StoneCo Ltd

Our focus is to serve MSMBs with great solutions, at fair prices, and provide the best customer experience to help them better manage their businesses and sell more. We have organized ourselves around each client segment to increase our ability to serve and solve their issues in a differentiated way, seeking to increase our competitive advantages.

We operate in two main business segments: financial services and software. In financial services, we offer payments, digital banking, and credit solutions, tailoring our Ton offering mainly for micro merchants, and our Stone solution for SMBs. In software, we offer POS and ERP solutions for different retail and services verticals, Customer Relationship Management (“CRM”), engagement tools, e-commerce and Order Management System (“OMS”) solutions, among others, focused on both SMBs and large clients.

Our positioning in the micro merchant segment, which considers clients with monthly total payment volume (“TPV”) below R$15,000, is to offer easy-to-use solutions and a digital business model with low costs for the clients and good economics for us. In the SMB client segment, which comprises clients with monthly TPV between R$15,000 and R$2 million, we have two different approaches: (i) for clients with simpler operations, we strive to offer an all-in-one Stone solution that combines our merchant-focused payments and banking services; and (ii) for clients with more mature operations, we look to offer more sophisticated solutions that integrate our financial services with software for specific verticals. We believe such approach supports the business of our more mature clients with their industry-specific needs. Finally, for large clients, we are positioned to have an opportunistic approach focusing on efficiency and profitability, offering more tailor-made solutions.

With the acquisition of Linx in 2021, we became a leading player in the retail software market in Brazil. We believe that the combination of financial services and software solutions is powerful, and we are committed to capturing the opportunity by integrating these solutions within four strategic software verticals which are gas stations, retail, food and drugstores.

Financial Services

Our goal in financial services is to be the best and more complete financial operating system for Brazilian merchants, from where they can manage their financial lives in a seamless and integrated way. This segment encompasses our financial services offering for both MSMBs (micro-merchants and SMBs) and Key Accounts (comprised of platform services and sub-acquirers). Our 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 aspayment slips (Boletos) and Pix transactions, and by conducting a wide range of transactions in brick-and-mortar and digital storefronts in a quick and user-friendly manner. We also provide digital product enhancements to help our merchants improve their consumers’ experience, such as our split-payment processing, multi-payment processing, and recurring payments for subscriptions. Additionally, we have our tap on phone solution (TapTon) that allows merchants to sell via their smartphones, opening new opportunities to improve their sales.

•Prepayment Solutions: We help our clients manage their working capital needs and effectively plan for the future by offering them prepayment financing, which consists of making the settlement of a card transaction to our clients at a discount before the settlement is originally due, allowing clients to receive their funds two days after the transaction is approved or as early as the same day. Such working capital solution provides clients with transparency and control over their receivables, enabling them to better manage their cash flow to help their businesses grow.

Below is an illustration of prepayment workflows in Brazil:

•Digital Banking Solutions: We offer a digital bank account to our clients, which is tailored specifically for merchants. The bank account can be integrated to the POS to help merchants manage their finances efficiently. In addition, with this digital banking account, merchants can receive and make payments, issue payment slips (Boletos), pay taxes, make Pix transfers and save money, all in a cost-effective and user-friendly way, seeking to increase their cash-flow within the Stone platform, significantly increasing the experience and convenience. Also, we developed multi-user access, permissions and safe authorization processes for those merchants who have employees that help with their workflow. In addition, we provide our clients some insurance solutions, acting solely as a broker.

•Credit Solutions: We offer an array of credit solutions to merchants, including working capital, credit card and revolving credit. Our working capital and revolving credit products feature an innovative repayment schedule, where clients pay down their loans in line with their performed TPV. In the working capital product revision undertaken since 2021, we introduced monthly installments to help merchants keep up with their repayment schedule. Also, in case sales aren’t keeping pace with the minimum, we offer other multiple payment sources, such aspayment slips (Boletos), payment link, Pix transfer, future receivables, or the possibility of using the Stone account balance.

Software

Our goal in software is to provide workflow tools for Brazilian merchants and help them to sell more through multiple channels. In 2023, after the significant turnaround the company underwent in 2022 and as part of our annual strategic revision, we defined a clear strategic focus on integrating our financial services and software offerings in high potential verticals within the software business. As a result of this revision and the reorganization which was undertaken within the business, we moved from monitoring the segment based on Core and Digital, to currently managing it on three main fronts. As of December 31, 2024, these three main fronts were: (i) Strategic Verticals, comprised of POS/ERP solutions for retail, gas stations, food and drugstores, as well as value added solutions such as fiscal solutions, electronic transfer of funds (“TEF”) and CRM; (ii) Enterprise, comprised of POS/ERP solutions for large enterprise clients, as well as digital solutions such as OMS, ads solutions and marketplace hub; (iii) Other Verticals, comprised of POS/ERP solutions in verticals not prioritized for combination with financial services as well as other software solutions.

These fronts are detailed below.

•Strategic Verticals: We provide POS and ERP software solutions to our clients in retail, gas stations, food and drugstores, that enable them to manage their daily operations considering the specific needs of those verticals. We also offer our clients in these verticals integrated software, payments and banking solutions, which simplify our clients workflows and provide better offerings at attractive bundles. As mentioned above, our focus in terms of software and financial services integration is within these four verticals.

•Enterprise: We provide POS and ERP solutions for large and enterprise businesses, customized to the specific needs of each business. Within enterprise, we also allow clients to effectively implement omnichannel sales processes through our OMS, ads solutions and marketplace hub.

•Other Verticals: Comprises POS/ERP solutions in verticals where we do not see a significant opportunity in terms of financial services or that has not been set within our initial priority for capturing such opportunity. This front also comprises other value added software solutions, such as CRM, which are managed on a standalone basis.

We also have some solutions that are not allocated to our financial services and software divisions. As of December 31, 2024, Non-allocated division included Delivery Much which is a food delivery marketplace.

Our Business Model

We believe we have a dynamic mix of core competencies that significantly distinguish us from our main competitors in the Brazilian market. These core competencies are defined in four pillars: (i) Our Unique Culture; (ii) Comprehensive Merchant Platform; (iii) Tech Enabled Distribution; and (iv) Superior Client Service. When combined, these competencies yield a powerful set of competitive strengths that have: (1) enabled us to disrupt legacy practices, older technologies, and incumbent vendors in the Brazilian market; (2) empowered us to launch other technology and financial services solutions and further expand to software; and (3) positioned us favorably to continue to grow our business and expand our addressable market. Below, we will detail each of these four core competencies.

1. Our Unique Culture

We have proactively fostered and developed a highly-innovative, entrepreneurial, and mission-driven culture that we believe helps attract new talent, enables us to achieve our objectives, and provides a key competitive advantage. Our culture unites our team across numerous functions and focuses our collective efforts on passionately developing technology and disrupting legacy practices, older technologies, and incumbent vendors in order to provide solutions and a level of service that go beyond simply meeting the needs of our clients, and instead seeks to deliver an enhanced overall client experience. Our client-centric culture is built upon the following five pillars, which we convey to our employees, employee candidates, clients, and partners:

•The Reason—Our culture is centered on the fundamental belief that our clients drive everything we do. We also emphasize to our clients that, like them, we have also worked hard to start and grow a new business. We believe that building and maintaining close and active relationships with our clients will improve our ability to innovate, expand our leadership in the market, and grow our business.

•Own It—We expect that all employees present an “owner” mindset and use their intelligence to solve problems with a primary focus on making our clients’ experience great. We constantly strive to recognize exceptional achievement.

•No Bullshit—We encourage respectful candor in all interactions and aim to be straight to the point. We criticize ideas, not people. We expect our teams to always choose the correct path, not the fastest, and to act in a simple and efficient way.

•Team Play—We have learned that people achieve greater results together. We believe that more ideas flourish, are debated better, and questioned more effectively in teams. As a result, we strive to work together and constantly look for people with complementary skills to join our team.

•Live the Ride—We believe we will evolve more effectively by trying new ideas and improving on them with energy and passion. New ideas need to be tested in a controlled way, and only scaled once they have demonstrated authentic promise.

2. Comprehensive Merchant Platform

We believe that building a robust technology stack on scalable platforms is a key element for companies aiming to stay competitive in the dynamic business landscape. Therefore, technology’s transformative impact is evident across industries, reshaping how businesses operate and engage with their audiences due to unparalleled scalability and extensive reach, outperforming conventional operational models.

In the financial sector, particularly among major incumbent banks in Brazil, the adoption of technological advancements has been gradual. These institutions face challenges in transitioning to a tech-first operational model, resulting in a slower pace of change. As a result, we believe it creates opportunities for innovative players to get ahead.

We recognize that being a fintech means placing technology at the core of our operational processes and in designing our services and products. We understand that client demands are increasingly instantaneous, leading us to digital products and services with self-service, real-time response, automation, and personalization. This is made possible by our technological mindset centered on platforms.

However, our rapid growth initially leaned heavily towards development speed, sometimes at the expense of consistency and reusability. This resulted in the existence of multiple data platforms managed by different teams and implemented across various cloud platforms, for instance. We believe that our platform-focused approach is a key differentiator element for our business, and we are on an ongoing journey to reach our ultimate destination.

In the last two years, we made substantial strides in integrating these disparate silos. We have united our technology teams, established consistent processes, and developed foundational components. This collaborative effort has culminated in the creation of a unified technology team that builds a cohesive, scalable, and reusable set of platforms known as the Stone Platform, which is structured into four layers:

•Experience: facilitates the creation of intuitive and customizable interfaces, tailored through simple configuration changes to suit different products. We believe the best way to build a long-term competitive advantage is to deeply understand the needs of each of the different segments we operate to build different value propositions. However, to achieve scale while operating with multiple value propositions, we need to provide flexibility to adapt communication, to choose features and craft the final experience in a unique way for each segment, with the maximum utilization of reusable components. We plan to expand our platform in three main directions: (i) open ecosystem to enable partners to provide complementary products and services to our clients; (ii) omnichannel lifecycle to connect the increasing new acquisition and relationship channels as we seek to increase cross-selling opportunities and client loyalty; and (iii) personalized offering to facilitate aligning with the increased options introduced by the ecosystem, without overwhelming the client experience.

•Product: encompasses our primary financial service platforms, including payments, banking, and credit. The product platform aims to provide specialized expertise in each business domain through easily integrable and customizable components and features via a set of software development kit (SDKs), application programming interfaces (“APIs”), and services. This allows for the maximum possible reuse of components while providing the capacity for specific configurations and customizations for each segment. This way, we gain flexibility and agility to quickly enter new segments with very low investment. Our Product Platform will evolve: (i) from payments to an omnichannel checkout; (ii) from credit to a smart cash flow equalizer, by actively providing and proposing alternatives to optimize the use of third-parties’ capital with an almost infinite flow of information that will enable our models to predict cash flow needs; and (iii) from banking to intelligent spending management, with the combination of open finance, AI and embedded banking into ERP, to provide insights with an automation business process solution to our clients.

•Operational: empowering our sales, includes client services, marketing, and logistics through dedicated platforms. Our operations are founded on clear and simple principles: deliver the best experience to clients while pursuing operational excellence – and make it all with simplicity. We strive to do this through an integrated suite of proprietary technology solutions that our team uses every day, including: (i) Marco Polo, our platform for sales and distribution, which has an important role in managing our territories, sales pipelines, and client’s life cycle, helping us to increase the productivity of our sales force; (ii) Green App, our platform for logistics operations across Brazil with capabilities that range from supply chain management to last mile logistics; and (iii) One Platform, that supports our client service operations enabling us to support clients through multiple channels, including chatbots, and to have a more complete view of client’s information.

•Internal: empowering our developer and product teams with platforms that foster agility and a data-centric approach maintaining an unwavering focus on the security, scalability, and availability of our services. This platform is an essential structure for our operations, providing the essential tools and services that empower our developers to remain agile and allowing us to innovate across all product domains. In our tech-centric approach, data guides every aspect of our decision making and one critical metric of concern revolves around developer agility. We are deeply committed to building the services that enhance our developer’s productivity, enabling us to promptly respond to the evolving needs of our product team.

3. Tech-enabled distribution

We sell and distribute our solutions through three different types of channels: (i) Proximity channels, focused mainly on SMBs, in which we leverage our in-person distribution through proprietary hubs and franchised hubs, leading to a closer relationship with our merchants with service differentiation as the main driver; (ii) Digital channels, with the focus on scaling with efficient Customer Acquisition Cost (“CAC”) through our digital, inbound sales and self-onboarding services; and (iii) Strategic Partners, which is composed of our member-get-member channel, focused mainly on micro-merchants, and our Partner Program, focused on SMBs and Key Accounts, with expanded reach as the main driver. We believe we have significant competitive advantages through our distribution capabilities. Our multiple channels allow us to provide service differentiation at scale, as we can dynamically choose the right channel to serve each client in an optimal and tailored manner, balancing growth with unit economics optimization.

i. Proximity Channels:

•Stone Hubs: We distribute our technology and solutions to brick-and-mortar merchants primarily through our Stone Hubs, which are designed to provide hyper-local sales and service to SMB merchants in a designated geographic region. Our 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 our competitors who sell their services mostly through ordinary bank branches or remote call centers. We have both proprietary hubs as well as franchised hubs. In December 2024, we had more than 600 Proprietary and Franchised Stone Hubs.

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

•Franchised Stone Hub—Our franchise hubs are similar to our 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 our proprietary hubs, in accordance with our policies, procedures and internal targets. We can decide to establish a franchise hub instead of a proprietary hub according to a few key parameters such as population density, estimated available TPV and profitability from merchants in the designated area, as well as if we identify an attractive potential partner in the region.

