our single product platforms around payments, banking and credit. In micro, we will continue to scale through our digital first service model that combines variable cost with a unique service differentiation. We will leverage our digital channels to sustain high client satisfaction and achieve word-of-mouth effects. The same technological platforms used to scale in SMB will also be foundations upon which we scale in micro merchants. So with that said, we're going to take a 20-minute break and get back to hear from our technology and product teams on our platform strategy. Thank you, everyone. Hello. [Break]

Thank you all for joining us today. In this model, we are excited to present the [ engine ] that powers our ability to provide unique and personalized solutions for each of our client segments with Stone platform. Allow me introduce myself, on Joao Bernartt, I'm responsible for Stone's products. We have over 20 years in the tech industry. My expertise lies on creating products and solutions for merchants and retailers. Let me share a brief overview of what you can expect for the next hour. We will begin with Marcus Fontoura, our CTO, sharing our technology mindset, introducing the Stone platform concept. After him, our product leaders will demonstrate our solutions and offer a sneak peek into what you can anticipate for the 2024 products road map. To conclude this model, we will offer our long-term product vision. So let's start, Marcus, please.

So thanks, Joao. Hello, everyone. Thanks for being here. My name is Marcus Fontoura. I joined Stone last year after a more than 20-year career in big tech, working Silicon Valley in Seattle. And I'm a big believer that technology can be used to solve the world's biggest problems, including helping entrepreneurs to achieve more and do more. That's the reason that brought me to Stone and I'm very excited to be here. I would like to begin by inviting you to watch a short video about our technology mindset. [Presentation]

So as we outlined in the video, we strongly believe that having scalable platforms is very essential for a competitive advantage. However, this is a journey, and we still have some work ahead of us. I'm sorry for deal slow here, engineers like these slides with lots of circles. But if you're looking in the tail here, like you can see that some names are replicated. And these names means like our services and teams that work to compose our experiences. If you look here, for instance, data platform appears thrice. This means that like we had 2 different data platforms since built without too much oversight and using different technologies. This was the state of the world about 18 months ago when I joined Stone. I'd like to joke that you were like multi-cloud, but we are chaotically multi-cloud because teams had independence to have contracts with different cloud providers. And of course, there is a reason we did that. We did that because we want to have fast time to market and development speed for it to be innovative. However, we saw a focus on multi-segment and multiproduct, this solution doesn't scale very well. That's why you build the concept of a Stone platform, and that's what me and my colleagues are going to detail for you today. So the main idea behind this Stone platform is this idea of use -- build one, use many. I mentioned in the video that banking, for instance, instead of building a stand-alone application for banking, we built a platform that is scalable and can be used in different segment domains like Stone and Ton. My colleague, Rodrigo Cury, will talk a lot more about baking in the next slide. So what is the Stone platform? Computer Science one on one tells us that platforms are built of layers. So these are set of layers for it. So I'm not going to detail about these layers, but I'll just give you a high level of overview and my colleagues on the product side will explain more that. So the experience layer is the layer that allow us to build customizable solutions for each product in segment domain. The product layer is the layer that contains our main financial services and software products, including banking, credit and payments. Operations. I'd like to call this layer as the technology proximity that allows us our teams to be close to our customers and delight our customers. And finally, internal, which is a very important layer for us is that the layer that has services that empower our developers and the rest of Stone to remain agile. So the main idea of building strong platform and organizing it across these layers is that although we still very much believe that fast time to market is crucial for us, we want to be more intentional in our technology outlook. And this intentionality allow us to still -- to gain more efficiency, but still like delight of our customers and drive innovation very fast. Again, this is just a few example of like some of the services that belong to each one of these layers, I'm not going to go in detail in each one of them. But from the -- my technology and engineering standpoint, the key idea here is to show it to you that these services are independently deployable units that we have strong guidelines for security, scalability, performance and efficiency. So we are being very intentional on how we will build these services and allow our technology platform at Stone to evolve. With that in mind, I will invite João back to the stage to tell you which one of these layers mean.

Thank you, Marcos. Now that you have seen how Stone platform is structured, let's zoom into the experience platform. As my colleagues have explained, we serve segments of different sizes and business activities, which brings complexity to understand and address the clients' requirements. To achieve scale to deliver applications for each of these segments, we need to be able to reuse our components and allow the developers to easily adapt the user experience to deploy a mutual platform with mobile Android iOS applications and easily set up features and craft the final experience in a unique way. Promote education systems to interface components like [indiscernible] or even our POS hardened software, we can reuse a lot of work. That's why the experience platform is where personalization meets scalability. But part of this amazing speed to build different solutions that we have here comes from another layer, the product platform. Let's understand. Imagine building a payments banking or a credit solution for each segment. That would mean a lot of efficiency waste since many things could be done in a common way for all segments. Instead, if we create just one experience for payment or banking that serves all segments, would lead to standardization, would result in low fit for the specific needs of each client, leading to a of competitiveness. The product platform aims at best of both worlds to provide specialized expertise through common APIs, application programming language and SDK, software development kits and micro service that will be used for all segment applications, but in an embedded way. This allows for the maximum possible use of a component and specialization here, this layer, while providing the capacity for specific configurations and customizations in the experience platform. From a perspective of technology, this is what it means to scale minimal incremental costs. I invite you to watch a video that shows what our product platform can achieve. [Presentation]

To demonstrate how the payment product can be combined with banking and ERP software for different value propositions, I'll call to the stage, João Misko, the leader of the payment platform. Please, Misko.

So hi, everyone, I would like to thank you for joining this session. My name is João Misko, and I have been part of Stone since 2016. I joined the company through Pagar.me, which is our company that serves digital merchants. After 2 years, I became the leader of this business. And in 2022, when we decided to pursue the platform strategy, I became the leader of our payment platform. We have evolved a lot during the last 2 years. And I would like to share what we have been doing and what we're going to do for the next year. So in order to do that, I'm going to share to use the cases with you on how we are deploying our payment capabilities in different segments. First of all, on micro and the other use case on medium merchants. So going to the -- all the streams of the spectrum of clients that we serve. Okay. So our first use case is TapTon, our tap Tap On Phone solution designed to simplify payment acceptance for micro merchants. As you have seen during Lino's presentation, micro merchants are cost sensitive and value simpler and digital solutions. With that in mind, we created TapTon, a chip ready to use that enables our clients to start selling within minutes. Okay. We were the first company in Brazil to invest in a tap-on-phone solution. And because of it, we get the leadership of this market, and we keep working hard to keep this position. So let me show you how it works. The process is very simple. The merchant just need to download Ton's app, pass through the registration process, would take like 5 minutes and choose sell through Tap. Once it happens, merchant can define a value and ask the consumer to tap their phone or credit card -- and debit card too -- sorry, the transaction is approved. What's important to say here is that this is the solution that's helping us to scale our offering within the micro segment even in the smallest clients as this solution is asset-light, it provides us with very low cost of acquisition and service, okay? Now that I have shown you the first use case, let me show you how we are combining payments, banking and software to deliver solutions for the medium merchants. As you may have seen during Rodrigues' speech, the life of a medium merchant in Brazil is tough, as they need to manage a lot of providers because we have a very fragmented ecosystem of solutions. And most of the time, they cannot afford to pay every solution they need. With that in mind, we created Stone embedded solution, basically integrating Stone services with Link's POS services, okay, where we can deliver everything that the merchant needs in the price they can pay. Starting the demonstration. I can say that before the POS terminal was only used to process transactions. Now, it's a whole sales solution. So imagine you are in a store buying for somebody. Now the sales attendant can choose from the stores product catalog, the product that you buy, but not only the stores they are in, but also other stores and e-commerce inventory, enhancing a lot of the chance of converting that sale. Beyond that, the sales attendant can also collect consumer data in order to further promotions and also CRM actions. Of course, the solution allows the merchants to collect payments and also print the tax receipt, and it might look simple. But in Brazil, this is a very complex process as geographically, it's very different. So we are simplifying a lot the life of our merchants. Okay. So the sales process is finished, but not the work of the merchant. Now the back office process of managing the sales starts, and in order to solve that, we are integrating our banking with the ERP, okay. So now within a few clicks, the merchant can check their financial statements looking for balance, future and actual; they can reconcile their sales and receivables; and also manage their cash flow. Going further -- I'm sorry. Now we can say that the ERP became the online banking of the merchant. This is something that we truly believe changed the game. Going further, these integrations also powers new automations like automating the new payment flow. So before a process what was made by humans manually can be automatically done by the ERP. Based on its entries, the ERP schedules bill payments and everything goes to an approval flow. So we make sure that there is no human errors during the process and the finance team can approve all the transactions and payments. In the end of this process, everything is reconciled to the cash management solution. Installment say that time is money, and we are helping merchants to save both. In summary for this first session, I would like to say that payments can be deployed in very different manners and different experience to multiple segments. Second, Stone's POS solution is the only POS solution that the merchant needs. And third, with Stone, the ERP became the online banking for the merchant. Now I'll bring you some highlights of what our clients can expect from our payment platform during next year. First, we are aiming to become the single part of contact for payments acceptance and reconciliation. And why is that? As we keep enabling new sales channels such as social networks, marketplaces and payment methods such as PIX, Boletos, and merchants want to sell through all of these channels and payment methods, managing sales gets complex and reconciliation becomes crucial. In order to solve that problem, we will provide a simple and intuitive experience that allows merchants to have full control over their sales independent of payment method or sales channels. This is the first one. Secondly, we believe that we need to pay our merchants whenever they need or want. So in order to go and solve this problem, we are doing 3 things. First of all, we are paying our merchants in non-weekdays. Second, we are starting to pay card transactions in the same day that transaction happens and we are pursuing to be instant settlers. We can set -- we want to settle transactions like 5 seconds after it happens, independently of it's a card transaction, PIX, Boleto or any kind of payment method. We believe money, it's important to be fast delivered to the merchant. Then the third point that will make us deliver our vision is going beyond payments, as you could see in the video, and what we are doing on that. We are creating product catalog that is integrated to multiple channels such as social media and marketplaces that will allow our merchants to sell more. Another thing that we are working on is to deliver an invoicing suite evolving our payment link to a new solution that will help our merchants to send bills and invoices to their customers. And the third point that we are working here is to bring that solution that have shown you of tax issuance in the integration of software natively for our solution. And the fourth point is our app store. We are opening our app store in the POS terminal to third-party software, okay? That's all that I had for today. And I would like to reinforce one last message. Everything that I have shown you today are products that can be delivering in any segment and any brand that we have as we have one single platform. This is a matter of a business and offering decision. Now I would like to invite Rodrigo Cury to share with you what we are doing in banking. Thank you, guys. [Presentation]

