StoneCo Ltd. (NASDAQ:STNE) Q4 2023 Earnings Call Transcript

StoneCo Ltd. (NASDAQ:STNE) Q4 2023 Earnings Call Transcript March 18, 2024

StoneCo Ltd. misses on earnings expectations. Reported EPS is $0.27 EPS, expectations were $0.32. StoneCo Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the StoneCo Fourth Quarter 2023 Earnings Conference Call. By now, everyone should have access to our earnings release. The Company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Throughout this conference call, the company will be presenting non-IFRS financial information including adjusted net income and adjusted net cash. These are important financial measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company’s non-IFRS financial information to the IFRS financial information appears in today’s press release. Finally, before we begin our formal remarks, I would like to remind you that today’s discussion might include forward-looking statements.

These forward-looking statements are not guarantees of future performances and therefore should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the company’s expectations. In addition, many of the risks regarding the business are disclosed in the company’s Form 20-F filed with the Securities and Exchange Commission, which is available at www.sec.gov. I would now like to turn the conference over to your host, Roberta Noronha, Head of Investor Relations at StoneCo. Please proceed.

Roberta Noronha: Thank you, operator, and good evening everyone. Joining me today on the call is our CEO, Pedro Zinner; our CFO and Investor Relations Officer, Mateus Scherer; and our Chief Strategy and Marketing Officer, Lia Matos. Today, we will present our fourth-quarter 2023 results and provide an updated outlook for our business. I will now pass it over to Pedro, so he can share some highlights of our performance. Pedro?

Pedro Zinner: Thank you, Roberta, and good evening everyone. As I have outlined in our Annual Shareholders Letter, after a year into my role as CEO, I have taken a deeper look at our Company, better spotting our strengths and areas of improvement. This journey has been, revealing as it has provided valuable lessons and enhanced my perspectives on the opportunities we face. Reflecting on the successful year we had it is impressive how well our company performed. I’m not only referring to our strong financial performance but also acknowledging the strategic milestones that have strengthened our position in the market and paved the way for future growth, as we detailed in our Investor Day. In response to the initial insights and assessment in my role as CEO, in 2023, we have initiated several strategic adjustments to better position our business for the future.

We have reorganized ourselves to deliver our solutions more effectively across different client segments from micro to medium businesses, tailoring our go-to-market approach to meet their unique needs. Our new organizational structure aligns with each client segment, while it also strengthens key capabilities around engineering, product, marketing, and innovation, enhancing our ability to address client needs in a unique way. We have sharpened our strategic focus around three strategic priorities, which we outlined in our Investor Day. These three priorities to win MSMBs to drive engagement with our clients and to scale through platforms help us to set key focus areas for the coming years. The first one, defining where our focus will be in terms of the software and financial services integration efforts.

By focusing our execution around four priority verticals of retail, gas stations, food, and drug stores. We are increasing our competitive edge and opening a significant growth avenue for the future. Lia will present some initial encouraging results we achieved in the fourth quarter. The second one, to leverage the power of the combination of payments, banking, and software. There is a huge opportunity in our installed base to increase engagement with our solutions. As an example, today, only a fraction of our client base can be considered heavy users of our solutions. And there is a substantial potential to improve our unit economics, as we continue to engage the bids. The results we saw in our Financial Services segment in the fourth quarter reflect the success of this strategy around payments and banking.

And the third one, the creation of the strong platform. Our rapid growth initially focus on development speed, sometimes at the expense of consistency and reusability. This resulted in the existence of multiple data platforms. But over the last year and a half, we’ve made a significant change. We’ve brought our technology teams together, streamline how we work, and started to build a solid foundation that we all share, the strong platform. As we move forward, especially with new tech like artificial intelligence, we are setting ourselves up to generate new synergies and use our insights even more effectively to serve our clients. Our last strategic adjustment focus on the implementation of cost management and spending controls. Recognizing the potential to unlock substantial operating leverage, we have embarked on initiatives aimed at enhancing profitability even further.