Our hubs are staffed by sales and logistics personnel that include:

•Stone Agents—Our troops-on-the-ground sales team. This is a qualified team, focused mostly on the Small segment within SMBs, who are highly trained to deliver personalized and effective sales and support directly to the doorstep of our clients. We believe that by being close to our clients, we have a unique ability to build strong client relationships, attend to their specific needs and react quickly to changes in each local market.

•Stone Specialists—Also part of our troops-on-the-ground sales team, specialists are part of the career path of an Agent. Specialists are responsible and specifically trained to address the needs of larger SMBs, who have more complex and specific issues and thus the need for more complete financial and management solutions. From 2024 onwards, we have reinforced this function in our hubs, as part of our efforts to increase our penetration in the medium client segment.

Our Stone Agents and Specialists are both supported by an integrated proprietary 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”—Our 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 our technology platform and management to facilitate active interaction and support with their teams.

We have developed a proprietary method of training and supporting our sales personnel, which we believe has directly increased our team’s results. Our Stone Agents receive extensive training in our company’s culture and operations during their onboarding process, and on an ongoing basis, to help reinforce our client-centric culture and high-performance standards. Our sales personnel have disciplined daily, weekly, and monthly touchpoints with their leaders, along with routine reporting, key performance indicators (KPI) reviews, and other core processes to help ensure they are equipped with the tools and support they need to maximize their effectiveness. The typical daily routine of a Stone Agent involves starting the day with team meetings to align goals and strategies, followed by client meetings focused on driving new sales. In addition, our sales personnel are supported by direct marketing campaigns to help build brand awareness as we enter new markets.

•Software Direct Channels— Our direct channels consist of business managers dedicated to our customer base (“farmers”) and business managers responsible for prospecting new clients (“hunters”). Our 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 we offer.

•Software Indirect Channel— Our indirect channels consist of independent sales agents. These sales channels allow us to be present in places where we do not have our own sales offices. Our independent sales agents are mostly exclusive distribution channels through which we acquire new customers and negotiate solutions in the regions where we operate. Our independent sales agents also carry out consulting services (implementation, installation, customization, and training services) of our software solutions.

ii. Digital Channels:

•Inbound Sales and Distribution— We also sell our 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 network effects of our clients within our hubs, as well as sales leads. This team can manage and onboard a new client in-house.

•Online self-onboarding— Our 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 our user-friendly website and app.

iii. Strategic Partners

•Partner Program— Our distribution through partners, mainly software providers (ISVs), marketplaces and e-commerce platforms. Different from the channels mentioned above, 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. We integrate and embed our 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. In December 2024, we had more than 500 Strategic Partners.

•Member-get-member— In 2021, we developed the “Renda-extra” channel, in which any client or person in Brazil that is registered in the channel can refer our Ton solutions to merchants in the country, in exchange for a commission for each POS offered. After the referral is made, the Ton team is responsible for the support and logistics to deliver the POS to the client.

An important part of making sure our distribution channels are excelling in their functions is to guarantee we have the right technological assets in place to support them. As we have already detailed in “Item 4. Information on the Company — B. Business Overview — 2. Comprehensive Merchant Platform”, the Stone Platform is structured in four layers, being one of those the Operational Platform. To assist our distribution channels, mainly our hubs, we have developed Marco Polo, our platform for sales and distribution. Marco Polo has an important role in managing our territories, sales pipelines, and client’s life cycle, which we believe helps us to increase the productivity of our sales force.

4. Superior Client Service

We serve and support our clients with fast, convenient, and high-quality customer service with support teams and technology tools that we believe are highly differentiated and have enabled us to maintain high customer service satisfaction. Our service and support functions, processes and tools were designed to embody our strong client-centric culture, continuously strengthen our client relationships, increasing their long-term value. Our client service team is essentially composed of our logistics and our customer support teams.

The first one is divided as below:

•Green Angels Team—This is the team of local and specialized personnel, who provide on-demand logistics support in the field. The Green Angel team is embedded inside our local Stone Hubs, where they interact with Stone Agents and our centralized client relationship team and leverage our cloud-based logistics platform to rapidly respond to the needs of our clients. Once they become aware of an issue, Green Angels commonly travel by motorcycle and reach our clients within minutes or hours to help them in a 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.

•Logistics Team—Our logistics 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 our local Green Angels to provide on-demand support.

Moving to customer support, our mission is to solve the clients’ issues as fast as possible, sustaining their high satisfaction, which can be done through different ways. Below, we will detail each of the solutions our clients can reach to have their problems solved, from the simplest to the more complex ones.

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

•Servicing through bots— We provide to our clients a chatbot capable of immediately resolving simpler issues, with access to clients information and authorization to execute actions. Brazil is highly conversational – a significant number of clients prefer to contact us via WhatsApp or chat, rather than by phone. This makes our bot a scalable and convenient solution for both our operation and our clients. Our chatbot team is a specialized, centralized and an in-house team responsible for the development and operation of our chatbots. The team’s main goal is to deploy scalable, high quality digital support for our clients with 24/7 availability. It leverages Natural Language Understanding (NLU) and Natural Language Processing (NLP) service providers with our CRM technology in order to build humanized conversation flows that can understand and solve our clients' requests and questions. The first chatbot we designed was made to support Ton’s customer experience operation, and is a key piece of Ton’s operational model, as it enables the customer support to scale up in high speed and low cost, reducing the cost to serve for this segment. In 2024, we made a significant improvement by implementing a proprietary Large Language Model (LLM) platform in our bots, boosting their deflection rates and at the same time improving client satisfaction (CSAT).

•Servicing through hubs— This is usually one of the first ways clients reach us. Through our hubs and franchises, clients can reach to our agents to resolve their day-to-day concerns. Our agents, utilizing the Marco Polo app, have access to the entire spectrum of client information, including historical relationship data, client profitability, and product usage details. Additionally, agents can request services, such as POS maintenance or additional devices, and immediately solve merchants’ issues.

•Servicing through enchanters—In addition to our self-service tools, bots and sales agents, our clients can rely on the expertise of our enchanters. Our enchanters are available through various channels, such as WhatsApp, in-app chat, and phone. Essentially, our clients can reach out to us in their preferred manner, and our unified platform seamlessly manages all interactions. When assisting a client, the enchanter quickly views their information, eliminating the need for time-consuming investigations. This improves efficiency and provides a comprehensive view of the client, from interactions with our sales team to detailed product configurations. There is still plenty of room to gain productivity using AI tools, but we have already started introducing AI to our client relationship team. For example, with AI, we help our enchanters to faster understand clients needs providing them summaries of client's history. This makes us more productive and also improves the quality of our service. In 2024, 87% of the contacts were answered within our internal service level agreement targets for calls and written channels. As a result, 88% of contacts were rated as “excellent” by our clients according to our internal surveys. This agility has yielded numerous customer service awards and acknowledgments throughout our history, such as best NPS in the acquiring segment, granted by SoluCX in 2024 and 2023.

Within our enchanters, we have one specialized team that is focused on client retention. This is a centralized team that is responsible for trying to keep clients who are considering canceling the services we provide. If a client contacts our client relationship team to cancel their services, our retention team is instantly notified and receives the demand. During the conversation with the client, they already have access to the client's profile and business model, enabling them to understand the reasons for cancellation and propose tailored solutions to better serve them, focusing on retention. We also have an adjacent data analytics group that constantly monitors our clients, uses AI technology to predict potential churn, and proactively identifies possible actions that our client retention team could take to reverse the propensity for churn.

We believe the use of technology to support our customer service team and our focus on self-service tools provide us with scalable customer service operations, while maintaining the quality of our services. In order to do so, we use a range of integrated systems, powered by the Stone Technology Platform, which empowers our client relationship, client retention and Green Angel team, to optimize our customer service and support functions through the Green App and the One Platform.

In the following section we will go over the opportunity we have within the market segments we target and the clients we serve, which we believe we are well-positioned to address through our competitive advantages just described.

Our Markets

Our Market Overview

We operate in Brazil, which is a large and fast-growing market for financial technology solutions. According to IBGE, Brazil nominal GDP and private consumption expenditures (“PCE”) in 2024 were R$11.7 trillion and R$7.5 trillion, respectively, up from R$10.9 trillion and R$6.9 trillion, respectively, in 2023. The payments market has continued to grow and demonstrated resilience to macroeconomic fluctuations in Brazil. During Brazil’s cycle of economic recession from 2014 to 2017, nominal GDP grew at a compound growth of 4.3%, according to the World Bank. During the same period, electronic payments volume grew at a compound annual growth rate of 8.1%, according to ABECS. In 2024, total volume of card transactions increased 10.9% to R$4.2 trillion, while in 2023, it recorded a growth of 10.1% to R$3.7 trillion.

As mentioned in “ — Business Overview — Pix ”, Pix was a key evolution for the payments system in Brazil, promoted by the Central Bank in the end of 2020. The Central Bank launched Pix with the goal of democratizing access to electronic payment methods, contributing to financial and digital inclusion and thus promoting greater digitalization of payments, fostering competition, market efficiency and lowering costs of electronic transactions. Since its launch, Pix transactions have been gaining traction, with more than 171 million unique Pix keys registered in the financial system as of December 31, 2024.

The initial wave of Pix, from 2020 to 2022, was primarily driven by Peer-to-Peer (“P2P”) transactions. During that period, individuals increasingly adopted Pix as an alternative to cash and wire transfers, leveraging its instant and cost-free payment functionality. This shift significantly contributed to greater financial inclusion within the ecosystem, leading to a reduction in the volume of cash in circulation.

The next phase of Pix, from 2022 to 2024, was driven by Peer-to-Merchant (“P2M”) transactions, where merchants increasingly adopted Pix QR codes at POS equipment to accept payments. Unlike P2P transactions, Pix QR code payments are typically subject to fees charged by Acquirers. Pix QR code transactions offer three key advantages to merchants: (i) lower costs, as they are not subject to interchange and network fees, (ii) seamless reconciliation with other card transactions processed through the POS system, which is critical for efficient store management, and (iii) ability to instantly confirm whether the transaction has been successfully settled, eliminating the need for customers to send payment receipts to the store owner, streamlining the payment process and avoiding fraud.

After assessing the impact of Pix transactions, we concluded that Pix has two main effects to our business: (i) Pix QR Code has a positive contribution, since this type of transaction has economics comparable to debit transactions, while they also bring higher client engagement within our banking ecosystem, and (ii) Pix P2P transactions have a slightly negative impact, primarily as micro-merchants—who often mix their personal and business finances—have increasingly replaced debit payments with Pix P2P transfers, which are cost free to them.

Considering these dynamics, we regard Pix as a meaningful evolution in the payments landscape. We remain committed to leading innovation within this rapidly developing environment, continuously adapting to future developments. For example, we have already started leveraging on Pix to enhance our products, such as using its volume on the daily amortization schedule of our credit product.

While electronic payments already exceed 90% of PCE by some accounts, in our view the total addressable market extends beyond personal consumption expenditure (PCE) given that intermediate consumption, a significant factor in Brazil, expands the Total Addressable Market (“TAM”) considerably. Also, evidence from other countries with even higher consumption penetration suggests that a competitive environment can remain both healthy and profitable. For example, in the United States, MSMB Take Rates have remained stable over the past 5 years, despite penetration estimates surrounding 120% of PCE (including card TPV and Automated Clearing House (ACH) person-to-business volumes). Furthermore, our analysis of Central Bank Pix data suggests that penetration calculated as such includes transactions from financial intermediation, property investments, agribusiness, and others which are not reflected in final consumption.

Despite high penetration levels, industry dynamics continue to support profitability improvement. In the United States, challenger Acquirers have continued to gain market share within the industry’s revenue pool. Additionally, our internal econometric analysis of take rate trends across cities and sectors with low cash usage has shown no indication of price reductions due to market saturation in recent years. This trend is driven by the increasing indispensability of Acquirers’ services in areas with higher electronic payment penetration. As electronic transactions representativeness continue to grow, the role of payment service providers becomes more critical for merchants, making their demand for these services more inelastic.

As a result, we believe there still is a big opportunity to continue to grow and increase our presence in the markets we address. According to our most recent internal estimates, as of December 31, 2023, we had a total available market (“TAM”), which considers revenue net of funding costs and provisions for loan losses for MSMBs in Brazil, in the amount of approximately R$34.0 billion for payments, as well as almost R$40.0 billion for credit and R$16.0 billion for banking.

As Pix became a relevant payment method, we have incorporated its TAM within payments, as it is a clear opportunity to us. To evaluate this opportunity, we developed internal estimates that take into account Pix P2M transactions conducted via both dynamic and static Pix QR Codes within certain retail Merchant Category Codes (MCC), as well as Pix P2P transactions also from certain MCCs that can be considered commercial transactions according to internal parameters. Based on this analysis, we estimate our addressable Pix market to be approximately R$2.0 billion, already incorporated in the R$34.0 billion mentioned above from payments.

In regards to software, according to our estimates considering our client base, data from Receita Federal do Brasil (RFB) and RAIS (Annual Social Information Report), the TAM for software tools for retail and services for MSMBs in Brazil was approximately R$8.0 billion in revenue as of December 31, 2023.

Below, a description of what is being considered in each MSMB business TAM:

•Our TAM for the payments business includes revenues from Net MDR from Pix and credit, debit and prepaid cards, prepayment and POS rental, excluding taxes;

•Our TAM for the banking business includes revenues from credit card issuance, interchange and floating;

•Our TAM for the credit business includes net revenues from working capital loans, revolving credit and credit card financing; and

•Our TAM for the software business includes recurring revenue from management systems as POS and ERP.

