$STNE: de-risked, profitable, growing fast

IMO they have a SUCCESSFUL turnaround in their rear-view mirror and are now firing on all cylinders in a greenfield environment. I will address the turnaround towards the bottom of this post. In the meantime I think they are growing RIGHT NOW, so it’s more important to focus on that vs. the turnaround.

The bulk of its revenue is from their POS solutions; to over-simplify, they are the Brazilian equivalent of Square. Their client base is SMB plus “micro” businesses that consist of only one person.

They have other active revenue streams they are actively growing. They have ambitions to expand adjacent revenue streams (…which they are already doing), expand to larger clients, and potentially expand to (edit: other) countries.

However for the near and mid-term, their competitive moat consists of the POS solutions they have that makes it easier to operate a business in Brazil. I won’t pretend to be well-versed in what that entails; I am still learning. My best understanding is that there are many challenges unique to POS systems in Brazil. For instance, Merchants have to be able to accept a lot of different forms of payment, some of which are unique to Brazil (…involving “Pix” and “Boleto”).

I think their profitability and growth numbers provide evidence that they do have a lucrative moat in their core POS business, and that they have a greenfield opportunity to increase revenues.

Revenue in Brazilian Reals

Year Q1 Q2 Q3 Q4
2021 228.86M 613.4M 1.47B 1.87B
2022 2.07B 2.30B 2.51B 2.71B
2023 2.71B 2.95B 3.14B

Sources of revenue:
POS terminals (hardware), Checkout, Tap-on-Phone, Whatsapp Pay, Credit Card handling, Cash Handling, Pix, Boleto, Close Cash Register, Settle Payment, Print Receipt.

NOTE: Their handheld hardware is connected to ERP and Financial Operations/Banking software (see below).

ERP Software
Create invoices, Manage an online store, purchase/manage inventory, pay employees, expense reports, “Hyper Local” Delivery Services, track Sales and Cash Flow. Functionality for Employees to request, and Owners to approve, scheduled payments.

Financial operations (banking)
Check balance, invest funds, obtain loans.

Long term vision for their software

  1. Save their clients time by having POS, ERP and Banking integrated and usable from a “single pane of glass”
  2. Ensure their clients have all payment options available so they never have to miss a sale
  3. Keep clients’ money in the $STNE ecosystem. NOTE: it’s my best understanding that $STNE has applied for, and expects to soon receive a Banking license, which should enable them to make $$ from their clients’ deposits
  4. Expand from being the Square of Brazil to also being the Shopify of Brazil

Long Term Vision for Durable Growth

  1. Keep expanding on current greenfield in POS for “Micro-and-SMB” (MSMB)
  2. Keep expanding sales of ERP solutions (…to become the Shopify of Brazil)
  3. Keep growing clients who sign up for Banking/Financial Services
  4. Keep growing their (currently-small-but-growing) Lending services
  5. Obtain and leverage a Banking License

Long Term Vision for Operating Leverage

  1. Reduce expenses and friction from new initiatives by rationalizing their existing three software stacks into a single platform ( this is in-progress )
  2. Detach themselves from Customers who are not sufficiently profitable (this is in-progress)

Main Plot Points in The Turnaround Story

  1. Things were going well; POS was their focus
  2. They decided to AGGRESSIVELY move into Lending
  3. They used faulty credit-worthiness data provided by the Brazilian Government (…the "national registry database), and had to eat a lot of bad loans.
  4. Pandemic happened and interest rates shot up, Brazilian Real vs. Dollar exchange rate got worse
  5. Stoneco had to pay a lot more interest on their debt, but did not raise interest on their clients’ debt. I’m sure their clients appreciated it, but Stoneco lost HUNDREDS OF MILLIONS on their credit portfolio and as of the end of 2022 still had $80M in bad debt on their books.
  6. In the third quarter of 2021 they registered a $230M loss from a bad investment in a bank called Banco International.
  7. They were able to stay in business, and even increase their customer count, based mostly on the strength of their POS business
  8. They got some new blood onto their Board and (…as of May 20230 a new CEO
  9. They got rid of the last of their bad debt and cleaned up their books
  10. They have acknowledged their mistakes: " …we tried to do a lot last year, and we simply did not execute it, as well as we would have liked.
    We ramped our credit offering quickly, but we did not manage this expansion well. "
  11. Going forward, they have a much more measured approach to Durable Growth, including a very specific roadmap of what they are focusing on, in what order.

