StoneCo Ltd. - SEC Filing

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stne-20201231

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-38714

StoneCo Ltd.
(Exact name of Registrant as specified in its charter)

The Cayman Islands
(Jurisdiction of incorporation or organization)

4th Floor, Harbour Place
103 South Church Street, P.O. Box 10240
Grand Cayman, KY1-1002, Cayman Islands
(Address of principal executive offices)

Marcelo Baldin, Vice President, Finance
Tel: +55 (11) 3157-3115 – marcelo.baldin@stone.com.br
R. Fidêncio Ramos, 308, 10th floor—Vila Olímpia
São Paulo—SP, 04551-010, Brazil
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class
Class A common shares, par value US$0.000079365 per share

Trading Symbol(s)
STNE

Name of each exchange on which registered
The Nasdaq Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.


Title of Class			Number of Shares Outstanding
Class A common shares, par value US$0.000079365 per share			256,946,670
Class B common shares, par value US$0.000079365 per share			51,782,702

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒

No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐

No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filers,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer ☒

Accelerated Filer ☐

Non-accelerated Filer ☐

Emerging Growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether an internal control over financial reporting auditor attestation is included in the filing:

Yes ☒

No ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

International Financial Reporting Standards as issued by
the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐

Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

StoneCo Ltd.
TABLE OF CONTENTS


			Page

Presentation of Financial and Other Information			1
Forward-Looking Statements			5
Certain Terms and Conventions			5
PART I			6
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			6
A.Directors and senior management			6
B.Advisers			6
C.Auditors			6
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			6
A. Offer statistics			6
B. Method and expected timetable			6
ITEM 3. KEY INFORMATION			7
A. Selected financial data			7
B. Capitalization and indebtedness			9
C. Reasons for the offer and use of proceeds			10
D. Risk factors			10
ITEM 4. INFORMATION ON THE COMPANY			51
A. History and development of the company			51
B. Business overview			54
C. Organizational structure			85
D. Property, plant and equipment			86
ITEM 4A. UNRESOLVED STAFF COMMENTS			87
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			87
A. Operating results			87
B. Liquidity and capital resources			108
C. Research and development, patents and licenses, etc.			117
D.Trend information			118
E. Off-balance sheet arrangements			118
F. Tabular disclosure of contractual obligations			118
G. Safe harbor			118
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			118
A. Directors and senior management			118
B. Compensation			122
C. Board practices			124
D. Employees			125
E. Share ownership			126
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			126
A. Major shareholders			126
B. Related party transactions			128
C. Interests of experts and counsel			130
ITEM 8. FINANCIAL INFORMATION			130
A. Consolidated statements and other financial information			130
B. Significant changes			131
ITEM 9. THE OFFER AND LISTING			131
A. Offering and listing details			131
B. Plan of distribution			131
C. Markets			132
D. Selling shareholders			132
E. Dilution			132
F. Expenses of the issue			132


ITEM 10. ADDITIONAL INFORMATION			132
A. Share capital			132
B. Memorandum and articles of association			132
C. Material contracts			151
D. Exchange controls			151
E. Taxation			152
F. Dividends and paying agents			155
G. Statement by experts			155
H. Documents on display			156
I. Subsidiary information			156
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			156
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			158
A. Debt securities			158
B. Warrants and rights			158
C. Other securities			158
D. American Depositary Shares			158
PART II			159
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			159
A. Defaults			159
B. Arrearages and delinquencies			159
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			159
A. Material modifications to instruments			159
B.Material modifications to rights			159
C. Withdrawal or substitution of assets			159
D. Change in trustees or paying agents			159
E. Use of proceeds			159
ITEM 15. CONTROLS AND PROCEDURES			160
A. Disclosure controls and procedures			160
B. Management’s annual report on internal control over financial reporting			160
C. Attestation report of the registered public accounting firm			161
D. Changes in internal control over financial reporting			161
ITEM 16. RESERVED			162
ITEM 16A.Audit committee financial expert			162
ITEM 16B.Code of ethics			162
ITEM 16C.Principal accountant fees and services			162
ITEM 16D.Exemptions from the listing standards for audit committees			163
ITEM 16E.Purchases of equity securities by the issuer and affiliated purchasers			163
ITEM 16F.Change in registrant’s certifying accountant			163
ITEM 16G.Corporate governance			164
ITEM 16H. Mine safety disclosure			164
PART III			165
ITEM 17. Financial statements			165
ITEM 18. Financial statements			165
ITEM 19. Exhibits			165
Glossary of Terms			167
Index to Consolidated Financial Statements			171

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this annual report to “Stone Co.” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to StoneCo Ltd., together with its consolidated subsidiaries, and Collact Serviços Digitais .Ltda. (“Collact”), VHSYS Sistema de Gestão S.A. (“VHSYS”), Alpha-Logo Serviços de Informática S.A. (“Tablet Cloud”), Trinks Serviços de Internet S.A. (“Trinks”) and Delivery Much Tecnologia S.A. (“Delivery Much”) being entities which we have a significant minority interest in but do not consolidate.

