StoneCo Stock

StoneCo Ltd. provides financial technology and software solutions that empower merchants to conduct commerce across multiple channels and help them grow their businesses.

The company started its journey by providing payments services to its clients and has evolved its business since then to provide multiple solutions to merchants, ranging from different financial services to software solutions.

The company started by developing a strong client-centric culture that sought to delight its clients rather than simply provide them with a solution or service. The Stone Business Model combined an advanced, end-to-end, cloud-based technology platform; a differentiated hyper-local and integrated distribution approach; and a white-glove, on-demand customer service.

Advanced, End-to-End, Cloud-Based Technology Platform—The company designed its cloud-based technology platform to help its clients connect, get paid and grow their businesses, while meeting the complex and rapidly changing demands of omni-channel commerce; and overcome long-standing inefficiencies within the Brazilian payments market. Having a proprietary, cloud-based, end-to-end platform enabled the company to develop, host and deploy its solutions very quickly.

Differentiated Hyper-Local and Integrated Distribution—The company developed its distribution solution to proactively reach and serve its clients in a more effective manner. In particular, the company developed Stone Hubs, which are local operations close to its clients that include an integrated team of sales, service, and operations support staff to reach small-and medium-sized businesses or SMBs, locally and efficiently, and to build stronger relationships with them. The company also developed a specialized in-house sales team with dedicated expertise to serve larger clients, including online merchants, digital service providers and ISVs.

White-Glove, On-Demand Customer Service—The company created its on-demand customer service team to support its clients quickly, conveniently, and with high-quality service designed to strengthen its customer relationships and improve their lifetime value with it. The company’s customer service approach combines a Human Connection, through which it seeks to address its clients’ service needs in a single phone call using a qualified team of technically trained agents; Proximity, through its Green Angels team of local support personnel who can serve its clients in person within minutes or hours, instead of days or weeks; and Technology, through a range of self-service tools and proprietary artificial intelligence, or AI, that help its clients manage their operations more conveniently and enable its agents to proactively address merchant’s needs, sometimes before they are even aware of an issue.

Client-Centric Culture—The company has proactively fostered and developed a highly-innovative, entrepreneurial, and mission-driven culture that helps attract new talent, enables it to achieve its objectives, and provides a key competitive advantage. The company’s culture unites its team across numerous functions and focuses its collective efforts on passionately developing technology and implementing its business model to disrupt legacy practices, older technologies, and incumbent vendors in order to provide solutions and a level of service that goes beyond simply meeting the needs of its clients, and instead seeks to deliver an enhanced overall client experience.

The company served almost 2.6 million payments active clients in Brazil as of December 31, 2022, including digital and brick-and-mortar merchants of varying sizes and types, although its focus is primarily on targeting the approximately 13.9 million Brazilian Micro, Small and Medium Businesses, or MSMBs.

In 2019, the company started to broaden its set of solutions to its merchants to include different financial services and software solutions, focused on helping its clients to better manage their businesses and grow. Within financial services, the company has developed digital banking solutions and working capital loans, in addition to the payments offering. In software, the company invested in different companies, including companies that offer POS/ERP solutions among different verticals, engagement tools & CRM solutions, accounting services offering, among others. In 2021, the company concluded the acquisition of Linx, a leading software company in Brazil focused on retail management solutions.

The company generates revenues based on fees it charges for the services it provides. These include payment processing fees and transactional banking fees related to transaction activities and other services (which are typically charged as a percentage of the transaction amount or as a fixed amount per transaction); financial income related to prepayment financing fees, interest/fees related to its credit solution and floating from deposits from digital banking clients; and subscription and equipment rental fees, which includes recurring subscription revenues from software solutions.

Segments

The company operates through two segments, Financial Services and Software.

In Financial Services, the company offers payments, digital banking and credit solutions, focused mainly on Micro, Small and Medium Businesses (MSMBs).

In Software, the company offers POS and ERP solutions for different retail and services verticals, customer relationship management (CRM), engagement tools, e-commerce and OMS (Omnichannel) solutions, among others. With the acquisition of Linx S.A.( Linx) in 2021, the company became a leading player in the retail software market in Brazil.

Financial Services

This segment encompasses the company’s financial services offering for both MSMBs (micro-merchants and SMBs) and key accounts (consisted of platform services and subacquirers). The company’s solutions include payments, digital banking and credit, as detailed below:

Payment Solutions: Payment collection is streamlined by accepting numerous forms of electronic payments and alternative payment methods (APMs), such as payments slips (boletos) and Pix transactions, and conducting a wide range of transactions in brick-and-mortar and digital storefronts in a quick and user-friendly manner. The company also provides digital product enhancements to help its merchants improve their consumers’ experience, such as its split-payment processing, multi-payment processing, recurring payments for subscriptions, and one-click buy functionality.