We believe we operate in a market with strong opportunities for long-term sustainable growth. This conclusion is based on several underlying trends that have directly affected the Brazilian retail sector in recent years, including increase in: (1) electronic commerce, (2) sales; (3) number of stores; (4) formalization; and (5) investment in IT by Brazilian companies.

Our Opportunity and Market Share

Analyzing the impact of all “Five Acts of our Evolution” in “Item 4. Business Overview — A. History and Development of the Company”, we see the strengths and benefits of our strategy. We seek to continue innovating and evolving to extend our capabilities and expand our market reach. Through this, we diversified our business revenue offerings, as each product offer matured within each market segment. We expect this pattern to continue, making our company stronger and more resilient.

We estimate that we still have a relevant opportunity ahead with the diversification of our payments business into other solutions such as banking, credit and software. Considering these products, we estimate that our TAM is approximately R$100 billion in revenues net of funding costs and credit losses in the MSMB segment as of December 2024. We also estimate that the micro segment revenue pool represents more than R$33 billion with a client pool of 11.6 million, while the SMB segment has the largest revenue pool opportunity, with R$64 billion and a client pool of 2.5 million. Based on our internal estimates and publicly available data, we can see that by successfully executing our “Five acts”, we have the potential to multiply the penetration in our current addressable market. As a result of such expectations, we believe that our market share as of December 31, 2023 on each of our addressable market’s buckets is still small in comparison to our TAM, as shown in the image below:

When analyzing the Brazilian card industry specifically, processing volumes were R$4.1 trillion during 2024, according to ABECS data, resulting in a market share for us in 2024 of 10.9%. When considering only our MSMB TPV in comparison to total card industry volume disclosed by ABECS, our market share in 2024 was 9.7% compared with 9.4% in 2023.

While we estimate we have 10.9% market share in merchant acquiring volumes according to ABECS data and 14% penetration of the software TAM for year of 2023, we believe we have not yet reached scale on new solutions, with 3% market share in digital banking and less than 1% market share in credit for MSMBs when compared to our TAM estimates for each segment as of December 2023.

Our Competition

As we evolve our business model to a multi-product portfolio of solutions consisting of financial services and software, we face competition from different players, with competition intensity based on the solution, and few players competing with us on all product fronts at once.

For example, in our financial services business, we face competition mostly from a variety of payments providers, as well as banks (traditional and neobanks), that have significant financial resources and develop different kinds of services, including gateways, PSPs, other reconciliation providers, banking services and credit operations. We may also face competition from fintechs that offer specific financial solutions.

In our software business, the market for retail management software in Brazil is highly fragmented. We believe most competitors are small software companies focused on specific niches, without the same breadth of solutions that we offer.

For information on risks relating to increased competition in our industry, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business, Strategy and Industry—If we cannot keep pace with rapid developments and changes in the markets in which we compete and continue to acquire new clients as rapidly as in the past, the use of our products and services could decline, reducing our revenues.”

Our Competitive Strengths and Advantages

Our operation in financial services combines our proprietary assets, intellectual property, capabilities and business processes to create a differentiated go-to-market approach and value proposition. We believe our business model, which is the combination of our comprehensive merchant platform, tech-enabled distribution and superior client service, disrupted the market and has enabled us to gain significant traction in just over a decade since the launch of our service. Although these remain the pillars of our strategy, we are in a dynamic market, leading us to be in constant evolution, which we can do so in the following manner:

First, through our comprehensive merchant platform, we are expanding our engagement levers, as we have been investing to have a unified technology stack that supports multiple value propositions, allowing us to have a multi segment reach while scaling efficiently. Second, in distribution, as we expand our channels, we can provide service differentiation at scale, as we can dynamically choose the right channel to serve each client. And lastly, from a client service perspective, we strive to serve our clients better by solving their issues faster combined with a good feedback score.

We believe these three pillars provide us with several sustainable competitive advantages that have enabled us to gain market share and will help us grow in the future. In addition, with the acquisition of Linx, we now have relevant strategic assets in software, that we believe, when combined with our financial services operation, provide us a competitive advantage compared to other market participants. The main competitive advantages that our model provides are as follows:

•First Mover Advantage— In order to reach SMBs in Brazil, we disrupted the market through our Stone Business Model, detailed in “Item 4 – Information on the Company – A – History and Development of the Company”. As far as we know, no single player had ever tried to do it before in Brazil, and we were the first ones to do so while being profitable. We believe this has brought us significant advantages over time, as we learned a lot from our clients, allowing us to move faster than other players, while keeping very high client satisfaction within our services and products.

Tech-enabled distribution:

•Extensive Reach to our Clients— Due to our focus on proximity, digital and strategic channels, we have a broad range of ways we can reach to our clients. As a result of our extensive range of channels, (i) we cover more than 99% of Brazil’s GDP and all of the 5,570 Brazilian cities, (ii) through our digital channel, we have millions of accesses per month and (iii) we have the ability to serve our clients with industry-specific solutions through our bundled solutions with software.

•Self-Reinforcing Network Effects— As we grow and expand our distribution and set of solutions, we benefit from self-reinforcing network effects. Our expanding distribution network enables us to reach more merchants, to whom we can offer more solutions. As we expand our client base, launch new solutions and remain constantly committed to being close to our clients, we are able to build stronger relationships, leading to higher client satisfaction scores, which also leads to new learnings and market insights. This creates a very strong network effect, as clients help us develop new features and solutions and they can also refer our solutions to friends and family.

•Low Cost of Acquisition—We believe our model, combined with the power and efficiency of our fully-digital technology platform, enable us to leverage our distribution to acquire new clients and upsell new solutions and services at a low marginal cost as compared to our competitors. We have 6 different sales channels, with more than 600 Proprietary and Franchised Stone Hubs, more than 500 Strategic Partners and millions of accesses per month in our digital channels, as of December 2024. We believe no single player in Brazil has a more extensive distribution network, allowing us to better balance returns and CAC on a client basis.

Superior client service:

•Best Client Service— Through our logistics and customer support we deliver the best experience in the market. The extensive and efficient network our logistics teams provides, leads us to deliver POSs for SMBs in up to 1 business-day and up to 3-days for micro clients. In our customer support, we have a fast call pickup time, where our clients talk to a human enchanter in under 5 seconds. As a result, we have consistently been ranked as the number one in client satisfaction in Brazil, according to Reclame Aqui, as of December 2024.

•Effective Client Support—The digital DNA and cloud-based architecture of our platform enables us to generate, capture, and aggregate a vast array of data across our various business activities. For example, we have developed and deployed machine-learning technologies throughout our company to leverage this data to improve the speed, functionality, and quality of many of our services and operations. For example, we use AI to (1) predict merchant behavior and enable proactive action by our sales and customer support teams, (2) turn long conversations our enchanters had with clients into short summaries that are stored in the client's history, and (3) increase the accuracy of fraud management.

•Greater Understanding of Our Clients—We proactively interact with our clients and seek to understand their business needs in order to develop stronger relationships and serve them more effectively. We believe we are able to do this in a manner that differentiates us from our peers due to the close proximity to our clients, transparency, fast, high-touch, and personalized customer support provided by our in-house customer support team.

Comprehensive merchant platform:

•Implement and Deploy New Capabilities—We utilize our digital, cloud-based architecture and integration capabilities to implement and deploy new features and technologies to our clients and integrated partners. Our technology platform provides the flexibility to do this easily without the need for expensive upgrades, complex conversions, or lengthy service disruptions. This enables us to provide our clients with the latest functionality in a quick and frictionless process. In addition, our architecture and infrastructure are designed for rapid scalability, which enables us to expand our capacity and manage utilization efficiently and cost-effectively.

•Effective Pricing— Due to our merchant-driven culture, we have revamped our pricing system to treat each client on an individual basis, considering specific and regional factors of each client and the full spectrum of solutions desired. Through this comprehensive data, we are able to craft tailored offerings that bundle acquiring, with different prepayment options, Pix, and banking services, each with minimum and target return thresholds, leading to better unit economics per client.

•Unique and Proprietary Data set – Our propriety model generates data on millions of MSMBs, providing us with unique insights into customer behavior. This data is integrated into our systems, including artificial intelligence machine learning algorithms to enhance customer support and experience, improve underwriting processes, and differentiate our products and services.

•Integrated solutions of financial services and software—By offering financial services and software solutions, we are better positioned than our competitors to offer integrated solutions to merchants. This provides them a better experience by simplifying their daily operations and providing a one-stop-shop solution. We believe this combination is powerful, with financial services providing stronger growth and monetization opportunities while software provides higher stickiness and data to increase assertiveness of our financial services offerings. Among the four strategic software verticals, in the fourth quarter of 2024 we already had R$7.0 billion of TPV coming from our software installed base, increasing 20.4% year over year, with a growth rate 1.5x higher than the growth in the same period from MSMB CTPV.

•Low Cost of Operations—Our business model enables us to operate with a low cost of operations and significant efficiencies. For example, as we developed our own end-to-end technology platform and do not rely on third-party vendors for processing and settlement, we can operate with low marginal transaction costs, while also attending our clients’ needs faster and more effectively. Also, through our Green Angels, we were able to create a reverse logistics ecosystem, in which we collect unused POSs from clients, refurbish them, and bring them back to our system, allowing us to grow with low incremental investments.

•Sustained Growth at Low Marginal Costs — Over the years, we developed foundational assets to enable our growth with low incremental costs. We have successfully reduced our nominal logistics costs per client by approximately 13% from 1Q23 to 4Q24, all while expanding our client base by 50% in the same period. This substantial reduction in costs amidst aggressive growth highlights our ability to leverage economies of scale, optimize logistics operations, and improve our cost structure. Our focus on identifying and addressing the core issues that lead to customer inquiries, coupled with the support of our tech team in implementing these solutions, has led to a decrease of more than 18% in the volume of contacts from our clients from the fourth quarter of 2024 compared with the first quarter of 2023. This approach resulted in a substantial reduction of 38% in cost per client in the same period, while maintaining customer satisfaction at historical levels, with a CSAT (customer satisfaction index) of 88% in 2024. The architecture and various operating advantages of the Stone Technology Platform enable us to run our business increasingly efficiently and with lower incremental transaction costs.

Also, we believe there are competitive advantages that derive from the combination of our business model pillars, as follows:

•Greater Flexibility to Adapt and Innovate, Allowing Full Control of the Client Experience—We strive to be well-positioned to quickly respond to competitive pressures through targeted, localized approaches. The proprietary nature, vertical integration, and control of our model enable us to adapt with greater agility and flexibility than competitors, allowing us to better understand our clients' needs. Also, the ownership of our foundational assets—technology, distribution, and customer service—gives us direct control over the development, deployment, and support of our financial solutions, ensuring an enhanced client experience. This control allows us to deliver high-quality solutions and premium service levels, differentiating us from competitors who rely on outsourced capabilities and third-party vendors that may not share the same client focus.

•Protective Barriers to Replicate—The combination of the various proprietary, vertically integrated elements of our business model, combined with our unique culture are difficult to replicate in full. We believe this provides us with strong protective barriers to entry which may make it difficult for our competitors to replicate our value proposition.

•Increasing Revenue per Customer— Due to our comprehensive set of solutions, we are able to combine them in bundles, increasing client engagement and revenues. When looking at heavy users, which are merchants that use more than three of our financial services solutions, in 4Q24 they represented 37% of our MSMB client base, while they brought more than 2x more revenue when compared to clients that use up to three solutions. Over time, the number of new Active Clients that join Stone with more than three solutions has increased from 17% in 1Q23 to 46% in 4Q24. We believe we have a big opportunity to address as we invest more in client engagement with our features while also making efforts to create and sell more financial services and software bundles.

•Better Unit Economics— The synergy between our growth strategies, monetization efforts, and efficiency improvements has led to strong unit economics performance, leading to a reduction in Customer Acquisition Cost (“CAC”), while scaling up the number of merchants we bring onboard and increasing contribution margin per client.

•Strong Lifetime Value—We believe we are well positioned to provide high-quality service levels and build strong, local or highly integrated relationships with our clients who value our differentiated approach and value proposition. These enable us to: (1) resist competitive pressures; (2) retain our clients for longer periods; and (3) upsell new solutions to increase our share of wallet. We also believe this enables us to enhance the overall lifetime value of our client portfolio.

Our Growth Strategies

Our primary mission is to remain focused on empowering our clients to grow their businesses through our financial services solutions and help them conduct commerce and run their operations more effectively with our software solutions. We believe this focus is a key differentiator for us and an important driver in helping us win and retain clients. We believe we have already come a long way, but there is still a lot of value to be unlocked through “the power of combining”, as follows. For further information on our history and solutions we offer, see “Item 4. Information on the Company—A. History and Development of the Company” and “Item 4. Information on the Company—B. Business Overview—Financial Services” and “—Software.”

We have defined our growth strategies within 3 priorities: (1) win in the MSMB Market; (2) drive engagement; and (3) scale through platforms. We can also grow our business through (4) entering new markets and (5) selectively pursuing acquisitions. In each of the sections below we will detail how we intend to achieve our next phase.

1. Win in The MSMB Market

a. True distribution powerhouse allowing multiple segment reach

We believe our distribution network is a key competitive strength that enables us to continue to scale our business, expand our geographic footprint, and increase market penetration. As we have already detailed in section “Item 4. Information on the Company – B. Business Overview – Our Business Model – 3. Tech-enabled distribution” we have a range of channels that we can leverage on to grow our client base. These channels are divided into (i) Proximity Channels, with its main growth driver being the service differentiation it offers through our Proprietary and Franchised Stone Hubs, (ii) Digital Channels, with its main goal to scale with efficient CAC mostly as a result of our marketing efforts in both traditional and digital media, and (iii) Strategic Partners, which we regard as key to expand our reach, mainly due to word of mouth from our existing clients through our member-get-member program and partners such as software providers (ISVs), marketplaces, and e-commerce platforms which also distribute our solutions.

