StoneCo released its 2022 Q2 earnings in August 2022. Here are the key points that you don't want to miss for StoneCo from this earnings!
Earlier this year (2022 Q1), we mentioned that StoneCo’s business continued to have a strong and growing core operation with a growing user base that could lead to good monetisation in the future, while it worked on its repricing initiatives (to improve its profitability), although there were also some uncertainties with execution (on its credit business) and capital allocation that remain to be seen.
In the latest quarter (2022 Q2), StoneCo continued to make good progress in its repricing efforts, with its revenue growing significantly y/y by 276%, or 83% on a more like-to-like basis (i.e. excluding credit business and pro-forma for Linx).
In this article, let’s first look at how StoneCo has fared on some key financials, followed by comments on its repricing initiatives & impact on valuation, profitability issues, and capital allocation.
Key Financials
In 2022 Q2, for StoneCo:
TPV grew 78% y/y or 10% q/q (to BRL 70b), driven by both growth in number of clients, and the average TPV per client, which grew for both TON and SMB segments (by 32% and 37% y/y respectively).
Payments client base surpassed 2.1 million clients, a significant increase of 98% y/y or 10% q/q. After the drop in net clients add to 168 thousand in 2022 Q1 after StoneCo repriced its lending solutions (to catch up with the increase in interest or funding costs), the net add had increased back to 196 thousand in 2022 Q2, which was even higher than a year ago by 4%, so that’s a good thing.
Helped by the repricing initiatives, take rate continued to increase to 2.09%, higher than the 1.79% last year (excluding effect from credit product) and 2.06% a quarter ago.
Thus, revenue grew significantly (due to the higher TPV and slightly higher take rate), by 83% y/y, proforma for Linx (which was consolidated only in 2021 Q3) and excluding the credit impact adjustment last year, or 276% y/y unadjusted. By segment, the revenue grew y/y faster for the financial services segment (102%, excluding the credit impact), while the software segment grew 23% (pro-forma for Linx).
Total costs grew by 160% (or RMB 1.4b) y/y, slower than the 276% revenue growth. The increase was mainly driven by increases in financial expenses (of RMB 0.8b) and cost of services (RMB 0.3b). For the other operating costs, they have decreased as a % of revenue, which helped with StoneCo’s profitability. Administrative expenses dropped y/y from 20.2% of revenue to 10.1% of revenue, due to operating leverage for back office expenses. Selling expenses dropped y/y from 31.2% of revenue to 14.6% of revenue, mainly due to more normalized levels of marketing expenses.
Adjusted StoneCo Q2 earnings before tax increased to BRL 84m (or 4.3% of revenue), higher than the negative BRL 203m a year ago, or positive BRL 66m (or 3.8% of revenue) a quarter ago.
Repricing (& Impact On Valuation), Profitability & Capital Allocation
Now, let’s talk about StoneCo’s repricing initiatives, profitability issues, and capital allocation.
For the remaining points of this article, check them out at our Multibagger Research Series (linked below).
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For our summary analysis of the company, check out the video below.
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