StoneCo Reports Second Quarter of 2021 Financial Results (August 30, 2021)

Summary

StoneCo Ltd. (Nasdaq: STNE) reports financial results for its second quarter ended June 30, 2021, in an earnings release dated August 30, 2021. The release lists Total Revenue and Income of R$ 613.4 MM, a decrease of 8.1% year over year that it explains by a R$397.2 million negative revenue contribution from credit, and Net Income of R$ 526.0 MM. The shareholder letter from Thiago Piau, CEO, says the SMB business reached over 1 million clients and grew SMB TPV by 104% year over year. It also says the Company temporarily stopped credit disbursement and that resuming could take three to six months.

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Full text

Exhibit
99.1

2Q21 Earnings Release

August 30 th ,
2021

investors.stone.co

StoneCo
Reports Second Quarter of 2021 Financial Results

George
Town, Grand Cayman, August 30, 2021 - StoneCo Ltd. (Nasdaq: STNE) (“Stone” or the “Company”), a leading provider
of financial technology solutions that empowers merchants to conduct commerce seamlessly across multiple channels, today reports its
financial results for its second quarter ended June 30, 2021.

“Dear
Shareholders,

Despite
strong underlying growth in our core business and evolution of our strategic roadmap, we had some mixed results this quarter primarily
driven by a challenging short-term scenario in our credit product, which was strongly affected by industry problems with the credit receivables
registry system and the resulting actions we took to address them, which we discussed in our August 25, 2021 press release ( New Dynamics
of Registration of Receivables in Brazil ).

Our
core business is very strong. During the quarter we accelerated the growth of our SMB business, reaching over 1 million SMB clients and
growing SMB TPV by 104% year over year. This accelerating growth was achieved with healthy unit economics, with TPV per client and revenue
per client excluding credit both increasing quarter over quarter. Our TON product has moved from being an experiment and optionality
to becoming a proven and high growth solution that added over 140,000 new clients in the quarter. Also, the engagement of our SMB clients
within our digital banking platform showed a significant improvement in the quarter, with prepaid card TPV, banking money-in and money-out
volumes, and total banking accounts balance all growing between 4 and 5.5 times. Overall, our consolidated Total Revenue and Income increased
by 68% year over year when we exclude credit revenues.

Our
credit business remains in the early stages and we made some mistakes in our execution, especially not foreseeing how the malfunctioning
of the registry system could harm our business. So we decided to take a cautious approach and implemented some prudent actions, like
temporarily stopping the disbursement of credit and increasing coverage for potential future losses, which impacted our reported results
for the quarter. While conservative, we think this was the best course of action to try to deal with the issue head-on. We will wait
for the system to be fixed, all parties to begin playing by the same rules and turnaround our execution before resuming our operations,
which we think could take three to six months. We have learned a lot in the past two years of building our credit product and we remain
very excited about the long-term opportunity and the material benefits to our clients.

Also,
we closed the acquisition of Linx on July 1 st , when we started managing the company. We remain
very excited with the opportunity to integrate software, payments and financial solutions. We see Linx as a rare asset built over decades
with very sticky client relationships and high switching costs. Linx has an unparalleled level of data from retailers that is very granular
for each vertical, which we think we can use more aggressively to identify great cross-sell or up-sell opportunities. We see a number
of avenues to create value with Linx and are focused on executing on the combination of the businesses.

We
have continued to make sizeable investments in the growth of our business focused on areas such as technology, distribution and customer
service operation. We believe that the incredible learnings from this quarter will take us to a new phase of our business. We are even
more convinced of the opportunities ahead and we keep our devotion to making our clients happy and to the evolution of our team.”

Thiago
Piau, CEO

2

Operating
and Financial Highlights 2Q21

Total Payment Volume (TPV) R$ 60.4 1 BN Up
58.6% year over year, or R$58.6 billion excluding Coronavoucher , an increase of 62.7%
year over year [1] | Take Rate 0.91% Impacted
by R$397.2 million negative revenue contribution from credit product, mainly due to higher provision for losses. Excluding
credit, take rate was 1.57%, + 7bps 2 year over year Take
Rate ex- Coronavoucher was 0.94%
Total Revenue and Income R$ 613.4
MM A
decrease of 8.1% year over year, explained by R$397.2 million negative revenue contribution from credit, mainly due to adjustments
in credit fair value and significantly lower credit disbursements. Total Revenue and Income excluding our credit
product 2 grew 68% year over year. | SMB Net Addition of Clients 188,000 3 leading
to an SMB Active Client base of 1.05 million 2 . [1]
Adjusted Net Income R$ (150.5)
MM Impacted
by credit fair value adjustments, lower credit disbursement, strong investments in the operation and higher financial expenses | Adjusted EPS (diluted) R$ (0.47) per share Compared
with R$0.54 in the prior year-period
Net Income R$ 526.0
MM With
R$715.0 million post-tax contribution from mark-to-market from our investment in Banco Inter. | EPS (basic) R$ 1.72 per share Compared
with R$0.46 in the prior year-period.

1 From
1Q21 onwards, reported TPV figures consider all volumes processed and settled by StoneCo. As a result, from 1Q21 onwards we have included
volumes processed by Pagar.me PSP with acquirers other than Stone. This change added R$157 million to total TPV in the quarter, implying
a 58.2% growth excluding those volumes, or 62.3% ex-Coronavoucher.

2 Comparison
excluding revenue from credit product both from 2Q20 and 2Q21.

3 From
1Q21 onwards, reported Active Client Base includes clients from our PSP solution which were not previously included in our reported numbers.
Please refer to the reconciliation of historical numbers from previous and current metric in our 1Q21 earnings release.

3

2Q21 Operational and Strategic Evolution

SMB Financial Operating Platform

The
fundamentals of our SMB business remain very strong, with accelerating TPV growth and record net addition of clients in the quarter. Our
SMB business grew TPV by 104% in the second quarter of 2021 and considering a two-year CAGR to normalize for the effects of COVID-19 in
overall volumes in 2020, TPV growth accelerated to 48% in the quarter, compared with 42% in the first quarter of 2021. In July, we saw
volumes accelerating even further, with a 2-year CAGR of 58%.

Chart
1: SMB TPV (R$bn) [ | Chart 2: SMB TPV 2-year CAGR [

We
also continue to see a strong increase in the SMB active client base. Total number of SMB payment clients increased from 857,800 to 1.05
million, with accelerating net addition of clients, which increased from 138,000 in the first quarter of 2021 to a historical record of
188,000 this quarter.

Chart
3: SMB Acquiring Clients and Net Adds ('000)

The
increase in the SMB client base resulted from 140,000 net adds from TON product and 47,300 from Stone and Pagar.me SMB products 5 .
We saw acceleration in the growth of TON's client base, reaching 330,300 clients in the second quarter of 2021, compared with 190,300
in the previous quarter, with net adds increasing by 83% quarter over quarter. At the same time, Stone and Pagar.me SMB clients reached
717,600, compared with 670,300 for the first quarter of 2021, or a client net addition of 47,300. This figure was lower than the 62,400
client net addition reported in the first quarter of 2021 mainly because we are seeking to maximize unit economics of clients based on
their profile and size while offering solutions that are best suited for each clients’ need. These guidelines resulted in better
unit economics for both Stone and TON, with higher TPV and revenue per new client, as we moved the lower TPV clients’ demand from
Stone product to TON product, while the hub operations targeted larger SMBs.

4 Data from Abecs.

5 Total net addition of
clients may not add up due to differences in client overlaps within quarters.

4

Beyond
payments, we have continued to grow the number of clients with our banking solutions. The number of active clients in banking increased
43% quarter over quarter, from 237,400 in the first quarter of 2021 to 340,100 in the second quarter, with activation increasing sequentially.
Also, the number of clients settling their sales directly in their Stone account reached 272,600 6 ,
compared with 188,400 in the previous quarter. In TON and Pagar.me, all clients settle sales in the digital account.

Clients
also continue to engage with different types of money-in and money-out transactions. Banking money-in volumes 7 ,
which do not include our acquiring TPV, grew by 4.4x year over year or almost 2x quarter over quarter to reach R$4.9 billion. Total accounts
balance reached R$862.0 million, or 3.8x year over year. Banking money-out volumes 8 grew 5.5x year over year to reach R$14.6 billion, while prepaid card TPV grew 4.4x over the same period to R$293.7 million.

6 Considers clients liquidating
in our Stone Digital Banking account regardless of which acquirer is being used.

7 Includes Pix In, wiretransfers,
boleto issuance and TPV from other acquirers.

8 Includes Pix Out, wiretransfers,
bill payments, boletos paid, withdrawals, recharge and others.

5

Credit

Despite
the strong evolution in our core SMB business, we are currently facing challenges in our credit operation, mainly as a result of higher
levels of NPLs and lower expectations regarding recovery of non-performing clients. Although we recognize that our underwriting capabilities
and collection process still have to evolve given the early stage of our credit solution, we believe that the malfunctioning of the providers
of registry of receivables services has played an important role in the poorer-than-expected results, as it has enabled merchants to
shift transactions to other acquiring services that in practice by-passed the collateral guarantees they had given to us. The demand
from merchants, especially those more affected by lockdowns, to by-pass the “lock” of receivables met the supply of temporary
alternatives by opportunistic acquirers and sub-acquirers in the market.

Given
this scenario, we took a cautious approach regarding new disbursements and increased coverage for potential losses. We decided to:

(i)
temporarily stop disbursing credit: disbursements in the second quarter of 2021 were R$376.2 million vs. R$752.7 million in the first
quarter of 2021, with R$59.8 million disbursed in June 2021 and R$0.8 million in July (representing disbursements to test the registry
system);

(ii)
make a significant downward adjustment in the fair value of our portfolio, which increases coverage for potential losses, as we perceived
a potential deterioration in the quality of the guarantees; and

(iii)
adapt the way we report credit metrics, so we can be closer to market standards and facilitate the understanding of our credit business
by investors.

In
addition, we also decided to change the accounting method of our credit portfolio for the new contracts originated from the third quarter
of 2021 onwards, to provide better transparency, by moving from a fair value method to an accrual basis method. Per IFRS 9 rules, this
change will only affect new credit operations, so our legacy portfolio (through June 30, 2021) will continue to be accounted for using
the fair value method.

Also,
we have changed the definition of our managerial portfolio to make it closer to market standards definition: (i) we stopped accrual of
outstanding balances with over 60 days without reducing principal (this was already done in the fair value calculation, but not in the
calculation of the portfolio outstanding) - this change decreases the portfolio balance in R$98.5 million vs. old method; (ii) we are
now considering the outstanding balance of clients not paying us for 8 weeks or more, whereas in the old method we considered only the
recovery value of those balances (fair value) - this change increases the portfolio balance in R$388.4 million vs. old method.

Lower
disbursements led our portfolio, already under the new methodology, to be stable quarter over quarter, at R$1,998 million.

6

From
the total outstanding balance of R$1,998mm, 35.0% (or R$ 699.4 million) was concentrated in loans from clients that have not been able
to amortize principal for 60 days regardless of any interest payments made during the period. When we further break down the number, R$373.1
million (or 18.7%) of the portfolio was concentrated in clients who haven’t been able to pay neither interest nor principal during
the last 60 days, as presented below:

After
the fair value adjustment mentioned above, we have recognized an accumulated amount of approximately R$780.8 million of provisions for losses
related to our current outstanding balance (approximately 39% of total balance).

We
look at NPLs as loans without reducing principal for 60 days or more, and we define this outstanding balance as “non-performing”.
Under this metric, the coverage ratio 9 is currently at 112%. If we look at NPLs as
loans without any payment (either principal or interest) for 60 days or more, our coverage ratio is currently 209%.

We
have experienced an impressive amount of learnings that we will use as fuel to boost the construction of what we envision as being a
much better credit solution aimed at serving merchants better. We are committed to building our credit solution over the long-term and
we see a huge opportunity ahead. We will continue to refine our products and capabilities, improve our recovery processes and credit
renegotiations, optimize rates and availability of credit, better connect our product experience with our hub strategy, and enhance usage
of data.

We
intend to resume scaling our credit solutions once we see the new registry system is working properly or we see other risk-appropriate
opportunities to pursue. We are looking forward to resuming disbursements to our clients, as credit is important for Brazilian merchants
to support their operations, and we will continue to offer this as part of our overall mission to help our small and medium business
clients run their operations and grow more effectively. Looking ahead, we will keep working towards our vision for “Stone Capital”:
an asset-light model, in which funding and underwriting risk for credit stays with multiple partners that consolidate the credit portfolio
in their balance sheet, combined with a credit product that is completely embedded in our solutions and leverages on the strength of
our SMB operation and our software capabilities. We believe that, despite the short-term implementation issues, the new card receivables
registry system will be transformational for Brazil as it creates the basis for a much bigger market for collateralized credit.

