We have reorganized ourselves to deliver our solutions more effectively across different client segments from micro to medium businesses, tailoring our go-to-market approach to meet their unique needs. Our new organizational structure aligns with each client segment, while it also strengthens key capabilities around engineering, product, marketing, and innovation, enhancing our ability to address client needs in a unique way. We have sharpened our strategic focus around three strategic priorities, which we outlined in our Investor Day. These three priorities to win MSMBs to drive engagement with our clients and to scale through platforms help us to set key focus areas for the coming years. The first one, defining where our focus will be in terms of the software and financial services integration efforts.

By focusing our execution around four priority verticals of retail, gas stations, food, and drug stores. We are increasing our competitive edge and opening a significant growth avenue for the future. Lia will present some initial encouraging results we achieved in the fourth quarter. The second one, to leverage the power of the combination of payments, banking, and software. There is a huge opportunity in our installed base to increase engagement with our solutions. As an example, today, only a fraction of our client base can be considered heavy users of our solutions. And there is a substantial potential to improve our unit economics, as we continue to engage the bids. The results we saw in our Financial Services segment in the fourth quarter reflect the success of this strategy around payments and banking.

And the third one, the creation of the strong platform. Our rapid growth initially focus on development speed, sometimes at the expense of consistency and reusability. This resulted in the existence of multiple data platforms. But over the last year and a half, we've made a significant change. We've brought our technology teams together, streamline how we work, and started to build a solid foundation that we all share, the strong platform. As we move forward, especially with new tech like artificial intelligence, we are setting ourselves up to generate new synergies and use our insights even more effectively to serve our clients. Our last strategic adjustment focus on the implementation of cost management and spending controls. Recognizing the potential to unlock substantial operating leverage, we have embarked on initiatives aimed at enhancing profitability even further.

Through sustainable cost optimization, we're setting the stage for more efficient and profitable operations. By implementing a shared-services center and a zero-based budgeting, we are enhancing our financial discipline across the organization. While the opportunity is huge, we will seize it through a targeted approach, ensuring we do not anticipate our efforts. Before handing it over to Lia, I'd like to briefly talk about our 2023 Results. Last year was a milestone for us, marking a complete rebound from the challenges faced in 2021. We closed the year with exceptional results, particularly in the fourth quarter when we accomplished a significant progress in our key strategic initiatives. We posted remarkable growth achieving a notable increase in MSMB TPV, both annually with MSMB TPV increasing 21% to BRL350 billion.

And in the fourth quarter with an acceleration from the previous period. Our banking services also recorded impressive growth, with deposits reaching BRL6.1 billion by the end of December, a significant increase from 2022. This growth not only reflects higher engagement but also a better conversion of TPV into deposits. Monetization improved substantially throughout the year, with MSMB take rates achieving 2.43% up 22 basis points year-over-year. In the fourth quarter, we saw a slight decline of 6 basis points compared to the previous quarter, but that was already expected and purely a result of seasonality. More importantly, we continued to advance in our credit solution reaching our working capital portfolio of BRL309 million by the end of the year, with very encouraging results regarding the health of the portfolio and NPLs strictly under control.

Additionally, our integration efforts in the four prioritized verticals have just started to be fruitful, with participation in TPV from these software clients surpassing BRL20 billion in the year. The push to Scale Through Platforms yielded substantial operational leverage, boosting our EBT to BRL2 billion, an increase of 3.3 times over the previous year. This leap forward improved our EBT margin by more than 10 percentage points. And our adjusted net profit surged to BRL1.6 billion up 3.8 times from the previous year. Our profitability also translated into cash generation and we ended the year with an adjusted net cash position of BRL5.1 billion, even after significant investments in our credit portfolio and share buybacks. On a separate note, the Software segment faced challenges in 2023, particularly in non-strategic verticals where growth was lower.

