StoneCo (STNE) Q4 2025 Earnings Call Transcript

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DATE

Monday, March 2, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Mateus Scherer
• Chief Financial Officer — Diego Salgado
• Head of Investor Relations — Roberta Noronia

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TAKEAWAYS

• Credit Portfolio Growth -- Sequential expansion by 23%, with the credit card portfolio growing 30% quarter over quarter from a smaller base.
• Credit Revenue and Provisions -- Credit revenues for 2025 reached BRL 238,000,000, up 33% sequentially; total provisions were BRL 110,000,000, a growth of 27%.
• Asset Quality Metrics -- NPLs 15 to 90 days increased to 4.43%, driven primarily by payment delays from a small group of higher-ticket clients; NPLs above 90 days at 5.21%, up from 5.03% in the prior quarter.
• Coverage Ratio and Cost of Risk -- Coverage ratio remained stable at 264%; cost of risk was approximately 17% during the quarter.
• Average Monthly Credit Yields -- Average monthly credit yields reached 3.1%, compared to 2.9% in 2025, despite a mix impact from the specialized desk and non-interest-bearing credit card balances.
• Cost of Services and Expense Breakdown -- Cost of services rose 23% with an increase of 200 bps as a percentage of revenues, mainly due to higher loan loss provisions; financial expenses increased 12% but decreased by 30 bps as a percentage of revenues; administrative expenses increased 12% and selling expenses increased 16%.
• Other Expenses -- Other expenses decreased 27% year over year, down 100 bps as a percentage of revenues, largely reflecting lower share-based compensation.
• Effective Tax Rate -- Effective tax rate was 10.3%, down from 13.7% in 2024, due to higher benefits from Leidou Bank.
• Adjusted Net Cash Position -- Closed at BRL 2.6 billion, a decrease of BRL 930,000,000 sequentially, mainly due to BRL 1.3 billion in share repurchases.
• Share Repurchase Policy and Capital Return -- BRL 2 billion in excess capital to be returned via share repurchases during 2026, with a board-approved open repurchase program already announced.
• Lynx Sale and Extraordinary Distribution -- Proceeds from the February 27 Lynx sale released slightly over BRL 1 billion in capital, with distribution to shareholders expected in 2026 after board approval in April.
• Capital Ratio Hurdle Update -- Core equity ratio requirement was reduced from 20% to 17% based on updated methodology aligned with Brazilian Central Bank standards.
• 2026 Guidance -- Adjusted gross profit projected between BRL 6.6 billion and BRL 7.0 billion; adjusted basic EPS expected between BRL 10.8 and BRL 11.4; this guidance incorporates the BRL 2 billion in buybacks but excludes Lynx proceeds.
• 2027 Guidance -- Adjusted gross profit expected between BRL 7.2 billion and BRL 8.3 billion; adjusted basic EPS projected between BRL 11.8 and BRL 13.4, assuming retention of capital and no further distributions.
• Guidance Tax Rate Assumption -- Effective tax rate for both years is assumed to be in the mid-teens percentage range.
• Selic Assumptions for Guidance -- 2026 guidance assumes Selic at low 12%; 2027 at high 11%.
• Strategic Priorities -- Management reiterated focus on earnings expansion, scalable credit business, and consistent capital return to shareholders, including the extraordinary Lynx distribution.
• Operational Guidance Discontinuation -- The company discontinued specific operational KPI guidance for 2027, citing a different mix of credit, deposits, and TPV relative to initial plans.

SUMMARY

StoneCo Ltd. (NASDAQ:STNE) reported strong sequential growth in its credit portfolio and revenue, accompanied by disciplined risk and capital management. The company executed BRL 1.3 billion in share repurchases and will distribute over BRL 2 billion via additional buybacks in 2026, excluding proceeds from its Lynx divestment. Updated 2026 and 2027 financial guidance incorporates these capital returns and reflects a cautious outlook on macro-driven TPV growth, with explicit expectations of softness in the near term but anticipated productivity gains through strategic initiatives.

