StoneCo Ltd. Class A Common Shares 2026 Q2 Earnings Call

Please proceed. Thank you, operator, and good evening, everyone.

Let me start with some perspective on the quarter. This was a quarter of steady progress on the priorities we laid out earlier in the year. We are accelerating TPV growth through better retention, deepening our banking and credit franchises, and keeping a disciplined approach to cost. TPV growth accelerated to 4%, an early signal that the retention initiatives we launched this year are beginning to work, though there is still a lot of work to be done. Banking and credit kept advancing with retail deposits up 22% year-over-year, and our credit portfolio now more than doubled its level from a year ago. On costs, we kept expense growth well below revenue growth while scaling the use of AI more broadly across the company. Finally, we continue to return meaningful capital to shareholders throughout the quarter.

Having said that, today I want to spend a few minutes on something that goes beyond the quarterly numbers. How we are positioning Stone today for the long term, and how our ecosystem is coming together for the merchants. Let's turn to slide 3. This quarter, we launched our new brand positioning, Stone, the bank for entrepreneurs. This is not a changing strategy, and it does not depend on anything new. We already have the complete offering, payments, banking, and credit working together in a single relationship. The gap is in the perception. Many clients still see Stone mainly as a payments company. This positioning is our way of closing that gap, so that when an entrepreneur needs banking or credit, Stone is part of the consideration from day one. As that perception builds, it naturally opens the door to more cross-sell, deeper relationships, and growth across the ecosystem.

To bring this to life, we also launched a campaign film. The link is on this page. Moving to slide 4. This is what the bank for entrepreneurs means in practice. Everything starts with a complete account. Money comes in through whatever channel the client sells, in person or online. It goes out to pay employees, suppliers, and taxes. In between, it stays within Stone, where clients can hold a balance, invest their money, or take credit. On its own, this is just what a complete account should do. The difference is what we build around it. Helping entrepreneurs run their day-to-day by charging customers, issuing invoices, managing orders, with AI increasingly doing part of that work, from enhancing catalog images to creating content that helps merchants sell more. On slide 5, we recently reached an important milestone in that direction.

Pagar.me, which historically was our digital commerce front, has been integrated into Stone. For the merchant, this means online and physical operations in one account with one view of the business. It brings our full digital commerce suite into the Stone platform. With sales consolidated in one place, we understand the business better, which unlocks more credit and more cross-sell. One brand, one account, one experience. For Stone, this opens a new growth avenue, capturing a larger share of digital transactions, a part of the market that is growing faster than the average. Now, let me connect this to our financial commitments for the year on slide six.

In the first half, we delivered BRL 3.1 billion in adjusted gross profits and BRL 4.58 in adjusted basic EPS against our full year 2026 guidance of BRL 6.6 billion to BRL 7 billion in adjusted gross profits and BRL 10.8 to BRL 11.4 in adjusted basic EPS. While our guidance remains achievable, interest rates have stayed higher for longer than expected, making the backdrop considerably more challenging than what we anticipated at the start of the year. In that context, while the scenario today is more challenging than it was last quarter, we continue to be focused on delivering towards the lower end of these ranges. Our year-to-date effective tax rate of 15.4% remains consistent with the mid-teens level we guided to, and we stay disciplined on execution, with performance weighted towards the second half as credit revenues compound and our commercial initiatives continues to take hold.

With that said, I will pass it over to Diego, who will go over our financial and operating results for the quarter.

Diego? Thank you, Mateus, and good evening, everyone.

Let me start on slide seven, where we present our main financial metrics for the quarter. Our revenue grew to BRL 3.6 billion, led by credit as our portfolio continues to scale. Adjusted gross profit was broadly stable year-over-year at BRL 1.6 billion, as higher revenues and lower financial expenses were offset by the provision expenses that come with the credit portfolio growth. Adjusted net income was down slightly on an an annual basis, while adjusted EPS grew 9%, with continued share buybacks over the past year meaningfully reducing our share count. On slide eight, our active client base reached 4.8 million merchants, and RPAC grew mainly as credit keeps gaining penetration and weight in our client base. Turning to slide nine, TPV growth accelerated to 4% annually, a small improvement over the pace we saw in the first quarter.

We're still facing the churn challenges we detected earlier this year, and they still weigh on our overall performance. However, this is the first tangible sign that our initiatives are gaining traction. Our work here is focused on three fronts: simplifying our offerings and bundles, aligning salesforce incentives, and improving client experience to reduce operational friction. So far, the effect is more meaningful on micro merchants as simpler offerings and an easier contact allowed us to move quickly and bring churn down. With larger merchants, the breadth of the offerings and needs make the operation more complex and riskier. Therefore, we calibrate it cautiously before scaling. We expect the benefits of our initiatives to become more visible as the year progresses, and therefore accelerates TPV. Looking at TPV mix, Pix QR code continues to grow faster than card volumes. In banking, our deposit franchise keeps building.

Retail deposits reached BRL 10.8 billion, up more than 20% year-over-year as we further engage clients with our account offerings. On slide 10, we present the growth metrics of our credit business. Our portfolio reached BRL 3.8 billion, two times larger than one year ago, driven mainly by working capital solutions. During this quarter, we also began disbursing government-backed loans, which already account for roughly BRL 300 million of our portfolio, while credit cards reached BRL 400 million. Moving to revenues. Given the continued growing contribution of our credit card, we have revisited our credit revenue and yield metrics to include credit card interchange fees as we see it as part of the overall product P&L. Credit revenues grew 14% in the period with flat-ish yield. The stability reflects the entry of government-backed lines, which carry lower rates and lower risk profile.

That takes me to slide 11, where I want to spend some time explaining how government-backed facilities will impact our P&L going forward, considering its growing relevance in our portfolio. Let me first explain how we segregate clients on working capital products based on the two main distribution channels we have. Our automated desk handles the smaller tickets, about BRL 40,000, and typically up to 18 months tenor at an average rate of 4% per month. Our dedicated desk serves larger clients with an average ticket to date closer to BRL 700,000, but with tenors going up to 30 months and lower rates of roughly 2.5% per month. Through those desks, we are currently operating two government programs, each with a different profile and focus. We began disbursing FGI Pix in April, and it has already gained some relevance in our book.

The second program we just launched, so it's still very small. What these programs have in common is a guarantee that reduces losses upon an event of default from a client of ours, considering the reimbursement of guarantees that we obtain from the government. As a result, this reduction on provision expenses affects the coverage for loans on stage 1 and 2. This kind of guarantee allows us to be more aggressive in pricing for clients where we were previously not that competitive, improving the risk-adjusted returns on what we lend. In short, this is about expanding access to credit and deepening merchant relationships while keeping the risk profile of our growth under control. On Slide 12, we turn to credit quality and cost of risk. In the quarter, provision expenses reached BRL 188 million. The growth on expenses is a combination of, first, the record expansion of the portfolio.