StoneCo reports a strong quarter which is above analysts’ estimates. We will talk about things that we like and things that we dislike in this quarter. Total Revenue and Income was R$2,070.3 million, up 138.6% year over year. This was contributed by 107.8% growth in financial services platform revenue which was R$1,721.3 million and 11x growth in software platform revenues at R$326.6 million. Software revenue was consolidated in 3Q21 and revenue for Linx grew 26.9% year over year.
Adjusted EBITA grew 19.4% quarter over quarter to R$817.3 million. EBITDA margin increased by 2.9% to 39.5% through a reduction in the cost of services and administrative expenses. Adjusted Net Income in 1Q22 was R$132.2 million, with a 6.4% net margin, this improvement was due to the new pricing policy and cost reduction. StoneCo is trying to improve the MSMB payment operation’s profitability level. Adjusted Net Cash was R$2,406.9 million in 1Q22, which is higher by R$260 million quarter over quarter. This is due to the increase of R$253.5 million in net collections from the credit business.
Total revenue and income for the financial services segment in 1Q22 were R$1,721.3 million, which is a 107.8% increase year over year. This was due to stronger performance in the MSMB segment, with strong year-over-year TPV and client base growth. StoneCo was able to pass the cost to customers due to the higher interest rate environment in Brazil. Adjusted Net Income for the Financial Services segment was R$125.9 million, 34.2% lower year over year and 136.7% higher quarter over quarter. Total Payment Active Client base reached 1.9 million, with a total quarterly net addition of 160,100 clients.
The Credit Business reached R$722.2 million in 1Q22, decreasing by R$479.4 million in 4Q21. The decrease is due to a net positive cash flow of R$253.5 million in the quarter to the sale of a distressed portion of the legacy portfolio. Out of the remaining portfolio, a balance of R$496.9 million is provisioned for bad debt, fair value was R$267.7 million.
For the Software segment, the total revenue in 1Q22 was R$326.6 million. Total Revenue grew 26.9% on a year-over-year basis. Adjusted EBITA for the Software division was R$40.3 million in 1Q22, with a margin of 12.3%, compared with R$6.0 million and a margin of 19.4% in 1Q21. They account for the lower margin due to investments in customer service, R&D to improve clients’ experience, higher cloud cost, personnel cost, and legacy costs from LinxPay infrastructure to migrating to Stone Platform.
Sale of Banco Inter Shares
During 2Q22, sold 21.5% of stake in Banco Inter through the cash-out option offer in corporate restructuring. The 5% of Banco Inter acquisition was through issuing of bonds. Stone is running at 85% losses on the R$2.5 billion invested in Banco Inter, they realized a R$459 million loss. This is not the most efficient asset allocation.
Refer here for past StoneCo results.