StoneCo Reports Third Quarter 2019 Financial Results
SÃO PAULO,
To our shareholders:
We reported another quarter of strong performance with continued top line growth and high profitability. I remain very excited to continue to implement our vision of becoming more present in our merchants’ daily activities, helping them to manage their businesses more effectively, become more productive and grow faster.
This quarter we reached a total base of 428,900 active clients and continued the roll-out of our new software, credit and banking solutions. We are looking forward to launching our integrated financial platform in the first quarter of 2020, which will represent an unparalleled combination of a unique financial platform with best-in-class customer service.
Despite our strong growth and expansion, I am pleased that we have continued to maintain our high NPS by staying focused on our client relationships, delivering a differentiated value proposition and providing high quality customer service across the organization. This is always our top priority.
We have also been able to attract many new talented people to join us in our journey through one of the biggest recruiting processes in the country. We completed our 2019 recruiting process with a total of ~109,000 applications from people who wanted to work for Stone, compared to ~29,000 in 2018. We continue to be inspired and humbled by the strong demand of talented people across the country who want to join our mission and be part of our team.
As planned, we continued to invest in our operations during the quarter, but still benefited from improved operating leverage in business compared to the previous quarter, which continues to demonstrate the powerful efficiency and economics of our unique business model. Since we went public one year ago, we have seen a huge improvement in our operations and today we are a much better company. However, our entire team remains driven by our mission and focused on continuing to innovate and make investments to drive future growth.
We remain focused on managing our business towards long term growth and value creation.
Thank you for your continued support,
Operating and Financial Highlights
Total Revenue and Income +62.1% Total Revenue and Income was R$671.1 million, an increase of 62.1% year over year |
Net Addition of Active Clients 68.7 K Total Active Clients were 428.9 thousand, an increase of 82.8% year over year, with a record net addition of 68.7 thousand clients in 3Q19 |
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Adjusted Net Income R$ 201.9 MM an increase of 126.0% year over year |
Adjusted Net Margin 30.1% an increase of 8.5 percentage points year over year |
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Net Income R$ 191.3 MM an increase of 111.6% year over year |
Net Margin 28.5% an increase of 6.7 percentage points year over year |
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Total Payment Volume (TPV) R$ 32.6 BN up 49.8% or R$10.9 billion year over year |
Take Rate1 1.88% comparable to previous quarters, with client lifetime upward revision taking actual take rate to 1.91% |
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1 According to IFRS 15, subscription revenue is accounted over the expected life of merchants on a linear basis. As part of the annual assessment of assumptions for linearization of subscription revenue, life of merchants was revised upwards, contributing positively 3 bps to 3Q19 take rate of 1.91% compared to 2Q19.
Important Developments for Our Strategy Roadmap in 3Q19
Acquiring, Banking and Credit
In acquiring, we continue to grow fast. We accelerated our net addition of clients, reaching a total base of 428.9 thousand active clients by the end of the third quarter. Our top line grew over 62% year over year despite tougher comps from 3Q18. Finally, we also posted a consistent take rate level in the quarter.
Our performance in the hubs remain strong, with acceleration in the quarterly addition of active clients and TPV compared to last quarter.
Our performance with digital clients and integrated partners also remains solid. However, lower quarter over quarter growth in TPV coming from those clients in 3Q19 compared to 2Q19 contributed to lower incremental TPV for the Company.
Regarding credit, we already provided over
In banking, we reached approximately 29,000 open accounts by the end of October, with number of transactions per account going up. We have recently launched our banking platform and prepaid credit card with a national campaign through different media channels.
We continue focused on the integration of acquiring, banking and credit in a single platform in order to provide a more seamless experience to our merchants. Merchants will have access to a complete financial platform, with the same service levels that they had in acquiring alone.
