StoneCo Reports Fourth Quarter and Fiscal Year 2018 Financial Results
SÃO PAULO,
“We are pleased to report strong fourth quarter and fiscal year 2018 financial results”, said
Operating and Financial Highlights for the Fourth Quarter of 2018 and Fiscal Year 2018
- Total Revenue and Income increased 113.7% year over year in the fourth quarter of 2018 and 106.0% in fiscal year 2018 compared to fiscal year 2017, reaching
R$1,579.2 million in the year
- Adjusted Net Income was
R$155.9 million in the fourth quarter of 2018, compared toR$20.9 million in the fourth quarter of 2017, an increase of 646.3%. Adjusted Net Margin in the fourth quarter of 2018 improved 21.0 percentage points year over year to 29.5%, compared to 8.4% in the fourth quarter of 2017
- In fiscal year 2018, the Company reported an Adjusted Net Income of
R$342.8 million , up 659.6% from fiscal year 2017
- Net Income reached
R$127.1 million in 4Q18, compared to a Net Loss ofR$14.3 million in 4Q17. Net Margin was 24.0%, up 29.8 percentage points versus 4Q17. In fiscal year 2018, the Company reported a Net Income ofR$305.2 million , up from a Net Loss ofR$105.0 million reported in fiscal year 2017
- The number of active clients increased by 136.7 thousand in fiscal year 2018, reaching a total of 267.9 thousand clients at the end of the year, up 104.1% compared to 2017
- The Company’s take rate reached 1.88% in the fourth quarter of 2018 compared to 1.58% in the fourth quarter of 2017, a 30 basis point increase year over year
Other Highlights and Comments from Management
- In 2018, we saw that our strategy of better serving merchants continued to yield positive results. Our key operational metrics, such as productivity of our sales force, churn and take rate, remained strong in the fourth quarter of 2018. Our focus is, and will always be, to listen to our clients and serve them better.
- We remain focused on adding capabilities to our platform that help our clients manage their business better and sell more. Our software solutions are showing traction and increasing penetration in clients through our subscription model, though still in early stages. Currently, approximately 14,000 clients use at least one type of software we provide1, and a much larger number of clients use the client portal dashboard and mobile app account.
- More recently, in
February 2019 , we invested in Collact, a provider of customer relationship management (CRM) software for customer engagement, focused mainly in the food service segment, which enables merchants to increase their sales consistently by increasing recurrence while also leveraging on customer data.
- Our banking digital account solution is currently in pilot mode, with nearly 2,500 open accounts and progressing according to plan. We have developed a proprietary technology, directly integrated to the Brazilian Central Bank’s system. Like our experience in merchant acquiring, the roll-out will happen when all necessary adjustments have been made and the platform and operations have been fully tested.
- We are on track with our plans operationally and financially and are excited to continue to expand our business by increasing our penetration in Brazil´s more than 5,000 cities through our hub strategy and providing our clients with a complete set of products and best in-class service.
Operating Metrics
Table 1: Operating Metrics
Operating Metrics | 4Q18 | 4Q17 | Δ | 2018 | 2017 | Δ | |||||||||
TPV (R$ billions) | 26.6 | 15.3 | 73.8% | 83.4 | 48.5 | 71.8% | |||||||||
Active Clients (thousands) | 267.9 | 131.2 | 104.1% | 267.9 | 131.2 | 104.1% | |||||||||
Take Rate | 1.88% | 1.58% | 0.30 p.p. | 1.83% | 1.53% | 0.31 p.p. |
Total Payment Volume (TPV) was
The Company ended 2018 with 267.9 thousand active clients, up 104.1% compared to the previous year, when it had 131.2 thousand clients. The net addition of active clients in the fourth quarter was 33.5 thousand, an improvement in net addition per sales force working day compared to the third quarter of 2018 by approximately 10%.
Take rate in the fourth quarter of 2018 increased by 30 basis points versus the fourth quarter of 2017, reaching 1.88%.