The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil. “Central Bank” refers to the Brazilian Central Bank (Banco Central do Brasil). References in the annual report to “real,” “reais” or “R$” refer to the Brazilian real, the official currency of Brazil and references to “U.S. dollar,” “U.S. dollars” or “US$” refer to U.S. dollars, the official currency of the United States.

Financial Statements

We prepare our consolidated financial statements in accordance with IFRS, as issued by the IASB. We maintain our books and records in Brazilian reais. Unless otherwise noted, our financial information presented herein as of December 31, 2019 and 2020 and for the years ended December 31, 2018, 2019 and 2020 is stated in reais, our functional and presentation currency. The financial information contained in this annual report includes our audited consolidated financial statements as of December 31, 2019 and 2020 and for each of the three years in the period ended December 31, 2020 together with the notes thereto. All references herein to “our financial statements” and “our audited consolidated financial statements” are to our consolidated financial statements included elsewhere in this annual report.

The financial information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements.

Our fiscal year ends on December 31. References in this annual report to a fiscal year, such as “fiscal year 2020,” relate to our fiscal year ended on December 31 of that calendar year.

Financial Information in U.S. Dollars

Solely for the convenience of the reader, we have translated some of the real amounts included in this annual report from reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.1967 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. See “Item 3. Key Information—A. Selected financial data—Exchange Rates” for more detailed information regarding translation of reais into U.S. dollars and for historical exchange rates for the Brazilian real.

Corporate Events

Investments in Software and other Companies

In April 2020, the Company obtained control of Linked Gourmet Soluções para Restaurantes S.A. (“Linked”) through a step acquisition, which started in June, 2018, with the acquisition of a 27.06% interest, followed by the acquisition of another 21.50% interest in 2019 and an additional interest in April 2020, leading to the control of Linked with a 58.1% interest. Linked Gourmet is a private company based in São Paulo, Brazil, that develops software and services for the food service market.

In April 2020, the Company acquired a 100% interest in MVarandas Tecnologia Serviços Ltda. (“MVarandas” or “Menew”). MVarandas is a private company based in João Pessoa, Brazil, that develops software and services for the food service market. In May, 2020 the Company acquired 100% interest in Vitta Tecnologia em Saúde S.A., VittaPar LLC, AXEI Saúde Corretora de Seguros LTDA and Vitta Serviços em Saúde LTDA. (all together described as “Vitta”). Vitta is a private company based in the State of São Paulo, Brazil, focused in health plan management, health services and insurance services.

In July 2020, the Group acquired a 22.64% interest in Delivery Much Tecnologia S.A. ("Delivery Much"). Delivery Much is a private company based in the State of Rio Grande do Sul, Brazil, which is a food delivery marketplace company focused on small-and-midsize cities.

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In August 2020, the Company signed a definitive agreement for STNE Participações S.A., a controlled company of StoneCo Ltd. that holds the software investments business of the Stone Group in Brazil, to merge its business with Linx S.A. (“Linx”), a leading provider of retail management software in Brazil. In November, 2020, the Linx Extraordinary General Meeting that approved the business combination was held. As of March 31, 2021, considering the approval by the Linx Shareholders, the transaction is pending antitrust (CADE) final approval and certain other conditions.

In September 2020, the Company acquired a 50.0% interest in MLabs Software Ltda (“MLabs”). MLabs is a private company based in the State of São Paulo, Brazil, that develops software and services for social media management.

In October 2020, the Group acquired a 50.0% interest in Questor Sistemas S.A. (“Questor”). Questor is a private company based in Santa Catarina, Brazil, that develops management software for accounting offices.

In November 2020, the Group acquired a 90.0% interest in Sponte Informática S.A (“Sponte”). Sponte is a private company based in Paraná, Brazil, that develops management software for schools.

