Core Insights - The article compares two Internet - Software stocks, StoneCo Ltd. (STNE) and Informatica Inc. (INFA), to determine which is more attractive to value investors [1]. Valuation Metrics - StoneCo Ltd. has a Zacks Rank of 1 (Strong Buy), indicating a positive earnings outlook, while Informatica Inc. has a Zacks Rank of 3 (Hold) [3]. - STNE has a forward P/E ratio of 10.88, significantly lower than INFA's forward P/E of 15.46, suggesting STNE may be undervalued [5]. - The PEG ratio for STNE is 0.41, compared to INFA's PEG ratio of 2.18, indicating STNE's expected earnings growth is more favorable [5]. - STNE's P/B ratio is 1.94, while INFA's P/B ratio is 2.83, further supporting STNE's valuation advantage [6]. - Based on these metrics, STNE holds a Value grade of B, whereas INFA has a Value grade of D, highlighting STNE's superior valuation profile [6]. Earnings Outlook - STNE is noted for its improving earnings outlook, which enhances its attractiveness in the Zacks Rank model [7].

Technical Analysis - StoneCo Ltd. (STNE) has reached a key level of support, indicating a potential bullish breakout as its 50-day simple moving average has crossed above the 200-day simple moving average, forming a "golden cross" [1] - A golden cross is characterized by a downtrend followed by a crossover of the shorter moving average over the longer moving average, leading to a trend reversal and subsequent upward price movement [2] Performance Metrics - STNE has experienced a significant price increase of 25.1% over the last four weeks, suggesting strong momentum [3] - The company currently holds a 1 (Strong Buy) rating on the Zacks Rank, indicating positive market sentiment [3] Earnings Outlook - The earnings outlook for STNE is positive, with no earnings estimates decreasing in the past two months, while there have been two upward revisions, contributing to an increase in the Zacks Consensus Estimate [3][4] - The combination of favorable earnings estimate revisions and the technical breakout position suggests that STNE may continue to see gains in the near future [4]

[Presentation of Financial and Other Information](index=7&type=section&id=Presentation%20of%20Financial%20and%20Other%20Information) [Financial Statements and Reporting Standards](index=7&type=section&id=Financial%20Statements%20and%20Reporting%20Standards) The company prepares IFRS-compliant financial statements with the Brazilian real (R$) as its functional currency, providing convenience U.S. dollar translations - Financial statements are prepared in accordance with IFRS Accounting Standards, and the functional currency is the Brazilian real (R$)[15](index=15&type=chunk) - For convenience, some amounts have been translated to U.S. dollars at a rate of **R$6.1923 to US$1.00** as of December 31, 2024, but these are not representations of actual value or convertibility[17](index=17&type=chunk) [Selected Financial Data](index=7&type=section&id=Selected%20financial%20data) The company reported a R$1.51 billion net loss in 2024 due to a goodwill impairment, though TPV grew 17.8% and adjusted net income rose to R$2.20 billion Consolidated Statement of Profit or Loss Data (in R$ millions) | Indicator | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Total revenue and income** | **13,257.5** | **12,055.0** | **9,588.9** | | Profit (loss) before income taxes | (1,017.6) | 1,970.8 | (387.3) | | **Net income (loss) attributable to controlling shareholders** | **(1,515.2)** | **1,592.1** | **(519.4)** | | Basic earnings (loss) per share (R$) | (5.02) | 5.09 | (1.67) | | Diluted earnings (loss) per share (R$) | (5.02) | 4.74 | (1.67) | Key Operational and Non-IFRS Data | Indicator | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Adjusted net income (in R$ millions)** | **2,200.0** | **1,557.5** | **410.5** | | TPV (in R$ billions) | 516.2 | 438.3 | 380.6 | | Active payment clients (in thousands) | 4,172.7 | 3,522.1 | 2,584.0 | Reconciliation of Net Income to Adjusted Net Income (in R$ millions) | Reconciliation Item | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Net income (loss) for the year** | **(1,507.1)** | **1,600.4** | **(526.4)** | | Amortization of fair value adjustment | 122.8 | 92.4 | 138.6 | | Software business goodwill impairment loss | 3,558.0 | — | — | | Mark-to-market related to the investment in Banco Inter | — | (30.6) | 853.1 | | Other income/expenses | 67.9 | (78.6) | (17.8) | | Tax effect on adjustments | (41.6) | (26.1) | (36.9) | | **Adjusted net