Earnings Call: Q3 2024

Nov 8, 2024

Summary

Q3 delivered growth in Shopping Brazil and financial services, alongside BRL 14.1 million in parent-level adjusted EBITDA and an 18.8% adjusted EBITDA margin. Priorities include scaling financial products, improving engagement and capitalizing on Black Friday.

Let's get started. Good morning, and thank you for joining us for another Méliuz earnings call. Before we get started, I'd like to let you know that this conference is being simultaneously translated into English. If you'd like to switch languages, just click the interpretation button at the bottom of your screen. I'm Márcio Penna, I'm Director of Investor Relations and Corporate Governance at the company. Joining me today are Israel Salmen, founder of Méliuz, and now Chairman of the Board and Institutional President of CASH3 Group, and Gabriel Loures, our newly appointed CEO who's also overseeing growth strategy and new business. Please note that this event is being recorded and will be published later on our investor relations website, along with the full transcript. The presentation materials are already available on our website and at the CVM web portal. After the presentation, we will open up for questions and answers. For those who would like to ask a question, simply click on the raise hand button, and when the time comes, we will enable your microphone. Enjoy the call. Over to you, Israel. Thank you, Marcio. Good morning, everyone. There have been some changes in our organizational chart. Changes for the better, I know. I'd like to first thank the co-founder of Méliuz, who was with me in 2011, who made great contributions for Méliuz to be where it is today. Up until yesterday, he was the chairman of the board. Hopefully, he said goodbye. Now I'm the chairman of the board because he resigned. But I'm also in an executive role. I'll be working with the CEOs of the different companies of the group, including Gabriel, giving him all the support I can. Congratulations, Gabriel. You are one of the most intelligent people I've ever met, and one of the most hardworking people I've ever met. I know that you're going to be great for this job. Count on me for whatever you need going forward. I hope we will experience together great times in this company. We made the right choice in appointing this new CEO. We know that because of the response of our team when we announced that. The team was really happy when they heard that Gabriel is going to be the CEO. He was congratulated by everyone. We saw in each one's faces when we made the announcement that that decision made sense for everyone. Welcome, Gabriel, to this new job, and I hope this is going to be a very happy journey. Thank you, Israel. I can't but begin by thanking you for everything we've done together so far, for your trust and autonomy. I'm really aware of the responsibility upon me now, and I'm confident that the journey going forward is going to be great. I also thank the board members for their trust, and I'd like to thank the Méliuz team, who have been working together since 2018 when I joined Méliuz. Everyone working together to grow the business and ensure the business sustainability. To the investors here, I'd like to let you know that I'm aware of the challenge, and I feel very energized to take the next step. We're going to go on on this growth journey, building more operational efficiency, as we already see in our results, as we're going to be seeing today. Let's have a look at our performance. First of all, I'd like to talk about the growth of Shopping Brazil. GMV 10% higher when compared to Q3 2023, and 20% higher net revenue in the same period at BRL 60.2 million in Q3 2024. The performance was thanks to the performance and commitment of our team of offering the best experience to users and working on retention. That's also a result of our engagement with partners. That's what we see in the take rate, which is now 6.6%, against 5.9% last year. This is the result of all of those campaigns that we've been working on with our partners and a closer relationship we've been having with partners. With that, we offer them more opportunities for them to sell more, to have more ROI, and each one achieving their goals of profitability and sales. I'm really happy with this third quarter growth. Also, it's important to look at the number of new buyers. We don't publish absolute number, but it was a 31% increase on year comparison. We worked on that, working with Marcus, our growth director, finding new channels, growing the base. That's why we have this significant growth in new buyers. This is going to have an impact on the long run because we have a very good retention, as we've mentioned before, and these users are going to go on buying at Shopping Brazil in the future. Now we'll talk about financial services. We see we are at the same growth pace that we've been having in the past few months, with an increase in open digital accounts of 36% growth, also 172,000 credit cards issued in our partnership with Banco BV. It's a 27% increase when compared to last quarter. Financial services net revenue was BRL 15.9 million. That's an 8% growth when compared to second quarter. We are going on strong, working to increase engagement with more financial services, foster this ecosystem, great value for users, so that financial services can be increasingly profitable, and our financial services are more and more used by our clients. An important step was the launch of this product with BV. It's a CDB product. It was launched in October 2024, so it was a little over one month ago, and we already have encouraging results. The initial results are really positive, and that's just the first step. We're working with the Banco BV to launch other products and increase engagement, increase our net balance, and make our products more profitable, and fostering more this ecosystem and more cross-selling. We are developing new investment products. In addition to this one, we are going to be offering other choices for our users, and insurance products that we are going to be launching, and also credit products that are part of our roadmap, so as to ensure more engagement and use of our financial services, which is our goal, as I mentioned. The consequence of the revenue growth together with our attention to operating efficiency is this EBITDA numbers that we see here for the quarter. Adjusted EBITDA of the parent company is BRL 14.1 million in the third quarter. It's almost double as it was last year. In the nine-month view, we reversed the number that was minus BRL 6.8 million in the initial nine months of 2023. Now we have a positive EBITDA of BRL 42.9 million in the year to date. Consequently, 18.8% EBITDA margin, adjusted for Q3 2024. In the long run, which is the right side of the page, we see what we've been working on in the past few years. 