Hello, everyone. I'm Rodrigo Cury, I'm the Head of Banking at Stone, and I joined the team about 1.5 years ago. I come from the market. I have about 25 years in the banking industry. And I worked for Citi, Barclays, Santander and BTG Pactual before coming to Stone. So I'm going to tell you a little bit of our plans. And it's working for Stone, implementing new features of banking is something very, very, very -- how do we say it, it's very good to know that you have the payments business going on, a very big strong thing that we can combine forces to give more to the customer. We are already part of the cashing -- the sales cashing process. So the banking is something that combine it to the payments is very, very strong, okay? I'm going to show you some things that we've done to grow the bank. If you were following the figures, you can see that we grew a lot in banking, Lia mentioned before. So there are a few things more than launching products and features that we did. I'm going to give you some examples. First one is to enlarge the methods we give to the customers to sale to cash in. So what have we done? Apart from the POS terminals and the online payment links, we are putting a lot of efforts in Boleto and PIX. It's growing a lot. If you've been recently in Brazil, maybe you have seen this kind of thing, a printed QR code on the counter of the store. If you are a merchant, don't do that. It's not very smart. Why not? Because you are very exposed to fraudsters. And it's out of your reconciling systems. So it's out of control. Don't do that. What have we done seeing the opportunity? We have launched the PIX embedded in our POS machines. So the customer can really make a shop in the stores in a safe way, and this transaction is like any card transaction within the reconciliation system. It's easier, safer, more convenient, okay? What else? One client, one interface, even if they are using multiple products. So we embedded our solutions into the apps and portals: statements, balances and everything that you can find in banking, they are interconnected to the legacy systems. So the other things that, remember, you heard before that everything we do is we do better because we know our clients, our clients' needs. What it means? Many of them, they have employees. And some of those employees, they help their owners to manage the businesses. What it means, that sometimes you have to be multi users on that account, okay? So it's a very important feature in our offer that we can give, for example, to a finance manager the power to use the account to pay bills and make transfers. Then it goes to the owner that can control and approve the transaction. It's much safer as well. Okay. And I think we've done a lot of things here and it's helping to grow the business. But recall, we are expanding integrated cashing methods. The offering in a unified will of cash flow and tailoring workflows to meet complex needs. That's the summary we made for the recent deliveries. From now on, I'm going to share you a few things that we want to do for the next month, we want to deliver next month. Among a lot of things, I chose 4 things to share with you guys. A cash flow monitor, a new savings product, a payroll system and our credit card evolutions, okay? So briefly, I'm going to start with the cash flow monitor. We call that also the BFM, Business Finance Manager. So we can help the customers to consolidate not only the cash-in transactions, but the outflow transactions, the expenses, it makes control, you can categorize and it helps clients to control their finance across the board, everything. Even transactions for other financial institutions using the Brazilian Central Bank open finance rails, okay? More than that, we can add insights, ideas and advices. You really can help the customers to make -- our clients to make a better financial management on a daily basis. Second, is our new savings product. You can call that the virtual PD bank, [indiscernible] we say in Portuguese. What is that? Clients want to save money. They don't know how. So we give them an interface that they can set purposes like expanding the business or buying new equipment or anything like that. And automatically, from -- out of from the payment system receivables, they can save a part of that if they want, but it's flexible. I want to make an episodic deposit, okay? We're allowed to do that. I want to take it off. I mean you know that some that are very cash intensive. They want to take the money off, okay, it's free. So it's something that it's a huge demand from our customers and our clients to help them to save money, to have a healthier financial life. Third, I just said before, that many of our SMB customers that have employees, and it's a headache to them to manage the payroll. Big companies, they are well served by traditional banks in general. They have solutions available in the market. Small companies don't have anything. So we are going to launch something that are going to be integrated with their ERP, and they can anticipate sellers, for example, not only pay that or anticipate that. It's a headache, as I said before. And you can add benefits to the well-being of your workforce. So it's something unprecedented in Brazilian market. And fourth, not the least of the things. We are launching -- as you may know, we are launching a credit card right now as we speak. But it's a standard credit card. And we are going to launch a lot of new features based tailored for our customers. Benefits not just [indiscernible] and things like that, that are made for individuals. And we want to be, again, combined with the payment system, that's very strong. And let's remember that our clients, they don't have a salary one day per month. They have a cash flow day by day. So you're going to do something very new. And if you if you track us, you're going to see a very -- a number of things, okay. That said, after this glimpse of banking, I'm sure you are eager to know more about credit, and we invite my dear friend, Gregor, to the stage. Thank you very much.

Hi, everyone. Thank you for coming and for the patience to understand our business and the challenges that we will face ahead. I'm Gregor Ilg. I'm responsible for the credit business here at StoneCo. A little bit of background. I've been working in the financial markets for over 30 years, orbiting around credit, commercial, treasury and risk areas. Being the majority of my experience held at Banco Santander, where over the last 8 years, I was responsible for the risk SMB area from 2014 to 2022 when I eventually decided to join to StoneCo. The reason why I decided to trade 22 years at Santander, to rebuild the credit business here at Stone was because I envisioned the possibility of making a huge improvement in the SMB markets because we have here Stone in a unique situation. We hold currently the most important asset in the entire industry, clients. We have lots of clients, and not just clients, but clients that connect to us as Brazilian, and Lino mentioned before, in a very special way. Our payments platform connects deeply with our clients, driving their primary revenues. We align with our customers, develop solutions that addresses their main pain points expanding the banking product portfolio, enhances engagement are key to drive credit revenues. And last but not least, our hubs working as a potential first line of defense, strengthen our position for portfolio expansion. Over the last 18 months, we developed a comprehensive credit structure using data from across the company and the market. We now manage the entire credit system from concession to recovery, and this brings us to our new credit solution. I think it's going to be easier to demonstrate how user-friendly this solution is for our preapproved clients. Let's move on. Well, as I mentioned before, we rebuilt our credit solution from scratch. When I say solution, I think this showcases the synergy between platforms, because it links our clients' account data in our banking platform to the credit card receivables in our payments platform. Thus, generating a robust credit offer. In this case, you can see we are talking here about the BRL 25,000 offer. Once the client decides to apply for it and has the credit approved, we have now introduced monthly installments. Besides the installments, our clients can also access all the information of the offer via app. And we can have the resources, credit to his account in a couple of days. We just don't do it online in real time because we have to register the credit card receivables in the trade repository to have a stronger and solid collateral, and I will get to that later on. In this case, the client has installments of BRL 5,000. And we also have an innovative way to have the prepayment of our installments. As my colleague, Rodrigo has mentioned in the video, we can retain or re-retain portion of percentage of our clients' daily sales in credit or debit cards. So you don't see any kind of bullet payments across the entire period related to that specific installment, extremely smooth and easy, and I'll show you here how that works. And you will see that he can prepay a portion of the installment through his POS terminal. Through his payment link, these 2 features are already up and running. And he will be able also to do so with the Boleto and the PIX transfer. This is coming soon. And once the installment is fully settled, we informed the client how much he saved on his loan. This generates a win-win situation because the client reduces the cost of the loan, while Stone reduces the delinquency of the portfolio. However, if the retention mechanism is not enough to repay or prepay the entire installment, we also offer alternatives for our clients to keep the loan on track. The client can use future receivables, can use account balance, we can issue a Boleto, We can have PIX. But most important of all, if the client has card receivables at any other acquirer, the resources arising from these receivables will mandatory be used to serve our credit. This is the advantage of having the credit card receivables registered at the trade repository. So there will be no cash evasion. We acknowledge that our clients may have challenges over the time of the loan. And therefore, we offer to our clients the possibility to reschedule the repayment flow of his loan in case the client should need it. And this process is extremely easy, and it readapts the cash flow -- the new cash generation of our client to the repayment flow of the loan. One thing that's very clear to us is if our client is committed to repaying us, we are committed to helping him do so. Well, one question that always pops up is what are we doing differently this way -- this time. In the relaunch, we revamped both the product and user experience, learning from our initial credit venture. Key improvements include monthly installments, as I mentioned before, replacing the previous lump sum payment and retaining the retention mechanism. We integrated retention data into monitoring, enhancing our ability to identify credit issues and offer reschedule options via the app. Moreover, all loans now were the personal guarantee of the main shareholder. Enhanced monitoring tools provide real-time data for immediate response to any unusual vintage behavior. Our models now incorporate extensive external data and control points ensure the decision quality by continuous monitoring scoring processes. As I mentioned, just a couple of minutes ago, acquiring collateral is registered at the trade repository before disbursement, minimizing the cash evasion risk. We have also assembled an experienced team of well versed in credit business, developed advanced decision models and redefined governance, setting boundaries with the approval of our risk appetite statement at our Executive Committee. We are now definitely prepared for the new credit cycle. And now let's talk about the future. The strong interaction between segments and platform is a key strength in distributing credit products to our client base and unified language, mindset and ambition unite us to conquer the principality in the banking relationship of our clients. With these thoughts in mind, let's have a sneak peek of our goals for the next 12 months. Well, first of all, we intend to scale up our working capital facility for our SMBs by expanding our offers according to the performance of our models, unlocking new cohorts, but always with a cautious approach from a credit and risk perspective. As also mentioned before on the video, we will launch a new overdraft facility, which is different from what you can see or is currently available in the market, addressing several of the pain points that our clients commented to us and which will generate the capability of penetrating our portfolio. And last, but not least, we will build up our product market fit in micro. This is something that we will do by understanding the credit dynamics of this specific segment experimenting with different financing structure to find the best fit -- sorry, but that's not all. We are not just focusing on the next year. We are also setting things up for the long-term success. For instance, we are looking to providing links to customers, our software customers with building credit options to help them manage money better. We are also exploring partnership with the local development bank for more competitive deals for our SMBs and micro clients, and we are figuring out new ways to unlock challenging customers without reaching our risk appetite. We understand that too much credit, like too much medicine can be harmful, and we want to avoid that for our portfolio. We understand that the combination of the 3 main measures planned for the next 12 months, coupled with our payments and banking strategy will allow us to claim our spot as the primary bank of our clients, increasing engagement, satisfaction and significantly reducing the churn of our base without compromising either risk appetite levels or the quality of our credit portfolio. If you have any questions or would like to further explore any of the information I mentioned before, I'll be more than glad to address them at our Q&A sessions afterwards. Thank you so much for your attention. And now, I'll invite João, back to stage to wrap up the platform theme. João?

