Let's start our earnings release presentation.
Welcome to Bemobi's earnings release presentation for the third quarter of 2022. My name is Nicholas Baines. I'm the IR Director, and we have Mr. Ripper, our CEO, and André Veloso, our CFO. Please remember that this meeting is being recorded. Our participants will be able to hear us and see us during the call. Also, every attendee will have access to simultaneous interpreting into English, if needed. At the bottom bar, you can click Interpretation and then English. For those that don't speak Portuguese, we have an English channel that can be used by pressing the Interpretation button on the bottom right corner and choose the option English. Right after our presentation, we'll get started with a Q&A session for analysts and investors, and we'll be following instructions as needed and providing you with instructions then.
Any statements that may be made during this earnings release presentation regarding our forecast, estimates, targets, and goals are based on assumptions and beliefs at the board of Bemobi, as well as on information currently available to us. It involves risks, uncertainties, and assumptions because these are related to future events which may or may not happen. Investors must understand that overall economic conditions and other operating factors could have an impact on our future performance, leading to significantly different results. Now let me hand it over to Mr. Pedro Ripper, who will be providing us with comments on the third quarter. Please go ahead, Mr. Ripper.
Thank you, Nicholas. Hi, good morning, everyone. Once again, thank you for being with us for the earnings release presentation regarding the third quarter of 2022. Before we get started, let me also say that we also have our VP responsible for the presentation or the operation in Latin America, Mr. João Stricker, and he is in Mexico right now, so maybe he won't be on video because he's having internet issues. Let's start our presentation. I always like to start with a brief presentation regarding our business model, and we have significant changes. We've had significant changes in the last 11 months. At its core, Bemobi has a business model based on a go-to-market founded on B2B2C. We work with businesses that have access to thousands or even hundreds of thousands of clients.
We've worked mainly with telecommunications and mobile operations, and in the last few months, we started working especially with finance and energy. Through these partners, we offer our solutions to these industries. Originally, we were focusing on app subscriptions, especially for games. In the past few years, we also added solutions for microfinance with scoring and credit, payments, and other platforms. We usually work in emerging markets. This is where usually our partners have similar problems to Brazil. Let's look at our portfolio right now. This is how we report our revenue. Let's go to the next slide, please. Right now, our business model is split into four macro areas. Originally, we've always worked with digital subscription services. These are micro subscriptions, recurring subscriptions, and we have a global footprint for this one.
The second business line is a bit more recent for the last two years, which we call microfinance. This one involves two operations. We have Nano Credit, especially for telecommunications, with top-ups, for example, and we have the scoring model. As we can see in its name, usually we have risk management and credit so that financial companies can grant credit safely. Our third business line is our vertical, which we call digital payment. Here we have digital channels and the full journey, including payments. We originally focused on telecommunications, but recently we expanded into utilities. Finally, we have SaaS. Since this is more connected to platforms, we call it PaaS, platforms as a service. Among them, we find Loop. Loop is special compared to other platforms because it doesn't generate revenue. It is an enabler so that we can sell other services.
This is how Bemobi can scale up its business digitally by selling more services. After this brief introduction, let's talk about qualitative and quantitative results. We usually measure a few metrics for expansion. Even though we were originated in Brazil, we've been going international for a few years, and we are still expanding into new emerging countries. Recently, we added Afghanistan in Q3. This is an interesting country. Just a while back, it was an inhospitable country, but they have a lot of subscribers for telecommunications, and we believe this is going to be an interesting country in the medium to long term, especially B2B2C model, we added five new partners in the third quarter. We also have a stable volume of end clients we are reaching. Sometimes there's redundancy. Sometimes one partner is going to gain this different paths to reach the same customer.
Over on the next slide, we can zoom in into the B2B part of our operation. For each one of these four business lines, we can go into details of how many partners/clients we have right now in our operations. For this quarter, we have two new partners for the subscription vertical. That includes Movistar and Etisalat. In microfinance, and this is one of the most important qualitative data, and it's a highlight for sure. Because historically, in microfinance, in our offerings for scoring, our first partners and clients were neobanks. These were businesses innovating in the finance industry. For example, we had Rappi, we had Nubank, among others. These were businesses that were already prone to using alternative data for new scoring. Now, more mature financial businesses have more mature sources of data, and they usually didn't use our kind of offering.
However, after these years, we started working with American Express in Mexico, offering another factor to fine-tune their scoring model. We believe this is a very promising growth lane. We'll be able to show that this offering is useful for any financial institution, not only newer institutions. On another qualitative note, in the last quarter, for those who are following up with us, we announced two new contracts that we had just signed literally a few days before our last earnings release presentation. Now, after a few months, we're no longer discussing the contract, and we are already going into operation at Energisa. The impact of their operations is not showing in the numbers in our third quarter, but this is relevant because the contract was effectively signed during Q3, and we went into operation at the end of the quarter.
