StoneCo Ltd. Releases CEO Letter to Shareholders
April 19 2019 - 2:09PM
StoneCo Ltd. (Nasdaq: STNE) (“Stone”) today released the following
CEO letter:
To our shareholders:
As we have seen in the past, competitor
campaigns generate a lot of noise, but we remain focused on
delivering a differentiated value proposition to our clients
through our proprietary and disruptive business model. However,
given some recent inquiries we have received and the lack of
information in the market we wanted to share some of our thoughts
and perspectives to put some of this noise into context.
Aggressive Initiatives to Recover Lost
Share from Legacy Providers is Nothing New
We have seen numerous aggressive initiatives
from competitors in the past, including discounts, promotions and
“zero rate” offers, in an attempt to lure customers to legacy
bank offerings that have been losing market share and to force
clients to use additional bank services. For example, we have seen
legacy providers announce high double digits discounts to our
clients, which turned out to be closer to 5% or 10% in reality. We
have also seen competitors offer 0% MDR rates to our clients, which
turned into much higher rates after 3 months. Despite these efforts
in the past, we have seen limited impact to our business, which has
continued to produce growth and market share gains.
Anti-Competitive Actions from Banks are
Not Uncommon in Brazil
We have seen banks in Brazil fined for
anti-competitive actions as a result of their attempts to gain
market share through untransparent pricing strategies. That´s how
some large players in the country have been doing business for
years. For example, Itaú paid fines in the recent past for
anti-competitive measures that tied offerings together in an
attempt to win new business. As noted in our prospectus, it was in
2010 that the Central Bank of Brazil and Brazilian antitrust
authorities implemented a series of initiatives to create a
regulatory framework aimed at fostering a more open and competitive
environment. We designed Stone to disrupt the incumbents model and
their practices by providing differentiated offerings to our
clients through a strong client-centric culture as well as fair and
transparent rates.
At This Moment, The Latest Incentive
Offers from Competitors Don’t Change Our Strategy
We are always monitoring our competitive
landscape and taking note of various marketing programs, competitor
initiatives and potential anti-competitive actions. For
example, Rede (an affiliate of Itaú) recently announced a new
pricing offer for part of its prepayment solution, offering zero
prepayment rates in some cases. Our initial thoughts on this are
the following.
First, as total take rates paid by clients
include other components such as MDRs and subscription revenue, it
is still unclear what will be the benefit to clients on a take rate
basis. Given discrepancies between how take rate is distributed
among revenue streams from different players in the market, we do
not believe that all clients being offered such zero prepayment
rates will have lower take rates when compared to Stone´s current
offering.
Second, we do not believe that clients choose
Stone only based on price, but rather because of the value
proposition it offers, that includes integrated solutions, unique
customer service and level of support, reconciliation features, as
well as transparency in all rates. That´s one of the reasons why
Stone has been able to accelerate its net addition of clients,
keeping healthy growth and take rate levels despite a very
competitive market.
At this time, it is still very early to discuss
how such new offerings from competition could impact our business.
As always, we will continue to listen to our clients to find new
ways to serve them better and disrupt existing incumbent
offerings.
Stone will always advocate in the market and
with authorities for transparency in the rates in Brazil to make it
simpler for clients to understand and make their choice.
The relationship we have with our clients and
shareholders is very important for us. If and when we see any
material changes in our operations because of competition, we will
be the first ones to communicate to you. We remain very confident
in our strategy, the strength of our business model and our
profitability going forward.
Kind Regards,
________________________________________Thiago
Piau, CEO
About Stone
Stone is a leading provider of financial technology solutions
that empower merchants to conduct commerce seamlessly across
multiple channels and help them grow their business over time
through technology.
Contact:ICR, Inc.646-277-1200Investor
Relations: StoneIR@icrinc.com
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