• Management clarified that 2026 guidance embeds the full effect of the BRL 2 billion buyback, while 2027 guidance assumes retained capital, leading to potential EPS upside if additional buybacks occur.
• Selling and marketing expenses are expected to continue growing as a percentage of revenues in 2026, primarily to support repositioning efforts and deepening client engagement beyond payment services.
• Operational challenges impacting TPV growth include increased churn and lower new client acquisition in the prior quarter, though steps to improve onboarding and retention have been implemented.
• The company does not anticipate major competitive pricing pressures but acknowledges digital merchants outperformed brick-and-mortar, presenting a temporary mix headwind.
• Average monthly credit yields and asset quality metrics are improving despite anticipated natural increases in NPLs due to portfolio maturation and expanded exposure to higher-risk clients.
• Management emphasized the long-term opportunity lies in expanding credit and banking engagement within its ecosystem, with investments in workflow tools supporting retention but monetization focused on deposits and credit products.
• StoneCo Ltd. is actively pursuing AI-enabled productivity initiatives, highlighted by initial success in customer service and continued rollouts in core business areas, although financial benefits are not yet quantified in guidance.
• The reduction in the core equity ratio hurdle to 17% reflects alignment with regulatory standards and a more efficient approach to regulatory capital management.
• Extraordinary distribution of Lynx proceeds will follow a board decision in April, with guidance to be updated accordingly in 2027 if buybacks are used for capital return.

INDUSTRY GLOSSARY

• NPL (Non-Performing Loan): A loan on which the borrower is not making interest payments or repaying any principal.
• TPV (Total Payment Volume): The gross value of all payments processed by StoneCo Ltd. across its merchant network within a reporting period.
• Lynx: A business unit divested by StoneCo Ltd., the sale of which generated extraordinary capital for distribution.
• Selic: Brazil's benchmark short-term interest rate used as a reference for financial contract pricing and monetary policy.
• Coverage Ratio: The ratio of loan loss provisions to non-performing loans, indicating the degree to which potential credit losses are covered.
• MSMB: Micro, small, and medium-sized businesses, a principal client focus for StoneCo Ltd.; includes segmentation by merchant size in assessing credit and product exposure.
• Core Equity Ratio: A regulatory capital requirement representing the proportion of core equity capital to risk-weighted assets.

Full Conference Call Transcript

Mateus Scherer: Expanded 23% quarter over quarter. The remaining BRL 300,000,000 corresponds to our credit card portfolio, which grew 30% sequentially from a smaller base. Credit continues to bring relevance in our results. In 2025, credit revenues reached BRL 238,000,000, up 33% sequentially, while provisions totaled BRL 110,000,000, 27%. As provisions are recognized upfront and revenues are accrued over time, continued portfolio growth should translate into a stronger earnings contribution going forward. Since relaunching our credit operations, we have prioritized disciplined scaling and tight portfolio oversight.

Within MSMB working capital, we operate two distinct models: a fully digital approach for smaller merchants, resulting in granular and diversified exposures; and a more analytical, desk-based approach for large SMBs, with higher average ticket sizes and a more concentrated position. In terms of asset quality, we remain aligned with our risk appetites. NPL 15 to 90 days increased to 4.43%, primarily reflecting payment delays from a limited number of higher-ticket clients within the specialized desk. NPLs above 90 days stood at 5.21%, compared to 5.03% in the prior quarter, consistent with normal portfolio seasoning. Our coverage ratio remains stable at 264%, and cost of risk was approximately 17% in the quarter.

We have also continued refining our pricing framework, balancing client sensitivity with risk-adjusted returns. This has allowed us to improve spreads while maintaining disciplined and sustainable growth. As a result, our average monthly credit yields, calculated as credit revenue over the average portfolio, reached 3.1%, compared to 2.9% in 2025, despite mix effects from the specialized desk and non-interest-bearing credit card balances. To wrap up, and before I hand over to Diego, I want to thank the team for their resilience and dedication in delivering a performance despite a challenging year.

I am truly honored to lead the company into its next chapter, continuing to execute our strategy with energy and passion, as we strive to be the leading financial services provider for entrepreneurs in Brazil. With that, I will hand it over to Diego, our new CFO, who will take you through our financial performance in more detail, along with updates on capital allocation and guidance. Diego?

Diego Salgado: Thank you, Mateus, and good evening, everyone. It is a pleasure to speak with you today for the first time as CFO. I am honored to take this responsibility. You have my commitment to keep elevating our financial discipline and to hold a high bar on execution. Now I will begin by reviewing our adjusted consolidated P&L for continuing operations for the fourth quarter, as shown on Slide 9. Our cost of services increased 23%, rising 200 bps as a percentage of revenues. This increase was driven by higher loan loss provisions during the quarter, mostly driven by the growth of our credit portfolio. Financial expenses increased 12%, a reduction of 30 basis points as a percentage of revenues.

