And this is consistent with what we have been saying over time, that in the short term to medium term, the competitive environment is much more rational and stable and players will benefit from a decrease in interest rates. In terms of competitive dynamics, overall, this is pretty much what we see, a rational market, not anything much new to say about that.
Neha Agarwala: Super helpful. Thank you so much, Lia.
Lia Matos: Thank you, Neha.
Operator: Next question from Renato Meloni with Autonomous Research. You can activate your microphone.
Renato Meloni: Hi, everyone. Thanks for the space here to ask a question. So first on take rates, I wondering if you can give me some more granularity on the decline in 4Q, how much comes from seasonality, and how much is coming from the shift in client mix? And then the expectation on how that’s going to behave throughout 2024? And my second question is a follow-up on financial expenses. The — did the sequential decline, I think it’s a little bit more than we expected, given the declining rates. So, I wonder if there is a other factor here at play? And then if you have some ratio that could help us estimate this for the year. Thank you.
Mateus Scherer: Hi, Renato. I will start with the take rate piece and then move to financial expenses. In regards to take rates, the vast majority of the decline was a result of a mix, credit versus debit. We also noticed a slight client mix change, but this time around it was the opposite effect, with Stone TPV gaining relevance over Ton’s TPV in the quarter, which was a different trend than the previous quarters. And this likely offset the increased contribution from banking and credits, which is growing above the pace of payments overall. So in general tech rate, I think the vast majority is purely seasonality. That’s why we remain committed with the guidance that we provided, and it was pretty much in line with what we expected.
Now, in terms of financial expenses, you are right that this quarter there is a second minor effect. This is related to the mix between sale of receivables versus total debt outstanding. But again, we’ve always mentioned in the past that from quarter to quarter, you can have small effects related to the mix of receivables versus debt. But this is not much material at all when we look at the numbers. I think when we compose the reduction in CDI, the lower amount of working days, and the lower average cash balance in the period, you got pretty close to where financial expenses should land. So again, when we look at 2024, I think it’s safe to forecast based on these drivers alone and forget about these small variations due to the mix of funding lines that we use.
Renato Meloni: That’s very clear. Thank you.
Operator: Next question from John Coffey with Barclays. You can activate your microphone.
John Coffey: Great, thank you very much. So I said, two questions which are sort of tied to some of the questions that Lia had had. So given that the silica has been declining over time and you benefit from that and you haven’t really seen any irrational behavior in the market just yet. I’m just wondering like at a very-high level, is there a way to think about what has to happen in order for you to start becoming more aggressive on pricing, is it generally like one key competitor makes a significant change to pricing or you start to see this more broadly over the market? And I guess my second question is, as far as the TPV guidance for 2024, is there any kind of view you can give us on the cadence of that growth on a quarter-to-quarter basis? That’s it. Thank you.
Lia Matos: Thank you, John. I’ll take the TPV question and then pass it over to Mateus. So I think loan yields in terms of the cadence of TPV, I think our TPV growth dynamics has been pretty consistent. So the important thing to look out for is the guidance for the year overall, so I think not much to say beyond that. And of course the seasonality that tend to be pretty consistence. Mateus, you want to go ahead?
Mateus Scherer: Yes. And in regards to the sensitivity of changes in pricing for the changes in interest rates, I think here we have to talk about the dynamics of pricing within each segments. So when we look at Micro, we mostly addressed Micro through our brand TON. And when I look at TON, the dynamics in terms of pricing is one-off public prices. So the prices on the websites and if you look today is very similar to pricing project for all the main players. Why is that important? With public pricing whenever you make a move, it’s a very expensive move because your clients in Europe then they can call you and request seeing public price. So we don’t think there is an incentive for any player to make a move in the short term.