However, our efficiency initiatives already started showing results with EBITDA margins in 2023, improving by 1.9 percentage points to 16.4%. The fourth quarter recorded a dip due to one-off restructuring costs, but these moves are poised to generate savings in 2024. In summary, 2023 was a year of significant achievements and strategic advancements for us, and our fourth-quarter results are positioning us in a good place to deliver our 2024 and 2027 outlook. Now I would like to pass it over to Lia, to discuss our fourth quarter 2023 performance and strategic updates. Lia?

Lia Matos: Thank you, Pedro, and good evening, everyone. We had important evolutions over the last year in our strategic priorities, while we continue to balance growth with profitability, which you can see on slide five. Compared with the fourth quarter of '22, our consolidated revenues grew by 20%, which combined with lower financial expenses led to an increase of almost 2.3 times in adjusted EBT. These factors combined with a lower effective tax rate, resulted in adjusted net income increasing by almost three-fold year-over-year, with an adjusted net margin of 17.4%, up about 10 percentage points in the period. Taking a closer look at our Financial Services segment performance on slide six to 11. I will start on slide six with the performance of our payments business, for MSMBs. Payments active client base increased 37% year-over-year, reaching almost 3.5 million active clients.

Sequentially, this represented a net addition of 192,000 clients, lower compared to the previous quarters, mainly as a result of our strategic shift towards larger clients in the hubs and the fact that we have caught up to growth levels in the micro-segments. This growth in client base also resulted in healthy and profitable cohorts in all client tiers. As you'll see in the pages that follow and in line with our strategic priorities to win in the MSMB segment and to drive engagement with our solutions. Besides optimizing our commercial strategy for growth and market-share gains, we're also putting a lot of focus on improving bundle offerings of payments and banking to new client cohorts, both in Ton and Stone, as well as driving further engagement with our solutions for more mature cohorts of clients.

As I will show on slide seven, this approach has resulted in profitable TPV growth with market share gains in the MSMB segment versus the overall markets. MSMB TPV increased 20% year-over-year, growing more than twice the industry levels, considering Pix P2M volumes which were almost BRL8 billion in the quarter. MSMB TPV increased 25% year-over-year and an extra 5 percentage points of growth, when considering PIX P2M in our overall TPV. We achieved the strong growth performance, while also increasing take rates by 22 basis points year-over-year to 2.43%. Take rates were lower versus the third quarter as the natural result of seasonality in the fourth quarter, which always presents higher debit volumes. We are continuously evolving our pricing and bundle strategy to achieve higher levels of engaged clients, helping them more with their jobs to be done.

We believe the strong numbers are the result of our competitive advantages, around our distribution capabilities, our superior service and more and more the ability to offer more complete solutions to our clients. Now a quick update on our key accounts performance on slide eight. Key Accounts TPV decreased 17.6% year-over-year to BRL15 billion. As we have continued to deprioritize and offboard low-margin clients year-over-year Key Accounts take rates increased 11 basis points as a result of the adjustments in our commercial policies and a mix shift within the segments. Now let's discuss our banking performance on slide nine. Banking active client base increased three-fold year-over-year to 2.1 million active clients. This evolution was a result of the launch of Super Conta Ton in the beginning of 2023 and the continued activation of banking for Stone clients through our bundle offers.

The decrease in growth levels compared to the previous quarters is mainly due to the end of the migration of Ton clients to our full banking solution. This growth in client base was associated with a 52% year-over-year growth in deposits, which reached BRL6.1 billion in the quarter. This new level of deposits derived both from a positive impact in the cash-in level and engagement, due to the effectiveness of our payments in banking bundles. And second, from a seasonal and calendar effect at the end of the quarter. As a result, ARPAC increased 11.4% quarter-over-quarter to BRL28.4 per month. Despite lower seasonality, this positive trend in client deposits is also seen throughout the first quarter of 2024. On slide 10, we'll talk about our credit performance.