This was primarily driven by the use of low-cost demand deposits as a funding source, which helped offset the impact of a higher average CDI rate compared to the prior-year period. Admin expenses also increased 12%, a small decrease as a percentage of revenues, reflecting ongoing efforts to gain leverage across our support functions. Selling expenses increased 16%, a 40 bps increase as a percentage of revenues. This reflects a more evenly distributed market spending in 2025 compared with 2024, when expenses were weighted toward the first half of the year, to a significant investment in any specific reality show.

Other expenses decreased 27% year over year, a 100 basis points as a percentage of revenues, a result of lower share-based compensation expenses in the quarter. Our effective tax rate was 10.3% in the quarter, down from 13.7% in 2024. The year-over-year decrease was driven primarily by higher benefits from Leidou Bank. Moving to Slide 10, our adjusted net cash position closed the quarter at BRL 2.6 billion, down BRL 930,000,000 sequentially. This reduction stems primarily from the BRL 1,300,000,000 in share repurchases during the fourth quarter. Excluding these buybacks, adjusted net cash would have increased by nearly BRL 1,000,000,000.

Now, let us review our capital allocation in more detail, distinguishing between recurring operational generation and the extraordinary proceeds from the Lynx transaction. Starting with operational excess on Slide 11, as you may recall from last year's call, our framework is guided by three strict hurdles that define excess capital: maintaining a minimal core equity ratio for the consolidated entity, the maintenance of certain global ratings, and maintaining an adjusted net cash position above zero. This year, we have refined our core equity ratio hurdle. First, we have enhanced our methodology to better align it with the Brazilian Central Bank standards and the treatment of all the deferred tax assets that we have, regardless of which legal entity holds it.

Consequently, we felt more comfortable to reduce the capital hurdle from 20% to 17%. These adjustments mostly offset each other. Our policy is very straightforward: upon the approval of our annual budget and financial statements, in the absence of additional immediate value-accretive opportunities, excess capital is returned to shareholders. Following our 2025 performance, we have generated excess capital of just over BRL 2,000,000,000, which the Board approved for distribution via share repurchases during 2026. As a reminder, we already have an open repurchase program of the same amount announced on December 22, which will be used for distribution. Now turn to Slide 12. We detailed the extraordinary distribution from the Lynx sale.

On February 27, we received the proceeds from the sale and closed the deal. This divestment releases slightly over BRL 1,000,000,000 in capital, which will be returned to shareholders in 2026. However, given the recent closing, we expect to approve this specific distribution during a Board meeting in April, with a market announcement to follow. Finally, let us move to Slide 13, where we present our guidance for 2026 and 2027, for continuing operations. Starting with 2026, we expect adjusted gross profit to range between BRL 6.6 billion and BRL 7.0 billion. Adjusted basic EPS is expected to be between BRL 10.8 and BRL 11.4 per share.

The guidance for both KPIs considers the capital distribution that we already have of BRL 2 billion to be fully returned through buybacks during 2026, but does not include the proceeds from Lynx. Regarding 2027, we are no longer providing operational KPI guidances and keeping it consistent to 2026's. Therefore, we expect adjusted gross profit to range between BRL 7.2 billion and BRL 8.3 billion. Adjusted basic EPS is projected between BRL 11.8 and BRL 13.4. In those numbers, we are not considering yet any additional capital distribution. We will adjust this at the beginning of 2027 when we disclose 2026 full-year earnings.

Also important to keep in mind for the guidance, we assume an effective tax rate in the mid-teens range. To close, we started this journey with a simple belief that Brazilian merchants deserve a better financial partner, and that conviction has not changed. For 2026 and 2027, our priorities are clear: continued earnings expansion, a credit business that scales on our terms, and capital return to shareholders, including the extraordinary Lynx distribution. Operator? We are ready for questions.

Operator: Now we will begin the Q&A session with Mateus Scherer, CEO; Diego Salgado, CFO; and Roberta Noronia, Head of Investor Relations. If you would like to ask a question, please press the Q&A button at the bottom of the screen and click on raise hand. You will then receive a request to activate your microphone. Our first question comes from Guilherme Grespan with JPMorgan.

