UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2024 

 

 

Commission File Number: 001-38714

 

STONECO LTD. 

(Exact name of registrant as specified in its charter)

 

4th Floor, Harbour Place 

103 South Church Street, P.O. Box 10240 

Grand Cayman, KY1-1002, Cayman Islands 

+55 (11) 3004-9680 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

  Form 40-F

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

 

  

 

 

INCORPORATION BY REFERENCE

 

This report on Form 6-K shall be deemed to be incorporated by reference into the registration statement on Form S-8 (Registration Number: 333-265382) of StoneCo Ltd. and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  StoneCo Ltd.
   
   
  By: /s/ Mateus Scherer Schwening
    Name: Mateus Scherer Schwening
    Title: Chief Financial Officer and Investor Relations Officer

 

 

Date: May 13, 2024

 

 

 

EXHIBIT INDEX

 

Exhibit No. Description
99.1 StoneCo Ltd. – Unaudited Interim Condensed Consolidated Financial Statements For The Three Months Ended March 31, 2024.

 

 

 

 

Exhibit 99.1

 

 

 

 

Unaudited Interim Condensed

 

Consolidated Financial Statements

 

StoneCo Ltd.

 

March 31, 2024

 

 

 

Index to Consolidated Financial Statements

 

Interim Condensed Consolidated Financial Statements   Page
     
Report on review of interim condensed consolidated financial information   F-3
Unaudited interim consolidated statement of financial position as of March 31, 2024 and December 31, 2023   F-4
Unaudited interim consolidated statement of profit or loss for the three months ended March 31, 2024 and 2023   F-6
Unaudited interim consolidated statement of other comprehensive income for the three months ended March 31, 2024 and 2023   F-7
Unaudited interim consolidated statement of changes in equity for the three months ended March 31, 2024 and 2023   F-8
Unaudited interim consolidated statement of cash flows for the three months ended March 31, 2024 and 2023   F-9
Notes to unaudited interim condensed consolidated financial statements March 31, 2024   F-12

 

 

 

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

To the Shareholders and Management of 

StoneCo Ltd.

 

Introduction

 

We have reviewed the accompanying interim condensed consolidated financial statements of StoneCo Ltd. (the “Company”) as at March 31, 2024 which comprise the interim consolidated statement of financial position as at March 31, 2024 and the related interim consolidated statements of profit or loss, of other comprehensive income, changes in equity and cash flows for the three months period then ended and explanatory notes.

 

Management is responsible for the preparation and presentation of this interim consolidated financial information in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on this interim consolidated financial information based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB).

 

São Paulo, May 10, 2024.

 

 

ERNST & YOUNG 

Auditores Independentes S/S Ltda.

 

F-3 

 

StoneCo Ltd.

Unaudited interim consolidated statement of financial position

As of March 31, 2024 and December 31, 2023

(In thousands of Brazilian Reais)

 

 

   Notes  March 31, 2024  December 31, 2023
Assets         
Current assets         
Cash and cash equivalents   4    4,988,332    2,176,416 
Short-term investments   5.1    463,686    3,481,496 
Financial assets from banking solutions   5.5    6,620,250    6,397,898 
Accounts receivable from card issuers   5.2.1    26,470,461    23,895,512 
Trade accounts receivable   5.3.1    448,949    459,947 
Loans operations portfolio   5.4    342,408    209,957 
Recoverable taxes   7    216,143    146,339 
Derivative financial instruments   5.7    3,309    4,182 
Other assets   6    384,188    380,854 
         39,937,726    37,152,601 
Non-current assets               
Long-term investments   5.1    46,253    45,702 
Accounts receivable from card issuers   5.2.1    81,720    81,597 
Trade accounts receivable   5.3.1    25,493    28,533 
Loans operations portfolio   5.4    90,296    40,790 
Receivables from related parties   11.1    2,193    2,512 
Deferred tax assets   8.2    681,296    664,492 
Other assets   6    171,442    137,508 
Investment in associates        86,352    83,010 
Property and equipment   9.1    1,698,390    1,661,897 
Intangible assets   10.1    8,791,224    8,794,919 
         11,674,659    11,540,960 
                
Total assets        51,612,385    48,693,561 
                
                
Liabilities and equity               
Current liabilities               
Deposits from banking customers   5.5    5,985,018    6,119,455 
Accounts payable to clients   5.2.2    19,008,971    19,163,672 
Trade accounts payable        510,354    513,877 
Borrowing and financing   5.6.1    1,663,547    1,374,766 
Obligations to FIDC quota holders   5.6.1    567,655    505,231 
Labor and social security liabilities        396,974    515,749 
Taxes payable        611,989    514,299 
Derivative financial instruments   5.7    350,459    316,171 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-4

 

StoneCo Ltd.

Unaudited interim consolidated statement of financial position

As of March 31, 2024 and December 31, 2023

(In thousands of Brazilian Reais)

 

 

   Notes  March 31, 2024  December 31, 2023
Other liabilities        187,309    119,526 
         29,282,276    29,142,746 
Non-current liabilities               
Accounts payable to clients   5.2.2    35,413    35,455 
Borrowing and financing   5.6.1    3,720,673    3,639,215 
Obligations to FIDC quota holders    5.6.1    2,334,126     
Deferred tax liabilities   8.2    559,424    546,514 
Provision for contingencies   12.1    225,802    208,866 
Labor and social security liabilities        39,010    34,301 
Other liabilities        411,028    410,504 
         7,325,476    4,874,855 
                
Total liabilities        36,607,752    34,017,601 
                
Equity   13           
Issued capital   13.1    76    76 
Capital reserve   13.2    14,065,927    14,056,484 
Treasury shares   13.3    (279,319)   (282,709)
Other comprehensive income (loss)   13.4    (376,599)   (320,449)
Retained earnings (accumulated losses)        1,541,843    1,168,862 
Equity attributable to controlling shareholders        14,951,928    14,622,264 
Non-controlling interests        52,705    53,696 
Total equity        15,004,633    14,675,960 
                
Total liabilities and equity        51,612,385    48,693,561 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-5

 

StoneCo Ltd.

Unaudited interim consolidated statement of profit or loss

For the three months ended March 31, 2024 and 2023

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

      Three months ended March 31,
   Notes  2024  2023
          
Net revenue from transaction activities and other services   15.1    749,830    733,056 
Net revenue from subscription services and equipment rental   15.1    456,709    445,129 
Financial income   15.1    1,741,114    1,375,044 
Other financial income   15.1    137,257    158,427 
Total revenue and income        3,084,910    2,711,656 
                
Cost of services   16    (809,926)   (721,277)
Administrative expenses   16    (257,000)   (298,048)
Selling expenses   16    (529,675)   (389,928)
Financial expenses, net   17    (896,547)   (923,639)
Mark-to-market on equity securities designated at FVPL   16        30,574 
Other income (expenses), net   16    (108,056)   (101,504)
         (2,601,204)   (2,403,822)
                
Gain (loss) on investment in associates        311    (1,022)
Profit before income taxes        484,017    306,812 
                
Current income tax and social contribution   8.1    (105,852)   (43,554)
Deferred income tax and social contribution   8.1    (4,570)   (37,568)
Net income for the period        373,595    225,690 
                
Net income (loss) attributable to:               
Controlling shareholders        372,981    226,639 
Non-controlling interests        614    (949)
         373,595    225,690 
                
Earnings per share               
Basic earnings per share for the period attributable to controlling shareholders (in Brazilian reais)   14.2    R$ 1.21     R$ 0.72  
Diluted earnings per share for the period attributable to controlling shareholders (in Brazilian reais)   14.2    R$ 1.18     R$ 0.70  

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-6

 

StoneCo Ltd.

Unaudited interim consolidated statement of other comprehensive income

For the three months ended March 31, 2024 and 2023

(In thousands of Brazilian Reais)

 

 

      Three months ended March 31,
   Notes  2024  2023
          
Net income for the period        373,595    225,690 
Other comprehensive income               
                
Other comprehensive income that may be reclassified to profit or loss in subsequent periods:               
                
Changes in the fair value of accounts receivable from card issuers   19.1    (24,381)   91,757 
Tax on changes in the fair value of accounts receivable from card issuers        8,290    (31,198)
Exchange differences on translation of foreign operations        (315)   (4,464)
Changes in the fair value of cash flow hedge   5.7.1    (42,499)   105,981 
                
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:               
Net monetary position in hyperinflationary economies        897    858 
Changes in the fair value of equity instruments designated at fair value   5.1    750    (393)
Other comprehensive income for the period        (57,258)   162,541 
                
Total comprehensive income for the period        316,337    388,231 
                
Total comprehensive income attributable to:               
Controlling shareholders        316,831    389,180 
Non-controlling interests        (494)   (949)
Total comprehensive income for the period        316,337    388,231 

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-7

 

StoneCo Ltd.

Unaudited interim consolidated statement of changes in equity

For the three months ended March 31, 2024 and 2023

(In thousands of Brazilian Reais)

 

 

    Attributable to controlling shareholders        
        Capital reserve                        
    Issued capital   Additional paid-in capital   Transactions among shareholders   Special reserve   Other reserves   Total   Treasury shares   Other comprehensive income   Retained earnings   Total   Non-controlling interests   Total
                                                 
Balance as of December 31, 2022   76   13,825,325   (445,062)   61,127   377,429   13,818,819   (69,085)   (432,701)   (423,203)   12,893,906   56,118   12,950,024
Net income (loss) for the period                   226,639   226,639   (949)   225,690
Other comprehensive income for the period                 162,541     162,541     162,541
Total comprehensive income                 162,541   226,639   389,180   (949)   388,231
Share-based payments           59,433   59,433         59,433   4   59,437
Equity transaction related to put options over non-controlling interest           (8,290)   (8,290)         (8,290)   1,650   (6,640)
Dividends paid                       (1,408)   (1,408)
Others           (23)   (23)         (23)     (23)
Balance as of March 31, 2023   76   13,825,325   (445,062)   61,127   428,549   13,869,939   (69,085)   (270,160)   (196,564)   13,334,206   55,415   13,389,621
                                                 
Balance as of December 31, 2023   76   13,825,325   (518,504)   61,127   688,536   14,056,484   (282,709)   (320,449)   1,168,862   14,622,264   53,696   14,675,960
Net income for the period                   372,981   372,981   614   373,595
Other comprehensive income for the period                 (56,150)     (56,150)   (1,108)   (57,258)
Total comprehensive income                 (56,150)   372,981   316,831   (494)   316,337
Share-based payments       (3,390)     21,804   18,414   3,390       21,804     21,804
Equity transaction related to put options over non controlling interest           (8,971)   (8,971)         (8,971)   2,246   (6,725)
Dividends paid                       (2,743)   (2,743)
Balance as of March 31, 2024   76   13,825,325   (521,894)   61,127   701,369   14,065,927   (279,319)   (376,599)   1,541,843   14,951,928   52,705   15,004,633

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-8

 

StoneCo Ltd.