Through sustainable cost optimization, we’re setting the stage for more efficient and profitable operations. By implementing a shared-services center and a zero-based budgeting, we are enhancing our financial discipline across the organization. While the opportunity is huge, we will seize it through a targeted approach, ensuring we do not anticipate our efforts. Before handing it over to Lia, I’d like to briefly talk about our 2023 Results. Last year was a milestone for us, marking a complete rebound from the challenges faced in 2021. We closed the year with exceptional results, particularly in the fourth quarter when we accomplished a significant progress in our key strategic initiatives. We posted remarkable growth achieving a notable increase in MSMB TPV, both annually with MSMB TPV increasing 21% to BRL350 billion.

And in the fourth quarter with an acceleration from the previous period. Our banking services also recorded impressive growth, with deposits reaching BRL6.1 billion by the end of December, a significant increase from 2022. This growth not only reflects higher engagement but also a better conversion of TPV into deposits. Monetization improved substantially throughout the year, with MSMB take rates achieving 2.43% up 22 basis points year-over-year. In the fourth quarter, we saw a slight decline of 6 basis points compared to the previous quarter, but that was already expected and purely a result of seasonality. More importantly, we continued to advance in our credit solution reaching our working capital portfolio of BRL309 million by the end of the year, with very encouraging results regarding the health of the portfolio and NPLs strictly under control.

Additionally, our integration efforts in the four prioritized verticals have just started to be fruitful, with participation in TPV from these software clients surpassing BRL20 billion in the year. The push to Scale Through Platforms yielded substantial operational leverage, boosting our EBT to BRL2 billion, an increase of 3.3 times over the previous year. This leap forward improved our EBT margin by more than 10 percentage points. And our adjusted net profit surged to BRL1.6 billion up 3.8 times from the previous year. Our profitability also translated into cash generation and we ended the year with an adjusted net cash position of BRL5.1 billion, even after significant investments in our credit portfolio and share buybacks. On a separate note, the Software segment faced challenges in 2023, particularly in non-strategic verticals where growth was lower.

However, our efficiency initiatives already started showing results with EBITDA margins in 2023, improving by 1.9 percentage points to 16.4%. The fourth quarter recorded a dip due to one-off restructuring costs, but these moves are poised to generate savings in 2024. In summary, 2023 was a year of significant achievements and strategic advancements for us, and our fourth-quarter results are positioning us in a good place to deliver our 2024 and 2027 outlook. Now I would like to pass it over to Lia, to discuss our fourth quarter 2023 performance and strategic updates. Lia?

Lia Matos: Thank you, Pedro, and good evening, everyone. We had important evolutions over the last year in our strategic priorities, while we continue to balance growth with profitability, which you can see on slide five. Compared with the fourth quarter of ’22, our consolidated revenues grew by 20%, which combined with lower financial expenses led to an increase of almost 2.3 times in adjusted EBT. These factors combined with a lower effective tax rate, resulted in adjusted net income increasing by almost three-fold year-over-year, with an adjusted net margin of 17.4%, up about 10 percentage points in the period. Taking a closer look at our Financial Services segment performance on slide six to 11. I will start on slide six with the performance of our payments business, for MSMBs. Payments active client base increased 37% year-over-year, reaching almost 3.5 million active clients.

Sequentially, this represented a net addition of 192,000 clients, lower compared to the previous quarters, mainly as a result of our strategic shift towards larger clients in the hubs and the fact that we have caught up to growth levels in the micro-segments. This growth in client base also resulted in healthy and profitable cohorts in all client tiers. As you’ll see in the pages that follow and in line with our strategic priorities to win in the MSMB segment and to drive engagement with our solutions. Besides optimizing our commercial strategy for growth and market-share gains, we’re also putting a lot of focus on improving bundle offerings of payments and banking to new client cohorts, both in Ton and Stone, as well as driving further engagement with our solutions for more mature cohorts of clients.

As I will show on slide seven, this approach has resulted in profitable TPV growth with market share gains in the MSMB segment versus the overall markets. MSMB TPV increased 20% year-over-year, growing more than twice the industry levels, considering Pix P2M volumes which were almost BRL8 billion in the quarter. MSMB TPV increased 25% year-over-year and an extra 5 percentage points of growth, when considering PIX P2M in our overall TPV. We achieved the strong growth performance, while also increasing take rates by 22 basis points year-over-year to 2.43%. Take rates were lower versus the third quarter as the natural result of seasonality in the fourth quarter, which always presents higher debit volumes. We are continuously evolving our pricing and bundle strategy to achieve higher levels of engaged clients, helping them more with their jobs to be done.