income** | **2,200.0** | **1,557.5** | **410.5** | Consolidated Statement of Financial Position Data (in R$ millions) | Indicator | As of Dec 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **54,813.5** | **48,693.6** | | Total Current Assets | 45,965.1 | 37,152.6 | | Total Non-current Assets | 8,848.4 | 11,541.0 | | **Total Liabilities** | **42,986.2** | **34,017.6** | | Total Current Liabilities | 33,533.8 | 28,831.1 | | Total Non-current Liabilities | 9,452.4 | 5,186.5 | | **Total Equity** | **11,827.3** | **14,676.0** | - The Brazilian real depreciated by **21.8%** against the U.S. dollar in 2024, with the exchange rate reaching R$6.1923 per US$1.00 at year-end[25](index=25&type=chunk) [Corporate Events](index=13&type=section&id=Corporate%20Events) The company engaged in M&A, significant capital returns through share repurchases, debt management, and key organizational changes to streamline governance - The company's reportable segments are (i) **financial services**, (ii) **software**, and (iii) **Non-allocated**[29](index=29&type=chunk) - Key corporate events include acquiring **100% of Trinks** in May 2024, divesting from Neomode in December 2024, and divesting from PinPag in February 2024[30](index=30&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The company executed several share repurchase programs: a **R$300 million** program in September 2023, a **R$1 billion** program in November 2023, and a new **R$2 billion** program in November 2024[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - In July 2024, the company repurchased **58.9%** of its outstanding 2028 notes via a tender offer[42](index=42&type=chunk) - Significant board changes occurred in 2024, including the departure of André Street and the appointment of Mauricio Luchetti as the new Chairperson[48](index=48&type=chunk) PART I [ITEM 3. KEY INFORMATION](index=16&type=section&id=ITEM%203.%20KEY%20INFORMATION) The company faces significant risks from competition, regulation, technology, and Brazil's economic instability, alongside challenges from acquisitions and its dual-class share structure [Risk Factors](index=16&type=section&id=D.%20Risk%20factors) - The company faces substantial and increasingly intense competition from traditional merchant acquirers, financial institutions, and new entrants[95](index=95&type=chunk)[96](index=96&type=chunk) - The business is subject to extensive and evolving government regulation in Brazil, including data protection laws (LGPD) and Central Bank oversight[114](index=114&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk) - The rise of alternative payment methods like **Pix**, developed by the Central Bank, could reduce the use of traditional card payments, with Pix's share growing to **46%** of total transactions in Q3 2024[104](index=104&type=chunk)[105](index=105&type=chunk) - Operational risks include cybersecurity attacks, system failures, and reliance on third-party providers for data centers and transaction processing[146](index=146&type=chunk)[151](index=151&type=chunk)[164](index=164&type=chunk) - The business is exposed to Brazil's economic and political risks, including inflation, interest rate fluctuations, and political instability[213](index=213&type=chunk)[216](index=216&type=chunk)[222](index=222&type=chunk) - The balance sheet includes significant intangible assets (**R$5.5 billion** as of Dec 31, 2024), and an impairment, such as the **R$3.6 billion** goodwill impairment in 2024, can negatively affect financial results[212](index=212&type=chunk) - As a Cayman Islands exempted company, shareholder rights differ from those in U.S. jurisdictions, potentially making it more difficult for shareholders to protect their interests[249](index=249&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - The dual-class share structure gives Class B shareholders (**10 votes per share**) significant voting power, which may limit the influence of Class A shareholders[270](index=270&type=chunk)[273](index=273&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=56&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) StoneCo has evolved into a comprehensive financial and software solutions provider for Brazilian MSMBs, operating under a complex and evolving regulatory environment [History and development of the company](index=56&type=section&id=A.