Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the StoneCo Fourth Quarter 2023 Earnings Conference Call. By now, everyone should have access to our earnings release. The Company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Throughout this conference call, the company will be presenting non-IFRS financial information including adjusted net income and adjusted net cash. These are important financial measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information appears in today's press release. Finally, before we begin our formal remarks, I would like to remind you that today's discussion might include forward-looking statements. These forward-looking statements are not guarantees of future performances and therefore should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the company's expectations. In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov. I would now like to turn the conference over to your host, Roberta Noronha, Head of Investor Relations at StoneCo. Please proceed.

Thank you, operator, and good evening everyone. Joining me today on the call is our CEO, Pedro Zinner; our CFO and Investor Relations Officer, Mateus Scherer; and our Chief Strategy and Marketing Officer, Lia Matos. Today, we will present our fourth-quarter 2023 results and provide an updated outlook for our business. I will now pass it over to Pedro, so he can share some highlights of our performance. Pedro?

Thank you, Roberta, and good evening everyone. As I have outlined in our Annual Shareholders Letter, after a year into my role as CEO, I have taken a deeper look at our Company, better spotting our strengths and areas of improvement. This journey has been, revealing as it has provided valuable lessons and enhanced my perspectives on the opportunities we face. Reflecting on the successful year we had it is impressive how well our company performed. I'm not only referring to our strong financial performance but also acknowledging the strategic milestones that have strengthened our position in the market and paved the way for future growth, as we detailed in our Investor Day. In response to the initial insights and assessment in my role as CEO, in 2023, we have initiated several strategic adjustments to better position our business for the future. We have reorganized ourselves to deliver our solutions more effectively across different client segments from micro to medium businesses, tailoring our go-to-market approach to meet their unique needs. Our new organizational structure aligns with each client segment, while it also strengthens key capabilities around engineering, product, marketing, and innovation, enhancing our ability to address client needs in a unique way. We have sharpened our strategic focus around three strategic priorities, which we outlined in our Investor Day. These three priorities to win MSMBs to drive engagement with our clients and to scale through platforms help us to set key focus areas for the coming years. The first one, defining where our focus will be in terms of the software and financial services integration efforts. By focusing our execution around four priority verticals of retail, gas stations, food, and drug stores. We are increasing our competitive edge and opening a significant growth avenue for the future. Lia will present…

Thank you, Pedro, and good evening, everyone. We had important evolutions over the last year in our strategic priorities, while we continue to balance growth with profitability, which you can see on slide five. Compared with the fourth quarter of '22, our consolidated revenues grew by 20%, which combined with lower financial expenses led to an increase of almost 2.3 times in adjusted EBT. These factors combined with a lower effective tax rate, resulted in adjusted net income increasing by almost three-fold year-over-year, with an adjusted net margin of 17.4%, up about 10 percentage points in the period. Taking a closer look at our Financial Services segment performance on slide six to 11. I will start on slide six with the performance of our payments business, for MSMBs. Payments active client base increased 37% year-over-year, reaching almost 3.5 million active clients. Sequentially, this represented a net addition of 192,000 clients, lower compared to the previous quarters, mainly as a result of our strategic shift towards larger clients in the hubs and the fact that we have caught up to growth levels in the micro-segments. This growth in client base also resulted in healthy and profitable cohorts in all client tiers. As you'll see in the pages that follow and in line with our strategic priorities to win in the MSMB segment and to drive engagement with our solutions. Besides optimizing our commercial strategy for growth and market-share gains, we're also putting a lot of focus on improving bundle offerings of payments and banking to new client cohorts, both in Ton and Stone, as well as driving further engagement with our solutions for more mature cohorts of clients. As I will show on slide seven, this approach has resulted in profitable TPV growth with market share gains in the MSMB segment…