We believe the strong numbers are the result of our competitive advantages, around our distribution capabilities, our superior service and more and more the ability to offer more complete solutions to our clients. Now a quick update on our key accounts performance on slide eight. Key Accounts TPV decreased 17.6% year-over-year to BRL15 billion. As we have continued to deprioritize and offboard low-margin clients year-over-year Key Accounts take rates increased 11 basis points as a result of the adjustments in our commercial policies and a mix shift within the segments. Now let’s discuss our banking performance on slide nine. Banking active client base increased three-fold year-over-year to 2.1 million active clients. This evolution was a result of the launch of Super Conta Ton in the beginning of 2023 and the continued activation of banking for Stone clients through our bundle offers.

The decrease in growth levels compared to the previous quarters is mainly due to the end of the migration of Ton clients to our full banking solution. This growth in client base was associated with a 52% year-over-year growth in deposits, which reached BRL6.1 billion in the quarter. This new level of deposits derived both from a positive impact in the cash-in level and engagement, due to the effectiveness of our payments in banking bundles. And second, from a seasonal and calendar effect at the end of the quarter. As a result, ARPAC increased 11.4% quarter-over-quarter to BRL28.4 per month. Despite lower seasonality, this positive trend in client deposits is also seen throughout the first quarter of 2024. On slide 10, we’ll talk about our credit performance.

As you know, we’ve relaunched our working capital solution to SMBs in 2023 and have seen very positive initial results. In the fourth quarter of ’23, we disbursed more than BRL230 million to around 7,000 clients, reaching a portfolio of BRL309 million, an increase of 2.7 times quarter-over-quarter. Loan-loss provision expenses totaled BRL39 million in the period, an increase of 2.1 times sequentially as we constitute provisions of 20% of our portfolio. Although we are taking a conservative approach, the performance of our vintages is above our expectations, with NPLs between 15 and 90 days of 1.96% and NPLs over 90 days of 0.29%. As we have highlighted before, this is a recently launched portfolio, so the ratio of past-due loans should increase as our portfolio matures.

This year we will continue with disbursement without changing our diligence toward risk evaluation and close monitoring of market conditions. Beyond our working capital solution for SMBs, the principal driver of our portfolio growth. This year will mark also the launch of more credit solutions to our clients, such as credit cards and overdrafts. To summarize, the fourth quarter was again marked by above industry TPV growth and higher take rates, resulting in financial services revenue growth of 24% year-over-year in the fourth quarter, reaching BRL2.9 billion. In turn, adjusted EBT reached BRL604 million with an adjusted EBT margin of 21%, an increase of more than 10 percentage points year-over-year. Moving to slide 12, let’s talk about our software performance and strategic evolutions.

Quarter-over-quarter MSMB TPV overlap between financial services and software clients increased 19.3%, almost twice the growth we had in our MSMB TPV in the same period. Among the four strategic verticals, this performance was mainly driven by gas stations. This relative performance illustrates our continued efforts and first signs of success of our strategy to provide an end-to-end solution that combines management software, payments and banking to our SMB clients. Going forward we have listed three main priorities in order to drive growth and engagement in the four priority verticals. First, we’re focusing on setting up our go-to-market strategy in order to scale our distribution model for combined software and financial services offerings.

Second, we’re enhancing the product value proposition to seize the opportunity in the four key strategic verticals with gas stations and retail being the main focus for 2024. And third, we’re integrating the pole sales process to guarantee we maintain the superior levels of service our clients expect from us. There still is a huge opportunity for us to target within our software installed point base and to drive engagements with our bundled solutions and this will be a key focus for the next years. Moving to slide 13, Software segment revenues decreased 3.5% year-over-year to BRL363 million, as a result of lower revenues from the enterprise business, which was down 16% in the period. Sequentially, software revenues decreased 6.4% due to lower yields on cash, as well as lower revenues from enterprise business.