Unaudited interim consolidated statement of cash flows

For the three months ended March 31, 2024 and 2023

(In thousands of Brazilian Reais)

 

 

      Three months ended March 31,
   Notes  2024  2023
Operating activities         
Net income for the period        373,595    225,690 
Adjustments to reconcile net income for the period to net cash flows:               
Depreciation and amortization   9.2    217,335    212,494 
Deferred income tax and social contribution   8.1    4,570    37,568 
Gain (loss) on investment in associates        (311)   1,022 
Accrued interest, monetary and exchange variations, net        11,364    (131,572)
Provision (reversal) for contingencies   12.1    16,144    (2,367)
Share-based payments expense   18.1.4    25,783    70,118 
Allowance for expected credit losses        54,202    10,852 
Loss on disposal of property, equipment and intangible assets   19.5    6,070    14,948 
Effect of applying hyperinflation accounting        1,311    1,209 
Loss on sale of subsidiary   3.1    52,958     
Fair value adjustment in financial instruments at FVPL   19.1    (16,805)   85,825 
Fair value adjustment in derivatives        10,629    4,593 
Working capital adjustments:               
Accounts receivable from card issuers        (1,963,001)   2,615,995 
Receivables from related parties        10,341    1,954 
Recoverable taxes        (63,422)   (50,680)
Prepaid expenses        (13,957)   26,792 
Trade accounts receivable, banking solutions and other assets        (184,054)   (18,399)
Loans operations portfolio        (193,079)    
Accounts payable to clients        (1,778,728)   (2,367,437)
Taxes payable        156,107    74,115 
Labor and social security liabilities        (116,081)   (74,926)
Payment of contingencies   12.1    (7,356)   (15,612)
Trade accounts payable and other liabilities        80,458    1,234 
Interest paid        (51,153)   (133,428)
Interest income received, net of costs   19.4    958,208    606,793 
Income tax paid        (64,186)   (28,385)
Net cash provided by in operating activities        (2,473,058)   1,168,396 
Investing activities               
Purchases of property and equipment   19.5    (180,622)   (340,329)
Purchases and development of intangible assets   19.5    (126,027)   (76,061)
Proceeds from (acquisition of) short-term investments, net        3,029,151    253,534 
Sale of subsidiary, net of cash disposed of   3.1    (4,204)    
Proceeds from disposal of long-term investments – equity securities            218,105 
Proceeds from the disposal of non-current assets   19.5    41    206 
Payment for interest in subsidiaries acquired        (17,910)   (3,839)
Net cash provided by (used in) investing activities        2,700,429    51,616 
Financing activities               
Proceeds from borrowings   5.6.1    1,017,875    1,049,990 
Payment of borrowings   5.6.1    (790,140)   (1,580,632)
Proceeds from FIDC quota holders   5.6.1    2,406,548     
Payment to FIDC quota holders        (33,303)   (332,500)
Payment of principal portion of leases liabilities   5.6.1    (13,606)   (21,840)
Acquisition of non-controlling interests            (888)
Dividends paid to non-controlling interests        (2,743)   (1,408)
Net cash provided by (used in) financing activities        2,584,631    (887,278)

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-9

 

StoneCo Ltd.

Unaudited interim consolidated statement of cash flows

For the three months ended March 31, 2024 and 2023

(In thousands of Brazilian Reais)

 

 

Effect of foreign exchange on cash and cash equivalents        (86)   10,233 
Change in cash and cash equivalents        2,811,916    342,967 
Cash and cash equivalents at beginning of period   4    2,176,416    1,512,604 
Cash and cash equivalents at end of period   4    4,988,332    1,855,571 
Change in cash and cash equivalents        2,811,916    342,967 

 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

F-10

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

1.Operations

 

StoneCo Ltd. (the “Company”), is a Cayman Islands exempted company with limited liability, incorporated on March 11, 2014. The registered office of the Company is located at 4th Floor, Harbour Place 103 South Church Street, P.O. box 10240 Grand Cayman E9 KY1-1002.

 

VCK Investment Fund Limited SAC is the ultimate parent of HR Holdings LLC, which holds, approximately, 31% of the Company’s voting shares. VCK Investment Fund Limited SAC is owned by the co-founder of the Company, Mr. Andre Street.

 

The Company’s shares are publicly traded on Nasdaq under the ticker symbol STNE and its Brazilian Depositary Receipts (“BDRs”) representing the underlying Company´s shares are traded on the Brazilian stock exchange (B3) under the ticker symbol STOC31.

 

The Company and its subsidiaries (collectively, the “Group”) provide financial services and software solutions to clients across in-store, mobile and online device platforms helping them to better manage their businesses by increasing the productivity of their sales initiatives.

 

The interim condensed consolidated financial statements of the Group for the three months ended March 31, 2024 and 2023 were approved by the Audit Committee on 10 May, 2024.

 

1.1. Seasonality of operations

 

The Group’s revenues are subject to seasonal fluctuations as a result of consumer spending patterns. Historically, revenues have been strongest during the last quarter of the year as a result of higher sales during the Brazilian holiday season. This is due to the increase in the number and amount of electronic payment transactions related to seasonal retail events. Adverse events that occur during these months could have a disproportionate effect on the results of operations for the entire fiscal year. As a result of seasonal fluctuations caused by these and other factors, results for an interim period may not be indicative of those expected for the full fiscal year.

 

2.Basis of preparation and changes to the Group’s accounting policies and estimates

 

2.1.Basis of preparation

 

The interim condensed consolidated financial statements for the three months ended March 31, 2024 have been prepared in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (“IASB”).

 

The interim condensed consolidated financial statements are presented in Brazilian Reais (“R$”), and all values are rounded to the nearest thousand (R$ 000), except when otherwise indicated.

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual consolidated financial statements as of December 31, 2023.

 

The accounting policies adopted in this interim reporting period are consistent with those of the previous financial year, except for the following:

 

From January 1, 2024 onwards, the Group recognizes revenues from membership fees deferred through the expected lifetime of the client. The new criteria has been adopted and the Group has applied prospectively because the effect of the change and of the old criteria was not material to the consolidated financial statements both for the current and past periods. For further details see Note 15.1.

 

2.2.Estimates

 

The preparation of the Group’s financial statements requires management to make judgments and estimates and to adopt assumptions that affect the amounts presented of revenues, expenses, assets and liabilities at the financial statement date. Actual results may differ from these estimates.

 

F-11

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

Judgements, estimates and assumptions are frequently revised, and any effects are recognized in the revision period and in any future affected periods. The objective of these revisions is mitigating the risk of material differences between the estimated and actual results in the future.

 

In preparing these interim condensed consolidated financial statements, the significant judgements and estimates made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that are set the consolidated financial statements for the year ended December 31, 2023.

 

3.Group information

 

3.1.Subsidiaries

 

In accordance with IFRS 10 - Consolidated Financial Statements, subsidiaries are all entities in which the Company holds control.

 

The following table shows the main consolidated entities, which correspond to the Group’s most relevant operating vehicles.

 

        % of Group's equity interest
Entity name   Principal activities   March 31, 2024   December 31, 2023
             
Stone Instituição de Pagamento S.A. (“Stone Pagamentos”)   Merchant acquiring   100.00   100.00
Pagar.me Instituição de Pagamento S.A. (“Pagar.me”)   Merchant acquiring   100.00   100.00
Stone Sociedade de Crédito Direto S.A. (“Stone SCD”)   Financial services   100.00   100.00
Linx Sistemas e Consultoria Ltda. (“Linx Sistemas”)   Technology services   100.00   100.00
Tapso Fundo de Investimento em Direitos Creditórios (“FIDC TAPSO”)   Investment fund   100.00   100.00

 

During the three months ended March 31, 2024 the Group incorporated the companies Linx Impulse Ltda ("Linx Impulse"), Stone Sociedade de Crédito, Financiamento e Investimentos S.A. ("SCFI"), Sponte Educação Ltda ("Sponte Educação") and Linx Automotivo Ltda (“Linx Automotivo”) all of which are wholly owned by the Group.

 

On February 7, 2024, the equity interest of Pinpag was sold, thus, the Group ceased to hold equity interest in Pinpag.

 

Other than the changes described above there were no other changes in the interest held by the Group in its subsidiaries since January 1, 2024.

 

During the three months ended March 31, 2024, there were no changes in the ownership of the structured entities.

 

The Group holds call options to acquire additional interests in some of its subsidiaries (Note 5.7) and issued put options to non-controlling investors (Note 5.9.1. )

 

3.2.Associates

 

The following table shows all entities in which the Group has significant influence.

 

        % Group's equity interest
Entity name   Principal activities   March 31, 2024   December 31, 2023
             
Alpha-Logo Serviços de Informática S.A. (“Tablet Cloud”)   Technology services   25.00   25.00
APP Sistemas S.A. (“APP”) (a)   Technology services   19.80   19.90
Agilize Tecnologia S.A ("Agilize")   Technology services   33.33   33.33
Dental Office S.A. (“RH Software”)   Technology services   20.00   20.00
Neostore Desenvolvimento de Programas de Computador S.A. (“Neomode”)   Technology services   40.02   40.02
Trinks Serviços de Internet S.A. (“Trinks”)   Technology services   19.90   19.90
Delivery Much Tecnologia S.A. (“Delivery Much”)   Food delivery marketplace   29.50   29.50

 

(a)During the three months ended March 31, 2024 the equity interest held by the Group was diluted by the issuance of new shares under a long-term incentive program.

