StoneCo Ltd. (STNE) Q1 2026 Earnings Report, Transcript and Summary

Good evening, everyone. Thank you for standing by. Welcome to StoneCo's First Quarter 2026 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with this call. All material can be found online at investors.stone.co. Before we begin the call, I advise you to review the disclaimer included in the press release and presentation, which outlines important information about forward-looking statements and non-IFRS financial measures. 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. [Operator Instructions] Joining the call today is StoneCo's CEO, Mateus Schwening; the CFO and IRO, Diego Salgado; and the Head of IR, Roberta Noronha. I would now like to turn the conference over to Mateus. Please proceed.

Thank you, operator, and good evening, everyone. Let me begin with a broader view of our first quarter. The quarter was broadly consistent with the softer first half dynamics we had anticipated. Three dynamics shaped the quarter. First, a macro environment that continues to weigh on smaller merchants; second, typical first quarter seasonality; and third, a credit portfolio that continues to grow profitably, even though NPLs came in above our expectations. All of this while we work to bring churn to healthier levels and reaccelerate TPV growth. Against that backdrop, we grew revenue, held adjusted gross profit broadly stable and continue to return significant capital to shareholders. More importantly, this quarter marks the beginning of a transition phase between the extraordinary capital distribution linked to the Linx divestiture and the operational momentum we expect to build through the second half. The work underway give us confidence in the trajectory ahead, and we remain fully focused on execution. Now I want to spend a few minutes on what matters most heading into the rest of 2026, our capital allocation discipline, our operating priorities and our commitment to shareholder value. Let's turn to Slide 3, where we show our capital distribution to shareholders across the last couple of years with emphasis on what we have delivered so far in 2026. Year-to-date, we have distributed BRL 3.6 billion, representing a 27% distribution yield. This includes the extraordinary dividend paid on May 4 with proceeds from the Linx divestiture and approximately BRL 0.6 billion in ordinary share buybacks. In addition, we still have at least another BRL 1.4 billion to be repurchased throughout this year. As we have consistently said, whenever value-accretive opportunities are not immediately available, excess capital gets returned to shareholders and the 27% yield year-to-date is a direct reflection of that commitment. Moving on, Slide 4 outlines our key priorities for the rest of 2026. On payments, our priority is to reaccelerate profitable TPV growth. To do that, we're focused on improving retention, managing churn more actively and simplifying the way we bring our broader set of solutions to clients. As we deepened our understanding of the drivers behind the elevated churn observed towards the end of 2025, one important point became clear. The churn pressure is not broad-based. Our legacy customer base continues to perform in line with historical churn levels, reinforcing the strength of our core value proposition. Instead, the pressure has been more concentrated among clients onboarded during 2025, a period in which the company began offering a broader set of products. As we expanded our offering into additional products such as instant settlements, investments and credit cards, our bundles and pricing architecture became more complex than they should have been. That created friction for some clients, and we are addressing it directly. We are now conducting a full review of our offerings, simplifying bundles and moving towards a cleaner and more transparent pricing structure. The objective is not to chase volume at any cost. The objective is profitable TPV growth, supported by better retention and deeper relationship with clients who use more of our ecosystem. It is still too early to call a definitive trend, but the initial data is encouraging. TPV growth is improving in April. We are watching leading volume indicators closely, and they suggest that the actions we are taking are moving us in the right direction. On credit, we're also being proactive and disciplined. Towards the end of last year, we saw our models beginning to perform below our expectations with first payment default rates increasing in newer cohorts. We responded quickly by adjusting pricing to preserve cohort profitability and by tightening our risk selection. Since then, we have implemented a set of model and policy changes and the early results are promising as first payment default rates are converging back to historical levels. Looking ahead, our priority is not simply to grow credit, but to grow it with the right risk-adjusted returns. We will continue refining our underwriting models, pricing risk appropriately and diversifying the portfolio across products such as credit card, overdraft and secured working capital offerings. We have recently begun disbursing secured credit products, and we believe these offerings can help us expand access to credit, deepen our relationship with merchants and reduce the risk intensity of portfolio growth. We're also committed to improving efficiency throughout the year. First quarter results were affected by higher provisions and certain one-off expenses, including severance costs in addition to the quarter's typical seasonal softness. As these factors normalize, we expect operating leverage to resume, supporting continued improvements in our cost structure through disciplined prioritization and AI-driven efficiencies as we progress through 2026 and beyond. Finally, we're also focused on expanding the share of our clients using our full suite of solutions through our unified app, which we're progressively upgrading to address our merchants' needs across every financial workflow. Linked to that, we're making continuous investments in positioning our brands to reflect our evolution into a full-service financial partner. Turning to Slide 5. Our adjusted gross profit was BRL 1.5 billion in the quarter and adjusted basic EPS was BRL 2.19 per share. Although interest rates may continue higher for longer, our full year 2026 guidance remains unchanged. We are on a trajectory that we believe is consistent with delivering within that range with performance weighted towards the second half as credit revenues continue to compound and the commercial initiatives we are executing begin to normalize retention rates. Finally, beyond the quarterly numbers, I want to flag that what drives us every day is straightforward, building a financial platform that Brazilian entrepreneurs can rely on for their core financial needs. We're moving fast towards that goal, executing against it with focus and discipline. With that said, I will pass it over to Diego, who will go over our financial and operating results for the quarter.