We expect that this will gradually bring results both for Energisa and ourselves during the next year. In addition to Energisa, we are about to go into operations with another two partners. With Equatorial, we don't expect impacts from these operations in the fourth quarter, and we'll see positive results step by step as we enter 2023 and throughout the year. João sent me a message reminding me of something important. In the case of Movistar, it is already an important partner of ours regionally, but we started working with them in Colombia in the last quarter. With Movistar, we also released Loop in our fourth vertical, which is our platform, and which is a very important tool for us to leverage sales in Colombia. This was a very good quarter qualitatively. These are our lead indicators. Usually, our B2B indicators measure our potential for growth.
On our next slide, we're going to see B2C indicators, which are more related to revenue in the short term. In the three first verticals, which are more traditional B2B2C models, we had good evolution. We had a slight decrease quarter-over-quarter for digital subscription services, which was stable in the previous quarters. We had a relevant growth year-over-year with 35.5 million subscribers, a 10.3% increase. In microfinance, which is a metric that it is useful for volume, we see the number of transactions. Here we have two kinds of transactions here. We have Nano Credit granted, and we have Score granted. So these metrics are a bit different, but I think they capture the evolution of our business, and we had significant growth year-over-year.
This majorly happened because of the acquisition of Tiaxa, which historically speaking, was really strong in this segment. Finally, for our B2C metrics in digital payments, we usually use this metric, which is TPV, total payment value. This means the number and the volume of processing we're doing when it comes to payments. Here we had tailwinds and headwinds. The headwinds were that these payments so far had been 100% focused in Brazil and 100% focused on telecommunications, and utility numbers are not here yet. If you've been keeping up with Brazil, for some sectors, we had changes in tax rates.
Energy was one of those, and telecommunications was another one. Some of these costs transfers to end customers, which is good in the long term, have a bad effect on us in the short term. On the other hand, we also had organic growth to offset it. We believe this is positive, even though it does have a slight negative effect in the short term, which was offset by our new initiatives. Now moving on, let's look at our revenue. We had a very strong quarter. Once again, we had significant growth year-over-year, both for the quarter and for year-on-year growth. Again, we have the element of inorganic growth as well. We had two acquisitions with good performance, and we had organic growth as well. We have a slight increase quarter-over-quarter. One of the highlights here is our international operation.
We had two changes, maybe in opposite directions. When we look at the revenue mix, geographically speaking, year-over-year, Brazil gained more space vis-à-vis the international operations because we had the M4U and Tiaxa acquisitions, which bring more strength to our domestic market. However, quarter-over-quarter, we had the highlight of our international operations, which grew even more than Brazil. We see a trend that internationally we're going to offset these trends from Brazil. Year-over-year, we see a highlight for Brazil. Now when we talk about diversification, we are really happy, and this was a part of our strategy. We wanted to leverage the chain of B2B2C so that we could monetize other services that would be bringing us synergy and complementary operations. We are really balanced right now.
Payments is almost as big as subscription, and soon we believe these areas will be as big as each other, and payments may be even growing bigger than subscriptions. Microfinance is still our smallest, but with a lot of potential, and platform is a bit more stable. This diversification is not only a part of our growth hypothesis, but it brings us another impact. When we work with a B2B2C model, we end up being exposed to the cycles of our partners. However, when we have a multi-industry perspective, which we have right now with finance and utilities, more specifically energy distribution, by using different industries, we become acyclic. This means that we are not prone to following the ups and downs of one single industry. Of course, we're more exposed to telecommunications right now, but since we have multiple offerings, we're also avoiding some of these cycles.
We may see a decrease in subscriptions, but we can see an increase in microcredits. This leads to more resilient operations with a better range of offerings. In retrospect, this is an interesting metric because we can see resilience and new lanes of growth to accelerate organic growth. Next, when we look at another breakdown, I'm going to hand it over to Mr. André Veloso, who is going to go into details about the finances' revenue.
Thank you, Pedro. Good morning, everyone. I'm really happy for being here to talk about financial results for Bemobi for the third quarter of this year. Let's start with gross margin. We can see that our gross margin in the third quarter was around BRL 103 million. It's a 92% expansion vis-a-vis the previous year. Our relative expansion was around 1.9 percentage points. This happens because of a better mix of products and also efficiency gains related to the payments vertical. Year-over-year, we had 114% growth, around BRL 295 million.