Thank you, Lia, and good evening, everyone. I would like to begin on slide 13, where we discuss the quarter-on-quarter evolution of our costs and expenses on an adjusted basis. Cost of services reached BRL803 million, increasing 15% year-on-year and 3.8% per quarter. Cost of services was sequentially flattish as a percentage of revenues despite provisions for expected credit losses in the amount of BRL39 million realized in the first quarter, as we grow our credit book and higher investments in technology. Excluding provisions for expected credit losses, cost of services would have decreased 50 basis points sequentially as a percentage of revenues, showing continued operational leverage. Administrative expenses decreased 6.5% year-on-year, leading to a 250 basis points reduction as a percentage of revenue when compared to the first quarter 2022. Sequentially, administrative expenses increased 14%, up 70 basis points as a percentage of revenues, due to higher third-party service expenses combined with personal expenses which are seasonally higher in the first quarter. As we have shared in our Investor Day, achieving efficiency in G&A, we will continue to be a priority going forward. We remain committed to our guidance of less than BRL1.125 million of administrative expenses for 2024, which implies a growth of less than 7% for the year. Selling expenses increased 2.6% quarter-on-quarter and remained flat as a percentage of revenues, despite higher provisions for variable compensation in the periods. Financial expenses decreased 10% quarter-on-quarter, down 430 basis points as a percentage of revenues. This evolution was a result of lower interest rates with average CDI decreasing in the quarter, lower number of working days, a seasonal decline in the average duration of funding lines and a lower average cash balance in the periods. Other expenses increased 47.6% sequentially and 120 basis points as a percentage of revenues, because of higher contingencies and tax provisions related to share-based compensation, as a result of the share price appreciation in the first quarter. Lastly, adjusted effective tax rate reached 11.7% in the first quarter. The lower effective tax rate in the period was a result of higher utilization of tax benefits from Lei do Bem, as well as gains from subsidiaries abroad, subject to different statutory tax rats. By 2024, we continue to expect the effective tax rate between 20% to 25%. Turning to slide 15, our adjusted net cash position reached BRL5.1 billion, reflecting an increase of BRL1.6 billion year-on-year and BRL196 million for the quarter. The growth in adjusted net cash is especially notable as it came after the deployment of BRL290 on share buybacks within the quarter, while also continuing to deploy capital towards the expansion of our credit portfolio. Now, I would like to turn it back to Pedro.

Thank you, Mateus. To wrap it up, today we also announced a pivotal transition in our leadership. André Street, our Founder and Chairman has also chosen to conclude his tenure on the Board, stepping aside from reelection at the forthcoming Annual General Meeting scheduled for April 2024. Similarly, Vice Chairman Conrado Engel and Board member Patricia Verderesi will not seek reelection, honoring their two-year commitment. Andre will remain connected to the company as a Reference Shareholder, bolstered by special protections Shareholders' Agreement and Articles of Association, including the privilege to nominate the Chairman of the Board. This transition marks the culmination of a deliberate, multi-year effort led by Andre to professionalize management and enhance governance standards, a mission that was crystallized by our strong 2023 results and the robust, strategically aligned team now at the helm. The candidates recommended for the upcoming AGM will be Mauricio Luchetti as Chairman and Gilberto Caldart as Vice Chairman. Additionally, a new member will be indicated, Jose Alexandre Scheinkman. We have shared more details about the succession in a separate 6-K filing. We are committed to keeping alive the entrepreneurial spirit created by our founders. Our goal is to maintain high standards of governance as our company grows and continues to be a leader in entrepreneurship and client-centricity. With a committed shareholder like Andre, a great team, and a strong business, we are well set to continue to advance our mission forward. Before moving to Q&A, I would like to reinforce our guidance given for 2024. For our growth metrics, we expect MSMB TPV to reach more than BRL412 billion, an increase of more than 18% compared with 2023, while we expect client deposits of more than BRL7 billion increasing more than 14% year-over-year. For monetization. We expect our credit portfolio to surpass BRL800 million, increasing 2.6 times year-over-year with MSMB take rates higher than 2.49%, implying an increase of more than 4 basis points. Lastly, in efficiency we expect adjusted net income to be higher than BRL1.9 billion, representing more than 22% year-over-year growth, with administrative expenses of less than BRL1,125 million, decreasing 7% compared with 2023. As we close 2023 and kick off 2024, I am more enthusiastic than ever about our business. There is growth ahead of us and we are closer to demonstrating the power of combining. With that said, operator, can you please open the call up to questions?

Okay. At this time, we are going to open it up for questions-and-answers. [Operator Instructions] Our first question comes from Mauricio Ricardo with Evercore. Mauricio, you can open your microphone.