 

The Group holds call options to acquire additional interests in some of its associates (Note 5.7).

 

F-12

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

4.Cash and cash equivalents

 

   March 31, 2024  December 31, 2023
       
Denominated in R$   4,937,037    2,128,425 
Denominated in US$   51,295    47,991 
    4,988,332    2,176,416 

 

5.Financial instruments

 

5.1.Short and Long-term investments

 

   Short-term  Long-term  March 31, 2024
   Listed securities  Unlisted securities  Unlisted securities   
             
Bonds(a)            
Brazilian sovereign bonds   60,595            60,595 
Structured notes linked to Brazilian sovereign bonds       342,103        342,103 
Corporate bonds   59,550            59,550 
Equity securities(b)           46,253    46,253 
Investment funds(c)       1,438        1,438 
    120,145    343,541    46,253    509,939 
                     
Current                  463,686 
Non-current                  46,253 

 

   Short-term  Long-term  December 31, 2023
   Listed securities  Unlisted securities  Unlisted securities   
             
Bonds(a)            
Brazilian sovereign bonds   2,954,236            2,954,236 
Structured notes linked to Brazilian sovereign bonds       473,259        473,259 
Corporate bonds   51,933            51,933 
Equity securities(b)           45,702    45,702 
Investment funds(c)       2,068        2,068 
    3,006,169    475,327    45,702    3,527,198 
                     
Current                  3,481,496 
Non-current                  45,702 

 

(a)As of March 31, 2024, bonds of listed securities are mainly linked to the CDI and Selic benchmark interest rates.

 

(b)Comprised of common shares of unlisted entities. All assets at the reporting dates are unlisted securities that are not traded in an active market and recognized at fair value through other comprehensive income. Fair value of unlisted equity instruments was determined based on negotiations of the securities. The change in fair value of equity securities at FVOCI for the three months ended March 31, 2024 was R$ 750, (R$ (393) for the three months ended March 31, 2023).

 

(c)Comprised of foreign investment fund shares.

 

Short and Long-term investments are denominated in Brazilian Reais and U.S. dollars.

 

F-13

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.2.Accounts receivable from card issuers and accounts payable to clients

 

5.2.1.Composition of accounts receivable from card issuers

 

Accounts receivable are amounts due from card issuers and acquirers regarding the transactions of clients with card holders, performed in the ordinary course of business.

 

   March 31, 2024  December 31, 2023
       
Accounts receivable from card issuers (a)   25,982,959    23,364,806 
Accounts receivable from other acquirers (b)   628,309    667,922 
Allowance for expected credit losses   (59,087)   (55,619)
    26,552,181    23,977,109 
           
Current   26,470,461    23,895,512 
Non-current   81,720    81,597 

 

(a)Accounts receivable from card issuers, net of interchange fees, as a result of processing transactions with clients.

 

(b)Accounts receivable from other acquirers related to PSP (Payment Service Provider) transactions.

 

Part of the Group’s cash requirement are to make prepayments to acquiring customers. The Group finances those requirements through different sources of funding including the definitive sale of receivables to third parties. When such sales of receivables are carried out to entities in which the Group has subordinated shares or quotas, the receivables sold remain in statement of financial position, as these entities are consolidated in the financial statements. As of March 31, 2024 a total of R$ 430,931 (December 31 - R$ 467,622) were consolidated through FIDC ACR FAST and R$ 2,541,948 (December, 2023 - R$ nil) through FIDC ACR I, of which the Group has subordinated shares. When the sale of receivables is carried out to non-controlled entities and for transactions where continuous involvement is not present, the amounts transferred are derecognized from the accounts receivable from card issuers. As of March 31, 2024, the sale of receivables that were derecognized from accounts receivables from card issuers in the statement of financial position represent the main form of funding used for the prepayment business.

 

Accounts receivable held by FIDCs guarantee the obligations to FIDC quota holders.

 

5.2.2.Accounts payable to clients

 

Accounts payable to clients represent amounts due to accredited clients related to credit and debit card transactions, net of interchange fees retained by card issuers and assessment fees paid to payment scheme networks as well as the Group’s net merchant discount rate fees which are collected by the Group as an agent.

 

5.3.Trade accounts receivable

 

5.3.1.Composition of trade accounts receivable

 

Trade accounts receivables are amounts due from clients mainly related to subscription services and equipment rental.

 

   March 31, 2024  December 31, 2023
       
Accounts receivable from subscription services   281,614    293,304 
Accounts receivable from equipment rental   110,550    114,252 
Chargeback   72,023    72,401 
Services rendered   43,133    51,456 
Others   33,154    28,101 
Receivables from registry operation   27,312    22,347 
Cash in transit   20,767    24,172 
Allowance for expected credit losses   (114,111)   (117,553)
Total   474,442    488,480 
           
Current   448,949    459,947 
Non-current   25,493    28,533 

 

F-14

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.4.Loans operations portfolio

 

Portfolio balances by product:

 

   March 31, 2024  December 31, 2023
       
Credit card   7,900    3,131 
Working capital loan   531,703    309,677 
Loans operations portfolio, gross   539,603    312,808 
           
Allowance for expected credit losses (Note 5.4.4)   (106,899)   (62,061)
Loans operations portfolio, net of allowance for expected credit losses   432,704    250,747 
           
Current   342,408    209,957 
Non-current   90,296    40,790 

 

5.4.1.Non-performing loans ("NPL")

 

Total outstanding of the contract whenever the clients default on an installment:

 

   March 31, 2024  December 31, 2023
       
Balances not overdue   512,117    301,590 
Balances overdue by          
<= 15 days   7,974    4,351 
15 < 90 days   11,711    6,016 
> 90 days   7,801    851 
    27,486    11,218 
           
Loans operations portfolio, gross   539,603    312,808 

 

5.4.2.Aging by maturity

 

   March 31, 2024  December 31, 2023
       
Installments not overdue      
<= 30 days   29,987    14,376 
30 < 60 days   52,312    30,670 
61 < 180 days   185,889    110,957 
181 < 360 days   174,934    113,323 
361 < 720 days   84,971    41,573 
> 720 days   4,915    61 
    533,008    310,960 
           
Installments overdue by          
<= 30 days   2,446    947 
30 < 90 days   2,625    799 
91 < 180 days   1,427    99 
181 < 360 days   97    3 
    6,595    1,848 
           
Loans operations portfolio, gross   539,603    312,808 

 

F-15

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.4.3.Gross carrying amount

 

The Group calculates an expected credit loss allowance for its loans based on statistical models that consider both internal and external historical data, negative credit information and guarantees, among which information addressing the behavior of each debtor. The Group calculates its loans operations portfolio in three stages:

 

(i)Stage 1: corresponds to loans that do not present significant increase in credit risk since origination;

 

(ii)Stage 2: corresponds to loans that presented significant increase in credit risk subsequent to origination

 

The Group determines Stage 2 based on following criteria:

 

(a)absolute criteria: financial asset overdue more than 30 days, or;

 

(b)relative criteria: in addition to the absolute criteria, the Group analyzes the evolution of the risk of each financial instrument on a monthly basis, comparing the current behavior score attributed to each client with that attributed at the time of recognition of the financial asset. Behavioral scoring considers credit behavior variables, such as default on other products and market data about the customer. When the credit risk increases significantly since origination, the Stage 1 operation is moved to Stage 2.

 

For Stage 2, a cure criterion is applied when the financial asset no longer meets the criteria for a significant increase in credit risk, as mentioned above, and the loan is moved to Stage 1.

 

(iii)Stage 3: corresponds to impaired loans.

 

The Group determines Stage 3 based on following criteria:

 

(a)absolute criteria: financial asset overdue more than 90 days, or;

 

(b)relative criteria: indicators that the financial asset will not be paid in full without activating a guarantee or financial guarantee.

 

The indication that an obligation will not be paid in full includes the tolerance of financial instruments that imply the granting of advantages to the counterparty following the deterioration of the counterparty's credit quality.

 

The Group also assumes a cure criterion for Stage 3, with respect to the counterparty's repayment capacity, such as the percentage of total debt paid or the time limit to liquidate current debt obligations.

 

Management regularly seeks forward looking perspectives for future market developments including macroeconomic scenarios as well as its portfolio risk profile. Management may adjust the ECL resulting from the models above in order to better reflect this forward looking perspective.

 

Reconciliation of gross portfolio of loans operations, segregated by Stages:

 

Stage 1   December 31, 2023   Transfer to stage 2   Transfer to stage 3   Cure from stage 2   Cure from stage 3   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card   3,131   (250)     11       4,769   7,661
Working capital loan   296,282   (25,140)   (792)   6,542   138     221,769   498,799
    299,413   (25,390)   (792)   6,553   138     226,538   506,460

 

Stage 2   December 31, 2023   Cure to stage 1   Transfer to stage 3   Transfer from stage 1   Cure from stage 3   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card     (11)   (13)   250         226
Working capital loan   12,195   (6,542)   (6,734)   25,140   21     141   24,221
    12,195   (6,553)   (6,747)   25,390   21     141   24,447

 

F-16

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

Stage 3   December 31, 2023   Cure to stage 1   Cure to stage 2   Transfer from stage 1   Transfer from stage 2   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card           13       13
Working capital loan   1,200   (138)   (21)   792   6,734     116   8,683
    1,200   (138)   (21)   792   6,747     116   8,696

 

Consolidated 3 stages   December 31, 2023   Derecognition   Acquisition / (Settlement)   March 31, 2024
                 
Credit card   3,131     4,769   7,900
Working capital loan   309,677     222,026   531,703
    312,808     226,795   539,603

 

5.4.4.Allowance for expected credit losses of loans operations

 

Stage 1   December 31, 2023   Transfer to stage 2   Transfer to stage 3   Cure from stage 2   Cure from stage 3   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card   200   (98)     6       446   554
Working capital loan   57,576   (8,243)   (554)   1,236   13     42,001   92,029
    57,776   (8,341)   (554)   1,242   13     42,447   92,583

 

Stage 2   December 31, 2023   Cure to stage 1   Transfer to stage 3   Transfer from stage 1   Cure from stage 3   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card     (6)   (10)   98         82
Working capital loan   3,445   (1,236)   (4,714)   8,243   6     2,400   8,144
    3,445   (1,242)   (4,724)   8,341   6     2,400   8,226

 

Stage 3   December 31, 2023   Cure to stage 1   Cure to stage 2   Transfer from stage 1   Transfer from stage 2   Derecognition   Acquisition / (Settlement)   March 31, 2024
                                 
Credit card           10       10
Working capital loan   840   (13)   (6)   554   4,714     (9)   6,080
    840   (13)   (6)   554   4,724     (9)   6,090

 

Consolidated 3 stages   December 31, 2023   Derecognition   Acquisition / (Settlement)   March 31, 2024
                 
Credit card   200     446   646
Working capital loan   61,861     44,392   106,253
    62,061     44,838   106,899

 

5.5.Financial assets from banking solutions and deposits from banking customers

 

As required by Brazilian Central Bank (“BACEN”) regulation, financial assets arising from deposits from banking customers in payment accounts must be fully deposited in government securities, and/or deposits at BACEN ("CCME").