%20History%20and%20development%20of%20the%20company) - StoneCo's mission is to serve Brazilian entrepreneurs with financial and software solutions, focusing on MSMBs[283](index=283&type=chunk) - The company's evolution is described in "Five Acts": serving SMBs with payments, expanding to the micro-segment, building a banking platform, acquiring Linx for software integration, and relaunching a credit product[286](index=286&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk) Key Performance Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | Growth | | :--- | :--- | :--- | :--- | | TPV (R$ billion) | 516.2 | 438.3 | 17.8% | | Active Payments Clients (million) | 4.2 | 3.5 | 18.5% | | Total Revenue and Income (R$ million) | 13,257.5 | 12,055.0 | 10.0% | | Net Income (Loss) (R$ million) | (1,507.1) | 1,600.4 | - | | Adjusted Net Income (R$ million) | 2,200.0 | 1,557.5 | 41.3% | [Business Overview](index=60&type=section&id=B.%20Business%20overview) - The company operates in two main segments: **Financial Services** (payments, digital banking, credit) and **Software** (POS/ERP, CRM, e-commerce solutions)[308](index=308&type=chunk) - The business model is built on four core pillars: Unique Culture, Comprehensive Merchant Platform, Tech-Enabled Distribution, and Superior Client Service[321](index=321&type=chunk) - Distribution is a key competitive advantage, utilizing a mix of proximity channels (over **600 hubs**), digital channels, and strategic partners[331](index=331&type=chunk)[334](index=334&type=chunk)[337](index=337&type=chunk) Total Addressable Market (TAM) for MSMBs in Brazil (as of Dec 31, 2023) | Business | Estimated TAM (Revenue in R$ billion) | | :--- | :--- | | Payments | ~34.0 | | Credit | ~40.0 | | Banking | ~16.0 | | Software | ~8.0 | - The company's market share in the Brazilian card industry was **10.9%** in 2024 based on TPV, according to ABECS data[358](index=358&type=chunk) - Key regulatory frameworks impacting the business include rules for Payment Institutions, the Pix instant payment system, Open Finance initiatives, and the mandatory registration of card receivables[434](index=434&type=chunk)[466](index=466&type=chunk)[474](index=474&type=chunk)[484](index=484&type=chunk) [Organizational Structure](index=102&type=section&id=C.%20Organizational%20structure) - StoneCo Ltd is a Cayman Islands holding company that conducts its operations primarily through its Brazilian subsidiaries[517](index=517&type=chunk) [Property, Plants and Equipment](index=104&type=section&id=D.%20Property%2C%20plants%20and%20equipment) - The company's main operational hubs are leased properties located in São Paulo and Rio de Janeiro, Brazil[521](index=521&type=chunk) - As of December 31, 2024, the company leased data center facilities in Brazil and the United States[522](index=522&type=chunk) [Operating and Financial Review and Prospects](index=104&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Revenue grew 10.0% in 2024, but a R$3.6 billion goodwill impairment led to a net loss, while adjusted net income grew 41.3% on strong financial services performance [Operating Results](index=105&type=section&id=A.%20Operating%20results) Financial Performance Summary (2024 vs. 2023) | Metric | 2024 (R$ million) | 2023 (R$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue and Income | 13,257.5 | 12,055.0 | 10.0% | | Net Revenue from Transaction Activities | 3,216.0 | 3,309.8 | (2.8)% | | Financial Income | 7,676.2 | 6,229.3 | 23.2% | | Net Income (Loss) for the Year | (1,507.1) | 1,600.4 | N/A | | Adjusted Net Income | 2,200.0 | 1,557.5 | 41.3% | - The net loss in 2024 was primarily caused by a **R$3.6 billion goodwill impairment loss** related to the Software business unit[612](index=612&type=chunk) - Financial income grew **23.2%** in 2024, driven by higher prepaid volumes, increased credit revenues, and floating interest from banking solutions[605](index=605&type=chunk) - Selling expenses increased by **24.0%** in 2024 due to higher investments in salespeople, marketing, and partner commissions to drive growth[609](index=609&type=chunk) - Financial expenses decreased by **7.6%** in 2024, mainly due to a lower average CDI Rate, which reduced funding costs[610](index=610&type=chunk) [Liquidity and Capital Resources](index=123&type=section&id=B.