Prepayment Solutions: The company helps its clients manage their working capital needs and effectively plan for the future by offering them prepayment financing options, which consists of making the settlement of a card transaction to its clients at a discount before the settlement is originally due. Such working capital solution provides clients with transparency and control over their receivables and enable them to better manage their cash flow to help their businesses grow.

Digital Banking Solutions: The company offers its clients a digital bank account, which can be integrated to the POS and allows its clients to receive and make payments, issue payment slips (boletos), pay taxes, make Pix transfers, all in a cost-effective and user-friendly way. In addition, the company provides its clients with store, life (regular or whole life) and health insurance solutions, acting solely as a broker.

Credit Solutions: The company provides its clients with credit if they need further funding to grow their businesses beyond the working capital (prepayment) solutions that it provides. The company leverages on its clients’ data to offer this solution in a proactive and cost-effective way. Once onboarded, the company’s clients can access credit through multiple channels in a simple and transparent way. The company’s credit offering enables its clients to pay back their loans effortlessly through the automatic retention of a percentage of their credit card receivables to pay for their monthly fixed installment. The company temporarily stopped offering the credit solution for new clients since July 2021. The company has evolved since then, focusing on building a fully automated process for credit underwriting, as it strives to make its decision models more sophisticated through enhancement of data, strengthening its team and approving its risk policies, among different other improvements

Software

This segment consists of two main fronts, namely: Core, consisted of POS/ERP solutions, electronic transfer of funds (TEF) and QR Code gateways, reconciliation and CRM and Digital, which includes OMS, e-commerce platform, engagement tool, Ads solution and Marketplace Hub. These fronts are detailed below.

Core: The company provides POS and ERP software solutions to its clients across different retail and services verticals, simplifying their daily operations and, therefore, allowing them to better manage their businesses. Verticals served include apparel, gas stations, cosmetics, drugstores, footwear, among others. The company also provides TEF and QR Code gateway solutions that enable payments and Pix integration into the clients’ POS/ERP, streamlining their operations and increasing security. The company’s clients are also offered reconciliation solutions, which enable them to reconcile all their payment methods within their POS/ERP platform. Finally, the company also provides clients with CRM solutions, allowing them to better know their customers.

Digital: The company offers its clients an omnichannel platform (OMS), allowing them to better manage their businesses by integrating online and offline channels. For example, it allows them to better manage their inventories in an omnichannel environment. The company also provides clients with Linx Commerce, an e-commerce platform targeting medium and large-sized clients. In addition, the company provides clients with engagement tools, allowing its clients to increase customer engagement via search recommendation, re-engagement and advertising. Also, the company’s Ads solution allows clients to reach customers in a more efficient manner and its Marketplace Hub allows clients to connect to different marketplaces in a seamless way.

After the conclusion of the Linx acquisition in 2021, the company became the leading retail management software company in Brazil, focused on developing and providing affordable, easy-to-use, reliable and seamlessly integrated software solutions to merchants. The company has reached its position by the combination of Linx’s assets with the solutions from different software companies in which its has invested over time. In 2022, the company started integrating these portfolio companies into the software business unit. The company also continued to evolve its strategy of integrating financial services solutions into its software verticals.

Strategy

The key elements of the company’s strategy are to expand the reach of its financial services business; grow its software distribution channels; sell to new client segments; expand its offering and capabilities; enter new markets; and selectively pursue acquisitions.

Solutions

Financial Services

POS Capture Solutions: The company’s POS operating systems enable in-store merchants to accept a variety of credit cards, debit cards and other APMs, through POS hardware devices.

Pix QR Code: The company’s Pix QR Code solution enables merchants to accept Pix payments already integrated with the POS and thus enabling merchants to reconcile these transactions together with card receivables.

e-Commerce Gateway: Full-featured e-commerce gateway that seamlessly connects e-commerce merchants to the acquirers of their choice, enabling them to accept a wide variety of electronic payment options. The company’s clients are provided with a set of robust analytics, reporting and auditing capabilities through their portals.

Point of Sale Gateway: In-store gateway for the point-of-sale that connects merchants to the acquirers of their choice enabling a wide array of payment options including traditional and APM methods. It also offers clients the ability to integrate their POS with other business management software, such as inventory and tax management solutions.