 

F-17

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.6.Borrowing and financing and Obligations to FIDC quota holders

 

5.6.1.Changes in loans and financing and obligations to FIDC quota holders

 

  December 31, 2023   Additions   Disposals   Payment of principal   Payment of interest   Changes in Exchange Rates   Fair value adjustment   Interest   March 31, 2024
                                   
Obligations to FIDC ACR I quota holders (a)   2,325,984           (16,805)   24,948   2,334,127
Obligations to FIDC TAPSO quota holders 53,103               1,606   54,709
Obligations to FIDC ACR FAST quota holders 452,128   80,564     (33,302)         13,556   512,946
Leases 173,683   25,540   (4,695)   (13,606)   (2,785)   79     2,785   181,001
Bonds 2,402,698           77,758     25,350   2,505,806
Bank borrowings 1,321,348   1,017,875     (790,141)   (41,188)   6,788     38,918   1,553,600
Receivables backed securities 102,018         (7,180)       3,253   98,091
Debentures 1,014,234               31,487   1,045,721
  5,519,212   3,449,963   (4,695)   (837,049)   (51,153)   84,625   (16,805)   141,903   8,286,001
                                   
Current 1,879,997                               2,231,202
Non-current 3,639,215                               6,054,799

 

(a)FIDC ACR I issued quotas in exchange for a contribution of R$ 2,325,984. The contribution was made by a SPV funded by a revolving facility in which United States International Development Finance Corporation (¨DFC¨) has invested US$ 467.5 million, funding our prepayment bussiness through sales to this FIDC. The FIDC ACR I has a final maturity of seven years and pay a semi-annual coupon at a fixed 12.75% in R$.

 

F-18

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.7.Derivative financial instruments, net

 

    March 31, 2024   December 31, 2023
         
Cross-currency interest rate swap used as hedge accounting instrument classified as cash flow hedge (Note 5.7.1.1)   (335,977)   (311,445)
Interest rate swap used as hedge accounting instrument classified as fair value hedge (Note 5.7.1.2)   (12,112)  
Derivatives used as economic hedge instrument (Note 5.7.2)   (2,177)   (4,097)
Call options to acquire additional interest in associates and subsidiaries   3,116   3,553
Derivative financial instruments, net   (347,150)   (311,989)

 

5.7.1Hedge accounting

 

5.7.1.1 Cash flow hedge

 

During 2021, the Group entered into hedge operations to protect its inaugural dollar bonds, subject to foreign exchange exposure using cross-currency interest rate swap contracts. Additionally, in January 2024, the Group entered into hedge operations to protect bank borrowings, subject to foreign exchange exposure using cross-currency interest rate swap contracts. The transactions have been designated for hedge accounting and classified as cash flow hedge of the variability of the designated cash flows of the US Dollar denominated bonds / bank borrowings due to changes in the exchange rate. The effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive income, recorded in a specific equity account, and subsequently reclassified into earnings in the same period the hedge object affects earnings, while any ineffective portion, when applicable, is immediately recognized in profit or loss. The details of the cross-currency interest rate swaps and their financial position as of March 31, 2024 are presented as follows.

 

Notional in US$   Notional in R$   Pay rate in local currency   Trade date   Due date   Fair value as of March 31, 2024 – Asset (Liability)   Gain (loss) recognized in income in three months ended March 31, 2024(a)   Gain (loss) recognized in OCI (net of tax) in three months ended March 31, 2024(b)   Fair value as of December 31, 2023 – Asset (Liability)
                                 
Inaugural dollar bonds as hedged item                    
50,000   248,500   CDI + 2.94%   June 23, 2021   June 16, 2028   (29,301)   1,840   (4,174)   (26,967)
50,000   247,000   CDI + 2.90%   June 24, 2021   June 16, 2028   (28,627)   1,914   (4,183)   (26,359)
50,000   248,500   CDI + 2.90%   June 24, 2021   June 16, 2028   (32,067)   1,735   (4,097)   (27,625)
75,000   375,263   CDI + 2.99%   June 30, 2021   June 16, 2028   (17,709)   800   (2,014)   (43,894)
50,000   250,700   CDI + 2.99%   June 30, 2021   June 16, 2028   (47,425)   2,629   (6,160)   (29,705)
50,000   250,110   CDI + 2.98%   June 30, 2021   June 16, 2028   (40,015)   1,444   (3,943)   (29,207)
25,000   127,353   CDI + 2.99%   July 15, 2021   June 16, 2028   (29,915)   1,864   (4,155)   (16,495)
25,000   127,353   CDI + 2.99%   July 15, 2021   June 16, 2028   (17,789)   800   (2,015)   (16,573)
50,000   259,890   CDI + 2.96%   July 16, 2021   June 16, 2028   (20,447)   739   (1,959)   (37,516)
25,000   131,025   CDI + 3.00%   August 6, 2021   June 16, 2028   (20,648)   673   (1,930)   (18,487)
25,000   130,033   CDI + 2.85%   August 10, 2021   June 16, 2028   (31,555)   1,761   (4,109)   (19,391)
25,000   130,878   CDI + 2.81%   August 11, 2021   June 16, 2028   (19,706)   754   (1,973)   (19,226)
Bank borrowings as hedged item                        
95,000   467,875   CDI + 1.70%   January 4, 2024   January 8, 2025   (773)   1,014   (1,787)  
                Net amount   (335,977)   17,967   (42,499)   (311,445)

 

(a)Recognized in the statement of profit or loss, in “Financial expenses, net”. The amount recognized during the three months ended March 31, 2023 was a loss of R$ 145,166.

 

(b)Recognized in equity, in “Other comprehensive income.” The balance in the cash flow hedge reserve as of March 31, 2024 is a loss of R$ 239,687 (2023 - loss of R$ 197,188).

 

F-19

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.7.1.2 Fair Value Hedge

 

During the first quarter of 2024, the Group entered into hedge operations to change fixed rate to post-fixed rate (CDI) on the obligations to FIDC quota holders of FIDC ACR I using interest rate swap contracts. The transactions have been designated for hedge accounting and classified as fair value hedge. The fair value changes on both the hedge instruments and hedge object are recognized in profit or loss. The details of the interest rate swaps and their financial position as of March 31, 2024 are presented as follows.

 

Notional in R$(a)   Pay rate in local currency   Trade date   Due date   Fair value as of March 31, 2024 – Asset (Liability)   Gain (loss) recognized in income in three months ended March 31, 2024(b)   Fair value as of December 31, 2023 – Asset (Liability)
                         
760,040   CDI + 2.03%   January 17, 2024   January 31, 2031   (8,297)   (8,297)  
471,000   CDI + 2.14%   February 28, 2024   January 31, 2031   (3,430)   (3,430)  
265,000   CDI + 1.68%   March 15, 2024   January 31, 2031   (406)   (406)  
25,228   CDI + 1.94%   March 18, 2024   January 31, 2031   13   13  
14,514   CDI + 1.57%   March 18, 2024   January 31, 2031   8   8  
            Net amount   (12,112)   (12,112)  

 

(a)The interest expense of the hedged obligations is taxable/deductible. The hedge relationship has been designed to hedge the fair value risk on an after-tax basis. As a result, the notional amount of the swaps is less than the notional amount of the obligation.

 

(b)       Recognized in the statement of profit or loss, in “Financial expenses, net”.

 

5.7.2Economic hedge

 

5.7.2.1Currency hedge

 

The Group is party to non-deliverable forward (“NDF”) contracts with different counterparties approved by the Board of Directors following the Counterparty Policy to hedge its foreign currency risk in U.S. Dollar and Euro. The Group uses those derivatives to hedge foreign currency risk associated with two exposures: (i) the cash position it holds, and (ii) certain software purchase agreements.

 

    March 31, 2024    
    Minimum Rate   Maximum Rate   Notional   Gain (loss)   Balance
                     
NDF Dollar   4.9500   5.0350   9,023   (673)   (402)
NDF Euro   5.3788   5.4093   285   (23)   6
                     
    December 31, 2023    
    Minimum Rate   Maximum Rate   Notional   Gain (loss)   Balance
                     
NDF Dollar   4.8220   4.9400   6,460   19,116   323
NDF Euro   5.3208   5.3715   570   (447)   4

 

F-20

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.7.2.2Interest rates hedge

 

The Group mitigates the interest rate risk generated by the gap between its prepayment business (fixed rate) and its funding activities (either fixed or floating) with mixed maturities. This hedge is executed over-the-counter ("OTC") with multiple financial institutions following its Counterparty Policy.