Regarding expenses, and please remember that the consolidation of Tiaxa and M4U, which happened on the 31st of August and the 3rd of November of last year, brings two business models with lower margins compared to the previous Bemobi, which means that we're going to have an increase in expenses for our consolidated results. In the third quarter, we got to BRL 57.5 million, which is 158% growth vis-a-vis the same period of the previous year. In this case, we had two big impacts. First, we had an increase in payment terms for some geographies. We decided to go more conservative, so we registered this for this quarter. At the end of the third quarter, we also had a wage adjustment for our industry. This put more pressure on personnel expenses or personnel payments.
We focus on our structure, which leads to better potential for growth in the medium to long term.
Em setembro, com aproximadamente R$ 163 milhões de despesa, um crescimento ali da ordem de 36% versus o período igual de 2021. Aí, com isso, acabamos entregando o EBITDA ajustado nesse terceiro trimestre de 2022, R$ 45.4 milhões, uma expansão aí da ordem de 44% versus o igual período de 2021. No quadro do ano, pouco mais de R$ 132 milhões, uma expansão também de quase 70% versus o período de 2021. Ainda sustentando o patamar ali de 30%, com mais 30% de margem e com uma perspectiva também, como viemos ressaltando, de expansão gradual dessa margem, ao longo dos próximos trimestres. Por favor, vamos só avançar pro próximo slide.
Onde a gente vai ver no quadro superior esquerdo, o indicador de lucro líquido ajustado, no terceiro trimestre desse ano, atingiu a cifra de BRL 40 milhões, influenciado não só por uma melhor performance operacional, como também o resultado financeiro mais robusto, dado a maior, a taxa Selic nesse período. Principalmente também, o perfeito timing de uma rotação ao mercado de swaps pra recompra de ações, que nesse trimestre influenciou positivamente o nosso lucro em aproximadamente BRL 12.5 milhões, compensando parcialmente as perdas registradas no segundo trimestre desse ano. De tal modo que no quadro do ano, a gente atingiu um lucro de BRL 71.2 milhões, uma expansão de aproximadamente 40% versus o período de 2021.
Caso fossemos também ajustar o efeito do swap, que no quadro do ano ainda continua negativo em BRL 4 milhões, a expansão seria da ordem de 48%. Avançando pra linha de fluxo de caixa operacional, esse indicador representou ali uma expansão de aproximadamente 32% versus o terceiro trimestre de 2021, com uma taxa de conversão de caixa de aproximadamente 75%. Quando a gente olha pro quadro do ano, a geração de caixa foi da ordem ali de pouco mais de BRL 97 milhões, uma expansão de 55% versus o igual período de 2021, e com uma taxa de conversão de caixa também muito robusta, uma taxa de 74%.
Acho que o grande destaque desse trimestre, nesse caso aqui comparativamente ao segundo trimestre do ano, é a forte geração de caixa da Bemobi, expressa nesse quadro ali no inferior, onde a gente nota não só um EBITDA ajustado menos CAPEX, que é a nossa proxy ali de geração de caixa operacional, contribuindo com BRL 34 milhões. Nesse trimestre, a gente também conseguiu trabalhar ali de maneira mais eficiente o capital de giro, destravando um pouco mais de BRL 10 milhões, com a contribuição positiva também do resultado financeiro com efeito caixa de quase BRL 14 milhões. Compensados por um movimento de recompra de ações físico aí, um pouco mais de BRL 4 milhões, fazendo com que a gente encerrasse ali o terceiro trimestre desse ano com pouco mais de BRL 546 milhões em caixa.
Aí, cabe notar uma informação aqui interessante também, que a gente, dessa forma, recompõe boa parte da reposição de caixa que a companhia tinha pós IPO. Já temos entretanto concluído 2, e pago por 2 aquisições transformacionais, bem como pago por dividendos no período, e temos isso também em movimento de recompra de ações. Com isso, a gente vem esse ano com a capacidade de geração de caixa e destravamento de valor ali da companhia. Agradeço então aos ouvintes. Dessa forma, passo novamente a palavra pro Pedro, que vai tecer as considerações finais do nosso resultado. Obrigado.
Perfeito, André. Vamos lá, obrigado. Bem, assim, tentando resumir antes da gente abrir aqui pra perguntas e respostas, eu acho que a gente tem sido muito consistente do ponto de vista de entrega. A gente tá, no meu engano, esse é o nosso sétimo, né, oitavo, evento de resultados, eu acredito que seja o oitavo, e a gente tem conseguido basicamente ter crescimento consistente em todos os negócios. A gente tem conseguido ter uma margem consistente, crescimento de margem dentro dos negócios que a gente tá presente. Uma consistência numa derivada positiva dentro do negócio, que é o que a gente tem buscado. A gente tá também muito feliz com o movimento de a gente vai acelerar esse movimento agora de diversificação de muitos negócios que a gente já tem dentro da nossa área de atuação, né, não estamos abrindo tantas outras frentes.