Hi, this is Sheriq Sumar from Evercore ISI. I had a question on the Software business. Coming to slide 13, just wanted to get a sense as to, you know, I mean, how should we think about the potential benefits of the four key verticals heading into 2024, given that it just grew like 0.5 percentage point in the fourth quarter? And when can we expect the impact of the enterprise to decline, so that we can see a growth in the Software business from here? Thank you.

Hi, Sheriq. Lia here. Thank you for the question. So I'm going to kick off, talking a little bit about what we highlighted on page 14, which is regards to how we are advancing on our initiatives to cross-sell financial services into our software client base. So this page talks about the evolution of this strategic priority. And as we shared in the Investor Day last year, we selected those four key verticals, because they represents the majority of the opportunity and financial services revenues with our installed client base. So we believe that in order to capture this opportunity, it's going to be essential for us to offer our clients better solutions that combine software and financial services. And that we can do this in a way that we can leverage the capabilities of our vast distribution footprint and sustain our service differentiation, which really is a cornerstone of our value proposition. So, in that regard, the main metric for success in this initiative is the TPV overlap between financial services and software. And this metric reached BRL5.8 billion in the quarter, which represents a sequential growth of 19%, so we compare this growth with the growth of our MSMB TPV overall. And we can see that this growth is significantly higher than the sequential growth of MSMB TPVs. And as long as we can continue to grow the financial services TPV overlap in our software client base above the growth of the overall client base. This means, we capturing additional value from this combination. So I think this is the essence of what we talked about in this page. Maybe Mateus can give a bit more highlight on the revenue trends.

Yes, for sure. So I think you also touched upon the software revenues on a standalone basis which we show on page 13. And here, I think especially on enterprise we had some negative effects on the quarter related from IAS 29, so hyperinflation especially in Argentina. That was a direct top line in their price. But I think, Lia, you've said, the priority here is really not under the revenues for software standalone. Actually, the focus is really on improving that gross cross-sell metric for TPV. So again, yes, I think there can be some upside for enterprise software revenues in the future because there wasn't a one-off related to hyperinflation. But the focus is really not there.

Got it. Thank you. I just have one follow-up question. On the financial expenses, can you help us understand as to how should we think about the first quarter and even for 2024 as well given the prospect of lower interest rates and the use of cash versus going for third-party funding? And also I know this might be a pretty small impact but implications of the leap year or for like an extra day, in the month of Feb -- like would that have an impact on the financial expenses? Thank you.

Sure. I will start with the first part and then I’ll ask you to repeat the second part, you've got here a little bit. But just to start on financial expenses, I think the trends for 2024 are pretty much similar to what we saw in the quarter, which is that financial expenses should be driven by the changes in interest rates. So as we have net interest rates reducing, this should be a positive impact for financial expenses. Cash generation, which I think is a similar trend as the business evolves, it's cash generation and we use part of this cash to funds payments and credit. This has a positive effect on financial expenses. And of course, this will be offset from TPV growth. But again I think these are the same trends that we saw in the quarter itself and it should remain consistent throughout the year. Can you please repeat the second part of the question, Sheriq?

Yes. Sure. So, in your comments, you have said that there was a lower number of working days in the fourth quarter. But in the first quarter you're going to see an extra working day because you have an additional day in the month of February. So I know the impact is going to be pretty small, but just wanted to get a sense as to, you know what should -- how should we think about that?

Yeah. I think this was the smallest of the effects that we mentioned. So again, when we talk about one extra or lower extra during the quarter, it's about 3% impact maximum. So on the delta, right? So it's not material at all, I think.

Thank you so much. That's all from me.

Thank you, Sheriq.

Our next question from Eduardo Rosman with BTG. You can activate your microphone.

Hi. Hi, everyone. I have two questions here. The first one is on your credit business. You are booking your results now on an accrual basis and also booking upfront provisions rate, which I think makes total sense. But you're still using a cost-of-risk of 20% while you believe actual losses will be under 10%. So just trying to understand here, how much time you need, you know, to be able to use in our lower-cost of risk in or eventually how much time we need here to be able to see that like a convergence in all of the cost-of-risk to your actual kind of losses, that would be the first question. And the second one, just trying to understand because the stock is down 10% in the aftermarket. And my sense is here that the numbers were strong, right? So trying to understand here, what could be behind you know the sell-off and many investors, clients, you're asking about departure. So just wanted to underwrite, so just wanted to if you could help us understand how -- what was really his role in the last 12 to 24 months? He remains naturally an important kind of a partner of the company. But if you can remind us like his economic stake is not that large anymore. So if you can help us understand a little bit more about the changes in the Board you know maybe that could explain a little bit the sell-off, which to me, it doesn't make a lot of sense given the results. Thanks.