Software
We continue to roll out our software solutions and engage new clients to our base by offering them tools that drive improvement in their businesses. In the third quarter, we had over 100,000 clients with at least one of our software solutions, up organically compared to the over 70,000 clients as of
Partnership with Grupo Globo in the Micromerchant Space
We expect the partnership with Globo (announced on
Recruiting Program
Recruta, our semiannual recruiting program, received 70,000 applications in 2H19 for a total of almost 110,000 applications in 2019. This continues to show the strength of Stone’s employer brand in the market and our ability to find and engage the most talented people in
Operating and Financial Metrics
Table 1: Operating Metrics | |||||||||
Main Operating and Financial Metrics | 3Q19 | 3Q18 | Δ | 9M19 | 9M18 | Δ | |||
TPV (R$ billions) | 32.6 | 21.8 | 49.8% | 88.9 | 56.8 | 56.3% | |||
Active Clients (thousands) | 428.9 | 234.7 | 82.8% | 428.9 | 234.7 | 82.8% | |||
Period Net Additions (thousands) | 68.7 | 34.1 | 101.7% | 159.8 | 103.4 | 54.5% | |||
Take Rate | 1.91% | 1.87% | 0.04 p.p. | 1.87% | 1.81% | 0.06 p.p. |
In 3Q19, we saw continued improvement in our main operating metrics as we continue to invest in our operation.
- Our Total Active Clients reached 428,900, representing an acceleration of net client additions from 50,500 in 2Q19 to 68,700 in 3Q19. This increase came mostly from SMB clients, as micromerchant additions from the Stone Mais product represented only 4,600 in the quarter, totaling a base of 15,600 micromerchants2. When launched, we expect the partnership with Globo will enable us to build a solid business in the micromerchant space.
Chart 1: Active Client Base (Thousands) (See PDF)
Chart 2: Net Additions of Active Clients per Quarter (Thousands) (See PDF)
- Our Take Rate increased to 1.91% in 3Q19 from 1.85% in 2Q19. In the quarter, we had our take rate increased by 3 bps due to favorable business trends, such as stronger mix of hub clients compared to Digital and Integrated Partner clients. We also had a 3 bp positive impact due to an upward revision of client lifetime assumptions related to our subscription revenue line 3.
Chart 3: Evolution of Take Rate4 (See PDF)
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2 Measured as clients that have transacted with Stone Mais product at least once in the last 90 days.
3 According to IFRS 15, subscription revenue is accounted over the expected life of merchants on a linear basis. As part of the annual assessment of assumptions for linearization of subscription revenue, life of merchants was revised upwards, contributing positively 3 bps to 3Q19 take rate compared to 2Q19.
- Total Payment Volume (TPV) was
R$32.6 billion , a 49.8% increase year over year, despite an unusually strong 3Q18 comparison, when the company presented 83.7% annual growth. TPV growth came mostly from our hub operation, where we had an acceleration in quarterly TPV addition.
Table 2: Quarterly Statement of Profit or Loss | |||||||
Statement of Profit or Loss (R$mm) | 3Q19 | % Rev. | 3Q18 | % Rev. | Δ % | Δ p.p. | |
Net revenue from transaction activities and other services | 193.9 | 28.9% | 136.1 | 32.9% | 42.5% | (4.0 p.p.) | |
Net revenue from subscription services and equipment rental | 94.2 | 14.0% | 59.2 | 14.3% | 59.2% | (0.3 p.p.) | |
Financial income | 335.1 | 49.9% | 212.4 | 51.3% | 57.7% | (1.4 p.p.) | |