A gente acha que o portfólio que a gente tem hoje é bastante sinérgico, ele tem várias fontes de valor. Ao mesmo tempo, dentro dessa área de atuação que a gente tem hoje, a gente acredita que ainda tem um grande potencial de crescimento. É o caso dos serviços, que a gente tem um giro muito bom. Tem essa nova parceria com a CPFL Energia, que a gente acha que isso vai abrir muitas frentes de crescimento, principalmente no mercado mais addressável. Eu acho que em termos de aquisição, passando rápido, a gente fez duas aquisições distintas. Elas tinham estratégias levemente diferentes no momento da integração. A M4U, a gente queria integrar. A intenção foi integrá-la logo. Desde o início a gente tinha uma visão de que isso era uma aquisição que a gente precisava integrar logo.
Era uma aquisição que gerava muitos benefícios que a gente precisava ter logo. A nossa guideline desde novembro pro close, pra gente fechar o ano, foi lançar logo com a condição acertada.
Looking back, I think we made the right decision. We were able to enjoy many synergies from the get-go, and we're going to start reaping the fruit of that later on in 2024. By integrating M4U, we were able to achieve that. We've finished this integration, and now we're going to have synergies which are going to encompass different areas. With Tiaxa, we had a different approach because they were in other geographies and in other areas which we were not as familiar with. We decided to go slow with the integration, and as we became more confident and as we understand these leverages, we're able to review this strategy.
We also have Felipe Valdes for a fuller integration now with the brand and the go-to-market efforts. This is what we've been doing for the past few months. At the beginning of 2023, we'll have a way more integrated operation, and we believe this is going to give us a boost again, especially for revenue. Bemobi has a lot of outreach for sales, and Tiaxa is very innovative in products and business development. With this integration, we're now more comfortable with the risks that come with anything we don't know. Now, we also have another interesting side effect. Our ability to integrate and absorb new companies goes up again as we've already absorbed these two companies. Related to what André was saying, we are very comfortable right now regarding our cash flow. Every business that we bought, and also the original Bemobi, are cash-generating businesses.
We had the discipline to take our time and to work on things, and this was extremely important to us. We had an increase in the capital cost, and there is scarcity in the possibility to go to market. We're happy that we made very accretive acquisitions, and we preserved our cash in a way. We believe that in the medium to long term, this means that we're going to have acquisitions at a very attractive price. We didn't have a lot of adjustments when it comes to other companies, but we see more rationality, especially companies that are not listed when I say other companies. This means that we are still being picky, and we are still being disciplined when it comes to acquisition and other deals.
We believe that we have a comfortable cash, but we need to use it smartly so that we bring more synergies to Bemobi. Our plan has not changed in this sense. Let me now stop sharing my screen so that we can go into the Q&A. Nicholas, do you have any instructions on how the Q&A is going to work?
Yes. Thank you, Pedro. We have a few options. We have the Q&A button, so you can ask questions there. You can raise your hand, and we're going to unmute you. You can send us questions through the chat. If you don't speak Portuguese, please remember you can use the interpretation button at the lower right. Oh, yes, and I already see two questions here. Bernardo has his hand raised. Bernardo from XP, so let me try and unmute him. Bernardo, I think you can speak now.
Opa. Good day, pessoal. Você estão me escutando?
Hi, good morning, everyone. Can you hear me?
Yes, we can hear you loud and clear, Bernardo.
Obrigado pelo espaço aqui igualmente, Pedro.
Thank you for picking me, Pedro. I have two questions. Number one, regarding the credit score vertical. I know that this is a small segment, but which is growing quickly. It is abroad in Tiaxa, but you're gaining traction. I imagine you must have a plan to multiply that in Brazil. How big is this market for new Bemobi in Brazil? Also, has this thesis been validated to scale enough in Brazil? I would like to understand the value of this intelligence and the potential market. My second question has to do with the business in apps and games. We always talk about opportunities for Bemobi in new verticals with microfinance, payments, and scoring.
The truth is, the company has changed a lot and remains very rooted in its original business, but it's still really relevant. I'd like to explore the leverage in your original business. If your thesis is still the same, I understand that this service is the entry door for scaling things up, maybe through Loop, maybe 5G is going to bring new possibilities with cloud gaming. I just want to give you a provocation on how to forecast and how to plan ahead for your business in the upcoming years.