9 Calculated as the ratio
between allowance for bad debt and NPL

7

Software

Our
software business (ex-Linx) continues to grow organically. Our pro-forma 10 revenue reached
R$62.4 million in the quarter, up 3.2x year over year or 52.5% organically. The number of subscribed software clients reached 143,000
compared to 35,000 in the prior-year period.

Linx
will start being consolidated into our results in the third quarter of 2021; the combined annualized revenue of our current software
business with Linx is approximately R$1.2 billion. Our main priorities with Linx at this moment are: (i) to migrate financial services
to Stone Platform and further penetrate our existing products, (ii) invest in technology capabilities to enhance the existing platform,
improving client satisfaction and achieve scale in the SMB market, (iii) build the infrastructure and tools to enable merchants to have
a multi-channel storefront, selling their products seamlessly across their physical stores, web and mobile, social media, among others;
(iv) build a data management architecture that enables us to create new financial and technology products and (v) capture synergies and
cost efficiencies.

Despite
Linx´s results not yet being consolidated into StoneCo´s results, we have disclosed some preliminary Linx standalone highlights
about the second quarter of 2021 in Appendix A to this Earnings Release, in a similar format that Linx used to report as a public company.
From the third quarter of 2021 onwards, Linx results will be consolidated with StoneCo's.

Linx
second quarter 2021 numbers attached to and referenced by this release are preliminary and subject to changes once we incorporate Linx’s
results into Stone’s reporting standards and auditing procedures, which may be different from what Linx did before the closing
of the deal.

Key
Accounts – Fintech-as-a-service (“FaaS”)

Our
key accounts TPV, which includes integrated partners, marketplaces, big online stores and sub-acquirers, grew 12.3% year over year or
16.2% excluding Coronavoucher volumes, continuing to weigh on our overall TPV growth.

Within
Key Accounts, we saw different growth dynamics between sub-acquirers, where we have higher volatility in volumes versus clients where
relationship is more focused on platform service. The latter includes marketplaces, ecommerce platforms, software companies, big retailers,
among others, which use our solution either to create their own financial services offering to their clients or to enable more sophisticated
sales experiences.

10 Pro-forma numbers for
software are calculated as if StoneCo had acquired 100% stake of the software companies in its portfolio, regardless of the stake acquired.
We considered only companies in which we have the option to increase our stake and consolidate in our results. StoneCo has made minority
investments in some companies and has not yet exercised option to consolidate them. There is no assurance that StoneCo will exercise its
option to consolidate any companies in which it has made a minority investment

8

While
the sub-acquirer group´s TPV, which is composed of approximately 15 sub acquirers and currently represents 71% of key account
TPV, grew only 4.0%, the platform clients, which represents 29% of key account TPV, posted a 62.2% TPV growth. This segment, which
counts on better unit economics, is the focus of our commercial efforts in key accounts.

Despite
being more relevant in TPV, our top 2 largest sub-acquirers represent only approximately 3% of StoneCo revenue net of funding costs (ex- Coronavoucher ).

Our
attention is currently centered on two fronts: (i) creating and enhancing solutions to help penetrate the Linx client base and (ii) expanding
our white label offering to platforms through better integrations and adding new financial solutions, including banking and credit.

Outlook

Given
the short-term headwinds in credit with the technical challenges in the implementation of the new registry system, we are suspending our
previous Take Rate and Adjusted Net Margin outlooks for 2021. Our outlook regarding active client base of between 1.4 and 1.5 million
including TON and approximately 950,000 excluding TON is maintained. We will keep the market updated on new developments.

9

Operating and Financial Metrics

Table 2: Operating and Financial
Metrics [8

Main
 Operating and Financial Metrics | 2Q21 | 2Q20 | Δ | 1H21 | 1H20 | Δ
Consolidated Metrics
TPV (R$ billions) | 60.4 | 38.1 | 58.6% | 111.4 | 75.7 | 47.1%
Active Payment Clients (ex-TON) (thousands) 11 | 766.5 | 527.1 | 45.4% | 766.5 | 527.1 | 45.4%
Period Net Additions (ex-TON) (thousands) 11 | 44.2 | (10.0) | (543.9%) | 104.4 | 41.6 | 151.2%
TON Active Clients 12 | 330.3 | 35.2 | 838.5% | 330.3 | 35.2 | 838.5%
Take Rate | 0.91% | 1.67% | (0.75 p.p.) | 1.24% | 1.74% | (0.50 p.p.)
Take Rate ex-credit | 1.57% | 1.50% | 0.08 p.p. | 1.57% | 1.62% | (0.05 p.p.)
Total Revenue and Income (R$ millions) | 613.4 | 667.4 | (8.1%) | 1,481.1 | 1,384.1 | 7.0%
Total Revenue and Income ex-credit (R$ millions) | 1,010.6 | 602.2 | 67.8% | 1,852.8 | 1,299.6 | 42.6%
Adjusted Pre-Tax Income (R$ millions) | (197.7) | 199.9 | n.m | 49.9 | 433.2 | (88.5%)
Adjusted Pre-Tax Income ex-credit (R$ millions) 13 | 217.9 | 137.7 | 58.3% | 452.4 | 353.5 | 28.0%
Adjusted Net Income (R$ millions) | (150.5) | 150.3 | (200.1%) | 36.9 | 312.6 | (88.2%)
Adjusted diluted EPS | (0.47) | 0.54 | (186.3%) | (0.22) | 1.12 | (119.3%)
Financial Operating System for SMBs 14
Active Payment Clients (with TON) (thousands) | 1,045.8 | 517.3 | 102.2% | 1,045.8 | 517.3 | 102.2%
Period Net Additions (with TON) (thousands) | 188.0 | 2.6 | 7226.9% | 326.0 | 55.6 | 486.6%
Digital Active Banking Account (thousands) 15 | 340 | 67 | 407.5% | 340 | 67 | 407.5%
Credit Clients (thousands) | 114.1 | 46.6 | 144.9% | 114.1 | 46.6 | 144.9%
Take Rate | 0.78% | 2.34% | 1.56% | 1.28% | 2.26% | (0.98% p.p.)
Take Rate ex-credit | 1.79% | 2.00% | (0.21 p.p.) | 1.79% | 2.06% | (0.27 p.p.)
Money In
TPV (R$ billions) | 39.3 | 19.3 | 103.5% | 72.1 | 41.9 | 71.8%
Banking Money-In Volumes (R$ billions) | 4.9 | 1.1 | 340.1% | 7.6 | 1.7 | 345.9%
Total Accounts Balance (R$ millions) | 862.0 | 226.9 | 279.9% | 862.0 | 226.9 | 279.9%
Money Out
Prepaid Card TPV (R$ millions) | 293.7 | 66.6 | 340.7% | 512.5 | 111.6 | 359.3%
Banking Money-Out Volumes (R$ billions) | 14.6 | 2.6 | 450.0% | 23.6 | 4.2 | 457.2%
Working Capital
Credit Portfolio (R$ millions) 16 | 1,997.8 | 491.1 | 306.8% | 1,997.8 | 491.1 | 306.8%
Fintech-as-a-Service
TPV (R$ billions) | 21.1 | 18.8 | 12.3% | 39.3 | 33.8 | 16.3%
Active Payment Clients (thousands) | 51.7 | 45.5 | 13.5% | 51.7 | 45.5 | 13.5%
Take Rate | 0.76% | 0.87% | (0.11 p.p.) | 0.78% | 0.97% | (0.19 p.p.)
Software
Subscribed Clients (thousands) 17 | 143 | 35 | 308.6% | 143 | 35 | 308.6%

11 Active clients mean clients
that have transacted at least once over the preceding 90 days.

12 For clients of TON, Active
Clients mean clients that have transacted with TON or Stone Mais solution at least once over the last 12 months.

13 Adjusted pre-tax numbers
ex-credit exclude credit revenue and financial expenses associated with the credit product. However, it does not exclude any other costs
and expenses.

14 Includes Stone brick-and-mortar
operations, Pagar.me SMB online product and TON, unless otherwise noted

15 Does not include clients
from Pagar.me and TON.

16 We have changed the definition
of our managerial portfolio to make it closer to market standards definition: (i) we stopped accrual of outstanding balances with over
60 days without reducing principal (this was already done in the fair value calculation, but not in the calculation of the portfolio outstanding)
- this change decreases the portfolio balance vs. old method; (ii) we are now considering the outstanding balance of distressed clients,
whereas in the old method we considered only the recovery value of those balances - this change increases the portfolio balance
vs. old method. Our portfolio as of Jun/21 calculated in the previous methodology was R$1,707.9mm.

17 Excludes RaioX (reconciliation)
and Collact (CRM/Loyalty).

10

][9][10][11] [12][13][14]

Active
payments client base

In
the second quarter of 2021, we reached an active client base of 766,500 18 (excluding TON), or a 45.4% growth year over year.
This represents a net addition of 44,200 clients in the quarter, lower than the 60,200 reported in the first quarter of 2021 mainly due
to a better allocation of clients between the Stone and TON brands, aiming at maximizing unit economics while providing them with the
solution that best fits their specific needs. These guidelines resulted in better unit economics for both Stone and TON, with higher
TPV and revenue per new client, as we moved the lower TPV clients’ demand from Stone product to TON product, while the hub operations
targeted larger SMBs. The net addition of 44,200 clients includes 47,300 from our SMB business (ex-TON), while our key accounts business
presented a net reduction of 2,700 clients in the quarter.

Client
base in TON 19 reached 330,300 clients in the second quarter of 2021, growing 74% quarter over quarter, and accelerating
from the 67% growth showed in the first quarter of 2021. This also represents an acceleration in the net addition of clients to 140,000
new customers in the quarter, compared with 76,600 in the previous one.

As
a result, our SMB client base including TON surpassed the 1 million mark, reaching 1.05 million in the quarter.

We
are monitoring closely the global microchip crisis and its evolution. Although we do not foresee impacts to our ability to grow, if the
situation gets worse the industry could face some POS shortages.

In
that sense and looking to empower merchants, we have just launched TapTon, a new solution that enables merchants to accept credit and
debit card transactions directly through their cell phones, with no need of a POS device.

18 Excludes
TON clients.

19 For
clients of TON, Active Clients mean clients that have transacted with TON or Stone Mais solution at least once over the last 12 months.

11

Take
Rate

Our
reported Take Rate was 0.91% in the second quarter of 2021, 71bps lower than the first quarter of 2021 and 75bps lower compared with
the second quarter of 2020. Excluding Coronavoucher , take rate was 0.94%, a reduction of 69bps quarter over quarter and 80bps
year over year. This significantly lower take rate was mainly a result of the R$397.2 million negative impact from our credit solution
to our revenues, which had a negative impact of 66bps in our take rate in the quarter. Excluding revenues from credit, our consolidated
Take Rate was 1.57% in the second quarter of 2021, compared with 1.50% in the second quarter of 2020. In SMBs, Take Rate excluding credit
was 1.79%, compared with 2.00% in the second quarter of 2020.

TPV

Total Payment
Volume (TPV) was R$60.4 21 billion, up 58.6% year over year in the second quarter of 2021. Excluding Coronavoucher volumes,
which amounted to R$1.8 billion in the quarter, TPV grew 62.7% year over year.

20 According
to IFRS 15, subscription revenue is accounted for over the expected life of merchants on a linear basis. As part of the annual assessment
of assumptions for linearization of subscription revenue, life of merchants was revised upwards in 3Q19, contributing positively 3 bps
to 3Q19 take rate of 1.91% compared with 2Q19.

21 From 1Q21 onwards, reported
TPV figures consider all volumes processed and settled by StoneCo. As a result, from 1Q21 onwards we have included volumes processed by
Pagar.me PSP with acquirers other than Stone. This change added R$157 million to total TPV in the quarter, implying a 58.2% growth excluding
those volumes, or 62.3% ex-Coronavoucher.

12

Table 3: Quarterly Statement of
Profit or Loss

Statement
 of Profit or Loss (R$mm) | 2Q21 | %
 Rev. | 2Q20 | %
 Rev. | Δ
 % | Δ
 p.p.
Net revenue from transaction activities and other services | 359.2 | 58.6% | 227.5 | 34.1% | 57.9% | 24.5 p.p.
Net revenue from subscription services and equipment rental | 152.9 | 24.9% | 80.4 | 12.1% | 90.1% | 12.9 p.p.
Financial income | 40.0 | 6.5% | 326.6 | 48.9% | (87.7%) | (42.4 p.p.)
Other financial income | 61.3 | 10.0% | 32.9 | 4.9% | 86.6% | 5.1 p.p.
Total revenue and income | 613.4 | 100.0% | 667.4 | 100.0% | (8.1%) | 0.0 p.p.
Cost of services | (302.4) | (49.3%) | (198.7) | (29.8%) | 52.2% | (19.5 p.p.)
Administrative expenses | (121.8) | (19.9%) | (89.9) | (13.5%) | 35.5% | (6.4 p.p.)
Selling expenses | (223.2) | (36.4%) | (114.7) | (17.2%) | 94.6% | (19.2 p.p.)
Financial expenses, net | (157.6) | (25.7%) | (62.6) | (9.4%) | 151.8% | (16.3 p.p.)
Other income (expenses), net | 777.0 | 126.7% | (40.1) | (6.0%) | n.m | 132.7 p.p.
Loss on investment in associates | (2.8) | (0.5%) | (1.5) | (0.2%) | 82.7% | (0.2 p.p.)
Profit before income taxes | 582.6 | 95.0% | 159.8 | 24.0% | 264.5% | 71.0 p.p.
Income tax and social contribution | (56.6) | (9.2%) | (36.2) | (5.4%) | 56.2% | (3.8 p.p.)
Net income for the period | 526.0 | 85.7% | 123.6 | 18.5% | 325.6% | 67.2 p.p.
Adjusted Net Income | (150.5) | (24.5%) | 150.3 | 22.5% | n.m | (47.1 p.p.)