Other financial income | 48.0 | 7.1% | 6.4 | 1.5% | 652.6% | 5.6 p.p. | |
Total revenue and income | 671.1 | 100.0% | 414.1 | 100.0% | 62.1% | 0.0 p.p. | |
Cost of services | (112.5) | (16.8%) | (80.7) | (19.5%) | 39.4% | 2.7 p.p. | |
Administrative expenses | (71.2) | (10.6%) | (62.1) | (15.0%) | 14.6% | 4.4 p.p. | |
Selling expenses | (101.7) | (15.1%) | (50.0) | (12.1%) | 103.1% | (3.1 p.p.) | |
Financial expenses, net | (101.2) | (15.1%) | (83.4) | (20.1%) | 21.3% | 5.1 p.p. | |
Other operating expenses, net | (11.4) | (1.7%) | (6.9) | (1.7%) | 65.6% | (0.0 p.p.) | |
Gain on investment in associates | 0.9 | 0.1% | 0.1 | 0.0% | 1287.1% | 0.1 p.p. | |
Profit before income taxes | 274.0 | 40.8% | 130.9 | 31.6% | 109.3% | 9.2 p.p. | |
Income tax and social contribution | (82.7) | (12.3%) | (40.5) | (9.8%) | 104.3% | (2.5 p.p.) | |
Net income for the period | 191.3 | 28.5% | 90.4 | 21.8% | 111.6% | 6.7 p.p. | |
Adjusted Net Income | 201.9 | 30.1% | 89.3 | 21.6% | 126.0% | 8.5 p.p. | |
Table 3: Accumulated Statement of Profit or Loss | |||||||
Statement of Profit or Loss (R$mm) | 9M19 | % Rev. | 9M18 | % Rev. | Δ % | Δ p.p. | |
Net revenue from transaction activities and other services | 539.9 | 30.1% | 340.2 | 32.4% | 58.7% | (2.3 p.p.) | |
Net revenue from subscription services and equipment rental | 239.9 | 13.4% | 144.2 | 13.7% | 66.4% | (0.4 p.p.) | |
Financial income | 883.7 | 49.3% | 545.5 | 52.0% | 62.0% | (2.7 p.p.) | |
Other financial income | 129.5 | 7.2% | 20.0 | 1.9% | 549.2% | 5.3 p.p. | |
Total revenue and income | 1,793.1 | 100.0% | 1,049.8 | 100.0% | 70.8% | 0.0 p.p. | |
Cost of services | (298.7) | (16.7%) | (221.8) | (21.1%) | 34.7% | 4.5 p.p. | |
Administrative expenses | (213.3) | (11.9%) | (179.5) | (17.1%) | 18.9% | 5.2 p.p. | |
Selling expenses | (251.6) | (14.0%) | (131.5) | (12.5%) | 91.4% | (1.5 p.p.) | |
Financial expenses, net | (246.6) | (13.8%) | (226.0) | (21.5%) | 9.1% | 7.8 p.p. | |
Other operating expenses, net | (55.2) | (3.1%) | (27.7) | (2.6%) | 99.3% | (0.4 p.p.) | |
Gain (loss) on investment in associates | 0.3 | 0.0% | (0.3) | (0.0%) | n.m | 0.0 p.p. | |
Profit before income taxes | 728.0 | 40.6% | 263.1 | 25.1% | 176.8% | 15.5 p.p. | |
Income tax and social contribution | (187.8) | (10.5%) | (84.9) | (8.1%) | 121.2% | (2.4 p.p.) | |
Net income for the period | 540.2 | 30.1% | 178.2 | 17.0% | 203.2% | 13.2 p.p. | |
Adjusted Net Income | 582.1 | 32.5% | 186.9 | 17.8% | 211.4% | 14.7 p.p. |
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4 According to IFRS 15, subscription revenue is accounted over the expected life of merchants on a linear basis. As part of the annual assessment of assumptions for linearization of subscription revenue, life of merchants was revised upwards, contributing positively 3 bps to 3Q19 take rate compared to 2Q19.
Total Revenue and Income
Total Revenue and Income was
Chart 4: Total Revenue and Income in the Quarter (R$mm) (See PDF)
Chart 5: Accumulated Total Revenue and Income (R$) (See PDF)
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
Operating Costs and Expenses as a percentage of Total Revenue and Income decreased by 2.8 percentage points on a sequential basis to 42.5%, despite continued investments in our operation in 3Q19.
Chart 6: Operating Leverage* (See PDF)
* Includes Cost of Services, Administrative Expenses and Selling Expenses as a percentage of Total Revenue and Income. Quarterly unaudited data.