In November 2020, the Company acquired a 53.05% interest in StoneCo CI Ltd, Creditinfo Jamaica Ltd, Creditinfo Guyana Inc and Creditadvice Barbados Ltd. (all together described as “Creditinfo Caribbean”). Creditinfo Caribbean is a private credit bureaus company, having as main products credit reports, credit scores, monitoring, international business reports and a suite of value-added services, based in Cayman, Jamaica, Guyana and Barbados, respectively.

In December 2020, we completed the issuance of R$ 580,000 of FIDC SOMA III quotas, raising R$ 493,000 in third-party capital for our credit solution, of which R$ 246,500 were received in 2020. FIDC SOMA III is structured with senior and mezzanine quotas held by institutional investors for a 36-month period, while Stone holds the subordinated quotas. The senior quotas reached R$ 348,000 with a benchmark return rate of CDI + 4.0% per year. The mezzanine quotas reached R$ 145,000 and the benchmark return rate is CDI + 7.0% per year.

January, 2021, the Group has fully acquired the non-controlling interest in PDCA held by Bellver Fundo de Investimento Multimercado Crédito Privado Investimento no Exterior (“Bellver”). The transaction was made by a purchase and sale of shares, where Bellver agreed to acquire 1,313,066 STNE shares by a payment being part in cash in the amount of R$ 230,500 and part by the delivering of their PDCA shares. The number of STNE shares delivered to Bellver was based on STNE volume-weighted average trading price of the 30 days preceding the signing of a memorandum of understanding (“MOU”) between the parties on December 8th, 2020. As a result of this transaction, Stone is now the owner of 100% of the TON.

Special Note Regarding Non-IFRS Financial Measure

This annual report presents our adjusted net income (loss) for the convenience of investors. Adjusted net income (loss) is a non-IFRS financial measure. Generally, a non-IFRS financial measure is a numerical measure of a company’s performance, financial position or cash flow 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. Adjusted net income (loss), however, should be considered in addition to, and not as a substitute for or superior to, profit (loss), or other measures of the financial performance prepared in accordance with IFRS.

Adjusted net income (loss) is prepared and presented to eliminate the effect of items from profit (loss) that we do not consider indicative of our continuing business performance within the period presented. We define adjusted net income (loss) as profit (loss) for the period, adjusted for (1) 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 (and reversal of impairment charges), (4) unusual income and expenses, and (5) tax effects of the foregoing adjustments, as described in note (3) to “Item 3. Key Information—A. Selected financial data.”

Adjusted net income (loss) is presented because our management believes that this non-IFRS financial measure can provide useful information to investors, securities analysts and the public in their review of our operating and financial performance, although it is not calculated in accordance with IFRS or any other generally accepted accounting principles and should not be considered as a measure of performance in isolation. We believe adjusted net income (loss) is useful to evaluate our operating and financial performance for the following reasons:

•adjusted net income (loss) is widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company and from period to period, depending on their accounting and tax methods, the book value of their assets and the method by which their assets were acquired;

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•equity grants made to executives and employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and the related expenses are not key measures of our core operating performance;

•fair value adjustments to share-based compensation expenses classified as a liability do not directly reflect how our business is performing at any particular time and the related expense adjustment amounts are not key measures of our core operating performance;

•amortization of the fair value adjustment on intangible assets and property and equipment relating to acquisitions can vary substantially from company to company and from period to period depending upon the applicable financing and accounting methods, the fair value and average expected life of the acquired intangible assets, the capital structure and the method by which the intangible assets were acquired and, as such, we do not believe that these adjustments are reflective of our core operating performance; and

•other write-offs that are one-time extraordinary charges and are not reflective of our core operating performance.

We use adjusted net income (loss) as a key profitability measure to assess the performance of our business. We believe that adjusted net income (loss) should therefore be made available to investors, securities analysts and other interested parties to assist in their assessment of the performance of our business.

Adjusted net income (loss) is not a substitute for net income or loss for the period, which is the IFRS measure of earnings. Additionally, our calculation of adjusted net income (loss) may be different from the calculation used by other companies, including our competitors in the payments processing industry, because other companies may not calculate these measures in the same manner as we do, and therefore, our measure may not be comparable to those of other companies. Additionally, this measure is not intended to be a measure of cash available for management’s discretionary use as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. For a reconciliation of our adjusted net income (loss), see “Item 3. Key Information—A. Selected financial data.” You are encouraged to evaluate our adjustments and the reasons we consider them appropriate.