Hey, Rosman. Mateus here. I will start with the credit piece and then hand it over to Pedro to talk about the governance changes. Regarding credit, you're totally right. So we're booking credits on an accrual basis and we're using the expected credit losses of 20% until we have more confidence on the models itself. The migration for a risk-based approach will occur throughout this year, so it probably will be gradual. So we're going to start to converge the provisioning models towards our risk models. And then maybe, I think it's also worthwhile to provide an update on how we're seeing NPLs as well, which touches upon your comment about the 10% versus the 20% expected loss levels. So this quarter we started to report NPLs. As you can see, 90 days NPLs are still really low at 0.24, and NPLs from 15 to 90 days are still at 2%. Of course, this metric is affected by the speed of growth of the portfolio, and that's why the numbers are so low. But even when you look at the cohort data, our over 30 remains roughly at the same level that we disclosed in Investor Day, in the 2% -- between 2% and 4% area. So I think you're right in that point, that overall when we look at the numbers, that continues to put us on the right track to land at an expected loss below the 10% level. But again, it is still really soon and we're taking the cautious approach here. So the migration will be gradual over time. Then maybe Pedro, if you want to comment about the governance.

Yes. Hi, Rosman. I think what I'll try to do, I think it's hard to talk about rational or irrational reactions on the investor side. I think I'll try to be a little bit pragmatic in terms of changes we had at the Board in -- how we see this as we move ahead. So I think, Andrea, transition is kind of a natural step in the company's journey. And I think over the past two years or so, the company has been professionalizing its Board of Directors, bringing a mix of technical expertise, industry, and company knowledge, right? I think I was even part of this changing process a couple of years ago. Two years ago I joined the Board in April. I think 2022 was a year of a turnaround and I think 2023 we presented very solid results. I think we have a strong management team and a clear strategy as we move ahead. And I think Andre played a key role in terms of changing the governance and setting the directions as we move ahead. And I think he felt it was the right time to make the transition, right? I think the important point here to highlight is that despite him stepping back from his formal role, he remained as a reference shareholder of the company. I think addressing the question he holds as of today, roughly 7% of the economic -- in terms of economic value for the company and a voting power of roughly 37%. I think another point which is worth highlighting is safeguards regarding the company shareholders agreement and articles of association that is held by Andre, right? The first one is that as long as he holds at least 15% of the voting rights, he can indicate a Board member. The other safeguard which is building on that is that while he holds more than 25% of the voting rights, he decides who is the Chairman among the Board members. So I think in a nutshell, Andrea is still very committed to the company as a reference shareholder. And I think he played an important role in terms of changing the governance and setting the directions as we move ahead.

No, thanks a lot Pedro for the tough question. And thanks a lot, Mateus as well.

Thank you, Rosman.

Thank you.

Our next question from Mario Pierry with Bank of America. You can activate your microphone.

Hi guys, thanks for taking my question. Let me ask you two questions as well. The first one is you recently acquired a Financiera license that should help your funding costs going forward. Have you seen any benefits of that so far? Also, if we look at your deposit base, strong growth. Can you explain to us better what drove this growth? Is it because all of your clients now have a banking account with you, or what percentage of your clients already have a banking account? And maybe that's why you're seeing the benefits. And can you just remind us if you continue not to remunerate these deposits? And then the second question is related to your tax rate. We saw an effective tax rate of only 11%. Can you remind us what is the effective tax rate that you are forecasting on your guidance for the year? So when you talk about net income, adjusted net income of more than BRl1.9 billion, are you assuming that tax rate should stay around the current levels, or should we see a more normalized tax rate, which I think had been running closer to 20%? Thank you.