Through our channels, we cover the totality of the cities and the services’ GDP in Brazil, as of December 2024. Despite this, we believe that our business model is far from saturation. According to our internal analysis, all our territories continue to grow across the board, regardless of their maturity levels.

b. Attractive financial services opportunity in our installed Software Base

In 2021, we acquired Linx, a leading retail software business in Brazil. Following some pilots with smaller software company acquisitions, our goal was to tap into Linx's extensive client base by offering an integrated solution of software and financial services, as we believe this approach could create a powerful competitive advantage in the SMB merchant market in the future. In 2023, we decided to focus on four key strategic verticals, namely, gas stations, retail, food, and drugstores, as we believe they represent the optimal spot for the combination of financial services and software and due to their representativeness in TPV and financial services pools. We have prioritized those verticals to greatly enhance our value proposition by embedding our financial services platform in the POS and ERP Software, facilitating the most critical workflows that those clients need and offering an end-to-end solution.

We envision this combination of financial services and software as a strategic enabler of better growth rates in medium clients in the future. Based on our internal analysis of the overlap between Linx and Stone clients, we conclude that there still is a small overlap between them, amounting to R$23.4 billion in 2024 and R$7.0 billion in the fourth quarter of 2024, an increase of 20.4% compared with the previous year. Our strategy to penetrate this base lies on identifying the specific pain points of each segment, and then further developing an integrated solution, seeking to help merchants save time and better manage their businesses.

In 2024, our strategy to cross-sell financial services to software clients proved more effective through the financial services sales specialists rather than the software distribution channel. This shift impacted the allocation of economics between the financial services and software segments and led us to evaluate potential partners for the software business, as we are implementing the strategy without leveraging the software channel. While we conducted this assessment in late 2024 and reviewed several proposals by March 2025, none reflected the asset's intrinsic value.

As further detailed under our second growth strategy “Drive Engagement”, we believe the combination between Financial Services and Software will also enable us to produce more attractive unit economics as we ramp up these integrated solutions.

c. Sustained best service in the industry

Our commitment to customer-centricity has been the cornerstone of our competitive advantage since our inception, when we decided to create a specialized service to provide the best customer experience in the market. In this regard, we have developed multiple channels to interact closely with our clients facilitating the resolution of their issues, and we believe that this is the key to comprehend and effectively address their needs.

In 2024, we served 4.2 million customers through (i) our proximity and digital channels and strategic partners, maintaining our values of proximity, (ii) our logistics, and (iii) our customer support team.

The journey of client interaction begins in the moment they sign up for our service through our sales teams, with proprietary and franchised hubs and digital channels. Within one business day for SMBs and three days for micro merchants, our green angels deliver and set up the contracted products and services, aiming to provide the best experience for the client, so they can start using our products and services immediately. Our customer support team helps clients with their daily needs, both through our in-house and outsourced customer support team, with telephone calls answered in less than 5 seconds. Our customer support team is composed of, highly trained agents, harnessing the best technological tools, and bots, our automated customer service.

We believe our on-demand customer service team supports our clients quickly, conveniently, and with high-quality service designed to strengthen our customer relationships and improve their lifetime value with us. Our approach combines human connection, proximity, and technology, through a range of self-service tools and proprietary artificial intelligence, that seeks to help our clients manage their operations more conveniently and enables our agents to proactively address merchant’s needs, occasionally, prior to the awareness of any issue.

Since our establishment, we have consistently maintained the highest ratings for customer service on Reclame Aqui, Brazil's foremost customer service benchmark, and we believe the disparity between our performance and that of our competitors remains significant. Although this does not represent a financial metric, we see this as one of the catalysts for our future growth.

Source: Reclame Aqui, as of December 31, 2024, 2023 and 2022.

2. Drive Engagement

a. More levers to build price bundles

Our culture of innovation and technology development has empowered us to price merchants in a much more dynamic way than anyone in Brazil. By the end of 2022, amid a tightening economic cycle in the country, we recognized the need to revamp our pricing system. We transitioned to an automated approach guided by transparent and straightforward standards. This new methodology treats each client as unique, taking into account various factors such as location, transaction volume, industry segment, and channel (whether through a hub or our inside sales team). Moreover, we consider the full spectrum of solutions desired by the client, ranging from POS devices to prepayment options (including daily, business days or instant settlement). We also consider whether merchants want to accept Pix QR code payments in the POS and if they want to manage their banking domicile with Stone. Through this comprehensive data, we craft tailored offerings that bundle acquiring, Pix, and banking services, each with minimum and target return thresholds aligned with the individual characteristics of the client.

In the SMB segment, our engagement equation rests on driving bundles with payments and banking as an entry-point of more product penetration, which has yielded substantive results. Since 2022, the majority of new Stone clients have been onboarded with our payments and banking bundle, serving as a pivotal factor driving the growth of heavy users within our client base. Heavy users, defined as clients utilizing three or more solutions within our financial services ecosystem, have increased substantially, comprising 37% of our client base by December 31, 2024— almost a 15-percentage-point increase from December 31, 2023. We believe this upward trajectory is particularly promising as heavy users exhibit an average revenue per client more than 2 times higher than that of regular clients. Moreover, we are seeing consistent improvement across all sales cohorts, maintaining a stable CAC over time. A comparative analysis between clients onboarded in the fourth quarters of 2023 and 2024 reveals a substantial increase of around 12 percentage points, from 34% to 46%, in new clients adopting more than three solutions. We believe these trends underscore our commitment to foster sustainable growth and maximize value for both our clients and stakeholders.

We are also beginning to evaluate the possibility of bundling our credit solution with acquiring and banking, thereby enhancing the value proposition for SMBs. To more mature clients of the segment we envision leveraging software as a differentiator, tailoring our offerings to address the vertical-specific requirements of each segment. For more information, see “—Drive Engagement – c. Software as a differentiator”.

b. Scale working capital solutions to monetize further

Following our mission of being the Brazilian entrepreneur’s best partner and helping them, through our solutions, to invest and manage their business, we identified the credit product as a significant need for business owners. Thus, we developed a user-friendly product aimed at providing a solution to their existing capital needs.

In 2023, we started testing our new working capital product, and we developed a comprehensive credit structure with new features and a robust monitoring process, collecting data from across the company and the market and we now manage the entire credit system from concession to recovery. The new product creates synergy between platforms, linking our clients account data in our banking platform to the credit card receivables in our payment’s platform, creating an end to end offer.

In the relaunch, we rebuilt both the product and user experience, learning from our initial credit venture. Key improvements include the use of several internal and external data to better assess merchant behavior and risk patters, monthly installments, replacing the previous lump sum payment and maintaining the retention mechanism. We have integrated retention data into monitoring, enhancing our ability to identify credit issues and offer reschedule options via the app. Enhanced monitoring tools provide real time data for immediate response to any unusual vintage behavior, and our models now incorporate extensive external data and control points to ensure better decision making and continuous monitoring scoring processes. Also, acquiring collateral is registered at the chamber of receivables before disbursement, and all loans are personally guaranteed by the store’s main shareholder, as we seek to reduce cash evasion risk,

Once the clients are approved for our credit solutions, they can have the credit resources in their account in a couple of days and are able to access all information using the app. The credit acquired is paid through monthly installments by the retention of a percentage of the clients’ daily transactions receivables. If a merchant’s monthly receivables are insufficient to cover an installment, we provide alternative payment options, such as issuing a payment slip (Boleto) or facilitating a Pix transfer, allowing them to supplement the payment and thereby reducing portfolio delinquency.

Another key differentiator of our product is our proactive approach to risk management. If we identify that a client is experiencing difficulties meeting their installment obligations due to lower-than-expected card transaction volumes, we engage with them before default occurs. This allows us to renegotiate the retention rate on receivables or adjust the loan term, minimizing the risk of default while supporting the client’s financial sustainability.

We believe that the expansion into credit provides a substantial incremental revenue opportunity for us and the strong interaction between segments and platforms is a key strength to scale the product in our client base, always with a cautious approach. As a merchant-centric company focused on SMBs, our commitment to supporting our clients extends beyond working capital loans. As such, in 2024 we broadened our portfolio of credit solutions to better serve their evolving needs. We introduced (i) credit cards, our primary solution for addressing the credit needs of micro-merchants, providing them with essential financial flexibility, and (ii) revolving credit, a short-term loan designed to provide flexible access to capital. These expanded offerings reinforce our mission to empower merchants with tailored financial solutions that enhance their growth and financial stability.

As of December 31, 2024, our credit portfolio totaled R$1,207.6 million, composed of R$1,093.5 million of merchant portfolio (working capital and revolving credit) and R$114.2 million from credit cards. Our non-performing loans, or “NPL”, 15-90 days were 2.47% and NPL over 90 days were 3.61%. The coverage ratio over NPL 90 days totaled 331.2%. Our focus continues to be on disbursing credit to SMB clients. Additional details regarding our credit portfolio can be found in note 6.6 of our Consolidated Financial Statements.

c. Software as a differentiator

Our merchant-driven DNA provides us with a significant advantage to continue building differentiated solutions. Since 2023, we have increasingly focused on serving more mature SMBs with multiple locations and staff, recognizing their need for unified control and comprehensive business view. These businesses often have sector-specific demands, which we address through sophisticated, end-to-end solutions that integrate our financial services with vertical-specific software, helping them optimize operations, save time, and reduce costs.

By continuously refining our offerings to meet the diverse needs of SMBs of varying sizes and profiles, we strengthen our position as a trusted partner in their growth journey. Our close relationships with clients, combined with our technological capabilities, enable us to tailor solutions more effectively than any other provider. Our unique value proposition in financial services and software, along with a robust distribution and service network, has allowed us to become a strong partner of SMBs in Brazil.

3. Scale Through Platforms

a. Foundational assets: distribution, logistics, client service and brand

The foundational assets of a company serve as the bedrock upon which its entire operations and success are built, and we believe that our foundational assets are one of the main reasons we are in a favorable position to capture the opportunities we have ahead in the market. Throughout our (i) sizable distribution model, (ii) our logistics operation, (iii) our strong client service, and (iv) a recognizable brand, we can reach, serve, and engage clients efficiently driving our growth, and long-term success. Below, we detail how we intend to leverage each of our foundational assets to scale our business for multiple segments, with low incremental costs.

First, our unique set of distribution channels are the pathways through which products reach customers. After a merchant becomes our client, the onboarding process begins with our logistics operations, in which they are essential for ensuring efficient supply chain management, timely delivery of products, and a cost-effective distribution. A well-organized logistics network can significantly enhance operational efficiency, reduce costs, and improve customer satisfaction by ensuring that our solutions reach our consumers promptly.

Similar to logistics, our customer service operations play a critical role in building and maintaining strong relationships with customers with a responsive and overspecialized team to address inquiries, resolve issues promptly and proactively, and enhance customer loyalty, thereby contributing to repeat business and positive word-of-mouth marketing.

Last, a strong brand serves as a strong representation of the company's core values, quality, and reputation. We believe it distinguishes the company from competitors, instills trust and credibility among consumers, and creates a loyal customer base. Our marketing department employs a cohesive approach in crafting a 360 degree communication strategy, ensuring that our brand maintains consistent visual elements and key messages across all channels. In line with our strategy, in 2024, we have made several marketing deliverables that established the strength of our brand in the local market, such as the sponsorship of “Big Brother Brasil,” one of the most watched TV shows in Brazil, as well as Formula 1 and MasterChef, which was crucial to our bundle offering of financial services and software. As a result, we were considered the 12th most valuable brand in Brazil, according to Interbrand's yearly Most Valued Brazilian Brands ranking.

The development of our foundational assets with a strong emphasis on leveraging technology plays a pivotal role in supporting our operations as we seek to enhance efficiency, connectivity, and innovation within our integrated applications.

b. Stone Tech Platform: Build Once, Use Many

Technology plays a fundamental role in expanding our operations, supporting various teams and the expansion of our product portfolio as we execute our strategy. For this reason, having an unified platform is substantial to govern the entire client life cycle, to operate with multiple value propositions and flexibility. Envisioning our expansion, in the last two years we have made improvements integrating technology teams, establishing consistent processes, and developing foundational components to create the Stone platform.

As we previously detailed in “Item 4. Information on the Company—B. Business Overview—Comprehensive Merchant Platform”, the Stone Platform is structured into four layers: (i) Experience; (ii) Product; (iii) Operational; and (iv) Internal. Within each of these layers there are multiple platforms, each housing independently deployable services. These allow us to pursue with high scalability and implementation, using our specialized engineering tools, for a customized experience for each type of client.

Evidence of our efforts towards scaling efficiently through our “Build Once, Use Many” philosophy, is the development of our banking solution. Rather than creating a stand-alone banking application, we focused on building a comprehensive banking platform, designed to serve a variety of applications and client segments. This platform is already seamlessly integrated into Stone, Ton and several other products within our software ecosystem. In “Item 4. Information on the Company—B. Business Overview—Comprehensive Merchant Platform” we have further detailed how we have been scaling efficiently within each of our platforms.

c. Scale with reduced incremental investments

Over the more than ten years of our journey, we have cultivated the platforms that underpin our ability to drive our future growth efficiently with minimal incremental costs, our foundational assets. Two main assets that contributed to our growth are our logistics and customer service platforms.

