Ladies and gentlemen, welcome. Good morning. Welcome to the video conference of Bemobi to disclose the results of the second quarter of 2022. I'm Nicholas Baines, the new IRO of the company, and today we have with us Pedro Ripper, CEO, André Veloso, CFO, and João Stricker, VP of Operations in Brazil and Latin America. We inform that this presentation is being recorded and that all participants will be able to listen to us during the conference. Participants may also access simultaneous translation in English. Just click on the interpretation button and select the language. For those who 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. After the presentation, we will have a Q&A session.
The Q&A session is exclusive for analysts and investors when further instructions will be given. Before proceeding, we would like to clarify that any forward-looking statements that may be made during this conference call relating to Bemobi's business outlook, projections, operational and financial targets are based on beliefs and premises on the part of the company's management and on information currently available. They involve risks, uncertainties and premises as they have to do with future events, which depend on circumstances that may or may not materialize. Investors should understand that general economic conditions, industry conditions and other operational factors may affect the future performance of Bemobi, thus leading to results which differ materially from those expressed in such forward-looking statements. I now turn the floor over to Mr. Ripper.
Thank you very much, Nicholas. Let's start with the presentation. Good morning to all.
It's very good to be here with you again and to share our results for Q2 and the consolidated results for the first half of the year. I apologize for those who already know about our business, but I would just like to give you an overview about our business model. We are a tech company. Our business model is B2B2C. That is, we work with large companies that have millions of clients, and we provide technology solutions in four formats: digital subscriptions, microfinance and payments or software-as-a-service. This model has been the same since Bemobi was founded, but we have been expanding to different business lines. We also work preferably with emerging countries. On the next slide, you see how we divide our business lines. Practically all the disclosure and the breakout of information that we give is based on these four pillars.
This includes our financial information and also performance indicators. We have digital subscription services, and it's a take rate, a type of revenue share, where we share the revenue we get from the services. We have microfinance and two different lines, nano credits, which we give to telecom users, and it's a percentage of the success rate. That is credits granted, less any bad debts. We have a scoring model where we use the same base of information on telecom clients, but then it's a different business model. We anonymize data and sell them for scoring for those companies that are extending credit to end users, typically fintechs and credit card companies. We have digital payment solutions.
These are the solutions that came from the acquisition of M4U, and this focuses on payment solutions for the telecom industry, and we are beginning to expand that to other sectors. We have a take rate model where we take a small percentage of the total value transacted. We have a business line, which is the software as a service, and the business model is not a take rate, but it's licensing, usually linked to a physical activity, number of messages sent, number of clients managed. 100% of the revenue of Bemobi comes from these four groups. Let's move to the highlights of the quarter. Very broadly speaking, we continue to expand geographically, and we work with emerging countries where the nature of problems is very similar to what we see in Brazil.
These are countries that have challenges in line with the solutions that we can offer. We are now operating in Morocco and Tajikistan. We have increased the number of partner companies in B2B2C. We added six partners in Q2. We continue to expand our penetration through these partners. On the next slide, I'll give you a breakdown of our new partnerships. In terms of digital subscriptions, and this is our oldest business line, we have a greater penetration and a greater breadth of partners. We now have 85 partners, mostly telephone carriers, with some exceptions in the fintech business. We have added four new mobile carriers. We have increased our addressable market and our potential for growth in that line of business. In terms of microfinance, we added two new partners.
In terms of microcredit, two new partners, specifically in Mexico, which are now using our scoring as a decision-making tool to grant credit. In terms of digital payment, in Q2, we maintain the same five partners in Brazil and in telecom mostly. I'm going to tell you about the next two partners, which are going to be included in Q3. These are our first partners outside the telecom space. In terms of PaaS, platforms as a service, we have two numbers. Our channel platform, Loop, is the one that enables the sale of other services. It's an enabler that allows us to sell more digital services, microfinance, and digital payments. It does not have a revenue on its own, but it generates revenue through other services.