Hi, Mario, thank you for the questions. I will start with the tax rate piece and then hand it over to Lia to talk about banking. So in terms of the tax rates, I think the main driver for the lower tax rates in the quarter was that we were able to maximize the usage of tax benefits associated with research and development, the [Indiscernible]. And just to give some perspective here, even though our company as a whole has been profitable for many years, some of our entities where we had significant R&D expenses were not. So we have been working really hard to make sure that we improve profitability, not only at the consolidated level but also in those main legal entities. As a result of this effort, we were able to revert accounting losses at some of our subsidiaries in the fourth quarter and increase the usage of legal bank, which was really concentrated in the first quarter of '23. As we move ahead, the level of legal bank usage across the year will not materially change, but the benefits should be more spread out throughout the year. So when we look ahead in terms of tax rates, we continue to expect a tax rate between 20% to 25%, which is what we guided during the Investor Day, and that's what is embedded in the guidance that we provided.

Yeah. So Mario, just to give you some color on the -- your questions regarding banking, right? So in terms of the strong results in deposits that we saw, these results were mainly a result -- a consequence of two main factors. First is that we continue to put significant efforts around bundling payments and banking. So we talked a lot about this in the Investor Day, right? So payments, TPV becomes a relevant cash in to clients that use banking as a domicile. And that was an important driver in increase in deposits, but also our ability to continue to engage more and more clients with our banking solutions. Of course, the fourth quarter does have seasonality in deposits, so there is a seasonality effect there. But we continue to see the same very positive trends throughout the first quarter of '24. So with regards to your question about the Financera license, we talked -- we gave a lot of color on this in the Investor Day, right? Roadmap that we have ahead of us in terms of banking this year. So investment products are a part of our roadmap and we gave some color on that. And there's not much to say beyond what we already said. We are testing this product to our clients. Our focus is really that we develop a roadmap that can prioritize the main jobs to be done for our clients. So investment is a part of that roadmap. And we will be giving more color on this throughout 2024.

Thanks. Lia, just let me ask you then on the banking domicile what percentage of your clients today have a banking account?

Today, Mario, between -- around 50% of our clients have a banking domicile, of course, there has been a significant shift towards 2023 when we migrated all of our Ton clients to the full banking solution. But we continue to drive payments and banking bundles to new sales as well as upsell banking to current clients in the base.

Okay. And then just confirm that, you are not remunerating these deposits and you do not plan on remunerating rating them, correct?

So you are correct in the sense that deposits currently we do not pass through any of the floats. But of course, as long as we decide to scale investment products that may change, but too early to give any more specifics about that.

Okay. Thank you very much.

And just to be clear, our guidance that we gave in the Investor Day for the level of deposits of 2024 that considers that we do not pass through any of the interests to clients.

Our next question is from Tiago Binsfeld with Goldman Sachs. You can activate your microphone.

Hi everyone. Thanks for taking my question. I have just one on expenses. When we look at your guidance growing below 7% in 2024, what do you think are the main challenges and opportunities here? And especially thinking that third-party services and personnel picked up this quarter. Are there any new trends to read from these two lines, but more broadly, we would appreciate any color you can give on expenses in 2024. Thank you.

Hey, Tiago, thank you for the question, Mateus here. So I'll first address the fourth quarter and then talk about 2024. In regards to the first quarter, administrative expenses are seasonally higher in this quarter and this is mostly a result of two drivers. The first one in general is variable compensation because we provision variable compensation according to the expected EBT of each quarter. Naturally, the fourth quarter has a higher result and drives more variable compensation. But also we have a concentration of more corporate events in the quarter and that drives a lot of the third party expenses. So I wouldn't read too much into the trends for the quarter. I think that's seasonally expected. Now when it comes to the guidance, we guided 1.125 million in 2024, this implies a growth slightly below 7% when we compare to the numbers we closed in 2023. And here I think you had basically two drivers. On one end, we've been doing a lot of efforts to implement zero basic budgeting and shared services center throughout the company. And when we talk about these two processes, I think the main driver behind them is really unifying processes throughout the company that either because we grew too fast or either because we have the software segment not integrated yet, we may have duplicate processes for some corporate functions. On the other hand, we still need to invest more, especially in the financial services segments as we're bringing more capability to the company and improving the processes as a whole. So I think the 7% figure in terms of growth is really the net effect of these two trends. On one hand, seeking efficiency and implementing these initiatives. And on the other hand, continuing to invest in what we feel we need to deliver our plans.