Financial Metrics
Table 2: Income Statement
Income Statement (R$mn) | 4Q18 | % Rev. | 4Q17 | % Rev. | Δ % | Δ p.p. | 2018 | % Rev. | 2017 | % Rev. | Δ % | Δ p.p. | |||||||||||||
Net revenue from transaction activities and other services | 174.4 | 32.9% | 83.4 | 33.6% | 109.2% | (0.7 p.p.) | 514.6 | 32.6% | 224.2 | 29.2% | 129.5% | 3.3 p.p. | |||||||||||||
Net revenue from subscription services and equipment rental | 69.5 | 13.1% | 29.2 | 11.8% | 138.3% | 1.4 p.p. | 213.7 | 13.5% | 105.0 | 13.7% | 103.6% | (0.2 p.p.) | |||||||||||||
Financial income | 255.8 | 48.3% | 129.0 | 52.1% | 98.4% | (3.7 p.p.) | 801.3 | 50.7% | 412.2 | 53.8% | 94.4% | (3.0 p.p.) | |||||||||||||
Other financial income | 29.6 | 5.6% | 6.3 | 2.5% | 371.8% | 3.1 p.p. | 49.6 | 3.1% | 25.3 | 3.3% | 96.2% | (0.2 p.p.) | |||||||||||||
Total net revenue and income | 529.4 | 100.0% | 247.8 | 100.0% | 113.7% | 0.0 p.p. | 1,579.2 | 100.0% | 766.6 | 100.0% | 106.0% | 0.0 p.p. | |||||||||||||
Cost of services | (101.3) | (19.1%) | (73.5) | (29.7%) | 37.7% | 10.5 p.p. | (323.0) | (20.5%) | (224.1) | (29.2%) | 44.1% | 8.8 p.p. | |||||||||||||
Administrative expenses | (73.4) | (13.9%) | (62.6) | (25.3%) | 17.2% | 11.4 p.p. | (252.9) | (16.0%) | (174.6) | (22.8%) | 44.8% | 6.8 p.p. | |||||||||||||
Selling expenses | (58.7) | (11.1%) | (33.7) | (13.6%) | 74.2% | 2.5 p.p. | (190.2) | (12.0%) | (92.0) | (12.0%) | 106.7% | (0.0 p.p.) | |||||||||||||
Financial expenses, net | (75.1) | (14.2%) | (61.4) | (24.8%) | 22.2% | 10.6 p.p. | (301.1) | (19.1%) | (237.1) | (30.9%) | 27.0% | 11.9 p.p. | |||||||||||||
Other operating income (expense), net | (41.6) | (7.9%) | (30.3) | (12.2%) | 37.4% | 4.4 p.p. | (69.3) | (4.4%) | (134.2) | (17.5%) | (48.4%) | 13.1 p.p. | |||||||||||||
(Loss) income from investment in associates | (0.1) | (0.0%) | (0.1) | (0.0%) | 61.3% | 0.0 p.p. | (0.4) | (0.0%) | (0.3) | (0.0%) | 43.5% | 0.0 p.p. | |||||||||||||
Profit (loss) before income taxes | 179.3 | 33.9% | (13.8) | (5.6%) | n.m | 39.4 p.p. | 442.3 | 28.0% | (95.7) | (12.5%) | n.m | 40.5 p.p. | |||||||||||||
Income tax and social contribution | (52.2) | (9.9%) | (0.5) | (0.2%) | 10824.3% | (9.7 p.p.) | (137.1) | (8.7%) | (9.3) | (1.2%) | 1373.7% | (7.5 p.p.) | |||||||||||||
Net income (loss) for the period | 127.1 | 24.0% | (14.3) | (5.8%) | n.m | 29.8 p.p. | 305.2 | 19.3% | (105.0) | (13.7%) | n.m | 33.0 p.p. | |||||||||||||
Adjusted Net Income | 155.9 | 29.5% | 20.9 | 8.4% | 646.3% | 21.0 p.p. | 342.8 | 21.7% | 45.1 | 5.9% | 659.6% | 15.8 p.p. | |||||||||||||
Total Net Revenue and Income (see Graphs 1 & 2)
Total Net Revenue and Income was
Net Revenue from Transaction Activities and Other Services
Net Revenue from Transaction Activities and Other Services was
Net revenue from Subscription Services and Equipment Rental
Net Revenue from Subscription Services and Equipment Rental was
Financial Income
Financial Income was
Other Financial Income
Other Financial Income was
Costs and Expenses (see Graph 3)
Stone has seen strong operating leverage as it continues to roll-out its hub strategy. In the fourth quarter of 2018, operating costs and expenses as a percentage of Total Net Revenue and Income reached 44.1%, down from 68.5% in the fourth quarter of 2017.