We now have 27 partners in Loop, of which three new ones, which we added in this quarter. An important element for the growth of our business, last year, we had one or two launches, and this year we are accelerating. This makes us very excited and makes us very optimistic in terms of increasing and making this channel more prominent. In terms of our B2C metrics. In terms of digital subscriptions, this is a more mature line of business, and in the last two quarters, the growth has been very considerable. Year-on-year and quarter-on-quarter, we grew. We had a bit of a surprise here. We faced headwinds in Russia and Ukraine, where we had a medium to large operation.
The upside was that Brazil had a good performance in the period and also Southeast Asia as well. We had good results despite the troubles in Russia and Ukraine. We will talk a little bit more about this later. As for microfinance, there is a small seasonality. We are now back to the levels of Q4, which is our best performing quarter, and a strong growth year-over-year driven by an acquisition made at the end of last year, Tiaxa, and then the digital payment. The metric we use there is the total volume of transactions, the total payment volume, TPV, and it's a very, very solid number, which also had the contribution by our M4U. We bought this company with a turnaround intent, and some indicators are now performing better.
In terms of PaaS, the metrics are different, so it doesn't make much sense to include this under B2C, as PaaS is mostly a B2B business line. Now, speaking about our solutions, we have been thinking that a lot of what we do in terms of B2B2C, be it digital subscription, be it payment, be it scoring, we always thought that this model could be expanded to other industries. Originally, Bemobi concentrated on telecom, which serves billions of customers worldwide. Two quarters ago, we started our first experiences with fintechs, either offering scoring or distributing apps through partnerships. Now we want to penetrate other sectors further. We have been working with utilities for some months now. We focused on energy distribution.
Which is the one that has the largest transaction volumes, and where there is a good match between their model and the offerings we have. The privatization in Brazil is quite advanced. The major players are private companies, and some are owned both privately and by the state. There are many similarities in terms of the life cycle when we speak of utilities, especially energy. There are many similarities with what happened to telecom some years ago. Both these sectors have millions of clients, recurring billings, accounts with variable amounts. The challenge is to digitize the relationship with the clients. They have to deal with defaulting costs for charging clients, and they all want to have a closer relationship with customers. In utilities, there is deregulation, and current distributors want to know more about their clients.
This may seem basic, but it's a big challenge, and digitization can play a very important role. We created an offering based on two of our competencies. Bemobi, in terms of digitization, was a good partner of telcos to create digital channels to bring customers from the brick-and-mortar world to the digital world. This adds convenience and lowers costs. We also have a lot of experience in creating digital payment solutions. We can take clients from more expensive channels, such as lottery shops, and offer them other modes of payment. We want to adapt this experience, this journey that we offer to the telecom industry. We have been working with many companies. Our two first partners, Energisa and Voltz, it's fintech.
We have been identifying these points of pain to identify better ways to offer a better journey to the customer. We have been working with Equatorial, a large energy group in the country, who shares our vision in terms of the power of a digital transformation. We can offer a white label solution, just as we do with other partners, B2B2C. The end customers still see Energisa and Equatorial as the business that provides service, and then we add a platform to improve the payment journey for clients in general, especially the defaulting clients. There are creative modes of payment with payments in installments, and we can provide a better balance of risk and return to the energy companies.
We have been working on these services, and we expect that by the end of Q3, the beginning of Q4, these services should come online on stream for these two partners. Then we will be able to expand these services to other companies in Brazil and globally, just as we did with telecom. The last highlight may be that from the point of view of TPV of this market, although telecom is a huge industry, the TPV here in Brazil is three times higher than telecom. In other countries, it's more or less the same correlation. It's a long journey, but a very promising journey that allows us to build on our strengths. We start really well with these two companies that joined us in this journey. We're going to have more news on that. Moving on to the financial part.
I'm going to talk about revenue before I pass the floor over to our CFO. In terms of revenue, it was a very strong quarter in absolute terms, but we had two adverse effects. We, last quarter, had the effect of one month of the conflict between Russia and Ukraine. We were affected only in March. In Q2, we had the full impact of that conflict in the whole quarter. This obviously affects these two geographies, which historically accounted for 5% of our revenue. Also because a lot of our business revenue comes from the international market, we had a fluctuation, a negative effect of the exchange rate year-on-year and quarter-on-quarter. Here you see that there was an impact of BRL 4 million because of the exchange rate.