Guilherme Grespan: Hello. Good evening, everyone. Thank you for opening for questions. Just one on the guidance itself, clarification plus a follow-up. Share count: if I understood correctly, I should work with 248,000,000 by the end of 2025, right, which is the end share count. Then if I assume that you are going to buy back BRL 2,000,000,000 in the year and you are going to meet your expectation, assuming current screen price it means that I should work with roughly 225,000,000 shares for 2026. Then I should work with a flat share count for 2027.

I just want to confirm that the rationale makes sense here because then my question is, if that is true, your earnings in 2027 are growing 8% year over year, which is almost half of gross profit of 14%. I just wanted to confirm what is driving this delta between gross profit growth and earnings growth. Thank you so much.

Mateus Scherer: Hey, Grespan. Thanks for the question. Mateus here. I will first clarify a few things on the capital distribution because there are indeed a lot of moving pieces, and then I will hand it over to Diego to clarify the 2026 question. Just to clarify, when we look at the guidance for 2026 and 2027, the guidance does not include any impact from a potential distribution of Lynx, neither on the P&L nor on the share count.

Just to make it clear, if Lynx were to be distributed via dividends, there will be no impact on our EPS guidance, but if we were to distribute that value through share repurchases instead, there would be potential upside to EPS due to the reduction in share count. Now, regarding the ordinary capital distributions, which I think were your question, for 2026 we have decided to execute distributions through buybacks, like Diego has said. This impact is already embedded in the EPS guidance, which means that the guidance assumes that shares are repurchased throughout the year at an estimated average price.

For 2027, since we have not yet defined the mechanism for capital distribution, the guidance was constructed under the assumption that capital is retained and reinvested in the business. So depending on the eventual allocation decision, particularly if we opt for buybacks, there could be incremental upside to EPS relative to the current guidance. That is the general overview. I will hand it over to Diego to address the 2026 part. So, Guilherme,

Diego Salgado: let me walk you through a bit of the growth numbers for 2026. Basically, we are guiding to a growth on gross profit between 4% and 11%. That has to do with a softer growth of TPV of mid-single digits throughout the year, being compensated in terms of margin expansions and impact on P&L by both banking and credit, but naturally that comes with a cost from the credit business, which is charged upfront, as you know. Then on EPS, what you are looking at is a growth between 17% and 24%, which, as Mateus has mentioned, has to do with the fact that we are considering only the BRL 2,000,000,000 buybacks.

If we were to use the Lynx distribution to buybacks, that number would have grown significantly on one hand. If not, then EPS grows between 17% and 24%. As we mentioned, the total shareholders’ return would be massively impacted.

Guilherme Grespan: That is clear. But just the second point of the question: if we assume all else equal, no further distributions, earnings would be growing much less than gross profit, right, in 2027 specifically. I just want to get your view on why this happens, if there is any headwind that I am missing here.

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

Guilherme Grespan: That is clear. Yes, the gap widens a little bit in 2027. That is why I asked, but it is clear. Thank you so much.

Diego Salgado: Yeah. Naturally, when building a 2027 guidance, we tend to look for a little bit more of a leeway, especially on the bottom of the range. You get me?

Operator: Our next question comes from Ricardo Buscpigo with BTG.

Ricardo Buscpigo: Hi, everyone. Thank you for the opportunity of making questions. I understand that one of the priorities for StoneCo Ltd. today is to accelerate the banking and credit initiatives. However, although StoneCo Ltd. has been advancing on this front, many of the merchants still see the company more as a payment provider, as a POS machine, than necessarily as a bank. In this regard, I wanted to understand how you plan to change this perception among your merchants, and would the possibility of obtaining a banking license and being able to have a bank in your name help in this direction? Thank you.

Mateus Scherer: Thanks for the question. Mateus here. So on the license front, I do not think having the license is actually a big constraint on our plans. We already have a full product roadmap, and we are evolving on the banking and credit features with the license that we have in place. That said, I think you hit the nail on the question. When we look back at 2025, I think we had a massive improvement in terms of how many products we have and what we launched. I think there is still a huge effort in terms of how we bundle those products and also, like you mentioned, in how the clients perceive our offering.

When we look into 2026, part of the selling expenses and the marketing investments that we are doing throughout the year is on how we reposition the company to be perceived by the clients as not only a POS provider but much more than that. I think we have a plan in place to address that point.

Ricardo Buscpigo: Thank you. Very clear.