Thank you, Mateus, and good evening, everyone. Let me start on Slide 6, where we present our main financial metrics for the quarter. Total revenue and income reached BRL 3.6 billion, up 6% year-over-year. This growth was primarily driven by the continued expansion of our credit revenues and healthy profitability in payments. These tailwinds more than offset the expected headwind from lower floating revenues from deposits, which we started using as funding source in early 2025 and reduced our revenue recognition with the benefit showing up as lower financial expenses. Adjusted gross profit came in at BRL 1.5 billion, broadly stable year-over-year as revenue growth was offset mostly by higher provision for credit losses and increased operating costs. Gross profit margin contracted from 44.4% in the first quarter of 2025 to 41.6% this quarter, primarily reflecting the step-up in credit provisions, which we will further explore in this presentation. Adjusted net income increased 3% year-over-year and reached BRL 549 million in the quarter, but adjusted basic EPS grew over 4x faster, increasing 15% year-over-year, reaching BRL 2.19 per share. The EPS outperformance relative to net income was driven by the continued and consistent share buyback execution, reflecting our ongoing commitment to returning excess capital to our shareholders. On Slide 7, I want to briefly explain a reporting change that we're introducing this quarter. As we advance in our strategy to become the primary financial partner for Brazilian merchants, we are consolidating our active client base definition into a single unified metric, merchants that have generated revenue during the past 30 days across any of our payments, banking or credit solutions. While payments are still usually our first contact point with merchants, we have a growing number of clients with whom our relationship starts with other business fronts and then evolves into a broader relationship. As a result, we are discontinuing the separate disclosure of the micro, small and medium-sized payments active client base and banking active client base that we previously reported. Going forward, you will see one unified number. Under this new definition, our total active client base was 4.7 million clients in the first quarter 2026, up 13% year-over-year and 5% down sequentially. The sequential decline is largely a result of conscious actions to focus our efforts on a more engaged and revenue-generating client set. We're also introducing average revenue per active client as a new key metric to track how effectively we are monetizing our client relationships. ARPAC was BRL 247 per month per client in the first quarter 2026, down 3% sequentially and 11% year-over-year. The sequential decline largely reflects first quarter seasonality, while year-over-year decrease reflects client mix effects. Now let's turn to Slide 8. On TPV, starting this quarter, we're simplifying our disclosure to focus on total TPV only. TPV was BRL 137 billion in the period, growing 3% year-over-year with PIX QR code volumes continuing to outperform card TPV. This growth reflects the impacts of a more challenging macroeconomic environment for smaller merchants, the relative outperformance of digital sales where we have less exposure. And finally, the elevated churn levels identified last quarter and that are still affecting our performance while being slowly addressed. On the other hand, retail deposits reached BRL 10.1 billion at the quarter end, growing 22% year-over-year and declining 9% sequentially, reflecting typical first quarter seasonality. A better read of the underlying trend is the average daily retail deposits, which grew 7% sequentially and 26% year-over-year, reinforcing the ongoing development of our banking franchise when normalized for end of quarter timing effects. On Slide 9, we present our credit portfolio evolution alongside its revenue and new trajectory. Our total credit portfolio reached BRL 3.2 billion, growing 14% sequentially. Merchant Solutions, composed mostly by our working capital offerings, reached BRL 2.9 billion, growing 13% quarter-over-quarter, while our credit card portfolio reached BRL 400 million, growing 23% sequentially. Credit revenues kept their strong growth trajectory, both on a nominal and yield basis, reaching BRL 297 million in the quarter, up 25% sequentially and the portfolio yield reaching 3.3%, up from 3.1% in the fourth quarter and 2.6% 1 year ago. The growth in revenues reflects the expansion of the portfolio, but also the better risk-adjusted products and mix. Now on Slide 10, we focus on credit quality and provision expenses. During the first quarter, our models for micro, small and medium-sized merchants on the automated desk lost efficiency, and we saw newer cohorts performing worse than historical average, leading to higher-than-expected delinquencies, a trend that seems to