Table 4: Accumulated Statement
of Profit or Loss

Statement
 of Profit or Loss (R$mm) | 1H21 | %
 Rev. | 1H20 | %
 Rev. | Δ
 % | Δ
 p.p.
Net revenue from transaction activities and other services | 677.5 | 45.7% | 454.8 | 32.9% | 49.0% | 12.9 p.p.
Net revenue from subscription services and equipment rental | 292.8 | 19.8% | 173.6 | 12.5% | 68.7% | 7.2 p.p.
Financial income | 408.8 | 27.6% | 685.9 | 49.6% | (40.4%) | (22.0 p.p.)
Other financial income | 102.0 | 6.9% | 69.9 | 5.0% | 45.9% | 1.8 p.p.
Total revenue and income | 1,481.1 | 100.0% | 1,384.1 | 100.0% | 7.0% | 0.0 p.p.
Cost of services | (542.1) | (36.6%) | (348.7) | (25.2%) | 55.5% | (11.4 p.p.)
Administrative expenses | (239.5) | (16.2%) | (163.9) | (11.8%) | 46.1% | (4.3 p.p.)
Selling expenses | (385.9) | (26.1%) | (226.5) | (16.4%) | 70.4% | (9.7 p.p.)
Financial expenses, net | (250.1) | (16.9%) | (211.0) | (15.2%) | 18.6% | (1.6 p.p.)
Other income (expenses), net | 735.5 | 49.7% | (43.6) | (3.1%) | n.m | 52.8 p.p.
Loss on investment in associates | (6.4) | (0.4%) | (2.8) | (0.2%) | 127.8% | (0.2 p.p.)
Profit before income taxes | 792.6 | 53.5% | 387.8 | 28.0% | 104.4% | 25.5 p.p.
Income tax and social contribution | (108.3) | (7.3%) | (105.5) | (7.6%) | 2.6% | 0.3 p.p.
Net income for the period | 684.3 | 46.2% | 282.2 | 20.4% | 142.5% | 25.8 p.p.
Adjusted Net Income | 36.9 | 2.5% | 312.6 | 22.6% | (88.2%) | (20.1 p.p.)

13

Total
Revenue and Income

Total
Revenue and Income in the second quarter of 2021 was R$613.4 million, a decrease of 8.1% from R$667.4 million in the second quarter of
2020. Excluding Other Financial Income, which is mainly comprised of interest on cash, Total Revenue and Income decreased 13.0% to R$552.1
million.

The
decrease was driven primarily by lower revenue from our credit business, as previously explained. The negative impact from our credit
solution to our revenues amounted to R$397.2 million, which significantly reduced our take rate. However, our TPV grew strongly, at 58.6%
year over year, positively contributing to our Total Revenue and Income.

Apart
from the effect from credit, our SMB revenues grew strongly. In key accounts, we did not see much change in revenues.

Overall,
Total Revenue and Income excluding credit solution was R$1,010.6 million, a 68% growth year over year.

Net
Revenue from Transaction Activities and Other Services

Net
Revenue from Transaction Activities and Other Services was R$359.2 million in the second quarter of 2021, an increase of 57.9%, compared
with the second quarter of 2020. This increase was mostly due to the 58.6% growth in TPV year over year.

Net
Revenue from Subscription Services and Equipment Rental

Net
Revenue from Subscription Services and Equipment Rental was R$152.9 million in the second quarter of 2021, 90.1% higher than the second
quarter of 2020. This increase was primarily due to a higher active client base combined with contribution from our software solutions
and partially offset by lower POS average subscription per client, which is mainly a result of additional new-client subscription incentives.

Financial
Income

Financial
Income in the second quarter of 2021 was R$40.0 million, a decrease of 87.7% year over year. This decrease was due to the R$397.2 million
negative contribution from our credit solution, mainly as a result of a significant fair value adjustment and lower disbursements. Our
prepayment business continues to grow strongly. Excluding revenues from credit product, our Financial Income grew by 67.2% year over
year.

Revenue
from our credit solution is currently accounted for at fair value and factors in expected delinquency and recovery rates. From July onwards,
all new disbursements will be accounted for under the accrual methodology.

Other
Financial Income

Other
Financial Income was R$61.3 million in the second quarter of 2021, compared with R$32.9 million for the second quarter of 2020. This
increase was mainly due to (i) the Company’s higher cash balance position, mainly as a result of the follow-on offering in August
2020 amounting to USD1.5 billion, used to fund the transaction with Linx concluded in July 2021, and (ii) the higher base rate in the
country year over year.

14

Costs
and Expenses

Operating
Costs and Expenses as a percentage of Total Revenue and Income were 105.5%, higher than previous quarters, with strong impact from the
deleverage effect from our credit revenue, which reduced our Total Revenue and Income in R$397.2 million in the quarter.

Our
credit product was responsible for a strong decrease in pre-tax margins year over year. In parallel, we continued to invest in the growth
of our operations. We increased our salesforce headcount by 98% and our operations personnel, which includes our customer support and
logistic teams, by 88% year over year, as we continue to expand our hub model. Our investments in marketing were 231% higher year over
year as we continue to allocate capital in the growth of the TON product. We also increased our technology headcount by 91% over the
same period to support the evolution of our business and solutions. Finally, we continued to invest in new solutions, including banking,
software, TON, as well as our registry of receivables platform, TAG.

22 Includes
Cost of Services, Administrative Expenses and Selling Expenses as a percentage of Total Revenue and Income. Quarterly unaudited data.

15

Cost
of Services

Cost
of Services were R$302.4 million, 52.2% higher year over year. This increase was mainly due to (i) higher investments in our technology
and customer support teams, (ii) higher investment in TAG, as the registry of receivables regulation became effective and (iii) higher
D&A costs, mainly in TON, in line with the strong increase of our client base.

Compared
with the first quarter of 2021, Cost of Services increased 26.2%, mainly because of the same reasons explained above, in addition to
(iv) higher provisions and losses.

Administrative
Expenses

Administrative
Expenses were R$121.8 million, 35.5% higher year over year mainly explained by (i) higher third-party services, mainly expenses with
software services (ii) higher D&A expenses, especially due to amortization of fair value adjustment on intangibles related to acquisitions,
(iii) higher facilities expenses and (iv) higher travel expenses. Compared with the first quarter of 2021, Administrative Expenses were
3.6% higher.

Selling
Expenses

Selling
Expenses were R$223.2 million in the quarter, an increase of 94.6% year over year, mostly as a result of (i) higher marketing investments,
mainly in TON and (ii) investments in hiring of salespeople related to hubs expansion.

Compared
with the first quarter of 2021, Selling Expenses increased 37.1%, mostly due to the same reasons explained above.

Financial
Expenses, Net

Financial
Expenses, Net were R$157.6 million, 151.8% higher compared with the second quarter of 2020, mainly because of (i) higher outstanding
volumes of prepayment and credit and (ii) increased cost of funds, mostly due to the higher base rate in the country.

Compared
with the previous quarter, Financial Expenses, net was 70.4% higher, mainly explained by higher cost of funds as a result of the higher
base rate in the country.

Other
Income (Expenses), Net

Other
Income (Expenses), Net was R$777.0 million in the second quarter of 2021, mainly related to R$841.2 million in mark-to-market gain on
the investment in Inter in the quarter. Excluding this effect, Other Income (Expenses), net was -R$64.2 million, 60.2% higher year over
year, mostly explained by (i) share-based compensation expenses, (ii) fees paid to investment banks regarding the USD500 million bond
issuance in June; partially offset by (iii) R$20.1 million in dividends from Linx.

Compared
with the first quarter of 2021, Other Expenses, net , excluding the mark-to-market effect from the investment in Inter, were R$22.7 million
higher, mostly because of share-based compensation expenses, mainly related to the tax and social charges provisions in relation to the
STNE stock appreciation in the quarter, higher income taxes and new grants of share-based compensation.

16

Profit
(Loss) Before Income Taxes

Profit Before
Income Taxes was R$582.6 million as a result of the R$841.2 million pre-tax effect from mark-to-market from our investment in Inter.
Excluding this effect, Loss Before Income Taxes was R$258.6 million, compared with R$159.8 million of Profit Before Income Taxes in the
prior year-period. This loss was mainly explained by the R$397.2 million negative impact from credit in our Total Revenue and Income.
Higher financial expenses and investments in our operation also affected our pre-tax income in the quarter.

Compared
with the first quarter of 2021, pre-tax income excluding the mark-to-market effect from Banco Inter was significantly lower, reflecting
the same factors as for the year over year comparison just mentioned.

Income
Tax and Social Contribution

During
the second quarter of 2021, the Company incurred in R$56.6 million in Income Tax and Social Contribution, an effective tax rate of 9.7%,
compared with an effective tax rate of 22.7% and 24.6% in the second quarter of 2020 and first quarter of 2021, respectively. This lower
tax rate is a result of reporting a pre-tax loss in its Income Statement when excluding the mark-to-market gain from the investment in
Banco Inter.

17

Net
Income (Loss) and EPS

Adjusted
Net Loss was R$150.5 million in the second quarter of 2021, compared with R$150.3 million of Adjusted Net Income in the second quarter
of 2020.

Net
Income in the second quarter of 2021 was R$526.0 million, compared with R$123.6 million in the second quarter of 2020. This increase
was mainly due to the positive post-tax mark-to-market effect from our investment in Banco Inter of R$715.0 million. Excluding this effect,
the variation was mainly explained by the same factors mentioned above for the variation in Profit Before Income Taxes.

Adjusted
diluted EPS for the Company was a negative R$0.47 per share in the second quarter of 2021, compared with a positive R$0.54 per share
in the second quarter of 2020, mostly explained by the lower Adjusted Net Income resulting from the R$397.2 million negative impact from
our credit operation. GAAP basic EPS was R$1.72 per share, compared with R$0.46 in the prior year-period. This difference was due to
the R$715.0 million post-tax mark-to-market effect on Net Income from the investment in Banco Inter.

18

Table
5: Adjusted Net Income Reconciliation (Quarter)

Net
 Income Bridge (R$mm) | 2Q21 | %
 Rev. | 2Q20 | %
 Rev. | Δ
 % | Δ
 p.p.
Net income for the period | 526.0 | 85.7% | 123.6 | 18.5% | 325.6% | 67.2 p.p.
Share-based compensation expenses (a) | 46.4 | 7.6% | 37.8 | 5.7% | 22.7% | 1.9 p.p.
Amortization of fair value adjustment (b) | 8.8 | 1.4% | 3.4 | 0.5% | 154.9% | 0.9 p.p.
Gain on previously held interest in associate (c) | (12.0) | (2.0%) | (3.0) | (0.4%) | 301.3% | (1.5 p.p.)
Mark-to-market and Cost of Funds related to the investment in Banco Inter | (836.2) | (136.3%) | 0.0 | 0.0% | n.a. | (136.3 p.p.)
Other expenses (d) | 12.7 | 2.1% | 1.7 | 0.3% | 638.6% | 1.8 p.p.
Tax effect on adjustments | 103.8 | 16.9% | (13.3) | (2.0%) | n.m | 18.9 p.p.
Adjusted net income | (150.5) | (24.5%) | 150.3 | 22.5% | n.m | (47.1 p.p.)
GAAP basic EPS (e) | 1.72 | n.a. | 0.46 | n.a. | 276.3% | n.a.
Adjusted diluted EPS (f) | (0.47) | n.a. | 0.54 | n.a. | n.m | n.a.
Basic Number of shares | 308.2 | n.a. | 277.4 | n.a. | 11.1% | n.a.
Diluted Number of shares | 314.5 | n.a. | 282.0 | n.a. | 11.5% | n.a.