Cost of Services
Cost of Services was
Administrative Expenses
Administrative Expenses were
For the fiscal year 2018, Stone was able to dilute Administrative Expenses by 6.8 percentage points, reaching 16.0% of Total Net Revenue and Income.
Selling Expenses
Selling Expenses were
Financial Expenses, Net
Financial Expenses, Net were
Financial Expenses, Net as a percentage of Financial Income reduced from 47.6% in the fourth quarter of 2017 to 29.3% in the fourth quarter of 2018. This reduction is explained by (i) a higher financial income and especially by (ii) lower cost of funds due to the lower base rate, cheaper funding lines contracted by the Company and use of a higher amount of own cash to fund prepayment operations.
Other Operating Expenses, Net
Other Operating Expenses, Net were
Profit (Loss) before Income Taxes
Profit before Income Taxes was
Income Tax and Social Contribution
During the fourth quarter of 2018, the Company incurred in
Net Income (Loss) for the Period
Net Income was
Net Income in fiscal year 2018 reached
Adjusted Net Income (Loss) (see Graphs 4, 5, 6 & 7)
Table 3: Adjusted Net Income Reconciliation
Net Income Bridge (R$mn) | 4Q18 | % Rev. | 4Q17 | % Rev. | Δ % | Δ p.p. | 2018 | % Rev. | 2017 | % Rev. | Δ % | Δ p.p. | |||||||||||||
Net income (loss) for the period | 127.1 | 24.0% | (14.3) | (5.8%) | n.m | 29.8 p.p. | 305.2 | 19.3% | (105.0) | 19.3% | n.m | 33.0 p.p. | |||||||||||||
Share-based compensation expenses (a) | 36.0 | 6.8% | 36.0 | 14.5% | 0.0% | (7.7 p.p.) | 60.8 | 3.9% | 138.9 | 18.1% | (56.2%) | (14.3 p.p.) | |||||||||||||
Amortization of fair value adjustment (b) | 4.3 | 0.8% | 2.8 | 1.1% | 54.2% | (0.3 p.p.) | 12.6 | 0.8% | 14.8 | 1.9% | (14.9%) | (1.1 p.p.) | |||||||||||||
Gain on previously held interest in associate (c) | 0.0 | 0.0% | 0.0 | 0.0% | n.a. | 0.0 p.p. | (21.4) | (1.4%) | 0.0 | 0.0% | n.a. | (1.4 p.p.) | |||||||||||||
One-time impairment charges (d) | 0.0 | 0.0% | 0.0 | 0.0% | n.a. | 0.0 p.p. | 8.4 | 0.5% | 0.0 | 0.0% | n.a. | 0.5 p.p. | |||||||||||||
Tax effect on adjustments | (11.5) | (2.2%) | (3.6) | (1.4%) | 224.6% | (0.7 p.p.) | (22.8) | (1.4%) | (3.6) | (0.5%) | 542.4% | (1.0 p.p.) | |||||||||||||
Adjusted net income (loss) | 155.9 | 29.5% | 20.9 | 8.4% | 646.3% | 21.0 p.p. | 342.8 | 21.7% | 45.1 | 5.9% | 659.6% | 15.8 p.p. | |||||||||||||
(a) Consists of non-cash expenses related to the grant of share-based compensation, as well as fair value (mark-to-market) adjustments for share-based compensation expense classified as a liability in our consolidated financial statements. For 4Q18 and 2018, represents a one-time share-based expense related to the IPO. (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 the gain on re-measurement of our previously held equity interest in Equals to fair value upon the date control was acquired. (d) 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. |
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In connection with the earnings release, the Company has provided an analysis of Adjusted Net Income which is a non-IFRS measure, which the Company believes is an important metric to evaluate the operating performance.