%20Liquidity%20and%20capital%20resources) Summary of Cash Flows (in R$ millions) | Cash Flow Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | (3,621.4) | 1,647.7 | 1,683.7 | | Net cash (used in) provided by investing activities | 1,587.5 | (845.4) | (1,871.1) | | Net cash provided by (used in) financing activities | 5,040.6 | (148.8) | (2,810.1) | - The company's primary sources of liquidity are sales of receivables, bank borrowings, debt issuances, client deposits, and cash flows from operations[634](index=634&type=chunk) Outstanding Debt Instruments (as of Dec 31, 2024, in R$ millions) | Instrument Type | Current Portion | Non-current Portion | Total | | :--- | :--- | :--- | :--- | | Institutional deposits and marketable debt securities | 3,066.0 | 5,430.0 | 8,496.0 | | Other Debt Instruments | 1,903.8 | 2,496.1 | 4,400.0 | - Capital expenditures in 2024 totaled **R$1.3 billion**, primarily for purchasing POS devices and software development[655](index=655&type=chunk) - The company has a capital management framework based on a minimum managerial **CET1 ratio of 20%**, maintaining credit ratings, and holding a positive adjusted net cash position[661](index=661&type=chunk)[663](index=663&type=chunk) [Directors, Senior Management and Employees](index=133&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) The company is led by an independent board and experienced executives, with compensation tied to performance and a workforce of 16,793 employees [Directors and Senior Management](index=133&type=section&id=A.%20Directors%20and%20senior%20management) - The Board of Directors is responsible for overall strategy and supervising management; all current members are independent[668](index=668&type=chunk)[670](index=670&type=chunk) Current Board of Directors | Name | Position | | :--- | :--- | | Mauricio Luis Luchetti | Director and Chairperson | | Gilberto Caldart | Director and Vice-Chairperson | | Antonio Silveira | Director | | Diego Fresco Gutierrez | Director | | José Alexandre Scheinkman | Director | | Luciana Ibiapina Lira Aguiar | Director | | Luis Henrique Cals de Beauclair Guimarães | Director | | Silvio José Morais | Director | - Pedro Zinner serves as the Chief Executive Officer, leading a management team with extensive experience in finance, technology, and operations[681](index=681&type=chunk)[689](index=689&type=chunk) [Compensation](index=138&type=section&id=B.%20Compensation) - Aggregate compensation for the Board of Directors and executive officers for the year ended December 31, 2024, was **R$137.3 million**[692](index=692&type=chunk) - The company maintains a Long-Term Incentive Plan (LTIP), with a new pool of **19.2 million shares** approved for RSUs and PSUs in May 2022[700](index=700&type=chunk) - As of December 31, 2024, there were outstanding equity awards corresponding to **18,638,934 Class A common shares**[703](index=703&type=chunk) - In 2024, the company modified **3.9 million PSU awards**, introducing new performance conditions and extending vesting periods by an average of one year[701](index=701&type=chunk) [Board Practices](index=140&type=section&id=C.%20Board%20practices) - The Board of Directors has four standing committees: Audit, People and Compensation, Finance, and Risk[704](index=704&type=chunk) - The Audit Committee consists of three independent directors, all of whom are considered "audit committee financial experts" under SEC rules[705](index=705&type=chunk) - As a foreign private issuer, the company follows Cayman Islands corporate governance practices in lieu of certain Nasdaq requirements[709](index=709&type=chunk)[712](index=712&type=chunk) [Employees](index=141&type=section&id=D.%20Employees) Full-Time Employees by Year | Year | Number of Employees | | :--- | :--- | | 2024 | 16,793 | | 2023 | 17,091 | | 2022 | 16,685 | Employees by Function (as of Dec 31, 2024) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Sales and Marketing | 5,860 | 34.9% | | Operations | 4,297 | 25.6% | | Technology and Product Development | 4,573 | 27.2% | | Administrative | 2,063 | 12.3% | | **Total** | **16,793** | **100%** | [Major Shareholders and Related Party Transactions](index=144&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) Co-founder André Street controls 41.0% of voting power, with a shareholders' agreement granting certain rights, while all related party transactions require audit committee approval [Major Shareholders](index=144&type=section&id=A.%20Major%20shareholders) Beneficial Ownership of Major Shareholders (as of March 31, 2025) | Shareholder | % of Total Voting Power | | :--- | :--- | | André Street | 40.99% | | Entities affiliated with BlackRock, Inc. | 7.53% | | Madrone Partners L.P. | 5.98% | - A Shareholders Agreement grants founder shareholders certain rights, including consent on major actions, though some rights were formally waived in April 2023[725](index=725&type=chunk) [Related Party Transactions](index=145&type=section&id=B.