As a result of this weaker top line, combined with one-time restructuring costs in the amount of BRL11.5 million, adjusted EBITDA decreased to BRL59 million in the quarter, with an adjusted EBITDA margin of 16.2% compared with 20.5% in the third quarter of ’23. Excluding these restructuring costs, adjusted EBITDA margin would have been 19.3% in the fourth quarter. And as we continue to focus on diligent cost-savings and process improvements in our Software segments, we expect margins to improve in 2024. As Pedro mentioned, the fourth quarter marked the closing of an important year of strategic advancements for our business. The combined evolution of our strategic priorities around win, engage, and scale through platforms led to the strong results we have seen in the fourth quarter.

Reinforcing what Pedro already said, I believe we’re well-positioned for a strong 2024 and 2027 outlook. Now, I want to pass it over to Mateus, for him to discuss in more detail our key financial metrics. Mateus?

Mateus Scherer: Thank you, Lia, and good evening, everyone. I would like to begin on slide 13, where we discuss the quarter-on-quarter evolution of our costs and expenses on an adjusted basis. Cost of services reached BRL803 million, increasing 15% year-on-year and 3.8% per quarter. Cost of services was sequentially flattish as a percentage of revenues despite provisions for expected credit losses in the amount of BRL39 million realized in the first quarter, as we grow our credit book and higher investments in technology. Excluding provisions for expected credit losses, cost of services would have decreased 50 basis points sequentially as a percentage of revenues, showing continued operational leverage. Administrative expenses decreased 6.5% year-on-year, leading to a 250 basis points reduction as a percentage of revenue when compared to the first quarter 2022.

Sequentially, administrative expenses increased 14%, up 70 basis points as a percentage of revenues, due to higher third-party service expenses combined with personal expenses which are seasonally higher in the first quarter. As we have shared in our Investor Day, achieving efficiency in G&A, we will continue to be a priority going forward. We remain committed to our guidance of less than BRL1.125 million of administrative expenses for 2024, which implies a growth of less than 7% for the year. Selling expenses increased 2.6% quarter-on-quarter and remained flat as a percentage of revenues, despite higher provisions for variable compensation in the periods. Financial expenses decreased 10% quarter-on-quarter, down 430 basis points as a percentage of revenues.

This evolution was a result of lower interest rates with average CDI decreasing in the quarter, lower number of working days, a seasonal decline in the average duration of funding lines and a lower average cash balance in the periods. Other expenses increased 47.6% sequentially and 120 basis points as a percentage of revenues, because of higher contingencies and tax provisions related to share-based compensation, as a result of the share price appreciation in the first quarter. Lastly, adjusted effective tax rate reached 11.7% in the first quarter. The lower effective tax rate in the period was a result of higher utilization of tax benefits from Lei do Bem, as well as gains from subsidiaries abroad, subject to different statutory tax rats. By 2024, we continue to expect the effective tax rate between 20% to 25%.

Turning to slide 15, our adjusted net cash position reached BRL5.1 billion, reflecting an increase of BRL1.6 billion year-on-year and BRL196 million for the quarter. The growth in adjusted net cash is especially notable as it came after the deployment of BRL290 on share buybacks within the quarter, while also continuing to deploy capital towards the expansion of our credit portfolio. Now, I would like to turn it back to Pedro.

Pedro Zinner: Thank you, Mateus. To wrap it up, today we also announced a pivotal transition in our leadership. André Street, our Founder and Chairman has also chosen to conclude his tenure on the Board, stepping aside from reelection at the forthcoming Annual General Meeting scheduled for April 2024. Similarly, Vice Chairman Conrado Engel and Board member Patricia Verderesi will not seek reelection, honoring their two-year commitment. Andre will remain connected to the company as a Reference Shareholder, bolstered by special protections Shareholders’ Agreement and Articles of Association, including the privilege to nominate the Chairman of the Board. This transition marks the culmination of a deliberate, multi-year effort led by Andre to professionalize management and enhance governance standards, a mission that was crystallized by our strong 2023 results and the robust, strategically aligned team now at the helm.

The candidates recommended for the upcoming AGM will be Mauricio Luchetti as Chairman and Gilberto Caldart as Vice Chairman. Additionally, a new member will be indicated, Jose Alexandre Scheinkman. We have shared more details about the succession in a separate 6-K filing. We are committed to keeping alive the entrepreneurial spirit created by our founders. Our goal is to maintain high standards of governance as our company grows and continues to be a leader in entrepreneurship and client-centricity. With a committed shareholder like Andre, a great team, and a strong business, we are well set to continue to advance our mission forward. Before moving to Q&A, I would like to reinforce our guidance given for 2024. For our growth metrics, we expect MSMB TPV to reach more than BRL412 billion, an increase of more than 18% compared with 2023, while we expect client deposits of more than BRL7 billion increasing more than 14% year-over-year.