Our logistics platform was developed with a robust and precise infrastructure, and with this firmly established, we have been able to grow our operations with reduced incremental costs. Our logistics cost per client has decreased by 13% all while expanding our client base by almost 50% when comparing the fourth quarter of 2024 with the first quarter of 2023. This substantial reduction in costs amidst aggressive growth highlights our ability to leverage economies of scale, optimize logistics operations, and improve our cost structure.

We have identified similar trends in our client service platform, as we have reduced our cost per client over the past three years. Since the beginning, our approach to client service was not designed towards minimizing costs, but rather towards providing a superior service, through quality and proactivity. Our rationale was firmly grounded in the conviction that preemptive measures are superior to remedial actions, as by proactively addressing the root causes of client inquiries, we could deliver a superior service with remarkable efficiency. We have begun to capitalize on this approach, resulting in a decrease of approximately 38% in our cost per client on a unitary basis, when comparing the fourth quarter of 2024 with the first quarter of 2023. This reduction can be primarily attributed to the diminishing frequency of client interactions with our support services, reflecting the success of our proactive measures in mitigating issues before they arise.

When examining these trends over time, the synergy between our growth strategies, monetization efforts, and efficiency improvements has yielded significant results, with a reduction in CAC, while scaling up the number of merchants we bring onboard. We remain committed to reducing our CAC in the future.

4. Enter New Markets

We believe our business model is well suited to serve clients in other markets where our technology, solutions, and support model can continue to disrupt traditional vendors and legacy business models. We believe this opportunity exists in:

•New Geographies—We are expanding our geographic footprint by growing our distribution across Brazil. In the future, we may also seek to grow our business by selectively expanding into new international markets where we can leverage our business model.

•New Sectors—We are exploring new complementary business opportunities in adjacent sectors, such as digital banking, software solutions and credit. In the future, we may selectively expand into other sectors where we see an opportunity to leverage our capabilities to provide a differentiated value proposition for clients.

•Client Segments—We are a company focused on merchants, but if we believe we have an opportunity to address final consumers with a strong competitive advantage, we may also seek to do so.

5. Selectively Pursue Acquisitions

Although we are primarily focused on growing our business organically, we may selectively pursue strategic acquisitions that strengthen our competitive position, enhance operational efficiency, and expand our capabilities. These acquisitions can help us build on our technological capabilities, deepen our expertise, scale our operations, expand our geographic presence, or position us in complementary market segments.

Additionally, we assess opportunistic transactions that could create value, especially in challenging market conditions, focusing on areas that align with our long-term strategy or strengthen our competitive position.

We have established a track record of investing in, acquiring, and integrating complementary solutions and businesses, ensuring synergies that drive sustainable growth and value creation. For the full track record of acquisitions and divestments, refer to “Presentation of Financial and Other Information—Corporate Events—Investments in Software and other Companies” and “—Divestments in Software and other Companies”.

Trends and Challenges

In the dynamic landscape of the financial services and software markets, the possibilities for innovation and disruption are ever-present. With the rapid advancements in the regulatory environment in Brazil and in technology, companies have an expansive reach for experimentation. These innovations have the potential to revolutionize traditional services, offering more efficient processes, greater accessibility, and enhanced security. We believe there are various important trends that are impacting the growth and market opportunity for our services in Brazil. These include:

•Increasing Use of Electronic Commerce—Commerce in Brazil is increasingly being transacted through electronic accounts, such as credit, debit, and prepaid cards, eWallets and Pix instead of cash and checks. Our main goal as a financial services company is to allow our merchants to accept all types of payments existent in the market, and thus we need to constantly evolve our solutions to do so. With the launch of Pix in the end of 2020, more volume has been transferred to electronic accounts, leading to a decrease in the amount of cash in circulation. Also, according to the Focus report from the Central Bank, nominal household consumption in Brazil is expected to increase at a compounded annual growth rate between 5-6% each year between 2024 and 2028. We believe this represents one of the key drivers for card volumes growth.

•Increasing Shift to Digital Channels—Consumers and merchants are increasingly conducting commerce through digital channels online and through mobile devices. We believe there is an important opportunity for us considering that both in Brazil and Latin America, e-commerce solutions penetration is still relatively low in comparison to other countries. According to a 2023 study from Insider Intelligence, e-commerce sales in Latam are expected to grow in high double digits from 2024-2027, while non-e-commerce retail sales, are expected to grow low single digits. Also, even when comparing Brazil to other Latam countries, including Argentina, Chile, Peru and Colombia, e-commerce CAGR expected for Brazil between 2022 and 2026 is the lowest, with 11% growth estimated. Thus, there is still a big opportunity to address in this segment.

•More Open Regulatory Environment—The regulatory environment for the payments industry in Brazil has undergone significant changes in the past few years due to a concerted effort by the Central Bank and the Brazilian government to foster innovation and promote more open and fair competition. For example, (i) in 2019, Central Bank enacted a more robust framework, in which card receivables due by Acquirers to merchants are subject to registration at trade repositories, (ii) in 2020, it launched Pix, with the goal to streamline the process of completing payment transactions, making it straightforward, convenient, and direct for users, and (iii) also in 2020, it enacted the rules for Open Finance in Brazil, which allows customers to authorize financial institutions to share some of their data on with other authorized institutions. All of these measures have the goal to continue fostering competition. We believe this has created an attractive environment for innovative financial technology providers, such as us, to continue to disrupt the market, bring better solutions to clients, and grow our market share.

•More Integrated Solutions to Manage Increased Business Complexity—As consumers and merchants in Brazil increasingly connect across multiple channels, such as in-store, online and on mobile devices, an increased amount of data needs to be managed in their front office operations and back office functions. Thus, merchants are demanding better integrated and more seamless shopping and selling experiences, enabling them to manage their various commercial activities across channels on a single technology platform, and to conduct commerce more effectively, with greater functionalities and more sophisticated reporting tools. For example, most vendors in Brazil typically sell, manage, and process their point-of-sale and online solutions separately and on different platforms because they use older legacy technology platforms for point-of-sale transactions, which were not originally designed to incorporate e-commerce or mobile commerce. As a result, SMBs in Brazil typically have a lower penetration of management software use in comparison to other countries. According to a 2023 study from Atlantico, SMBs represent 15% and 20% of all businesses and 60% and 47% of employment in Brazil and USA, respectively. However, the contribution of SMBs to GDP in Brazil is close to 25%, much lower than the 44% recorded in the USA, proving that there is an opportunity for these businesses to become more efficient, with the use of integrated financial services and software solutions being one way to do so.

•More Robust Technology Platforms, with Easier Connectivity Tools—In order to provide the advanced functionality, seamless omni-channel experience, tighter integration, and better connectivity that merchants are seeking, providers require next-generation technology platforms with cloud-based architectures and more flexible connectivity solutions, such as gateways and APIs, to develop, host, deploy and manage these capabilities in a fast, flexible and cost-effective manner. The older legacy platforms provided by incumbent vendors typically do not have many of these capabilities and can be difficult and expensive to maintain.

•Faster and More Specialized Customer Support—In order to support merchants with advanced technologies, integrated solutions between software and financial services and multiple sales channels, providers in our market need to utilize more specialized and dedicated customer support operations that can help resolve the complex technical issues they face. The increased complexity that these new technologies can create for merchants requires customer support teams with experience and expertise in working with advanced technologies, advanced diagnostic technology, and the ability and support structure to respond quickly and effectively. Also, there is a significant opportunity to further enhance efficiency in customer support by leveraging AI. Through chatbots, we can already address simpler client issues and provide an initial screening of more complex cases, directing them to a support agent when necessary. This is an approach we are already implementing, and we believe expanding its use will further streamline operations and improve even more our customer support.

•New Business Models To Serve Clients—As consumers and merchants increasingly adopt new technologies for commerce and migrate towards digital channels, new approaches and business models are required to meet the demand for faster, safer, and more convenient commerce-enabling solutions. For example, we believe digital channels, including social media, email, and mobile platforms, provide more opportunities to reach and engage potential customers, while AI can enhance lead qualification, recommend tailored products, and predict customer intent. Together, these technologies enable businesses to not only increase efficiency but also deliver highly targeted, personalized experiences, ultimately driving higher conversion rates and improving overall sales performance. Also, selling integrated solutions of financial services and software demands specific capabilities and knowledge from salespeople, thus creating the need to have specific and trained people to do so.

We believe we are well-positioned to take advantage of these trends and opportunities, and to continue to disrupt the market, bring better solutions to clients, and grow our market share.

Our Solutions

We provide a wide range of solutions and tools for merchants, including a variety of payments, banking, credit and software products with features designed to attract and retain clients, focusing on helping our customers to manage and drive growth in their businesses. These solutions are divided between our Financial Services and Software segments and each of them are described in the tables below:

Financial Services

Payments

Banking

Credit

Software

Other

PinPag was part of the “Other” business segment. From February 2024 onwards, we no longer have an equity stake in PinPag, a company focused in financial solutions in electronic means of payment, which was previously acquired by Linx Pay.

Seasonality

We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenues as a result of consumer spending patterns. Historically, our revenues have been strongest during the last quarter of each year 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. Adverse events that occur during these months could have a disproportionate effect on our results of operations for the entire fiscal year. As a result of quarterly fluctuations caused by these and other factors, comparisons of StoneCo’s operating results across different fiscal quarters may not be accurate indicators of its future performance. For additional information, see “Risk Factors—Risks Relating to Our Operations—Our operating results are subject to seasonal fluctuations, which could result in variations in our quarterly profit”.

Raw Materials

We are dependent on a few manufacturers for a substantial amount of our POS devices. We are constrained by their manufacturing capabilities and pricing. We may face production delays or escalating costs if they are unable to manufacture enough product at an affordable cost. Some of the key components used to manufacture our POS devices, such as the chip, pin reader and battery, come from limited sources of supply in limited countries in Asia.

See “Item 3. Information on the Company— D. Risk Factors—Risks Relating to Our Operations—We are dependent on a few manufacturers for a substantial amount of our POS devices. We are at risk of shortage, price increases, changes, delay or discontinuation of key components from our POS device manufacturers, which could disrupt and harm our business”.

Risk Governance

During 2023, the Company underwent a process of centralization and integration of risk management. Risk management is performed by a specific area segregated from business areas and from the area that conducts the internal audit. The Chief Risk Officer is responsible for this specific area and reports to the Company’s CEO.

The risk management area is responsible for the identification, measurement, evaluation, monitoring, reporting, control, and mitigation of the risks to which we are exposed, including the following:

•Credit risk is defined as the potential losses for the Company deriving from: a counterparty’s failure to meet its obligations under the contracted terms, including Card Issuers, holders of credit cards issued by the Company, and working capital loan borrowers; a devaluation or a reduction in remunerations or expected earnings of a financial instrument arising from a deterioration in the credit quality of the counterparty, the intermediary party, or the mitigation instrument; a forbearance of financial instruments; or recovery costs of problem assets.

•Market risk is defined as the potential losses for the Company deriving from changes in prices or rates.

•Liquidity risk is defined as the potential losses for the Company deriving from its inability: to duly honor its expected and unexpected obligations, both current and future, including those arising from guarantees provided, without affecting its daily operations; to trade a position at the market price, due to its significant size in relation to the volume normally transacted or due to some market discontinuity; and to convert electronic currency into physical or scriptural currency at the time of the user's request.

•Operational risk is defined as the potential losses for the Company resulting from external events or from failure, deficiency, or inadequacy of internal processes, personnel, or systems.

•Social risk is defined as the potential losses for the Company resulting from the violation of fundamental rights and guarantees or acts harmful to the common interest.

•Environmental risk is defined as the potential losses for the Company due to events associated with environmental degradation, including the excessive use of natural resource.

•Climate risk is defined as the potential losses for the Company caused by events associated with: (i) the transition process to a low-carbon economy, in which the emission of greenhouse gases is reduced or compensated and the natural mechanisms for capturing these gases are preserved (transition climate risk); and (ii) frequent and severe weather or long-term environmental changes, which may be related to changes in climate patterns (physical climate risk).

For more information regarding risks, refer to “Item 11. Quantitative And Qualitative Disclosures About Market Risk”.

In addition to the above risks, the risk management area is responsible for the potential losses arising from interactions between them, regulatory capital management, and business continuity management.

The risk management area is structured into the following subareas:

•Market and liquidity risks, including the interest rate risk in the banking book.

•Credit risk.

•Regulatory capital management.

•Cybersecurity and data privacy.

•Fraud detection and prevention.

•Operational risk, which is responsible for internal controls, social, environmental, climate, business continuity management, and other operational risks.

•Enterprise risk management.

The key governance bodies are the following:

•The Board and its committees, particularly the Risk, the Finance, and the Audit Committees.

•The Executive Management Committee and its supportive committees, particularly the Internal Risk and the Crises Management Forums.

•The Risk Management area.

The key governance elements are as follows:

•Risk and Regulatory Capital Policy. It establishes the governance for risk and capital managements, defining structures and bodies and their respective roles and responsibilities.

•Risk Appetite Statement.

•Risk assessment methodology.

•Risk response policy.

•Incident response policy.

Compliance

The Compliance area is responsible for Regulatory Compliance, Prevention of Money Laundering and Terrorist Financing (“AML/FT”), and Integrity Compliance. The Compliance manager reports to the Company’s Chief Legal and Compliance Officer. The Regulatory Compliance team is responsible for ensuring the company's regulatory adherence to applicable standards, as well as being the communication channel with regulators. The AML/FT team is assigned for implementation of AML/FT policies and measures, mitigating the risk of one using the Company’s products and services to commit illegal acts. The Integrity team is responsible for receiving and handling complaints, conducting corporate investigations, and contributing to the achievement of institutional objectives honestly and ethically, in compliance with the guidelines of the StoneCo Code of Ethics.