You see that from the dollar went to BRL 4.90. BRL 4.90 per dollar. This estimated effect had an effect on EBITDA as well. It is very easy to see. We have just one service, and many of the carriers just shut down the billings during the war. It's easy to estimate. The operation of the business in general grew 83.5%. This was because of the acquisitions that had happened, but there was also organic growth quarter-on-quarter. The last points that I would like to highlight here was that the growth in the semester was robust. There was a slight reduction in the international share. This has to do with the purchase of M4U.
We will see the full effect this quarter and also the impact of the exchange rate. There was a small effect here, but overall, we have a very relevant exposure internationally, and we want this, our business to grow internationally. When we look in terms of the mix of revenue, we see that the company is more balanced in terms of different business lines, which are complementary, thus mitigating against volatility. For us to zoom in, I would like to share with you some data which we find very useful to share every semester. B2B2C helps the company scale up faster to work in a symbiotic way with other partners that have other competencies. The challenge for B2B2C is that you have a co-dependence if you have a small number of partners and if there is a concentration of partners.
This can present problems for the companies. We offer diversification in terms of offering a number of partners, and this is an indicator of the health and resilience of the business. As you can see here, diversification grew. Our revenues are distributed in a more diversified way. The intent is to look for this diversification. We want to penetrate new countries with new partners. We want to look for resilience to mitigate against the volatility of the business. Now I turn the floor over to André, who's going to talk about the financial aspects.
As said by Pedro, this was yet one more quarter with very sound results, which reflects the consistency of our strategy. Beginning with the indicators. On the left-hand side, you see the gross margin.
In Q2 2022, the gross margin was BRL 97 million. Growth by 132% relative to the same period in 2021. In the accumulated for the last six months, BRL 192 million, a growth by 129%. In both cases, the margin grew relative to last year by 3 percentage points, which reflects the new mix of revenues of the company. It is a more balanced mix and more concentrated in new business lines where the margins are better, such as digital payment, PaaS, and microfinances. Speaking of administrative expenses in this quarter, they rose by 181% and were BRL 52 million and in the accumulated for the year at BRL 105 million.
This had to do with the consolidation of the two companies we acquired in the second half of last year, Tiaxa and M4U, which brought some very important structures to allow us to execute our strategy. However, these business units have a lower EBITDA relative to Bemobi as a standalone company. As a consequence, the adjusted EBITDA was BRL 45 million, a 92% increase relative to the second quarter of 2021. In the accumulated for the year, BRL 87 million, an 84% increase relative to the first six months of 2021. In this case, because of the comments I made about the units that we brought on board.
The margin relative to 2021 is slightly lower, but we were able to see an expansion by 1.3 percentage points relative to the first quarter of 2022, which reflects the new situation of the company. This has to do with efforts focusing on gaining efficiency and especially in renegotiation of hosting contracts and optimization in our personnel structure. With this, we expect to have better news in terms of recovering these margins. Moving on to the next slide, we explain the adjusted net income for the period, which was BRL 8.6 million, a 43% reduction relative to Q2 2021. Basically, this net income was affected by the marking to market of the swap operation for the buyback of shares.
This has no cash effect as this operation matures at the fourth quarter of 2022, and this affected the net income for the quarter by BRL 18 million. In the accumulated for the year, the impact was for BRL 15 million. Were it not for that, the adjusted income for Q3 would be BRL 23 million, growth by 74%, driven by a larger financial income in the period. This was also offset by the amortizations of the allocated goodwill and financial expenses having to do with the payment of earn-out. Moving to the right-hand side, you see our proxy for operational cash flow. That would be adjusted EBITDA minus CapEx. In the second quarter of 2022, this was BRL 33 million, a 61% increase relative to Q1 2021.
In the accumulated for the year, BRL 63.4 million, 72% growth. In both cases, the cash conversion was extremely sound, 73%, and this gives us comfort in terms of our ability to generate cash. Specifically in this quarter, there was some disbursements, one-off disbursements. You can see here on the lower part of the slide, the variation of the cash balance as compared with the first quarter of 2021. Although 2022. Although we have generated cash in this quarter, we disbursed the first earn-out to Tiaxa for BRL 30 million. In Q2, we paid out BRL 18 million in dividends. The buyback of shares, which in the quarter consumed BRL 8 million.