Thank you, Mateus. It's very clear.

Our next question from Neha Agarwala with HSBC. You can activate your microphone.

Hi, congratulations on the results, and thank you for taking my question. Just a quick one on volume growth for '24, the guidance remain strong after the good year in 2023. How are you seeing the competition evolve given that most of your competitors are focusing on the SMB segment? You mentioned that you maintain your benchmark status in the SMB segment, but are you seeing a bit more competition from the competitors, both in terms of price aggressiveness as well as adding new sales force on the street? Is that putting pressure on the volumes? So any color on that would be very helpful. Thank you so much.

Hi, Neha, Lia here. Thank you for your question. So I'm going to start talking a little bit about TPV trends in the guidance and then give some color on the competition. So I think regarding TPV, nothing really new in terms of the dynamics that we're seeing. Abex released recently their outlook for market growth in 2024. And when you contrast that with our guidance for 2024 of BRL412 billion in MSMB TPV, this implies that we will continue to grow more or less twice the market rate of growth, which means essentially we will continue to gain share in the MSMB segment versus the overall market. So we remain committed to this guidance. In terms of competition, nothing really new regarding the competitive environment. Based on the fourth quarter results, we can see that we're starting to experience benefits from reduction in interest rates with financial expenses as a percentage of revenue decreasing 4.3 percentage points. And this is consistent with what we have been saying over time, that in the short term to medium term, the competitive environment is much more rational and stable and players will benefit from a decrease in interest rates. In terms of competitive dynamics, overall, this is pretty much what we see, a rational market, not anything much new to say about that.

Super helpful. Thank you so much, Lia.

Thank you, Neha.

Next question from Renato Meloni with Autonomous Research. You can activate your microphone.

Hi, everyone. Thanks for the space here to ask a question. So first on take rates, I wondering if you can give me some more granularity on the decline in 4Q, how much comes from seasonality, and how much is coming from the shift in client mix? And then the expectation on how that's going to behave throughout 2024? And my second question is a follow-up on financial expenses. The -- did the sequential decline, I think it's a little bit more than we expected, given the declining rates. So, I wonder if there is a other factor here at play? And then if you have some ratio that could help us estimate this for the year. Thank you.

Hi, Renato. I will start with the take rate piece and then move to financial expenses. In regards to take rates, the vast majority of the decline was a result of a mix, credit versus debit. We also noticed a slight client mix change, but this time around it was the opposite effect, with Stone TPV gaining relevance over Ton's TPV in the quarter, which was a different trend than the previous quarters. And this likely offset the increased contribution from banking and credits, which is growing above the pace of payments overall. So in general tech rate, I think the vast majority is purely seasonality. That's why we remain committed with the guidance that we provided, and it was pretty much in line with what we expected. Now, in terms of financial expenses, you are right that this quarter there is a second minor effect. This is related to the mix between sale of receivables versus total debt outstanding. But again, we've always mentioned in the past that from quarter to quarter, you can have small effects related to the mix of receivables versus debt. But this is not much material at all when we look at the numbers. I think when we compose the reduction in CDI, the lower amount of working days, and the lower average cash balance in the period, you got pretty close to where financial expenses should land. So again, when we look at 2024, I think it's safe to forecast based on these drivers alone and forget about these small variations due to the mix of funding lines that we use.

That's very clear. Thank you.

Next question from John Coffey with Barclays. You can activate your microphone.

Great, thank you very much. So I said, two questions which are sort of tied to some of the questions that Lia had had. So given that the silica has been declining over time and you benefit from that and you haven't really seen any irrational behavior in the market just yet. I'm just wondering like at a very-high level, is there a way to think about what has to happen in order for you to start becoming more aggressive on pricing, is it generally like one key competitor makes a significant change to pricing or you start to see this more broadly over the market? And I guess my second question is, as far as the TPV guidance for 2024, is there any kind of view you can give us on the cadence of that growth on a quarter-to-quarter basis? That's it. Thank you.

Thank you, John. I'll take the TPV question and then pass it over to Mateus. So I think loan yields in terms of the cadence of TPV, I think our TPV growth dynamics has been pretty consistent. So the important thing to look out for is the guidance for the year overall, so I think not much to say beyond that. And of course the seasonality that tend to be pretty consistence. Mateus, you want to go ahead?