have affected the entire banking industry, but is more pronounced in our portfolio given the concentration that we have on the segment. Our NPLs 15 to 90 days increased almost 60 basis points, driven mostly from the worst performance in the automated desk. The dedicated desk, while no longer the main driver of sequential movement, continued to contribute to an elevated baseline. NPLs over 90 days reached 7%, up from 5.2% in the prior quarter, but mostly as a carryover effect of select cases within the dedicated desk progressing into higher delinquency bands, along with the expected seasoning trajectory of our portfolio. In response, we maintained a conservative provisioning approach with our coverage ratio standing at 229%. We have provisioned BRL 166 million in the first quarter for credit losses, driving our cost of risk to 21.9%. Moving forward, we expect that the combination of tighter underwriting policies on the dedicated desk and the deployment of new models to the automated desk push down cost of risk to lower level at a slow but steady pace. The early signs that we have arising from first payment defaults indicate the path. Looking at the March cohort, we see a clear improvement compared to January and February, returning to levels closer to our baseline. While this represents one data point, we see it as a positive early sign. On Slide 11, our cost of services increased 420 basis points as a percentage of revenues year-over-year, driven primarily by higher provision for credit losses, as I just described. Excluding provisions, cost of services increased a more modest 60 basis points, reflecting severance costs related to the workforce reduction we executed at the end of the first quarter and higher D&A as several technology projects were completed and moved into production. Financial expenses improved 150 basis points as a percentage of revenues year-over-year, reflecting the benefit of client deposits as a lower cost of funding source, which more than offset the impact of higher average CDI rate. As we keep developing our deposit franchise, deposits will increase its importance as a funding source. As a result, we have been able to reduce our total cost of funding from 100% of CDI in early 2025 to approximately 87% more recently, a meaningful improvement that flows directly into our financial expenses. Admin expenses decreased 30 basis points, reflecting continued operating leverage in our support functions. Selling expenses decreased 50 basis points, driven by lower marketing and distribution channel spending as a percentage of revenues. Other expenses decreased 50 basis points, primarily due to lower share-based compensation, which was partially offset by certain intangible write-offs. Effective tax rate was 14.3% in the quarter, a reduction of 4.5 percentage points on a year-over-year basis. This reduction is mostly a reflection of the aggregated benefits from deferred tax assets. Moving to Slide 12. We present our managerial capital position and return on equity. We're introducing this metric to provide greater transparency about our capital position on a quarterly basis. As a reminder, our capital ratio metric is based on the Brazilian Central Bank methodology for authorized entities, but we apply it to all StoneCo legal entities. Our capital ratio stood at 44% at the end of the first quarter, elevated by Lin's divestiture concluded in February. Excluding Linx proceeds, which were returned to shareholders on May 4, our capital ratio would have been approximately 29%, still comfortably above our 17% internal hurdle. It is also worth noting that we still expect to buy back BRL 1.4 billion worth of shares until the end of the year as announced in our last earnings call. Finally, our adjusted return on equity was 19% in the first quarter, up 40 basis points year-over-year, but down sequentially from 25% in the fourth quarter of 2025. The sequential decline reflects the recognition of BRL 1.2 billion in deferred tax assets related to the Linx goodwill amortization, which expanded our GAAP equity base and compressed the ratio by approximately 100 basis points. Additionally, it is important to remember that the extraordinary dividend links payment will reduce our equity base starting on the second quarter and will have a positive impact in our ROE going forward. Therefore, to wrap it up and going back to Mateus's initial comments, we had a first quarter in which TPV was soft, but in line with what we expected. And although it will be a longer journey, we believe we have the tools to further engage and retain our clients. In addition, we had a challenging backdrop on credit, but this is part of our learning journey as we build the business for the long term, and we remain highly confident that both credit and banking will be the main growth levers to our business in the coming years. With that, let's open it up for questions.