Specifically in this quarter, we also burned cash with working capital, which can be justified by three major factors. One of them is the renewal of some contracts, and we were unable to issue the invoices to customers. This will be regularized in Q3. We had payments of PLR. Specifically for the reasons Pedro referred to, we were impacted by the Russia and Ukraine conflict. We had to extend deadlines in our accounts receivable, which we are now recomposing. All of these negative factors have been partially offset by the financial revenue with a cash impact, and that was about BRL 10 million. At the end of the quarter, we had BRL 493 million in cash, a very robust position that makes us comfortable to continue to look for new targets for M&A.
With this, I turn the floor over to Pedro, who's going to make his final remarks.
Thank you very much, André . Just to be brief, yet another quarter with sound results, not only in the financial front. Our cash position has grown, and we have been able to face the conflict in Ukraine. We have an operation there. Our people there are doing well. We are happy with these new partners that came on board. These are extremely important indicators that help us predict the future, be it our partners in apps or Loop or Mobile Scoring. A highlight, and this has to do with the last nine months in which we have worked with the utilities, is our decision to penetrate a new industry. It's never easy. Obviously we have to adapt our solutions.
This is a very important milestone that could be even more important for us in the future. We were able to do all of this. We have been able to maintain the margin. There is a nice balance between investing in new business lines, which will bear fruit in 2023 and 2024, while maintaining the profitability of the current business. As André said, we want to have a strong cash position and to allocate cash in an intelligent manner. We believe that we have to be responsible and disciplined in terms of M&A. I'm stressing this because the equity of all listed companies is under pressure. This creates a pressure towards buying companies that have values in line with what we believe is right.
We are actively looking for assets that can add to our performance, just as Tiaxa and M4U. Having said that, Nicholas, maybe we can remove the presentation from the screen and open the Q&A session?
Just to remind how we are going to proceed, the questions may be asked on audio, and maybe we can have also the questions from the chat. We have someone who would like to speak, Bernardo? Bernardo, you can go ahead, please. Bernardo, you can turn on your mic, please? It says here you're on mute.
[Foreign language] Opa.
Now, here you are.
Thank you. Good morning. [Foreign language] Opa. Can you hear me now?
Yes.
Okay. Thank you. Thank you for allowing me to ask two questions. The first one is about the new contracts with the energy sector. You have two large contracts with a very relevant client base.
What is the curve you are projecting for the revenue from these contracts? When should this gain traction in terms of results and income? And, Stricker, if I could ask you a question about opportunities in payments in telecom. What is the potential for growth in terms of top up and digital plans with carriers?
I'm going to take the first part of your question, and then I'll turn the floor over to Stricker. As regards what we can expect from these two contracts and what our expectation is going forward, we haven't started operating those contracts yet.
This is a caveat, but we believe that there will be no effect on Q3, and we are going to see the effects in a gradual manner in Q4 from one of the partners, and then at the end of Q4 with the other partner. This is going to be a gradual curve. It's not going to be a big bang. We gradually open the tap, so to speak, as things work. The other one, as I said, is going to start at the end of this year. As we create this digital behavior, that is a change of behavior on the part of customers, and this might take time. This is for Energisa. With Equatorial, we are going to start in three regions. One in the north, one in the south. It's the same rationale.
If everything goes well, we want to expand this type of offering to other places. We believe, Bernardo, that the effect for 2022 will be very small. We are not counting on that. In 2023, yes, we are going to see a material impact from Energisa and Equatorial. We also expect we will be working with other energy providers. In terms of take rate, I can say more about that after two quarters. Going to be in line with what we get in telecoms. Some in some lines better, others worse, but roughly the same. Operations for defaulting clients are riskier but with a better margin of return, so there should be a better margin there. For the regular clients, because the ticket is higher, there is a greater discount.
Once you add all of these vectors, this looks like if we achieve the same scale as telecom, and which is totally feasible in the medium to long term, we should have contribution to the gross margin, which is very similar, but with a higher EBITDA. Because in practice, there is an intersection of platforms, so there is a material gain of scale as well, which is what we want when we grow services. As we evolve, we are going to give you a little bit more color about this industry. I'll turn it over to João now.