%20Related%20party%20transactions) - The company has a related person transaction policy requiring any such transaction to be approved by the audit committee[737](index=737&type=chunk) - The company has entered into indemnification agreements with its directors and executive officers to the fullest extent permitted by law[738](index=738&type=chunk) - A Registration Rights Agreement provides founder shareholders and Madrone Partners L.P. with demand registration rights for public resale of their shares[733](index=733&type=chunk)[734](index=734&type=chunk) [Financial Information](index=147&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) The company faces numerous legal proceedings with a R$237.4 million provision and does not currently anticipate paying cash dividends [Consolidated Statements and Other Financial Information](index=147&type=section&id=A.%20Consolidated%20statements%20and%20other%20financial%20information) - The company is involved in numerous judicial and administrative proceedings related to civil, labor, and tax matters[741](index=741&type=chunk) Provisions for Legal Proceedings (as of Dec 31, 2024) | Claim Type | Provision Amount (R$ million) | | :--- | :--- | | Civil | 44.5 | | Labor | 71.5 | | Tax and Social Security | 121.5 | | **Total** | **237.4** | - A securities class action was filed against the company in 2021, alleging misrepresentations regarding its credit product, and is currently in the discovery phase[748](index=748&type=chunk)[749](index=749&type=chunk) - The company does not anticipate paying cash dividends in the foreseeable future, intending to retain earnings to fund business development and expansion[751](index=751&type=chunk) [Additional Information](index=150&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) As a Cayman Islands company, its governance features a dual-class share structure and shareholder rights that differ from U.S. law [Memorandum and Articles of Association](index=150&type=section&id=B.%20Memorandum%20and%20articles%20of%20association) - The company has a dual-class share structure: Class A common shares have one vote per share, while Class B common shares have ten votes per share[767](index=767&type=chunk)[771](index=771&type=chunk) - Class B shares automatically convert to Class A shares upon most transfers, with all converting if their total voting power falls below 10%[775](index=775&type=chunk) - As a Cayman Islands exempted company, shareholders have no general right to inspect corporate records and accounts under Cayman law[249](index=249&type=chunk)[251](index=251&type=chunk) - The Board of Directors is composed of 5 to 11 members, elected by an ordinary resolution of shareholders[783](index=783&type=chunk)[786](index=786&type=chunk) [Taxation](index=173&type=section&id=E.%20Taxation) - The company has obtained a **20-year undertaking** from the Cayman Islands government, ensuring no taxes on profits, income, or gains will be applied to its operations[911](index=911&type=chunk)[913](index=913&type=chunk) - For U.S. federal income tax purposes, the company believes it was not a Passive Foreign Investment Company (PFIC) for the 2024 taxable year but notes an increasing risk for future years[267](index=267&type=chunk)[926](index=926&type=chunk) - If the company were classified as a PFIC, U.S. Holders would face adverse tax consequences, including ordinary income tax rates and an interest charge[929](index=929&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=178&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market, liquidity, and credit risks, which it manages through VaR models, derivatives, and diverse funding sources - The company is exposed to credit risk from counterparties in financial contracts, including card issuers and customers in its credit portfolio[944](index=944&type=chunk) - Market risk is primarily driven by interest rate risk (CDI mismatches) and foreign currency risk (non-BRL assets/liabilities)[949](index=949&type=chunk)[950](index=950&type=chunk)[952](index=952&type=chunk) Value-at-Risk (VaR) Summary (in R$ thousands) | Risk Factor | VaR (1 day) | VaR (10 days) | VaR (60 days) | | :--- | :--- | :--- | :--- | | Interest rates | 811 | 2,564 | 6,280 | | Foreign currency exchange | 233 | 737 | 1,805 | - Liquidity risk is significant due to the company's prepayment and credit businesses and is managed by forecasting liquidity requirements and maintaining diverse funding sources[957](index=957&type=chunk) PART II [Controls and Procedures](index=182&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2024 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[973](index=973&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective, based on the COSO 2013 framework[974](index=974&type=chunk) - The independent registered public accounting firm, Ernst & Young, issued an **unqualified audit report** on the effectiveness of the company's internal controls over financial reporting as of December 31, 2024[976](index=976&type=chunk) [Various Governance and Shareholder Matters](index=183&type=section&id=ITEM%2016.