20-F: StoneCo Divests Software Businesses, Focuses on Financial Services

StoneCo Ltd. announced the completion of its divestment of software businesses and SimplesVet, streamlining operations to focus on its core financial services portfolio.

Summary

• StoneCo Ltd. has completed the sale of its Software Businesses and Simplesvet, classifying them as discontinued operations and assets held for sale.
• The company is now focusing on its continuing operations in financial services, including payments, digital banking, and credit solutions.
• This strategic divestment is part of a broader effort to streamline operations and enhance focus on the core financial services platform.
• The sale of the Software Businesses was completed in February 2026 for R$3,272.2 million.
• SimplesVet was divested in July 2025.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive, with strong growth in core financial services offset by concerns regarding increasing credit risk metrics and the strategic shift away from the software segment.

Positives

• Divestment of non-core software businesses allows for a sharper focus on the more profitable financial services segment.
• Completion of the Linx Sistemas and SimplesVet sales provides capital and simplifies the business structure.
• The company continues to show growth in its core financial services, with TPV increasing by 8.7% and net revenue from continuing operations growing by 17.5% in 2025.
• Net income from continuing operations increased by 17.6% in 2025.
• The company received R$3.08 billion in extraordinary cash dividends following the sale of Linx, which was approved for payment on May 4, 2026.

Negatives

• The divestment of the Software Businesses, which represented a substantial portion of revenue and profitability in 2024, indicates a strategic shift away from a previously significant area of the business.
• The company's credit portfolio saw a significant increase in non-performing loans (NPL) in 2025 compared to 2024, with NPL 15-90 days rising from 2.47% to 4.43% and NPL over 90 days increasing from 3.61% to 5.21%.
• The coverage ratio over NPL 90 days decreased from 331% in 2024 to 264% in 2025, indicating a reduced buffer against potential credit losses.

Risks

• The company faces significant macroeconomic uncertainty, fiscal and political instability in Brazil, which could harm its business cycles, client credit risk, and overall spending.
• Intense competition in the financial services market, including from banks and fintechs, could harm its business.
• Reliance on technology and potential system failures or cybersecurity attacks could disrupt services and damage reputation.
• Changes in government regulation and oversight in Brazil could impact business practices and profitability.
• Fluctuations in interest rates, inflation, and exchange rates in Brazil can adversely affect financial performance.
• The company's business strategy may not yield expected results if demand is misforecasted or product inventory is not managed adequately.
• The company is subject to extensive government regulation and oversight in Brazil, and any violation or non-compliance could be costly and expose it to substantial liability.

Future Outlook

The company is focused on growing its core financial services business, including payments, digital banking, and credit solutions, by driving client engagement and scaling through its platform. The divestment of software businesses is expected to allow for a more concentrated approach on these core areas.

Management Comments

• The company's strategy centers on building comprehensive ecosystems that seamlessly connect merchants' financial money flows with their daily operational workflows, thereby driving greater efficiency and long-term engagement.
• 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.
• 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.

Industry Context

StockSavvy.ai notes that StoneCo's strategic divestment of its software segment aligns with a broader industry trend of financial technology companies focusing on their core competencies to drive profitability and growth, particularly in the competitive Brazilian market.

Management Changes

Legal Proceedings

• As of December 31, 2025, the company was party to approximately 1,541 proceedings with PROCONs (consumer protection agencies).
• As of December 31, 2025, the company was subject to approximately 3,893 active judicial claims in Special Civil Court.
• A securities class action lawsuit was filed, with a settlement of R$145.3 million agreed upon, of which R$96.6 million was covered by insurers. The settlement was approved by the court on February 27, 2026.
• Certain investors have filed an opt-out action in the southern district of New York related to the class action settlement.

Related Party Transactions

• The Group has agreements with its associates (Tablet Cloud, APP, Dental Office, Trinks) for accreditation services and other related services.
• The Group has no outstanding loans with investees as of December 31, 2025.
• No loans have been granted to any of the directors or executive officers.
• Officers and directors have subscribed to the Groups banking solutions.

Stakeholder Impact

• Shareholders may benefit from the extraordinary cash dividend of R$3.08 billion approved for payment on May 4, 2026, following the sale of software businesses.
• The divestment of software businesses may impact employees in that segment, though specific details are not provided.
• The focus on financial services aims to better serve merchants by providing integrated solutions for payments, banking, and credit.
• Creditors and debt holders may be impacted by the company's capital structure management and ongoing debt levels.

Next Steps

• Continue to focus on growing the financial services segment (payments, banking, credit).
• Integrate new European corporate structure for capital markets access and financing activities.
• Commence operations for Stone Distribuidora de Títulos e Valores Mobiliários S.A. (Stone DTVM) after registration with CVM.
• Continue to manage and mitigate credit risk and operational risks.
• Monitor and adapt to evolving regulatory and market conditions in Brazil.

Key Dates

Recommendation

While StoneCo shows strong growth in its core financial services, the increase in NPLs and the decrease in the NPL coverage ratio are concerning. The divestment of the software business simplifies the company but also removes a significant revenue stream. The company's ability to manage credit risk and navigate the Brazilian economic and regulatory landscape will be key to future performance. A 'hold' recommendation reflects a balance between positive growth in core areas and the identified risks.

Keywords

StoneCo, SEC Filing, Form 20-F, Financial Services, Payments, Banking, Credit, Divestment, Software Business, Linx, SimplesVet, Brazil, IFRS, TPV, Active Clients, NPL, Capital Raise