Adjusted Net Income was
In 2018, the Company reported Adjusted Net Income of
Cash Flows
Note on the impact of different funding sources in operating and financing cash flows
A natural consequence of TPV growth is the corresponding increase in both Accounts Receivable from Card Issuers and Accounts Payable to Clients. When the Company makes a prepayment to its clients as part of its working capital solutions offering, it derecognizes accounts payable by the corresponding prepaid amount plus fees earned by providing such prepayment service. In order to fund the prepayment operation, the Company principally uses one of the following sources of funding: (i) the sale of its receivables from card issuers to third party banks or financial institutions, (ii) the issuance of senior quotas by FIDCs to institutional investors or (iii) by deploying its own capital from capital contributions or cash flows from operations. These funding options lead to different impacts on the Company’s statement of cash flows and balance sheet:
(i) Sale of receivables: the true sale of receivables results in the derecognition of Accounts Receivable from Card Issuers. As a result, when a prepayment operation is funded through the true sale of receivables, both Accounts Receivable from Card Issuers and Accounts Payable to Clients are derecognized from the balance sheet in the same amount and the combined effect to the cash flows is a positive operational cash flow equivalent to net fees earned by providing such prepayment service.
(ii) Issuance of senior quotas by FIDCs2: when the Company launches a new FIDC in order to raise capital, the amount raised from senior quota holders less structuring and transaction costs will be recognized on its balance sheet as cash and as a non-current liability to senior quota holders. The Company then transfers its receivables from card issuers from its operating subsidiary to the FIDC and uses the cash to fund the prepayment operations. As a result of consolidating the FIDC in the Company’s financial statements, the Accounts Receivable from Card Issuers held by the FIDC remain on its consolidated balance sheet. These set of transactions generate a positive impact on the Company’s cash flows from financing activities in the amount received by the FIDC from senior quota holders less structuring and transaction costs. However, as Accounts Receivable from Card Issuers remains on the balance sheet but the Accounts Payable to Clients are derecognized, these transactions also cause a negative impact on our cash flow from operations.
(iii) Deploying the Company’s capital: when the Company uses its own capital to fund prepayment operations, it does not sell its receivables from card issuers and they remain on its balance sheet. However, its Accounts Payable to Clients are derecognized, and therefore these transactions cause a negative impact on the Company’s cash flow from operations.
Net Cash Provided by / (Used in) Operating Activities
Net Cash Used in Operating Activities for the twelve months ended
- Net Income of
R$305.2 million , combined with non-cash expenses consisting primarily of (i) Other Financial Costs and Foreign Exchange, Net ofR$126.8 million ; (ii) Depreciation and Amortization Expenses ofR$92.3 million ; (iii) Share-based Payment Expenses ofR$46.1 million ; (iv) Allowance for Doubtful Accounts ofR$14.3 million , and (v) Loss on Disposal of Property, Equipment and Intangibles ofR$10.7 million . The total amount of adjustment to Net Income from non-cash items in the twelve months endedDecember 31, 2018 wasR$255.9 million . - Net cash from changes in working capital, arising from changes in operating assets and liabilities, totaled an outflow of
R$2,976.7 million , principally due to:- an increase in the balance of Accounts Receivable from Card Issuers which led to negative cash flows of
R$3,990.4 million , an increase in Recoverable Taxes ofR$98.7 million , Interest Paid in the amount ofR$141.4 million , and Income Tax Paid in the amount ofR$87.4 million ; - partially offset by an increase in Accounts Payable to Clients of
R$570.1 million , an increase in Taxes Payable ofR$183.9 million , an increase in Labor andSocial Security balance ofR$59.1 million and a generation of cash from Interest Income Received, Net of Costs in the amount ofR$514.8 million
- an increase in the balance of Accounts Receivable from Card Issuers which led to negative cash flows of
- The negative cash flow from the increase in Accounts Receivable from Card Issuers is mainly related to: (i) the increase in TPV, which naturally increases the Accounts Receivable from Card Issuers and also the Accounts Payable to Clients and, specially, (ii) the change of funding mix for the prepayment operation by decreasing the amount of receivables sold to financial institutions and increasing the use of own cash to fund the prepayment.