%20(VARIOUS)) The company maintains strong governance with designated financial experts, an active share repurchase program, and a formal cybersecurity risk management program [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=185&type=section&id=ITEM%2016E.%20Purchases%20of%20equity%20securities%20by%20the%20issuer%20and%20affiliated%20purchasers) - In November 2024, the Board of Directors approved a new share repurchase program authorizing the repurchase of up to **R$2.0 billion** of its outstanding Class A common shares[990](index=990&type=chunk) - This new program replaced a previous R$1.0 billion program, under which the company had repurchased **13.2 million shares for US$178.3 million**[989](index=989&type=chunk)[991](index=991&type=chunk) Share Repurchases in 2024 | Period | Total Shares Purchased | Average Price Paid (USD) | | :--- | :--- | :--- | | May 2024 | 2,319,645 | $14.35 | | June 2024 | 917,606 | $13.43 | | July 2024 | 9,670,688 | $13.38 | | September 2024 | 295,000 | $11.86 | | November 2024 | 1,182,291 | $10.55 | | December 2024 | 9,705,261 | $9.04 | | **Total 2024** | **24,090,491** | **$11.57** | [Corporate Governance](index=186&type=section&id=ITEM%2016G.%20Corporate%20governance) - As a foreign private issuer, the company is permitted to follow its home country (Cayman Islands) corporate governance practices instead of certain Nasdaq listing standards[996](index=996&type=chunk) - All current directors are considered independent under the Nasdaq test, although this is not a requirement under Cayman Islands law[998](index=998&type=chunk) [Cybersecurity](index=188&type=section&id=ITEM%2016K.%20Cybersecurity) - The company has an established cybersecurity risk management program, with oversight from the Board's audit and risk committees[1005](index=1005&type=chunk)[1006](index=1006&type=chunk) - The cybersecurity team is led by a Chief Information and Security Officer (CISO), and no material cybersecurity threats were identified in 2024[1007](index=1007&type=chunk)[1008](index=1008&type=chunk) PART III [Financial Statements](index=189&type=section&id=ITEM%2018.%20Financial%20statements) The audited IFRS financial statements received an unqualified opinion, with the impairment of goodwill for the Software unit highlighted as a key audit matter [Report of Independent Registered Public Accounting Firm](index=213&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Ernst & Young issued an **unqualified opinion**, stating that the consolidated financial statements present fairly the financial position and results of StoneCo Ltd[1066](index=1066&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2024[1067](index=1067&type=chunk)[1076](index=1076&type=chunk) - A **Critical Audit Matter** was identified concerning the impairment of goodwill for the Software cash generating unit due to the subjective estimation required[1071](index=1071&type=chunk)[1072](index=1072&type=chunk) [Notes to Consolidated Financial Statements](index=224&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - An impairment loss of **R$3.56 billion** was recognized for the Software CGU as its estimated recoverable amount was lower than its net book value[1366](index=1366&type=chunk)[1367](index=1367&type=chunk) - As of December 31, 2024, the company had provisions for contingencies totaling **R$237.4 million** for probable losses from litigation[1387](index=1387&type=chunk) - The company has an active share repurchase program and held **28.2 million Class A common shares** in treasury as of December 31, 2024[1404](index=1404&type=chunk)[1406](index=1406&type=chunk) - In May 2024, the company acquired the remaining stake in Trinks, making it a wholly-owned subsidiary for a total consideration of **R$59.0 million**[1499](index=1499&type=chunk)[1501](index=1501&type=chunk)[1509](index=1509&type=chunk) Segment Adjusted Net Income (in R$ millions) | Segment | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Financial services | 2,019.9 | 1,436.6 | 361.8 | | Software | 178.3 | 113.8 | 64.7 | | Non allocated | 1.7 | 7.0 | (16.0) | | **Total Adjusted Net Income** | **2,200.0** | **1,557.5** | **410.5** |