Yes. And in regards to the sensitivity of changes in pricing for the changes in interest rates, I think here we have to talk about the dynamics of pricing within each segments. So when we look at Micro, we mostly addressed Micro through our brand TON. And when I look at TON, the dynamics in terms of pricing is one-off public prices. So the prices on the websites and if you look today is very similar to pricing project for all the main players. Why is that important? With public pricing whenever you make a move, it's a very expensive move because your clients in Europe then they can call you and request seeing public price. So we don't think there is an incentive for any player to make a move in the short term. Of course, longer-term, if rates really go down in a significant manner, a smaller player has incentives to reduce prices and then the others will most likely follow suit over time, but we don't see that happening in the short to medium term. And then in the SMB, the dynamics in terms of pricing is the opposite. But the effect is quite the same. Because on SMB, the pricing is done on an individual basis. So very common in Brazil to have let's say it, should drugstores same neighborhood same size but with two very different pricing profiles. And what that means is that if any player wants to be aggressive in SMB, there is no such thing as being aggressive for the whole base. The behavioral occurs in the new sales and then it really takes a while for the whole base to recycle and to have the effects on the P&L. So that's why we don't see any likelihood of having the negative impact regarding interest rates in terms of pricing. But longer term, I think the strategy that we viewed at the Investor Day is really not about increasing these present payments, right? I think when you look at the guidance that we provided for take rates for 2027, all the increase can be attributed to the higher engagement of our banking solutions and also with the rollout of new products, especially credits. So again, short to medium term, we think because of this pricing dynamics, it is likely that the benefits of all interest rates will flow through the P&L. Longer term, the focus is not there, the focus is really on improving the engagement with the new solutions.

Great. Thank you.

Next question from Yuri Fernandes with JPMorgan. You can activate your microphone.

Yuri, I don't know if you're trying to state your question. We can't hear you.

I believe he dropped out of the queue. Can we pass to the next question?

Sure, let's move on.

Next question from Kyle Washington with Greenwich Capital. You can activate your microphone. Sir, you can activate your microphone.

Let's move to the next person in the queue.

Sure. Next question from Daniel with Unrivaled Investing. You can activate your microphone.

Hi there. Can you hear me?

Yeah, we can hear you.

Oh, great. Thank you so much for taking my question, and I wanted to say thank you. You guys have done a wonderful job communicating the strategy and the presentation materials and I really appreciate the long-form letter from Pedro Zinner, this quarter and I hope to see more in the coming quarters. So once again, my name is Daniel from Unrivaled Investing. My question -- two questions really. The first is regarding capital allocation. It's been a treat to hear the commentary on your value proposition, why you think you're winning, and that you think you're going to continue growing faster than the underlying market. So that is very helpful, the rational marketplace perspective. Do you have any sort of thoughts on though the capital allocation? Because I still think that there is this disconnect with what you're saying, which is, you have this very strong value proposition, you expect to continue winning, and what Wall Street's pricing where the stock is trading around low-teens earnings multiple. And I love to see the buyback last year. So that's the first question and I can ask the second one later. Thank you.

Thanks for the question, Daniel. So I think in regards to capital allocation, you're pretty spot on. So when you look at the cash generation of the company, the company has consistently generating cash. First part we generated cash despite BRL300 million in buybacks and also deploying capital in credits. And that's why at the end of the day, we approved and announced a new BRL1 billion buyback plan in Investor Day, right? I think the only question here is that we're planning the execution of this buyback. And we also have to be mindful because when you look at the guidance, especially for the credit book, the BRL5.5 billion is a sizable increase versus what we have now. But it's really small when compared to the overall credit markets in Brazil. So the only thing we need to be mindful in terms of capital allocation longer term is that if we get it right in terms of the credit, there is potentially a lot more to be done in terms of deploying credit there and we want to have this optionality in maintaining a really strong balance sheet. So again, general terms, we're aligning doing the buyback plan. It's just a matter of planning the execution. And longer-term, we need to be mindful about the credit book.