Net Cash Used in Operating Activities for the twelve months ended
- Net Loss of
R$105.0 million , combined with non-cash expenses consisting primarily of (i) Share-based Payment Expenses ofR$138.9 million ; (ii) Other Financial Costs and Foreign Exchange, net ofR$71.9 million ; and (iii) Depreciation and Amortization Expenses ofR$57.2 million . The total amount of adjustment to Net Income from non-cash items in the twelve months endedDecember 31, 2017 wasR$277.0 million . - Net cash from changes in working capital, arising from changes in operating assets and liabilities, totaled an outflow of
R$1,456.0 million , mainly due to:- An increase in Accounts Receivable from Card Issuers which led to negative cash flows of
R$1.774.3 million and Interest Paid ofR$47.5 million - partially offset by an increase in Accounts Payable to Clients of
R$ 210.3 million and Interest Income Received, Net of Costs ofR$147.4 million
- An increase in Accounts Receivable from Card Issuers which led to negative cash flows of
Adjusted Net Cash Provided by / (Used in) Operating Activities
Due to the nature of prepayment business and dynamics of sale of receivables in
Table 4: Adjusted Net Cash Provided by / (Used in) Operating Activities
Adjusted net cash provided by /(used in) from operating activities (R$mn) | 2018 | 2017 | ||
Net cash used in operating activities | (2,415.6) | (1,283.9) | ||
(-) Adjustments in Operating Activities: | ||||
Accounts receivable from card issuers | 3,990.4 | 1,774.3 | ||
Accounts payable to clients | (570.1) | (210.3) | ||
Interest income received, net of costs | (514.8) | (147.4) | ||
(=) Adjusted net cash provided by /(used in) operating activities | 489.9 | 132.7 |
In fiscal year 2018, Net Cash Used in Operating Activities was negative
The
Net Cash Provided by (Used in) Investing Activities
Net Cash Used in Investing Activities was
Net Cash Provided by (Used in) Financing Activities
Net Cash Provided by Financing Activities was
Adjusted Free Cash Flow
The Company defines Adjusted Free Cash Flow, a non-IFRS metric, as Net Cash Provided by/ (Used in) Operating Activities, reduced by Purchases of Property and Equipment, Purchases and Development of Intangible Assets, less the effects from working capital adjustments related to changes in Accounts Receivable from Card Issuers and Accounts Payable to Clients mentioned in the section “Adjusted Net Cash Provided by / (Used in) Operating Activities” above.
The Company generated
Table 5: Adjusted Free Cash Flow
Reconciliation of Adjusted free cash flow (R$mn) | 2018 | 2017 | 4Q18 | 4Q17 | |||||
Net cash used in operating activities | (2,415.6) | (1,283.9) | (2,125.6) | (507.3) | |||||
(-) Adjustments in Operating Activities: | |||||||||
Accounts receivable from card issuers | 3,990.4 | 1,774.3 | 2,629.3 | 1,336.2 | |||||
Accounts payable to clients | (570.1) | (210.3) | (174.3) | (774.7) | |||||
Interest income received, net of costs | (514.8) | (147.4) | (158.4) | (18.5) | |||||
Purchases of property and equipment | (140.9) | (141.0) | (15.6) | (53.0) | |||||
Purchases and development of intangible assets | (44.8) | (21.3) | (10.7) | (4.8) | |||||
Adjusted free cash flow (R$mn) | 304.2 | (29.6) | 144.7 | (22.1) |
The main reason for the increase in Adjusted Free Cash Flow in 2018 compared to 2017 was the improvement in our Adjusted Net Income, from
Adjusted Net Cash / (Debt)
Management assesses net liquidity of the Company by the Adjusted Net Cash/(Debt) metric4. It consists of our Cash and Cash Equivalents, plus Short-term Investments and Accounts Receivable from Card Issuers, reduced by Accounts Payable to Clients, Loans and Financing and Obligations to FIDC Senior Quota Holders.