For monetization. We expect our credit portfolio to surpass BRL800 million, increasing 2.6 times year-over-year with MSMB take rates higher than 2.49%, implying an increase of more than 4 basis points. Lastly, in efficiency we expect adjusted net income to be higher than BRL1.9 billion, representing more than 22% year-over-year growth, with administrative expenses of less than BRL1,125 million, decreasing 7% compared with 2023. As we close 2023 and kick off 2024, I am more enthusiastic than ever about our business. There is growth ahead of us and we are closer to demonstrating the power of combining. With that said, operator, can you please open the call up to questions?

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Q&A Session

Operator: Okay. At this time, we are going to open it up for questions-and-answers. [Operator Instructions] Our first question comes from Mauricio Ricardo with Evercore. Mauricio, you can open your microphone.

Sheriq Sumar: Hi, this is Sheriq Sumar from Evercore ISI. I had a question on the Software business. Coming to slide 13, just wanted to get a sense as to, you know, I mean, how should we think about the potential benefits of the four key verticals heading into 2024, given that it just grew like 0.5 percentage point in the fourth quarter? And when can we expect the impact of the enterprise to decline, so that we can see a growth in the Software business from here? Thank you.

Lia Matos: Hi, Sheriq. Lia here. Thank you for the question. So I’m going to kick off, talking a little bit about what we highlighted on page 14, which is regards to how we are advancing on our initiatives to cross-sell financial services into our software client base. So this page talks about the evolution of this strategic priority. And as we shared in the Investor Day last year, we selected those four key verticals, because they represents the majority of the opportunity and financial services revenues with our installed client base. So we believe that in order to capture this opportunity, it’s going to be essential for us to offer our clients better solutions that combine software and financial services. And that we can do this in a way that we can leverage the capabilities of our vast distribution footprint and sustain our service differentiation, which really is a cornerstone of our value proposition.

So, in that regard, the main metric for success in this initiative is the TPV overlap between financial services and software. And this metric reached BRL5.8 billion in the quarter, which represents a sequential growth of 19%, so we compare this growth with the growth of our MSMB TPV overall. And we can see that this growth is significantly higher than the sequential growth of MSMB TPVs. And as long as we can continue to grow the financial services TPV overlap in our software client base above the growth of the overall client base. This means, we capturing additional value from this combination. So I think this is the essence of what we talked about in this page. Maybe Mateus can give a bit more highlight on the revenue trends.

Mateus Scherer: Yes, for sure. So I think you also touched upon the software revenues on a standalone basis which we show on page 13. And here, I think especially on enterprise we had some negative effects on the quarter related from IAS 29, so hyperinflation especially in Argentina. That was a direct top line in their price. But I think, Lia, you’ve said, the priority here is really not under the revenues for software standalone. Actually, the focus is really on improving that gross cross-sell metric for TPV. So again, yes, I think there can be some upside for enterprise software revenues in the future because there wasn’t a one-off related to hyperinflation. But the focus is really not there.

Sheriq Sumar: Got it. Thank you. I just have one follow-up question. On the financial expenses, can you help us understand as to how should we think about the first quarter and even for 2024 as well given the prospect of lower interest rates and the use of cash versus going for third-party funding? And also I know this might be a pretty small impact but implications of the leap year or for like an extra day, in the month of Feb — like would that have an impact on the financial expenses? Thank you.

Mateus Scherer: Sure. I will start with the first part and then I’ll ask you to repeat the second part, you’ve got here a little bit. But just to start on financial expenses, I think the trends for 2024 are pretty much similar to what we saw in the quarter, which is that financial expenses should be driven by the changes in interest rates. So as we have net interest rates reducing, this should be a positive impact for financial expenses. Cash generation, which I think is a similar trend as the business evolves, it’s cash generation and we use part of this cash to funds payments and credit. This has a positive effect on financial expenses. And of course, this will be offset from TPV growth. But again I think these are the same trends that we saw in the quarter itself and it should remain consistent throughout the year. Can you please repeat the second part of the question, Sheriq?