[Operator Instructions] Our first question comes from Daniel Vaz with Safra.

I was looking at again at your 2026 priorities on the payments. You said you're shifting focus from new sales to active base, right? So you're looking into your active base rather than new sales. And I wanted to understand how are you looking to improve the ARPAC, right? So when we see the ARPAC right now, it's down 11% year-over-year and the client base, they contract, right? So can you help us frame what's the trajectory you want to go from here? Like when you go from a negative trajectory on ARPAC to a positive? Any quarter that you expect that to happen or any moment that you want to share with us? And the second related to that, what's the optimal number of clients that you want to work with since you're looking at your base? Does that mean that you're going to still have a net loss on your clients for the next quarters?

Daniel, Mateus here. Thanks for the question. So I think the question is generally around ARPAC. When we look around ARPAC, it has been decreasing mainly because of mix, not because of a deterioration in the monetization of our core client base. So just to give you a little bit more color, what we're seeing now is basically 2 opposing trends. On one hand, we're now expanding our ecosystem more and more towards new products. And when we do that, we also have more clients using lower ARPAC solutions. Just to give you an example, if we were to look at the banking-only clients that we have, -- those clients are really valuable because they expand our relationship base and increase engagement with the ecosystem. But of course, their initial ARPAC is naturally lower than that of a client using payments or credit. So that's one trend that we have. As we open new products, we have new avenues to onboard clients as well, and they tend to use these newer solutions, which have lower ARPAC. On the other hand, when you look at clients that use multiple products, for example, payments, banking and credit, their ARPAC is significantly higher than the company average. So short term, you have this negative pressure as you open up more avenues. But longer term, this is a big opportunity for the company. So those are the trends. As for the second question around the optimal amount of clients, I think it aligns with the first piece of the answer, which is as we open these new layers and new products over time, they also become a new source of opportunity for us to onboard new clients that were previously not in our TAM. So in the end of the day, that expands the amount of clients that we can target longer term. So we're not seeing the roof on active client base as of now.

Daniel, adding to Matteo's comments, naturally, this is the first time that investors see this metric. It's the first time that we're reporting it. What we should be able to disclose in time, it's a vintage analysis for the ARPAC in which investors will be able to see this involvement, this increasing involvement from clients with us in time. The reason why we're disclosing this is to unify how we look at clients -- as you know, previously, we reported different numbers for active clients in banking, active clients in payments, so on and so forth. The idea here is really to present to the market how we are looking at the client base and how we are really positioning ourselves and looking at the business more as a broader financial platform than a pure payment business.

Our next question comes from Kaio Da Prato with UBS.

I have a question on the credit business, please. First, we saw some pickup on your cost of risk this quarter and still some consumption of your coverage ratio. If you can please comment a little bit more on that. I would like to clarify if this is only on the dedicated desk or also on your automated working capital solution as well. And you showed the first payment default improving in March after tightening the underwriting. By the way, thanks for the data. But how should we read that? Would that mean a deceleration in the pace of growth of the book going forward? And on the cost of risk, also some improvement going forward? Or this is the new level that we should work with, please?