As of
Table 6: Adjusted Net Cash
Adjusted Net Cash (R$mn) | 2018 | 2017 | ||
Cash and cash equivalents | 297.9 | 642.0 | ||
Short-term investments | 2,770.6 | 201.8 | ||
Accounts receivable from card issuers | 9,244.6 | 5,078.4 | ||
Adjusted Cash | 12,313.1 | 5,922.1 | ||
Accounts payable to clients | (4,996.1) | (3,637.5) | ||
Loans and financing | (762.5) | (16.9) | ||
Obligations to FIDC senior quota holders | (2,074.6) | (2,065.0) | ||
Adjusted Debt | (7,833.1) | (5,719.4) | ||
Adjusted Net Cash | 4,480.0 | 202.7 |
Conference Call
Stone will discuss its fourth quarter and fiscal 2018 financial results during a teleconference today,
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. For more information please visit https://www.stone.co/.
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, among other factors.
About Non-IFRS Financial Measures
To supplement the financial measures presented in this press release and related conference call, presentation, or webcast in accordance with IFRS, Stone also presents the following non-IFRS measures of financial performance: Adjusted Net Income, Adjusted Net Cash Provided by / (Used in) Operating Activities , Adjusted Free Cash Flow and Adjusted Net Cash.
A “non-IFRS financial measure” refers to a numerical measure of Stone’s historical or future financial performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS in Stone’s financial statements. Stone provides certain non-IFRS measures as additional information relating to its operating results as a complement to results provided in accordance with IFRS. The non-IFRS financial information presented herein should be considered in conjunction with, and not as a substitute for or superior to, the financial information presented in accordance with IFRS. There are significant limitations associated with the use of non-IFRS financial measures. Further, these measures may differ from the non-IFRS information, even where similarly titled, used by other companies and therefore should not be used to compare Stone’s performance to that of other companies.
Stone has presented Adjusted Net Income to eliminate the effect of items from Net Income that it does not consider indicative of its core operating performance within the period presented. Stone defines Adjusted Net Income as Net Income (Loss) for the Period, adjusted for (1) non-cash expenses related to the grant of share-based compensation and the fair value (mark-to-market) adjustment for share-based compensation classified as a liability, (2) amortization of intangibles related to acquisitions, (3) one-time impairment charges, (4) one-off gains and (5) tax expense relating to the foregoing adjustments.
Stone has presented Adjusted Free Cash Flow metric, which has limitations as it omits certain components of the overall Cash Flow Statement and does not represent the residual cash flow available for discretionary expenditures. For example, this metric does not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions. Therefore, the Company believes it is important to view Free Cash Flows measures only as a complement to our entire consolidated Statements of Cash Flows.
Stone has presented Adjusted Net Cash / (Debt) metric in order to adjust its Net Cash / (Debt) by the balances of Accounts Receivable from Card Issuers and Accounts Payable to Clients, since these lines vary according to the Company’s funding source together with the lines of (i) Cash and Cash Equivalents, (ii) Short-term Investments, and (iii) Debt balances, due to the nature of Stone’s business and prepayment operation.
Contact:
+1 646-277-1200
StoneIR@icrinc.com
1 Includes online and offline gateways, reconciliation, POS/ERP and CRM software.
2
3Each “Accounts Payable to Clients” recognized as a liability in our balance sheet is directly linked to an “Accounts Receivable from Card Issuers” recognized as an asset in our balance sheet. Originally, the Company receives from issuing banks first, and only then pays its clients, thus having no working capital requirement. When a client opts to be paid early (prepayment), the Company has a working capital requirement. However, the Company has the option itself to sell the receivables from card issuers related to those payables in order to meet such working capital requirement. The combined effect to the cash flows is a positive operational cash flow equivalent to net fees earned by providing such prepayment service.
Whenever management opts to fund its prepayment operation with sources other than the sale of its own receivables, this may have an impact in Net Cash Provided by/ (Used in) Operating Activities, as discussed in the section “Note on the impact of different funding sources in operating and financing cash flows” above.
However, management does not see such decision translating itself into higher or lower ability of our business to generate cash operationally.
