Stoneco ((STNE)) has held its Q2 earnings call. Read on for the main highlights of the call.
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StoneCo’s recent earnings call painted a picture of strong financial performance and strategic success, tempered by some caution due to macroeconomic challenges. The company reported impressive growth in net income and earnings per share, alongside successful divestitures and significant share buybacks. However, slowing TPV growth and increased provisions indicate a cautious outlook amidst broader economic uncertainties.
Strong Financial Performance
StoneCo reported a robust 27% year-over-year increase in adjusted net income, reaching BRL 631 million. This growth was primarily driven by a 21% increase in financial services. Additionally, the company’s adjusted basic earnings per share (EPS) saw a remarkable 45% year-over-year rise, reaching BRL 2.33 per share, showcasing the company’s strong financial health.
Successful Software Divestitures
The company successfully divested its software assets, including the sale of Linx to TOTVS for an enterprise value of BRL 3.05 billion and SimplesVet for BRL 140 million. These transactions unlocked over BRL 4 billion in value, including goodwill retention, marking a strategic shift in StoneCo’s business focus.
Record Share Buybacks
StoneCo returned a substantial 41% of its BRL 3 billion excess capital to shareholders through share buybacks, amounting to BRL 2.6 billion over the past year. This move underscores the company’s commitment to enhancing shareholder value and confidence in its financial stability.
Growth in Banking and Credit
The company’s banking and credit segments showed significant growth, with the active banking client base increasing by 23% year-over-year and client deposits up by 36%. The credit portfolio also grew 25% sequentially, reaching BRL 1.8 billion, indicating strong demand and expansion in these areas.
Slowing TPV Growth
Despite the overall positive performance, StoneCo experienced a slowdown in Total Payment Volume (TPV) growth, with MSMB TPV increasing by only 12% year-over-year and card TPV growth at 6.4%. This deceleration is attributed to the challenging macroeconomic environment and repricing initiatives.
Increased Provisions for Expected Losses
Provisions for expected losses saw a significant rise from BRL 34 million in Q1 to BRL 82 million in Q2. This increase was driven by portfolio expansion and a cautious macroeconomic outlook, reflecting the company’s prudent risk management approach.
High Cost of Risk
The cost of risk increased to 20% from 10% in the first quarter, although it would have been 13.5% without the increased provisions. This highlights the impact of the current economic conditions on StoneCo’s risk profile.
Forward-Looking Guidance
Looking ahead, StoneCo provided updated guidance reflecting its strategic focus on financial services following recent divestitures. The company anticipates over 14.5% year-over-year growth in gross profit, surpassing BRL 6.3 billion. EPS growth expectations have been revised upward to 32% year-over-year, with adjusted net income guidance increased to BRL 2.6 billion. StoneCo remains committed to returning BRL 3 billion in excess capital to shareholders, with a significant portion already returned through share buybacks.
In summary, StoneCo’s earnings call highlighted a strong financial performance and strategic achievements, with a positive outlook despite macroeconomic challenges. The company’s focus on financial services, successful divestitures, and shareholder returns position it well for future growth, although caution remains due to external economic factors.