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

Antonio Gregorin Ruette: Hey, everyone. Thank you for your time. So two quick things on my side. First, on the guidance, if you could just explore which Selic rate you used for that. And the second one, credit. If you could dig a little bit deeper on your operating numbers for the fourth quarter. We saw an increase in write-offs for both working capital and also credit cards. The same on NPLs, while maintaining an elevated cost of risk. So what are you seeing there, and what are you expecting going forward? If you could give a little bit of color, since you will no longer have the guidance for operating metrics. Thank you.

Diego Salgado: Hey, Antonio. Good evening. So, basically, we are assuming Selic at low 12% by 2026 and high 11% for 2027. That is what is behind the guidance number. On the credit side, basically what you have is the result of a portfolio that keeps growing into different publics and different products, but also getting more mature, especially on the core product for the digital credit offerings that we have. Let me try to walk you through a bit of some of those moving parts. As we expand the public to which we are offering credit, naturally we tend to extend credit to a little bit more riskier clients.

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

Mateus Scherer: Yeah. If I may add your points in the NPL that you mentioned, I think when you look at the trends in NPLs, we have two factors in place. The NPLs 15 to 90 days are impacted by a few cases on the specialized desk, which tends to add some volatility to that number in the short run. And the NPLs 90 days are basically just the process of maturation of the portfolio. As the growth rate for the portfolio is declining on a percentage basis, it is natural that the NPLs over 90 days will increase over time, and that is something that we already had anticipated in the past.

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

Operator: Alright. Thank you. Our next question comes from Neha Agarwala with HSBC.

Neha Agarwala: Hi. Thank you for taking my question. If we can touch a bit upon the volume growth, as I think you mentioned during the remarks, you expect about single-digit TPV growth and stand your focus on profitability. But could you break down a bit in terms of what kind of volumes are you giving up? What is behind this expected growth? And is competition playing a role? Because we see some players among the incumbents like Cielo ramping up their operations, which might make it more competitive. And also at the bottom of the pyramid, you have players like PagBank who are being more active.

So how do you see competition playing out in the volume growth expectations that you have? Thank you so much.

Mateus Scherer: Yeah. Thanks for the question. Around, first, the competitive environment, I think overall the message has not changed. When you look at the players, the market in general has remained rational from a pricing standpoint. We are not observing behavior that suggests competitors using growth at any cost or engaging in structuring unsustainable pricing. What we did see throughout the second half of last year was some players expanding their ops and strengthening their sales footprint, but this is a natural movement in the industry. It tends to come in waves. Now in terms of the TPV growth itself, when we look back at our performance, there are clearly three trends playing at the same time.

The first one is that since the third quarter of last year, we have been operating in a more challenging macro environment, which has put pressure on TPV growth. The second one, we mentioned in the call, is that within the market itself, we saw digital merchants performing better than brick-and-mortar recently, and this mix shift creates a temporary headwind for our TPV, given our focus on brick-and-mortar and SMBs. The third one is that in the fourth quarter we experienced higher-than-expected churn and softer new client acquisition, which weighed on TPV growth as we head into this year. These factors are more internal than external. It is less about competition and more about execution.

On the commercial side, we have already made meaningful progress in addressing the onboarding dynamics, and when we look at the new sales productivity recently, it has improved significantly. Now what we are doing is turning our attention to deepening engagement with our existing base, both in terms of share of wallet and in terms of retention, where we see clear room to improve and have specific initiatives underway. So when we put that all together, for the first quarter of the year, these factors should result in TPV growth roughly flattish year over year, and then as we move through the year, we expect a stronger second half as our bundle and cross-sell initiatives gain traction.

That is what composes the guidance of mid-single-digit TPV growth for the year.

Neha Agarwala: If I may ask on that, do you see any reason to believe why, going forward, the brick-and-mortar sales are going to pick up? I mean, they could pick up more with the overall economy, but not much more than that. Is there any way that you could participate in a profitable manner on the online side, or anything that you could do? Any optionalities that you see to improve the volume growth as the macro improves?

Mateus Scherer: That is a good question. On the second part of the question, on how we can participate, the digital volumes tend to be more concentrated on markets where the economics are smaller than the overall economics for MSMBs. That said, we did launch the new payments link product late last year, and it is fairly common for MSMBs in Brazil to sell through WhatsApp, and they can use our payments links, which improved a lot. So that is one of the initiatives behind the plan. The second question, I am sorry. If you could repeat?