4 Adjusted Net Cash / (Debt) is a non-IFRS metric
Table 7: Unaudited fourth quarter 2018 and audited fiscal year consolidated Statement of Profit or Loss
Statement of Profit or Loss (R$mn) | 4Q18 | 4Q17 | 2018 | 2017 | |||||
Net revenue from transaction activities and other services | 174.4 | 83.4 | 514.6 | 224.2 | |||||
Net revenue from subscription services and equipment rental | 69.5 | 29.2 | 213.7 | 105.0 | |||||
Financial income | 255.8 | 129.0 | 801.3 | 412.2 | |||||
Other financial income | 29.6 | 6.3 | 49.6 | 25.3 | |||||
Total net revenue and income | 529.4 | 247.8 | 1,579.2 | 766.6 | |||||
Cost of services | (101.3) | (73.5) | (323.0) | (224.1) | |||||
Administrative expenses | (73.4) | (62.6) | (252.9) | (174.6) | |||||
Selling expenses | (58.7) | (33.7) | (190.2) | (92.0) | |||||
Financial expenses, net | (75.1) | (61.4) | (301.1) | (237.1) | |||||
Other operating income (expense), net | (41.6) | (30.3) | (69.3) | (134.2) | |||||
(Loss) income from investment in associates | (0.1) | (0.1) | (0.4) | (0.3) | |||||
Profit (loss) before income taxes | 179.3 | (13.8) | 442.3 | (95.7) | |||||
Income tax and social contribution | (52.2) | (0.5) | (137.1) | (9.3) | |||||
Net income (loss) for the period | 127.1 | (14.3) | 305.2 | (105.0) |
Table 8: Audited fiscal year consolidated Statement of Financial Position
Balance Sheet (R$mn) | 2018 | 2017 | ||
Assets | ||||
Current assets | 12,437.8 | 5,999.5 | ||
Cash and cash equivalents | 297.9 | 642.0 | ||
Short-term investments | 2,770.6 | 201.8 | ||
Accounts receivable from card issuers | 9,244.6 | 5,078.4 | ||
Trade accounts receivable | 44.6 | 23.1 | ||
Recoverable taxes | 56.9 | 39.1 | ||
Prepaid expenses | 15.1 | 10.4 | ||
Derivative financial instruments | 1.2 | 0.0 | ||
Other accounts receivable | 6.9 | 4.7 | ||
Non-current assets | 855.4 | 636.2 | ||
Receivables from related parties | 8.1 | 9.1 | ||
Deferred income tax assets | 262.7 | 198.2 | ||
Other accounts receivable | 8.5 | 3.4 | ||
Investment in associate | 2.2 | 1.7 | ||
Property and equipment | 266.3 | 189.6 | ||
Intangible assets | 307.7 | 234.1 | ||
Total Assets | 13,293.2 | 6,635.7 | ||
Liabilities and equity | ||||
Current liabilities | 6,054.8 | 3,823.6 | ||
Accounts payable to clients | 4,996.1 | 3,637.5 | ||
Trade accounts payable | 117.8 | 53.2 | ||
Loans and financing | 761.1 | 13.8 | ||
Obligations to FIDC senior quota holders | 16.6 | 8.7 | ||
Labor and social security liabilities | 96.7 | 36.0 | ||
Taxes payable | 51.6 | 35.9 | ||
Derivative financial instruments | 0.6 | 0.0 | ||
Other accounts payable | 14.2 | 38.4 | ||
Non-current liabilities | 2,145.5 | 2,329.6 | ||
Loans and financing | 1.4 | 3.0 | ||
Obligations to FIDC senior quota holders | 2,057.9 | 2,056.3 | ||
Share-based payments | 0.0 | 217.5 | ||
Deferred income tax liabilities | 80.2 | 52.3 | ||
Provision for contingencies | 1.2 | 0.5 | ||
Other accounts payable | 4.7 | 0.0 | ||
Total liabilities | 8,200.2 | 6,153.2 | ||
Equity attributable to owners of the parent | 5,093.3 | 467.4 | ||
Issued capital | 0.1 | 0.0 | ||
Capital reserve | 5,351.9 | 967.7 | ||
Other comprehensive income | (56.3) | 2.6 | ||
Accumulated losses | (202.3) | (503.0) | ||