PSP Platform: The company has a sophisticated PSP solution with a quick and simple API integration, enabling omni-channel players and marketplaces to accept a wide array of electronic payments through multiple channels. With a large basket of features and products, clients are equipped with the tools and features they need to grow and manage their business.

Omni-Channel Merchant Acquiring: The company is a fully licensed, end-to-end omni-channel merchant acquiring solution. With a large basket of features and products, clients are equipped with the tools they need to accept a wide array of electronic payments and effectively and efficiently manage their transaction receivables. Clients can integrate to the company’s platform through multiple channels.

Split Payments: Enables merchants and marketplaces to predetermine multiple accounts for receiving the settlement of their transactions. Through customizable splitting rules, consumer payments can be routed and deposited instantly to multiple parties.

Web Checkout: Frictionless e-checkout that simplifies the buying experience leading to increased client conversion.

Automated Retrial: Proprietary automated retry technology that helps to drastically reduce lost business from failed transactions, many of which are caused by payment scheme and third-party systems involved in a payment transaction. This is achieved by instantly reprocessing the transaction utilizing predetermined rules that could be reprocessed via another acquirer.

One-Click Buy: Encrypts and stores consumer payment methods in a secure virtual account that facilitates quick and easy one-click payments.

Recurring Billing: Simplifies and automates the company’s clients’ businesses by allowing periodic and recurring billing, such as subscription services, in a simple and fully customizable manner.

Multi-Buyer Payment—Bill Split: Enables consumers to make group payments easier for their customers. This solution allows a single purchase to be billed, and paid, to multiple consumers.

Multi-Payment Acceptance: Enables a consumer to pay for a single invoice using multiple payment methods such as multiple debit and/or credit cards along with other alternative methods such as payment slips (boletos).

Social Commerce: Provides merchants and digital service providers with the ability to request payments from their customers via WhatsApp, SMS text or an email link.

Digital Banking: Fully digital banking platform, integrated to the company’s acquiring solution, that enables merchants to get paid and manage their finances more effectively. This platform can provide the automation of cash management through a direct integration with the client’s ERP.

Working Capital Solutions: Omni-channel cash management solution that allows clients to accelerate the payment of their future receivables, including installment-based receivables up to 12 months. Clients can request and predetermine the payment of their receivables via their client portal, directly on their mobile application, POS device, via email, or over the phone with its dedicated receivables prepayment team.

SMB Credit Solutions: Allows the company’s clients to contract, monitor and payback loans by fully integrating its credit solution within its payments platform. In 2021, the company interrupted its working capital product and it should start disbursing by the end of 2023.

Insurance: The company’s insurance solutions offer financial protection to clients related to life, health and store insurance. The company acts as a broker only, not taking insurance risk.

App Store for POSs: The company has an application in its POS devices that can provide additional software features to a merchant’s point-of-sale through its open, cloud-based Mamba App store. This enables third-party app developers to deploy new complementary solutions to the point-of-sale for merchants and consumers, such as mobile phone top-up, bill pay, and APM acceptance.

Data Reporting and Merchant Portal: Gives merchants full transparency and enterprise-level insight into their transactions in a simplified and easy manner with fully customizable dashboards and automated reporting functionality.

Integrated Financial Platform: Provides merchants with a complete financial platform, integrating payments, banking and credit into a single dashboard, simplifying its clients’ financial management, eliminating bureaucracy and increasing transparency.

Registry of Receivables Platform (TAG): Financial Market Infrastructure (FMI) authorized by the Brazilian Central Bank to operate as a Trade Repository for card receivables (credit and debit), captured through physical or online transactions. TAG enables creditors to safely buy merchants' card receivables or take it as collateral.

Trampolin: Trampolin is a banking-as-a-service fintech that has developed a software that allows other companies to offer banking functionality on their own systems and/or offer white label digital wallet applications.

Software

VHSYS: VHSYS is an omni-channel, cloud-based, API driven, POS and ERP platform built to serve a wide array of service and retail businesses. The fully self-service platform consists of over 40 applications such as order and sales management, invoicing, dynamic inventory management, cash and payments management, CRM, mobile messaging, along with multi-marketplace, logistics, and e-commerce integrations amongst others.

Tablet Cloud: Tablet Cloud is a white label Point of Sale and simple ERP application focused on less sophisticated SMBs, which runs on smart POS and tablet solutions, giving business owners complete control over their cash register and inventory in a fully mobile device while having a robust ERP platform accessible online.

Trinks: Trinks is a SaaS ERP and booking app which allows beauty and aesthetics service providers to manage all their operations. The system automates key components of service providers’ functions such as client appointments, work schedules, inventory control and supplier contacts.

