StoneCo Ltd. Announces Preliminary Second Quarter 2019 Results
July 30 2019 - 6:00AM
StoneCo Ltd. (Nasdaq: STNE) (“Stone” or the “Company”), a leading
provider of financial technology solutions that empower merchants
to conduct commerce seamlessly across multiple channels, today
announced preliminary results for the second quarter of 2019.
“We are pleased to present a new record of net
new active clients and an acceleration in TPV, with stable
take-rates and strong profitability, which demonstrates the quality
and execution consistency of this amazing team and unique business
model. Our Company produced great results while increasing
investments for the long-term. We believe that in two years from
now the boundaries between payments, software, credit and banking
will be overcome and Stone will drive this evolution in Brazil,
being the leading player in the SMB market. The ability to
successfully scale new products in the second quarter proves our
company’s capabilities to continue disrupting this industry through
software and financial services,” said Thiago Piau, CEO.
“In addition to the current success in the SMB
market, we are very excited to announce that we are entering the
micro-merchant space in a Joint Venture with Grupo Globo, the
largest media conglomerate in Brazil. The Joint Venture will
combine Stone’s experience in technology and payments with Grupo
Globo’s deep expertise in media and marketing to create a
heavyweight contender in the micro-merchant space,” concluded
Piau.
Preliminary Results for the Second
Quarter of 2019
Table 1: Operating Metrics
|
2Q19 |
2Q18 |
|
Δ |
TPV (R$ billions) |
29.8 |
18.5 |
|
60.6% |
Active Clients (thousands) |
360.2 |
200.6 |
|
79.5% |
Quarterly Net Additions (thousands) |
50.5 |
39.9 |
|
26.5% |
Take Rate |
1.85% |
1.86% |
|
(0.01 p.p.) |
- Active Client base reached 360.2
thousand in the second quarter of 2019, compared to 200.6 thousand
in the second quarter of 2018, representing year over year growth
of 79.5%.
- In software, we have seen the number of subscribed clients grow
quickly, from approximately 32,000 in 1Q19 to approximately 70,000
in July 2019.
- Total Payment Volume (TPV) was
R$29.8 billion in the second quarter of 2019, representing year
over year growth of 60.6% or R$11.2 billion.
- Take Rate for the second quarter of
2019 was 1.85%, roughly stable compared to the first quarter of
2019.
- Total Revenue and Income for the
second quarter of 2019 is expected to be between R$583.0 million
and R$586.2 million, compared to R$347.7 million for the second
quarter of 2018, representing a year over year growth between 67.7%
and 68.6%.
- Adjusted Net Income is expected to
be between R$191.9 million and R$194.0 million for the second
quarter of 2019, compared to R$71.1 million in the second quarter
of 2018, a year over year growth between 169.8% and 172.8%.
Adjusted Net Margin for the second quarter of 2019 is expected to
be between 32.9% and 33.1%, an improvement of between 12.5 and 12.6
percentage points compared to the second quarter of 2018. See
Table 2 for a reconciliation of Net Income to Adjusted Net
Income.
- Net Income is expected to be
between R$169.7 million and R$171.9 million for the second quarter
of 2019, compared to R$63.0 million for the second quarter of 2018.
Net Margin for the second quarter of 2019 is expected to be between
29.1% and 29.3%, an improvement of between 11.0 and 11.2 percentage
points compared to the second quarter of 2018.
Key Recent Operational
Highlights
- Our performance was above our expectations in the second
quarter of 2019. Since the beginning of the quarter, we have
increased investments in our operations, especially in our hub and
software strategies. Those investments have already started showing
initial results, with growth performance improving in each month of
the quarter.
- We are pleased to see accelerating growth in our business in
2Q19: ° (i) Our TPV year over year growth has increased
sequentially to 60.6% in 2Q19, from 60.1% year over year growth
presented in 1Q19. Such acceleration came on top of a tougher
comparable quarter in 2Q18.