Regulatory Matters

Our business is subject to several laws and regulations that affect payment schemes, payment institutions and financial services, many of which are still evolving and could be interpreted in ways that could harm our business. While it is difficult to fully ascertain the extent to which new developments in the field of law will affect our business, there has been a trend towards increased consumer and data privacy protection. It is possible that general business regulations and laws may be interpreted and applied in a manner that may place restrictions on the conduct of our business. Below is a summary of the most relevant laws that apply to the operations of the Brazilian Payments System (the Sistema de Pagamentos Brasileiro, or SPB).

Regulation of the SPB

Our activities in Brazil are subject to Brazilian laws and regulations relating to payment schemes and payment institutions. Law 12,865, establishes the first set of rules regulating the electronic payments industry within the overall SPB and creates the concepts of payment schemes, payment scheme settlors and payment institutions.

In addition, Law 12,865 gave the Central Bank, in accordance with the guidelines set out by the CMN, authority to regulate entities involved in the payments industry. Such authority covers matters such as the operation of these entities, risk management, the opening of payment accounts, and the transfer of funds to and from payment accounts. After the enactment of Law 12,865, the CMN and the Central Bank created a regulatory framework regulating the operation of payment schemes and payment institutions. The framework consists of CMN Resolution No. 4,282, dated as of November 4, 2013; Central Bank Resolution No. 80, dated as of March 25, 2021; Central Bank Resolution No. 150, dated as of October 6, 2021; Central Bank Resolution No. 96, dated as of May 19, 2021, and Central Bank Circular No. 3978, dated as of January 23, 2020, and other related rules and regulations.

Payment Schemes

A payment scheme, for Brazilian regulatory purposes, is the set of rules and procedures that governs payment services provided to the public, with direct access by its users (i.e., payors and receivers). In addition, such payment service must be accepted by more than one receiver in order to qualify as a payment scheme. The main features of payments schemes set out in the Brazilian regulation are the following:

•Payment schemes that exceed certain thresholds are considered to form part of the SPB and are subject to the legal and regulatory framework applicable to the payment industry in Brazil, including the requirement to obtain an authorization by the Central Bank.

•Payment schemes that operate below these thresholds are not considered to form part of the SPB and are therefore not subject to the legal and regulatory framework applicable to the payment industry in Brazil, including the requirement to obtain an authorization from the Central Bank, although they are required to report certain operational information to the Central Bank on an annual basis.

•Limited-purpose payment schemes are not considered to form part of the SPB and, therefore, are not subject to the legal and regulatory framework applicable to the payment industry in Brazil, including the requirement to obtain authorization from the Central Bank. Limited-purpose payment schemes are those whose payment instruments are: (a) accepted only at the network of merchants pertaining to the same entity, even if not issued by it; or (b) accepted only at the network of merchants which have the same visual identity, such as franchisees and gas stations chains; (c) intended for the payment of specific public services, such as public transport and public telephone network; or (d) issued and accepted exclusively within the scope of a closed payment scheme and which are intended exclusively for payment of a specific type of product or service, of a restricted set of products or of services aimed at serving a certain economic activity or specialized markets.

•Certain types of payment schemes have specific exemptions from the requirement to obtain authorization from the Central Bank. This applies, for example, to payment schemes set up by governmental authorities, payment schemes set up by certain financial institutions, payment schemes aimed at granting benefits to natural persons due to employment relationships (such as meal vouchers) and payment schemes set up by an authorized payment institution in which financial settlement of payment transactions are carried out exclusively using the book-transfer method.

On October 6, 2021 the Central Bank enacted Central Bank Resolution No. 150, which replaced Central Bank Circular No. 3,682/13 and consolidated the rules on payment schemes. Such Resolution now governs the provision of payment services within the scope of payment schemes that are part of the SPB and establishes new criteria for a payment scheme to be considered part of the SPB. Besides, Central Bank Resolution No. 150 strengthened the governance mechanism to which the payment schemes rules — as released by the payment scheme settlor — are subject to. It not only has expanded the list of themes that, in order to be amended, are subject to prior authorization from the Central Bank, but also determined that the requests for Central Bank’s approval shall be preceded by consultation to the participants of the payment scheme.

Central Bank Resolution No. 150/21 also sets forth guidelines for payment scheme settlement. In this context, Public Consultation No. 104/2024 seeks to enhance these rules in three key areas: (i) centralized risk management; (ii) transparency of scheme fees; and (iii) anti-money laundering and counter-terrorism financing (AML/CFT) measures. The Central Bank may enact the new regulation in 2025.

While these provisions could help reduce participants’ financial exposure—since the settlor would be responsible for residual risks—they may also require acquirers to make additional contributions to a default fund, depending on the volume of installment-based credit card transactions.

Payment Scheme Settlor

A payment scheme is set up and operated by a payment scheme settlor, which is the entity responsible for the payment scheme’s authorization and functioning. Payment scheme settlors, for Brazilian regulatory purposes, are the legal entities responsible for managing the rules, procedures and use of the brand associated with a payment scheme. Central Bank regulations require that payment scheme settlors must be (i) incorporated in Brazil, (ii) have a corporate purpose compatible with their payments activities and (iii) have the technical, operational, organizational, administrative and financial capacity to meet their obligations. They must also have clear and effective corporate governance mechanisms that are appropriate for the needs of payment institutions and the users of payment schemes. As mentioned above, Central Bank Resolution 150 strengthened the governance mechanism to which the payment schemes rules are subject to, therefore, payment scheme settlors shall observe them in order to maintain their payment schemes in compliance with the applicable regulation.

Payment Institutions

A payment institution is defined as the legal entity that participates in one or more payment schemes and is dedicated to the execution of the remittance of funds to the receivers in payment schemes, among other activities. Specifically, based on the Brazilian payment regulations, payment institutions are entities that can be classified into one of the following four categories:

•Issuers of electronic currency (prepaid payment instruments): These payment institutions manage prepaid payment accounts for Cardholders or end-users. They carry out payment transactions using electronic currency deposited into such prepaid accounts, and convert the deposits into physical or book-entry currency or vice versa.

•Issuers of post-paid payment instruments (e.g., credit cards): These payment institutions manage payment accounts where the end-user intends to make payment on a post-paid basis. They carry out payment transactions using these post-paid accounts.

•Acquirers: These payment institutions do not manage payment accounts but enable merchants to accept payment instruments issued by a payment institution or by a financial institution that participates in the same payment scheme. They participate in the settlement process for payment transactions by receiving the payment from the Card Issuer and settling with the merchant.

•Payment Initiation Service Provider (“PISP”): These payment institutions provide payment transaction initiation services without requiring the initiation of payment transactions. They accomplish this without (a) managing a payment account; and (b) intermediating, at any time, the funds transferred in the respective payment transaction.

Payment institutions must be authorized to operate in Brazil and must have a corporate purpose that is compatible with payments activities. As for payment schemes, the regulations applicable to payment institutions depend on certain features, such as the annual cash value of transactions handled by the payment institution or the value of resources maintained in prepaid payment accounts. Certain financial institutions have specific exemptions from the requirement to obtain an authorization from the Central Bank to act as a payment institution and provide payment services. Furthermore, certain payment institutions are not subject to the legal and regulatory framework applicable to the payment industry in Brazil. This applies, for example, to payment institutions that only participate in limited-purpose payment schemes. Moreover, payment institutions that provide services in the scope of programs set up by governmental authorities aimed at granting benefits to natural persons due to employment relationships (such as meal vouchers) are required to obtain an authorization from Ministery of Labor and Employment (Ministério do Trabalho e Emprego).

The CMN and Central Bank regulations applicable to payment institutions cover a wide variety of issues, including: (i) penalties for noncompliance; (ii) promotion of financial inclusion; (iii) reduction of systemic, operational and credit risks; (iv) reporting obligations; and (v) governance. The regulation applicable to payment institutions also cover “payment accounts” (contas de pagamento), which are the end-user accounts, in registered (i.e., book-entry) form, which are opened with payment institutions that are Card Issuers of prepaid or post-paid instruments and used for carrying out each payment transaction. Central Bank Resolution No. 96, classifies payment accounts into two types:

•Prepaid payment accounts: Which is destined for the execution of payment transactions in electronic currency available as a result of previously deposited funds; and

•Post-paid payment accounts: Which is destined for the execution of payment transactions which do not depend on the prior deposit of funds.

In order to provide protection from bankruptcy, Law 12,865 requires payment institutions that issue electronic currency to segregate the funds deposited in prepaid payment accounts from their own assets. In addition, with respect to prepaid electronic currency, the payment institutions must hold a portion of the funds deposited in the prepaid payment account in certain specified instruments: either (i) in a specific account with the Central Bank entitled Electronic Currency Correspondent Account that pays interest according to the SELIC Rate; or (ii) in federal government bonds registered with the SELIC. The portion of the prepaid electronic currency that must be held in this form is currently 100%.

Our Regulatory Position

Three of our subsidiaries perform activities that are subject to Law 12,865 or Law 4,595 and regulations from the Central Bank and the CMN, as applicable, which are Stone IP, Stone Sociedade de Crédito Direto S.A. (“Stone SCD”) and Stone SCFI. On November 5, 2021, MNLT applied for registration with 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). As required by the applicable regulations, the four of them have submitted operational authorization requests before the Central Bank and CVM, as applicable, which current status follows below:

•Stone IP was granted a license to operate as a payment institution in the Acquirer category on July 3, 2017, in the issuer of electronic currency category on April 24, 2018, in the issuer of post-paid payment instruments category on November 24, 2021 and in the payment initiation service provider category on October 28, 2021.

•Stone SCD was granted a license to operate as a financial institution established as a direct credit company (sociedade de crédito direto) on July 19, 2019.

•MNLT applied for registration to become a category B public company, aiming at being entitled to issue securities other than shares and depositary receipts or other securities that entitle the holder to purchase shares or share certificates, which was granted by the CVM on February 2, 2022.

•Stone SCFI was granted a license to operate as a financial institution established as a credit, funding and investment company (sociedade de crédito, financiamento e investimento) on January 5, 2024.

Pagar.me Instituição de Pagamento S.A. (“Pagar.me”) applied for a license to operate as a payment scheme settlor on February 3, 2017, and as a payment institution in the acquirer and issuer of electronic currency categories on April 7, 2017. Due to changes in the Central Bank regulation, Pagar.me’s payment scheme is no longer subject to the authorization of Central Bank. Therefore, Pagar.me’s authorization request as a payment scheme was dismissed by the Central Bank on June 8, 2017. In relation to the application for a license to operate as a payment institution, Pagar.me required the withdrawal of its request proceedings in 2024 as a result of a decision to migrate acquiring and banking solutions operations from Pagar.me to Stone IP.

Additionally, on October 20, 2020, one of our subsidiaries, TAG, received approval from the Central Bank to operate as a trade repository (entidade registradora) in Brazil, and, therefore, is subject to Brazilian laws and regulations relating to financial assets and securities subject to centralized deposit on central securities depositories or registration in trade repositories, as per Brazilian Federal Law No. 12,810, dated as of May 15, 2013 and its related rules and regulations. The effective date of the rules that established the mandatory registration of card receivables with trade repositories and stated that credit transactions guaranteed by such receivables should be registered with the same trade repository was June 7, 2021.

Moreover, we started issuing post-paid instruments through Stone Cartões Instituição de Pagamento S.A. (“Stone Cartões”). As provided in Central Bank Resolution 80, payment institutions that act as post-paid instrument issuers are not required to file an authorization request until the regulatory threshold is met. Stone Cartões met this threshold in March 2025 and will timely submit its authorization request to the Central Bank.

On January 3, 2025, we submitted an application with the Central Bank for a brokerage firm license (DTVM), Stone Distribuidora de Títulos e Valores Mobiliários S.A. With this license we aim to expand the range of investment products offered to our clients and internalize key services provided to investment funds. Since their licenses to operate were granted by the Central Bank, Stone IP, Stone SCD and Stone SCFI have been in compliance with applicable payment and financial laws and regulations.

In addition, Law 12,865 prohibits payment institutions from performing activities that are restricted to financial institutions, which are regulated by Law 4,595. There is some debate under Brazilian law as to whether providing early payment of receivables to merchants could be characterized as “lending,” which is an activity that is restricted to financial institutions. Similarly, there was some debate as to whether the discount rates applicable to this early payment feature should be considered as “interest,” in which case the limits set by the Brazilian Usury Law would apply to these rates. This discussion was formally settled as of June 28, 2024, with the enactment of Law No. 14,905, which expressly removed all institutions under the regulation of the Central Bank from the applicability of the Brazilian Usury Law.

If we fail to comply with the requirements of the Brazilian legal and regulatory frameworks, we could be prevented from carrying out our regulated activities, we could be (i) required to pay substantial fines (including per transaction fines) and disgorgement of our profits, (ii) required to change our business practices or (iii) subjected to insolvency procedures under an intervention by the Central Bank and the out-of-court liquidation of Stone IP, Stone SCD and Stone SCFI. We could also be subject to private lawsuits. For additional information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Legal and Regulatory Matters—Our business is subject to extensive government regulation and oversight in Brazil and our status under these regulations may change. Violation of or compliance with present or future regulation could be costly, expose us to substantial liability and force us to change our business practices, any of which could seriously harm our business and results of operations”.

The Central Bank’s regulations also allow payment schemes to set additional rules for entities that use their brands. Since we participate in these third-party payment schemes, we must comply with their rules in order to continue accepting payments from payment instruments bearing their brands.