Thank you, Bernardo. Let me talk about scoring. Scoring is a subset of microfinance.
I don't think this is mature enough yet for us to think about mass scale upscaling. Right now when it comes to our maturity levels, we're operating in one country, and we are starting to operate with the second carrier. Together they will represent around 85% of coverage for the Mexican population, which is really good. It is a huge chunk of their population. As I was saying earlier, this kind of offering has been around for around one year for fintechs and neobanks. We're going to have a new pipeline with traditional banks soon, as I was saying, which is another key element for this model, which validates this model even further.
as we're able to validate it and to scale it up next we need to choose another country with slightly different traits to see if these models are still useful and effective. Because at the end of the day, banks want to know that if they add this scoring to their operations, they are going to improve their concession rates or their granting. They're going to improve the doubtful debtors rates as well. This is what matters. Yes, Brazil would be up next, and it is only natural for us to do that, right? Because this is a market where we know our players really well. We're also headquartered in Brazil, which is a point of advantage because we do have a relationship with a number of institutions. Brazil is sophisticated, it's innovative, and historically speaking, it's very aggressive credit-wise.
In the last quarters, we've seen that it's been a challenge for many banks to offer these concessions in countries where we have lower profit. We believe that if we go through this trial here, then we'd go into a third stage of approaching multiple countries. For our next chapters, we are starting to work on a few pilots. This is a long-term sales cycle. With American Express, it took us a year, and of course, we expect to take fewer months as we improve our model. You asked about the size of this market. I would look at two proxies. This is a subset of the credit bureau business. With credit bureaus, usually they have three pillars. They have credit with market and identity, and we're biting a chunk of this segment. This is a huge market.
Even though we also have identity solutions, we're focusing more on credit scoring, which we believe we can add more value to. For clients who have more access to banking services with a positive score base, this alternative model has more marginal gains. For a more emerging market with more rarefied data, this is very valuable. Even though we have less money, this is where we can get more new clients. Maybe 10%-15% of this chunk of the credit bureau segment, which is a huge, huge market, is what we're talking about. We need to take it step by step. We're going to approach Brazil first, and we're going to share this information with you as we make progress. Brazil and another country in Latin America which we have to pick. Now let me talk about your second question regarding apps and games.
We don't talk a lot about it, not because not enough things are happening, but because other areas are newer and we're not sharing as much with our market, so it is only natural for us to talk about newer segments. Now, having said that, a lot of things are happening over there. Internationally speaking, apps and games have been doing well. We must remember that we had very negative impacts which took our numbers for Q2 and for Q3, which is the war. There's a war happening between Russia and Ukraine, which represented 5% of our revenue. And on apps and games, it used to represent 10%-15% of this business line. We still have growth in this business line with two countries that were significant for this line, and they are at war, so this is positive.
Russia and Ukraine was 5% of everything, but it was actually much more for apps and games, so its relative weight is bigger. When it comes to product innovation, let me give you a spoiler. We've been working on innovation. Much of that is for our catalog because, of course, with subscription services we need to have a good catalog. The same thing applies to streaming services in music. You should have a good app, but the quality of the videos and the songs is what is going to determine the quality of the subscription service. We look for new developers and the next trend developers to add value to our final clients, to our end users. However, technologically speaking, for over two years or almost two years, we've been working on a streaming solution. Just between you and I, this is very, very, very challenging.
Even Google gave up on their streaming model. With Google, they had a streaming model with very high-end games, and people needed a high-end PC to play it. We're trying to make it more accessible, and They were trying to have servers run games on the cloud. This is a very, very interesting approach, but it's very challenging as well, what Google was trying to do. Since we focus on mobile clients, which is the biggest volume in emerging clients, we're focusing on mobility and phones. Everyone has phones that usually can play games and run games, so we're focusing on a value proposition regarding convenience so that people can try games without having to download this. With one click, they are able to play these games without having to download them.
To be very honest with you, I don't think this is going to be transformative for us, but this is one example of the cycle of improvement when it comes to B2C. We have a lot of incredible cases with IoT and the corporate growth, but we don't have a lot of cases for end users, and this is a very good example of that. It used to be more challenging to do this without 5G. Of course, 5G is still at its early stages. I don't think this is going to have huge impacts for us in the long term, but it goes to show our commitment of innovating in this field. It's not as though we probably have 10 million clients with 5G in Brazil, and it is another way to go up the pyramid and approach higher-end users.