Sheriq Sumar: Yes. Sure. So, in your comments, you have said that there was a lower number of working days in the fourth quarter. But in the first quarter you’re going to see an extra working day because you have an additional day in the month of February. So I know the impact is going to be pretty small, but just wanted to get a sense as to, you know what should — how should we think about that?

Mateus Scherer: Yeah. I think this was the smallest of the effects that we mentioned. So again, when we talk about one extra or lower extra during the quarter, it’s about 3% impact maximum. So on the delta, right? So it’s not material at all, I think.

Sheriq Sumar: Thank you so much. That’s all from me.

Lia Matos: Thank you, Sheriq.

Operator: Our next question from Eduardo Rosman with BTG. You can activate your microphone.

Eduardo Rosman: Hi. Hi, everyone. I have two questions here. The first one is on your credit business. You are booking your results now on an accrual basis and also booking upfront provisions rate, which I think makes total sense. But you’re still using a cost-of-risk of 20% while you believe actual losses will be under 10%. So just trying to understand here, how much time you need, you know, to be able to use in our lower-cost of risk in or eventually how much time we need here to be able to see that like a convergence in all of the cost-of-risk to your actual kind of losses, that would be the first question. And the second one, just trying to understand because the stock is down 10% in the aftermarket. And my sense is here that the numbers were strong, right?

So trying to understand here, what could be behind you know the sell-off and many investors, clients, you’re asking about departure. So just wanted to underwrite, so just wanted to if you could help us understand how — what was really his role in the last 12 to 24 months? He remains naturally an important kind of a partner of the company. But if you can remind us like his economic stake is not that large anymore. So if you can help us understand a little bit more about the changes in the Board you know maybe that could explain a little bit the sell-off, which to me, it doesn’t make a lot of sense given the results. Thanks.

Mateus Scherer: Hey, Rosman. Mateus here. I will start with the credit piece and then hand it over to Pedro to talk about the governance changes. Regarding credit, you’re totally right. So we’re booking credits on an accrual basis and we’re using the expected credit losses of 20% until we have more confidence on the models itself. The migration for a risk-based approach will occur throughout this year, so it probably will be gradual. So we’re going to start to converge the provisioning models towards our risk models. And then maybe, I think it’s also worthwhile to provide an update on how we’re seeing NPLs as well, which touches upon your comment about the 10% versus the 20% expected loss levels. So this quarter we started to report NPLs. As you can see, 90 days NPLs are still really low at 0.24, and NPLs from 15 to 90 days are still at 2%.

Of course, this metric is affected by the speed of growth of the portfolio, and that’s why the numbers are so low. But even when you look at the cohort data, our over 30 remains roughly at the same level that we disclosed in Investor Day, in the 2% — between 2% and 4% area. So I think you’re right in that point, that overall when we look at the numbers, that continues to put us on the right track to land at an expected loss below the 10% level. But again, it is still really soon and we’re taking the cautious approach here. So the migration will be gradual over time. Then maybe Pedro, if you want to comment about the governance.

Pedro Zinner: Yes. Hi, Rosman. I think what I’ll try to do, I think it’s hard to talk about rational or irrational reactions on the investor side. I think I’ll try to be a little bit pragmatic in terms of changes we had at the Board in — how we see this as we move ahead. So I think, Andrea, transition is kind of a natural step in the company’s journey. And I think over the past two years or so, the company has been professionalizing its Board of Directors, bringing a mix of technical expertise, industry, and company knowledge, right? I think I was even part of this changing process a couple of years ago. Two years ago I joined the Board in April. I think 2022 was a year of a turnaround and I think 2023 we presented very solid results.

I think we have a strong management team and a clear strategy as we move ahead. And I think Andre played a key role in terms of changing the governance and setting the directions as we move ahead. And I think he felt it was the right time to make the transition, right? I think the important point here to highlight is that despite him stepping back from his formal role, he remained as a reference shareholder of the company. I think addressing the question he holds as of today, roughly 7% of the economic — in terms of economic value for the company and a voting power of roughly 37%. I think another point which is worth highlighting is safeguards regarding the company shareholders agreement and articles of association that is held by Andre, right?