Regulatory Capital Requirements for Payment Institutions

On December 1, 2021, the Central Bank enacted Resolution No. 168, which provides for the accounting criteria applicable to the preparation of the consolidated financial statements of prudential conglomerates of authorized payment institutions and the operating procedures of such documents by financial and payment institutions. This rule created the prudential conglomerate led by payment institutions authorized to operate by the Central Bank, aimed at better addressing risks arising from the activities held by the payment institution and the other ones carried out by other institutions of its economic group.

The main aspects of such Central Bank’s strategy was subject to Public Consultation Notice 78, closed on January 26, 2021, which resulted in the enactment of Resolutions Nos. 197, 198, 199, 200, 201 and 202, all dated of March 11, 2022. According to Central Bank Resolution 197, the prudential conglomerates are now segmented into 3 types depending on whether the conglomerate is composed by financial or payment institution as well as if it is headed by a financial or payment institution:

•Type 1: conglomerates which are composed of both financial and payment institutions, but headed by a financial institution (“Type 1 Conglomerates”);

•Type 2: conglomerates which are not composed of financial institutions; and

•Type 3: conglomerates which are headed by a payment institution and also composed of a financial institution ("Type 3 Conglomerates”). The conglomerate headed by Stone IP has been defined as a Type 3 Conglomerate.

Type 3 Conglomerates shall maintain minimum capital adequacy ratio in relation to its risk-weighted assets ("RWA”), which shall be assessed in a similar manner to the approaches established by the Basel Committee on Banking Supervision (“BCBS”). The main differences between this new method and the one applicable to financial institutions are the concept of a specific RWA component for payment related risks and the consequent review of the components related to credit, market and operational risk.

In June 2023, the Central Bank published Resolution No. 324, which brought significant changes to the criteria for recognition of credit risk mitigation for banking book exposures that are risk-weighted under the standardized approach, to implement the credit risk mitigation standards of the Basel III reforms and to make payment account balances eligible for recognition as financial collateral.

In respect of the implementation of Basel III reforms, the Central Bank also published Resolution No. 356 on November 2023, which establishes the key components of the new standardized approach for measuring operational risk capital requirements, replacing the three former methodologies (BIA, ASA, ASA2). The new standardized approach is based on two key variables: (i) the Business Indicator (BI), which is a financial-statement-based proxy for operational risk, and (ii) the average historical losses of the Conglomerate. On June 12, 2024, the Central Bank enacted Normative Ruling No. 479, which specifies the BI composition. The new standardized approach is phasing in from 2025 until 2028.

The Central Bank is still evaluating the impacts of the RWA calculation on payment services and may adequate certain details related to the components of such calculation in the near future. This new environment applicable to payment institutions may affect our business, since the minimum capital requirements may be higher, resulting in a more complex monitoring of the capital adequacy. Moreover, there is a risk that the Conglomerate does not fulfill the minimum capital requirement, which would lead the Central Bank to enforce regulatory consequences in the manner prescribed by the regulation.

The Central Bank is responsible for defining which subsidiaries are included in the prudential conglomerate, assessing each entity's risk profile to ensure proper regulatory oversight and capital adequacy within the group. As of January, 2025, the following entities were part of the Prudential Conglomerate: Stone IP, MNLT, Pagar.me, Stone SCD, Stone SCFI, Stone Cartões, Tapso Fundo de Investimento em Direitos Creditórios (“FIDC TAPSO”), FIDC ACR I and ACR Fast Fundo de Investimento em Direitos Creditórios. As per the same date, the minimum Basel ratio defined for the prudential conglomerate was 10.5%.

Post-paid Payment Instruments Financing

On the scope of Law 14,690, also known as “Desenrola Brasil”, the CMN and the Central Bank published a set of rules on December 21, 2023 aimed at regulating the provisions on interest on revolving and installment credit operations and combating the financial over-indebtedness of Brazilian consumers, especially resulting from credit card debts.

As such, the CMN Resolution No. 5,112 of December 21, 2023 (“CMN Resolution 5,112”) provided significant changes in the regulation of revolving loans by revising CMN Resolution No. 4,549 of January 26, 2017. The main changes cover the granting of financing related to the outstanding balances of credit card invoices and other post-paid instruments. Although CMN Resolution 5,112 became effective immediately, its provisions apply only to credit transactions entered into as of January 1, 2024.

In addition, CMN Resolution 5,112 also introduced changes related to the portability of credit operations and the disclosure of information when contracting credit operations, as provided for in other regulations. These provisions will become effective as of July 1, 2024.

With regards to the Central Bank regulation, Central Bank Resolution No. 365, of December 21, 2023, amended Central Bank Resolution 96, in order to provide greater transparency and visibility for post-paid Cardholders in their relationship with the issuer. As such, issuers will be required to adjust the invoices and the communication with their clients. These provisions will become effective as of July 1, 2024.

Pix

Pix was created by the Central Bank through Resolution No. 1, issued on August 12, 2020, establishing a real-time payment system designed to make transactions faster, simpler, and more convenient for users. The primary goals of Pix include: (i) enhancing competition; (ii) improving market efficiency; (iii) reducing costs; (iv) straightening security; (v) enhancing client experience; (vi) accelerating the digitalization of the retail payment market, thus promoting financial inclusion; and (vii) overcoming gaps of other payments methods. To ensure proper functioning, the Central Bank issued further regulation on the Pix ecosystem, setting forth operational procedure, technological infrastructure, disclosure requirements and potential penalties to relevant participants.

Pix transactions are processed through the Brazilian Instant Payments System (Sistema de Pagamentos Instantâneos) (“SPI”), a centralized payment infrastructure developed by the Central Bank, and implemented through Central Bank Circular No. 3,985, dated as of February 18, 2020, currently under Central Bank Resolution No. 195, dated as of March 3, 2022.

All financial and payment institutions with a license to operate granted by the Central Bank and which have more than 500,000 Active Client accounts (including checking, savings and payment accounts) are required to be a participant on Pix and on the SPI. The participation by other financial and payment institutions that operate client accounts by the National Treasury Secretariat is optional. This structure ensures broad coverage of the payment system while maintaining regulatory oversight.

On October 29, 2020, the Central Bank issued Resolution No. 30, which amends Central Bank Resolution No. 1 to include new functionalities in the Pix regulations. Among these new functionalities is the Pix Cobrança, through which merchants, suppliers, service providers and other entrepreneurs can issue a QR Code to make instant payments, in points of sale or e-commerce, for example, or collections due on a future date. Another functionality is Pix Agendado, through which users can schedule transactions.

As Pix gained scale in 2021, concerns about security during the usage of this payment method also increased. To address these, Central Bank Resolution No. 142, dated as of September 23, 2021, implemented mandatory frauds records and reports prepared by financial and payment institutions and established nighttime limits, by which users are limited to transactions of up to R$1,000.00 between 8 p.m. and 6 a.m., as a general rule, and a special devolution mechanism to request return of funds in case of frauds and other scenarios was created (“Mecanismo Especial de Devolução”).

Moreover, on November 29, 2021, the Central Bank released two features related to cash withdrawal with Pix – Pix Saque (Pix Withdraw) and Pix Troco (Pix Change), which enable users to withdraw cash from any accredited merchant participating in the system, a role traditionally played by ATMs.

In December 2023, the Central Bank issued Resolutions Nos. 360 and 361 addressing the operational rules of its new Pix product called Pix Automático (Pix Automatic), which came into effect in February 28, 2025. Although it is also a product aimed at recurring transfers, the difference between Pix Automático and Pix Agendado (Pix Scheduled) is that Pix Automático will be able to give their consent to payments even if that charge is in a variable amount each month, unlike Pix Agendado the consent is given to a single transfer amount. Pix Automático features brings a new range of opportunities for institutions whose clients are mainly companies. The Central Bank Resolution No. 402 substituted Resolution No. 360 to make Pix Automático effective on June 16, 2025.

Pix’s ecosystem is in constant evolution. As of December 31, 2024, there were more than 157 million active users, which correspond to more than 73% of the Brazilian population, the Central Bank is planning to incorporate more functionalities to this payment method. Therefore, we are always keeping up with new rules and building new functionalities with the regulator and its stakeholders with the aim to offer the best payment services for our clients. Moreover, the Central Bank published a consultation to Pix’s participants to set the standards for Pix transfers initiated by Near Field Communication (NFC) on POS machines, and is expected to make a determination before the end of 2025. Such functionality may significantly reduce the timeframe to initiate a transaction and increase Pix acceptance for face-to-face purchases on merchants. On March 27, 2025, the Central Bank announced that it was developing Pix Parcelado (Pix Installments) and Pix em Garantia (Pix under Guarantee). Pix Parcelado will be a functionality in which the financial institutions use a credit operation to fund a Pix transfer, settling the funds immediately and allowing the users to make credit payments in installments. According to the Central Bank, Pix Parcelado can be introduced in September 2025. Pix em Garantia will be a functionality in which credit operations can use Pix receivables as collateral. There is currently no date set for the launch of this functionality. For more information regarding Pix market size, refer to “Item 4. Information on the Company – B. Business Overview – Our Markets”.

Open Finance

On May 4, 2020, the CMN and the Central Bank issued Joint Resolution No. 1, which defined the scope of services and data protection rules for the Open Finance system. Open Finance in Brazil allows customers to authorize financial institutions to share their data on customer record, transactions, products, and services with other authorized institutions, fostering competition, innovation and making the banking sector more efficient.

In this context, membership will be mandatory for financial institutions belonging to the prudential segments 1 and 2, according to Central Bank Resolution No. 4,553, dated as of January 30, 2017. In relation to the sharing of payment transaction initiation services, mandatory membership will apply to account provider institutions and payment initiation service providers (PISPs).

The implementation of Open Finance will be gradual, conducted in four phases, as follows:

a. Phase 1: sharing of public data belonging to participating institutions on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions;

b. Phase 2: sharing of customer record data and customer transactional data among the participating institutions upon customer’s consent;

c. Phase 3: sharing of payment initiation services, as well as forwarding credit transaction proposals; and

d. Phase 4: expansion of in-scope data to encompass foreign exchange, acquiring, investment, insurance, and open-end private pension transactions.

The transitory governance structure, pursuant to Central Bank Circular No. 4,032, dated as of June 23, 2020, includes technical groups, a secretariat and a deliberative council, responsible for discussing and defining key topics such as APIs, security, compliance, and fraud prevention. Decisions made by this structure, which also includes input from financial and payments market associations, are subject to Central Bank review to ensure alignment with regulatory goals.

Brazilian’s Open Finance ecosystem is one of the biggest in the world, since it aims to share both individuals and legal entities data, as well as payment and credit services. Furthermore, the scope of data also includes foreign exchange, acquiring, investment, insurance, and open-ended private pension transactions. Moreover, Brazil also is developing Open Insurance, a similar initiative in progress, made by SUSEP, Brazilian regulator on the insurance market.

Joint Resolution No. 10, enacted on July 4, 2024, introduced new mandatory participation criteria for Open Finance, expanding the scope of institutions required to participate in data sharing and payment initiation services. Effective by January 1, 2025, individual institutions and those belonging to conglomerates with more than 5 million customers must comply with Open Finance participation requirements and, if an institution voluntarily joins Open Finance for data sharing, all other entities within its conglomerate must also participate.

On July 4, 2024, Central Bank Resolution No. 398 amended Joint Resolution No. 1/2020 in order to provide for a payment initiation journey without redirection to the app of the institution that holds the client’s account, in order to improve the payment experience.

In December 2024, the Central Bank issued Normative Ruling No. 575, which published the second Open Finance Monitoring Handbook. The regulation is a measure by the Central Bank to enhance Open Finance compliance rules, detailing the procedures to be followed by the Open Finance Governance Structure for monitoring the performance of the participant institutions.

On December 5, 2024, Open Finance was formalized as a legal entity capable of implementing the definitive structure established by Resolution No. 400. Financial and payments market associations have joined the legal entity structure to keep contributing and building a diverse ecosystem, promoting competition and innovation.

In December 2024, over 800 institutions were participating in Open Finance, with approximately 61 million active consents. Despite the impressive numbers, the APIs are still being built and implemented gradually, and a lot of adjustments and corrections are being made to enable data and services sharing. Payment and financial institutions are engaged in making the ecosystem prosper, although still facing challenges to establish a truly interoperable ecosystem.

Registration of Card Receivables

On June 27, 2019, a more robust legal framework for card receivables was enacted underneath CMN Resolution 4,734 and the Central Bank Circular 3,952. As a result of these regulations, card receivables due by Acquirers to merchants are subject to registration at trade repositories (entidades registradoras), which aim to facilitate (i) Acquirers to anticipate card receivables originated by other Acquirers, and (ii) such card receivables to be used as collateral in credit transactions.

Although the above mentioned regulations were initially expected to fully come into effect on August 3, 2020, this date was postponed by the Central Bank on different occasions, coming into effect on June 7, 2021.

We explore this opportunity both commercially (through StoneCo) and technologically (through one of our subsidiaries, TAG). In this context, TAG, which was authorized by the Central Bank to operate card receivables registration system on October 20, 2020, became operational by June 7, 2021, when it started to render services of card receivables registration.

When entered into force, the operating trade repositories faced operational challenges to comply with the regulation, mainly regarding interoperability between the registration systems and failures to protect creditor’s collaterals. After several interactions between trade repositories, market participants and the Central Bank, the Central Bank enacted Resolutions 264, 349 and 373 reinforcing duties of trade repositories to (i) ensure the reliability of information, whether owned or interoperated, through recurring reconciliations between registration systems, and (ii) develop mechanisms to protect creditors' collaterals.

On December 20, 2024, the Central Bank submitted a Public Consultation to collect comments from the market on capping the interoperability fee for trade repositories for public consultation, aiming at reducing credit costs.