Thank you, Gregor. Watching the demonstrations, we see that the 3 products reinforce each other, turning financial management into a simple and smooth process. This is what we call the power of combining. At the core of our experience, we have placed our bank account as a business management tool, not as a checking account for individuals. We are calling it a working account because it automates various day-to-day operational workflows for the customers. We strongly believe that the convenience that we are creating through this account, we enhanced the primary and engagement not only for the banking but for all our products. So surrounding this account, we will evolve the value for our clients reinforcing the options for money through payment features, as you saw with Misko. We'll improve cash flow management, provide new ways of money out, and we will help merchants for future planning through banking features combined with ERP software. And finally, the credit platform will complete the set of offerings. As you can see, what will make the difference, a set of solutions from all platforms working together, reinforcing each other. Looking ahead, we have established some strategic guidelines to create a clear product vision for the evolution of each of our platforms. Our product platform will evolve from payment to an omnichannel checkout merging our payment platform with order management solutions and other retail sectors will simplify how clients set up sales through different channels, and we will amplify the possibilities to our clients sell more. Additionally, we will evolve from banking to intelligent spend management, open finance plus AI plus embedded banking to ERP will bring a complete new way of spend management from reaction to proaction, from a place to find information to a place to get in sites, from a [indiscernible] oriented banking to an automated business process solutions. That is the future of banking. And finally, we will move from credit to a more cash flow adviser. Our banking evolving to an intelligent spend management will provide a huge amount of data to credit models predict cash flow requirements and suggest new way to optimize the use of external capital. This will reduce interest costs and maximize net results. So our product vision, we will empower our clients with intelligence and knowledge that will help them sell more, save time, manage a better and healthier financial life. Thank you for your attention. Now we have Natan with the operations platform. Thank you.

Hello, everyone. So my name is Natan Gorin. I joined Stone in 2015, and over the past several years, I played different roles to help build our sales, client services and technology teams. And since 2017, I am responsible for our operations platform. As João and Marcus have explained, operations platform is one of our tech platforms. And during this module, we are going to better understand how it works. Biselli and [ Lino ] mentioned that our MSMB operations rely on 3 distinct yet interrelated teams. Our sales operation has established a distribution in over 5,000 cities across Brazil with an effective way to relate and reach local merchants. Our logistics operations provide quick delivery and maintenance of our hardwares everywhere in Brazil. And our client service provides round-the-clock support, promptly solving clients' issues through our chat bots and our enchanters. Since the beginning of stone, we have always taken a tech-first approach to drive scalability and deploy intelligence to the front lines of our businesses. We've done this by developing in-house proprietary technological solutions that our teams use every single day. Those solutions are what we call the Stone Operations Platform. Earlier today, during the SMB segment block, we were able to see a video in which you better understood how our sales and distribution work. Now we are going to watch a video that will better explain how our service differentiation takes place through our logistics and client services operations. Let's watch it. [Presentation]

As we had the opportunity to understand in this video, Stone Operations were founded on very clear and simple principles. To provide the best client experience possible, while pursuing our operational excellence. And we did it all with simplicity, for both our operations and mainly for our clients. Having the tech-first approach since the beginning was very important to make the creation of this mode possible. We created 3 main operational platforms, technological platforms for our operations, Marco Polo, Green App and One. Marco Polo is our platform for sales and distribution. It helps us to manage our sales territories across Brazil, the sales pipelines, the client's portfolio and their whole life cycle. It plays a very important role to increase the productivity of our sales force. Green App is our platform for logistics operations. It has -- it supports our whole logistics operations throughout Brazil with capabilities that range from supply chain management through last mile logistics management. It plays a very important role to keep our delivery times low. And we have One which is our platform for client services. It enables us to service our clients through multiple channels, including chatbots and empower our in-centers to be very effective while solving client issues. Here, our main goal is to solve clients' issues as fast as possible while sustaining high satisfaction rates from our clients. We have organized a demonstration to show how all of this works in practice. The first demo is on how we onboard the clients to Stone. We are going to use only illustrative data during this demonstration and we have developed a comprehensive system to manage the whole onboarding cycle of a client to Stone. From deciding where to open a hub to then deciding which clients to prospect to then finally pricing and affiliating the new merchants to Stone. It all starts with the system we built to manage our sales territories and distribute the sales territories across Brazil. As you can see, we have already deployed several hubs and franchises throughout Brazil. For every one of them, we have designed sales routes, which are smaller territories that our sales agents are assigned to. Those sales routes are designed considering market share and active client base data. With these metrics, we know exactly where we need to allocate our sales agents and our sales routes to get the best results and to rightsize our sales force. After we deploy our sales force to the territories across Brazil, we start our lead prospecting process. We have very detailed information of MSMB merchants in Brazil that do not use Stone solutions yet. So we can go after them to increase our market share. We also have very detailed information of the active clients at Linx, so we can go after them to increase our cross-sell metrics. To effectively go after the correct MSMB merchants, every sales agent at Stone has a very detailed information of the market share and cross-sell opportunities within their sales territories. So we provide them with simple and direct list of clients they need to go after. So we reduced the time spent on nontarget leads. The active client base landscape varies a lot across territories. And for us, it's very important to guarantee that our sales agents have clear priorities. So for example, how to decide if we need to go after a new lead or we need to go after a retention alert for a current client or to go after an upsell opportunity. All of our sales agents and hub leaders -- sales leaders at all, they have access to a system in which they can plan their activities for the week. In this system, they have access to our central suggestions of basically what to do. So we can take into account all the sectors, most profitable leads, most profitable retention alerts, most profitable upsell opportunities and taking it all into account to optimize the planning of our sales force, so we can maximize our results. Moving on, we are going to now see one of the core features of our sales platform. Every sales agent in our team has access in real time to their sales pipeline and full clients' portfolio. This allows us to continually track our clients' engagement with Stone. Also, our team has access to very specific information, such as, for example, if our clients have a current open credit offering, where there are great potential cross-sell opportunities within Linx. Now we are going to see a very important part of our sales platform. Whenever we reach a client, we have the opportunity to present to them price offerings from Stone. And our pricing methodology considers very specific requisites to generate an offering for a client. For example, we take into account the location of the merchant, its TPV, its industry or segment and even who is the sales agent that is currently pricing that merchant. When we have this information, we are capable of generating multiple pricing offerings detailed for this merchant. As of now, bundled with payments, peaks, banking, and we are evolving this. As soon as the client chooses one of the offerings, our sales agent closes the deal and welcome the new merchants to Stone. After the sale, the setup is very simple. Our sales agent can have a POS with himself and immediately set up the POS for the merchant. In this case, our merchants can use the POS immediately and start right away accepting credit card payments using our banking accounts and accepting PIX payments. The other option, which is more common, is that the agent will request a Green Angel to complete the setup. And through the integration between Marco Polo and Green App, our logistics operation will immediately receive a request that will allocate the nearest Green Angel to complete the setup in the same day or the next one. That's what you can see on the screen on the right here, which is the print of the integration between Green App and Marco Polo. We have seen here various steps on how we decide to open a hub and then we go after the client. But all of this process is supported by a robust management system. All of our sales leadership has access to multiple real-time dashboards in which they can keep track in detail of all of our sales growth targets so they can act on the levers we are not performing well. Additionally, our logistics operation also has precise controls over thousands of deliveries we do every single day. And in the logistics systems, we invest a lot on how to optimize the delivery routes of our Green Angels, as you can see on this screen here. This is very important to maintain high SLA levels to keep delivery times low and to prioritize emergency deliveries when needed. So in this first demonstration, we could see how we strategically deploy technology and our operation to bring new clients to Stone. Now we are going through the second demonstration in which we will show how we solve clients' issues when they reach out to us. The first way is when the client reaches out to our sales agents in the hubs or in the franchises. So our clients can reach out to our sales agents to solve any day-to-day concerns. And through Marco Polo, our sales agents have access to the full spectrum of information regarding the life cycle of the client, since historical CRM interactions or the profitability -- detailed profitability for each product they can keep track of the interactions with the client services team and they can even request services. So for example, if the client reaches out to the sales agent because he has a problem with the POS device, the sales agents, through Marco Polo, can immediately request the service order for the Green Angel. The other option is to service our clients through chatbots. So as you saw in the video, our chatbots are available 24/7, and they are effective because they have information regarding the clients, they have access to the information and they have authorization to perform actions with security. Brazil is a very conversational country. So a significant number of our clients prefer to reach out to us through WhatsApp or Chat. That makes our chatbots a convenient solution for both our operations and for our clients. In the micro segment, as we saw earlier with Linx, our chatbots retained the majority of requests and issues, which drastically reduces our cost of services for these segments. Additionally, to our chatbots and our sales agents in the hubs and franchises, our clients can rely on the expertise of our in-centers. Our in-centers, they are also available 24/7 through all the channels, phone, chat, WhatsApp, e-mail. In other words, our clients can choose to contact us in their preferred manner. And our unified platform, which is One, has one of its core features that is to make it seamless to service them through any channel. Additionally to this, as soon as an enchanter answers the phone or answers the chat or answer the WhatsApp for clients, all the information regarding the client pops out on the screen of our enchanter. This makes us very effective to solve their issues quickly because we reduced the time spent on investigations or data gathering to solve the issue. As we saw in Marco Polo, our enchanters also have access to the full spectrum of information here. We still see a lot of room to grow productivity in our operations using artificial intelligence tools, more specifically, Generative AI. And we gave a first important step in our client services team. So our agents, through One, can also turn long conversations into short summaries that are stored in the historical data of our clients. This increases our productivity and elevates the quality of the data we have stored regarding our clients because those summaries are very precise. So in the second demonstration, we could see how we solve our client issues fast and maintain high satisfaction rates from our clients. To wrap up this module, I would like to go through some key messages that I have already said here. It took a lot of time to reach this level of effectiveness and simplicity in our operation, took a lot of time, investment, efforts. This is precisely why it is so hard to replicate. The second key message here is that we plan to continue scaling our products to new clients and roll out our new solutions to our existing ones through this platform very easily because we can use the platform that we have already built. And looking ahead, we plan to, as I said before, we still see a lot of room to grow productivity with AI. So we plan to grow in this direction and we also plan to expand our operations platform ecosystem to new parties such as Linx sales channels and our integrated partners. We plan to go in this direction so we can get even more clients and delight them even more. So now we will have a 20-minute break. And after the break, we are going for our financial outlook module with Mateus. Thank you very much. [Break]