Core Insights - StoneCo is a Brazilian fintech operator primarily focused on payment acquiring, with additional banking services and software offerings [1] Financial Performance - In mid-March, StoneCo reported its 4Q 2024 earnings, which exceeded analysts' profitability estimates [1] Management Insights - The management provided several insights into their strategic thinking and future direction during the earnings report [1]

Financial Data and Key Metrics Changes - In 2024, the company achieved a net income of BRL2.2 billion, exceeding the guidance of BRL1.9 billion, despite macroeconomic challenges and over BRL100 million negative impacts from accounting changes [10][12] - Adjusted net income grew 18% year over year, with adjusted basic EPS increasing by 26% compared to the fourth quarter of 2023 [12][10] - The adjusted net margin was 18.4%, one percentage point higher year over year, reflecting strong operational performance [12] Business Line Data and Key Metrics Changes - The MSMB car TPV reached BRL403 billion, a 15% year-over-year growth, while total MSMB TPV exceeded expectations at BRL454 billion, a 22% increase [6][10] - The MSNB take rate was 2.55%, surpassing the guidance of 2.49%, indicating effective pricing strategies and increased contributions from banking and credit solutions [8][9] - The credit portfolio grew to BRL1.2 billion, significantly exceeding the target of BRL800 million, with non-performing loans over ninety days remaining controlled at 3.61% [9][21] Market Data and Key Metrics Changes - The active client base for MSMB payments increased by 19% year over year to 4.1 million clients, with a notable acceleration in client additions [15] - Retail deposits reached BRL8.7 billion, exceeding the guidance of BRL7 billion, reflecting strong performance in bundled payments and banking offerings [7][19] - The banking active client base grew 46% year over year to 3.1 million, outpacing the growth in the payments client base [19] Company Strategy and Development Direction - The company aims to establish Stone accounts as the primary financial hub for clients, focusing on enhancing the value proposition through a comprehensive ecosystem beyond payments [8][10] - Key initiatives for 2025 include investment products and workflow tools to accelerate deposit growth, alongside a focus on client engagement [8][19] - The company is transitioning to a strategy that emphasizes gross profit as a key performance metric, reflecting a more comprehensive view of monetization [18][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential macroeconomic challenges but expressed confidence in delivering sustainable long-term value creation [43][44] - The company remains committed to disciplined execution and prudent capital allocation, with a focus on maximizing intrinsic business value per share [43][44] - Management highlighted the importance of adapting to industry dynamics and maintaining a strong capital structure to support future growth [37][92] Other Important Information - The company recognized a goodwill impairment charge of BRL3.6 billion for the software cash-generating units, which is a non-cash accounting adjustment [28] - The adjusted net cash position at the end of the quarter was BRL4.7 billion, reflecting ongoing share repurchase activity [34] - The company expects to return excess capital to shareholders over time when growth opportunities are not immediately available [37] Q&A Session Summary Question: Performance of banking solutions and areas for improvement - Management noted that deposits are growing ahead of TPV due to successful bundling of payments and banking solutions, with ongoing development of new offerings to enhance client engagement [47][50] Question: View on dividends and capital structure - Management emphasized a commitment to transparency in capital allocation but did not commit to specific targets for dividends or buybacks at this time [52][53] Question: Pricing increases and their impact - Management confirmed that a substantial repricing initiative was implemented at the beginning of the first quarter of 2025, with expectations of low churn during this process [62][63] Question: Guidance on basic vs. diluted EPS - Management explained the decision to guide basic EPS was due to accounting volatility and the desire to avoid double counting share-based compensation expenses [66][68] Question: Potential sale of software business - Management stated that while there have been offers, none met the intrinsic value established for the software assets, and the focus will remain on maximizing value through cross-selling strategies [79][80]