Got it. Super helpful. So it sounds like the buyback may not be at full capacity if you're thinking about the underlying credit book and the incredible growth you could have there in the coming years. So that's sort of the takeaway there. But the second half of the question, this is a bit of a tougher question which is, do you see a future where the software segment, which clearly hasn't performed as well as the financial segment, which has done very well, do you see a future where the software segment turns around and really starts to accelerate in the future, really starts to -- where you could say it has that type of value proposition where you're growing significantly faster than the underlying industry where you say, hey, the value proposition here is very strong and that's why we're going to win? Thank you.

Yeah, so I'm going to take this question. I think, Daniel, so in terms of the growth prospects for software, as Mateus said at the beginning, right? I think there is a mix -- a little bit of a mixed bag when we talk about the software business standalone. In the Investor Day, we communicated sort of the software business fragmented in three buckets. Number one, the four key priority verticals. Number two, the enterprise business. And number three, the other software assets that we have not prioritized in terms of cross-sell of financial services at this point. I think in the first bucket those core priority verticals there's a lot that we're doing in terms of driving the integration of software and financial services. We really have set three key priorities there and we believe that there is a vast opportunity for us to continue to grow. Naturally, this growth will come from two drivers. Number one, our ability to penetrate Financial Services to the current installed software base, but also as we improve our go-to-market, improve our wholesales process, improve our value proposition around products. We expect to also continue to drive growth on software revenues standalone. The bucket that we have not prioritized in terms of the other verticals and other software assets that also has a pretty healthy growth and we see it continuing to grow at healthy levels going forward. I think the dynamics in the enterprise business is a little different because we already have a pretty large market share there, so I think we can expect less growth from the enterprise business going forward. So it's hard to talk about one single answer in terms of the software business. It's really those three main buckets that I have just mentioned. Mateus, maybe you can talk a little bit about margin evolution.

Yeah, for sure. So I think we touched upon this in the Investor Day as well and also in the answer about administrative expenses. But when it comes to efficiency in the software as a standalone segment, there is a lot to be done in terms of implementing a shared services center and also the zero-basic budget in there. I think 2023 was the first year that we ran the ZBB. But it was mostly focused on the Financial Services segments. We're now rolling it out for this software segments as well. And that's why we guided that when you look at the EBITDA margins for the software segments, we reached mid-teens in 2023 and we should be significantly above the 20% threshold for 2024. Most of that will most likely be driven by efficiency in OpEx and loss from top line of the software standalone, like Lia said.

Great. Thank you very much.

Thank you, Daniel.

Next question from Jorge Kuri with Morgan Stanley. You can activate your microphone.

Hi, everyone, thanks for taking my questions. I have two questions. The first one is on your NPL ratio on slide 10, the way you measure it is the -- what do you consider to be non-performing is the total amount of the loan outstanding or only the installment that was missed? And then I'll ask my second question. Thank you.

Thank you for the question. Kuri, for the first one, in the slide 10, we measured the full amount of the loan. And then on foot -- on the note 6.6.1, you have also the information regarding the amount of only the installment that was passed through. So we have both information, but in this slide this is the full amount of the loan.

Great. Thank you very much. And then my second question is regarding on the news on Andre Street. Thanks for telling those shares, that still loans on the company which if I understood correctly, is around 7% of economic value. My question is, with this announcement, is there any modification or existing lockup that he has on those shares? Is he able, if he wanted to? I'm not saying he will, theoretical. Is he able to sell all of the shares at any point in time? Or is there any sort of like local -- lock-up agreement? And then also, is there -- now or will there be, with this move, a non-compete agreement signed with Mr. Street?

Hi, Jorge, Pedro speaking. I think, regarding the first question, I don't believe there are any changes at all, right? On the second point, I think our non-compete is actually being elaborated in which we will give -- he will not engage in any business that competes for Stone's primary activities in Brazil. So -- and this non-compete should be ready before the AGM, which is expected to be held on April 23. So you're going to see more flavor of that in the documents for the AGM.

Thank you, and that's very clear. But just to clarify the first part, when you say there is no changes, it means that he doesn't have any lock-up on his shares?

That's right. Correct.

Okay. Got it. Thank you very much.

There are no questions at this time. This concludes the question-and-answer session. I will now turn over to Pedro Zinner, CEO at StoneCo for final considerations.

Well, thank you very much everyone for participating in the call. And as I mentioned in the letter, I appreciate the value of our shareholders. Hope to see you again next quarter. Thank you very much.

This concludes today's presentation. Thank you for participating.