Menew: Menew is an ERP/POS software for food service with a strong regional presence in the northeast of Brazil and an expanding operation throughout the country.

MLabs: MLabs is an SMB social media management platform. Its purpose is to be the best cost-effective platform to make social media actions more effective and consequently increase the online presence of their clients. MLabs functionalities are focused on the specific needs of SMBs, using a variety of methods to help them reduce content production costs, optimize media investments and increase efficiency in the operations of social media management.

Questor: Questor is a management system for accounting offices and integrated cloud ERP offering for SMBs. Their almost 6,600 accounting clients serve more than 600,000 businesses across the whole country.

Sponte: Sponte is a leading provider of cloud ERP solutions for schools, with 4,800 clients in the segment and 2.0 million students, in an underpenetrated sector in terms of both payments and software.

SimplesVet: SimplesVet is an ERP solution for veterinary clinics, pet shops and autonomous veterinarians.

APP: APP is a software management company, focused on the hotel segment.

ClinicWeb: ClinicWeb is Vitta’s ERP for medical clinics in Brazil, helping professionals from the health segment to manage their appointments, patient’s files, finance and marketing.

Reclame Aqui: Nodis is an app that helps clients digitize their businesses connecting them to the biggest marketplaces of the country, such as Magalu, Americanas and Shoptime. Through one single portal, the merchant can control its catalog, manage the orders and shipping online.

Neomode: Neomode offers a sales channel and white label commerce app platform with integration to ERP, POS, e-commerce and gateways.

Mercadapp: Mercadapp is a digital product that offers an APP and e-commerce for supermarkets which is integrated with POS and ERP.

RH Software: RH Software is an ERP for dental clinics, helping dentists better manage their businesses through features specifically designed for their needs.

Plugg.to: Plugg.To integrates inventory, products and orders between the marketplaces and e-commerce platforms, POSs and ERPs in the market.

HubCount: Hubcount is a technology company focused on offering solutions for accounting offices and large corporations.

Reconciliation, TEF and QR: Software solutions that streamline the complex process of reconciling payments transactions, and managing cash flow. These powerful tools enable the company’s clients, from brick and mortar SMBs to large online enterprises, to accept, reconcile and monitor transactional data from all payment solutions providers, such as merchant acquirers, e-wallets and gateways, giving transparency of fees paid, discounts/chargebacks, and taxes at the individual transaction level, in a single dashboard.

Advertising: Engine designed to help industries and manufacturers improve their return on investment, or ROI, of their online advertising expenditures.

Analytics: Allows retailers to access graphs, benchmarks, product performance, user information, employee performance and other management tools.

CRM: Designed to help the company’s customers to manage their sales processes more efficiently, integrate marketing campaigns and content into their sales processes more efficiently and deliver high-quality service to their customers.

Connectivity Suite of customized solutions to help retailers connect their consumers, protect their data and connect their network through a single point of contact.

E-commerce Platform: The company’s e-commerce services consist of the receipt of wholesale orders and the monitoring of sales targets; directed sales to the final consumer; and an interactive electronic catalog with information about inventory and prices, among others, that are integrated to the ERP system.

Human Capital Management: Humanus integrates all Human Resources procedures, allowing the organization of activities, processes, and information in a safe and reliable way.

MID-E: Middleware application used to connect the Linx systems with the Brazilian tax authorities for the purpose of issuing an electronic invoice (NFe), and electronic consumer receipt (NFCe), in an integrated manner.

Mobility: Internally named Smart POS. Via smartphones or tablets, customers are served in a fast and customized manner, with no lines and far more interaction with the variety of products offered in the store. The company offers solutions for different retail segments using features, such as the virtual catalog, lookbook combinations, inventory query, pre-sale and sale record, waitlist and closure of service.

OMS: By using the company’s OMS technology, retailers can meet orders originating from any channel, regardless of where the product is located.

Point of Sale and ERP: Software solutions for the company’s customers’ in-store terminals where sales transactions occur. In the vast majority of cases, these solutions are integrated with the company’s own ERP software. Solutions for more than 10 retail segments.

Promo: Platform that facilitates the planning of promotions in a unified way, seeking to achieve the best results in each campaign, based on the needs of a retailer’s business.

Reshop: Multichannel platform designed for complete campaign management that works seamlessly with the retailer’s POS capturing real-time data.

Search and Recommendation: Internally named Linx Impulse. The company’s search solution uses machine learning and proprietary algorithms that best fit the customer.