Table
6: Adjusted Net Income Reconciliation (Accumulated)

Net
 Income Bridge (R$mm) | 1H21 | %
 Rev. | 1H20 | %
 Rev. | Δ
 % | Δ
 p.p.
Net income for the period | 684.3 | 46.2% | 282.2 | 20.4% | 142.5% | 25.8 p.p.
Share-based compensation expenses (a) | 67.1 | 4.5% | 39.9 | 2.9% | 68.2% | 1.6 p.p.
Amortization of fair value adjustment (b) | 15.7 | 1.1% | 6.9 | 0.5% | 128.6% | 0.6 p.p.
Gain on previously held interest in associate (c) | (12.0) | (0.8%) | (3.0) | (0.2%) | 301.3% | (0.6 p.p.)
Mark-to-market and Cost of Funds related to the investment in Banco Inter | (836.2) | (56.5%) | 0.0 | 0.0% | n.a. | (56.5 p.p.)
Other expenses (d) | 22.7 | 1.5% | 1.7 | 0.1% | 1222.2% | 1.4 p.p.
Tax effect on adjustments | 95.3 | 6.4% | (15.1) | (1.1%) | n.m | 7.5 p.p.
Adjusted net income | 36.9 | 2.5% | 312.6 | 22.6% | (88.2%) | (20.1 p.p.)
GAAP basic EPS (e) | 2.23 | n.a. | 1.03 | n.a. | 116.3% | n.a.
Adjusted diluted EPS (f) | (0.22) | n.a. | 1.12 | n.a. | n.m | n.a.
Basic Number of shares | 308.9 | n.a. | 277.4 | n.a. | 11.3% | n.a.
Diluted Number of shares | 314.7 | n.a. | 281.9 | n.a. | 11.6% | n.a.

(a)
Consists of expenses related to the vesting of one-time pre-IPO pool of share-based compensation.

(b)
On intangibles related to acquisitions. Consists of expenses resulting from the amortization of the fair value adjustment on intangible
assets and property and equipment as a result of the application of the acquisition method, a significant portion of which relates to
the EdB and Equals acquisitions.

(c)
Consists of the gain on re-measurement of our previously held equity interest in Linked (2Q20) and Vhsys (2Q21) to fair value upon the
date control was acquired.

(d)
Consists of the fair value adjustment related to associates call option, M&A and Bond Issuance expenses, earn-out interests related
to acquisitions, gains/losses in the sale of companies and dividends from Linx.

(e)
Calculated as Net income attributable to owners of the parent (Net Income reduced by Net Income attributable to Non-Controlling interest)
divided by basic number of shares. For more details on calculation, please refer to Note 17 of our Interim Condensed Consolidated Financial
Statements, June 30th, 2021.

(f)
Calculated as Adjusted Net income attributable to owners of the parent (Adjusted Net Income reduced by Net Income attributable to Non-Controlling
interest) divided by diluted number of shares.

19

Cash Flow

Because
of the nature of the prepayment and credit businesses, the dynamics of the sale of receivables and the dynamics of the sale of credit
outstanding balance to third-party investors, StoneCo management looks at Adjusted Net Cash Provided by/ (Used in) Operating Activities
and Adjusted Net Cash Provided by/ (Used in) Financing Activities, both non-IFRS metrics. These metrics consist of transferring the following
four working capital items 23 from our operating cash flow to our financing cash flow:
(i) changes in Accounts Payable to Clients; (ii) changes in Accounts Receivables from Card Issuers; (iii) Interest Income Received, Net
of Costs 24 , which is shown separately in our Cash Flow Statement but is directly linked
to the funding of our prepayment operation and (iv) Loans Designated at FVPL related to our credit operation (see Appendix "Notes
on Cash Flows" in our 2020 Earnings Release for further details).

The
table below is a summarized version of our Statement of Cash Flows and Adjusted Free Cash Flow (a non-IFRS metric), along with a reconciliation
of these metrics with our managerial (non-IFRS) view of them, as well as reconciliation of Adjusted Net Cash Provided by/ (Used in) Operating
Activities and Adjusted Net Cash Provided by/ (Used in) Financing Activities to Net Cash Provided by/ (Used in) Operating Activities
and Net Cash Provided by/ (Used in) Financing Activities.

Table 7 : Summarized Statement of Cash Flows and Free Cash Flow

Summarized
 Statement of Cash Flows (R$mm) | 2Q21 | 2Q20
IFRS | (+) Adjustments | Managerial (Non-IFRS) | IFRS | (+) Adjustments | Managerial (Non-IFRS)
Net Income | 526.0 | 526.0 | 123.6 | 123.6
(+) Adjustments to Net Income | (203.3) | (203.3) | 137.0 | 137.0
(+) Working capital adjustments | 999.5 | (1,474.9) | (475.4) | 860.7 | (868.6) | (7.9)
(+) AR, AP, interest income received, net of costs (a) | 911.3 | (911.3) | 0.0 | 1,067.1 | (1,067.1) | 0.0
(+) Changes in Loans Designated at FVPL | 563.6 | (563.6) | 0.0 | (198.5) | 198.5 | 0.0
(+) Other working capital changes | (475.4) | (475.4) | (7.9) | (7.9)
(=) Cash provided by (used in) operating activities | 1,322.2 | (152.7) | 1,121.3 | 252.7
(-) Capex (b) | (224.5) | (224.5) | (111.3) | (111.3)
(+) Other investing activities | 1,088.2 | 1,088.2 | 1,553.9 | 1,553.9
(=) Cash provided by (used in) investing activities | 863.7 | 863.7 | 1,442.6 | 1,442.6
(+) Debt/FIDC issuance (repayment) | 2,541.3 | 2,541.3 | (1,274.3) | (1,274.3)
(+) Working capital related to credit operation | 563.6 | 563.6 | (198.5) | (198.5)
(+) Working capital related to AR/AP | 911.3 | 911.3 | 1,067.1 | 1,067.1
(+) Capital events (c) | (758.0) | (758.0) | (29.0) | (29.0)
(=) Cash provided by (used in) financing activities | 1,783.3 | 3,258.2 | (1,303.3) | (434.7)
(+) Effect of foreign exchange on cash and cash equivalents | 39.9 | 39.9 | (2.4) | (2.4)
(=) Change in cash and cash equivalents | 4,009.2 | 4,009.2 | 1,258.2 | 1,258.2
Free Cash Flow (R$mm) | 2Q21 | 2Q20
Cash provided by (used in) operating activities | 1,322.2 | (1,474.9) | (152.7) | 1,121.3 | (868.6) | 252.7
(-) Capex (b) | (224.5) | (224.5) | (111.3) | (111.3)
Free Cash Flow | 1,097.7 | (377.1) | 1,010.0 | 141.4

(a)
Includes changes in accounts receivables from card issuers, accounts payable to clients and interest income received, net of costs .

(b)
Includes purchase of property and equipment, plus purchases and development of intangibles assets.

(c)
Includes capital increase, repurchase of shares, acquisition of non-controlling interest and cash proceeds from non-controlling interest

23 Each
“Accounts Payable to Clients” recognized as a liability on our balance sheet is directly linked to an “Accounts Receivable
from Card Issuers” recognized as an asset in our balance sheet. The Company receives payment from issuing banks first, and only
then pays its clients, thus having no working capital requirement. When a client opts to be paid early (prepayment), the Company has a
working capital requirement. However, the Company has the option to sell the receivables related to those payables from card issuers in
order to meet such working capital requirements. The combined effect to the cash flow is a positive operational cash flow equivalent to
net fees earned by providing such prepayment service. Whenever management opts to fund its prepayment operation with sources other than
the sale of its own receivables, Net Cash Provided by/ (Used in) Operating Activities may be affected, as discussed in “Note on
the impact of different funding sources for prepayment in the financial statements” in the appendix of our 2020 Earnings Release.
However, management does not view such decision as translating into higher or lower ability of our business to generate cash operationally.
In addition to prepayment, the Company has started to offer credit solutions to clients. The Company intends to fund its credit operation
primarily through third parties (i.e. FIDC and debt), as well as with some own cash. Given the operational nature of our credit business,
as in the case of prepayment mentioned above, management does not view related funding decision as translating into higher or lower ability
of our business to generate cash operationally.

24 Interest
Income Received, Net of Costs, consists of two items: (i) financial income from our prepayment activity, less (ii) financial expenses
related to the sale of receivables to commercial banks. The first item has direct influence on the level of Accounts Payable to Clients
in our balance sheet; the second item has direct influence on the amount of Accounts Receivables from Card Issuers on our balance sheet.

20

Adjusted
(non-IFRS) Free Cash Flow

The
Company defines Adjusted Free Cash Flow 25 , a non-IFRS metric, as Adjusted net cash
provided by (used in) operating activities (non-IFRS), less purchase of property and equipment and purchases and development of intangible
assets ("Capex").

The
Company reported negative Adjusted Free Cash Flow of R$377.1 million in the second quarter of 2021, compared with a positive R$141.4
million in the second quarter of 2020. The decrease was mainly due to the fair value adjustment in our credit portfolio, which led our
revenues from credit to be a negative R$397.2 million. Even though the fair value adjustment is a non-cash metric in the quarter, we
are considering it as a subtractor of free cash flow as the changes in the portfolio fair value represent changes in expectations of
future cash flows from the credit solution.

As
mentioned in the “2Q21 Operational and Strategic Evolution” section, we are adapting the way we report credit metrics, so
we can be closer to market standards and facilitate the understanding of our credit business by investors. Also, new contracts originated
in our credit portfolio from the third quarter of 2021 onwards will be accounted for on an accrual basis rather than fair value basis.

In
that context, from the third quarter of 2021 onwards, we will evolve our concept regarding Adjusted Free Cash Flow metric.

Net
Cash Provided by (Used In) Operating Activities

In
the second quarter of 2021, Net Cash Provided by Operating Activities was R$1,322.2 million, compared with R$1,121.3 million in
the second quarter of 2020, an increase of R$200.9 million. This variation reflects R$138.8 million higher Net Cash Provided by Operating
Activities from Working Capital and R$62.1 million higher Net Income adjusted by non-cash events. The positive variation from Working
Capital resulted from (i) R$1,051.9 million higher Net Cash Provided by Operating Activities from Accounts Payable to Clients and (ii)
R$415.4 million higher Net Cash Provided by Operating Activities from Trade Accounts Receivable and Other Assets, mainly due to credit
inflows exceeding amounts disbursed, as we reduced disbursements in face of the challenges with the implementation of the registry of
receivables regulation. These factors were partially offset by R$1,262.3 million higher Net Cash Used in Operating Activities from Accounts
Receivable from Card Issuers and R$66.3 million Net Cash Used in Operating Activities from other smaller effects.

Adjusting
for the effects on table 7 above, our Adjusted (non-IFRS) Net Cash Used in Operating Activities 26 was R$152.7 million, compared with Adjusted Net Cash Provided by Operating Activities of R$252.7 million in the second
quarter of 2020. The R$405.3 million difference is explained by R$467.5 million higher Net Cash Used in Operating Activities from Working
Capital, partially offset by R$62.1 million higher Net Income adjusted by non-cash events. The negative variation from Working Capital
is explained by (i) R$346.6 million higher Net Cash Used in Operating Activities from Trade Accounts Receivable and Other Assets, as
we exclude the effects from the whole credit fair value from our cash flow from Operations, in line with the Adjusted Free Cash Flow
explanation; (ii) R$65.9 million lower Net Cash Provided by Operating Activities from Taxes Payable and (iii) R$54.9 million higher Net
Cash Used in Operating Activities from other effects.

25 Adjusted
Free Cash Flow is a non-IFRS measure. Refer to the discussion on non-IFRS financial measures and reconciliations included in our 2020
Earnings Release.

26 Adjusted
Net Cash Provided by (Used in) Operating Activities is a non-IFRS measure. Refer to the discussion on non-IFRS financial measures and
reconciliations included in our 2020 Earnings Release.

21

Net
Cash Provided by Investing Activities

Net
Cash Provided by Investing Activities was R$863.7 million for the second quarter of 2021, compared with R$1,442.6 million in the
second quarter of 2020, a difference of R$578.9 million. This difference was driven by the combination of (i) R$2,480.0 million higher
Acquisition of Equity Securities related to our investment in Banco Inter and (ii) R$113.2 million higher capex, partially compensated
by (iii) R$1,961.3 million higher Proceeds from Short and Long Term Investments as we converted short-term investments into cash to pay
for the Linx acquisition and (iv) R$53.0 million of other smaller effects.

Net
Cash Provided by (Used in) Financing Activities

Net
Cash Provided by Financing Activities was R$1,783.3 million for the second quarter of 2021, compared with Net Cash Used in Financing
Activities of R$1,303,3 million for the second quarter of 2020, a difference of R$3,086.6 million. This difference is mainly explained
by R$3,815.6 million higher Proceeds from Borrowings, net of repayments, mainly explained by the Company's USD500 million inaugural dollar
bond issuance to fund the investment in Banco Inter, R$1.7 billion in new CCB ( "Cédula de Crédito Bancário" ),
part of which already amortized and R$340 million in FIDC Soma IV issuance to fund the credit operation. This effect was partially offset
by R$729.0 million higher outflow related to capital events, mostly due to the repurchase of R$756.7 million in company's own shares
in the quarter.