Thank you, Bernardo, for the question. Great question, because these are fronts where we see a great potential for the medium term. Medium term because these are fronts that require a change in behavior, so it takes a bit until we achieve scale.
We are working to make that happen. Speaking of digital plans, the basis for carriers in postpaid and control, these are plans where an invoice is issued. This is a legacy method for more traditional services industries. New subscription industries tend to use credit cards or digital payment for the clients. We see that interest grow within customers and within the carriers. For the customers, it is a digital experience. It's simplicity, it's convenience to control your payments. It's a habit. You have your services charged to credit cards or other types of digital payments. For the carrier, there is a reduction in collecting costs, operational costs. That's the direction the market is going to. Bemobi specializes on that.
We are able to integrate different payment means, channel intelligence with Loop and other communication channels, and this is essential to ensure the recurring payments of these clients. Our expectation is very high. We have been working with the carriers very strongly to make that even better. In terms of top up, top up is increasingly digital. 60%-70% of the customers top up digitally, and this was accelerated during the pandemic. Customers moved to the digital world, and a lot of this market was captured by fintechs, wallets, digital banks, and they used top up to capture clients, to win over clients to their base. In this case, carriers are interested in using the top up strategy. The fact that the customer has to establish a relationship when they want to top up their mobile phones to digitize their relationship with the clients.
It's a very strong movement towards bringing customers to white label. That is, they are branded with the carrier's branding. Again, Bemobi is very well-positioned. We operate white label channels for different carriers. From the first contract to try to encourage customers to go to the channel, to the green light. We have been working with the operators, with the carriers to add intelligence, to have better journeys, and to offer better benefits for customers, so that we can also grow. These are two elements which are very well-structured. It's in the interest of the carriers to make it happen. It's going to take some time for customers to change their behavior and use these channels, these new forms of payment, so that they have a better journey throughout.
We have another question, Pedro.
From Andrea Danielson, which is very similar to Bernardo's. How long will these new clients take to start generating revenue?
Yes, that has been answered. Again, there are two drivers. Penetrate new geographies of those existing clients and then penetrate new clients so that we can gradually digitize the operations. It's very similar to what we did in telecom. You have to win new customers and then work with to develop the digital channel. You don't need a new client to grow. There is a gravity there is an inertia there. We are able to serve clients better.
The next question is from Vicente, who asks us to explain the company's vision for games and how this is related to payments.
We still believe the idea that the world is flat and everybody's equal, and that the Google Play and Apple model is 100% efficient to the whole market. We don't believe that. We have a model of subscription which is gaining traction at very aggressive prices. Yes, it's the leftover balance can be used for this type of entertainment. This allows us to monetize users that historically are not monetized, and also a billing model that is very appropriate. We are always looking for the best games, and Bemobi doesn't develop, we publish. We, or we are not publisher, we distribute games. A critical element is for us to have access to the best games. What I can say is that we are going to continue to look for new app developers.
This is a very dynamic market. There are new games coming up all the time. This is part of the evolution of the service. It's the same for video or music, for example. We continue to look for carriers and markets where this model has not been established yet, and this is an avenue for growth. We are trying to look for innovation. Just to give you a teaser of what we are going to announce, very shortly. In some countries where we operate, and Brazil is one of them, very gradually 5G is being implemented. You will have a little bit more color about it, but we are going to have an update in our games service to be able to tap good opportunities such as streaming of games. We are very committed to this industry.
It's an industry we like, but we are not a games company. We don't develop games. We help increase the profitability of a segment through users in those areas of the market that are underserved by publishers and other models.
We have one more question from Skade Capital, Eduardo Cortez, who can now open his mic.
Good morning to all. I have two questions, actually. If I remember correctly, in last quarter's call, you said something about having identified synergies with the acquisition of M4U and Tiaxa, that you had mapped the synergies and might execute on that in 2022 or 2023. Can you tell us about these synergies? Do you have a design on how this is going to happen? Is it going to be on the cost front? Is it going to be in cross-selling?