Market Share and Other Information

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reliable. Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this annual report relating to the Brazilian internet, payment solutions and e-commerce markets, and more broadly, the industry in which we operate, as well as the estimates concerning market shares, through internal research, public information and publications on the industry prepared by official public sources, such as (1) the Brazilian Association of Credit Card and Service Companies (Associação Brasileira das Empresas de Cartões de Crédito e Serviços), or the ABECS, (2) the Central Bank, (3) the Brazilian Federation of Banks (Federação Brasileira de Bancos), or FEBRABAN, and (4) the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE, among others.

Industry publications generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, neither we, the selling shareholders, the underwriters, nor their respective agents have independently verified it. Governmental publications and other market sources, including those referred to above, generally state that their information was obtained from recognized and reliable sources, but the accuracy and completeness of that information is not guaranteed. In addition, the data that we compile internally and our estimates have not been verified by an independent source. Except as disclosed in this annual report, none of the publications, reports or other published industry sources referred to in this annual report were commissioned by us or prepared at our request. Except as disclosed in this annual report, we have not sought or obtained the consent of any of these sources to include such market data in this annual report.

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Calculation of Net Promoter Score

Net Promoter Score, or NPS, is a widely known survey methodology that measures the willingness of customers to recommend a company’s products and services. It is used to gauge customers’ overall satisfaction with a company’s products and services and their loyalty to the brand, and it is typically based on customer surveys. NPS measures satisfaction using a scale of zero to 10 based on a customer’s response to the following question: “How likely is it that you would recommend Stone Co. to a friend or colleague?” Responses of nine or 10 are considered “Promoters.” Responses of seven or eight are considered neutral. Responses of six or less are considered “Detractors.” The NPS, a percentage expressed as a numerical value, is calculated by subtracting the percentage of respondents who are Detractors from the percentage who are Promoters and dividing that number by the total number of respondents. The NPS calculation gives no weight to customers who decline to answer the survey question. According to an external survey conducted by IBOPE in November 2020, our NPS was 64.

Rounding

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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FORWARD-LOOKING STATEMENTS

This annual report on form 20-F contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this annual report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “may,” “predict,” “continue,” “estimate” and “potential,” or the negative of these terms or other similar expressions.

Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled “Item 3. Key Information—D. Risk Factors” in this annual report. The statements we make regarding the following matters are forward-looking by their nature:

•our expectations regarding revenues generated by transaction activities, subscription and equipment rental fees and other services;

•our expectations regarding our operating and net profit margins;

•our expectations regarding significant drivers of our future growth;

•our expectations regarding the performance of our current and new solutions

•our plans to continue to invest in research and development to develop technology for both existing and new products and services;

•our ability to differentiate ourselves from our competition by delivering a superior customer experience and through our network of hyper-local sales and services;

•our ability to attract and retain a qualified management team and other team members while controlling our labor costs;

•our ability to invest more and collect results in the short-term;

•our plans to expand our global footprint and explore opportunities in adjacent sectors and markets;

•competition adversely affecting our profitability;

•the occurrence of a natural disaster, widespread health epidemic or pandemics, including the coronavirus (COVID-19) pandemic;

•fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

•the inherent risks related to the digital payments market, such as the interruption, failure or breach of our computer or information technology systems;

•our ability to anticipate market needs and develop and introduce new and enhanced products and service functionalities to adapt to changes in our industry;

•our ability to innovate and respond to technological advances and changing market needs and customer demands;

•our ability to maintain, protect and enhance our brand and intellectual property;

•changes in consumer demands and preferences and technological advances, and our ability to innovate in order to respond to such changes;

•our failure to successfully maintain a relevant omni-channel experience for our clients, thereby adversely impacting our results of operations;

•our ability to implement technology initiatives successfully and to capture the anticipated benefits of such initiatives; and

•our plans to pursue, conclude and successfully integrate strategic acquisitions.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

CERTAIN TERMS AND CONVENTIONS

A glossary of industry and other defined terms is included in this annual report, beginning on page 167.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A. Directors and senior management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A. Offer statistics

Not applicable.

B. Method and expected timetable

Not applicable.

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ITEM 3. KEY INFORMATION

A. Selected financial data

You should read the following selected financial data together with “Item 5. Operating and Financial Review and Prospects” and our financial statements and the related notes appearing elsewhere in this annual report.