Other

Delivery Much: Delivery Much is a food delivery marketplace company focused on small-and-midsize cities, with a similar and synergistic expansion approach to the company. Delivery Much generates more sales to restaurants using their consumer client base.

Cappta: Cappta offers offline gateway, also called TEF, in which merchants can have efficiency gains and agility in the processes related to cash closing and conciliation of receivables as the payment’s system is directly integrated with goods and services sold in the store.

PinPag: PinPag is specialized in means of payments and offers.

CreditInfo Caribbean (Stone CI): CreditInfo is a credit bureau provider, having as main products credit reports, credit scores, monitoring, international business reports and a suite of value-added services, with three operational countries in the Caribbean.

Sales and Distribution

The company sells and distributes its solutions through two different types of channels, such as relational channels, focused mainly on SMBs, in which it leverages its in-person distribution through proprietary hubs and franchised hubs, leading to a closer relationship with its merchants and transactional channels, which include digital, inbound sales, self-onboarding services, and renda-extra, focusing mainly on micro merchants, in addition to Partner Program, which focuses on Platform Services clients and Special Services which is related to Key Accounts.

Relational Channels

Stone Hubs: The company distributes its technology and solutions to brick-and-mortar merchants primarily through its Stone Hubs, which are designed to provide hyper-local sales and service to SMB merchants in a designated geographic region. The company’s hubs are local operational offices that house an integrated team of sales and logistics support personnel. These offices are located in small-and-medium sized cities (or regions of larger cities), which have historically been underserved and disregarded by many of its competitors who sell their services through ordinary bank branches or remote call centers. The company has both proprietary hubs, as well as franchise hubs:

Proprietary Stone Hub—The company establishes local operations and send highly trained Stone Agents and Green Angels to develop its operations, train new team members, and ensure that its focus on high-quality service is instilled. The company has a few hundreds of operational Proprietary Stone Hubs across Brazil, representing the vast majority of its hub base and are its primary method of establishing new Stone Hubs.

Franchise Stone Hub—The company’s franchise hubs are similar to its proprietary hubs, except that the hub is owned and operated by a local business owner who typically provides local sales and operational support and relationships in the community. These hubs are entirely Stone-branded and operated by highly trained personnel who perform the same duties as personnel working in the company’s proprietary hubs, in accordance with its policies, procedures and internal targets. The company utilizes the franchise hub method selectively when it identifies an attractive potential partner in a region where it makes sense for its expansion plans.

The company’s hubs are staffed by sales personnel that include:

Stone Agents—The company’s troops-on-the-ground sales team. This is a qualified team of young entrepreneurs who are highly trained to deliver personalized and effective sales and support directly to the doorstep of the company’s clients. The company’s Stone Agents are supported by an integrated technology platform, which combines smart routing with merchant behavior mapping, which enables them to provide sales and support services efficiently and effectively.

District Owners and Hub Owners—The company’s regional sales leadership. This team is composed of highly trained and experienced former Stone Agents that are tasked with opening and managing new hub territories. Regional managers are supported extensively with daily performance indicators and tools provided by its technology platform and management to facilitate active interaction and support with their teams.

The company has developed its method of training and supporting its sales personnel that has directly increased its team’s results. The company’s Stone Agents receive extensive training in its culture and operations during their onboarding process, and on an ongoing basis, to help reinforce its client-centric culture and high-performance standards. The company’s sales personnel have disciplined daily, weekly, and monthly touchpoints with their leaders, along with routine reporting, KPI reviews, and other core processes to help ensure they are equipped with the tools and support they need to maximize their effectiveness. In addition, the company’s sales personnel are supported by direct marketing campaigns to help build brand awareness as it enters new markets.

Transactional Channels

Inbound Sales and Distribution: The company also sells its solutions to brick-and-mortar and digital merchants through a similar, highly trained sales team that is centrally located and dedicated to fielding inbound calls as a result of digital advertising campaigns and referrals resulting from networking effects of its clients within its hubs, as well as sales leads. This team can manage and onboard a new client in-house.

Self-Onboarding: The company’s self-onboarding channel is fast and convenient for merchants that already know which solutions are better suited for them. This method allows merchants to sign up and complete the purchase process on their own, without the need for direct interaction with a sales representative through its user-friendly website and App.

Renda-Extra Channel: In 2021, the company developed the Renda-extra channel, in which any person in Brazil that is registered in the channel can refer its TON solutions to merchants in the country in exchange for a commission for each POS offered to merchants. After the referral is made, the TON team is responsible for the support and logistics to deliver the POS to the client.