Some thoughts on where things stand now

  1. Their stock has been completely pummeled
  2. IMO they are de-risked not just in stock price, but they have made appropriate adjustments that make them much less vulnerable to the stuff that went wrong previously.
  3. Their numbers are super compelling. Where else can you get forward revenue growth of 40% (…according to their page on SeekingAlpha), a Gross Margin of 74%, producing buckets of cash from operations at a P/E of 18

I got in with a 6% position last week.
Sorry for the lack of detail; I’ve run out of time for this evening…I’ll try to add some additional detail this coming week.


Hi Intjudo

Thanks for proposing a company.

Do you have the numbers in USD? I find it difficult to navigate in Real - dividing by a couple of thousand is not my strong suit :wink:

Would also be great to see the rest of the numbers - gross, operating and net margins and customer growth for example - to get a better sense of the company.

Also just wondering if the revenue ex the loans business is available? Or are they still continuing with the loans business? Do they split the revenue and other metrics between the different lines of business?

What is your view of this company vs FOUR - a US company expanding abroad with tailwinds?






OT, new to Saul’s community. What is the data source of your spreadsheet on STNE? Thanks for any input!


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The 6K’s and 20F’s on Sec.gov. Everything is in Brazilian Real’s except for conversion on Sales of Brazilian to USD.



Hi wsm,

$FOUR is on my to-research-list; Bert wrote favorably about it on SeekingAlpha on May 3rd 2022.

(BTW, Bert asserts that (…contrary to popular opinion) there are moats available to payment processors who can identify, and preset a unique resolution to, unique challenges faced by particular subsets of merchants. )

The value proposition presented by $STNE and $FOUR is identical: they claim to save their clients time, ensure they never miss a sale for lack of a viable payment method, and enable identification and acceleration of business initiatives.

What differs is the challenges addressed by $STNE vs. $FOUR:

  1. $STNE solves a narrowly defined problem (POS/payments) for a wide audience (“All MSMB merchants in Brazil”)
  2. $FOUR solves a BROAD set of problems (integration of POS with a huge number of partners with widely varying integration requirements) to a more NARROW audience (…vendors with sprawling business models requiring said wide range of integrations)

I’ll admit to not knowing much about $FOUR, and I have no true understanding of the technical challenges faced by either.

Comparing numbers via their home pages on SeekingAlpha, I see that they are similar in terms of Cash from Operations and Net Income per Employee. They show similar growth rates. Their Market Cap is even similar. However $STNE has a much higher Gross Margin and a much lower P/E.

$FOUR certainly has executed well, and if it can successfully jump the pond there could be a lot of upside.

Again, apologies for the detail lacking in my original post. I’ll try to fill some in this week.


Hi Andy

Thanks for that.

However FCF margin and net profit margin look suspect/confusing; are you sure they are correct? Per your sheet:

Free cash flow margins:
Q4 2020: 204.18%
Q1 2021: 84.48%
Q2 2021: 107.87%

EPS Percent:
Q3 2023 -100% (Revenues of 3.2bn and net income of 411k)

Q3 2023: 2.692

The operating margin (is that Operating Measure in your sheet?) looks like it is showing very good improvement if that is correct - you have that as 14.29% in Q2 2023 vs negative 20.98% in Q2 of last year. But Q3 2023 is empty so not sure of the last Q/trend.

Looks interesting but the numbers are confusing to me.



I see what you mean WSM. Let me check what I did and I will get back to you.


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Thanks WSM for catching that. I really messed that up. I have been following the company for awhile but didn’t fill out the spread sheet for a few quarters so I had a hole in the spreadsheet. Plus some of my numbers were incorrect. That was some extremely sloppy work. So I went over it and I think this will be better. The way I calculate FCF margin is I add the 4 quarters of FCF starting with the latest and divide it my the last 4 quarters of revenue. I don’t do it quarter by quarter because I like to see it more smoothed out. Although with Stne it really does not seem to matter. So if you look at row eleven that is my total Yearly FCF and then row 33 is my total yearly Revenue. Yes that should have been Operating Margins. Hopefully I have all my errors cleaned up.



Andy and WSM,

As I’m sure you’ve noticed, in their CCs and earnings presentations over the past three years they do much of the description of their progress in this manner:

  1. In narrative fashion
  2. …using percentages and growth rates
  3. …often/usually without stating the specific revenue figures used to determine said percentages and growth rates.

To make matters worse:

  1. They have a complex business
  2. They are acquisitive
  3. They went through several (hopefully) one-off negative events like their financing fiasco and sunk costs in a bad investment e.g. the stuff they have hopefully turned-around-from.

In short, there aren’t many metrics they report consistently across the past three years-ish.