 

    March 31, 2024  
    Minimum Rate   Maximum Rate   Maturity is up to   Notional   Gain (loss) Balance
                       
Interest rate swaps (Fixed rate to CDI)   9.8 %   14.2 %   Nov/25   8,592,700   482 (1,781)
                       
    December 31, 2023  
    Minimum Rate   Maximum Rate   Maturity is up to   Notional   Gain (loss) Balance
                       
Interest rate swaps (Fixed rate to CDI)   10.2 %   14.3 %   May/25   6,079,500   (7,328) (4,424)

 

5.8.Financial risk management

 

F-21

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

The Group’s activities expose it to market, liquidity, credit, and counterparty risks. The two main market risks for the Group are interest rates and exchange rates. Interest rate risk arises as the Group’s originates assets at fixed rates (credit card prepayment and loans) and with funding through fixed and floating rates with unmatched maturities of such assets. The second risk arises from fluctuations in exchange rates among Brazilian Reais and the currencies of countries where the Group has subsidiaries in addition to its indebtedness and expenses denominated in currencies other than the Brazilian Real. The Group’s main liquidity risk in potential its inability to raise financing to continue its prepayment business, which although not a legal obligation, is a significant component of its revenues. The counterparty risk is mainly generated by the counterparties with which the Group engages for financial contracts for hedging, investments and committed funding, in addition to its inherent credit risk exposure to credit card issuers.

 

The Board of Directors has approved policies, including a counterparties policy, and limits for its financial risk management. The Group uses financial derivatives only to mitigate market risk exposures. It is the Group’s policy not to engage in derivatives for speculative purposes. Different levels of managerial approval are required for entering into financial instruments depending on its nature and the type of risk associated.

 

The Group’s Financial risk management is carried out by the Risk Management Area.

 

5.9.Financial instruments by category

 

5.9.1.Financial assets by category

 

    Amortized cost   FVPL   FVOCI   Total
                 
March 31, 2024                
Short and Long-term investments     463,686   46,253   509,939
Financial assets from banking solutions   6,620,250       6,620,250
Accounts receivable from card issuers   5,980     26,546,201   26,552,181
Trade accounts receivable   474,442       474,442
Loans operations portfolio   432,704       432,704
Derivative financial instruments(a)     3,309     3,309
Receivables from related parties   2,193       2,193
Other assets   555,630       555,630
    8,091,199   466,995   26,592,454   35,150,648
                 
December 31, 2023                
Short and Long-term investments     3,481,496   45,702   3,527,198
Financial assets from banking solutions   5,250,496   1,147,402     6,397,898
Accounts receivable from card issuers   5,877     23,971,232   23,977,109
Trade accounts receivable   488,480       488,480
Loans operations portfolio   250,747       250,747
Derivative financial instruments(a)     4,182     4,182
Receivables from related parties   2,512       2,512
Other assets   518,362       518,362
    6,516,474   4,633,080   24,016,934   35,166,488

 

(a)Derivative financial instruments as of March 31, 2024 of R$ 335,977 (December 31, 2023 – R$ 311,445) were designated as cash flow hedging instruments, and therefore the effective portion of the hedge is accounted for in OCI.

 

F-22

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

5.9.2.Financial liabilities by category

 

    Amortized cost   FVPL   Total
             
March 31, 2024            
Deposits from banking customers   5,985,018     5,985,018
Accounts payable to clients   19,044,384     19,044,384
Trade accounts payable   510,354     510,354
Borrowings and financing (a)   5,384,220     5,384,220
Obligations to FIDC quota holders   567,655   2,334,126   2,901,781
Derivative financial instruments     350,459   350,459
Other liabilities   191,479   406,858   598,337
    31,683,110   3,091,443   34,774,553
             
December 31, 2023            
Deposits from banking customers   6,119,455     6,119,455
Accounts payable to clients   19,199,127     19,199,127
Trade accounts payable   513,877     513,877
Borrowings and financing   5,013,981     5,013,981
Obligations to FIDC quota holders   505,231     505,231
Derivative financial instruments     316,171   316,171
Other liabilities   119,526   410,504   530,030
    31,471,197   726,675   32,197,872

 

(a)The debt designated for hedge accounting as the hedged item in a fair value hedge is adjusted for changes on its fair value only attributable to the specifically designated risks being hedged.

 

5.10.Fair value measurement

 

5.10.1.Assets and liabilities by fair value hierarchy

 

The following table shows an analysis of financial instruments measured at fair value by level of the fair value hierarchy:

 

  March 31, 2024   December 31, 2023
  Fair value   Hierarchy level   Fair value   Hierarchy level
               
Assets measured at fair value              
Short and Long-term investments(a) (b) 509,939   I /II   3,527,198   I /II
Financial assets from banking solutions(b)   I   1,147,402   I
Accounts receivable from card issuers(c) 26,546,201   II   23,971,232   II
Derivative financial instruments(d) 3,309   II   4,182   II
  27,059,449       28,650,014    
               
Liabilities measured at fair value              
Obligations to FIDC quota holders(d)(g) 2,334,126   II     II
Derivative financial instruments(d) 350,459   II   316,171   II
Other liabilities(e) (f) 406,858   III   410,504   III
  3,091,443       726,675    

 

(a)Listed securities are classified as Level I and unlisted securities classified as Level II, determining fair value using valuation techniques, which employ the use of market observable inputs.

 

(b)Sovereign bonds are priced using quotations from Anbima public pricing method.

 

(c)For Accounts receivable from card issuers measured at FVOCI, fair value is estimated by discounting future cash flows using market rates for similar items.

 

(d)The Group enters into derivative financial instruments with financial institutions with investment grade credit ratings. Derivative financial instruments are valued using valuation techniques, which employ the use of observable market inputs.

 

(e)These are contingent considerations included in Other liabilities arising on business combinations that are measured at FVPL. Fair values are estimated in accordance with pre-determined formulae explicit in the contracts with selling shareholders. The significant unobservable inputs used in the fair value measurement of contingent consideration categorized as Level III of the fair value hierarchy are based on projections of revenue, net debt, number of clients, net margin and the discount rates used to evaluate the liability.

 

(f)The Group issued put options for Reclame Aqui’s non-controlling interests, in the 2022 business combination. For the non-controlling shareholder amounts the Group has elected as an accounting policy that the put options derecognize the non-controlling interests at each reporting date as if it was acquired at that date and recognize a financial liability at the present value of the amount payable on exercise of the non-controlling interests put option. The difference between the financial liability and the non-controlling interests derecognized at each period is recognized as an equity transaction. The amount of R$ 186,268 was recorded in the consolidated statement of financial position as of March 31, 2024 as a financial liability under Other liabilities (December 31, 2023 - R$ 178,721).

 

(g)The debt designated for hedge accounting as the hedged item in a fair value hedge is adjusted for changes on its fair value only attributable to the specifically designated risks being hedged.

 

In the three month periods ended March 31, 2024 and 2023, there were no transfers between level I and level II and between level II and level III fair value measurements.

 

5.10.2.       Fair value of financial instruments not measured at fair value

 

The table below presents a comparison by class between book value and fair value of the financial instruments of the Group, other than those with carrying amounts that are reasonable approximations of fair values:

 

F-23

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

    March 31, 2024 December 31, 2023
    Book value   Fair value   Book value   Fair value
                 
Financial assets                
Loans operations portfolio   432,704   420,055   250,747   250,877
    432,704   420,055   250,747   250,877
                 
Financial liabilities                
Accounts payable to clients   19,044,384   18,299,499   19,199,127   18,685,622
Borrowings and financing   5,384,220   5,026,512   5,013,982   4,692,866
    24,428,604   23,326,011   24,213,109   23,378,488

 

 6.

Other assets

 

    March 31, 2024   December 31, 2023
         
Prepaid expenses(a)   202,665   189,371
Customer deferred acquisition costs   190,296   190,239
Receivables from the sale of associates and subsidiaries (b)   54,003   18,676
Judicial deposits   22,438   22,507
Suppliers advances   20,839   35,835
Security deposits   14,236   14,230
Convertible loans   11,267   10,527
Salary advances   7,952   10,837
Other   31,934   26,140
    555,630   518,362
         
Current   384,188   380,854
Non-current   171,442   137,508

 

(a)These expenditures include, but are not limited to, prepaid software licenses, certain consulting services, insurance premiums and prepaid marketing expenses.
The amount recognized as asset in the statement of financial position is charged to the statement of profit or loss once the prepaid services are consumed by the Group.
As of March 31, 2024, the balance includes prepaid media to the Globo group of R$ 39,457 (December 31, 2023 - R$ 96,198). Under the terms of the agreement the amount is available to place media until 2026.

 

(b)Refers to balances receivable from buyers for the sale of the equity interest of Pinpag and Everydata Group Ltd. (formerly, StoneCo CI) and its subsidiaries (namely, the Creditinfo Caribbean companies).

 

F-24

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

7.Recoverable taxes

 

  March 31, 2024   December 31, 2023
       
Withholding income tax on financial income(a) 131,009   101,579
Other withholding income tax 17,299   19,710
Income tax and social contribution 54,389   9,584
Contributions over revenue(b) 3,062   544
Other taxes 10,384   14,922
  216,143   146,339

 

(a)Refers to income taxes withheld on financial income which will be offset against future income tax payable.

 

(b)Refers to income taxes, social contributions, and withholding tax prepayments that have been offset against income tax payable.

 

8.Income taxes

 

The Company is domiciled in the Cayman Islands and there is no income tax in that jurisdiction. Some of the income earned by the Company is related to transactions abroad which are subject to a 15% rate of withholding tax.

 

8.1.Reconciliation of income tax expense

 

Considering the fact that the Company is an entity located in the Cayman Islands which has no income tax, for the purpose of the following reconciliation of income tax expense to profit (loss) for the periods ended March 31, 2024 and 2023, as Brazil is the jurisdiction in which most of the Group’s transactions takes place, the combined Brazilian statutory income tax rates at 34% was applied.

 

In Brazil such combined rate is applied, in general, to all entities and comprises the Corporate Income Tax (“IRPJ”) and the Social Contribution on Net Income (“CSLL”) on the taxable income of each Brazilian legal entity (not on a consolidated basis).