Thanks for the question, Kaio. I'll give some overview around credit in general and then pass it over to Diego to comment on the coverage and the cost of risk going forward. So first of all, on credit, I think there were 3 main drivers behind the increase in NPLs and therefore in provisions as well that we had in the quarter. The first thing that is important to keep in mind is that the broader market deteriorated within the quarter. If you look at Central Bank data, it clearly shows that delinquency increased across the market in the first quarter as a whole. So part of what we're seeing reflects a tougher macro and credit environment in general. The second point, which we flagged in the presentation is that starting towards the end of the fourth quarter, we saw our models beginning to underperform, meaning that the actual delinquency that we saw was coming above our expectations. And the third point is that we did continue to see some isolated delinquency cases in the dedicated desk, but they are not the majority of what explains the sequential improvement. And given the larger ticket size in that portfolio, these individual cases, they can have some impact on the overall numbers. Now in terms of how we address the problems, we are addressing this on several fronts. The first thing that we did proactively is to increase pricing throughout the second half of last year to preserve cohort profitability. And I think we also showed that in the presentation. The second thing was basically implementing a new set of models and credit policies, which are now in production. And this is what explains the early data from March with the first payment defaults converging back to the norm. And April data suggests we're moving in the right direction as well. And the third thing, which is related to the dedicated desk, we did reduce the maximum ticket size in the dedicated desk to limit the impact of these outliers. And I think going forward, what we are beginning to do now is to move more and more towards disbursing secured working capital products as well, which should gradually increase the share of secured lending in the portfolio and improve the overall risk profile. So while the first quarter was clearly impacted, we believe we took the right actions. And then let me pass it over to Diego.

So Kaio, let me start first with your question on the coverage. When you have the chance to look at the numbers, you're going to see that the coverage for both Stage 1 and Stage 2 remained flattish. Actually, coverage for Stage 2 increased a bit and coverage for Stage 3 decreased a bit. The coverage for Stage 3 decreased a bit basically as a result of different collateral levels and different collateral enhancements that we have for certain places that went through Stage 3. So basically, when you have a strong collateral for a client that is on Stage 3, the LGD, the loss given default may fluctuate, and that's what leads to this fluctuation in coverage. As to cost of risk, what's the level, how it should trend in time. As we've mentioned on the call, we expect cost of risk to decrease going back to mid- to high teens in time. It will take some time. First, because some of these delinquencies, these early delinquencies that we've seen on the first quarter, they still have to flow through the P&L during the following months. So there's going to be a lag on those expenses during the following months. But most importantly, what we expect is that this combination that Mateus mentioned of both new underwriting standards, a reduction on the concentration of the dedicated desk and the new secured facilities that we've been deploying now for clients using some credit facilities from the Brazilian National Bank tend to have a positive impact in time, especially these new programs from the Brazilian National Development Bank that I've mentioned, they have multiple benefits. First, they require on one hand that we limit the yield that we charge from clients. But on the other hand, they enable a material reduction in risk given its nature. So that enable us both to increase the client base to whom we can extend credit. It makes us more competitive, and it's an inherent demand that we see in our client base.

Okay. This is a pretty comprehensive answer. Just a quick follow-up, the last part in terms of the pace of growth of the portfolio going forward, if this should be more at these levels or a little bit different because of this measure that you are taking or not?

No, it didn't change, Kaio, as we mentioned, the growth on the portfolio will not be linear. As we deploy new products, new models, expand to new publics, there may be short-term fluctuations. But we don't expect the overall decision to tighten the screws a bit on the underwriting process given the recent macro backdrop to affect long-term trends.

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

Before my question, I just have a quick follow-up on Kaio's previous question on credit. I understand the problem and how you decided to address that. But I would like to focus on why it happened. So what do you think it happened here? It was a concentration on sectors and segments that maybe -- they were riskier than you initially thought. Maybe it was a level of underwriting issues here or prices. So rather than how you decided to address it and particularly about the underlying deterioration of the SME problem. I'm just trying to dig deeper here on why it happened. But my actual question here is on the guidance that you provided earlier. Since you provided it, what came different from what we expected in this first 4 or 5 months of the year, mainly credit or even TPV prices?