The summary statement of profit or loss data and statement of financial position data as of December 31, 2020 and 2019 and for each of the three years ended December 31, 2020 have been derived from our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB, included elsewhere in this annual report. The statement of financial position date as of December 31, 2018, 2017 and 2016 is derived from our audited consolidated financial statements previously filed.


	For the Year Ended December 31,
	2020		2020		2019		2018		2017		2016
	(US$)(1)		(R$)
	(in millions, except amounts per share)
Statement of profit or loss data:
Net revenue from transaction activities and other services	220.2		1,144.1		770.3		514.6		224.2		121.1
Net revenue from subscription services and equipment rental	74.7		388.0		331.6		213.7		105.0		54.7
Financial income	316.9		1,647.0		1,287.8		801.3		412.2		247.4
Other financial income	27.1		140.7		186.4		49.6		25.3		16.7
Total revenue and income	638.9		3,319.8		2,576.0		1,579.2		766.6		439.9
Cost of services	(148.2)		(769.9)		(427.0)		(323.0)		(224.1)		(133.2)
Administrative expenses	(75.5)		(392.5)		(285.8)		(252.9)		(174.6)		(106.1)
Selling expenses	(97.4)		(505.9)		(360.6)		(190.2)		(92.0)		(49.5)
Financial expenses, net	(65.4)		(339.8)		(353.5)		(301.1)		(237.1)		(244.7)
Other operating expense, net	(34.1)		(177.1)		(57.7)		(69.3)		(134.2)		(55.7)
(Loss) income from investment in associates	(1.3)		(6.9)		(0.8)		(0.4)		(0.3)		0.1
Profit (loss) before income taxes	217.0		1,127.7		1,090.7		442.3		(95.7)		(149.2)
Income tax and social contribution	(55.8)		(290.2)		(286.5)		(137.1)		(9.3)		27.0
Net income (loss) for the year	161.2		837.5		804.2		305.2		(105.0)		(122.2)
Net income (loss) attributable to non-controlling interests	(3.2)		(16.6)		1.0		4.0		3.8		(2.4)
Net income (loss) attributable to owners of the parent	164.4		854.1		803.2		301.2		(108.7)		(119.8)
Basic earnings (loss) per share(2)	US$	0.60	R$	2.95	R$	2.90	R$	1.30	R$	(0.49)	R$	(0.61)
Diluted earnings (loss) per share(2)	US$	0.60	R$	2.91	R$	2.85	R$	1.29	R$	(0.49)	R$	(0.61)
Other data:
Adjusted net income (loss) (in millions)(3)	US$	184.3	R$	958.2	R$	857.1	R$	342.8	R$	45.1	R$	(51.9)
TPV (in billions)	US$	40.40	R$	209.9	R$	129.1	R$	83.4	R$	48.5	R$	28.1
Active clients (in thousands)(4)	n/a		652.6		480.9		267.9		131.2		82.0
Take rate(5)	n/a		1.51%		1.85%		1.83%		1.53%		1.51%


(1)			For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5.1967 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.
(2)			Calculated by dividing net income or loss for the year attributed to the owners of the parent, adjusted for losses allocated to contractual rights and participating instruments, by the weighted average number of ordinary shares outstanding during the year. See note 22 to our audited consolidated financial statements included elsewhere in this annual report.
(3)			In the table below, we have provided a reconciliation of adjusted net income (loss) to our net income (loss) for the year, the most directly comparable financial measure calculated and presented in accordance with IFRS.
(4)			Does not include micromerchants from the previous Stone Mais and current TON products
(5)			Total revenue and income excluding other financial income, divided by TPV.

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	For the Year Ended December 31,
	2020	2020	2019	2018	2017	2016
	(US$ millions)(a)	(R$ millions)

Net income (loss) for the year	161.2	837.5	804.2	305.2	(105.0)	(122.2)
Share-based compensation expenses(b)	23.2	120.7	64.3	60.8	138.9	53.1
Amortization of fair value adjustment on intangibles related to acquisitions(c)	3.3	17.2	17.2	12.6	14.8	17.2
Fair value adjustments of assets whose control was acquired(d)	(0.6)	(3.0)	—	(21.4)	—	—
One-time impairment charges(e)	—	—	—	8.4	—	—
Other income/expenses(f)	5.9	30.8	(1.7)	—	—	—
Pre-tax subtotal	193.0	1,003.2	884.0	365.7	48.7	(51.9)
Tax effect on adjustments(g)	(8.7)	(45.0)	(26.8)	(22.8)	(3.6)	—
Adjusted net income	184.3	958.2	857.1	342.8	45.1	(51.9)