Cost of Services
Cost of Services was
Compared to 2Q19, Cost of Services decreased as a percentage of Total Revenue and Income to 16.8% from 17.2%, mainly due to lower provisions and losses and brand fees.
Administrative Expenses
Administrative Expenses were
Compared with 2Q19, Administrative Expenses decreased by 2.6 percentage point, mainly because of lower third-party services expenses, as well as lower travel expenses as in 2Q19 the Company hosted its annual sales convention.
Selling Expenses
Selling Expenses were
Financial Expenses, Net
Financial Expenses, Net were
Financial Expenses, Net as a percentage of Revenue, increased from 13.4% in 2Q19 to 15.1% in 3Q19 mainly due to a higher mix of third-party capital to fund the prepayment business, as the Company takes advantage of attractive funding alternatives.
Other Operating Expenses, Net
Other Operating Expenses, Net were
Profit Before Income Taxes
Profit Before Income Taxes was
Income Tax and Social Contribution
During the third quarter of 2019, the Company incurred
Net Income
Adjusted Net Income was
Compared to 2Q19, adjusted net margin was 3.0 percentage points lower, explained by lower than usual tax rate in 2Q19, as well as higher financial expenses in 3Q19 as the mix of funding is higher towards third-party capital.
Chart 7: Adjusted Net Income in the Quarter (R$mm) (See PDF)
Chart 8: Adjusted Net Margin in the Quarter (See PDF)
Chart 9: Accumulated Adjusted Net Income (R$mm) (See PDF)
Chart 10: Accumulated Adjusted Net Margin (See PDF)
Net Income was
Reconciliation of Net Income to Adjusted Net Income
Table 4: Adjusted Net Income Reconciliation (Quarter) | |||||||
Net Income Bridge (R$mm) | 3Q19 | % Rev. | 3Q18 | % Rev. | Δ % | Δ p.p. | |
Net income for the period | 191.3 | 28.5% | 90.4 | 21.8% | 111.6% | 6.7 p.p. | |
Share-based compensation expenses (a) | 11.2 | 1.7% | 24.8 | 6.0% | (54.7%) | (4.3 p.p.) | |
Amortization of fair value adjustment (b) | 4.6 | 0.7% | 2.8 | 0.7% | 61.1% | (0.0 p.p.) | |
Gain on previously held interest in associate (c) | 0.0 | 0.0% | (21.4) | (5.2%) | (100.0%) | 5.2 p.p. | |
One-time impairment charges (d) | 0.0 | 0.0% | 0.0 | 0.0% | n.a. | 0.0 p.p. | |
Tax effect on adjustments | (5.3) | (0.8%) | (7.3) | (1.8%) | (28.2%) | 1.0 p.p. | |
Adjusted net income | 201.9 | 30.1% | 89.3 | 21.6% | 126.0% | 8.5 p.p. |
Table 5: Accumulated Adjusted Net Income Reconciliation | |||||||
Net Income Bridge (R$mm) | 9M19 | % Rev. | 9M18 | % Rev. | Δ % | Δ p.p. | |
Net income for the period | 540.2 | 30.1% | 178.2 | 17.0% | 203.2% | 13.2 p.p. | |
Share-based compensation expenses (a) | 49.7 | 2.8% | 24.8 | 2.4% | 100.3% | 0.4 p.p. | |
Amortization of fair value adjustment (b) | 12.6 | 0.7% | 8.3 | 0.8% | 51.3% | (0.1 p.p.) | |
Gain on previously held interest in associate (c) | 0.0 | 0.0% | (21.4) | (2.0%) | (100.0%) | 2.0 p.p. | |
One-time impairment charges (d) | 0.0 | 0.0% | 8.4 | 0.8% | (100.0%) | (0.8 p.p.) | |
Tax effect on adjustments | (20.4) | (1.1%) | (11.4) | (1.1%) | 79.2% | (0.1 p.p.) | |
Adjusted net income | 582.1 | 32.5% | 186.9 | 17.8% | 211.4% | 14.7 p.p. |
(a) | Consists of 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 relates to the EdB and Equals acquisitions. | |
(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. |
Cash Flow
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 reduces accounts payable by the corresponding prepaid amount plus fees earned by providing such prepayment service. In order to fund the prepayment operation, the Company predominantly 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, (iii) the issuance of debentures and private loans or (iv) its own capital from capital contributions or cash flows from operations. These funding options lead to different effects on the Company’s statements of balance sheet and cash flows:
- 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.