That said, I did glean the following I can add: (EDIT: numbers below are in USD)

Metric 20 q4 21 q1 21 q2 21 q3 21 q4 22 Q1 22 Q2 22 Q3 22 Q4 23 Q1 23 Q2 23 Q3
revenue-fin-svcs ? 164,000,000 172,000,000 240,000,000 300,000,000 340,000,000 380,000,000 420,000,000 460,000,000 460,000,000 520,000,000 540,000,000
revenue-software ? 51,400,000 60,940,000 60,200,000 62,200,000 65,400,000 70,200,000 73,200,000 75,200,000 71,600,000 76,600,000 77,600,000


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Andy and WSM,

As you might notice, my number for 2021-Q2 for just “Financial Services revenue” is GREATER THAN Andy’s 2021-Q2 number for TOTAL revenue, which of course doesn’t make sense…
…unless/until you take a look at the bottom of the 2021-Q2 presentation, where they state that if you look at the numbers “excluding the credit product” the TOTAL revenue was actually R$ 1,010,600,000 e.g. USD$ 202,120,000

They didn’t specify “Financial Services revenue” anywhere for 2021-Q2; I derived that number using “Financial Services revenue” and corresponding YoY% stated in the 2022 Q2 presentation.

I hope this is all correct…if not, my apologies; I’ve got a long way to go learning this stuff :slight_smile:



Circling back to your post above:

"Also just wondering if the revenue ex the loans business is available? Or are they still continuing with the loans business?

Regarding the loans business, they basically jettisoned their old loans business and then started it up again; this time they are proceeding a lot more slowly/carefully. As far as I can tell, it’s a drop in the bucket vs. their overall revenue. For instance in their 2023 Q2 presentation they state “As of July 31, 2023, we disbursed (USD $5.2M) of the new credit product to ~850 clients with an outstanding balance of (USD $4.7M)”

“Do they split the revenue and other metrics between the different lines of business?”

Per my post above, the only breakouts they report consistently, that I have found, are total revenue, “Financial Services” revenue and “software” revenue.

“Would also be great to see the rest of the numbers - gross, operating and net margins and customer growth for example - to get a better sense of the company.”

I’ll have to dig some more; I’d like to at least get a history of gross margins.

My assessment so far is mainly based on the following:

  1. Because it’s a turnaround, we don’t actually have very much history that we can use for YoY comparisons, because the numbers were low and/or obfuscated while they were in the depths of the turnaround.
  2. So we can’t really use YoY nunbers until we get past the easy comps coming out of the turnaround.

That said, YoY revenue growth starting in 2022-q4 looks like this:
45% , 31% , 28% and 25% this past 2023-q3

Notably, “Software” growth rate has been almost completely flat for the same time period.

So my interim conclusions are:

  1. Growth is arguably good, considering macro, but it’s not hypergrowth using the criteria in the Knowledge Base.
  2. At the moment any “durable growth” they have (IMO) lies in their early-mover advantage: their revenue from their second-highest revenue stream ( “software” category ) is not getting any traction…I’m forced to conclude they are not succeeding, currently, in achieving Durable Growth via adjacent revenue streams.
  3. (…perhaps due to #2, above,) The market does not believe they will accelerate revenue meaningfully in the near future, thus the low P/E

IMO the wildcard is whether they are able to use the company they recently acquired (Linx) to get more revenue, and achieve higher margins, by moving into specialized market verticles like Gas Stations, Pharmacy etc. It will take some time to see if/how that plays out.

Looks like the title I chose for this thread is quite possibly too optimistic :confused: though they do seem to be having some success attaining better profitability.



The numbers I gave were in real as the company states them. How are you getting your numbers into USD? The tricky thing with foreign currency and converting it into USD is that with inflation that number will change. Today the number would be very different than in 2021 as you know.




Even being aware of the change over time in the conversion rate, I didn’t connect the dots.
I just used the current conversion rate for all of the numbers. My bad. Yet another layer of complexity to manage when assessing $STNE!

Here are the numbers in Reals.
Financial Services revenue is in billions, and software revenue is in millions.

Metric 20 q4 21 q1 21 q2 21 q3 21 q4 22 Q1 22 Q2 22 Q3 22 Q4 23 Q1 23 Q2 23 Q3
revenue-fin-svcs ? 0.82 0.86 1.2 1.5 1.7 1.9 2.1 2.3 2.3 2.6 2.7
revenue-software ? 257 304.7 301 311 327 351 366 376 358 383 388



Just to let everyone know. Based on what I’ve found, I’ve reduced my $STNE position back to an entry-sized position. I’ll be watching and learning though.