As you know, we've relaunched our working capital solution to SMBs in 2023 and have seen very positive initial results. In the fourth quarter of '23, we disbursed more than BRL230 million to around 7,000 clients, reaching a portfolio of BRL309 million, an increase of 2.7 times quarter-over-quarter. Loan-loss provision expenses totaled BRL39 million in the period, an increase of 2.1 times sequentially as we constitute provisions of 20% of our portfolio. Although we are taking a conservative approach, the performance of our vintages is above our expectations, with NPLs between 15 and 90 days of 1.96% and NPLs over 90 days of 0.29%. As we have highlighted before, this is a recently launched portfolio, so the ratio of past-due loans should increase as our portfolio matures.

This year we will continue with disbursement without changing our diligence toward risk evaluation and close monitoring of market conditions. Beyond our working capital solution for SMBs, the principal driver of our portfolio growth. This year will mark also the launch of more credit solutions to our clients, such as credit cards and overdrafts. To summarize, the fourth quarter was again marked by above industry TPV growth and higher take rates, resulting in financial services revenue growth of 24% year-over-year in the fourth quarter, reaching BRL2.9 billion. In turn, adjusted EBT reached BRL604 million with an adjusted EBT margin of 21%, an increase of more than 10 percentage points year-over-year. Moving to slide 12, let's talk about our software performance and strategic evolutions.

Quarter-over-quarter MSMB TPV overlap between financial services and software clients increased 19.3%, almost twice the growth we had in our MSMB TPV in the same period. Among the four strategic verticals, this performance was mainly driven by gas stations. This relative performance illustrates our continued efforts and first signs of success of our strategy to provide an end-to-end solution that combines management software, payments and banking to our SMB clients. Going forward we have listed three main priorities in order to drive growth and engagement in the four priority verticals. First, we're focusing on setting up our go-to-market strategy in order to scale our distribution model for combined software and financial services offerings.

Second, we're enhancing the product value proposition to seize the opportunity in the four key strategic verticals with gas stations and retail being the main focus for 2024. And third, we're integrating the pole sales process to guarantee we maintain the superior levels of service our clients expect from us. There still is a huge opportunity for us to target within our software installed point base and to drive engagements with our bundled solutions and this will be a key focus for the next years. Moving to slide 13, Software segment revenues decreased 3.5% year-over-year to BRL363 million, as a result of lower revenues from the enterprise business, which was down 16% in the period. Sequentially, software revenues decreased 6.4% due to lower yields on cash, as well as lower revenues from enterprise business.

As a result of this weaker top line, combined with one-time restructuring costs in the amount of BRL11.5 million, adjusted EBITDA decreased to BRL59 million in the quarter, with an adjusted EBITDA margin of 16.2% compared with 20.5% in the third quarter of '23. Excluding these restructuring costs, adjusted EBITDA margin would have been 19.3% in the fourth quarter. And as we continue to focus on diligent cost-savings and process improvements in our Software segments, we expect margins to improve in 2024. As Pedro mentioned, the fourth quarter marked the closing of an important year of strategic advancements for our business. The combined evolution of our strategic priorities around win, engage, and scale through platforms led to the strong results we have seen in the fourth quarter.

Reinforcing what Pedro already said, I believe we're well-positioned for a strong 2024 and 2027 outlook. Now, I want to pass it over to Mateus, for him to discuss in more detail our key financial metrics. Mateus?

Mateus Scherer: Thank you, Lia, and good evening, everyone. I would like to begin on slide 13, where we discuss the quarter-on-quarter evolution of our costs and expenses on an adjusted basis. Cost of services reached BRL803 million, increasing 15% year-on-year and 3.8% per quarter. Cost of services was sequentially flattish as a percentage of revenues despite provisions for expected credit losses in the amount of BRL39 million realized in the first quarter, as we grow our credit book and higher investments in technology. Excluding provisions for expected credit losses, cost of services would have decreased 50 basis points sequentially as a percentage of revenues, showing continued operational leverage. Administrative expenses decreased 6.5% year-on-year, leading to a 250 basis points reduction as a percentage of revenue when compared to the first quarter 2022.