Adjusting
for the effects on table 7 above, our Adjusted (non-IFRS) Net Cash Provided by Financing Activities 27 was R$3,258.2 million in the second quarter of 2020, compared with Adjusted (non-IFRS) Net Cash Used in Financing Activities
of R$434.7 million in the second quarter of 2020, a difference of R$3,692.9 million. This difference is related to the R$3,815.6 million
higher Proceeds from Borrowings, net of repayments explained above and R$762.1 million higher impact from our credit operation as we
significantly reduced our disbursements amid challenges with the registry of receivables regulation implementation in the market and
adjust for the effect of the credit, including fair value, from our Operating Activities Cash Flow to our Financing Activities Cash Flow.
These factors were partially offset by R$729.0 million higher outflow related to capital events and R$155.8 million lower inflow from
working capital related to our prepayment operation.

27 Adjusted
Net Cash Provided by (Used in) Financing Activities is a non-IFRS measure. Refer to the discussion on non-IFRS financial measures and
reconciliations included in our 2020 Earnings Release.

22

Adjusted
Net Cash

Management
assesses net liquidity of the Company by Adjusted Net Cash, a non-IFRS metric, consisting of the items detailed in the Table 8 below:

Table
8: Adjusted Net Cash

Adjusted
 Net Cash (R$mm) | 2Q21 | 4Q20
Cash and cash equivalents | 5,872.7 | 2,447.0
Short-term investments | 4,999.6 | 8,128.1
Accounts receivable from card issuers | 16,896.9 | 16,307.2
Loans designated at FVPL | 1,430.1 | 1,646.7
Derivative financial instrument (b) | 29.2 | 25.0
Adjusted Cash | 29,228.4 | 28,553.9
Accounts payable to clients | (10,924.9) | (9,172.4)
Loans and financing (a) | (5,323.8) | (1,534.2)
Obligations to FIDC quota holders | (3,348.8) | (4,374.6)
Derivative financial instrument (b) | (6.9) | (16.2)
Adjusted Debt | (19,604.4) | (15,097.4)
Adjusted Net Cash | 9,624.0 | 13,456.5

(a)
Loans and financing were reduced by the effects of leases liabilities recognized under IFRS 16.

(b)
Refers to economic hedge of cash and cash equivalents and short-term investments denominated in U.S. dollars.

Accounts
Receivable from Card Issuers and Loans Designated at FVPL are accounted for at their fair value in our balance sheet.

As
of June 30, 2021, the Company´s Adjusted Net Cash position was R$9,624.0 million compared with R$13,456.5 million on December 31,
2020, a decrease of R$3,832.5 million. The main factors for the decrease were the R$2.5 billion investment in Banco Inter and the R$988.8
million repurchase of our own shares in the semester.

Below,
we provide more details on each line item:

· | Cash and Cash Equivalents
plus Short-term Investments increased by R$297.2 million, from R$10,575.0 million on December 31, 2020 to R$10,872.2 million on June 30,
2021.
· | Loans and financing plus
Obligations to FIDC quota holders increased R$2,763.8 million from R$5,908.8 million on December 31, 2020 to R$8,672.6 million on June
30, 2021 as the company raised its USD500 million inaugural dollar bond, launched its FIDC Soma IV raising R$340 million for the credit
operation and raised R$1.7 billion in new CCBs (" Cédula de Crédito Bancário "). At the same time,
the Company amortized part of its CCBs and FIDC AR quotas.
· | Accounts Receivable from
Card Issuers, net of Accounts Payable to Clients decreased by R$1,162.9 million, from R$7,134.8 million on December 31, 2020 to R$5,971.9
million on June 30, 2021, mainly because of lower use of debt and own capital compared with sale of receivables to commercial banks to
fund our operations;
· | Loans Designated at FVPL
decreased from R$1,646.7 million on December 31, 2020 to R$1,430.1 million on June 30, 2021, as the Company (i) significantly reduced
its disbursement in the quarter amid challenges with the registry of receivables implementation and (ii) recognized a significant downward
adjustment to credit portfolio fair value.

23

As
mentioned above in our “Adjusted (non-IFRS) Free Cash Flow” section, we are adapting the way we report credit metrics, so
we can be closer to market standards and facilitate the understanding of our credit business by investors. In that context, from the
third quarter of 2021 onwards, we will evolve our disclosures regarding Adjusted Net Cash metric.

24

Other
Information

Conference
Call

Stone
will discuss its second quarter financial results during a teleconference today, August 30, 2021, at 5:00 PM ET / 6:00 PM BRT. The conference
call can be accessed at +1 (412) 317 6346 or +1 (844) 204 8586 (US), or +55 (11) 3181 8565 (Brazil), or +44 (20) 3795 9972 (UK).

The
call will also be broadcast simultaneously on Stone’s Investor Relations website at https://investors.stone.co/. Following the
completion of the call, a recorded replay of the webcast will be available on Stone’s Investor Relations website at https://investors.stone.co/.

About
Stone Co.

Stone
Co. is a leading provider of financial technology solutions that empower merchants to conduct commerce seamlessly across multiple channels
and help them grow their businesses.

Investor Contact

Investor
Relations investors@stone.co

25

Other
Information

Forward-Looking
Statements

This
press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date they were first issued and were based
on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. These statements
identify prospective information and may include words such as “believe,” “may,” “will,” “aim,”
“estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast,”
“plan,” “predict,” “project,” “potential,” “aspiration,” “objectives,”
“should,” “purpose,” “belief,” and similar, or variations of, or the negative of such words and expressions,
although not all forward-looking statements contain these identifying words.

Forward-looking
statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Stone’s
control.

Stone’s
actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including
but not limited to: more intense competition than expected, lower addition of new clients, regulatory measures, more investments in our
business than expected, and our inability to execute successfully upon our strategic initiatives, among other factors. In particular,
due to the high level of uncertainty with respect to the duration and scope of the COVID-19 crisis, the quantification of impacts on
our financial and operating results cannot be reasonably estimated at this time.

About
Non-IFRS Financial Measures

To
supplement the financial measures presented in this press release and related conference call, presentation, or webcast in accordance
with IFRS, Stone also presents the following non-IFRS measures of financial performance: Adjusted Net Income, Adjusted EPS (diluted),
Adjusted Net Margin, Adjusted Net Cash Provided by / (Used in) Operating Activities, Adjusted Net Cash Provided by (Used in) Financing
Activities, Free Cash Flow and Adjusted Free Cash Flow, Adjusted Net Cash / (Debt) and Adjusted Pre-Tax Margin.

A
“non-IFRS financial measure” refers to a numerical measure of Stone’s historical or future financial performance or
financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable
measure calculated and presented in accordance with IFRS in Stone’s financial statements. Stone provides certain non-IFRS measures
as additional information relating to its operating results as a complement to results provided in accordance with IFRS. The non-IFRS
financial information presented herein should be considered in conjunction with, and not as a substitute for or superior to, the financial
information presented in accordance with IFRS. There are significant limitations associated with the use of non-IFRS financial measures.
Further, these measures may differ from the non-IFRS information, even where similarly titled, used by other companies and therefore
should not be used to compare Stone’s performance to that of other companies.

Stone
has presented Adjusted Net Income to eliminate the effect of items from Net Income that it does not consider indicative of its continuing
business performance within the period presented. Stone defines Adjusted Net Income as Net Income (Loss) for the Period, adjusted for
(1) non-cash expenses related to the grant of share-based compensation and the fair value (mark-to-market) adjustment for share-based
compensation classified as a liability, (2) amortization of intangibles related to acquisitions, (3) one-time impairment charges, (4)
unusual income and expenses and (5) tax expense relating to the foregoing adjustments. Adjusted Net Margin is calculated by dividing
Adjusted Net Income by Total Revenue and Income. Adjusted EPS (diluted) is calculated as Adjusted Net income attributable to owners of
the parent (Adjusted Net Income reduced by Net Income attributable to Non-Controlling interest) divided by diluted number of shares.

Stone
has presented Adjusted Net Cash Provided by/ (Used in) Operating Activities, in order to provide an additional view of cash flow from
operations without the effect of funding decisions related to our financial solutions, that include prepayment business and credit solutions.
Stone has presented Adjusted Free Cash Flow metric, which has limitations as it omits certain components of the overall Cash Flow Statement
and does not represent the residual cash flow available for discretionary expenditures. For example, this metric does not incorporate
the portion of payments representing principal reductions of debt or cash payments for business acquisitions. Therefore, the Company
believes it is important to view Free Cash Flows measures only as a complement to our entire consolidated Statements of Cash Flows.

Stone
has presented Adjusted Net Cash metric in order to adjust its Net Cash / (Debt) by the balances of Accounts Receivable from Card Issuers,
Loans Designated at FVPL and Accounts Payable to Clients, since these lines vary according to the Company’s funding source together
with the lines of (i) Cash and Cash Equivalents, (ii) Short-term Investments, (iii) Debt balances and (iv) Derivative Financial Instruments
related to economic hedges of short term investments in assets, due to the nature of Stone’s business and its prepayment and credit
operations.

26

Unaudited Consolidated Statement of Profit
or Loss

Table
9: Unaudited Consolidated Statement of Profit or Loss

Statement
 of Profit or Loss (R$mm) | 2Q21 | 2Q20 | 1H21 | 1H20
Net revenue from transaction activities and other services | 359.2 | 227.5 | 677.5 | 454.8
Net revenue from subscription services and equipment rental | 152.9 | 80.4 | 292.8 | 173.6
Financial income | 40.0 | 326.6 | 408.8 | 685.9
Other financial income | 61.3 | 32.9 | 102.0 | 69.9
Total revenue and income | 613.4 | 667.4 | 1,481.1 | 1,384.1
Cost of services | (302.4) | (198.7) | (542.1) | (348.7)
Administrative expenses | (121.8) | (89.9) | (239.5) | (163.9)
Selling expenses | (223.2) | (114.7) | (385.9) | (226.5)
Financial expenses, net | (157.6) | (62.6) | (250.1) | (211.0)
Other income (expenses), net | 777.0 | (40.1) | 735.5 | (43.6)
Loss on investment in associates | (2.8) | (1.5) | (6.4) | (2.8)
Profit before income taxes | 582.6 | 159.8 | 792.6 | 387.8
Income tax and social contribution | (56.6) | (36.2) | (108.3) | (105.5)
Net income for the period | 526.0 | 123.6 | 684.3 | 282.2

27

Unaudited Consolidated Balance Sheet

Statement

Table
10: Unaudited Consolidated Balance Sheet Statement

Balance
 Sheet (R$mn) | 30-Jun-21 | 31-Dec-20
Assets
Current assets | 30,555.6 | 29,274.8
Cash and cash equivalents | 5,872.7 | 2,447.0
Short-term investments | 4,999.6 | 8,128.1
Accounts receivable from card issuers | 16,896.9 | 16,307.2
Trade accounts receivable | 1,412.4 | 1,415.9
Financial assets from banking solution | 842.7 | 714.9
Recoverable taxes | 90.3 | 56.4
Prepaid expenses | 115.8 | 67.7
Derivative financial instruments | 40.8 | 43.1
Other assets | 284.4 | 94.7
Non-current assets | 6,262.0 | 2,473.8
Trade accounts receivable | 168.5 | 382.1
Receivables from related parties | 9.2 | 7.2
Deferred tax assets | 225.6 | 138.7
Prepaid expenses | 234.8 | 51.2
Other assets | 103.2 | 85.6
Long-term investments | 3,340.4 | 0.0
Investment in associate | 68.5 | 52.0
Property and equipment | 972.1 | 717.2
Intangible assets | 1,139.8 | 1,039.9
Total
 Assets | 36,817.5 | 31,748.7
Liabilities and equity
Current liabilities | 15,698.8 | 13,380.4
Deposits from banking customers | 781.2 | 576.1
Accounts payable to clients | 10,921.6 | 9,172.4
Trade accounts payable | 215.9 | 180.5
Loans and financing | 2,504.0 | 1,184.7
Obligations to FIDC quota holders | 969.4 | 1,960.1
Labor and social security liabilities | 161.0 | 173.1
Taxes payable | 128.9 | 106.8
Derivative financial instruments | 6.9 | 16.2
Other liabilities | 10.1 | 10.4
Non-current liabilities | 5,967.9 | 3,376.3
Accounts payable to clients | 3.4 | 0.0
Loans and financing | 3,013.5 | 524.4
Obligations to FIDC quota holders | 2,379.4 | 2,414.4
Deferred tax liabilities | 170.4 | 61.1
Provision for contingencies | 8.4 | 10.2
Labor and social security liabilities | 80.8 | 81.3
Other liabilities | 311.9 | 285.0
Total liabilities | 21,666.7 | 16,756.6
Equity attributable to owners of the parent | 15,070.3 | 14,853.5
Issued capital | 0.1 | 0.1
Capital reserve | 14,441.5 | 13,479.7
Treasury shares | (1,675.1) | (76.4)
Other comprehensive income | 161.3 | (5.0)
Retained earnings | 2,142.5 | 1,455.0
Non-controlling interests | 80.6 | 138.6
Total equity | 15,150.9 | 14,992.0
Total
 liabilities and equity | 36,817.5 | 31,748.7