Antonio, thank you very much for the question. So what happened? As we mentioned on the call, this seems to have a trend that has affected the entire banking industry based on what we've seen so far in other banks results. Naturally, we have a larger concentration on that segment. We don't have other portfolios. We don't have other segments of the economy. Hence, -- this effect is more pronounced in our client base. That seems to be the effect. The overall macro environment in Brazil, delinquency from consumers and consumption in general suffering pressure affecting our clients. It takes a while to see some of that data, as you have seen on the graph in which we've shown the first payment default and the other KPIs that we follow up on a daily basis. So although we've seen it, it takes a while to fix the challenge. It's a learning process to start with. Then there's a second effect, which is there is a seasonality for our clients on top line. You all know that. We know that for a fact. So although it was a little bit -- the impact was a little bit bigger than we expected, we should get used in seeing that dynamic going forward as part of the overall business. Let me go to your question on the guidance. So naturally, the uptick that we had in expenses provisions during the first quarter wasn't really there on the guidance. It was a surprise. But I think it is something that we can accommodate within that guidance. We expect provision expenses to normalize throughout the year. As I've explained, there is -- there are a lot of moving parts that will lead to that normalization. In terms of TPV, TPV on the first quarter was soft, but in line with what we expected. So no surprises there. We expect TPV to grow faster on the second half of the year and therefore, contributing to gross profit and to net income. Therefore, the big challenge or the big question mark becomes interest rates, right? So when we provide the guidance for 2026, we've mentioned that we were expecting interest rates to end the year at 12.5%. That number today is probably closer to 14%. And as you all know, every 100 basis points at Selic levels has an impact of roughly BRL 200 million to BRL 250 million in pretax earnings. So that effect to date is probably the most challenging point in our forecast or in our projections. I think today, we're probably closer to the bottom of the guidance that we provided. But there is still a long way to go. We have other levers to pull. It's going to be an interesting year.

Our next question comes from Renato Meloni with Autonomous Research.

I would like to stick with the guidance, right? And especially because we're seeing this general deterioration in asset quality, as you mentioned, right? So despite all the problems that you might have had, we saw this in other banks, and I think the perspectives are also deteriorating. The last call, you mentioned that the -- like one of the levers here was to grow credit. And do you think you still have space to continue growing credit into a credit cycle? And what -- in the previous question, you mentioned about these levers, what are the levers you can pull here to achieve at least the bottom of the guidance? And what gives you conviction you might get there?

Renato, thanks for the question. I'll start around credit and then Diego can complement on the guidance as a whole. But on credit, I think we've actually touched upon this on the presentation as well. If on one hand, we have a more challenging scenario macroeconomically speaking, than what we anticipated in the beginning of the year, I think it's also important to keep in mind that, first of all, our penetration within credit is still really small. So while those macro challenges tend to affect us, we still have a very large base. And if we do a good job in terms of picking and choosing the right mix of clients, there is for sure, space to grow. And the second thing, I think Diego also mentioned on his previous answer, is the secured lending piece that was not really there when we initially planned for the year. So what we're seeing now is that we have more levers at our disposal to grow credit, not only the secured lending, which is for sure, a big one. But also if you look at the product portfolio as a whole, we have more and more new offerings to offer to our clients like overdrafts, like the credit card product as well. So when we bundle that all together, if on one hand, we have a tough scenario from a macro standpoint. On the other hand, I think we have more options than we did in the past to build good value proposition to our clients. So that's where the confidence lies. As for the second part, I'll pass it over to Diego.

Yes. I will just add to Mateus's point. The good thing about a challenging credit backdrop is the fact that we are probably now seeing more -- we're seeing better clients now that didn't demand credit before, actually considering the possibility, and that creates a new growth possibility without necessarily increasing risk in any relevant form. So there are still a lot of opportunities on the table. Going back to gross profit. So as I've mentioned, interest rates are still the main driver in addition to credit to make us get there or not. We have some levers still to pull on pricing depending on how quick we decide to pass over the recent interest rate cuts to the base or not, but it's going to be a super volatile year. I think everybody has been following what's going on with the economic environment and also with rates. And we are going to operate that environment in a very disciplined fashion on a daily basis.

Our next question comes from Neha Agarwala with HSBC.

On the credit product, I understand that you say that you have more credit product options now than you had previously, which will allow you to grow more. But doing more of secured working capital that should be a lower -- less profitable product than unsecured working capital in terms of how you price. Do you see that impacting the kind of profitability that you're expecting from the credit business for this year as well as for the coming 2, 3 years in your own budgeting? If you can just shed some light on that. And my second question is, you mentioned volume acceleration in the second half. What are the key drivers that make you expect that we will see an acceleration? Is it more you expect a better macro? Or is it because of your initiatives to reduce the churn should enable you to grow a bit more on volumes?