Special Services—The company’s highly specialized team of digital commerce experts. This team has a deep technical knowledge of the company’s capabilities which enables them to target digital merchants, PSPs and marketplaces that would most benefit from its digital commerce solutions. The Special Services team hosts initial discovery meetings with potential clients to understand their needs, and then meets with their technology developers and architects to design digital commerce solutions that meet the client’s needs. This team positions the company as a trusted technology provider and a key business partner for its digital and integrated clients and helps promote loyalty and long-term value.

Partner Program—The company’s distribution through partners, mainly software providers (ISVs), marketplaces and e-commerce platforms. Different from the channels, partner program is mainly focused on platform services merchants, within the key accounts business segment. Participants within the partner program develop vertical-specific software for merchants that help them run their front-of-house functions and back-office operations. The company integrates and embeds its connection, payment acceptance, and data reconciliation capabilities into their software in order to improve functionality and convenience. Partners may also participate in a portion of the economics generated by payments processed through their software.

Besides the distribution capabilities, the company has the following specific distribution channels for its software solutions:

Direct Channels: The company’s direct channels consist of business managers dedicated to its customer base (farmers) and business managers responsible for prospecting new clients (hunters). The company’s internal sales team is specialized in retail and is knowledgeable about the specialized needs of companies of different verticals and sizes and the various solutions it offers.

Indirect Channels: The company’s indirect channels consist of independent sales agents. These sales channels allow the company to be present in places where it does not have its own sales offices. The company’s independent sales agents are mostly exclusive distribution channels through which it acquires new customers and negotiate solutions in the regions where it operates. The company’s independent sales agents also carry out consulting services (implementation, installation, customization and training services) of its software solutions.

Inbound Channel: Centrally located and dedicated team to fielding inbound calls as a result of digital marketing efforts. Depending on the size of the merchants, the inbound sales team can also play a role in transferring leads to the other sales channels within the software segment.

Customer Service and Support

The company serves and supports its clients with fast, convenient, and high-quality customer service and support teams and technology tools that are highly differentiated, and have enabled it to maintain high customer service satisfaction. The company’s service and support functions, processes and tools were designed to embody its strong client-centric culture, continuously strengthen its client relationships, and increase the long-term value of its client relationships. These teams and tools include:

Client Relationship Team—This is a centralized, in-house customer relationship team largely consisting of technically trained in-house agents and equipped with the data, technology, and autonomy to resolve the company’s clients’ needs. In the fourth quarter of 2022, 88% of the calls were answered within 10 seconds for calls and 40 seconds for written channels and 90% were rated as excellent by the company’s clients according to its internal surveys.

Client Retention Team—This is a centralized team that is responsible for trying to keep clients who are considering canceling the services the company provides. The company’s retention team studies the client’s profile, speaks with them to understand the cause of their cancellations, and discusses potential ways in which it can better serve them. The company also has an adjacent data analytics group that constantly monitors its clients, uses AI technology to predict potential churn, and proactively identifies possible actions that its client retention team could take to reverse the propensity for churn.

CRM Technology—The company uses a range of integrated systems, powered by the Stone Technology Platform, which empower its client relationship, client retention and Green Angel teams, and enable it to optimize its customer service and support functions. For example:

Celebro—This is a system that helps the company’s client relationship, client retention and Green Angel teams manage service calls and access a 360-degree view of its clients through an integrated dashboard to view client sales, payments, logistics issues, activity history, registry data and more. This system integrates real-time data from the company’s authorization and processing systems, salesforce management applications, and logistics management systems and can provide its personnel with the responses for a client’s particular service call issue.

The Professor—This is a system that provides predictive modeling of client behavior and activity. The system constantly gathers information from Celebro and other databases to understand the company’s clients’ historical patterns, monitor their activity, and proactively identify anomalies that may indicate a potential client service issue or an opportunity to upsell a new solution. The company’s customer service and support teams use The Professor to identify and resolve a client’s issues, sometimes even before the client is aware themselves, which can create a superior client experience, reinforce its client-centric positioning, and strengthen its relationship.

Stone Self-Service Tools—The company also offers a range of apps, online portals, and self-service tools that help its clients check all of their data, manage their operations more conveniently, and solve certain issues by themselves, according to their preference.

Chatbot Team—This is a specialized, centralized and in-house team responsible for the development and operation of the company’s chatbots. The first chatbot was designed to support TON’s customer experience operation. The team’s main goal is to deploy scalable, high quality digital support for the company’s clients with 24/7 availability. It leverages NLU and NLP service providers with the company’s CRM technology in order to build humanized conversation flows that can understand and solve its clients' requests and questions. The chatbot is a key piece of TON’s operational model, as it enables the customer support to scale up in high speed and low cost.

