The Stone Company’s Ambitious Path: Doubling Profits and Expanding Beyond Machines

Ads

The Stone Company’s strategy to double profits in four years has taken a significant step forward with its integration with Linx, as the company aims to attract new customers through its software business. The company’s third-quarter results exceeded expectations, surprising the market and prompting management to encourage investors to maintain their optimism.

The primary target for the Stone Company is to achieve an annual profit of R$1.9 billion by 2024, with a total of up to R$4.3 billion by 2027, effectively tripling their bottom line. This ambitious goal was announced at the company’s Investor Day in New York, showcasing their commitment to growth and financial success.

CEO Pedro Zinner emphasizes that the company has historically prioritized rapid growth. However, he explains that there are now numerous opportunities to utilize efficiency to improve profitability. By implementing a profitable cash flow business strategy, the Stone Company aims to optimize its operations and increase its financial gains.

The company’s strategy also highlights the importance of micro, small, and medium-sized enterprises (MSMEs). With a take rate of 2.7 percent, Stone aims to surpass the industry average and handle payments worth over R$600 billion by 2027. This sector has always been a priority for the company, but its significance has been further reinforced in their growth plans.

In an interview with EXAME Invest, Zinner emphasizes that the company’s goal is not to alter its strategy but rather to clarify its implementation and focus on the most lucrative opportunities. While their main business remains in the acquiring sector, Stone aims to expand beyond card machines by integrating their financial services and software businesses.

The company’s growth strategy will be driven by the synergy between these two sectors. Stone plans to supply financial products to the customers of its software company, effectively positioning itself as a “one-stop-shop” solution for MSMEs in selected industries such as grocery stores, restaurants, pharmacies, and petrol stations. By combining financial services and software, Stone aims to extract the maximum value and provide comprehensive solutions to its customers.

Stone’s integration strategy with Linx’s software business has been a significant development. In October, the company announced its restructuring plans to incorporate Linx into its core business. This move was a long-awaited demand from the market, seeking clearer signs of business integration since the acquisition of Linx in 2020.

Aside from its software business, Stone also highlights its financial services as a primary revenue driver. The company’s financial services platform, initially focused on payments but now expanded to include banking and credit solutions, is currently in an expansion phase. According to Stone’s chief strategist, Lia Matos, the company’s greatest potential for monetizing its customer base lies in its software offerings, which serve as a key differentiator.

Recognizing the need to diversify its revenue streams, Stone has sought to resume lending activities, particularly in the banking vertical. While the company faced significant challenges in 2021 due to widespread insolvencies, it now sees the opportunity to cautiously resume operations. With R$113 million in available credit this year, Stone’s CFO, Mateus Scherer, states the goal is to reach R$800 million next year and exceed R$5.5 billion by the end of 2027.

In addition to credit expansion, other financial services are expected to grow as well. Stone currently holds deposits of R$4.5 billion, with aspirations to grow to R$7 billion in the coming year and reach R$14 billion by 2027. This expansion in financial services demonstrates the company’s commitment to diversification and maximizing its revenue potential.

Overall, the Stone Company’s strategy to double profits in four years is marked by its integration with Linx, focus on MSMEs, and expansion of its financial services and software offerings. With a clear plan in action and a commitment to optimizing efficiency and profitability, the company is well-positioned to achieve its ambitious goals and continue to surprise the market with its growth.