Well, hello and good afternoon to everyone. As we are approaching the end of the event, I would like to start by thanking everyone for being here. We're really glad that you all [indiscernible]. For those that don't know me yet, my name is Mateus. I joined the company back in 2015 when we were a really young company. Since then, I served on various roles across the company before having the opportunity to lead our finance function as the company CFO. Today, I'll be presenting about our financial outlook. But before doing so, I'd like to start by reviewing a few key takeaways from our financial journey to date. Today, you heard from my colleagues, the fact that we developed a strong growth engine in our company throughout our journey. We achieved this by offering the best services and solutions to our clients while investing to improve our operational model, invest in new distribution channels and unlocking new addressable markets. To put that number into perspective, when we compare the numbers for the third quarter of '23 to the numbers we had in the third quarter of 2018, just before our company did its IPO, we can see that during that period, we grew our TPV by 5x and our revenues grew eighth fold. I think the fact that we developed this strong growth engine is often underappreciated when assessing our financial journey. But what's more important to me is that our growth has been achieved while historically maintaining a strong commitment towards strong monetization and good unit economics. This can be seen by the level of take rates our company has been able to sustain throughout its journey, even while relying mostly on payments as a monetization level, which as you'll see, it's no longer a reality. By combining strong growth with good unit economics, we built a business that has been historically profitable, but even more importantly, cash generating throughout our journey. And there is still room for significant financial improvement. Historically, our company has placed more emphasis on the speed of growth rather than cost efficiency and expense management. Only recently, we started to implement new initiatives in the company towards tighter cost controls, which we are already starting to see the benefits. But as we're going to show, we are still in the early beginnings of that journey towards enhanced profitability. So as we move to our financial outlook, I would like you to keep these 4 key elements of our journey in mind as we move forward because they will continue to be important drivers for our growth going ahead. First, the growth engine we have developed still remains in place. And this is what will drive us towards winning MSMBs. Second, our commitment towards monetization is also in place and now will be equipped with a broader set of monetization tools at our disposal. Third, wireless speed remains essential. Cost efficiency will now rise as a crucial pillar in our journey ahead. And by combining these 3 factors, we can ensure that we have a business that continues to grow its profitability and cash generation over time. So with that, let's move to our financial outlook. You've heard from Lia and Pedro today on our 3 strategic priorities. When framing how to provide our financial outlook, we talked about linking strategy to finance, showing the main financial drivers and financial impacts from each one of our strategic pillars. Our first strategic priority is to win MSMBs, like you've heard many times today. In that journey, super important success metrics will be our ability to continue to grow our MSMB-TPV and gain market share and now also our ability to grow the level of client deposits. Our second priority is to drive more engagement with our clients. This connects with our continued commitment towards the strong monetization. If we are successful in that journey, take rates will rise over time. And now as we revamped our credit products, the growth in our credit portfolio also becomes another important source of monetization going ahead. Our third strategic priority is to scale through platforms in a way that we generate additional operational leverage in our business. In that, we expect our adjusted net income growth to significantly outpace the growth in our MSMB-TPV going ahead. While our operation and the foundational assets we have in place, will drive most of the profitability expansion, at this time, we're also going to control administrative expenses in a tighter way, generating further operational leverage in this line. Now by executing on these strategic and financial pillars, we can guarantee that our business remains profitable and cash generation in our journey. And in the end of the day, that will enable us to maintain a robust capital structure and generate increased shareholder value. Now we'll deep dive in each one of those strategic pillars providing you with not only the financial goals from our strategic plan, but also what we think are the key reasons to believe in our ability to execute on those targets. Let's dive deeper in the first priority to grow the base and winning MSMBs. When we look at third quarter '23 results, our company has just released that we were able to grow 20% year-on-year on MSMB-TPVs. We show throughout the day, the fact that we believe we have a unique set of distribution channels and a unique operational model. We believe that these factors combined will enable us to grow at a very similar pace next year reaching for BRL 112 billion TPV MSMB. As we're also going to show our distribution models are far from situation. That's why we believe we can compound our growth rate in TPV-MSMB at 13% per year between '24 and '27, reaching upwards of BRL 600 billion in MSMB-TPV by then. We also showed throughout the day that we completely integrated our banking and payments platform in a way that as we grow TPV-MSMB, we unlocked the growth in client deposits. To that end, as we evolve in the efforts to drive more engagement in these solutions and release new features, we expect the growth in our clients' deposits to significantly outpace the growth in MSMB-TPV by a factor of [indiscernible] times as we move ahead. This will drive our clients' deposits to grow to BRL 14 billion by 2027, effectively tripling from the current figures. Now as we reflect on what are the reasons to believe we're going to be able to achieve those goals, we wanted to share far many messages that we might have heard from today's presentations. First one, in regards to our distribution channel, we believe we are still far from saturation. Second, we have a big TPV pool within our software business, and now that we have decided to prioritize our 4 key verticals, we believe we have the right setup to seize this opportunity. Third, in regards to banking, we are still in the early beginnings of the journey. And fourth, while not being a financial metric, we consistently have the best service in the industry, and we believe this is a key enabler for our future growth. Now when we say that our operational model is far from saturation, you've already heard from Biselli and Zinner today that we now have a national footprint in regards to distribution that covers more than 90% of the cities in Brazil and more than 99.7% of the Brazil's country service GDP. But what's more important is that when we look across our geographies, all of our territories continue to grow across the board regardless of their maturity level. In this page, we show 2 critical pieces of data. The bar chart delineates our market penetration across our regions in Brazil. As you can see, in most regions, we have between 10% to 20% in market penetration, yet in more than 1/4 of our territories, our market penetration extends beyond 20%. But also more important is that our growth is the fastest where our presence is the strongest. This can be seen, for example, when looking at the TPV growth for the regions in which we have between 25% to 30%, which was of 36% year-on-year. This is not a coincidence. By sustaining superior service as our distribution channels mature, they continuously yield higher productivity and also unlock powerful word-of-mouth effects that unlocks further growth. This, in our view, is the first reason to believe in our MSMB-TPV growth targets. Now you've also heard today that we decided to prioritize 4 key verticals within our software business. Within those verticals, Lia has already shown that there is a substantial TPV pool. Now that we have realigned our organizational structure, we believe we have the right setup to seize this TPV pool. To give more perspective on this fact, let me remind you that within our priority verticals, we have a TPV pool of BRL 236 million. This is comparable in size to our overall MSMB-TPV business. But when we look at the current penetration, we still only have 8% of this TPV pool which showcases that now that we have a unique value proposition to address these verticals, we can unlock another significant TPV growth avenue, and I think this is the second reason to believe in our TPV growth targets. Now let's move to banking. Towards the day, [indiscernible] has explained that we have completely integrated our payments and banking offerings in a way that as we grow in MSMB-TPV, we automatically unlock the growth in client deposits. And the growth in our client deposits extends beyond the growth in our MSMB-TPV. When we look over the past 2 years, we saw a significant uptick in client engagement as measured between the ratio from deposits to TPV which grew from 2.9% in the third quarter of '21, up to 5% in the third quarter of '23. As we release new features and create more price bundles, we believe the engagement with our banking solution is going to continue to increase, driving our growth in client deposits. To that end, we expect to reach BRL 7 billion in deposits by the end of next year and BRL 14 billion in deposits by the end of 2027, effectively tripling deposits from the current figures. Like I said, this is only possible because we continue to sustain the best service in the industry. As you see, our company since the inception has continuously sustained the best customer service ratings in the market, as measured by [indiscernible], the biggest benchmark portal for client feedback in Brazil. And the gap versus our peers continues to be very substantial. Like I said, even though this is not a financial metric, we believe this is a key factor in our growth journey going ahead. Now let's move towards monetization. While growing the base by itself would already be a powerful driver for topline growth, by enhancing the level of engagement our clients have for solutions, we can accelerate these trends. And this -- and as we deepen the level of engagement for our solutions, we not only offer our clients a better value proposition, but we also unlock a broader set of monetization tools, upon which we can build price bundles, improve unit economics and add to overall profitability. While take rates are dependent on many variables, including client mix and macroeconomic conditions, by executing on this strategy and enhancing the level of engagement for our solutions, we believe we'll be able to maintain take rates for the next year flat despite falling rates and to increase it by more than 20 bps by 2027. Also, while our monetization strategy is no longer reliant on credit, we know that by managing our portfolio in a careful and disciplined way, we can significantly enhance our unit economics and add to our overall profitability. To that end, we expect our credit portfolio to grow to BRL 800 million by the end of next year and upwards of BRL 5.5 billion by the end of 2027. Now as we reflect on what are the reasons to believe in this take rate increase, I want to remind you a piece of data that Lia has just shown in the beginning of the presentation. We can already see in our base that clients that we call have users who use margin-free solutions have significantly better economics than clients that use less solutions. Also, the percentage of these merchants is improving in our base very rapidly. To remind you of the data, when we compare the ARPAC from heavy users versus the remainder of the base, we can see that these have users who generate more than twice -- more than 2x as much ARPAC as the others. Also, the potential to improve engagement in our base is still huge. We still can address 79% of our base, which currently still uses less solutions. Finally, not only is the percentage of merchants engaged increasing the overall base, but more and more, we are being able to onboard merchants already using multiple solutions. This speaks to the early success of our bundled offerings and the number of products that we have at our disposal. So as we move ahead, we expect the contribution from new solutions to our overall take rates to increase and to drive us towards our take rate goals. Now let's move to credit. Throughout the day, you've seen our efforts to completely revamp our credit offering. I've also shown you that we expect to grow our credit portfolio to BRL 800 million by the end of next year and by upwards of BRL 5.5 billion by the end of 2027. Needless to say, the potential to expand credit portfolio is very huge, with merchants requiring working capital solutions to run their businesses. We also believe that our operational model provides us with an edge to scale credit in a responsible and profitable manner. And this is due to the fact that we have proximity and solutions that combine payments, software, banking and credit. The issues we face in our first credit attempt in our view, were related to execution problems and not to our overall strategy. Because we understand the importance of transparency, especially in this area, we wanted to share with you the initial figures we have been seeing since resuming our credit offering. While it's too early to draw any definitive conclusions, our preliminary data suggests that when we look at the observations for the NPO 30 days for each cohorts 3 months since inception, we see a delay rate between 2% and 3%. Given the short-term nature of our loans, which have a 12-month maturity, this puts us in the right track to deliver expected losses below 10%. Given the rates to change, this puts us in the right track to have a very profitable credit product as we move ahead. Now when assessing the portfolio as a whole, NPLs falling between 15 and 90 days still remains very low at 0.5%. And also, NPLs over 90 days still remains virtually nonexistent. We know that these rates can be affected by the rate at which we grow our portfolio going ahead. But going forward, this will remain the norm in our disclosures. And given that this is a standard market metric, this will offer you a clear metric to gauge our performance as we evolve in this offering. Now before moving over to operational leverage, I wanted to emphasize the importance of prudence in our approach to credit underwriting. Despite the early indicators, we are fully aware of the complexities involved in this process. Credit underwriting is a journey that requires patience and cautious and careful navigation. This time, we're taking the conservative approach choosing to we are in the side of caution rather than a side of risk. With that, we cover the main drivers behind our topline expansion. Now let's move to our third priority, which is to gain operational leverage by scaling through platforms. In that, we expect our adjusted net income growth to significantly outpace the growth in our MSMB-TPV going ahead, reaching BRL 1.9 billion in adjusted net income for 2024 and BRL 4.3 billion in adjusted net income by 2027. Also, I mentioned earlier today that we are implementing tighter controls over expense management and cost optimization. This speaks to our guidance of administrative expenses, which we believe will grow closely aligned with inflation going ahead, not surpassing BRL 1.45 billion by 2027. As we reflect on the reasons why we believe we're going to achieve operational leverage and improve profitability, we want to focus on the main message. First, we developed what we call foundational assets upon which we are growing at very low marginal costs. Second, as we implement mark cost discipline towards the company, we're going to gain additional operational leverage in that line, adding to overall profitability. Now to give you more color on what we call foundational assets, let me guide you to our first foundational assets, which is our logistics platform. Like we showed in the videos earlier today, over the past 10 years, we have consistently and steadily invested to establish our logistics footprint. Now that this infrastructure is in place, we have been able to scale with diminishing costs as we grow the base. To give you more color on that fact, over the past 3 years, our logistics cost per client has decreased by 16%, while we grew our base. I think this showcases our ability to enjoy economies of scale as we scale our base and be more efficient in our logistics footprint. The second foundational asset we have in place is what we call our client service platform. Our approach to client service was not designed towards just minimizing costs, but rather towards providing superior service. Our rationale was deeply rooted in the belief that preventing issues is better than fixing them. So historically, we invested in what could be perceived as an overqualified team, but we believe that by eliminating reasons for our clients to contact us, we could sustain superior service in a very efficient manner. The results from that strategy are starting to show in our P&L. When you look over the past 3 years, our customer service cost per client has decreased by about 44% on a unitary basis. And I think the main notice here is that this was driven by the fact that our clients have less and less reasons to contact us. And that's why over this period, we have been able to sustain our historical customer satisfaction levels. So when we put all of this together, over time we have been able to decrease our tech by 9% while we improved our contribution margin by 2.4x. This was driven by the synergies between our growth, monetization and efficiency initiatives. Our contribution margin, for example, was driven both by our monetization and by the improvements we had in our client service and logistics platform. Now I've already said many times that while these operational levers will continue to be the main drivers behind our expansion, given that historically, we have placed more emphasis towards the speed of growth rather than efficiency, we realized that there was still a substantial opportunity to improve margins through cost efficiency. After the fourth quarter of 2022, we started to implement a series of initiatives in our company in the form of zero-based budgeting, implementation of shared service center and more recently, the integration of our software business that have started to yield results. When we look at our administrative expenses from the fourth quarter of '22, until the last quarter, we just released, we see a reduction of over BRL 50 million per quarter, which has already benefited our margins by 3 percentage points. As we move ahead, we fully expect this trend to continue. And that's why we're guiding that the growth in administrative expenses should remain closely aligned with inflation as we move ahead, driving margin expansion. Now to wrap up our long-term targets, I would like to share a few messages. First one, we have a strong growth machine in place that we believe is going to continue to drive us into any market share and growing. Second, we now have a broader set of monetization tools that extends beyond payments, and this is at our disposal to enhance our profitability. Third, by combining our operational model with a greater focus on efficiency, we believe we can drive our profitability up by more than 2x in the next 4 years. And with that, we believe our company is uniquely positioned to drive strong returns to our shareholders. Now to finish it up, as we advance towards our goals, like I said in the beginning, we've always had a company that has been profitable and cash generating and we expect this trend to continue with the gains in profitability driving market flow gains. To that end, the discussion of what we're going to do with that capital remains increasingly important. We believe that maintaining a robust capital structure in Brazil is paramount. So maintaining a strong balance sheet will continue to be priority number one. But as our business evolves and generates cash in excess of debt, we will always choose capital allocation alternatives as to what we believe increases shareholder value. That connects a buyback plan that we just announced and fully executed of BRL 300 million and also with the buyback plan of BRL 2 billion that we announced for the market yesterday. So with that, I would like to call Pedro back to the stage for closing remarks before we jump into Q&A. Thank you.