- Issuance of FIDC5 senior quotas: 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 liability to senior quota holders. The Company then transfers its receivables from card issuers in 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. This set of transactions generates 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, since 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.
- Debentures and private loans: when the Company issues a debenture or takes a private loan, the effect on the Company’s statements of balance sheet and cash flows is similar to the issuance of FIDC senior quotas.
- Deployment of 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.
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5 Receivables Investment Fund (Fundo de Investimento em Direitos Creditórios) is an investment fund legal structure established under Brazilian law designed specifically for investing in credit rights receivables
Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities for 3Q19 was
- Net Income of
R$191.3 million , combined with non-cash expenses consisting primarily of (i) Depreciation and Amortization ofR$43.9 million ; (ii) Other Financial Costs and Foreign Exchange, net ofR$28.4 million and (iii) Deferred Income Tax Expenses ofR$22.5 million . The total amount of adjustments to Net Income from non-cash items in the three months endedSeptember 30, 2019 wasR$118.3 million .
- Net cash from changes in working capital, arising from changes in operating assets and liabilities, totaled an outflow of
R$119.5 million , principally due to:
i. a decrease in Accounts Payable to Clients ofR$405.3 million ; an increase in Trade Accounts Receivable and Other Assets ofR$45.5 million ; Income Tax Paid in the amount ofR$33.7 million and Interest Paid ofR$31.0 million ;
ii. The impact of these factors was partially offset by Interest Income Received, Net of Costs ofR$304.3 million ; a decrease in Accounts Receivable from Card Issuers ofR$34.9 million and an increase in Taxes Payable in the amount ofR$31.5 million .
Net Cash Provided by Operating Activities for 3Q18 was
- Net Income of
R$90.4 million , combined with non-cash expenses consisting primarily of (i) Other Financial Costs and Foreign Exchange, Net ofR$31.0 million ; (ii) Share Based Payments Expense ofR$24.8 million ; and (iii) Depreciation and Amortization in the amount ofR$24.4 million . The total amount of adjustments to Net Income from non-cash items in the three months endedSeptember 30, 2018 wasR$56.0 million .
- Net cash from changes in working capital, arising from changes in operating assets and liabilities, totaled an outflow of
R$63.4 million , mainly due to:
iii. An increase in Accounts Receivable from Card Issuers which led to negative cash flows ofR$677.7 million ;
iv. partially offset by an increase in Accounts Payable to Clients ofR$427.9 million , Interest Income Received, Net of Costs in the amount ofR$139.1 million and an increase in Taxes Payable ofR$55.3 million .
Adjusted Net Cash Provided by Operating Activities
Because of the nature of the prepayment business and dynamics of the sale of receivables in
Table 6: Adjusted Net Cash Provided by Operating Activities | |||||
Adjusted Net Cash Provided by Operating Activities (R$mm) | 3Q19 | 3Q18 | 9M19 | 9M18 | |
Net cash provided by (used in) operating activities | 190.2 | 83.0 | (1,988.3) | (290.0) | |
(-) Adjustments in Operating Activities: | |||||
Accounts receivable from card issuers | (34.9) | 677.7 | 3,267.9 | 1,361.1 | |
Accounts payable to clients | 405.3 | (427.9) | 163.9 | (395.9) | |
Interest income received, net of costs | (304.3) | (139.1) | (852.2) | (356.4) | |
(=) Adjusted net cash provided by operating activities | 256.3 | 193.7 | 591.3 | 318.9 | |
In 3Q19 Net Cash Provided by Operating Activities was
The
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6 Each “Accounts Payable to Clients” recognized as a liability on our balance sheet is directly linked to an “Accounts Receivable from Card Issuers” recognized as an asset in our balance sheet. Originally, the Company received from issuing banks first, and only then paid 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 requirements. 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, Net Cash Provided by/ (Used in) Operating Activities may be affected, as discussed in “Note on the impact of different funding sources in operating and financing cash flows” at the beginning of the Cash Flow section. However, management does not view such decision as translating into higher or lower ability of our business to generate cash operationally.