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

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

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

Neha Agarwala: Understood. Thank you so much.

Operator: Thank you. Our next question comes from Caio Prasad with UBS.

Caio Prasad: Hi, everyone. Good evening. Thank you for the opportunity. I have two on my side, please. First, on the credit business, just to double check if you are discontinuing your guidance on portfolio for 2027 or not. And if so, what has changed? And second, if I may follow up on your expenses and overall operating leverage. If you can walk us through your investment plans towards 2026 and 2027, what kind of investments are we talking about? What should we expect in terms of leverage, not only for 2026 but also 2027?

I am not sure why we should not see some leverage for 2027, especially in a moment when we are discussing a lot about potential efficiency gains to come from AI and other tech developments. So it would be interesting to hear from you, especially as probably in this guidance we are not considering any relevant pickup in TPV for 2027.

Mateus Scherer: Hi, Caio. Good evening.

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

Naturally, we feel comfortable, based on the guidance that we are delivering, that we will deliver the plan ultimately, but with a different mix. That is why it did not make sense any longer to continue providing specific guidance on the operational KPIs. That said, if we switch to expenses, you should expect selling and marketing expenses still growing in 2026 as a percentage of total revenues. A lot of it has to do with this new positioning that we have been talking about and other growth initiatives that we have been putting in place. The dedicated desk in credit is naturally one of the things that is new in the company.

It is bringing portfolio, it is bringing top line, and it has an impact on 2026. For 2027, what you have in the guidance is still a similar trend. That said, I would not be surprised, as the overall market develops and especially as AI is being developed, as you just mentioned, that the mix could be potentially different in 2027. There are a lot of new initiatives going on in the company in terms of gaining efficiency. You should not expect large one-off actions. It should be more of a long-term practice that we will emphasize not only in 2026 but 2027 onwards.

Those things are naturally still not reflected in that guidance number because everything is so new, and we are all learning with it.

Mateus Scherer: Yeah. Diego, if I may complement on one point, I think Caio mentioned AI in the question. It is really true that over the past six months, we have seen a meaningful acceleration in practical application of AI not only in the company but in the world as a whole. When I think long term, we do believe that AI agents will meaningfully improve productivity of several processes, including processes that historically in the company required large operational structures, but I think it is too soon to estimate those impacts. When you look at the guidance for 2027, we are not including huge benefits from AI, even though we are doing all the effort to capture them over time.

Caio Prasad: Okay. Great. That is clear. Thank you, Diego and Mateus.

Operator: Our next question comes from Tito Labarta with Goldman Sachs.

Tito Labarta: Hi. Good evening. Thanks for the call and taking my question. I guess, just going back on the 2027 guidance, kind of just backing into a net income number assuming roughly 225,000,000 shares, it is BRL 2.7 to BRL 3.0 billion. When you issued the guidance—and I know it was a different environment then—the net income was above BRL 3.3 billion. I know you sold Lynx, but Lynx did not necessarily contribute that much to earnings. Just, I guess, the question is, what is the big difference today aside from slower TPV?

I mean, which obviously we can see that, but I think there was always some implied expectation that take rate for payments would come down with maybe the uplift coming from credit. You just said that credit, you can potentially still deliver on that, and we saw very good growth over the last year. But what do you think is the biggest difference from when you initially gave the guidance to what you are seeing now and why it is so much lower? And, I guess, along those lines, Mateus—congrats on moving to CEO—what would you say is your biggest priority now as you step into that role? Thank you.

Diego Salgado: Hi, Tito. Good evening. Let me try to help you reconcile the numbers. There are three big movements affecting the 2027 guidance. The first two effects are Lynx divestments and the repurchases executed in 2025 and expected for 2026. These two movements combined have an effect of a little bit over BRL 2,000,000,000 in gross profit and BRL 1,300,000,000 in nominal net income. These two effects would adjust our guidance from BRL 15 per share to BRL 13 per share. Therefore, at the top of the range of our new guidance, we are within the previous plan and guidance.

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

Mateus Scherer: And going to the second part of the question, Tito, let me start. Over that period, in terms of strategic direction, I think we have always had pretty clear targets, which is we built this very strong distribution channel, we serve our clients with passion, and we want to leverage that relationship to become the primary financial services platform for SMBs in Brazil. In terms of vision, it remains unchanged. What we are doing now is really sharpening our execution to become more agile, and we are doing that by focusing on three priorities. The first one around payments: we have mentioned this a couple times throughout the Q&A.