Linx Support — The company’s support department aims to provide its customers with any support necessary for the continuity of their operations. The company’s call center is available seven days a week. In addition, the company offers customer service and tracking via extranet.

Green Angels—These are teams of local, specialized personnel, who provide on-demand logistics support in the field. Green Angel teams are embedded inside the company’s local Stone Hubs, where they interact with Stone Agents and its centralized client relationship team and leverage its cloud-based logistics platform to rapidly respond to the needs of its clients. Once they become aware of an issue, the company’s Green Angels commonly travel by motorcycle and reach its clients within minutes or hours to help a client in need instead of taking days or weeks, through mail service, or using a third-party logistics company. Green Angels can deliver terminals, help with installation, set up a merchant’s Wi-Fi connectivity, replace parts, or provide other services.

Operations

The company runs and manages its operations with dedicated teams of specialized and experienced personnel that run various administrative, processing, and back-office functions. These enable the company to serve, fulfill, and support its clients in a high-quality and efficient manner, and help it achieve operating efficiencies and minimize operating risks. These functions include:

Client Onboarding—The company has integrated and segregated teams dedicated to the onboarding of its financial platform and software platform clients, respectively. In the case of its software platform, the company’s farmers, (i.e. business managers dedicated to its customer base) work closely with its sales personnel to provide a smooth and efficient transition from sales, to implementation and ongoing client services.

Logistics Management—The company’s logistics management team manages the deployment of POS devices and related accessories and uses predictive modeling of merchant behavior to proactively identify potential client logistics service issues. This centralized team manages terminal programming and equipment services, deployment, set-up, technical support, repair and replacement, remote terminal software updates, warehousing, and inventory control and reporting. They communicate with and deploy the company’s local Green Angels to provide on-demand support.

Settlement Operations—The company’s settlement operation team manages the clearing and settlement processes of its transaction processing functions with financial institutions and payment schemes. This team ensures that the company’s transaction processes and fee collections adhere to the appropriate regulations and payment scheme rules, and help safeguard its clients’ receivables and its operations.

Chargeback Operations—The company’s chargeback team uses agile monitoring technology to secure payment transactions carried out on its platform and identify potentially fraudulent or improper sales. They manage processes to enhance the company’s ability to prevent and manage fraud risk and avoid potential losses for its clients’ and its own operations. The team also provides support on behalf of the company’s clients when disputed charges are filed, working closely with payment scheme settlers and card issuers involved in disputed transactions and, when appropriate, opens claim processes to seek reversal of the chargeback.

Significant Events

In February 2022, the company acquired 50% of equity interest on Reclame Aqui Holdings Limited (Reclame Aqui). Reclame Aqui is an unlisted company based in Cayman Islands, with operations in Brazil, whose main activity is related to a public electronic platform for resolution of conflicts between customers and companies, offering software and API based CRM solutions to help businesses manage customer communication more efficiently The company also has the right to join the board of directors of Reclame Aqui with two seats out of four, to appoint the Chief Financial Officer and have a call option to acquire the remaining equity interest on Reclame Aqui to hold 100% of the company, which can be exercised between January 1, 2027 and July 30, 2027.

In May 2022, the company acquired a 20% equity interest in RH Software S.A. (RH Software), a private company based in the state of São Paulo, Brazil. RH Software develops cloud based ERP and scheduling and payments software servicing dental clinics. The company also holds a call option to acquire a 30% additional equity interest in the period from 2 to 3 years from the date of closing of the agreement.

In June 2022, the company acquired 100% of equity interest in ThirdLevel Soluções de Internet S.A. (Plugg.to). In November 2022, Plugg.to was merged into Linx Sistemas. Plugg.to was a private company headquartered in the state of São Paulo, Brazil that developed technology that works as a marketplace hub, offering fast and intelligent integrations between virtual store platforms, ERP's and marketplaces.

In August 2022, Questor, a subsidiary in which the company owns a 50% equity interest, acquired a 75.6% equity interest in Hubcount Tecnologia S.A (Hubcount). Hubcount is a private company headquartered in the state of São Paulo, Brazil that develops technology that offers accounting BI & Software solutions to accounting offices and large corporations.

In October 2022, the comopany created Stone Holding Instituições S.A., a new company with the objective of holding equity interests in institutions authorized to operate by Central Bank of Brazil (Banco Central do Brasil).