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 7: Adjusted Free Cash Flow | |||||
Reconciliation of Adjusted Free Cash Flow (R$mm) | 3Q19 | 3Q18 | 9M19 | 9M18 | |
Net cash used in operating activities | 190.2 | 83.0 | (1,988.3) | (290.0) | |
(-) Adjustments in Operating Activities: | |||||
Accounts receivable from card issuers | (34.9) | 677.7 | 3,267.9 | 1,361.1 | |
Accounts payable to clients | 405.3 | (427.9) | 163.9 | (395.9) | |
Interest income received, net of costs | (304.3) | (139.1) | (852.2) | (356.4) | |
Purchases of property and equipment | (197.2) | (32.8) | (314.2) | (125.3) | |
Purchases and development of intangible assets | (18.0) | (9.8) | (47.7) | (34.1) | |
Adjusted free cash flow (R$mn) | 41.1 | 151.1 | 229.5 | 159.5 | |
The main reason for the decrease in Adjusted Free Cash Flow in 3Q19 compared with 3Q18 was the
Adjusted Net Cash
Management assesses net liquidity of the Company by Adjusted Net Cash, a non-IFRS metric. 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 8: Adjusted Net Cash | ||
Adjusted Net Cash (R$mm) | 3Q19 | 4Q18 |
Cash and cash equivalents | 245.1 | 297.9 |
Short-term investments | 2,829.4 | 2,770.6 |
Accounts receivable from card issuers | 12,514.2 | 9,244.6 |
Adjusted Cash | 15,588.8 | 12,313.1 |
Accounts payable to clients | (5,718.0) | (4,996.1) |
Loans and financing | (1,507.5) | (762.5) |
Obligations to FIDC senior quota holders | (3,773.5) | (2,074.6) |
Adjusted Debt | (10,999.0) | (7,833.1) |
Adjusted Net Cash | 4,589.8 | 4,480.0 |
Other Information
Conference Call
Stone will discuss its third quarter financial results during a teleconference today,
The call will also be broadcast simultaneously on Stone’s Investor Relations website at https://investors.stone.co/. Following the completion of the call, a recorded replay of the webcast will be available on Stone’s Investor Relations website at https://investors.stone.co/.
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investors@stone.com.br
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 circum- stances 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 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 / (Debt).
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 business 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 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.