Well, it's been a long morning in some ways. And as we conclude today's event, I think I want to express and say a special thank you for Stone team. I think none of this would be possible without the work that you guys did, I think, was amazing. So from the bottom of my heart, I really appreciate and I'd like you to extend my thank to all the team. Thank you very much. I also like to thank you all of you for participating in the -- in our first Stone day. I think the last one we had was when we did our IPO. I think it was an amazing opportunity to have all the investors together, analysts, potential investors, and the real idea behind Investor Day is to provide you more visibility in terms of our strategy, what are the key levers and competitive advantages that we have within our plan and how we're going to evolve over time. So the idea is really to provide this and make this as a continued process over the next coming years. I think another big important piece of getting together today was really to show up the team. I think we have -- I started the conversation as of today talking about the quality of the people and the brain power that we have within Stone. I think this is a very sincere statement. And the idea is really to have you guys to engage more and had the chance of meeting the leaders that we have within the company because these are really the people that will make the difference and will get us there. And last but not least, I'd like to wish you all happy holidays. We're going to engage in our Q&A session right after this presentation. So happy holidays, and thank you for being here today. It was amazing. Thank you.

They're going to do the setup for the Q&A, okay? In the meantime, I'll just remind everyone, the ones here in person for sure, you just need to raise your hands. We'll have mics like the IR team, Julia and Carol. They'll be walking around with the mics. For the ones that are at home, following us through the webcast, we have already received a certain number of questions. We'll try to mix a little bit, get some from the in-person audience, some from the webcast. But if you still want to send us, we are receiving your questions. Okay? Thank you. We have questions here in the audience? We start here with Mario and then we go in this direction.

This is Mario Pierry from Bank of America. Thank you for your presentation, very insightful. I would like to focus more on the cost side because I think this is where you can control, right? The TPV can depend on the market, et cetera. So when you talk about cost optimization, can you elaborate a little bit more between headcount? When we look at your headcount relative to your peers, you're much higher. If you can discuss a little bit headcount per hub? How do you see opportunities between reducing costs in the software business versus the financial services? Also, if you can discuss a little bit on your guidance about the CapEx necessary to achieve such goals, especially on volumes, sales or POS and if you can expand on that?

Maybe I can start with the last part about CapEx, and then we talk about cost optimization. So regarding CapEx, I think the message here is very similar to what we previously said in our last earnings call. When you look at the general trends in CapEx over the past 2 or 3 years, I think the company has been increasing its efficiency as measured between the relationship between CapEx and revenues, which have decreased by over 2 percentage points. And we see the current level of CapEx that we have now as a stable levels that will enable us to keep growing. I think something that we have highlighted over the day is what we call scale to platforms. It speaks to the fact that over the past many years, we put a lot of capital towards building logistics, client service, our technology platforms with banking, credit and so on. And I think as we move ahead, we see the investments that we still need to make as being incremental. So we don't expect any big changes when we look at the trend for CapEx going forward. I think this is the first part of the question. Second part of the question regarding cost optimization, I think when we look at our plan, I would break down the enhancement in profitability that we can have line by line. So when we look at the general trading cost to serve, we highlighted that with logistics and client service, for example, which are 2 very big costs for us, we have been able to grow with diminished incremental costs. I think this trend, we expect to continue to fully taking place. So this will drive efficiency in our cost of services, move ahead. The only different factor here that we didn't have in the past is that as we scale our credit portfolio, we have provisions in the cost to serve. So this might offset some of those gains. Then most of the profitability expansion, looking from a margin perspective will come in the form of initiative expenses because at the end of the day, when we monetize our TPV better towards banking and credit, we dilute that line. And we see that given the initiatives we have in place, not only in the financial services segment, but also in software, then [indiscernible] can answer that. We're going to be able to control that line more going ahead, ensuring that the growth is not significantly above inflation. And of course, the business still needs a lot of investments going forward. But the idea here is to gain efficiency so that we offset some of that needed growth with further levers in the company. I don't know if you want to add.

No, I think you touched on most of the points. I agree with Mateus. I think on the software side, I think there are many initiatives we put in place within Stone like the shared service and the ZBB, which have not been implemented into the software business. So we're going to deploy this, and we're going to see efficiency increase over time. But I think you touched the key -- the main pain points.

I can start. You're right that when you compare headcount, we do have a much higher headcount than the other players. But I think the main reason for that is because we took the decision of having a verticalized operation when others have a lot of third-party services. So when you look at our logistics footprint, client service and distribution, this amounts to the vast majority of personnel expenses within the company. And in those lines, we believe that despite having a higher headcount, we are very efficient. I think we showed that today. So there is still improvements to come when we look to personnel expenses but they are more in the form of unifying processes that we have decentralized in the company. This is what the shared service center is about and less so about pure headcount reduction, like you see in other places.

Can I add on -- I think Mario also alluded to headcount and hubs, right? So maybe thoughts on that. Like I think it was obvious in the presentation. We already have a significant level of coverage to our hub operations. But most importantly, even the hubs that were more mature in terms of penetration, we continue to grow. So because we have the ability to take this very granular approach of our penetration in each part of the market, this allows us to be very precise in saying this specific region has room for more agents. And so we'll continue to make those decisions because we're seeing healthy returns on selling the investments that we do in selling. So although most of the distribution footprint is already in place, that doesn't mean that we won't continue to hire agents where we see opportunities to do so. I think that's the message around hub headcount.

I'll take one on each side.

I'm Jorge Kuri from Morgan Stanley. I wanted to ask you 2 questions about your net income guidance for 2027. How is management compensation tied up to this specific number, if any? And then the second question is, you evidently have seen the consensus number for 2027 is BRL 2.1 billion. So you're like well, well ahead of that. Help us understand what bridges that gap? How much of the delta from the current run rate to the BRL 4.3 billion is the new credit solution, how much is the monetization of the banking part, which I'm guessing is the monetization of the deposits? How much is the software? And how much continues to be the prepayment of credit card receivables, especially given that it just feels that, that may be not a business that's sustainable over the long term? I mean, evidently, it's probably not going to change in this regulatory inquiry, but I think this just has become an issue where seems like it's unsustainable over the long term. So how are you trying to move away from that?

Maybe I can jump in on the first part of the question. I think management compensation is linked to the plan that we just disclosed in 2 ways. Short-term compensation is aligned in terms of what we call global goals for 2024. So short-term compensation is linked to the KPIs we just provided to the market. Long-term incentives are linked to the 2027 -- guidance we just gave in terms of restricted stock units and performance stock units. So management compensation is really tied to the plan we just announced.