We're working with this for every carrier in Brazil, so it's basically the same service that we already offer, and it's going to be offered to users who have better latency and better connectivity. They will have the option of instantaneous play. They will be able to play games without downloading them. Also, our offering is very focused on Android. It used to be the only one that would allow us to play games outside of the App Store. This wasn't allowed for iPhones. With this streaming offering, since we don't need to download any apps, we're also able to do that with iOS devices. Again, this is interesting. This is good. iOS, once again, is not the most important device in our countries, but of course it is the device used by clients in more prosperous segments. Was this clear, Bernardo?
Yes, Pedro, this was clear. Can I just follow up on apps and games? This has to do with your M&A strategy. Are you still looking into product diversification as an important measure for inorganic growth? This is something you mentioned in your IPO. Is this still valid?
Yes, we're still looking into it. Let me tell you how, and let me tell you why I don't sound as confident. We believe that when it comes to growing digital services, our first point is the channel. Having more channels is better than having more services because we depend and we rely on channels. Having another service does not mean that we're going to double our revenue. However, of course, if we have more services for clients, we're going to have some gains. We have two lenses here.
We have services for which we don't have as much demand as we should have, and then we have marginal increases in revenue. We can look into it, and we can look into companies that are present in countries where we don't have such a big operation. We can look at these players both ways. We can not only bring services from them to resell them in our countries, and we can do the opposite. We can offer our services in apps and games to carriers and distribution services where we are not as present. This is not our priority number one, Bernardo, but we believe that a few assets at the right price, and price is key here, because we already have a presence with these assets, could be worth it.
Yes, it wouldn't be surprising if we struck another deal for this. Price is very important and geographies are really important, not only adding another service, because channels come first.
Perfect, Pedro. Thank you. Very clear.
Thank you.
I believe our next question is from Christian from Itaú. Let me unmute you, Christian. I think you can unmute now. Please go ahead, Christian. Can you please try and speak?
No, not this one. No.
Oh, there we go. Now you can unmute. Please try again.
Bom dia, pessoal.
Hi. Good morning, everyone. Can you hear me?
Alô?
Hi. Try again. There we go. You can go ahead, Christian. We can hear you now.
Perfect. Thank you. Good morning. Thank you for taking my question. I have a few questions. First, following up on Bernardo's question. I'd like to talk about what you announced in the last months. You mentioned partnerships like the Inter Arcade channel. How's your development going when we think about apps and games in other channels which is not telecommunications? How has this been playing out? I have a question regarding other players that have been working on the distribution of these products. For example, Netflix, which is trying to go into this field in a few regions. What do you think about that? My next question is, you talked about provisions. I'd like to understand how this works for different business lines.
I understand that subscription is a more transactional model, and then you can work on provisions for receivables. You don't have as much reversal ability. How can you look forward if in other areas you can reverse provisions as much? Also, what about locations? How are you distributed all over the world? Thank you.
Thank you, Christian. I couldn't really understand your first question because it was hard to hear you. I'd like to answer the first question first.
In a way, we have a matrix. We have a few different offerings we offer to the market. We have different industries or partners we work with. Right now, we have telecommunications. We have utilities, initially in energy, and we have finances. This matrix is not over. We don't offer every offering to every player or every industry we work on. For example, with carriers, which was our origin area and with which we share a lot of affinity, we have four verticals, and we offer all four verticals in telecommunications. With apps and games, we don't offer them as much to energy and utilities. With finances, especially through payments and engagement with their apps, we do have an interesting partner for the distribution of apps and games.
Now, having said that, we were very conservative up to now in the cases we've worked with, and we have a lot of demand from companies who have a partnership with us. However, we've been focused, and we try and get it right with the new model before scaling it up. Now, with the partnership you mentioned, things were okay. By okay, I mean that this hasn't been a significant partnership regarding size, but we still think it's worth it to invest energy into this sector. I think we need to fine-tune the business model. Let me give you an example of what we've been discussing with some of our partners. In the telecommunications model, we have two areas right now. The gross volume comes from different one-off purchases of subscription. They use a chunk of their free balance to get entertainment at very low costs.
This model works really well when it scales up. The second model is the bundle or the packages model. Carriers in Brazil and all over the world create bundles to offer better offerings. 90% of what we sell is one-off sales because it scales up really well. In the case of digital banks, for example, Inter Arcade, we were focusing initially on one-off sales, and its scaling up was not as good as it was in telecommunications. It's good, but it's not as good. One of the things we've been assessing is that maybe in other segments, bundles could be more interesting, where we have bundles and offer better benefits to clients. We have this wholesale price, so perceived value changes for clients.