 

  Three months ended March 31,
  2024   2023
       
Profit before income taxes 484,017   306,812
Brazilian statutory rate 34%   34%
Tax (expense) at the statutory rate (164,566)   (104,316)
       
Additions (exclusions):      
Profit (loss) from entities subject to different tax rates 69,612   26,526
Profit (loss) from entities subject to different tax rates - Mark to market on equity securities designated at FVPL   10,395
Other permanent differences (2,862)   (9,355)
Equity pickup on associates 106   (348)
Unrecognized deferred taxes (24,395)   (4,939)
Use of previously unrecognized tax losses 272  
Previously unrecognized on deferred income tax (temporary and tax losses) 577   358
Research and development tax benefits (Lei do Bem) 10,020  
Other tax incentives 814   557
Total income tax and social contribution benefit/(expense) (110,422)   (81,122)
Effective tax rate 22.8 %   26.4 %
       
Current income tax and social contribution (105,852)   (43,554)
Deferred income tax and social contribution (4,570)   (37,568)
Total income tax and social contribution benefit/(expense) (110,422)   (81,122)

 

F-25

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

8.2.Deferred income taxes by nature

 

  December 31, 2023   Recognized against other comprehensive income   Recognized against profit or loss   March 31, 2024
               
Assets at FVOCI 179,944   8,464     188,408
Losses available for offsetting against future taxable income 343,313     18,237   361,550
Other temporary differences 302,551     (44,414)   258,137
Tax deductible goodwill 42,625     (21,271)   21,354
Share-based compensation 123,211     42,728   165,939
Contingencies arising from business combinations 36,320     920   37,240
Technological innovation benefit (9,038)     (540)   (9,578)
Temporary differences under FIDC (224,733)     (16,145)   (240,878)
Intangible assets and property and equipment arising from business combinations (676,215)     15,915   (660,300)
Deferred tax, net 117,978   8,464   (4,570)   121,872

 

8.3.Unrecognized deferred taxes

 

The Group has accumulated tax loss carryforwards and other temporary differences in some subsidiaries in the amount of R$ 157,348 (December 31, 2023 – R$ 133,710) for which a deferred tax asset was not recognized and are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognized with respect of these losses as they cannot be used to offset taxable profits between subsidiaries of the Group, and there is no other evidence of recoverability in the near future.

 

9.Property and equipment

 

9.1.Changes in Property and equipment

 

  December 31, 2023   Additions   Disposals   Transfers   Effects of changes in foreign exchange rates   March 31,
2024
Cost                      
Pin Pads & POS 2,359,314   168,905   (41,675)       2,486,544
IT equipment 295,330   11,721   (27,663)     29   279,417
Facilities 77,594   666   (47)   288   (4)   78,497
Machinery and equipment 23,950   780   (205)     (9)   24,516
Furniture and fixtures 22,684   189   (97)     8   22,784
Vehicles and airplane 27,175   38       1   27,214
Construction in progress 30,962   3,323   (1,313)   (288)     32,684
Right-of-use assets - equipment 4,880     (197)       4,683
Right-of-use assets - vehicles 31,976   16,954   (10,329)       38,601
Right-of-use assets - offices 179,154   7,797   (5,512)     6   181,445
  3,053,019   210,373   (87,038)     31   3,176,385
Depreciation                      
Pin Pads & POS (1,065,406)   (124,621)   36,002       (1,154,025)
IT equipment (172,517)   (12,895)   20,885     (123)   (164,650)
Facilities (30,507)   (3,371)   29     268   (33,581)
Machinery and equipment (20,039)   (2,426)   61     1,144   (21,260)
Furniture and fixtures (6,798)   (862)   39     (20)   (7,641)
Vehicles and airplane (5,468)   (769)       (8)   (6,245)
Right-of-use assets - equipment (1,150)   (32)   197       (985)
Right-of-use assets - Vehicles (23,302)   (3,581)   6,115       (20,768)
Right-of-use assets - Offices (65,935)   (8,256)   5,242     109   (68,840)
  (1,391,122)   (156,813)   68,570     1,370   (1,477,995)
                       
Property and equipment, net 1,661,897   53,560   (18,468)     1,401   1,698,390

 

F-26

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

9.2.Depreciation and amortization charges

 

Depreciation and amortization expense has been charged in the following line items of the consolidated statement of profit or loss:

 

    Three months ended March 31,
    2024   2023
         
Cost of services   161,853   139,370
Administrative expenses   46,484   61,195
Selling expenses   8,998   11,929
Depreciation and Amortization charges (Note 16)   217,335   212,494
Depreciation charge   156,813   136,632
Amortization charge   60,522   75,862
Depreciation and Amortization charges   217,335   212,494

 

10.Intangible assets

 

10.1.Changes in Intangible assets

 

  December 31, 2023   Additions   Disposals   Transfers  

Effects of hyperinflation

 

  Effects of changes in foreign exchange rates   March 31, 2024
                           
Cost                          
Goodwill - acquisition of subsidiaries 5,634,903     (44,535)       (83)   5,590,285
Customer relationships 1,793,696   2,071   (11,675)         1,784,092
Trademarks and patents 550,999   2,065   (11,829)         541,235
Software 1,334,698   36,285   (17,887)   32,905     1,222   1,387,223
Non-compete agreement 26,024             26,024
Operating license 5,674             5,674
Software in progress 274,608   75,097   (2,234)   (32,565)       314,906
Right-of-use assets - Software 50,558   789           51,347
  9,671,160   116,307   (88,160)   340     1,139   9,700,786
Amortization                          
Customer relationships (343,981)   (15,384)   10,914         (348,451)
Trademarks and patents (20,219)   1,296   3,547         (15,376)
Software (474,163)   (41,525)   13,570   (340)   (414)   (76)   (502,948)
Non-compete agreement (12,834)   (1,218)           (14,052)
Operating license (5,673)             (5,673)
Right-of-use assets - Software (19,371)   (3,691)           (23,062)
  (876,241)   (60,522)   28,031   (340)   (414)   (76)   (909,562)
                           
Intangible assets net 8,794,919   55,785   (60,129)     (414)   1,063   8,791,224

 

11.Transactions with related parties

 

Related parties comprise the Group’s parent companies, key management personnel and any businesses which are controlled, directly or indirectly by the founders, officers and directors or over which they exercise significant management influence. Related party transactions are entered in the normal course of business at prices and terms approved by the Group’s management.

 

F-27

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

The following transactions were carried out with associates related parties:

 

    Three months ended March 31,
    2024   2023
         
Sale of services        
         
Associates (legal and administrative services)(a) 11   38
    11   38
         
Purchases of goods and services        
         
Associates (transaction services)(b) (370)   (1,226)
    (370)   (1,226)

 

(a)Related to services provided to Trinks.

 

(b)Related mainly to expenses paid to Trinks, RH Software, APP and Tablet Cloud for consulting services, marketing expenses, sales commissions and software license to new customer’s acquisition.

 

Services provided to related parties include legal and administrative services provided under normal trade terms and reimbursement of other expenses incurred in their respect.

 

11.1.Balances

 

The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

 

  March 31, 2024   December 31, 2023
       
Loans to associate 2,193   2,512
Receivables from related parties 2,193   2,512

 

As of March 31, 2024, there is no allowance for expected credit losses on related parties receivables. No guarantees were provided or received in relation to any accounts receivable or payable involving related parties.

 

12.Provision for contingencies

 

The Group companies are party to labor, civil and tax litigation in progress, which are being addressed at the administrative and judicial levels. For certain contingencies, the Group has made judicial deposits, which are legal reserves the Group is required to make by the Brazilian courts as security for any damages or settlements the Group may be required to pay as a result of litigation.

 

12.1.Probable losses, provided for in the statement of financial position

 

The provisions for probable losses arising from these matters are estimated and periodically adjusted by management, supported by the opinion of its external legal advisors and based on the actual status of the lawsuit. The amount, nature and the movement of the liabilities are summarized as follows:

 

    Civil   Labor   Tax   Total
                 
Balance as of December 31, 2023   35,862   39,705   133,299   208,866
Additions   16,757   12,713   2   29,472
Reversals   (3,813)   (9,515)     (13,328)
Interests   1,201   3,491   3,456   8,148
Payments   (4,910)   (2,444)   (2)   (7,356)
Balance as of March 31, 2024   45,097   43,950   136,755   225,802

 

F-28

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

    Civil   Labor   Tax   Total
                 
Balance as of December 31, 2022   25,324   24,460   160,592   210,376
Additions   6,483   2,316   8,400   17,199
Reversals   (2,369)   (12,485)   (4,712)   (19,566)
Interests   820   963   4,989   6,772
Payments   (915)     (14,697)   (15,612)
Balance as of March 31, 2023   29,343   15,254   154,572   199,169

 

12.1.1.Civil lawsuits

 

In general, provisions and contingencies arise from claims related to lawsuits of a similar nature, with individual amounts that are not considered significant. The nature of the civil litigations has been categorized according to the primary business fronts of the Company. Substantial provisions are specifically summarized in two of these business domains, namely (i) acquiring, totaling R$ 24,593 as of March 31, 2024 (R$ 18,556 as of December 31, 2023) and (ii) banking, totaling R$ 15,687 as of March 31, 2024 (R$ 12,559 as of December 31, 2023).

 

12.1.2.Labor claims

 

In the context of Labor Courts, the Group encounters recurrent lawsuits, primarily falling in two categories: (i) labor claims by former employees and (ii) labor claims brought forth by former employees of outsourced companies contracted by the Group. These claims commonly center around issues such as the claimant’s placement in a different trade union and payment of overtime. The initial value of these lawsuits is asserted by the former employees at the commencement of the legal proceeding.

 

12.2.Possible losses, not provided for in the statement of financial position

 

The Group has the following civil, labor and tax litigation involving risks of loss assessed by management as possible, based on the evaluation of the legal advisors, for which no provision for estimated possible losses was recognized:

 

    March 31, 2024   December 31, 2023
         
Civil   55,665   50,762
Labor   2,640   2,179
Tax   176,665   181,163
Total   234,970   234,104

 

12.2.1.Civil lawsuits

 

The Group is a party to several legal actions whose subjects are connected to its ordinary operations. In this regard, civil lawsuits have been categorized according to the Company’s primary business fronts, namely: (i) acquiring, amounting to R$ 12,675 as of March 31, 2024 (R$ 9,239 as of December 31, 2023); and (ii) software, amounting to R$ 28,747 as of March 31, 2024 (R$ 28,412 as of December 31, 2023).