Non-controlling interests | (0.3) | 15.2 | ||
Total equity | 5,093.0 | 482.6 | ||
Total liabilities and equity | 13,293.2 | 6,635.7 |
Table 9: Audited fiscal year consolidated Statement of Cash Flows
Cash Flow (R$mn) | 2018 | 2017 | ||
Net income (loss) for the year | 305.2 | (105.0) | ||
Adjustments on Net Income: | ||||
Depreciation and amortization | 92.3 | 57.2 | ||
Deferred income tax expenses | (17.8) | 3.6 | ||
Loss on investment in associates | 0.4 | 0.3 | ||
Other financial costs and foreign exchange, net | 126.8 | 71.9 | ||
Provision of contingencies | 0.8 | 0.4 | ||
Share based payment expense | 46.1 | 138.9 | ||
Allowance for doubtful accounts | 14.3 | 2.7 | ||
Impairment of intangible assets | 4.8 | 0.0 | ||
Loss on disposal of property, equipment and intangible assets | 10.7 | 5.5 | ||
Onerous contract | (0.4) | (5.7) | ||
Fair value adjustment to derivatives | (0.6) | 0.0 | ||
Remeasurement of previously held interest in subsidiary acquired | (21.4) | 0.0 | ||
Others | 0.0 | 2.1 | ||
Working capital adjustments: | ||||
Accounts receivable from card issuers | (3,990.4) | (1,774.3) | ||
Receivables from related parties | 4.0 | (7.1) | ||
Recoverable taxes | (98.7) | (33.7) | ||
Prepaid expenses | (4.7) | (6.4) | ||
Other accounts receivable | (36.9) | (15.6) | ||
Accounts payable to clients | 570.1 | 210.3 | ||
Taxes payable | 183.9 | 33.6 | ||
Labor and social security liabilities | 59.1 | 15.9 | ||
Accounts payable to related parties | 0.0 | 0.0 | ||
Provision for contingencies | (0.0) | (0.1) | ||
Other accounts payable | 50.9 | 24.7 | ||
Interest paid | (141.4) | (47.5) | ||
Interest income received, net of costs | 514.8 | 147.4 | ||
Income tax paid | (87.4) | (3.2) | ||
Net cash used in operating activity | (2,415.6) | (1,283.9) | ||
Investing activities | ||||
Purchases of property and equipment | (140.9) | (141.0) | ||
Purchases and development of intangible assets | (44.8) | (21.3) | ||
Acquisition of subsidiary, net of cash acquired | (2.9) | 0.0 | ||
Proceeds from (acquisition of) short term investments, net | (2,557.3) | (145.5) | ||
Proceeds from the disposal of non-current assets | 13.4 | 9.0 | ||
Acquisition of interest in associates | (4.5) | (1.2) | ||
Proceeds from the disposal of assets held for sale | 0.0 | 0.3 | ||
Net cash provided by (used in) investing activities | (2,737.1) | (299.7) | ||
Financing activities | ||||
Proceeds from borrowings | 746.9 | 0.0 | ||
Payment of borrowings | (3.7) | (11.7) | ||
Proceeds from FIDC senior quota holders | 10.0 | 2,053.3 | ||
Payment of finance leases | (14.3) | (13.0) | ||
Capital increase | 4,229.2 | 529.0 | ||
Repurchase of shares | (142.4) | (280.8) | ||
Acquisition of non-controlling interests | (30.8) | (223.4) | ||
Net cash provided by financing activities | 4,794.9 | 2,053.4 | ||
Effect of foreign exchange on cash and cash equivalents | 13.8 | 1.5 | ||
Change in cash and cash equivalents | (344.0) | 471.3 | ||
Cash and cash equivalents at beginning of period | 642.0 | 170.6 | ||
Cash and cash equivalents at end of period | 297.9 | 642.0 |
A PDF accompanying this announcement is available at:
http://ml.globenewswire.com/Resource/Download/67b17252-3dc7-4b39-af18-6712e322b58d
Source: StoneCo Ltd.