In January 2022, the company concluded the acquisition of an interest in the corporate capital of Neostore Desenvolvimento de Programas de Computadores SA (Neomode), representing approximately 40% of total shares issued by the company. Neomode offers a sales channel and white label commerce app platform with agnostic integrator to Enterprise Resource Planning (ERP), Point of Sale (POS), e-commerces and gateways with cloud-based solutions.

Seasonality

The company has experienced in the past, and expects to continue to experience, seasonal fluctuations in its revenues as a result of consumer spending patterns. Historically, the company’s revenues have been strongest during the last quarter of each year (year ended December 31, 2022) 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.

Intellectual Property

Most of the company’s services are based on proprietary software and related payment systems solutions. The company relies on a combination of copyrights laws (which includes the Law No. 9,610/1998 and Law No. 9,609/1998, related to software), trademarks and trade secret laws (specifically Law No. 9,279/1996, the industrial property law of Brazil), as well as employee and third-party non-disclosure, confidentiality and other types of contractual arrangements to establish, maintain and enforce its Intellectual Property rights, including with respect to its proprietary rights related to its products and services.

As of March 2023, the company owned more than 1,000 trademarks over 30 countries, including Stone, Linx, Cappta, Ton, Pagar.me, Equals, Buy4, Napse, and others, as well as more than 100 trademarks applications before authorities pending in Brazil and Uruguay.

The company has also registered several domain names with NIC.br, Brazil’s internet domain name registry, and domain registrars in the Latin America and the United States and elsewhere, including stone.com.br, collact.com.br, pagar.me, linx.com.br, napse.global, cappta.com.br, equals.com.br, stone.co, taginfraestrutura.com.br, and investors.stone.co.

The company has material contracts with Visa and Mastercard in connection with its activities as an acquirer for these card schemes. The company’s Visa Payment Arrangements Participation and Trademark License Agreement, dated as of February 19, 2016 (as amended from time to time), between Visa do Brasil Empreendimentos Ltda. and Stone Instituição de Pagamento S.A. sets forth the general terms and conditions under which Stone Instituição de Pagamento S.A. acts as a merchant acquiring principal participant for Visa in Brazil and provides Stone Instituição de Pagamento S.A. with a non-exclusive and non-transferable license to use certain trademarks owned by Visa in connection with its activities as an acquirer in Brazil. The company’s License Agreement, dated as of December 21, 2015 and as amended from time to time, between MasterCard International Incorporated and Stone Instituição de Pagamento S.A. (formerly Stone Pagamentos S.A.) sets forth the general terms and conditions under which Mastercard grants Stone Instituição de Pagamento S.A. a non-exclusive license to use certain trade names, trademarks, service marks and logotypes (including Mastercard, Cirrus and Maestro branded marks) in Brazil in connection with Stone Instituição de Pagamento’S.A. issuing and acquiring activities. No consideration is due to Mastercard under this agreement.

Regulatory Matters

Three of the company’s subsidiaries perform activities that are subject to Law No. 12,865 or Law No. 4,595 and regulations from the Central Bank and the CMN, as applicable, which are Stone Instituição de Pagamento S.A., Pagar.me Instituição de Pagamento S.A., or Pagar.me, and Stone Sociedade de Credito Direto S.A., or Stone SCD. On November 5, 2021, MNLT applied for registration with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários — CVM) to become a category B public company (allowed to issue any securities other than shares and depositary receipts or other securities that entitle the holder to purchase shares or share certificates).

The company’s activities in Brazil are subject to Brazilian laws and regulations relating to anti-money laundering (AML), and terrorism financing (CFT) rules. These rules require the company to implement risk-based policies and internal procedures to identify and qualify clients, employees, suppliers and business partners (KYC, KYE, KYS and KYP, respectively), as well as to monitor and identify suspicious or atypical money-laundering transactions, which must be duly reported to the Financial Activities Control Council, or COAF, Brazil’s financial intelligence unit.

The company complies with the applicable AML laws and regulations and it has implemented required policies and internal procedures to ensure compliance with such rules and regulations, including procedures to report suspicious or atypical activities money-laundering and suspected terrorism financing to COAF.

Due to some of its products, the company is subject to several laws and regulations designed to protect consumer rights—most importantly, Law No. 8,078 of September 11, 1990—known as the Consumer Protection Code (Código de Defesa do Consumidor), which sets forth the legal principles and requirements applicable to consumer relations in Brazil, setting out certain basic rights, and the consumers’ rights to access and modify personal information collected about them and stored in private databases.

History

StoneCo Ltd. was founded in 2000. The company was incorporated in the Cayman Islands as an exempted company in 2014, subject to the Cayman Companies Act.