Yes, there is good demand, and we have the other retailers and other fintechs that believe that games could be interesting for their customer base. We've been talking to them about it. We're open to it. But out of intellectual honesty and sincerity, we don't want to just try it all out. We want to prove it first and then scale it up. With the results we've had so far, we don't think it's a good idea to just scale it up. As we achieve progress, we're going to share that with you. Right now, we are not at a point where we should scale it up, but I think the thesis has been proven. We just need to work on the better distribution model for monetization. Now, regarding our second point, Christian, let me answer according to what I understood.
If I understood it wrongly, please interrupt me and let me know. Let me see if I got it right. The nature of recurring payments versus the microcredit, credit of services. Is that what you wanted to know about? In a way. I just want to understand your provisions. Where are they focused? Is it on subscriptions or is it on microfinance? How does that play out vis-a-vis the possibility of reducing them? Oh, okay. Got it. First, let's understand the flow of revenue. In most cases in B2B2C- I mean, let me rephrase that. In the case of carriers, this is how revenue works. Clients pay for services, either a game subscription or a microcredit, and this comes out as a debit, either prepaid or paid on the spot.
This money is acknowledged by carriers, and they transfer our take rates depending on the kind of transaction. It is almost real-time coming from customers that we acknowledge this revenue with the IFRS. Then carriers transfer our take rate. This is the normal flow. For payments, the flow is a bit different. I collect the payment, and then I transfer it to carriers, so it's different. With microcredits, it's also a bit different. I make the sale for a financial institution, I collect, and then I transfer to them. Because I used telecommunication data, so I have to transfer to carriers as well. With the case that we were discussing, this is connected to apps and games. This flow is from client to carrier. They collect the money and then they transfer the money to us. Specific cases are also related to country-related challenges.
Because with specific emerging countries, we have a lot of rules on how to transfer money to companies abroad. We work in over 41 countries, so we don't have a local representation everywhere. In Myanmar, in Nepal. The money is already in the hands of the carrier. They recognize a bad debt. Sometimes because of the conditions in each country, it may be harder to get it. As it takes us longer to get this money, it may be interesting, as André was saying, to provision a part of this to be more conservative. Is it possible to reverse it? Yes, it is possible. If we were sure that we were going to reverse it, we wouldn't turn it into a provision. We have a plan and we have different formats, but this is the cost of doing business. It is not an external factor.
We are working on emerging countries. We've been doing that for 10 years, and it is only natural, it is only expected. It's normal for us to have provisions for that or even more reversals over time of these provisions. We're lucky we work with very large, very robust companies. In 90% of cases, it is more related to geopolitical conditions for these specific countries. For example, with the war between Russia and Ukraine, we started thinking about how to work with cash flow. Surprisingly enough, everything is under control over there. It's only the nature of the business. These countries still have lower exposure in a sense. We are still starting to work with them, so it's 100% going to apps and games. Was that clear?
Yes, it was clear, Pedro.
Let me just follow up on this and ask one last question. M4U was acquired relatively a short time ago, only 12 months. You also announced two other partnerships for the telecommunications industry. What should we expect from this? How can we see this turning into results throughout the year? I understand you're trying to deliver. I wonder about timing and challenges. Is everything going as expected? I expect everything to go even faster as it was in the last 12 months. Can you please talk about that?
Of course. Let's split this answer. A large chunk of our total payments value comes from recurring payments. There is a range of digital services offered by carriers, which is the future of telecommunications. For example, we have recurring plans.
We'll be talking a bit more about the evolution of this industry and how its evolution has a positive impact on us. A large chunk of the total payments value has to do with more digital modalities based on credit cards, where we have the whole stack. We have recurrence. We have the same clients, we have anti-fraud services. As we have a recurring base, we need to build this base up. Of course, if you get a new customer, it's going to contribute to the month of when we got them, but it's also going to contribute to the next month. You have a ramp up. This is not as true when it comes to digital top-ups. With these services, recurring services, we gradually build up our base. When we bought M4U, let's recap our motivation.
We bought it because we were really excited with the type of problems M4U we're solving. We saw that the idea of adding digital channels and anti-fraud would unlock a lot of value. We had better conversion, better churn than other elements of the chain when they are not aggregated. We got farther away from end users. Derivative services for M4U was negative. In under six months, we were able to reverse that. This was important for this acquisition to be successful. We were already able to reverse that for derivative actions. We implemented new initiatives. Let me give you an example. We started going into telecommunications segments where we were not present, for example, broadband. It was usually with payment slips and debit. Nobody used credit cards, but this is very beneficial both for carriers and end users.