We are now at a stage where we have reached a leadership position in our core segments, and at this scale, the game evolves. While onboarding new clients remains important, developing the capability to deepen the relationship with them through better engagement, through cross-sell, and retention is now as important. That is priority number one. Second, when we think about banking and credit, we have built a solid foundation over the past three years. We are seeing encouraging results when you look at the portfolio and the deposits evolution, but we are very early relative to the opportunity ahead of us.

Acceleration in the execution on credit and banking, while preserving the risk discipline that has defined the approach, is priority number two. The third one, I think Diego has touched on this topic as well: when you look at what is happening in the world recently with the underway in AI, we see substantial room to drive further gains across the organization and to be more efficient in general. So efficiency is priority number three. When we put that all together, again, I think it is much more about raising the bar on execution and trying to become a more agile organization than it is about shifting the direction of the company.

Tito Labarta: Okay. No. That is very helpful. Thanks, Diego and Mateus. And maybe just to touch on that second point, Mateus, with AI—this is not completely comparable, right?—but we saw one of the payment peers in the US reduce their employee base almost in half. How do you think about your position in terms of—not asking if you are going to cut employees or not—but just in terms of the employee base that you have: is it the right level? Is there more productivity there? Do you need to grow more? How do you think about your positioning given these potential efficiencies in AI and what you have today?

Mateus Scherer: Yeah. That is a good question, Tito. In terms of AI, over the past six months we have seen meaningful acceleration in the application of AI across the company. We touched upon that in the earnings release as well. Our approach on the topic has been very deliberate. We are intentionally avoiding the temptation to launch dozens of disconnected pilots with no clear path to scale or without measurable economic impact, and instead, what we are doing is twofold. First, we are focused on the core. Within the core, we have dedicated teams redesigning how we operate in key areas like customer service, the sales process, the hubs, or even in risk.

We had a first successful example of this application within customer service, where we implemented AI agents to handle the first-level interactions, and we had huge efficiencies there. The second front is really around AI enablement, which is making sure that everyone in the company has the modern AI tools available to use within their day to day. When we democratize the access, we allow the teams to improve their workflows, and on the other hand, we centrally monitor the usage and then establish the best practices to capture the efficiencies later. Now it is hard to talk about actual impacts or estimates at this time.

The one thing that we are certain is that, over time, we can massively improve productivity in the company by embedding AI. I think the how and the how much is still too early to talk, but we are going to pursue those gains over the medium term.

Tito Labarta: Okay. That is great. Thanks, Mateus.

Operator: Our next question comes from Renato Meloni with Autonomous Research.

Renato Meloni: Hey, everyone. Hey, Mateus. Diego. Thanks for the question here. I would like to explore the guidance a bit more. Going back to your comments, Mateus, in the last call, you said that you still expected to see some expansion in the gross profit yield, and thinking back, in light of lower rates, I was assuming there would be some price maintenance. This time, you are getting lower funding costs. But during the call today, I am left with the impression that you are assuming the entire expansion is going to come from credit.

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

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

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

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

Diego Salgado: Yeah. Well, that is a tricky question, and naturally that has to do with pace of sales but also with churn levels. We monitor those two things on a daily basis, and based on the performance of those KPIs, we try to hold those spreads for as long as possible, but naturally they tend to be passed through as competition enhances.

Operator: Guys. Our next question comes from Daniel Vaz with Safra.

Daniel Vaz: Good night, and thank you for your time. I will go back to the operating expenses and the selling. Sorry—can you hear me? Yeah. Okay. Thank you. In trying to connect your higher OpEx or selling expenses to your main strategy to develop a more complete bundle and a more competitive environment in terms of rates or your competitors being more aggressive on taking market shares. Am I looking at your higher OpEx as a defensive strategy? I mean, are you trying to maintain your market share, or maybe you are looking at increased growth on OpEx and selling expenses as an attacking strategy?

Maybe we are looking here to try to get a sense of are you defending, trying to create a bundle? Are you attacking, trying to look at different opportunities here? Trying to figure out what is the main goal for 2026, 2027. I know you already talked about in the past that market share is a consequence, but I am looking at your—is it more defensive or attack? It would be good to hear from you. Thank you.