Sequentially, administrative expenses increased 14%, up 70 basis points as a percentage of revenues, due to higher third-party service expenses combined with personal expenses which are seasonally higher in the first quarter. As we have shared in our Investor Day, achieving efficiency in G&A, we will continue to be a priority going forward. We remain committed to our guidance of less than BRL1.125 million of administrative expenses for 2024, which implies a growth of less than 7% for the year. Selling expenses increased 2.6% quarter-on-quarter and remained flat as a percentage of revenues, despite higher provisions for variable compensation in the periods. Financial expenses decreased 10% quarter-on-quarter, down 430 basis points as a percentage of revenues.

This evolution was a result of lower interest rates with average CDI decreasing in the quarter, lower number of working days, a seasonal decline in the average duration of funding lines and a lower average cash balance in the periods. Other expenses increased 47.6% sequentially and 120 basis points as a percentage of revenues, because of higher contingencies and tax provisions related to share-based compensation, as a result of the share price appreciation in the first quarter. Lastly, adjusted effective tax rate reached 11.7% in the first quarter. The lower effective tax rate in the period was a result of higher utilization of tax benefits from Lei do Bem, as well as gains from subsidiaries abroad, subject to different statutory tax rats. By 2024, we continue to expect the effective tax rate between 20% to 25%.

Turning to slide 15, our adjusted net cash position reached BRL5.1 billion, reflecting an increase of BRL1.6 billion year-on-year and BRL196 million for the quarter. The growth in adjusted net cash is especially notable as it came after the deployment of BRL290 on share buybacks within the quarter, while also continuing to deploy capital towards the expansion of our credit portfolio. Now, I would like to turn it back to Pedro.

Pedro Zinner: Thank you, Mateus. To wrap it up, today we also announced a pivotal transition in our leadership. André Street, our Founder and Chairman has also chosen to conclude his tenure on the Board, stepping aside from reelection at the forthcoming Annual General Meeting scheduled for April 2024. Similarly, Vice Chairman Conrado Engel and Board member Patricia Verderesi will not seek reelection, honoring their two-year commitment. Andre will remain connected to the company as a Reference Shareholder, bolstered by special protections Shareholders' Agreement and Articles of Association, including the privilege to nominate the Chairman of the Board. This transition marks the culmination of a deliberate, multi-year effort led by Andre to professionalize management and enhance governance standards, a mission that was crystallized by our strong 2023 results and the robust, strategically aligned team now at the helm.

The candidates recommended for the upcoming AGM will be Mauricio Luchetti as Chairman and Gilberto Caldart as Vice Chairman. Additionally, a new member will be indicated, Jose Alexandre Scheinkman. We have shared more details about the succession in a separate 6-K filing. We are committed to keeping alive the entrepreneurial spirit created by our founders. Our goal is to maintain high standards of governance as our company grows and continues to be a leader in entrepreneurship and client-centricity. With a committed shareholder like Andre, a great team, and a strong business, we are well set to continue to advance our mission forward. Before moving to Q&A, I would like to reinforce our guidance given for 2024. For our growth metrics, we expect MSMB TPV to reach more than BRL412 billion, an increase of more than 18% compared with 2023, while we expect client deposits of more than BRL7 billion increasing more than 14% year-over-year.

For monetization. We expect our credit portfolio to surpass BRL800 million, increasing 2.6 times year-over-year with MSMB take rates higher than 2.49%, implying an increase of more than 4 basis points. Lastly, in efficiency we expect adjusted net income to be higher than BRL1.9 billion, representing more than 22% year-over-year growth, with administrative expenses of less than BRL1,125 million, decreasing 7% compared with 2023. As we close 2023 and kick off 2024, I am more enthusiastic than ever about our business. There is growth ahead of us and we are closer to demonstrating the power of combining. With that said, operator, can you please open the call up to questions?

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