(a)			For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5.1967 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.
(b)			Consists of 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. See “Item 5. Operating and Financial Review and Prospects—A. Operating results—Description of Principal Line Items—Other operating expenses, net—Liability-classified share-based compensation expense” and note 26 to our consolidated financial statements for further information.
(c)			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 Elavon do Brasil (“EdB”) and Equals acquisitions. See “Item 5. Operating and Financial Review and Prospects—A. Operating results—EdB Acquisition” for further information.
(d)			Consists of the gain on re-measurement of our previously held equity interest in Equals (2018) and Linked Gourmet (2020) to fair value upon the date control was acquired.
(e)			Consists of (1) 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 for the year ended December 31, 2018 and (2) 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 the year ended December 31, 2018.
(f)			Consists of the fair value adjustment related to associates call option, M&A expenses and earn-out interests related to acquisitions.. See notes 1.5, 2.2 and 5 to our consolidated financial statements for further information.
(g)			Represents the tax effect of pre-tax items excluded from adjusted net income (loss). The tax effect of pre-tax items excluded from adjusted net income (loss) is computed using the statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances.


	As of December 31,
	2020	2020	2019	2018	2017	2016
	(US$ millions)(1)	(R$ millions)
Statement of financial position data:
Assets
Current assets
Cash and cash equivalents and short-term investments	2,034.9	10,575.0	3,905.4	3,068.5	843.7	237.0
Accounts receivable from card issuers	3,138.0	16,307.2	14,066.8	9,244.6	5,078.4	3,052.6
Other current assets	460.4	2,392.6	432.7	124.7	77.4	29.5
Total current assets	5,633.3	29,274.8	18,404.9	12,437.8	5,999.5	3,319.1
Total non-current assets	476.0	2,473.8	1,200.9	855.4	636.2	520.2
Total assets	6,109.4	31,748.6	19,605.7	13,293.2	6,635.7	3,839.2
Liabilities and Equity
Current liabilities
Accounts payable to merchants	1,765.0	9,172.4	6,500.1	4,996.1	3,637.5	3,029.3
Other current liabilities	809.7	4,208.0	5,372.5	1,058.7	186.1	92.6
Total current liabilities	2,574.8	13,380.4	11,872.5	6,054.8	3,823.6	3,121.9
Non-current liabilities
Obligations to FIDC quota holders	464.6	2,414.4	1,620.0	2,057.9	2,056.3	—
Other non-current liabilities	185.1	961.8	140.2	87.6	273.3	130.1
Total non-current liabilities	649.7	3,376.2	1,760.2	2,145.5	2,329.6	130.1
Total liabilities	3,224.5	16,756.6	13,632.7	8,200.2	6,153.2	3,252.0
Total equity	2,884.9	14,992.0	5,973.0	5,093.0	482.6	587.2
Total liabilities and equity	6,109.4	31,748.6	19,605.7	13,293.2	6,635.7	3,839.2


(1)			For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5.1967 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2020as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.

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Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was much higher than in previous years. Overall in 2015, the real depreciated 32.0%, reaching R$3.9048 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil’s political instability, appreciating 19.8% to R$3.2591 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.3080 per U.S.$1.00. The real/U.S. dollar exchange rate reported by the Brazilian Central Bank (“Central Bank” or “BCB”) was R$3.8748 per U.S.$1.00 on December 31, 2018, which reflected a 14.6% depreciation in the real against the U.S. dollar during 2018, primarily as a result of lower interest rates in Brazil, which reduced the volume of foreign currency deposited in Brazil in the “carry trade,” as well as uncertainty regarding the results of the Brazilian presidential elections held in October 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$4.0307 per U.S.$1.00 on December 31, 2019, which reflected a 3.9% depreciation in the real against the U.S. dollar since December 31, 2018. On December 31, 2020, the real/U.S. dollar exchange rate reported by the Central Bank was R$5.1967, reflecting a depreciation of 22.4% in the real from December 31, 2019, being strongly affected by the COVID-19 pandemic.

There can be no assurance that the real will not depreciate or appreciate further against the U.S. dollar. The Central Bank has intervened occasionally in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future.

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in Brazilian reais per U.S. dollar. The average rate is calculated by using the average of reported exchange rates by the Central Bank on each business day during each annual or monthly period, as applicable.

Year

Period-end

Average(1)

Low