Very soon we'll be launching the first offering for broadband with this solution. Again, it's going to be the same phenomenon. We're going to start small, but then we're going to ramp up a lot over time. With Energisa, we just went into the first channels focusing on default clients. We went really well with that, and now we're going to focus on clients who are not in default. We have these different segments, and we're gonna explore them. With Equatorial, for example, again, we're going to work with only one sub-region with defaulting clients, and then we're going to work with clients who are not in default. This creates a ladder. Our expectation is we had quick integration for this company because derivative efforts were not good, but the clients were amazing. We reversed it.
We were able to change course and go into the right direction. In 2023, quarter-over-quarter, we're probably going to see a ramp-up, where these new things are going to gradually have an impact on things. Let me set the expectations. Whenever we announce something new, its impact is going to be very timid at the beginning, and we're going to see increases quarter-over-quarter. We think the trend is going to be material. After 12 months, this is going to change the needle in our results. Let's set the expectations. There's a cycle here. For every client we start working with, we start ramping it up, we start working with new segments, and that's when we see growth. We need more scale and more partners so that these effects add up, and then we can make progress in a business line.
Was this clear, Christian?
Yes. Thank you. This is very similar to the software model, right? With recurring revenue.
Yes, extremely similar. Even though, of course, we're seeing gains from total payments value, the gain is recurring payments. Nicholas, do we have time, or should we wrap this up?
I think we have time for one last question. We had two questions in the chat regarding M&As, whether they're going to happen abroad or in Brazil, and then we can wrap it up.
Perfect. This comes as no surprise. M&As are going to happen when they must happen. What I can share with you is that we're looking both at Brazil and abroad. Of course, we prefer locations that are similar and share affinities with our business. We look into the U.S. and Israel and other centers of innovation, of course.
It's more natural for us to see companies that may come from these locations, but we may be addressing problems in markets where we're located. We'd like to play to our strengths. We have a big bias when it comes to Brazil, because right now we think our ability to promote integration is bigger here in Brazil. Of course, we can look at operations abroad. For example, Tiaxa, which has very strong operations in Asia. We weren't as strong in Asia. When it comes to segments, it is natural for us to look at companies that are closer to our four lanes of operation. Yes, we are looking at software platform with the SaaS and PaaS models, which are closely connected to our clients. We're also looking into microfinance. As Bernardo was exploring, tactically speaking, we're looking at subscriptions.
Of course, we're looking into payments. What's key here, and something where we got it right, is that yes, we have this cash right now, but we can't have a parallel P&L. You know, if we have a positive debt, it becomes a P&L because we have cash being generated through interest. This is not our goal as a business, of course. If we're not able to assign it and allocate it, well, we're going to give it back as dividends. Of course, we've been talking to companies, we've been discussing deals, and we know that we're going to get a better return if we expand the company. Our goal is not offering dividends, but we just need the discipline to work on it.
If we find good assets at the right price, then we need to be patient, we need to be disciplined, we need to be resilient. We need to keep on looking at offers. I don't want to give you spoilers, but we're very active in that, and we've found a number of assets that make sense, and many of them are being discussed and being negotiated. Of course, all of them could go wrong, for sure. My hypothesis is that when we are disciplined and we keep focused on what makes sense, something is going to happen. This is how we acquired M4U and Tiaxa. We made many offers, and two of them were standing. They were even going wrong before they went right.
I'm not going to tell you when or how, but this is our plan, and we've already spotted assets that fulfill these requirements. They are synergistic to us. They have good value, they make sense, and we're only going to acquire them if it makes sense cost-wise. This is our strategy. The share buyback strategy is still applicable, but it's secondary to M&As. Obviously, if we fail, which we don't think it's the case, we're going to give dividends to our shareholders because we're not being paid to manage fixed income. We have a very clear, very strong agenda. We believe that soon we should have news to share with you.
Wonderful. Thank you, Pedro. Very clear. I think this is the end of our earnings release presentation. Do you have any final remarks?
Not really. Once again, thank you for keeping up with us.
I know in the capital market we had 1.5 years of maximum volatility, and of course we're attributing the right value to that. This is also a way to attract talent. We're also thinking the long term, the next one, two or three years. This is our duty here, our fiduciary duty. We're sensitive to what is happening in this industry, but I don't think we'll be as affected in the short term. With M&As, we're going to use cash mainly, not as much shares, because we do have cash right now. We're confident volatility is the name of the game, but it doesn't affect us as much in the short and medium term. Thank you and have a great day.
Have a great day, everyone. Thank you for being here.
We had over 200 people here with us. Thank you so much. Have a good day. Take care.