Maybe I can handle the second part of the question. So we did see the consensus at BRL 2.1 billion. But if you look at the third quarter '23 numbers already, the company reported BRL 435 million in net income which when we annualize, we are already at 1.74, give or take in terms of run rate. So first message here is that only by increasing MSMB take rates which were almost doubling until 2027. When you combine this with controlling and administrative expenses, you have most of the way map there. Then when I think about monetization, think even internally, we don't look at the P&L for each product, separate from on the other. What we try to see is how much is our relationship with our client worth and how we can better manage those lines given that we have this relationship. So the message here, I think we don't see like prepayment rates versus MDR rates versus credit income as we move ahead. What we do have confidence is that given that we're currently able to monetize our MSMB take rates, our MSMB TPV by 2.49%, which is the take rate. As we advance on the engagement with banking and credit, we believe that with those solutions, we can increment it by at least 21 bps. If you do some backwards engineering that number, I think you'll see that only by monetizing banking through floats. And with very reasonable assumptions in credit, we're still being very conservative on what we call currently creates, the current levers that we have. And I think that is a place where execution might differ from the plan. When we look ahead, we are really conservative in terms of building that up in the plan. But in execution, our approach to pricing, I think we explained a few times, which is based on internal return hurdles and also what we're seeing in the market. So we're going to remain disciplined and even though our plan assumes some room to manage the relationship. I think the execution we're going to have to continued price discipline as we move ahead.

Tito Labarta from Goldman Sachs. A couple of questions, if I can. One, I guess, a little bit of a follow-up to [indiscernible] on thinking about the take rates and the evolution, do you -- how do you factor in sort of the competitive environment? You mentioned Mateus, I think stable take rates for next year despite lower rates, do you see potentially take rates coming down as rates come down? And then also on, I guess, on the competitive environment, you mentioned MSMB TPV growth of 13%, industry is growing maybe a little bit below that. So it does assume some type of market share gains. Maybe what do you assume for the industry in that? And how do you see the competitive market dynamics evolving between incumbent players, other disruptive players like you? And just the last thing, do you factor in financial expenses coming down as well with lower rates just to see how it factors into the guidance?

Yes. Maybe I'll start from the last question as well, and then Lia, maybe can comment on the competitive landscape. In regards to macroeconomic assumptions in the plan, we just updated with the latest market data from October. So our assumptions for yield curve and inflation rates are what's implied in the curves by -- as the end of October, which I believe it's 11.7% in terms of interest rates going forward. So there's not a big assumption in terms of falling rates and increasing spreads quite to the opposite. And then in regards to what we assume, our plan is conservative by nature, when we look at take rates, so we do have some room for take rates -- stable take rates to decline over time, but the contribution from new products margin offsets the trends in our plan.

Yes. I think what I would add in terms of competitive dynamics, Tito, is what I believe we say almost every earnings call. Competitive dynamics hasn't really changed for us. If anything, the market is much more rational and as Mateus said, right, we will maintain our pricing discipline as we move ahead. And what is implied in the plan is that regardless of which levers we use to price the relationship with our clients. We're going to maintain the same healthy return hurdles that we have done so as we grow. I think that our ability to continue to grow and gain share is something that we have proven we can do. The implied TPV growth -- the TPV growth implied in the guidance, this is a growth that we believe is above the growth of the market. We're not disclosing estimates on market growth because we don't want to get into that realm, but we do expect the market to grow below the guidance of TPV that we are giving, which implies that within the MSMB segment, we will continue to gain share. So I think that's the message around competitive dynamics and how we see that moving ahead.

Now we will take a question from Yuri and then I will get one from the webcast.

Good to go.

I was going to ask the industry growth, but Lia already replied my -- I'm not going to share -- what is the 13% comparison to the industry. So on expenses, maybe for Mateus, when I look here for the third quarter, the run rate in the annualization here on your run rate versus 2024 expenses guidance, going back to Mario's question as well. I see an implied 15% growth for the next year. What is that? Like should we see a bump on expense in the fourth Q? Like should we not annualize the third Q expenses guidance? That's the first one. And on deposits, when you look to the BRL 14 billion guidance you have for total deposits, what is the mix of interest earning -- interest in paying deposits? How much is [ meant by ] deposits just to try to understand the floating that I think it's a powerful driver there.

Well again, start from the last one. So when we look at deposits, different from other peers. In our history, most of our deposits is noninterest-bearing and that continues to be the assumption for the plan. I think earlier in the presentation, [ Cody ] has highlighted the fact that we are experimenting with time deposits as well, creating what we call the [indiscernible] or the automated savings offering. I think the right way to think about that in our plan is that as we launch the solution, this is going to be additive to the guidance that we are providing in terms of volume. And then to the second part of the question regarding expenses. You're right, the run rate for administrative expenses, it's slightly lower than BRL 1 billion in the third quarter. We do have some seasonality for administrative expenses in the first Q. That was the case for the previous year as well. We're not expecting to be a huge bump, but that explains why when you compare the 15%, or 10% to 15% implied growth versus the run rate, it seems to increase margin inflation. In reality, I think the growth will be closely aligned with inflation, a little bit beyond.

So I think like we have already addressed some of the questions from the audience that's following us on the webcast. But there are like 3 different questions regarding the same topic which has to do with the fact that we have already grown in the domestic markets. And they are questioning if we think about internal personalization going abroad, especially LatAm if we're considering any expansion plans on this sense?

Well, I'll be very blunt in some ways. I think in the plan that we just released, there is no consideration in terms of expansion into international markets, right? I think there are many opportunities on the domestic market yet. I think we have an amazing plan. And we have to focus on the execution, right? I think what I believe we should not be doing is trying to engage in too many venues or too many opportunities at the same time, it's really focused on delivering what we're promising. But having said that, I think we always have to be open for optionalities that might come abroad -- aboard. So if there is a good opportunity, I think we have to evaluate. If it is accretive, we're going to move ahead. But as of today, the plan that you've seen, that's what we have within the domestic market.

I think I have lost count here. I'm not sure I...

Neha has a question.

Yes. And then we go Sheriq and [indiscernible]. Is that okay. Please. Neha?

Sir, two questions. First, on the prepayment business. I think following [ Horikuri's ] question, I don't think that was very clear. How do you tackle the long-term headwind of regulatory changes in the prepayment business? Maybe not in this cycle, there's no change in that. But what do you include in your guidance of the 2.7% take rate in 2027? Do you expect some pressure from the regulatory side on the prepayment business? Is that already included? So just a little bit more if you could zoom in on the 2.7% take rate that you mentioned for 2027, if you could break it down. Just very generically, maybe 50% of that is coming from payments, 20% coming from software, 30% coming from credit or any kind of rough breakdown, what is included, what is not included, where is the upside? Where is the downside to your numbers, like you mentioned financial expenses coming down is an upside to your numbers, which you have not baked in with the current assumptions. So any more color on that would be very helpful.

I think there's 2 parts to the question. First is assumption on regulatory. And then the second is take rates, right? I don't know if you want to take or maybe call...

Vinicius want to join us and maybe talk a bit about the regulatory environment back in Brazil. Well, for those that don't know, I think it's better if you introduce yourself Vinicius.

Yes. My name is [ Vinicius ], I lead the regulatory affairs and economic research teams in Stone and there's -- at Stone since 2019. And on the regulatory issue you brought, we don't believe there will be changes because any attempt would face a stronger position from clients, from customers, from merchants, from congressmen, from pretty much all the society. This is one point. The second point, there's no technical reason to believe there will be changes. So first of all, banks themselves, they can restrict or increase the numberings of installments of a transaction. There's no need to have some sort of coordination kind of implied by a change in regulation. So we believe that such a change would be really a form of restrict competition. So secondly, there's no evidence whatsoever on the relationship between delinquency and installments, quite the opposite. If any, transactors that pay in installments more often they fall less. And third, and related to the first point, the impact on consumption would be huge. I guess that's why we would see stronger position. So we really don't believe there will be changes.

And then if I may add on the take rate question. Again, we really don't look at take rates from a revenue line perspective. We look at the core relationship. But I think some important factors to highlight are, first of all, we don't include software revenues in our take rates, so that's definitely an upside as we create the [ mono ] offerings. And also last quarter, we started to disclose PIX TPV. But this is not included in the guidance for MSMB TPV that we just provided. So we're only talking about [ CAGR ] TPV in this guidance. Of course, we are monetizing and improving our PIX TPV as well, but this can be seen as an upside to that number as we move ahead.

How do you see PIX from a medium-term perspective? More in the sense, you have some players like Novak doing fixed financing. So essentially, they're moving the revenues, which would stay with the acquirer as this is now going to players like Novak. So there's more and more adoption of things like this, like people purchasing from PIX getting a discount and doing financing to the bank, do you see that adoption increasing further? And do you see that as a risk for the acquiring business?

Yes. So I'll elaborate a little bit on PIX. And I think maybe [indiscernible] would want to come back and be much more technical than I will be. But this is our stance on PIX Parcelado as a solution. The economic logic behind PIX Parcelado has been around for decades. It's called Parcelado [indiscernible]. From the perspective of risk, that means giving credit to consumers, right? In order to -- we've seen, for example, some players with some solutions where they bridge both sides of the market and then you can create this cross subsidy effect that [indiscernible] can talk a lot about. But for that to happen, you really need to bridge and you need to reach merchants and you need to reach consumers. And the models that we have seen, they do this basically within the online space where it's easier to do that because you can partner with platforms that will make that connection. In the brick-and-mortar space, we see that as a much bigger challenge because of the challenge of distribution that we talked a lot about today. So I think that in our perspective, perspective, PIX overall, we do think that it will increase adoption, but we continue to see this as an opportunity because we enable our clients to accept PIX as a payment method. We monetize that. We help them reconcile. PIX becomes deposits in the accounts and the more that we evolve our banking solution, the more we will use PIX as rails to create different types of solutions and offer to our clients like [indiscernible], for example, gave the example of payroll, which is completely being developed on top of PIX rails. So I think the perspective on PIX's and our stance is positive. I don't know, [indiscernible], you want to add.

Ditto. Fully agreed. So again, PIX is not a network, PIX is a rail. Mastercard is a network, Visa is a network, they connect merchants and customers. And as Lia pointed out, we've seen something similar to PIX [indiscernible], PIX Parcelado for decades. Parcelado [indiscernible] on the rails of Visa and Mastercard. And then you do not extract the benefits of connecting merchants and customers. So there's a subsidy going on. So merchants kind of paying more to stimulate sales and subsidizing customers. That's what the interest-free installment transaction is, if you have a relationship between banks and cardholders, the subsidy don't -- doesn't take place and is much more expensive type of transaction. We really believe that installment-free transactions are the most efficient and the cheapest way to have a transaction and Parcelado [indiscernible] is really an example of the difficulty of displacing Parcelado [indiscernible].