Thank you for the question. So let me start on credit. So when we move into some of these government-backed programs, they demand lower rates. Some of them have actually captive rates, but the NII or the NIM is not necessarily lower because of the risk that it's both embedded in the profile of the product, considering the guarantees that we have from the NDS or because of the profile of the client. On top of that, we are talking about better rated clients, the clients in which banks tend to be more competitive. And once we are able to deploy credit to those clients, we tend to be more competitive in not only gaining share in credit from banks, but also in gaining other services, including deposits and payments. So that's the first answer. The second on TPV, the growth that we expect on the second half of the year has to do with the fact of lower churn above other variations. So naturally, we still expect to work better on the capital that we are deploying for new sales for new clients and so on. That's an ongoing process. But just by adjusting the churn levels on the client base, if we maintain the same investments on the distribution channels, then TPV tends to accelerate significantly.

Yes. Just to add on the churn piece, I think we're really focused on doing 3 things here. The first thing is that we are reviewing our product offerings and bundles end-to-end. The clear focus here is on simplification, transparency and doing that across all of the distribution channels that we have. Some of the offerings that are simpler, they have already been deployed. Others naturally require more work, especially when you have more products. And therefore, they should begin to contribute more meaningfully in the second half of the year. The second thing that we did, and this connects to the focus on the client base instead of solely on new sales is adjusting the sales force incentives to better align origination with client retention and long-term value creation. And the third thing that we're focused is on really making targeted product and experience improvements. All of them aimed in reducing friction and improving the overall client journey. So all of those actions, when we add them all up, they should start to yield more results in the second half of the year and therefore, accelerate TPV growth. So just to emphasize what Diego said, I don't think we're betting in the macro environment becoming better in the second half. I think it's more a matter of execution.

Our next question comes from Marcelo Mizrahi with Bradesco.

My question is regarding the credit again. So 2 questions. First one is how is the proportion or the participation of the centralized desk comparing to the total credit just when compared to in the outstanding credit. So how much it depends on the centralized desk. Just to think looking forward, the impact on the originations, not clear for me, why we will not see any impact if -- or after you guys are doing too many adjustments in terms of risk appetite, okay? So you are reducing the ticket or you are reducing the risk in the clients and you are increasing prices. So you are adjusting a little bit the risk appetite to maintain the profitability. So definitely, in my view, I'm not clear for me why we will not see any impact on the outstanding credit. And the second one is regarding the automatized portfolio automatized credit. How is the -- if you can understand a little bit more how the delinquency ratio of this credit were or how can we compare the delinquency of both credits on this quarter? So if we are seeing any -- the same pace of deterioration on delinquency as we are seeing in the centralized.

Thank you for the question. So the dedicated desk today accounts for roughly 20% to 25% of our current portfolio. The decision that we have made on that front was basically to reduce the maximum ticket that would be -- that we were willing to extend to the clients on that front. So basically reducing our overall risk appetite in terms of size. And we have naturally also made the decision to reduce the risk appetite to lower-rated clients. On the other hand, with the new secured lendings that we've just mentioned, we are actually able to be more competitive in clients, in large clients that we typically were not -- we were not to or that we were not willing to take the risk -- despite those clients had better ratings, the risk-adjusted returns were not necessarily the best that we had in the portfolio. But now considering the new BNDES facilities that we're being able to transfer or to offer to those clients, that P&L dynamic changes.

And if I may add, Diego, I think there is a third point here, which is actually model improvements as well. So I think we've mentioned this on the presentation, but we just deployed a new generation of models. And that, of course, over time, whenever we have those upgrades, they allow us to discriminate more the clients and somewhat increase the pool without increasing necessarily the risk. And I think a good example of that, if you look at the March cohort, which is the one that we flagged that had performed actual lower first payment default rate -- if you look at the FDIC data, March was one of the months within the quarter with the highest disbursement as well. So I think that shows that you don't necessarily have a one-to-one correlation between tightening the risk appetite profiles versus the disbursement levels because like Diego said, we have more products, we have better models and so on and so forth. And...