 

For the acquiring business, there is a noteworthy lawsuit filed by a business partner who was responsible for a portion of the acquisition and referral of commercial establishments. The amount considered as a possible loss is R$ 10,914 as of March 31, 2024 (R$ 10,706 as of December 31, 2023). For the software product line, there is significant indemnity lawsuit filed by an indirect supplier, for the utilization of a specific software provided by the partner, amounting to R$ 26,093 as of March 31, 2024 (R$ 25,596 as of December 31, 2023).

 

F-29

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

12.2.2 Tax litigations

 

An action for annulment of tax debits regarding the tax assessment issued by the state tax authorities on the understanding that the Group would have carried out lease of equipment and data center spaces from January 2014 to December 2015, on the grounds that the operations would have the nature of services of telecommunications and therefore would be subject to state tax at the rate of 25% and a fine equivalent to 50% of the updated tax amount for failure to issue ancillary tax obligations. As of March 31, 2024, the updated amount recorded as a probable loss is R$ 28,669 (December 31, 2023 - R$ 27,937), and the amount of R$ 30,005 (December 31, 2023 - R$ 29,727) is considered as a possible loss (contingency arising from the acquisition of Linx).

 

During 2022 and 2023, the Group received tax assessment issued by a municipal tax Authority relating to the allegedly insufficient payment of tax on services rendered. As of March 31, 2024 the updated amount of claim are R$ 134,331 (December 31,2023 – R$ 129,141). The cases, classified as possible loss, are being challenged at the administrative level of the court.

 

12.3.Judicial deposits

 

For certain contingencies, the Group has made judicial escrow deposits, which are legal reserves the Group is required to make by the Brazilian courts as security for any damages or settlements the Group may be required to pay as a result of litigation.

 

The amount of the judicial deposits as of March 31, 2024 is R$ 22,438 (December 31, 2023 - R$ 22,507), which are included in Other assets in the non-current assets.

 

13.Equity

 

13.1Authorized capital

 

On March 31, 2024 and December 31, 2023, the Company’s issued capital totaled R$ 76. The Company has an authorized share capital of US Dollar 50 thousand, corresponding to 630,000,000 authorized shares with a par value of US Dollar 0.000079365 each. The Company is authorized to increase capital up to this limit, subject to approval of the Board of Directors. The liability of each member is limited to the amount from time to time unpaid on such member’s shares.

 

13.2.Subscribed and paid-in capital and capital reserve

 

The Articles of Association provide that at any time when there are Class A common shares issued, Class B common shares may only be issued pursuant to: (a) a share split, subdivision or similar transaction or as contemplated in the Articles of Association; or (b) a business combination involving the issuance of Class B common shares as full or partial consideration. A business combination, as defined in the Articles of Association, would include, amongst other things, a statutory amalgamation, merger, consolidation, arrangement or other reorganization.

 

The additional paid-in capital refers to the difference between the purchase price that the shareholders pay for the shares and their par value. Under Cayman Islands Law, the balance in this type of account may be applied by the Company to pay distributions or dividends to members, pay up unissued shares to be issued as fully paid, for redemptions and repurchases of own shares, for writing off preliminary expenses, recognized expenses, commissions or for other reasons. All distributions are subject to the Cayman Islands Solvency Test which addresses the Company’s ability to pay debts as they fall due in the natural course of business.

 

There were no changes in the number shares during the three months ended March 2024:

 

    Number of shares
    Class A   Class B   Total
             
At December 31, 2023   295,498,750   18,748,770   314,247,520
At March 31, 2024   295,498,750   18,748,770   314,247,520

 

F-30

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

13.3.Treasury shares

 

Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in equity.

 

On September 21, 2023, the Company's Board of Directors approved a new program under which the Company may repurchase up to R$ 300,000 in outstanding Class A common shares ("New Repurchase Program"). The New Repurchase Program went into effect after the date of the resolution.

 

Following the New Repurchase Program concluded in early November 2023, on November 9, 2023 the amount of R$ 292,745 was used to repurchase shares. As a result, the Company's Board of Directors approved an additional share repurchase program. Under this program, the Company may repurchase up to R$ 1 billion in Class A common shares (“Additional Share Repurchase Program”).

 

As of December 31, 2023 the Company holds 5,311,421 Class A common shares in treasury. The main transactions involving treasury shares during the calendar year ended on December 31, 2023 were: (i) sale of 16,641 Class A common shares to Pagar.me, which were used for payment of contingent consideration related to acquisition of Trampolin, which originally occurred in August 2021; (ii) delivery of 824 shares in the context of the transaction completed with Vitta Group in May 2020; (iii) delivery of 132,607 shares to Linx founders shareholders, in accordance with the non-compete agreement signed; (iv) delivery of 375,531 shares due to vesting of RSUs awards ; (v) transfer of 130,488 treasury shares due to the anti-dilutive mechanism of the IPO pool signed with the founders of the Company; and (vi) repurchase of 5,733,740 Class A shares for the amount of R$ 292,745.

 

The main transaction during the first quarter of 2024 was the fulfillment of vesting conditions of 63,689 shares. As of March 31, 2024, the Company maintains a balance of 5,247,732 Class A common shares in treasury.

 

13.4. Other comprehensive income

 

Other comprehensive income (“OCI”) represents the profit or loss not reported in the statement of profit and loss being separately presented in the financial statements. This includes Company transactions and operations that are not considered realized gains or losses. The table presents the accumulated balance of each category of OCI as of March 31, 2024 and December 31, 2023:

 

    March 31, 2024   December 31, 2023
         
Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent periods (net of tax):        
         
Exchange differences on translation of foreign operations   (40,473)   (41,266)
Accounts receivable from card issuers at fair value   (364,620)   (348,529)
Unrealized loss on cash flow hedge   (239,687)   (197,188)
         
Other comprehensive income (loss) that will not be reclassified to profit or loss in subsequent periods (net of tax):        
         
Fair value of equity instruments designated at fair value   255,103   254,353
Effects of hyperinflationary accounting   13,078   12,181
Total   (376,599)   (320,449)

 

F-31

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

14.Earnings per share

 

Basic earnings per share is calculated by dividing net income for the period attributed to the controlling shareholders by the weighted average number of common shares outstanding during the period.

 

Diluted earnings per share considers the number of shares outstanding for the purposes of Basic earnings plus (when dilutive) the number of potentially issuable shares.

 

All numbers of shares for the purpose of earnings per share are the weighted average during each period presented.

 

14.1.Numerator of earnings per share

 

In determining the numerator of basic EPS, earnings attributable to the Group is allocated as follows:

 

    Three months ended March 31,
    2024   2023
         
Net income attributable to controlling shareholders   372,981   226,639
Numerator of basic EPS   372,981   226,639

 

In determining the numerator of diluted EPS, earnings attributable to the Group is allocated as follows:

 

    Three months ended March 31,
    2024   2023
         
Numerator of basic EPS   372,981   226,639
Numerator of diluted EPS   372,981   226,639

 

14.2.Basic and Diluted earnings per share

 

The following table contains the EPS of the Group for the three months ended March 31, 2024 and 2023 (in thousands except share and per share amounts):

 

    Three months ended March 31,
    2024   2023
         
Numerator of basic EPS   372,981   226,639
         
Weighted average number of outstanding shares   308,999,088   312,748,594
Weighted average number of contingently issuable shares with conditions satisfied   119,535  
Denominator of basic EPS   309,118,623   312,748,594
         
Basic earnings per share - R$   1.21   0.72
         
Numerator of diluted EPS   372,981   226,639
         
Share-based instruments (a)   6,972,810   12,163,245
Denominator of basic EPS   309,118,623   312,748,594
Denominator of diluted EPS   316,091,433   324,911,839
Diluted earnings per share - R$   1.18   0.70

 

(a)Including share-based compensation, contingent consideration and non-compete agreement with founders of Linx. Diluted earnings per share are calculated by adjusting the weighted average number of shares outstanding, considering potentially convertible instruments.

 

F-32

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

14.3.Detail of potentially issuable common shares for purposes of Diluted EPS

 

The potentially issuable common shares consider the difference between the issuable shares under share-based instruments and the number of shares that potentially be purchased at the weighted average market price of the shares during the period with the amount of future compensation expense of those share-based instruments, as presented as follows:

 

    March 31, 2024
     
Shares issuable under share-based payment plans for which performance conditions have already been met   12,975,203
Total weighted average shares that could have been purchased: compensation expense to be recognized in future periods divided by the weighted average market price of Company’s shares   (6,402,521)
Other total weighted average shares potentially issuable for no additional consideration   400,128
Share-based instruments   6,972,810

 

15.Revenue and income

 

15.1.Timing of revenue recognition

 

Net revenue from transaction activities and other services and discount fees charged for the prepayment are recognized at a point in time, except for membership fees which are recognized over time as mentioned in Note 2.1. All other revenue and income are recognized over time.

 

During the three months ended March 31, 2024 the Group billed R$ 78,995 in membership fees (three months ended March 31, 2023 - R$ 81,958). The Group has recognized revenue to those membership fees in the amount of R$ 10,309 in the three months ended March 31, 2024 (March 31, 2023 - R$ 81,958).

 

Net revenue from transaction activities and other services includes membership fee mentioned above and R$ 9,000 of registry business fee in the three months ended March 31, 2024 (R$ 19,159 in three months ended March 31, 2023).

 

16.Expenses by nature

 

  Three months ended March 31,
  2024   2023
       
Personnel expenses 677,018   688,360
Mark-to-market on equity securities designated at FVPL   (30,574)
Transaction and client services costs (a) 354,171   287,660
Depreciation and amortization (Note 9.2) 217,335   212,494
Marketing expenses and sales commissions (b) 270,362   183,643
Third parties services 65,695   61,268
Other 120,076   77,332
Total expenses 1,704,657   1,480,183

 

(a)Transaction and client services costs include card transaction capturing services, card transaction and settlement processing services, logistics costs, payment scheme fees, cloud services, allowance for expected credit losses and other costs.

 

(b)Marketing expenses and sales commissions relate to marketing and advertising expenses, and commissions paid to sales related partnerships.