Josh Siegler, Cantor. Fantastic presentation, by the way. So for my question, multiple times, you brought up a chart where basically you demonstrated the fact that penetration of financial services in the software market still has a lot of room to run. I was wondering if you could comment on what the biggest challenge of cross-sell in the software market has been thus far, what gives you confidence that, that will improve moving forward as well. And whenever you're bringing new software customers and if it's easier to offer them a bundled service initially.

Great question, Josh. I think I'm going to take that one. [indiscernible], feel free to complement. So I think the short answer is we have -- the biggest challenge is really the go-to market, right? So at the end of the day, it's not -- it doesn't suffice to have great integrated solutions that help clients pain points. If you don't have the right go-to-market to actually drive the distribution and I think it's also about how we align incentives across the organization to make that happen. So although we had put a lot of effort on the integration side, and we had voiced this a few times in past earnings calls that we had developed integrations across many POS and ERP solutions within Links. We did very little on the go-to-market side until very recently. So a good example is the recent effort that we've done in gas stations. Maybe Sandy, you want to talk a little bit about that and what we're doing in gas stations how we're leveraging the channels and [indiscernible] thing so far.

Good afternoon everyone.

Maybe Sam you can introduce yourself.

I can introduce myself, exactly. I joined Stone in October 2021. So I used to be the Head of People organization. And now I took over software to work and lead the integration with financial service. I really believe that the way that we organize ourselves and this structure is a big enabler for what we need to do. And today, and you are just organizing in a way that is going to segregate these 4 verticals, and you just assigned leaders for each of them. And then we're going to -- we created already some functions. So you have -- that's going to serve the 4 verticals. So we have a go-to-market function. This go-to-market function will lead the go-to-market strategy for each of the 4 verticals, but also we'll need the integration work together with the financial service go-to-market team to integrate them. And then we can have a much better alignment in synchronous between the team that we have in the software mainly, the distribution franchises that we have with our specialists, our agents and our hubs. So we're going to synchronize this and we just did this in software. We were able to grow very fast in the last month with more than 200 -- around 200 gas station having our solution that you guys just say here. And the other one going to be pricing, it's a point. So we're going to have a price that's going to serve all 4 verticals and it will be totally aligned with the people -- sorry, if the pricing team for this vertical. And the main objective of this price team, we're going to be to optimize the bundle looking at the P&L of the clients, not the P&L of software or the P&L of financial services. So this is going to help us a lot. The other function will be the client service. So the client service, we are already discussing how we're going to integrate. So I think -- I believe that in the end of the first quarter, we're going to have 1 point of contact for these 4 verticals already. And then our -- these clients can be served in a level of storm that's going to be a big change, okay? And the other one is inbound sales that you can generate a lot of demand from our sales team in e-financial service from other kinds of channels that we have, and we're going to integrate them as well. So this is going to be a tower. And this tower going to be our leaders at verticals. And our leaders have the functions will be reported to me directly, then we can make very quick decisions to integrate the whole system.

I think to Sandro's point, there is one aspect that we didn't talk too much about, but I believe a lot, which is, our focus is on capturing the 236 CPV opportunity. And I think on the gas station initiative that we're undertaking. Now we're already seeing a lot of traction, but the essence is to enable all of our channels, be them franchises within the software business, be them the specialist sales organization that we have within financial services to sell those bundles. So what we did see in this initial efforts in gas stations is that, for example, when a specialist, a stone specialist goes to sell the bundled solution. They actually within the route go to gas stations that don't use links. And so that also becomes a new sale of the software -- on the software side. And that connects a little bit to Mateus' point that it is so early for us to assess the opportunity on the software subscription side that we don't make very strong assumptions in our plan, but that is an upside opportunity. If we really are able to enable all of those channels to sell the bundles, then that should also drive additional revenue growth in software. And naturally, I think one more point that is important as an element and a key driver is that we can deploy all of the technology that we use in our operations within Stone and all of our software channels and customer relationship, like Sandro mentioned. So there's a lot of work to do. But essentially, I think most of the work is like Sandro said, on the go-to-market and on the pricing and our ability to execute and create good bundles for clients.

Sheriq Sumar from Evercore ISI. I have a 3-part question, if you don't mind. And one is following up on the prior question. Within the priority verticals that you have talked about, what -- how much is the penetration within each of these verticals? And going forward, what are the low-hanging fruits that you think that could immediately help you drive the volume growth. That's one. On the second part, on the winning the MSMB space, you laid out just the volume growth and the take rate is going higher, I mean, but why not include the -- any software metrics within that as to why is that not a priority within that segment. And the third part is, excluding the macro noise within the software business that you're seeing on inflation and everything and all, it's like are there any metrics that could help us point as to what exactly is the organic growth that we could consider or anything that would help us understand as to okay. The number of subscribers are increasing or the penetration is increasing on that?

Maybe I'll take the first part on the penetration. So I think we gave the number, right? The BRL 236 billion versus the BRL 358 billion and the overlap, it's still very small. It's very in line actually if you look at the TPV pool. The big majority of those clients are medium clients. So remember, I was explaining the Act for, in hindsight, it's easy to explain how its strategy played out. But the actual reality is what we learned, the more and more we looked within Link's is that there's a significant pool of clients that are actually SMB clients, but they are the very top range of SMBs, right? And so our market share with the pure stone solution, in those larger SMBs was actually low. That overlap that you're seeing is pretty much close to our market share there. because we didn't have such a strong value proposition with a pure stone horizontal offering to those more sophisticated SMB clients. So that is why we believe that by putting everything in place that Sandro just said, on the incentives and the go-to-market and pricing those bundles, we'll be able to gain more participation of that pool. And that will be a driver of growth of the TPV guidance that Mateus provided. So I think that's the part on penetration. I think that's the...

Second part was on the software winning [indiscernible] MSMB side. As why not provide any metrics when you're trying to win the MSMB segment, why not provide any metrics on the software side. And outside of the noise of the -- on the macro front, like what are the organic trends that we can keep track of?

Yes, that's a good question. I think the general question here is about disclosure in software in general. So to that regard, in the Investor Day, we really wanted to emphasize the opportunity in terms of the TPV pool, because this is the largest opportunity. I think as we move ahead, we are thinking about how to improve our disclosures in software and how to provide you with more drivers for our performance. So that is probably something that we're going to address in the later -- the next earnings calls. But to give a little bit of color in that regard, when you look at our Software segment on a stand-alone basis, there are 2 main areas of focus. In regards to top line, I think you got the point, which is there's a lot of macro noise, but Lia showed in her presentation that when we break down that growth, when we look at the priority verticals, we still have robust and strong growth in terms of revenue lines, and this is driven by the increase in the number of stores and also the ticket. Where we're lagging in terms of revenue in the software more recently, is on digital and enterprise, which again has more to do with macro conditions than the underlying performance of the business itself. The second area that we're focusing in terms of the software execution has to do with efficiency. So over the past 2 quarters, we saw an uptick in terms of the EBITDA margin for the Software segment that reached 20% at the end of the third Q. And this is a trend that we should continue to see, which is digital margins strongly improving, especially in the short term. As we drive more integrations, not only in the top line, which Lia mentioned, but also integration in the back-office functions between the 2 platforms. So just to give you a bit of color in that sense.

Jorge over there. And then I have one Carlos. John, okay. Jorge. Yes, sorry.

A follow-up question, sorry. Going back to the guidance. I think the market buys your TPV guidance, I was looking at Consensus, Consensus is actually a little bit more aggressive at BRL 690-something billion. I'm at BRL 615 billion. I think there is an agreement that the growth rate of the industry and your company could be as such, where there is a really big divergence is on the take rate. Consensus assumes 50 basis points take rate degradation until 2027. My numbers have like 40 basis points. And so I guess, help us bridge that gap, right? I mean, just from my vantage point, you have an industry that has become more competitive because the challengers now are competing against each other, not only against incumbents. The incumbent themselves are getting a little bit better and some of them kind of like just maybe don't even want to care about pricing and profitability to just care about keeping the client maybe [ read ], maybe get net for them, cutting prices in order to keep like a client is what really works hard for them. So that in itself means probably take rate pressure across all of the different products in payments. Then you have the new business, which is the discounting of receivables outside of the transaction using the clearing house that now apparently works using CERC, which is another clearing house that private money is looking after. So it feels that there's going to be a significantly larger amount of money going after receivables, and that maybe also suggest pricing pressure over time. The mix of the industry is also becoming less profitable, right? So it's more PIX, it's more debit, well, more PIX really not even debit, credit, hard to think that credit is going to become more profitable over time. I think it's the other way around. It's going to be less profitable. So you have pressure on the transaction take rate, pressure on the prepayment take rate, pressure from a competitive standpoint in everything that has to do with payments. You have all of the digital banks. You have an incredibly successful new bank doing SME banking as well. So how do we get comfortable that in this environment, you're not going to see a 40 or 50 basis point take rate contraction over the next 3 years but rather a 20 basis point increase. So if you just help us really walk through that math, I think, will be incredibly helpful for people to buy into the guidance.

Yes. Maybe I can start and then you can add. But I think something that we highlighted in our presentation is the difference in economics that we see between heavy users and the users that are less engaged. And if you remind the data, we're not showing a 10% or 20% increase in ARPAC, we're talking about 2.4x. So I think this is something that most people probably under appreciate that -- which is when you offer a complete set of solutions, the competition is not about what is their MDR rates or prepayment or any given revenue stream. There is kind of a virtuous cycle that happens, which is not only you monetize better through banking and credit, but also because the client is using a single solution. All of their volumes become concentrated with you being the main player and so on and so forth. So I think probably the main answer to that question relates to the second priority, which is driving engagement. Second thing I would add even though our market is indeed competitive, I think a lot of the topics that were mentioned, it's more about noise than actual threats in our view. So just to pick a few examples here. Competition in regards to the register of receivables. Again, this is happening for quite a while. When you actually do the math, it's very hard to justify to compete on prepayment for a client that transacts between BRL 10,000 and BRL 20,000 per month, the math simply doesn't work. In regards to PIX, PIX is indeed growing a lot, and we acknowledge that. But I think Lia mentioned this and [indiscernible] has also reinforced, we actually see PIX as an opportunity, not a threat. It's been driving healthy take rates since increasing the usage of the banking account, which in the end of the day, translates to this higher ARPAC and more engaged users. So again, I think the main point for me is to keep in mind that the difference in ARPAC is not 10%, 20%, it's 2.4x.