Unaudited Consolidated Statement of Profit or Loss
Table 9: Unaudited Consolidated Statement of Profit or Loss | |||||
Statement of Profit or Loss (R$mm) | 3Q19 | 3Q18 | 9M19 | 9M18 | |
Net revenue from transaction activities and other services | 193.9 | 136.1 | 539.9 | 340.2 | |
Net revenue from subscription services and equipment rental | 94.2 | 59.2 | 239.9 | 144.2 | |
Financial income | 335.1 | 212.4 | 883.7 | 545.5 | |
Other financial income | 48.0 | 6.4 | 129.5 | 20.0 | |
Total revenue and income | 671.1 | 414.1 | 1,793.1 | 1,049.8 | |
Cost of services | (112.5) | (80.7) | (298.7) | (221.8) | |
Administrative expenses | (71.2) | (62.1) | (213.3) | (179.5) | |
Selling expenses | (101.7) | (50.0) | (251.6) | (131.4) | |
Financial expenses, net | (101.2) | (83.4) | (246.6) | (226.0) | |
Other operating expenses, net | (11.4) | (6.9) | (55.2) | (27.7) | |
Gain (loss) on investment in associates | 0.9 | 0.1 | 0.3 | (0.3) | |
Profit before income taxes | 274.0 | 130.9 | 728.0 | 263.1 | |
Income tax and social contribution | (82.7) | (40.5) | (187.8) | (84.9) | |
Net income for the period | 191.3 | 90.4 | 540.2 | 178.2 | |
Unaudited Consolidated Balance Sheet Statement
Table 10: Unaudited Consolidated Balance Sheet Statement | ||
Balance Sheet (R$mm) | 31-Sep-19 | 31-Dec-18 |
Assets | ||
Current assets | 15,889.2 | 12,437.8 |
Cash and cash equivalents | 245.1 | 297.9 |
Short-term investments | 2,829.4 | 2,770.6 |
Accounts receivable from card issuers | 12,514.2 | 9,244.6 |
Trade accounts receivable | 81.3 | 44.6 |
Recoverable taxes | 67.3 | 56.9 |
Prepaid expenses | 21.5 | 15.1 |
Derivative financial instruments | 1.0 | 1.2 |
Other assets | 129.2 | 6.9 |
Non-current assets | 1,127.6 | 855.4 |
Receivables from related parties | 7.7 | 8.1 |
Deferred income tax assets | 240.4 | 262.7 |
Other assets | 11.7 | 8.5 |
Investment in associate | 21.7 | 2.2 |
Property and equipment | 478.9 | 266.3 |
Intangible assets | 367.2 | 307.7 |
Total Assets | 17,016.7 | 13,293.2 |
Liabilities and equity | ||
Current liabilities | 8,767.7 | 6,054.8 |
Accounts payable to clients | 5,718.0 | 4,996.1 |
Trade accounts payable | 92.0 | 117.8 |
Loans and financing | 1,036.1 | 761.1 |
Obligations to FIDC senior quota holders | 1,740.5 | 16.6 |
Labor and social security liabilities | 120.7 | 96.7 |
Taxes payable | 40.0 | 51.6 |
Derivative financial instruments | 0.4 | 0.6 |
Other accounts payable | 20.1 | 14.2 |
Non-current liabilities | 2,613.9 | 2,145.5 |
Loans and financing | 471.5 | 1.4 |
Obligations to FIDC senior quota holders | 2,033.0 | 2,057.9 |
Deferred income tax liabilities | 100.5 | 80.2 |
Provision for contingencies | 3.8 | 1.2 |
Other accounts payable | 5.2 | 4.7 |
Total liabilities | 11,381.6 | 8,200.2 |
Equity attributable to owners of the parent | 5,635.5 | 5,093.3 |
Issued capital | 0.1 | 0.1 |
Capital reserve | 5,375.0 | 5,351.9 |
Other comprehensive income | (77.6) | (56.3) |
Retained earnings | 338.0 | (202.3) |
Non-controlling interests | (0.4) | (0.3) |
Total equity | 5,635.1 | 5,093.0 |
Total liabilities and equity | 17,016.7 | 13,293.2 |
Table 11: Unaudited Consolidated Statement of Cash Flows | ||||||
Cash Flow (R$mm) | 3Q19 | 3Q18 | 9M19 | 9M18 | ||
Net income for the period | 191.3 | 90.4 | 540.2 | 178.2 | ||
Adjustments on Net Income: | ||||||
Depreciation and amortization | 43.9 | 24.4 | 107.7 | 64.5 | ||