 

F-33

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

17. Financial expenses, net

 

  Three months ended March 31,
  2024   2023
       
Finance cost of sale of receivables 672,802   714,711
Other interest on loans and financing (Note 5.6.1) 116,553   83,423
Cost of bond (Note 5.6.1 and 5.7.1) 85,140   102,946
Foreign exchange (gains) and losses (2,967)   (9,868)
Other 25,019   32,427
Total 896,547   923,639

 

18.Employee benefits

 

18.1.Share-based payment plans

 

The Group has equity settled share-based payment instruments, under which management grants shares to employees and non-employees depending on the strategy of the Group. The following table outlines the key share-based awards movements - in number of shares - as of March 31, 2024 and December 31, 2023.

 

  Equity
  RSU   PSU   Options   Total
Balance as of December 31, 2023 12,429,557   8,305,048   45,159   20,779,764
Granted 2,369,160   124,420     2,493,580
Cancelled (958,346)   (2,982,630)     (3,940,976)
Delivered (a) (68,569)       (68,569)
Balance as of March 31, 2024 13,771,802   5,446,838   45,159   19,263,799

 

(a)The delivery of the period net of withholding taxes represents 63,689 shares.

 

18.1.1.       Restricted share units ("RSU")

 

RSUs have been granted to certain key employees under the LTIP to incentivize and reward such individuals. These awards are equity-classified for accounting purposes and may be granted as part of the annual equity bonus and also as special recognition equity awards with a weighted average vesting period of 2.9 years, subject to and conditioned upon the achievement of certain targets which are generally solely service conditions. Assuming these conditions are met, awards are settled through Class A common shares. If the applicable conditions are not achieved, the awards are forfeited for no consideration.

 

In the first quarter of 2024, the Company granted 2,369,160 RSU’s with an average grant-date fair value of R$ 81.75, which were determined based on the fair value of the equity instruments granted and the exchange rate, both at the grant date. Moreover, 68,569 RSUs vested in the first quarter, resulting in a delivery through treasury shares of 63,689 shares net of withholding taxes.

 

18.1.2.Performance share units ("PSU")

 

PSUs are equity classified for accounting purposes and the vast majority have been granted as part of special recognition equity awards with a weighted average vesting period of 2.7 years. PSU grants beneficiaries the right to receive shares if the Group reaches minimum levels of total shareholder return (“TSR”) for a specific period. If the minimum performance condition is not met the PSUs will not be delivered.

 

The fair value of the instruments is estimated at the grant date using the Black-Scholes-Merton pricing model, considering the terms and conditions on which the PSUs were granted, and the related expense is recognized over the vesting period. The performance condition is considered for estimating the grant-date fair value and of the number of PSUs expected to be issued, based on historical data and current expectations and is not necessarily indicative of performance patterns that may occur.

 

F-34

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

In the first quarter of 2024, the Company granted 124,420 new PSUs with an average grant-date fair value of R$ 9.10. The grant-date fair value was determined based on historical data and current expectations and is not necessarily indicative of performance patterns that may occur.

 

The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the PSUs is indicative of future trends, which may not necessarily be the actual outcome. For the grants mentioned above, the main two inputs to the model were: (i) Risk–free interest rate between of 3.94% and 4.77% according to 3-month LIBOR/SOFR forward curve for 3 and 5 years period, and (ii) annual volatility between 73.3% and 75.1%, based on the Company’s historical stock price.

 

18.1.3.Options

 

The Group has granted awards as stock options, of which the exercise date will be between 3 and 10 years with a fair value estimated at the grant date based on the Black-Scholes-Merton pricing model. On March 31, 2024, R$ 14,592 (R$ 14,592 for the three months ended March 31, 2023) stock options were exercisable.

 

18.1.4 Share-based payment expenses

 

During the first quarter of 2024, a net reversal of R$ 40,461 was recognized due to extraordinary events such as the forfeiture of 3,833,527 shares because of failure to satisfy service vesting condition.

 

The total expense related to share-based plans, including taxes and social charges, recognized as Other income (expenses), net for the programs was R$ 25,783 for the three months ended March 31, 2024 (R$ 70,118 for the three months ended March 31, 2023).

 

19.Other disclosures on cash flows

 

19.1.Non-cash operating activities

 

  Three months ended March 31,
  2024   2023
Fair value adjustment on loans designated at FVPL   (116,400)
Adjustment on FIDC obligations designated for fair value hedge 16,805  
Fair value adjustment on equity securities designated at FVPL   30,574
Fair value adjustment in financial instruments designated at FVPL 16,805   (85,826)
       
Changes in the fair value of accounts receivable from card issuers at FVOCI 24,381   (91,757)
Fair value adjustment on equity instruments/listed securities designated at FVOCI 750   (393)

 

19.2.Non-cash investing activities

 

  Three months ended March 31,
  2024   2023
       
Property and equipment and intangible assets acquired through lease (Note 9.1 and 10.1) 25,540   25,835

 

19.3.Non-cash financing activities

 

  Three months ended March 31,
  2024   2023
       
Unpaid consideration for acquisition of non-controlling shares 725   1,277

 

F-35

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

19.4Breakdown of interest income received, net of costs

 

  Three months ended March 31,
  2024   2023
Interest income received on accounts payable to clients 1,631,010   1,321,504
Finance cost of sale of receivables on Accounts receivable from card issuers (Note 17) (672,802)   (714,711)
Interest income received, net of costs 958,208   606,793

 

19.5.Property and equipment, and intangible assets

 

  Three months ended March 31,
  2024   2023
       
Additions of property and equipment (Note 9.1) (210,373)   (314,181)
Additions of right of use (IFRS 16) (Note 9.1) 24,751   25,025
Payments from previous period (65,348)   (176,835)
Purchases not paid at period end 70,348   125,906
Prepaid purchases of POS   (244)
Purchases of property and equipment (180,622)   (340,329)
       
Additions of intangible assets (Note 10.1) (116,307)   (71,131)
Additions of right of use (IFRS 16) (Note 10.1) 789   1,502
Payments from previous period (14,117)   (6,593)
Purchases not paid at period end 3,608   161
Purchases and development of intangible assets (126,027)   (76,061)
       
Net book value of disposed assets (Notes 9.1 and 10.1) 78,597   27,855
Net book value of disposed Leases (Note 5.6.1) (4,695)   (10,407)
Gain (loss) on disposal of property and equipment and intangible assets (6,070)   (14,948)
Disposal of Pinpag property, equipment and intangible assets (59,176)  
Outstanding balance (8,615)   (2,295)
Proceeds from disposal of property and equipment and intangible assets 41   205

 

20.Segment information

 

In line with the strategy and organizational structure of the Group, the Group is presenting two reportable segments, namely “Financial Services” and “Software” and certain non-allocated activities:

 

     Financial services: Comprised of our financial services solutions which includes mainly payments solutions, digital banking, credit, insurance solutions as well as the registry business.

 

     Software: Composed of our Strategic Verticals (Retail, Gas Stations, Food and Drugstores), Enterprise and Other Verticals. The Software segment includes the following solutions: POS/ERP, TEF and QR Code gateways, reconciliation, CRM, OMS, e-commerce platform, engagement tool, ads solution, and marketplace hub.

 

     Non allocated activities: Comprised of non-strategic businesses, including results on disposal / discontinuation of non-core businesses.

 

The Group used and continues to use Adjusted net income (loss) as the measure reported to the CODM about the performance of each segment.

 

F-36

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

20.1.Statement of profit or loss by segment

 

    Three months ended March 31, 2024
    Financial Services   Software   Non allocated
             
Total revenue and income   2,710,347   369,070   5,493
             
Cost of services   (647,571)   (162,339)   (16)
Administrative expenses   (158,897)   (70,576)   (2,561)
Selling expenses   (447,024)   (81,498)   (1,153)
Financial expenses, net   (878,129)   (11,038)   (74)
Other income (expenses), net   (50,155)   (6,574)  
Total adjusted expenses   (2,181,776)   (332,025)   (3,804)
             
Gain on investment in associates     120   191
Adjusted profit before income taxes   528,571   37,165   1,880
             
Income taxes and social contributions   (107,268)   (9,492)   (428)
Adjusted net income for the period   421,303   27,673   1,452

 

    Three months ended March 31, 2023
    Financial Services   Software   Non allocated
             
Total revenue and income   2,335,926   358,218   17,512
             
Cost of services   (555,272)   (164,196)   (1,808)
Administrative expenses   (170,930)   (83,458)   (8,064)
Selling expenses   (314,827)   (68,952)   (6,149)
Financial expenses, net   (895,018)   (13,631)   (236)
Other income (expenses), net   (92,627)   (11,011)   (438)
Total adjusted expenses   (2,028,674)   (341,248)   (16,695)
             
Gain (loss) on investment in associates   (1,273)   (107)   357
Adjusted profit before income taxes   305,979   16,863   1,174
             
Income taxes and social contributions   (79,081)   (8,377)   39
Adjusted net income for the period   226,898   8,486   1,213

 

F-37

StoneCo Ltd.

Notes to unaudited interim condensed consolidated financial statements

March 31, 2024

(In thousands of Brazilian Reais, unless otherwise stated)

 

20.2.Reconciliation of segment adjusted net income for the period with net income in the consolidated financial statements

 

  Three months ended March 31,
  2024   2023
       
Adjusted net income – Financial Services 421,303   226,898
Adjusted net income – Software 27,673   8,486
Adjusted net income – Non allocated 1,452   1,213
Adjusted net income 450,428   236,597
       
Adjustments from adjusted net income to consolidated net income (loss)      
Mark-to-market from the investment in Banco Inter   30,574
Amortization of fair value adjustment (a) (12,288)   (33,673)
Other income (loss)(b) (71,311)   (14,105)
Tax effect on adjustments 6,766   6,297
Consolidated net income 373,595   225,690

 

(a)Related to acquisitions. Consists of expenses resulting from the changes of the fair value adjustments as a result of the application of the acquisition method.

 

(b)Consists of the fair value adjustment related to associates call option, earn-out and earn-out interests related to acquisitions, reversal of litigation of Linx and divestment of assets.

 

F-38