Financial Data and Key Metrics Changes - In 2024, the company achieved a net income of BRL2.2 billion, exceeding the guidance of BRL1.9 billion, despite macroeconomic challenges and over BRL100 million negative impacts from accounting changes [10] - Adjusted net income grew 18% year over year, with adjusted basic EPS increasing by 26% compared to Q4 2023 [12] - Adjusted administrative expenses were BRL994 million, lower than the guidance of BRL1.125 billion, reflecting ongoing efficiency improvements [10][12] Business Line Data and Key Metrics Changes - The MSMB car TPV reached BRL403 billion, a 15% year-over-year growth, while total MSMB TPV exceeded expectations at BRL454 billion, a 22% increase [6][10] - The MSNB take rate was 2.55%, surpassing the guidance of 2.49%, driven by disciplined pricing and increased contributions from banking and credit solutions [8][10] - The credit portfolio grew to BRL1.2 billion, significantly exceeding the target of BRL800 million, with non-performing loans over ninety days remaining controlled at 3.61% [9][20] Market Data and Key Metrics Changes - The active client base for MSMB payments increased by 19% year over year to 4.1 million clients, with a notable acceleration in client additions [15] - Retail deposits reached BRL8.7 billion, exceeding the guidance of BRL7 billion, reflecting strong performance in bundled payments and banking offerings [7][18] - The banking active client base grew by 46% year over year to 3.1 million, outpacing the payments client base growth [18] Company Strategy and Development Direction - The company aims to establish Stone accounts as the primary financial hub for clients, focusing on enhancing the value proposition through a comprehensive ecosystem beyond payments [8] - Key initiatives for 2025 include investment products and workflow tools to accelerate deposit growth [8] - The company is committed to maximizing long-term intrinsic business value growth, emphasizing disciplined execution and prudent capital allocation [40] Management Comments on Operating Environment and Future Outlook - Management acknowledged potential macroeconomic challenges but expressed confidence in delivering sustainable long-term value creation [40] - The company plans to continue outpacing market growth and expanding its share in the MSMB payments market [6] - Management highlighted the importance of evolving client engagement and the successful execution of strategic priorities [5][10] Other Important Information - The company recognized a goodwill impairment charge of BRL3.6 billion for the software cash-generating units, which is a non-cash accounting adjustment [27] - The adjusted net cash position was BRL4.7 billion at quarter end, reflecting ongoing share repurchase activity [32] - The company expects to return excess capital to shareholders over time when value-accretive growth opportunities are not immediately available [35] Q&A Session Summary Question: Performance of banking solutions and room for improvement - Management noted that deposits are growing ahead of TPV due to successful bundling of payments and banking solutions, with expectations for continued growth as more solutions are developed [45][46] Question: View on dividends and capital structure - Management emphasized a commitment to returning capital to shareholders through share buybacks, with no specific targets for dividends at this time [50][51] Question: Pricing strategy and impact - Management confirmed that a substantial repricing initiative was implemented at the beginning of Q1 2025, with expectations for effective adjustments across the client base [58][61] Question: Guidance on basic vs. diluted EPS - Management explained the decision to guide basic EPS due to accounting volatility and the potential for double counting with share-based compensation [62][64] Question: Potential sale of software business - Management stated that no offers met the intrinsic value for the software assets, and they will focus on maximizing value through cross-selling financial services [75][76]