Of course, longer-term, if rates really go down in a significant manner, a smaller player has incentives to reduce prices and then the others will most likely follow suit over time, but we don’t see that happening in the short to medium term. And then in the SMB, the dynamics in terms of pricing is the opposite. But the effect is quite the same. Because on SMB, the pricing is done on an individual basis. So very common in Brazil to have let’s say it, should drugstores same neighborhood same size but with two very different pricing profiles. And what that means is that if any player wants to be aggressive in SMB, there is no such thing as being aggressive for the whole base. The behavioral occurs in the new sales and then it really takes a while for the whole base to recycle and to have the effects on the P&L.
So that’s why we don’t see any likelihood of having the negative impact regarding interest rates in terms of pricing. But longer term, I think the strategy that we viewed at the Investor Day is really not about increasing these present payments, right? I think when you look at the guidance that we provided for take rates for 2027, all the increase can be attributed to the higher engagement of our banking solutions and also with the rollout of new products, especially credits. So again, short to medium term, we think because of this pricing dynamics, it is likely that the benefits of all interest rates will flow through the P&L. Longer term, the focus is not there, the focus is really on improving the engagement with the new solutions.
John Coffey: Great. Thank you.
Operator: Next question from Yuri Fernandes with JPMorgan. You can activate your microphone.
Lia Matos: Yuri, I don’t know if you’re trying to state your question. We can’t hear you.
Operator: I believe he dropped out of the queue. Can we pass to the next question?
Lia Matos: Sure, let’s move on.
Operator: Next question from Kyle Washington with Greenwich Capital. You can activate your microphone. Sir, you can activate your microphone.
Lia Matos: Let’s move to the next person in the queue.
Operator: Sure. Next question from Daniel with Unrivaled Investing. You can activate your microphone.
Daniel: Hi there. Can you hear me?
Lia Matos: Yeah, we can hear you.
Daniel: Oh, great. Thank you so much for taking my question, and I wanted to say thank you. You guys have done a wonderful job communicating the strategy and the presentation materials and I really appreciate the long-form letter from Pedro Zinner, this quarter and I hope to see more in the coming quarters. So once again, my name is Daniel from Unrivaled Investing. My question — two questions really. The first is regarding capital allocation. It’s been a treat to hear the commentary on your value proposition, why you think you’re winning, and that you think you’re going to continue growing faster than the underlying market. So that is very helpful, the rational marketplace perspective. Do you have any sort of thoughts on though the capital allocation?
Because I still think that there is this disconnect with what you’re saying, which is, you have this very strong value proposition, you expect to continue winning, and what Wall Street’s pricing where the stock is trading around low-teens earnings multiple. And I love to see the buyback last year. So that’s the first question and I can ask the second one later. Thank you.
Pedro Zinner: Thanks for the question, Daniel. So I think in regards to capital allocation, you’re pretty spot on. So when you look at the cash generation of the company, the company has consistently generating cash. First part we generated cash despite BRL300 million in buybacks and also deploying capital in credits. And that’s why at the end of the day, we approved and announced a new BRL1 billion buyback plan in Investor Day, right? I think the only question here is that we’re planning the execution of this buyback. And we also have to be mindful because when you look at the guidance, especially for the credit book, the BRL5.5 billion is a sizable increase versus what we have now. But it’s really small when compared to the overall credit markets in Brazil.
So the only thing we need to be mindful in terms of capital allocation longer term is that if we get it right in terms of the credit, there is potentially a lot more to be done in terms of deploying credit there and we want to have this optionality in maintaining a really strong balance sheet. So again, general terms, we’re aligning doing the buyback plan. It’s just a matter of planning the execution. And longer-term, we need to be mindful about the credit book.
Daniel: Got it. Super helpful. So it sounds like the buyback may not be at full capacity if you’re thinking about the underlying credit book and the incredible growth you could have there in the coming years. So that’s sort of the takeaway there. But the second half of the question, this is a bit of a tougher question which is, do you see a future where the software segment, which clearly hasn’t performed as well as the financial segment, which has done very well, do you see a future where the software segment turns around and really starts to accelerate in the future, really starts to — where you could say it has that type of value proposition where you’re growing significantly faster than the underlying industry where you say, hey, the value proposition here is very strong and that’s why we’re going to win? Thank you.