Deferred income tax expenses | 22.5 | (14.1) | 53.0 | (19.3) | ||
Loss (gain) on investment in associates | (0.9) | (0.1) | (0.3) | 0.3 | ||
Other financial costs and foreign exchange, net | 28.4 | 31.0 | 55.7 | 103.0 | ||
Provision for contingencies | 0.5 | 0.1 | 2.2 | 0.4 | ||
Share based payments expense | 6.1 | 24.8 | 23.1 | 24.8 | ||
Allowance for doubtful accounts | 6.6 | 6.7 | 26.8 | 15.7 | ||
Loss on disposal of property, equipment and intangible assets | 3.6 | 4.5 | 6.4 | 23.4 | ||
Onerous contract | 0.0 | 0.0 | 0.0 | (0.4) | ||
Fair value adjustment in derivatives | 7.6 | 0.0 | (0.0) | 0.0 | ||
Remeasurement of previously held interest in subsidiary acquired | 0.0 | (21.4) | 0.0 | (21.4) | ||
Working capital adjustments: | ||||||
Accounts receivable from card issuers | 34.9 | (677.7) | (3,267.9) | (1,361.1) | ||
Receivables from related parties | 0.9 | 1.3 | 3.9 | 0.3 | ||
Recoverable taxes | 4.9 | (7.9) | (54.5) | (67.0) | ||
Prepaid expenses | 1.1 | (10.5) | (6.4) | (16.4) | ||
Trade accounts receivable and other assets | (45.5) | (11.3) | (85.6) | (34.4) | ||
Accounts payable to clients | (405.3) | 427.9 | (163.9) | 395.9 | ||
Taxes payable | 31.5 | 55.3 | 159.2 | 106.5 | ||
Labor and social security liabilities | 15.6 | 18.7 | 24.0 | 46.0 | ||
Provision for contingencies | 0.3 | (0.0) | 0.4 | (0.0) | ||
Other Liabilities | 2.5 | 15.8 | (20.2) | 22.4 | ||
Interest paid | (31.0) | (1.4) | (117.6) | (77.0) | ||
Interest income received, net of costs | 304.3 | 139.1 | 852.2 | 356.4 | ||
Income tax paid | (33.7) | (12.8) | (126.6) | (30.6) | ||
Net cash provided by (used in) operating activity | 190.2 | 83.0 | (1,988.3) | (290.0) | ||
Investing activities | ||||||
Purchases of property and equipment | (197.2) | (32.8) | (314.2) | (125.3) | ||
Purchases and development of intangible assets | (18.0) | (9.8) | (47.7) | (34.1) | ||
Acquisition of subsidiary, net of cash acquired | 0.0 | (2.9) | 0.0 | (2.9) | ||
Proceeds from (acquisition of) short term investments, net | (78.7) | 66.6 | 59.8 | 59.3 | ||
Proceeds from the disposal of non-current assets | 0.1 | 3.2 | 1.0 | 4.3 | ||
Acquisition of interest in associates | (4.4) | (1.1) | (11.5) | (1.5) | ||
Net cash provided by (used in) investing activities | (298.1) | 23.1 | (312.5) | (100.2) | ||
Financing activities | ||||||
Proceeds from borrowings | 388.6 | 0.0 | 838.6 | 0.0 | ||
Payment of borrowings | (210.2) | (0.3) | (211.6) | (0.8) | ||
Proceeds from FIDC senior quota holders | 20.0 | 10.0 | 1,640.0 | 10.0 | ||
Payment of finance leases | (7.9) | (3.7) | (19.3) | (9.0) | ||
Capital increase | 0.0 | 0.0 | 0.0 | 3.2 | ||
Repurchase of shares | 0.0 | (63.2) | 0.0 | (63.2) | ||
Acquisition of non-controlling interests | (0.2) | (23.2) | (0.7) | (23.2) | ||
Net cash provided by (used in) financing activities | 190.3 | (80.4) | 2,247.1 | (83.0) | ||
Effect of foreign exchange on cash and cash equivalents | 2.1 | 4.9 | 0.9 | 4.8 | ||
Change in cash and cash equivalents | 84.5 | 30.7 | (52.8) | (468.4) | ||
Cash and cash equivalents at beginning of period | 160.6 | 142.9 | 297.9 | 642.0 | ||
Cash and cash equivalents at end of period | 245.1 | 173.6 | 245.1 | 173.6 | ||
A PDF accompanying this announcement is available at http://ml.globenewswire.com/Resource/Download/b21fa5ce-2c3e-4e53-a80e-519991b29914
Source: StoneCo Ltd.