28

Unaudited Consolidated Statement of
Cash Flows

Table
11: Unaudited Consolidated Statement of Cash Flows

Cash
 Flow (R$mm) | 2Q21 | 2Q20 | 1H21 | 1H20
Net income for the period | 526.0 | 123.6 | 684.3 | 282.2
Adjustments on Net Income:
Depreciation and amortization | 97.4 | 63.2 | 181.8 | 123.4
Deferred income tax and social contribution | 34.8 | 43.4 | 23.7 | 35.2
Loss on investment in associates | 2.8 | 1.5 | 6.4 | 2.8
Interest, monetary and exchange variations, net | (221.8) | 55.1 | (491.5) | 56.7
Provision for contingencies | 1.7 | 0.7 | 3.4 | 1.7
Share-based payments expense | 29.0 | 0.6 | 51.2 | 7.7
Allowance for expected credit losses | 10.5 | 11.3 | 18.8 | 21.0
Loss on disposal of property, equipment and intangible assets | 29.1 | 2.5 | 39.4 | 14.3
Loss on sale of subsidiary | 12.7 | 0.0 | 12.7 | 0.0
Fair value adjustment in financial instruments at FVPL | (151.1) | (12.5) | 76.2 | (5.1)
Fair value adjustment in derivatives | (36.5) | (26.0) | (4.8) | 20.7
Remeasurement of previously held interest in subsidiary acquired | (12.0) | (3.0) | (12.0) | (3.0)
Working capital adjustments:
Accounts receivable from card issuers | (1,533.5) | (271.2) | (555.4) | 1,263.5
Receivables from related parties | 1.1 | 15.1 | (0.6) | 7.7
Recoverable taxes | (39.8) | (26.7) | (44.0) | (75.1)
Prepaid expenses | 9.3 | (1.1) | (231.7) | (107.4)
Trade accounts receivable, banking solutions and other assets | 199.4 | (216.0) | (132.6) | (509.4)
Accounts payable to clients | 2,078.6 | 1,026.7 | 962.8 | (301.1)
Taxes payable | 31.1 | 96.9 | 96.0 | 173.6
Labor and social security liabilities | (36.5) | 5.2 | (14.8) | 14.2
Provision for contingencies | (5.2) | (0.2) | (5.3) | (1.6)
Other Liabilities | (4.2) | 24.6 | 42.5 | 13.4
Interest paid | (42.6) | (55.0) | (89.1) | (110.3)
Interest income received, net of costs | 366.1 | 311.5 | 684.9 | 661.1
Income tax paid | (24.3) | (49.3) | (69.2) | (102.5)
Net cash provided by operating activity | 1,322.2 | 1,121.3 | 1,233.0 | 1,483.8
Investing activities
Purchases of property and equipment | (190.3) | (90.8) | (524.7) | (181.0)
Purchases and development of intangible assets | (34.2) | (20.5) | (76.3) | (42.5)
Acquisition of subsidiary, net of cash acquired | (9.5) | (57.4) | (9.5) | (57.4)
Sale of subsidiary, net of cash disposed of | (0.0) | 0.0 | (0.0) | 0.0
Proceeds from short- and long-term investments, net | 3,371.3 | 1,619.3 | 3,157.5 | 2,220.5
Acquisition of equity securities | (2,480.0) | 0.0 | (2,480.0) | 0.0
Disposal of short-term investments - equity securities | 209.3 | 0.0 | 209.3 | 0.0
Proceeds from the disposal of non-current assets | 0.0 | 4.8 | 0.1 | 4.8
Acquisition of interest in associates | (2.9) | (12.9) | (38.6) | (7.5)
Net cash provided by investing activities | 863.7 | 1,442.6 | 237.9 | 1,937.1
Financing activities
Proceeds from borrowings | 4,176.4 | 567.7 | 5,285.4 | 3,456.8
Payment of borrowings | (1,148.2) | (1,217.1) | (1,508.2) | (4,087.1)
Payment to FIDC quota holders | (810.0) | (616.6) | (1,620.0) | (1,116.6)
Proceeds from FIDC quota holders | 336.3 | 0.0 | 584.2 | 0.0
Payment of leases | (13.1) | (8.3) | (45.2) | (14.5)
Repurchase of shares | (756.7) | (28.8) | (988.8) | (76.3)
Acquisition of non-controlling interests | (0.3) | (0.3) | (0.6) | (0.5)
Transaction with non-controlling interests | 0.0 | 0.0 | 230.5 | 0.0
Dividends paid to non-controlling interests | (0.9) | 0.0 | (0.9) | 0.0
Cash proceeds from non-controlling interest | 0.0 | 0.0 | 0.9 | 230.5
Net cash provided by (used in) financing activities | 1,783.3 | (1,303.3) | 1,937.2 | (1,607.7)
Effect of foreign exchange on cash and cash equivalents | 39.9 | (2.4) | 17.5 | (4.7)
Change in cash and cash equivalents | 4,009.2 | 1,258.2 | 3,425.7 | 1,808.4
Cash and cash equivalents at beginning of period | 1,863.5 | 1,518.6 | 2,447.0 | 968.3
Cash and cash equivalents at end of
 period | 5,872.7 | 2,776.8 | 5,872.7 | 2,776.8

29

Glossary of Terms

· | “ABC Platform” : integrated financial platform including our acquiring, banking and credit solutions in a single interface.
· | “Active Clients
(ex-TON)”: refers to Stone SMBs, Pagar.me SMBs and Pagar.me key accounts clients. Does not include TON micromerchants. Considers
clients that have transacted at least once over the preceding 90 days.
· | “Active Clients
- Financial Operating System for SMBs”: refers to Stone SMBs, Pagar.me SMBs and TON micromerchants. Considers clients that
have transacted at least once over the preceding 90 days, except for TON active clients which considers clients that have transacted once
in the preceding 12 months.
· | “ Banking Money-In
Volumes”: includes money-in volumes from TED, PIX, boleto issuance and TPV from other acquirers settled in the Stone
account.
· | “Banking Money-Out
Volumes” : Includes Pix Out, wiretransfers, bill payments, boletos paid, withdrawals, recharge and others.
· | “Coronavoucher” :
government financial aid program created amid COVID, targeting the most vulnerable part of the population as autonomous and informal workers
and people without income.
· | “Financial
Operating System for SMBs” : refers to our payments and financial services business serving bricks-and-mortar SMBs with Stone
product, Pagar.me SMB online product and micromerchants in TON. Includes money-in, money-out and working capital solutions, including
digital banking, credit and online checkout.
· | “Heavy Users” :
Stone SMB clients that are active in payments, banking and credit solutions at the same time. Active clients are clients that have transacted
at least once over the preceding 90 days.
· | “Offline SMBs”: Brick-and-mortar SMBs, mostly served through our hub operations.
· | “Online SMBs”: Online SMBs at Pagar.me.
· | “Pagar.me Fintech-as-a-Service” or “Pagar.me FaaS” or “Pagar.me key accounts” : refers to operations in which Pagar.me
acts as a fintech infrastructure provider for different types of clients, especially larger ones, such as mature ecommerces and digital
platforms, commonly delivering financial services via APIs.
· | “Pagar.me SMBs” :
refers to SMB clients with our online payments solutions.
· | “SMBs”: from now on, when we refer to SMBs, we will be referring to the combination of our Stone SMBs, Pagar.me SMBs and TON micromerchants.
· | “Software Workflow
Tools”: refers to our software ecosystem with solutions in different verticals for all sizes of clients.
· | “Stone SMBs”: refers to SMB clients with our brick-and-mortar solutions, being the vast majority served through the Stone hubs.
· | “Take Rate”: Total Revenue and Income minus Other Financial Income, divided by TPV.

30

Glossary of Terms

· | “TON”: refers to our solution for micromerchants.
· | “TON Active Client
Base”: refers to clients that have transacted with TON at least once over the preceding 12 months.
· | “Total Account
Balance”: accounts balance from our brick-and-mortar SMBs at Stone, our online SMBs at Pagar.me and our micromerchants under
TON.
· | “TPV”: Total Payment Volume. Up to the fourth quarter of 2020, refers to processed TPV. From the first quarter of 2021 onwards, reported TPV
figures consider all volumes settled by StoneCo.

31

2Q21
highlights

Gross Revenue | Subscription Revenue
R$ 279.3 Million | + 13.4% yoy | R$ 241.8 million | + 16.3% yoy
Organic growth | Retention Rate
15.1% YoY | 98.8%
Linx Core | +16% YoY SUBSCRIPTION REVENUE
Big Retail&Napse: Subscription Revenue (SR) grew 11% YoY
Food Delivery Platform: SR grew 158% YoY | customer base increased 120% YoY
Core Mid&Large: SR grew 12% YoY | 50% of incremental SR originated from Connectivity, Apparel, Car Dealers and Pharma
Small: SR growth of 31% YoY | active clients increased 12% YoY
Linx Franchisees: 460 franchisees as of June 2021 | 38% of new activations in 2Q21, accelerating from 30% in 2Q20
Linx Digital | +26% YoY SUBSCRIPTION REVENUE
Linx Commerce: SR grew +7% YoY and +114% vs 2Q19 1 | GMV growth of +95.5% vs 2Q19 1 | #clients increased 44% YoY
Linx Impulse: SR +27% YoY and +47% vs 2Q19 1 | representing 64% of Linx Digital´s SR
OMNI OMS: acceleration of active stores, +77% YoY | SR grew 41% YoY | 4,700 roll-out stores and 4,300 stores to roll-out
Linx Digital Partners: agencies homologation for selling Linx Digital solutions, 52 partners in 2Q21, +37% vs 1Q21
Linx Pay | +23% YoY SUBSCRIPTION REVENUE
TEF: 68% of the Linx Pay´s SR
Gateway: 5,000 clients using Linx's payment solution for e-commerce
TPV: 3.0x higher vs 2Q20
1. | Considering that we had all brick-and-mortar retail normalized during the 2Q21, it is worth comparing
it with the same period of 2019, when we have comparable market variables.

32

NEW
IDC RESEARCH

IDC (International
Data Corporation) released its annual study on the Brazilian retail software market , with results for 2020. According to the study,
the estimated total addressable market (TAM) reached R$ 11.1 billion, +4.2% vs 2019. Total revenue from retail management software (POS
and ERP) in 2020 was R$ 1.7 billion, +11.9% vs. 2019 and a 15.2% penetration of TAM. Linx's market share reached 45.5% in 2020, +20 bps
vs 2019 reinforcing its position as the market leader in Brazil, year after year.

In the Brazilian e-commerce solutions market 1 , also according to IDC, Linx reached 14.3% market share in 2020, +60 bps vs 2019, maintaining
its position as the second largest player in the Brazilian market while the first place reached 23.5% market share in 2020. Total revenue
from e-commerce solutions in 2020 was R$ 0.9 billion, +26.1% vs 2019 and a 7.9% penetration of TAM. These data are the result of Linx's
investment in the continuous improvement of its offerings and adaptation to market trends.

33

FINANCIAL
RESULTS

OPERATING REVENUE

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | HoH
Total recurring revenue | 243,401 | 213,130 | 14.2% | 233,221 | 4.4% | 476,622 | 415,306 | 14.8%
Subscription revenue | 241,761 | 207,801 | 16.3% | 231,445 | 4.5% | 473,206 | 404,085 | 17.1%
Royalties | 1,640 | 5,330 | (69.2%) | 1,777 | (7.7%) | 3,416 | 11,221 | (69.6%)
Consulting service revenue | 35,859 | 33,163 | 8.1% | 31,280 | 14.6% | 67,139 | 68,644 | (2.2%)
Gross Operating Revenues | 279,261 | 246,293 | 13.4% | 264,501 | 5.6% | 543,762 | 483,950 | 12.4%
Sales taxes¹ | (29,186) | (24,468) | 19.3% | (27,126) | 7.6% | (56,312) | (48,211) | 16.8%
Cancellations and rebates | (7,771) | (8,374) | (7.2%) | (6,791) | 14.4% | (14,562) | (13,757) | 5.9%
Net Operating Revenues | 242,303 | 213,451 | 13.5% | 230,584 | 5.1% | 472,887 | 421,982 | 12.1%

1- Includes
Social integration program – PIS, Social security financing contribution – COFINS, Service tax – ISS, INSS and others.