I missed -- can you repeat the second part of your question again, Mizrahi, please?

Okay. It's how we compare the deterioration of -- on the delinquency ratios on the central dedicated desk.

The dedicated desk and the automated desk -- that's very hard to compare because of the size of the ticket -- of the different size of the tickets, right? So remember that on the dedicated desk, we have tickets that go up to BRL 500,000. And on the -- sorry, on the automated desk up to BRL 500,000 and on the dedicated gas above BRL 500,000, in some cases, reaching a few million reals. So whenever you have a specific delinquency case on the dedicated desk like we had, for example, in March, one client for BRL 2 billion or BRL 3 billion, if I'm not mistaken, that files for judicial recovery that creates a bigger asymmetry on the ratios of the 2 portfolios.

Our next question comes from Tiago Binsfeld with Goldman Sachs.

We wanted to understand a little bit your strategy on deposits. So there was a decline sequentially quarter-on-quarter with the penetration over TPV also staying stable. Is this mostly a function of seasonality or is it also affected by the churn dynamics you were discussing? Can you discuss a little bit more how you expect both penetration and overall deposit growth to perform for the rest of the year?

Tiago, thank you very much for the question. So again, long story short, seasonality -- that's what explains the fluctuation quarter-over-quarter. How do we move forward from here? We've been mentioning that we've been investing a lot in getting other transactional flows from our clients. So how do we get other forms of money in that doesn't include only TPV or core TPV whatsoever. And that has to do with how we enable clients to sell more, use more of our platform and then engage on the platform once that cash is in-house, right? So whenever we build a workflow tool that enables a client to sell more using the app and delivering to a client a payment link, that's one form of increasing money in and increasing deposits. Then once that money is in-house, how we help the client to better manage that money. It's how we make that money stays longer with us, increase the duration of the deposits and then grow at a healthy pace.

Our next question comes from Arnaud Shirazi with Citi.

My question is related to transaction activities in general. We see a strong decrease on a yearly basis, while it's very clear to us that it's going to financial income, mostly through prepayment product. So what should we expect in the future of transaction activity revenue line in general? Should we see further pressure it or sometime we're going to see a bottom -- what's behind the decision?

So Arnaud, thank you very much for the question. Nothing different than what happened during the previous quarters. We've always mentioned that we look at the client overall relationship and the way we allocate the pricing to the client, whether through financial revenues or through MDRs or through the sale of the POS or through the fee on the account that really doesn't matter to us is how we better price it to clients. So fluctuations within those lines tend to occur, but nothing really special. It's really about the best way of interacting and selling to the client, the services that we provide.

Our next question comes from Ricardo Buchpiguel with BTG.

I have just a follow-up on the deposit question. Can you provide more details on what we should expect in terms of deposit growth and also cost of funding on deposits for the remaining of the year? And also to what extent that could be an important lever to offset the higher interest rate scenario that could be unfolding both by reducing the sensitivity to interest rates and also by adding more ARPAC to the following quarters?

So Ricardo, thank you very much for the question. Yes, increasing deposits is the best way to naturally hedge interest rate fluctuations. As you know, today, we have a very strong exposure in interest rates because we have materially more assets at a fixed rate than the liabilities that we have. Hence, the exposure. So whenever we go to the market on the wholesale market and have to fund, we always fund new facilities at CDI plus a given spread. And when we get new deposits from clients, new demand deposits from clients, we usually pay very close to 0% on those deposits. So that's an important lever, not only to reduce the overall cost of funding, but also to reduce our exposure to interest rate fluctuations. That said, the profile of the clients that we have or slightly different than the overall economy, not necessarily all of our clients have large cash available on their accounts. But that's an evolution. As I was answering to Tiago before, it's something that we've been investing a lot in enhancing those levers, improving the engagement and getting that money for a longer period in our accounts.

We are showing no further questions. I would now like to hand the floor back to Stone's team for closing remarks.

Thank you all for coming. We remain focused on our execution, and we see you on the next call.

This concludes today's presentation. You may now disconnect, and have a nice evening.