Yes. I just want to maybe summarize what Mateus said and try to like bring 2 points, right, that I think explain this gap quarter. Number one is really the stage at which we -- our business is at regarding everything beyond payments. So I think to some extent, we're even steps behind in the journey, but positive side of this is that there's a lot of upside. And we're seeing the early indicators that this is going to continue to grow. And I think on the payment side, we do assume in our plan that this is a competitive market. So our pricing execution, I think, has shown that we've been able to price, as Mateus showed, historically based majority -- in the majority on payments, we've been able to maintain discipline on monetization, looking at return hurdles. But naturally, we realize that we are in a competitive market. And that to the extent that we can pull all of these levers, we will always maintain the discipline to grow with healthy returns. But if there are changes, for example, in interest rates, and interest rates go down, we will continue to price maintaining healthy returns, which may mean prices will go down depending on the competitive environment. So we have as a central assumption in the model that we are in a competitive market. And to the point that [indiscernible] pointed out, we don't believe that there will be changes in the interest installment structure of the market.

[indiscernible] and then John and Carlos. [indiscernible] over there.

Nicolas Riva from Bank of America. So one question on the use of your liquidity. So you spent BRL 300 million earlier this month to buy back shares. You just announced share by back program of BRL 1 billion. The BRL 1.3 billion that would have been enough to buy back more than 50% of your 2028 bonds. So my question would be, why do you see more value in buying back your shares as compared to your 2028 bonds? And then the second question, the credit business, right now, your loan book is essentially 0, I think, BRL 100 million. But in your 2027 projections, you have, I think, about BRL 5 billion or BRL 5.5 billion by the end of 2027. So that's about $1 billion that you will need of new funding to fund that product. So I would assume that going forward in the next few years, your main funding requirements are going to be related to prepayments, number one; and then number two, the growth of your credit book. So my question would be, how do you plan to finance all the growth in the credit book and if it's going to be similar to prepayments with the [indiscernible].

Do you mind if I just Nicolas -- we have received a lot of questions with regards to see subjects overall, like capital allocation to asking about dividends as well and so on and so forth. So Mateus, if you could.

Yes, sure. So first question is about buying back the bond versus buying back stock. I think we mentioned this in the call as well, we do believe that the current levels are ones, is trading is not reflective of the creditworthiness of the company because when you look over the past many quarters and years. I think the company has been consistently generating cash. And as we improve the profitability, our cash conversion has been really high. So if we take the last 18 months -- the last 12 months, the company has generated BRL 1.8 billion in cash, which when you compare it to our market cap to the rating of the bond, I think it's it sends the same message. But here, when we think about capital allocation, we need to make choices in the end of the day. So given our belief in our strategic plan, when you look at the levels that our company is trading, when we assume that we're going to beat the plan, we're talking maybe about 4x earnings for 2027. So in that regard, it seems to us that buying back the stock now is more accretive than buying back the bonds. But again, as we generate cash in excess of what we need to fund the business, we have the duty to evaluate all the options and choose the one that we think will generate most value. So I think there is a discussion that is always in the table. And then to address the point about capital structure in general, maybe Diego can come to give more details. While he's coming, I think you're probably right that prepayment and credit are the biggest users of funding going ahead? I would also highlight that we have a lot of deposits nowadays that we don't yet use to fund our operations. So this can be a big lever going forward as well.

Good afternoon. Thank you very much, Nicolas, for the question. I'm Diego Salgado, Head of Treasury, joined Stone in April 2021. So as Mateus started, we're going to be generating a lot of cash flow as we have already started, especially during the past 12 months. If you see our cash conversion, it's pretty high compared to our net income, and we don't expect that to change in the near future. On top of that, yes, you're right, we're talking about BRL 5 billion in total assets on the credit portfolio. But you also saw that we're going to have 3x that amount in terms of deposits on which we don't leverage and we're going to start leveraging next year. once we get our license from the Brazilian Central Bank. That said, most of our capital allocation is still going to be deployed on the prepayment business, and we're going to keep funding that with the tools that we have today and the additional diversification strategy that we have for the business. We don't rely heavily on any specific funding source, as a matter of fact, the strategy is really to keep diversifying and having a balanced approach towards all different markets so that we don't have any specific dependency.

Okay. I think we can John and Carlos, I'll give the microphone here, John and Carlos. You're the next John.

This is John Coffey from Barclays. So basically -- so historically, you've provided great disclosures on financial services, very easy or very helpful for us to model the company. But when it comes to software, it's been a little bit more opaque and hard to see him to and forecast successfully. And I know, Mateus you said that it's still to be determined whether or not you're going to release more financial -- more metrics on software going forward. That being said, as we look out to 2024 and 2027, for the guide the guidance or milestones that you had laid out, is there any way you could help break out what software would be? Like how much we should think of net income being driven by software or anything on EBT or any other metrics you could give us on how the corporation splits between financial services and software going forward?

Do you want to talk about margins trends and then we can talk about metrics.

Yes, for sure. So I'll start by the bottom line. Like I said, one of the main drivers behind the administrative expenses expansion in terms of profitability that we're going to see is the integration between our software segment and our Financial Services segment. That's something that we are already starting to yield the benefits and this was one of the main drivers behind the margin expansion we saw over the past few quarters. But as we move ahead, we do expect EBITDA margins in our software segment reached upwards of 23% next year. So I think that can give you a sense of how the profitability for the software business evolves as a percentage of the overall business in the short term.

I think regarding growth, we showed numbers that break down softer revenues within the bucket. So high-priority verticals versus enterprise versus the other assets. And aside from just considering the fact that we're going to allocate most of the capital to grow in the priority verticals. There is also a macro context that is impacting revenues within enterprise. But our software enterprise business is also a business where we already have high -- very high market penetration. So there's less upside in growth within enterprise than there is within the 4 priority verticals, exactly because of the fact that those verticals are -- serve more the large SMB clients. So I think regarding growth ahead, a good way to look at it is to look at that breakdown and consider that those are more arrays that are more in line with what we're going to continue to see lower growth in enterprise and higher growth in the priority of verticals. And maybe I don't know, Sandro maybe wants to talk a little bit about metrics because we do have a discussion consideration to do regarding disclosure, but that doesn't mean that we don't measure software metrics, right? I think there's a discussion around the disclosure. But maybe Sandro can talk a little bit about what are the software metrics that we do like to monitor within the business because that can provide some color.

As Lia mentioned, we will separate the enterprise business. We're going to create a business unit for this. This business unit is going to focus on keep the growth rate that has been having in the last years, but also EBITDA margin. So it would be this combination of growth and EBITDA margin that you're going to focus on that enterprise and the other assets that we manage, they don't have much synergies because they are like car dealers softwares or educational softwares or health care softwares, don't need to integrate them. And regarding the main KPIs that we will be following and giving us targets for the team, you have ARR, net revenue retention with the net revenue rotation, we have cross-sell, upsell, churn, active stores and of course, NPS that's going to follow very strongly, mainly in the 4 verticals and also EBITDA margin, cash conversion. So it's a little bit what we'll be following.

Carlos, I'm sorry your mic was...

Carlos Gomez, HSBC. I have another financial question about the use of capital. And I completely understand what you said about your assessment about the value of the shares. But then looking at the BRL 1 billion that you are paying and I'm thinking, why don't you pay a dividend and more important, why don't you pay interest on own capital? I mean as it happens, you have a large equity base of BRL 40 million because of your acquisitions. Maybe the equity is not in Brazil, and you cannot -- maybe there is a technical reason for it. But in principle, I would think that you could save like BRL 300 million by doing that.

Yes, that's a great question. I think you already answered most of the question, which is, given our capital structure, most of our equity is not onshore, it's offshore, and that already generates a positive effect on our tax rate. I think we spoke about the earnings release as well. But when you look at the evolution from the 28s until the 20s that we just released, part of that was a small enough in the quarter. The remainder had to do with basically where the profits were coming from. So we did evaluate this extensively, and we think that now what optimizes our returns is not to pay interest on equity. Rather, I think our capital structure is better optimized in that way.

Do we have any -- sorry, please, and then just for a matter of organization here, we're approaching the end. So I think we'll take one question here. I'll just take another one from the website and then we finalize.

My name is Alan, i'm from AAC Capital. So I did have a question on one of the credit portfolio -- couple of questions. First, I think I know it's very small right now, but the NPL looks extremely low. And how should I compare to like similar products existing in the market? And the second one is are they like -- could you provide a breakdown of the current like 4,000 clients by various cohorts, such as like TPV or average duration this can stay with StoneCo. So we can get a better understanding when you scale it up, like will the NPL stay the same or would that like gradually trend up. I think lastly, is like I'd like to know how the risk-adjusted margin and return on equity of the credit portfolio compared to the prepayment.

I'll start with the last part, then maybe Gregor can join us to provide a few insights in terms of the credit product as well. But the answer to prepayment versus credit, I think, is the same answer to the take rates questions we received. We don't see really our take rates from monetization by lever. The only difference in that regard that when it comes to credit, it has a different risk profile. Therefore, we have a separate hurdle in terms of return for credits. But other than that, we are really focused on the monetization of the client relationship as a whole and not on individual lines. Now forgot the question right. I think the question was around profile of our credit disbursements by cohorts and what you expect going forward and also how our NPLs compared to the market, right? Gregor, I think you can give a lot of detail in that. Maybe Gregor you start and then I'll join you.

Okay. Well, we don't have any specific concentration or public right now, we are talking about company's loan sizes in the range of BRL 30,000 spread all over the country in all segments. And what we do here, we use our scoring process and -- sorry, and we target our clients on the expected loss that we have in each cohort. So we are not driving any kind of specific segment, but rather the risk involved in each one of our clients. So this is how our policy is being written right now. And the first part of the question was?

In part of the current like the NPL compared with [indiscernible] comparable markets?

I can compare to what I had in my last job at Banco Santander. And so far, the performance of our vintages is extremely positive. I mean it's below what I've seen in the market, specifically talking about this smaller clients. So we have a much better performance than what I've seen so far. And the collateral that we have also is very strong in providing this better performance to the portfolio we are building up.

So as I've mentioned, I'll take just the last question. And just to make clear for the one's who send questions through the webcast, we are going to be answering. I think I tried to aggregate all the main topics, but if there's anything specific, the IR team will reply shortly, okay? But the final question is like, do you believe the earnings growth will be similar to the one of EPS growth just trying to understand here if we should expect any material increase in the share count on the back of employee compensation.

To be very straight, no, there's no material change in terms of employee compensation that would affect EPS.

So Pedro, would you like to do like...

I think it's -- again, appreciate the time you guys spent with us today. I think it was, for us a great opportunity at least for me, it was amazing to have the time to engage with some of you. And again, Hope to see you more often, and we're going to talk more and more about the company, provide more disclosure and discuss the guidelines and the targets for the company as we move ahead. Thank you very much. Again, amazing holidays for all of you and Merry Christmas. Okay. Thank you guys.