If it's in costs, I would appreciate having more details. Something which is great is your penetration in the utilities industry. It's going to take some time until you see the revenues. Is this going to affect or not administrative expenses? Thank you, and congratulations for the balance. Very balanced results.
Thank you so much for following us. There are two types of synergies. We are already taking advantage of them. First is the synergy in terms of revenue. When we look at a new business and we make an acquisition, the rationale is, does this company provide services that once integrated with Bemobi, we can increase the reach of these services through the carriers we have partnerships with and so on, and to new geographies? We had an impact coming from M4U. The business areas were fully integrated.
Technology products, fully integrated. The synergy in terms of revenues have already been felt. We now are winning new contracts. We have reversed the downward trend, and these contracts will have an impact on 2022, 2023. The same for Tiaxa. Bemobi has a sales force which has a greater outreach relative to Tiaxa, so we are selling together. There is a long cycle there. We have to knock on more doors. This will translate in terms of sales funnel. In terms of cost, there is an opportunity, but also a trade-off. These opportunities were captured, and André talked about it. There was a growth in the margin quarter-over-quarter, which came from the synergies. Areas where there was redundancy, but especially in platforms, we have renegotiated contracts, consolidated contracts, and optimized the platforms to gain scale.
This made a contribution for the margin. In the next six quarters, we should be able to recompose one or two basis points. We might be able to increase the margin even more, but because we are excited with the outlook in the payment area, particularly with new projects, we want to maintain the company in a more balanced way because we see opportunities. We should gain scale by leveraging the team that came from the acquired companies. The last part of your question has to do with utilities. In terms of cost, the utilities market allows us to have greater operational synergy given what we do with telecom. The digital platforms are very similar. Payment, fraud. There is an economy in terms of scope, that is 70% or 80% of the functions are the same.
70 or 80% of the overhead is the same. As we gain traction, we will have to focus more on the new sector. We have hired some new people. People who are more familiarized with these new industries. They understand the regulation, the consumers. We will have to grow our, some of the areas a little bit. Our product area works really well. There's a cross-pollination of what you learn in one sector. We were trying to take our experience from telecom to utilities, but we just started in utilities, and we see an opportunity to, work the other way around. The model for defaulting customers, which we are starting to operate with in the energy sector, could be used also in telecom, so we are going to bring news in the near future.
As long as there is a critical mass in terms of size and a relevant overlap in terms of the types of problems, this is a synergistic scope. We feel very comfortable with that. I don't know if I have answered your question?
Yes, yes. Great. Thank you, and congratulations again for the results.
We have. Yeah, just one more so we can finish. Andrea is asking about the reasons why there were more transactions in terms of microfinances?
There were two drivers. The biggest one has to do less with new clients, but it's a seasonal effect. Normally in Q4 is a stronger quarter in general, but just to put it simply, it is a stronger quarter. For many business lines, it is weaker, but Q2 is always better than Q1.
Part of the improvement came from there, and then the other part of the improvement came from something that is still small, and I'm referring here to Mobile Scoring. In one of the modalities, we give credit in terms of voice, data, or top up, which is our more traditional business. We grant this credit before the customer pays, and then we recover the money in the future. We have the scoring business, which is a startup within Bemobi. We take data and behavior, behavioral data. This data can be very effective and rich for you to grant credit. We did really well in Q2 in this area, especially in Mexico with some banks that work with us. In absolute terms, it's a small amount, but it grew very considerably.
This gave us a little bit of positive impact, but seasonality actually accounts for the biggest effect in the quarter. With this, I think we can end the video conference. Well, people always ask about M&A, and although the market now is a bit depressed in terms of valuations, we continue to look in the middle to long term. We still believe a lot despite the macroeconomic environment, and I think we have to be consistent with our medium and long-term vision despite the situation of the market now. We have always been very careful with the acquisitions. We made three acquisitions so far. We are very excited in that we are able to grow organically and inorganically as well. With this, Nicholas, I think we have reviewed the highlights for the quarter, and I would like to thank you all for being with us.
We will have more cool news to share with you.
The video conference is now ended. Thank you very much for participating. A good day to everybody. Good day. Have a good day.