Moreover, Central Bank enacted Resolution No. 392, dated as of June 12, 2024, introducing the Financial Asset Catalog, in order to list the types of financial assets subject to registration and centralized deposit services and standardize the information of that should be registered for each type of asset.

We believe that this ecosystem will increase our addressable market for both prepayment and credit solutions, while bringing transparency and more efficiency to the financial market.

Banking

On October 10, 2024, the Central Bank published Consultation No. 108, proposing regulation for banking as a service (BaaS). The regulation aims to enhance transparency in White-label structures, as well as to regulate certain aspects of the relationship between the service provider institution and the clients. Since the proposal may impact our banking and payment solutions, we are actively monitoring industry discussions and assessing the potential impact on our business.

Payment Slips (“Boleto”)

Boleto is a standardized payment instrument that integrates a payment scheme settled by the Central Bank. It can be issued either by a financial or a payment institution (in this case, the payment institution shall be authorized to act as an electronic currency issuer). Operational aspects, fees and other matters are regulated by a convention executed among market associations.

On December 12, 2024, the Central Bank enacted Resolution No. 443, which replaced Central Bank Circular No. 3,598 and consolidated the rules on this payment instrument. The new rule (i) enhances the governance of the Convention to ensure broad participation, aiming to increase diversity in the payment scheme’s decision making process; (ii) explicitly states the interoperability of boleto with other payment schemes; and (iii) introduces the “boleto dinâmico”, a mechanism through which the beneficiary of the funds can be modified following the negotiation of the underlying financial asset, thereby providing greater security for the buyer of the financial asset.

Direct Credit Corporation

CMN enacted Resolution No. 5,050 on November 25, 2022, to regulate online lending fintechs and established new categories of financial institutions (“CMN Resolution 5,050”), such associedade de crédito direto – SCD. This isa financial institution that carries out loan transactions, financing and acquisition of credit rights exclusively through an electronic platform, using mainly its own capital as financial source for such transactions. The SCDs are authorized to assign credits related to their own transactions to: (i) financial institutions; (ii) investment funds; or (iii) securitization companies, provided that the quotas of the investment funds and the securitization assets issued by the securitization company are offered exclusively to qualified investors.

The regulatory framework for SCDs is simple and straightforward, considering that such institutions have a limited and less complex scope of activities, focusing exclusively on the extension of borrowings and financing, as well as on the acquisition of receivables, using financial resources that originate either from its own capital or from the BNDES.

Seeking to provide greater legal certainty to this “new credit market” the applicable regulation requires SCDs to select their clients based on consistent, verifiable and transparent criteria, including relevant aspects of credit risk assessment.

The SCDs are authorized to provide ancillary credit services, limited to an exhaustive list set forth in the regulation, encompassing: (i) credit analysis for third-parties; (ii) collection of debts owed by third-parties; (iii) acting as insurance representative in distribution of insurance related to credit transactions; and (iv) issuance of electronic currency and post-paid instruments. Notwithstanding, SCDs are prohibited from having equity interest in financial institutions, and also restricted from raising funds from the public, except for the issuance of shares.

Credit, Financing and Investment Company

Credit, Financing, and Investment Companies (Sociedade de Crédito, Financiamento e Investimento – SCFI) are financial institutions regulated by Law No. 4595 and Portaria MF No. 309. Therefore, they are subject to the other general rules and obligations applicable to financial institutions.

These entities must be incorporated as corporations and are active in medium and long-term lending and investment in the securities market. Many non-bank financial institutions are part of economic conglomerates and operate as the financial arm of commercial or industrial groups. SCFIs can also operate in niches that are not served by bank conglomerates, particularly in loans and financing with specific characteristics, such as higher risk, agreements with merchants, among others.

Anti-Money Laundering and Terrorism Financing Rules

Our activities in Brazil are subject to Brazilian laws and regulations relating to anti-money laundering (or “AML”), and terrorism financing (“CFT”) rules. These rules require us 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 (“COAF”) Brazil’s financial intelligence unit.

We comply with the applicable AML laws and regulations and we have 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. Our employees are aware of and have been periodically trained regarding our policies and internal procedures, which is mandatorily complied with and supervised. The Brazilian AML law specifies the acts that may constitute money laundering crimes, which may subject the agents of these illegal practices to imprisonment, temporary disqualification from managing enterprises up to 10 years and monetary fines.

The Brazilian AML law also sets forth business activities that are required to implement measures to monitor and prevent such crimes (which includes payment and financial institutions), subjecting those who do not comply therewith to warning, monetary fines and the revocation of the authorization to operate given by the competent regulators. Additionally, it created COAF, which has a key role in the Brazilian AML and counter-terrorism financing system, and it is legally liable for the coordination of the mechanisms for international cooperation and information exchange.

We have adopted the internal controls and procedures required by the Brazilian AML/CFT rules, which are focused on:

•Identifying and qualifying our clients, suppliers, employees and business partners.

•Conducting risk-based KYC, KYS, KYP and KYE processes.

•Carrying out a prior analysis of new products and services, under the perspective of money laundering prevention.

•Keeping records of all transactions.

•Reporting to COAF, within one business day and without informing the involved person or any third party: (i) any transaction exceeding the limit set by the competent authority and as required under applicable regulations; (ii) any transaction deemed to be suspicious, as required under applicable regulations; and (iii) at least once a year, whether or not suspicious transactions are verified, in order to certify the non-occurrence of transactions subject to reporting to COAF (negative report).

•Applying special attention to: (i) Politically Exposed Persons; (ii) unusual transactions or proposed transactions with no apparent economic or legal basis; (iii) clients and transactions for which the UBO (ultimate beneficial owners) cannot be identified; and (iv) situations in which it is not possible to keep the clients’ identification records duly updated.

•Offering AML-CFT training for employees.

•Monitoring transactions and situations that could be considered suspicious for anti-money laundering purposes, which includes checking the compatibility between the volume of funds of a client and such client’s economic and financial capacity, as well as the origin of funds.

•Ensuring that policies, procedures and internal controls are commensurate with the size and volume of transactions.

•The unavailability of goods, values and rights possessed, directly or indirectly, by any individual or legal entity sanctioned by any resolution of the United Nations Security Council.

•Conducting and updating, in every 2 (two) years, risk assessments with respect to clients, employees, partners and suppliers, our business model, transactions, products and services.

•Assessing our AML-CFT program’s effectiveness annually.

On October 1, 2020 the new regulation enacted by the Central Bank with regards to AML/CFT policies came into force. In summary, the new regulation comprises: (i) the Central Bank’s Circular 3,978, which provides new guidelines for the AML/CFT processes and the expansion and the strengthening of the list of PEP (Politically Exposed People); and (ii) the Central Bank’s Circular Letter No. 4,001/20, which sets forth a list of operations and situations that may constitute money laundering and terrorism financing. By the end of 2020, the Central Bank required certain adjustments in our AML-CFT to fully comply with the new guidelines, all of which have been promptly implemented by us and acknowledged/confirmed by the Central Bank. Nevertheless, we are continuously reviewing our AML-CFT program to identify improvement opportunities. See “Item 3. Key Information—D. Risk Factors—Risks Related to Legal and Regulatory Matters—We are subject to anti-corruption, anti-bribery and anti-money laundering laws and regulations.”

E-Commerce, Personal Data Protection and Taxes.

In addition to regulations affecting digital payment schemes, we are also subject to laws relating to internet activities and e-commerce, as well as banking secrecy laws, personal data and data protection laws, consumer protection laws, tax laws and other regulations applicable to Brazilian companies generally. Until September 2020 Internet activities in Brazil were mainly regulated by Law No. 12,965/14. On September 18, 2020, LGPD came into force, which unified and complemented legal provisions that governed personal data in Brazil so far by replacing or supplementing certain regulations and provisions and creating new ones. The law provides for the processing of personal data, including by digital means, with the purpose of protecting the fundamental rights of freedom and privacy and the free development of the personality of the natural person. One important change brought by the LGPD is the establishment of nine legal bases other than consent upon which personal data may be legally processed. Despite the LGPD coming into force in September 2020, the sanctions provided for therein were only regulated in February 2023.

This legislative innovation brought new obligations and liabilities to all natural persons or legal entities, whether public or private law that processes the personal data of individuals in Brazil, regardless of where that business or organization itself might be located. The LGPD is a relatively new law that, although already in force, is still under development and continues to evolve. Many of its provisions have been further clarified through ongoing regulatory efforts by ANPD, which has been actively issuing regulations to address various aspects of the law.

Customer accounts on our digital platform are subject to the LGPD and bank secrecy law (Complementary Law No. 105/01 and Article 17 of the CMN’s Resolution No. 4,282/13). We are also subject to trademark and software protection rules, and to tax laws and related obligations such as the rules governing the sharing of customer information with tax and financial authorities. It is unclear whether the tax and regulatory authorities would seek to obtain information regarding our customers. Any such request could come into conflict with the data protection rules, which could create risks for our business.

The laws and regulations applicable to the Brazilian digital payments industry are subject to ongoing interpretation and change, and our digital payments business may become subject to regulation by other authorities. For further information on the risks relating to regulation of business, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Legal and Regulatory Matters—Our business is subject to extensive government regulation and oversight in Brazil and our status under these regulations may change. Violation of or compliance with present or future regulation could be costly, expose us to substantial liability and force us to change our business practices, any of which could seriously harm our business and results of operations.”

Consumer Protection Laws

Due to some of our products, we are subject to several laws and regulations designed to protect consumer rights—most importantly, the Consumer Protection Code, 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. This law regulates, among other things, commercial practices, product and service liability, strict liability of the supplier of products or services, reversal of the burden of proof to the benefit of consumers, the joint and several liability of all companies within the supply chain, abuse of rights in contractual clauses, advertising and information on products and services offered to the public. Consumers have the right to receive clear and accurate information regarding retail products and services, with correct specification of characteristics, structure, quality, price, risks, and consumers’ rights to access and amend personal information collected about them and stored in private databases. These consumer protection laws could result in substantial compliance costs.

Personal Data Protection

The LGPD establishes general principles, with a comprehensive framework for regulating the processing of personal data, encompassing various aspects such as collection, use, processing and storage. It introduced, since 2018, significant changes to data protection regulations in Brazil, impacting various economic sectors and relationships, including those between customers and suppliers of goods and services, employees and employers and any other interactions involving personal data, whether in a digital or physical environment. Unauthorized disclosure, sharing, destruction or modification of personal data, regardless of the cause (i.e., cybersecurity breaches, computer viruses or otherwise disruption of our services) can expose us to liability, including protracted and costly litigation, financial penalties and damage our reputation. The LGPD also established an authority responsible for overseeing and enforcing the law. The ANPD is a special autarchy connected to the Brazilian Ministry of Justice and Public Security. According to the LGPD, the ANPD have the following responsibilities, among others: (i) enact rules and regulations relating to data protection; (ii) analyze and interpret, in the administrative sphere, matters relating to the LGPD; (iii) request access to information from data controllers and processors; (iv) supervise processing activities and impose sanctions; and (v) promote cooperation with international and transnational data protection authorities, among others.

As an example of its rulemaking authority under item (i) above, the ANPD has enacted the following resolutions: (a) Resolution No. 15, of April 24, 2024, approving new rules for the regulation on communication of security incidents; (b) Resolution No. 18, of July 16, 2024, approving new rules for the regulation on the activities of the “Data Protection Officer”; and (c) Resolution No. 19, of August 23, 2024, approving new rules for the regulation on international data transfers and the content of standard contractual clauses.

All legal entities will be required to conform their data processing activities to these new rules. In relation to the LGPD, we have implemented and are committed to continuously improving our processes to ensure compliance with its provisions. However, the foregoing list of laws and regulations to which we are subject is not exhaustive and the regulatory framework governing our operations changes continuously. Although we do not believe that compliance with future laws and regulations will have a material adverse effect on our business, financial condition or results of operations, the enactment of new laws and regulations may increasingly affect the operation of our business, directly and indirectly, which could result in substantial regulatory compliance costs, litigation expense, adverse publicity, the loss of revenue and decreased profitability.

Intellectual Property

Our services are largely based on proprietary software and related payment systems solutions. We rely 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 our intellectual property rights, including with respect to our proprietary rights related to our products and services. In addition, we license technology from third-parties.

As of February 2025, we owned more than 1,000 trademarks over 30 countries, including “Stone”, “Linx”, “Ton”, “Pagar.me”, “Buy4”, “Napse”, and others, as well as more than 150 software registrations.

We have 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”, “pagar.me”, “linx.com.br”, “napse.global” “stone.co”, “taginfraestrutura.com.br” and “investors.stone.co.”

We have material contracts with Visa and Mastercard in connection with our activities as an Acquirer for these card schemes. Our 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 IP sets forth the general terms and conditions under which Stone IP acts as a merchant acquiring principal participant for Visa in Brazil and provides Stone IP 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. Under this agreement, Stone IP is exclusively responsible for all the costs and risks associated with its participation as a merchant acquiring principal and consideration payable to Visa under this agreement is determined by the standard payment terms set forth in the Visa Core Rules and Visa Product and Service Rules, available on Visa’s website. Our License Agreement, dated as of December 21, 2015 and as amended from time to time, between MasterCard International Incorporated and Stone IP sets forth the general terms and conditions under which Mastercard grants Stone IP 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 IP’s issuing and acquiring activities. No consideration is due to Mastercard under this agreement. Additionally, we have the rights to use the “Pix” brand, which is the instant payment system established by the Central Bank. No payment is due to the Central Bank for the use of the “Pix” brand.

Other trademarks, service marks and trade names appearing in this annual report are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this annual report are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.