Graph 1: TPV (see PDF)
° (ii) Our
quarterly Net Addition of Active Clients has accelerated to a
record of 50.5 thousand in 2Q19, compared to 40.6 thousand added in
1Q19, representing a strong acceleration in Net Addition of SMB
clients. As we have seen Net Addition of Active Clients improving
even within the quarter, we expect further increases in Net
Additions in the following quarters. On top of such trend in SMBs,
the new Joint-Venture with Grupo Globo should soon start to
contribute with the Net Addition of autonomous workers and
micro-merchants.
Graph 2: Active Clients (see PDF)Graph 3: Net
Addition of Active Clients (see PDF)
- Our Take Rate was roughly stable, at 1.85%. During times in
which the industry is solely focused on prices, we continue to have
a relationship with our clients based on value proposition.
Graph 4: Take-Rate (see PDF)
Joint Venture with Grupo Globo in the
Micro-Merchant Space
- Since the fourth quarter of 2018, Stone has been testing a
solution for micro-merchants, which have been increasingly adopting
card-based payments in Brazil. There are over 21 million autonomous
workers and micro-merchants in the country, significant part of
them being unbanked and with a low penetration of card-based
transactions, representing a significant greenfield
opportunity.
- Addressing this opportunity requires heavy investments in media
and, most importantly, deep knowledge and expertise in marketing
and advertisement.
- Over the last three quarters, we decided to focus our attention
on product development, while looking for the right strategic
partner before addressing this huge opportunity, going beyond the
SMB market.
- On July 29, Stone partnered with Grupo Globo to create a
heavyweight financial technology player focused on serving
autonomous workers and micro-merchants. This Joint Venture (JV)
brings together the vast media and marketing know-how of the
largest media group in Brazil with Stone’s expertise in technology,
payments and financial services, as well as its execution
capabilities.
- The JV will be owned 33% by Grupo Globo and 67% by
Stone.
- The transaction is subject to the accomplishment of certain
conditions, including approval by the competent anti-trust
authorities.
- Caio Fiuza, operating director of Stone, will move from his
current role to be the CEO of the JV. Stone will appoint a
dedicated team from its pool of talents to be part of this new
endeavor.
- In addition to the knowledge and DNA of both partners, Grupo
Globo will contribute with an upfront investment equivalent to a
market value of R$461 million in media, and Stone will contribute
with its technology and payment processing capabilities,
operational support and management resources, as well as R$50
million in cash.
- Through its diversified media properties, Grupo Globo reaches
more than 100 million unique Brazilians daily, almost half of the
country’s population. Grupo Globo controls the country’s
leading free to air television network, the country’s largest
portfolio of pay-TV networks, as well as leading digital
assets. The Group’s internet business is the top source for
local and international news, sports and entertainment content in
Brazil.
- “The partnership with Stone will give us the opportunity to
join forces to create a showcase in financial services that is
powered by our wide reach and deep knowledge of the Brazilian
customer,” said Jorge Nobrega, CEO of Grupo Globo.
- “We welcome our new partners and feel very confident to address
this opportunity together with such dedicated and high-quality team
of Grupo Globo,” said Thiago Piau, CEO of Stone.
Exhibit 1: Stone Partnering with Grupo Globo
(see PDF)
Important Developments of Our Strategy
Roadmap
Software
- Our software strategy is progressing as expected, aimed at
providing tools to help our clients better manage their business
and sell more. This creates more engagement with our clients,
deepening our relationship with them and creating greater client
stickiness.
- During the second quarter of 2019, we have started the roll-out
of some of our software solutions in our hubs all over Brazil. We
have seen strong traction in those solutions, adding hundreds of
new clients every day.
- Overall, we have seen the number of subscribed clients in
software grow quickly, from approximately 32,000 in 1Q19 to
approximately 70,000 in July 2019.
- In addition to our food service and small retail verticals, we
recently entered in the beauty salons segment, with an omnichannel,
cloud-based, scheduling and management software platform.
Credit Solutions
- In 1Q19 we started to pilot a credit solution for SMBs that
combines self-service functionality (ability to take pre-approved
credit through the client portal), transparent pricing and a
flexible and easy way to pay down amounts owed with a percentage of
clients´ sales.
