StoneCo Reports Second Quarter 2020 Financial Results

GEORGE TOWN, Grand Cayman, Aug. 11, 2020 (GLOBE NEWSWIRE) — 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 reports its financial results for its second quarter ended June 30, 2020.

To our shareholders:

“As the world continues to face the public health and economic challenges caused by the COVID-19 crisis, Stone remains focused on our mission – and we continue to find ways to help merchants to thrive through the offering of best-in-class service and products delivered by an amazing and talented team of hard-working people who always put our clients at the center of everything we do.

Our Business is Strong and Fairly Resilient

In the second quarter of 2020, our business began to rebound and return to pre-COVID levels across all of our business lines. We gained an incremental R$500 million in TPV in the quarter and our year-over-year growth rates improved each month – culminating in nearly 47% growth in June and 129% growth in July. Our HUB volumes and client net adds are re-accelerating and we were able to maintain our normalized take rates and Net Margin relatively flat at 1.77% and 22.5%, respectively. As a result, our free cash flow was strong, improving by R$264 million over 1Q20. Throughout the quarter, we have also maintained our high-quality level of customer service – which is even more important and differentiated in a crisis.

Strong Performance in Digital Commerce

Not surprisingly, the strongest performing part of our business was in Digital Commerce, where we have made significant investments over the past 12 months. This strategy has served us well during the crisis. Our online TPV grew 80% year-over-year in 2Q20 and continues to trend favorably – with over 94% growth in July 2020 (excluding the favorable, but likely temporary impact of Coronavoucher). Our eCommerce revenues from SMBs have grown nearly 100% since the beginning of the year driven by the mix shift from physical storefront sales to eCommerce, which we have helped our clients manage. Similarly, our software investments have performed very well. Our software revenues reached an annualized run-rate of over R$100mm in 2Q20, driven by a 126% increase in our software client base since the beginning of the year – which is now 305,000 clients strong.

HUBs and Integrated Financial Platform (ABC) Are Rebounding

Our HUBs and ABC Platform solutions have also rebounded. 42% of our HUB personnel are back to the front line, with daily routes and presence in the hubs and our HUB TPV began to rebound in May and June – and growing 9% above pre-COVID levels in July 2020. Our Net Client adds are trending the same way across the company and 67,000 of our clients now boarded on our ABC platform (up from 45,000 in April 2020). In our Digital Banking and Credit business, we have also seen significant traction. Our Digital Accounts reached 248,000 in the 2Q, growing over 100% from 1Q20. Digital Banking revenue increased throughout the quarter and grew 3.4x in July 2020 as our account growth began to translate into material transactions. Our credit portfolio also continues to scale with discipline. Our credit portfolio grew 48% in 2Q20 (vs 1Q) to R$491 million driven by a 51% increase in credit clients, but our delinquency rates are trending downwards as we implemented a more conservative credit policy during COVID.

Reinvesting in the Business

Given the strong re-acceleration of our business, we are intensifying investments, having begun to hire new employees in July and continued to invest behind our software, banking and credit initiatives.

Looking Ahead

Despite the tough challenges that we have all experienced over the past few months, we remain focused on our strategic priorities of expanding and consolidating our presence in the SMB market, becoming the main financial platform for our clients and investing in great solutions to help SMBs manage their businesses, grow and sell online.

We remain grateful to all Stone team members for their strong continued performance during these past few months and to all of our clients who have shown courage and perseverance during the crisis. While there is still a lot of work to be done in helping Brazil recover, we believe the future is bright and are excited to continue in our mission.”

Thiago Piau, CEO

Operating and Financial Highlights 2Q20

Developments Related to COVID-19 Outbreak

Update on COVID-19 business-related trends

We are living unprecedented times with the COVID-19 outbreak. This crisis, which intensified over the course of March and resulted in social distancing and store lockdown policies throughout the country, led many clients to be forced to end their businesses or close their stores temporarily, affecting the whole economy as well as our business. Since the intensification of the pandemic happened in March, the second quarter was the most impacted quarter for businesses and the society.

Still, we were able to report solid results for the quarter and the recovery we are seeing so far is very positive. Since April, we have seen continued recovery in our transacted volumes, with TPV growing 9.1% year over year in April, 27.2% in May and 46.8% in June, resulting in a year over year growth of 27.9% in the quarter to R$38.1 billion. Compared to the prior quarter, we were able to add almost half a billion reais, proving our strong resilience even in the worst of times. In July, growth accelerated even further to 128.8% year over year, with strong contribution from Coronavoucher.

Chart 1: StoneCo TPV Growth (y/y) (See PDF)