Subscription
revenue reached R$ 241.8 million in 2Q21, representing 86.6% of gross operating revenue, +16.3% vs 2Q20 and +4.5% vs 1Q21. The higher
figures exemplify the resilience of the business model based on recurring revenue (SaaS), in addition to the importance of offering an
end-to-end platform that guarantees multiple entry points for Linx solutions, something that was intensified with the acceleration of
the digital transformation process for retailers since March 2020. We highlight that more than 60% of recurring revenue comes from offers
entirely in the cloud.

In 2Q21,
the annual organic growth of subscription revenue was 15.1%, accelerating from the 14.0% increase recorded in the previous quarter.
This evolution is mainly explained by the positive impact of the continuous acceleration of the digital transformation process, which
increases adherence to Linx's end-to-end platform solutions even in the context of COVID-19.

Royalties
revenue reached R$ 1.6 million in 2Q21, -69.2% vs 2Q20 and -7.7% vs 1Q21. As in previous quarters, the lower figures are mainly explained
by an increased contribution of SaaS offers, with higher decreases from Car Dealers and Service Retail verticals. It is important to
note that the new SaaS offers, which generate recurring revenue and are cloud based, do not charge royalties, mostly.

In 2Q21, Total Recurring Revenue reached R$ 243.4 million, +14.2% vs 2Q20 and +4.4% vs 1Q21. In the quarter, Linx Core represented 71.9%
of total recurring revenue, while Linx Digital and Linx Pay Hub reached 15.6% and 12.5%, respectively. The positive annual variation
of Linx Digital is explained by the continuous demand for solutions that in many cases ensured the continuity of operations for different
retailer profiles in the context of COVID-19.

34

Consulting
service revenue reached R$ 35.9 million in 2Q21, +8.1% and +14.6% vs 2Q20 and 1Q21, respectively. The higher figures reflect the
increased volume and size of implementation projects mainly concentrated in Linx Digital business during the 2Q21, even in a continuous
challenging scenario for retailers.

Deferred
short and long-term revenues on the balance sheet (consulting service revenue already billed, but not recognized, given that the
service has not yet been provided) totaled R$ 23.2 million at the end of 2Q21. In the following months, as the services are provided,
these revenues will be duly recognized.

Operating
expenses

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | HoH
Net Operating Revenues (NOR) | 242,303 | 213,451 | 13.5% | 230,584 | 5.1% | 472,887 | 421,982 | 12.1%
Cost of services (ex-depreciation and amortization) | (68,715) | (51,094) | 34.5% | (53,978) | 27.3% | (122,693) | (109,053) | 12.5%
% NOR | 28.4% | 23.9% | 440 bps | 23.4% | 490 bps | 25.9% | 25.8% | 10 bps
General and administrative expenses (ex-depreciation and amortization) | (108,404) | (44,377) | 144.3% | (47,423) | 128.6% | (155,827) | (88,392) | 76.3%
% NOR | 44.7% | 20.8% | 2390 bps | 20.6% | 2420 bps | 33.0% | 20.9% | 1210 bps
Depreciation and amortization | (44,547) | (38,917) | 14.5% | (41,692) | 6.8% | (86,239) | (75,279) | 14.6%
% NOR | 18.4% | 18.2% | 20 bps | 18.1% | 30 bps | 18.2% | 17.8% | 40 bps
Sales and marketing expenses | (48,519) | (39,088) | 24.1% | (44,198) | 9.8% | (92,717) | (75,785) | 22.3%
% NOR | 20.0% | 18.3% | 170 bps | 19.2% | 90 bps | 19.6% | 18.0% | 160 bps
Research and development | (35,981) | (25,143) | 43.1% | (31,545) | 14.1% | (67,526) | (54,695) | 23.5%
% NOR | 14.8% | 11.8% | 310 bps | 13.7% | 120 bps | 14.3% | 13.0% | 130 bps
Other operating revenues (expenses) | (44,768) | (4,260) | 950.9% | (7,136) | 527.4% | (51,904) | (7,224) | 618.5%
% NOR | 18.5% | 2.0% | 1650 bps | 3.1% | 1540 bps | 11.0% | 1.7% | 930 bps

Note: We detach the account “Depreciation and amortization” from the “Cost of services provided” and “General
and administrative expenses”, so they are presented as R$ 68.7 million and R$ 108.4 million in 2Q21, respectively. The same concept
was applied in the other compared quarters.

The cost
of services (ex-depreciation and amortization) reached R$ 68.7 million in 2Q21, +440 bps as a percentage of NOR compared to 2Q20
and 490 bps higher than 1Q21. These higher figures are mainly explained by (i) third-party costs with Cloud as a consequence of IFRS
16, and (ii) increases in compensation and overtime hours, mainly on Implementation, Support and Infra/IT teams. As a result, gross margin
was 71.6% in 2Q21, -450 bps vs 2Q20 and -490 bps vs 1Q21.

General
and administrative expenses (ex-depreciation and amortization) showed an increase of 2390 bps and 2420 bps as a percentage of NOR
compared to 2Q20 and 1Q21, respectively. These higher figures are mainly explained by the following events linked to Stone´s proposal
for Linx: (i) higher level of non-recurring legal and financial advisory expenses, (ii) acceleration of Linx´s stock option plan
during the 2Q21, and (iii) talent retention incentives in the period.

Depreciation
and amortization expenses reached R$ 44.6 million, stable when compared to the percentage of NOR recorded in 2Q20 and 1Q21.

Sales
and marketing expenses , when compared as a percentage of NOR, increased of 170 bps and 90 bps compared to 2Q20 and 1Q21, respectively.
These figures are mainly explained by higher commissions and investments in the inbound marketing and commercial team to reinforce the
cross-sell of solutions that strengthen Linx´s end-to-end platform. In this context, we reinforced our commercial strategy by ending
the quarter with 460 franchisees and 52 partners selling Linx Digital solutions.

35

Research
and development (R&D) expenses, when compared as a percentage of NOR, increased 310 bps and 120 bps vs 2Q20 and 1Q21, respectively.
These higher figures are mainly explained by (i) the higher compensation as a consequence of the legal annual wages increase and talent
retention initiatives in the period, and (ii) expenses with fringe benefits that were resumed in 4Q20 after being paused since 2Q20 as
a temporary measure during the pandemic.

Other
net operating expenses increased 1650 bps and 1540 bps as a percentage of NOR in relation to 2Q20 and 1Q21, respectively. These higher
figures are mainly explained by non-recurring events: (i) PinPag´s net earn-out reversion and impairment in the quarter considering
that operating and financial performance were not achieved in comparison with the targets established in the purchase agreement, and
(ii) one-off operational losses in the quarter involving Linx Pay.

In 2Q21,
R$ 8.2 million was capitalized as an investment in R&D , +31.9% vs 2Q20. In the quarter, Linx Core represented 80.6% of capitalized
R&D, while Linx Digital and Linx Pay reached 8.6% and 10.9%, respectively. The annual increase is mainly linked to the innovation
initiatives to adapt Linx's ERPs to the omnichannel concept and consolidate our position as the main supplier of an end-to-end platform,
100% integrated and that allows the retailer to become omnichannel.

NET
FINANCIAL RESULT

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | HoH
Net financial result | (7,154) | (4,025) | 77.7% | (7,904) | (9.5%) | (15,058) | (13,194) | 14.1%
Financial revenues | 10,273 | 8,965 | 14.6% | 8,476 | 21.2% | 18,749 | 21,587 | (13.1%)
Financial expenses | (17,427) | (12,990) | 34.2% | (16,380) | 6.4% | (33,807) | (34,781) | (2.8%)

Net financial
result reached -R$ 7.2 million in 2Q21, -R$ 3.1 million vs 2Q20, mainly explained by the negative exchange rate variation on Napse
Latam in the period. Compared to 1Q21, the net financial result improved R$ 0.8 million mainly due to the gradual increase in the CDI
over the quarter, which increased our financial revenues in the period.

NET
INCOME (LOSS)

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | Δ%
Net income (loss) | (107,210) | 2,802 | n.a. | (6,870) | 1461% | (114,080) | (6,252) | 1724.7%
Net earn-out reversion 1 | (33,468) | (1,037) | n.a. | (235) | n.a. | (33,703) | (1,037) | n.a.
Impairment PinPag 2 | 48,079 | - | n.a. | - | n.a. | 48,079 | - | n.a.
Stone Operation Expenses 3 | 41,300 | - | n.a. | 305 | n.a. | 41,605 | - | n.a.
Linx Pay One-Off Operating Losses 4 | 20,324 | - | n.a. | - | n.a. | 20,324 | - | n.a.
Stock options plan | 13,612 | 3,063 | 344.4% | 2,938 | 363% | 16,550 | 3,063 | 440.4%
Elo´s agreement 5 | 9,343 | - | n.a. | - | n.a. | 9,343 | - | n.a.
Cloud adjustments (IFRS 16) 6 | 9,249 | - | n.a. | - | n.a. | 9,249 | - | n.a.
Organizational restructuring 7 | - | 4,275 | n.a. | - | n.a. | - | 5,091 | n.a.
M&A expenses 8 | - | 1,030 | n.a. | 147 | n.a. | 147 | 1,855 | (92.1%)
Donation for the Salvando Vidas project 9 | - | 1,000 | n.a. | - | n.a. | - | 1,000 | n.a.
NYSE IPO Expenses 10 | - | 883 | n.a. | - | n.a. | - | 1,432 | n.a.
Adjusted net income (loss) | 1,229 | 12,016 | (89.8%) | (3,715) | n.a. | (2,486) | 5,151 | n.a.

Observation: The adjustments presented here do not consider the impacts of income tax and social contribution on Net income (loss), they are presented
in accordance with the amounts presented in this document for the purpose of comparability. Notes: (1) Of the total purchase
price we pay for the acquired companies, a portion is paid through earn-outs, subject to the achievement of financial and operational
goals. When these goals are not achieved by the acquired companies, there is a reversal of earn-out in the period. (2) PinPag´s
Impairment losses concluded in the quarter. (3) Legal and financial advisory expenses arising from STNE´s proposal for Linx. (4) Linx Pay one-off operating losses linked to Accounts Payable and to Accounts Receivable. (5) A fine charged by Elo
as a consequence of terminating the 5-year agreement signed in 2019. (6) Third-party costs with Cloud due IFRS 16. (7) Organizational
restructuring carried out in 1H20. (8) Expenses related to the due diligence process of acquired companies. (9) Donation
to the BNDES Salvando Vidas project. The amount collected has been applied to the frontline of coping with the pandemic of COVID-19,
that is, in the acquisition of material, supplies and protective equipment for doctors, nurses and other health professionals who work
in hospitals. (10) Expenses related to Linx's IPO on the NYSE and consultancy to adapt to SOX rules.

36

EBITDA
AND EBITDA MARGIN

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | Δ%
Net income (loss) | (107,210) | 2,802 | n.a. | (6,870) | n.a. | (114,080) | (6,252) | n.a.
(+) Income and social contribution taxes | (8,575) | 3,745 | n.a. | 3,578 | n.a. | (4,997) | 4,612 | n.a.
(+) Net financial result | 7,154 | 4,025 | 77.7% | 7,904 | (9.5%) | 15,058 | 13,194 | 14.1%
(+) Depreciation and amortization | 44,547 | 38,917 | 14.5% | 41,692 | 6.8% | 86,239 | 75,279 | 14.6%
EBITDA | (64,084) | 49,489 | n.a. | 46,304 | n.a. | (17,781) | 86,833 | n.a.
Net Operating Revenues | 242,303 | 213,451 | 13.5% | 230,584 | 5.1% | 472,887 | 421,982 | 12.1%
EBITDA Margin | (26.4%) | 23.2% | n.a. | 20.1% | n.a. | (3.8%) | 20.6% | n.a.
Net earn-out reversion 1 | (33,468) | (1,037) | n.a. | (235) | n.a. | (33,703) | (1,037) | n.a.
Impairment PinPag 2 | 48,079 | - | n.a. | - | n.a. | 48,079 | - | n.a.
Stone Operation Expenses 3 | 41,300 | - | n.a. | 305 | n.a. | 41,605 | - | n.a.
Linx Pay One-Off Operating Losses 4 | 20,324 | - | n.a. | - | n.a. | 20,324 | - | n.a.
Stock options Plan | 13,612 | 3,063 | 344.4% | 2,938 | 363.3% | 16,550 | 3,063 | 440.4%
Elo´s agreement 5 | 9,343 | - | n.a. | - | n.a. | 9,343 | - | n.a.
Cloud adjustments (IFRS 16) 6 | 9,249 | - | n.a. | - | n.a. | 9,249 | - | n.a.
Anticipation and assignment of receivables 7 | 342 | 1,588 | (78.5%) | 2,144 | (84.0%) | 2,486 | 2,882 | (13.7%)
Organizational restructuring 8 | - | 4,275 | n.a. | - | n.a. | - | 5,091 | n.a.
M&A expenses 9 | - | 1,030 | n.a. | 147 | n.a. | 147 | 1,855 | (92.1%)
Donation for the Salvando Vidas project 10 | - | 1,000 | n.a. | - | n.a. | - | 1,000 | n.a.
NYSE IPO expenses 11 | - | 883 | n.a. | - | n.a. | - | 1,432 | n.a.
Adjusted EBITDA | 44,697 | 60,291 | (25.9%) | 51,603 | (13.4%) | 96,299 | 101,118 | (4.8%)
Adjusted EBITDA margin | 18.4% | 28.2% | (980 bps) | 22.4% | (400 bps) | 20.4% | 24.0% | (360 bps)