- Our credit offering is advancing fast and exceeding our
expectations. As of July, the company has already provided loans to
more than 3,000 clients with a total disbursed volume exceeding
R$50 million, which accelerated throughout the quarter.
Graph 5: Number of Clients with Credit (see
PDF)
Graph 6: Evolution in Number of Clients Within 2Q19 (see
PDF)
- Also, we are pleased to announce that we recently obtained a
license from the Central Bank to offer credit (“SCD”) on our own,
which gives us more flexibility and room to grow our credit
offering in the future.
Digital Banking Solutions
- Our digital account banking solution specially designed for SMB
entrepreneurs allows merchants to make financial transactions
through a proprietary mobile application without unnecessary
bureaucracy.
- With a little over 10 thousand open accounts, we are focused on
evolving our roadmap of solutions by adding new features to provide
a better and more comprehensive experience to our clients.
|
Table 2: Adjusted Net Income Reconciliation |
|
Net Income Bridge (R$ millions) |
2Q19 |
2Q18 |
|
Δ |
Net Income for the Period |
169.7 -
171.9 |
63.0 |
|
106.7 -
108.9 |
Share-based Compensation Expenses (a) |
28.4 |
0.0 |
|
28.4 |
Amortization of Fair Value Adjustment (b) |
4.3 |
2.8 |
|
1.5 |
One-time Impairment Charges (c) |
0.0 |
8.4 |
|
(8.4) |
Tax Effect on Adjustments |
(10.5) |
(3.1) |
|
(7.4) |
Adjusted Net Income |
191.9 - 194.0 |
71.1 |
|
120.8 - 122.9 |
|
(a) Consists of non-cash expenses related to the
vesting of share-based compensation. |
(b) On intangibles related to acquisitions.
Consists of expenses resulting from the amortization of the fair
value adjustment on intangible assets and property and equipment as
a result of the application of the acquisition method, a
significant portion of which relate to the EdB acquisition. |
(c) Consists of (i) impairment charges associated
with certain processing system intangible assets acquired in the
EdB acquisition that we no longer use, in an amount of R$6.4
million in 2Q18 and (ii) impairment associated with improvements
made to certain leased office space upon the termination of the
lease, in an amount of R$2.0 million for 2Q18. |
|
Cautionary Statement Regarding
Preliminary Results
The results for the three months ended June 30,
2019 are preliminary, unaudited and subject to completion, reflect
our management’s current views and may change as a result of our
management’s review of our results and other factors, including
economic and competitive risks and uncertainties. Such preliminary
results for the three months ended June 30, 2019 are subject to the
finalization and closing of our accounting books and records (which
have yet to be performed), and should not be viewed as a substitute
for full quarterly financial statements prepared in accordance with
IFRS. We caution you that these preliminary results for the three
months ended June 30, 2019 are not guarantees of future performance
or outcomes and that actual results may differ materially from
those described above. These preliminary results have been prepared
by and are the sole responsibility of our management.
Forward-Looking Statements
This press release contains "forward-looking
statements" within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are made as of the date they were first
issued and were based on current expectations, estimates, forecasts
and projections as well as the beliefs and assumptions of
management. These statements identify prospective information and
may include words such as “believe,” “may,” “will,” “aim,”
“estimate,” “continue,” “anticipate,” “intend,” “expect,”
“forecast,” “plan,” “predict,” “project,” “potential,”
“aspiration,” “objectives,” “should,” “purpose,” “belief,” and
similar, or variations of, or the negative of such words and
expressions, although not all forward-looking statements contain
these identifying words. Forward-looking statements are
subject to a number of risks and uncertainties, many of which
involve factors or circumstances that are beyond Stone’s
control.
Stone’s actual results could differ materially
from those stated or implied in forward-looking statements due to a
number of factors, including but not limited to: more intense
competition than expected, lower addition of new clients,
regulatory measures, more investments in our business than
expected, and our inability to execute successfully upon our
strategic initiatives among other factors.
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
Investor Relationsinvestors@stone.com.br
A PDF accompanying this announcement is available
at http://ml.globenewswire.com/Resource/Download/eaaa9bc7-10db-4b81-92aa-c871c05b93dc
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