Mateus Scherer: Thanks for the question, Daniel. I think we have two different dynamics when we look at the short term versus when we look ahead. Short term, when we look at the selling expenses for the fourth quarter, what happened was that we had higher turnover in the third quarter, and therefore we hired more in the fourth quarter to replace turnover, and that is why selling expenses increased primarily.

Now, if we look ahead, I think the reason why we are not being vocal about seeking too much efficiency in the short-run selling expenses is because we still think we need to invest heavily in terms of repositioning the company not only as a payment provider but as a provider of financial services as a whole. That will require capital, of course, but on the other hand, those investments should yield continued growth in the credit and banking operations as we move ahead. Again, we have two different dynamics: short term is about hiring salespeople; longer term, it is about this repositioning of the company to offer more bundles.

Daniel Vaz: Well, thank you. And maybe a follow-up. On these bundles, I guess in the past we have tried to see the payment segment as more linked to the US or any developed market software model, kind of trying to upsell products for a service kind of revenue. But I do not know. Maybe correct me if I am wrong, but the Brazilian pain point here is working capital, and I think credit is the way you monetize and how you maybe increase loyalty through your client base. Are you looking again to the service model? Has it changed in any way the clients’ requirements, or any specific needs from them you see?

Mateus Scherer: That is a very good question. We are rolling out a lot of features within our banking that we call workflow tools. It is basically helping our clients to manage their businesses in their day-to-day operations. But I do not think the goal here is really to monetize those tools through service fees, but rather to have more lifetime value because clients become stickier. In terms of monetization, the reality is that when we look at the country and the markets, most of the monetization is around holding deposits and underwriting credits. I would only complement what you said: you talked about working capital loans. They are one specific part of the credit value proposition.

There are plenty of other products within credit which we have launched and that we are developing. They are still very small, but they can be a lot bigger than they currently are—like overdraft, the credit card operation itself, and so on and so forth. Again, we are not giving up in terms of developing those workflow tools, but in terms of monetization, it is around financial services.

Daniel Vaz: Alright. No. Pretty complete. Thank you.

Operator: Our next question comes from Jamie Friedman.

Jamie Friedman: Hi. Good evening. Thank you for the opportunity. Mateus, in your prepared remarks, you had referenced improving execution, especially on onboarding and the inputs that would go into volume. I was just hoping you could elaborate on what some of those execution initiatives are that would propose volume? And then a question about credit. In terms of Slide 8, the one that shows the NPL and coverage ratios, and you may have alluded to this, or it may be in the footnotes, but can you unpack what you are seeing in terms of credit between the working capital portfolio and the other dimensions of lending?

I apologize if it is in these footnotes, but that would be my question: what you are observing about overall credit performance by product line. Thank you.

Mateus Scherer: Yeah. For sure, Jamie. I think we have two different dynamics: one related to new onboarding, and the other one related to churn. In terms of new onboardings, it is basically a full review that we did of our offerings and the go-to-market approach of each distribution channel. Those initiatives have already been implemented. We are starting to see the results. In terms of churn, what I would say is that historically our focus as a company was heavily skewed towards optimizing the sales engine, with a lot less emphasis on deep engagement and systematically nurturing our existing client base.

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

Diego Salgado: So, Jamie, the more mature product, which is the working capital solution, is converging well towards losses, margins, and so forth. That said, we have been seeing the possibility to increase margins on that product, and it is something that we are executing on a monthly basis. On the short-dated products, especially on credit cards, you probably noticed an uptick in the volumes in the fourth quarter. That said, it is probably one of the products in which we have a bigger opportunity in 2026 when compared to 2025.

There is still a lot to learn in terms of the credit and underwriting of that product and also in other short-term facilities to riskier clients, but it is a focus of the firm for 2026. On the longer-dated products, we have not launched anything yet. It is also something that is within our expectations for 2026 and that should provide a bigger support for the dedicated desk. We currently have a medium-term product for the dedicated desk. As you know, the dedicated desk is focused on slightly larger clients, not necessarily credit card businesses, and that bit of the portfolio is slightly more volatile because of the concentration.

As we scale the three products and launch these additional features for that client base, you should see the portfolio maturing slowly going forward.

Jamie Friedman: Okay. Thank you, Diego. Thank you, Mateus.

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

Mateus Scherer: Thank you all for the support, and we will see you in the second quarter.

Operator: This concludes today’s presentation. You may now disconnect.

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