2023 was a year of operating adjustments, so as to recover profitability, and the margin was minus 35.8%, increased to 12.8. In 2024, we've been growing revenue. When compared quarter by quarter, we've had 38% growth. Also the improvement of our EBITDA margin, achieving 18.8%, as I just mentioned. That's been possible because of our very stringent expense control. In 2022, expenses were BRL 420 million in the year. In the last 12 months, as of Q3 2024, the number was BRL 221.7 million. This is a 23% drop when compared to 2022, with a slight increase in the second to third quarter 2024, which is also a consequence of our greater revenue and the number of new buyers. In terms of EBITDA, we see the long-term vision that we are pursuing. The consolidated EBITDA in 12 months was minus BRL 93.5 million back in 2022. In 2023, it was very close to break even with minus BRL 1.1 million. In Q3 2024, in the last 12 months, it's BRL 49.4 million of EBITDA margin. This is what we've been mentioning in the past calls. We focus on growing, but growing sustainably and with good margins. To conclude, I couldn't but mention our Black Friday promotion. It's already started. You know how important this period is in our seasonality. This year, we want to be the number one in cashback because we are the first player to have adopted this model in Brazil. There's many new developments, and we are working more and more closely with Promobit, and there are greater commercial end products synergies. Promobit is a social selling initiative in the CASH3 Group. Users post and look for the best offerings for other users to buy. This is a slightly different model from Méliuz, but it's focused on social selling, and there's good synergies for a successful Black Friday for both parties. Also, as I mentioned in my letter or our release, our Black Friday started in December last year. As soon as the last year's Black Friday closed, and we've been working on dozens of improvements so as to increase number of users, so as to engage our users better and to retain more users. This is the results we see now. This year also, we've developed new special opportunities for partners and users alike. It's important that we have a robust campaign calendar offering more opportunities for our partners to invest with a healthy ROI and greater sales. We've been doing that a lot for Black Friday 2024. Opportunities for users as well, so that they can make more. Méliuz Prime is one of the choices that our users have so as to have greater cashback in each one of their purchases, and that increases engagement in our ecosystem. There's a new feature of combined redemption. There are different things we are doing for both parties, both to benefit users and to benefit our partners. We can have even better performance in this Black Friday. Over to you, Márcio. Thank you, Gabriel. Let's begin the Q&A session. The first session is by Alexandre from Morgan Stanley. Alexandre, over to you. Your mic's been enabled. Good morning, everyone. Congratulations. Also congratulations, Israel, for your new job, and congratulations, Gabriel, on this new challenge. I have just one question. In your release, you mention, what I feel in your notes about the Black Friday is that you're very excited. What's your early read for November? Do you have any? We know that many players have already started working on their Black Friday promotions. That's my question. Thank you. Thank you for your question, Alexandre. We cannot yet publish anything about, cannot disclose anything about Black Friday. Our partners are really excited, and we are working on many opportunities so that our users can benefit. That's what we see in our missions and distributed cashbacks. Also, we've been working to improve products and increase retention and engagement for 12 months already. Now we see the results. We know that the better products will have an impact on this Black Friday. I can't disclose anything about in terms of figures or guidance for this year's Black Friday. No, I'm not talking about guidance. I just wanted to know if you had any performance figures for the beginning of November. Anyway, thank you. A very quick follow-up question. You mentioned improvements that you started to develop last year, but in terms of appetite of partners, do you see your partners with appetite for cashback campaigns or not so much? Is it kind of flat when compared to last year? Thank you. We've seen great appetite on the part of our partners. It's important seasonality period, of course, but we see great appetite on part of our partners, especially based on what I mentioned. We are coming up with new opportunities and more customized opportunities for partners to sell and so that we can have better performance. There is Méliuz Prime, which is an example. We have a number of campaigns for these high users. Also, we're coming up with new promotions in November, working with our product marketing teams and also working closely with e-commerce and industry partners, so that this is going to be a great Black Friday, very engaging Black Friday for our users. Thank you. Congratulations once again, Gabriel. Thank you, Alexandre. Next question is Antonio Cosman, Genial Investimentos. Antonio, you can ask. Good morning, and congratulations, Gabriel and Israel, for your promotions. In the release, you mentioned about Méliuz Ads. It is a product for which I see great potential, and we see it has been very successful in other companies. If you could give us more color about that and what you see for Q4 and Black Friday. Thank you, Antonio. We have seen significant growth of Méliuz Ads over the past years. We are very excited with this product and what we have been building in partnership with our e-commerce and industry partners. There has been a growth in available spaces for our partners' ads in our channels, our app, our website extension. But also in other channels, we have been working with influencers and other market players who help us advertise the promotions and campaigns. We have seen significant growth in the past few years. We are very excited with Méliuz Ads in this Black Friday and the whole year ahead. Thank you. I would like to thank you for your questions. I will turn it over for Gabriel for his final remarks. Thank you, Marcio Penna, and thank you all for having joined us this morning. I would like to reinforce my commitment and energy for us to achieve the established goals of profitability and growth. We are very excited with this year end 2024 and next year. We go on the same note, ensuring more value for our partners in every vertical and financial services, and ensuring greater user engagement so that we can grow in sales and profitability. Thank you very much. Thank you for your presence, and ahead to the Black Friday.