Notes: (1) Of the total purchase price we pay for the acquired companies, a portion is paid through earn-outs, subject to the achievement of
financial and operational goals. When these goals are not achieved by the acquired companies, there is a reversal of earn-out in the
period. (2) PinPag´s Impairment losses concluded in the quarter. (3) Legal and financial advisory expenses arising
from STNE´s proposal for Linx. (4) Linx Pay one-off operating losses linked to Accounts Payable and to Accounts Receivable. (5) A fine charged by Elo as a consequence of terminating the 5-year agreement signed in 2019. (6) Third-party costs with
Cloud due IFRS 16. (7) Impact of the anticipation and assignment of receivables offered by Linx Pay Hub, considering that this
revenue is allocated to the Financial Result, below EBITDA. (8) Organizational restructuring carried out in 1H20. (9) Expenses
related to the due diligence process of acquired companies. (10) Donation to the BNDES Salvando Vidas project. The amount collected
has been applied to the frontline of coping with the pandemic of COVID-19, that is, in the acquisition of material, supplies and protective
equipment for doctors, nurses and other health professionals who work in hospitals. (11) Expenses related to Linx's IPO on the
NYSE and consultancy to adapt to SOX rules .

In this quarter,
we had non-recurring expenses totaling R$ 108.8 million, involving: (i) PinPag´s net earn-out reversion and impairment, (ii) legal
and financial advisory expenses arising from Stone´s proposal for Linx, (iii) Linx Pay one-off operating losses linked to Accounts
Payable and to Accounts Receivable, (iv) the Company's stock option plan, (v) the financial impact as a consequence of terminating the
5-year agreement signed with Elo in 2019, (vi) third-party costs with Cloud due IFRS 16, and (vii) the impact of revenue from anticipation
and assignment of receivables offered by the Linx Pay Hub, amount allocated to the financial result. Accordingly, adjusted EBITDA reached R$ 44.7 million in the quarter, -25.9% and -13.4% in relation to adjusted EBITDA in 2Q20 and 1Q21, respectively.

The adjusted
EBITDA margin was 18.4% in the quarter compared to 28.2% in 2Q20 and 22.4% in 1Q21. The lower figure is mainly explained by: (i)
the higher compensation as a consequence of the legal annual wages increase in the period, (ii) increased talent retention initiatives,
(iii) expenses with fringe benefits that were resumed in 4Q20 after being paused since 2Q20 as a temporary measure during the pandemic,
and (iv) continuous investment in R&D teams in order to reinforce the portfolio of new offerings, as well as in Sales teams to reinforce
the cross-sell strategy.

37

ATTACHMENT
– INCOME STATEMENT

R$ ‘000 | 2Q21 | 2Q20 | YoY | 1Q21 | QoQ | 1H21 | 1H20 | Δ%
Total recurring revenue | 243,401 | 213,130 | 14.2% | 233,221 | 4.4% | 476,622 | 415,306 | 14.8%
Subscription revenue | 241,761 | 207,801 | 16.3% | 231,445 | 4.5% | 473,206 | 404,085 | 17.1%
Royalties | 1,640 | 5,330 | (69.2%) | 1,777 | (7.7%) | 3,416 | 11,221 | (69.6%)
Consulting service revenue | 35,859 | 33,163 | 8.1% | 31,280 | 14.6% | 67,139 | 68,644 | (2.2%)
Gross operating revenues | 279,261 | 246,294 | 13.4% | 264,501 | 5.6% | 543,762 | 483,951 | 12.4%
Sales taxes¹ | (29,186) | (24,468) | 19.3% | (27,126) | 7.6% | (56,312) | (48,211) | 16.8%
Cancellations and rebates | (7,771) | (8,374) | (7.2%) | (6,791) | 14.4% | (14,562) | (13,757) | 5.9%
Net operating revenues | 242,303 | 213,451 | 13.5% | 230,584 | 5.1% | 472,887 | 421,982 | 12.1%
Cost of services | (85,341) | (65,809) | 29.7% | (70,821) | 20.5% | (156,162) | (138,645) | 12.6%
Gross profit | 156,962 | 147,642 | 6.3% | 159,763 | (1.8%) | 316,725 | 283,337 | 11.8%
Operating expenses | (265,593) | (137,070) | 93.8% | (155,151) | 71.2% | (420,744) | (271,783) | 54.8%
General and administrative expenses | (136,325) | (68,579) | 98.8% | (72,272) | 88.6% | (208,597) | (134,079) | 55.6%
Selling expenses | (48,519) | (39,088) | 24.1% | (44,198) | 9.8% | (92,717) | (75,785) | 22.3%
Research and development | (35,981) | (25,143) | 43.1% | (31,545) | 14.1% | (67,526) | (54,695) | 23.5%
Other operating revenues (expenses) | (44,768) | (4,260) | 950.9% | (7,136) | 527.4% | (51,904) | (7,224) | 618.5%
Income before financial income (expenses) and taxes | (108,631) | 10,572 | n.a. | 4,612 | n.a. | (104,019) | 11,554 | n.a.
Net financial result | (7,154) | (4,025) | 77.7% | (7,904) | (9.5%) | (15,058) | (13,194) | 14.1%
Financial revenues | 10,273 | 8,965 | 14.6% | 8,476 | 21.2% | 18,749 | 21,587 | (13.1%)
Financial expenses | (17,427) | (12,990) | 34.2% | (16,380) | 6.4% | (33,807) | (34,781) | (2.8%)
Income (loss) before taxes | (115,785) | 6,547 | n.a. | (3,292) | n.a. | (119,077) | (1,640) | n.a.
Deferred income and social contribution taxes | 11,038 | (1,179) | n.a. | (732) | n.a. | 10,306 | 1,528 | 574.5%
Current income and social contribution taxes | (2,463) | (2,566) | (4.0%) | (2,846) | (13.5%) | (5,309) | (6,140) | (13.5%)
Net income (loss) | (107,210) | 2,802 | n.a. | (6,870) | n.a. | (114,080) | (6,252) | n.a.

1- Social
integration program – PIS, Social security financing contribution – COFINS, Service tax – ISS, INSS and others.

38

GLOSSARY

Delivery
app: Personalized delivery through the integration of the establishment's delivery application and its e-commerce platform, offering
the consumer an omnichannel experience.

EBITDA :
We calculate EBITDA as net income plus: (1) net financial revenue (expense); (2) income tax and social contribution and (3) depreciation
and amortization. Therefore, EBITDA serves as an indicator of our overall financial performance, which is not affected by changes in
interest rates, income or social contribution, tax rates or levels of depreciation and amortization. Consequently, we believe that EBITDA,
when considered in conjunction with other available accounting and financial information, serves as a comparative tool to measure our
operating performance, as well as to guide certain administrative decisions. We believe that EBITDA provides the reader with a better
understanding not only of our financial performance, but also of our ability to pay interest and principal on our debt and incur additional
debt to finance our investments and working capital. We calculate EBITDA and EBITDA margin in accordance with CVM rules. For the sake
of comparability, in Adjusted EBITDA, we highlight EBITDA non-recurring expenses in the period.

Gateway: online gateway for payments in e-commerce .

Payment
Link: Enables retailers to offer customers a secure link to pay for their purchases via messaging applications. The tool is fully
integrated with the retailer's POS, eliminating the need for a website to make non-face-to-face sale.

Linx Digital
or Digital : convergence of all channels used by the company with its customer, integrating the customer experience between
online and offline world. In the case of Linx, it concentrates Linx Omni (OMS), Linx Commerce (the e-commerce platform) and Linx Impulse
(search, recommendation, reengagement and retargeting tools).

Linx Pay
Hub, Pay Hub or financial services : it involves initiatives such as TEF, Linx Pay (sub-acquiring), Linx Antecipa (anticipation
and assignment of receivables), QR Linx, and new products aligned to the strategic positioning of Linx in this area.

EBITDA
margin : we calculate the EBITDA margin by dividing EBITDA for the period by net operating revenue for the same period.

OMS: by
using Linx Omni OMS technology, retailers can meet orders originating from any channel, regardless of where the product is located. Our
OMS product offers multi-channel purchasing processes that integrate stores, franchises and distribution centers, thereby providing a
single channel for our customers that decreases inventory shortage, generates more consumer traffic and increased sales. Our OMS product
is divided into two modules:

• Omni
OMS : A smart cloud-based suite of communication channels facilitates the interaction between business operations and applicable tax
and accounting regulations. The Omni OMS module is responsible for integrating all systems associated with the OMS, such as the retailer's
ERP, customer service, logistics, ecommerce platform and mobile solutions, among others.

• Omni
in-store : This module is connected to a brick and mortar store's POS software, helping transform the store into a distribution center.
The instore module allows the store operator to confirm that a customer has placed an order and monitor the necessary steps to ship or
reserve the product, including choice of packaging, labeling, separation for pickup and interaction with the carrier for delivery, among
others.

Through our
OMS product, retailers can manage the following functionalities: ship from store, ship to home, ship to store, pick-up in store, click
& collect, return in store, showrooming.

39

Consulting
service revenue: revenue from implementation services of our solutions, including installation, customization, training and other
services related to our products. These revenue components are characterized by their one-time or non-recurring nature. Consulting service
revenue are recognized on our statement of income when delivered, in the case of installation, customization and training. If the amount
billed exceeds the services performed for any given period, the difference is presented as deferred revenues on the statement of financial
position.

Total
recurring revenue: comprises revenue from monthly subscription fees that we charge our customers (1) for using our software; and
(2) the fees we charge for ongoing technical support, helpdesk services, software hosting services, support teams and connectivity services.
The fees in (1) and (2), above, are charged together in a single contract, with an average duration of twelve months, subject to automatic
renewal, Subscription-related revenues are non-refundable and are paid monthly. Subscription revenues are reported as they are performed,
beginning on the date the service is made available to customers and all other income recognition criteria have been identified. Subscription
revenues for services made available to customers in 2017 and 2016 have been recognized since the beginning of the service. Since the
adoption of IFRS 15, the fee is recognized over the average time the service is offered to the customer. Most of the revenue derives
from customers' monthly use of services.

SaaS (Software as a Service): cloud-based solutions that have a recurring subscription revenue model. Examples of SaaS solutions include
ERP software in the cloud, Electronic Funds Transfer (TEF), Electronic Fiscal Receipt (NFC-e), OMS, advertising and re-engagement.

Customer
retention rate : the rate at which billings from existing subscribed customers at the beginning of the period continue as billings
during the end of such applicable period not adjusted for (x) any increases or decreases in billings for pricing changes or (y) additional
products or services provided to these existing subscribed customers.

TEF: electronic funds transfer is a middleware between POS (point of sale) software and the retail acquirer that allows our customers to direct
credit and debit card transactions to their merchant acquirer of choice (credit and debit card processor), among other functionalities.
This electronic payment solution is also fully integrated with our ERP (Enterprise resource planning) software. Through TEF, we have
a unique opportunity to capture a significant volume of debit and credit card transactions pass through the cloud gateways managed by
Linx. We actively seek to expand our electronic payment mechanisms. With the increase in debit and credit card transactions, as well
as the adoption of cloud-based software, the importance of and demand for these solutions has increased. We offer TEF services as a complementary
solution to our software solutions and our primary strategy is on cross-selling to our existing customer base. Customers using our TEF
solutions may experience improved performance, stability and availability of our other software solutions.

Forward-looking statements

This earnings release contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance. In
some cases, you can identify forward looking statements because they contain words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “going to,” “could,” “intends,”
“target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these words or other similar terms or expressions that concern our
expectations, strategy, priorities, plans or intentions. Forward-looking statements in this release include, but are not limited to, statements
regarding our future profitability and timing for profitability, our future financial and operating performance, including our outlook
for the full year of 2020, demand for our products and services and the markets in which we operate and the future of our industry. Our
expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties
that could cause actual results to differ materially from those projected, including risks regarding our ability to forecast our business,
our competition, fluctuations in the markets in which we operate, our ability to attract and retain customers and our partner relationships.
The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully
described in our filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements in this release
are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements,
except as required by law.

40

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