In addition to the machine: Stone’s strategy to double profits in four years.
The Stone Company has exceeded expectations in the third quarter, surprising the market and leaving the company’s management optimistic about future growth. During the company’s Investor Day in New York, it announced its target to achieve an annual profit by cumulative 2024, delivering a staggering sum of up to in 2027. This ambitious goal aims to more than triple the bottom line of the company’s balance sheet.
CEO Pedro Zinner explains that historically, the company has prioritized growth speed. However, there are now numerous opportunities to leverage efficiency and improve profitability. As a result, the company has developed a new profitable cash flow business strategy. This strategy focuses on utilizing efficiency to drive profitability and attract new customers.
One of the key elements of Stone’s new strategy is the integration with Linx, a software business. By integrating with Linx, the company aims to attract new customers through its software offerings. This integration is seen as a significant step towards achieving the company’s profit goals.
The micro, small, and medium-sized enterprises (MSMEs) sector holds considerable importance in Stone’s strategy. It has always been a priority for the company, but its significance has been further reinforced. Stone aims to grow faster than the industry average and handle payments worth more than 600 billion by 2027, achieving a take rate of percent.
In an interview with EXAME Invest, Zinner emphasized that the goal is not to alter the strategy but rather to ensure its smooth implementation and focus on the most lucrative opportunities. The company’s main business remains in acquiring customers, but Stone desires to go beyond just providing card machines. It aims to integrate its financial services and software businesses to offer a comprehensive solution.
The growth strategy will be driven by the synergy between Stone’s core business and Linx’s software business. The company plans to leverage its software capabilities by providing financial products to customers of Linx’s software business. Stone’s main concentration will be on four key sectors – grocery stores, restaurants, pharmacies, and petrol stations – solidifying its position as a “one-stop-shop” solution for MSMEs.
Zinner said, “We’re making it clear to the market which verticals hold the greatest potential for value extraction by combining financial services and software.” The integration with Linx’s software business has bolstered Stone’s position in the market. This move was a long-awaited demand from the market, which has been seeking clearer signs of business combination since Stone’s acquisition of Linx in 2020.
Financial services have been identified as the main revenue driver for the company. The company’s financial services platform, which started with payments and has expanded to include banking and credit solutions, is currently undergoing an expansion phase. Lia Matos, Stone’s chief strategist, believes that the greatest potential for monetizing the customer base lies in the software aspect of the business. The software offerings act as a differentiating factor for Stone in the market.
At the beginning of the year, Stone recognized an opportunity to reestablish its lending operations, particularly in the banking vertical. The company faced significant challenges in 2021 due to the wave of insolvency. However, two years later, Stone sees room to carefully resume operations.
“We have resumed production this year and have million in available credit,” stated Stone’s CFO, Mateus Scherer. He further added, “Our goal is to reach million next year and surpass billion in card payments by the end of 2027.”
Stone plans to expand its financial services beyond credit as well. The company currently has billion in deposits and aims to grow it to billion next year and billion by 2027. This expansion of financial services provides additional revenue streams and strengthens Stone’s position in the market.
In conclusion, Stone’s strategic plan to double profits in four years encompasses various aspects such as integrating with Linx’s software business, focusing on MSMEs, expanding financial services, and leveraging software as a differentiating factor. With these initiatives, Stone aims to not only achieve its profit targets but also solidify its position as a comprehensive solution provider in the financial services industry.