Earnings Call: Q1 2024

May 10, 2024

Summary

Q1 delivered positive EBITDA, BRL 19.1M consolidated net income and stronger shopping margins, with no extraordinary items. Priorities remain profitable Brazil Shopping growth, financial-services expansion and cost discipline, while GMV recovery and international cash burn remain challenges.

Good morning everyone, and thank you for joining us for another Méliuz conference call. We will now begin the webcast on the results of Méliuz in the first quarter of 2024. Our conference call is being simultaneously translated into English. For those who wish to change the language, please click on the interpretation button at the bottom of your screen. My name is Fernanda. I am part of the Investor Relations team here at the company. Today, I am joined by Marcio Penna, Director of Investor Relations and Corporate Governance, and Gabriel Loures, Director of Growth. Before I give the floor to Marcio, I would like to point out that this event is being recorded and it will be published along with the transcript on our IR website later on. Additionally, the slide deck presented here is already available on our website under the result center tab and the CVM portal. After the presentation, we will have a Q&A session. For those who wish to ask a question, just click on the raise your hand button at the bottom of your screen, and I will then enable the microphone so you can ask your question. I would like to wish you all a good call. Marcio, now I hand the floor over to you. Thank you, Fe. It is a pleasure to welcome you all this morning. Good morning. I am here to present the results for the first quarter of 2024. Now, I will show you my presentation. Just a moment. Our results for the first quarter were pretty well welcomed by the market. Some were surprised by the EBITDA we achieved. For us, here at Méliuz, we received our results very positively, obviously, but for us it was less of a surprise because we have been transforming Méliuz, trying to achieve a better margin for at least one year and a quarter that we have been retaking and changing our strategy. For us, this was a pathway that showed that we would reap the results in this year of 2024. These results show that everything we say and do in these past quarters is aligned and is being consolidated with our performance. We know there are cycles and external issues, but we have been always reliable on our front in our work with even better features and characteristics today. We have a much better app, which was presented back in the IPO. Today, we have a user base that doubled. It was 15 million users, and now it is over 30 million users. We have many products and our feedbacks are overwhelmingly positive. Also, positive feedback from our partners. We improve the generation of sales for them, and thus this partnership is something that may remain for the long run. This is our environment, this is our scenario, our base to generate this win-win between users and partners and keep on generating results for our shareholders. We are absolutely sure that we are on the right track. The results for the first quarter is a simple sample of this. We are confident for the better results of other quarters in these years. We had EBITDA. It is nice to tell you that in this first quarter, there were no extraordinary items. When you see adjusted EBITDA and EBITDA, these are for previous ones. We had no extraordinary items for this quarter, so we have 12.8% of our EBITDA, especially in this quarter that is seasonally weaker, the weaker quarter, especially for e-commerce. We managed to perform, to achieve a very positive EBITDA. In the consolidated scenario, we also delivered a very good EBITDA, 5.8. What is the difference between the parent company and the consolidated EBITDA? Basically, the difference is the FIDC. FIDC, we hired for our portfolio of our own cards back when Méliuz had no partnership with BV. Notably, FIDC in the parent company, it enters in financial results. It doesn't have an impact on EBITDA and for consolidated results. It's on operational expenses and other costs. It's an accounting rule. There is a difference between the parent company EBITDA and the consolidated EBITDA. Obviously, now that we have a partnership with BV and our own cards tend to zero, this FIDC tends to be zero in the next few quarters. This difference between the parent company and the consolidated EBITDA tends to decrease in the next few months, in the next few quarters. Still talking about EBITDA, it's nice to show to you something about the LTM, the last 12 months. Especially when you talk about seasonality, we've been improving our margin within the company. In the parent company, we come from less than BRL 83 million in LTM, and after a year, it's BRL 36 million in the positive side. It is an improvement that happens quarter after quarter. It's less surprising to us because we knew where we were headed and we knew where we wanted to get. It's a pleasure to let you know about these results of what we've done in the previous years. In the consolidated, the LTM adjusted EBITDA is a little bit different. The FIDC explains this difference, but we went from less BRL 83 million, less BRL 86 million, getting to BRL 11.6 million in the past 12 months. This is a marked improvement aside from the seasonality in our e-commerce sector. When you talk about bottom line and net income, we still have a good improvement of our financial result, and more and more will be less representative because of the cash margin that will be growing. It will be very important for the company from now on. We have a bottom line of BRL 19.1 million in the consolidated, with a net margin of 23.2%. In our parent company, EBITDA was 19%. The net income is 23.2%. It shows we are truly confident we would, by following our strategy, the idea was to be back to margins we showed to the market back in the moment when we went IPO. The intention here is to keep on improving. Talking a little about cash, we have an especially robust cash. Last year, we had BRL 174 million. The financial results helped complement this in the first quarters with BRL 17 million. We had positive results from the consolidated cash operation in BRL 8.2 million. There is a cash series referring to participation of Méliuz employees because it's provisioned in 12 parts. There is this cash that is given to this. We have BRL 676.7 million in the cash margin. BRL 210 million were given to capital reduction. As a result, we still have BRL 466.7 million in cash equivalents in securities after capital reduction. We have to consider the acquired companies that would be paid in the second quarter of 2024. Certainly when we get back here in August, this number of BRL 466 million will be below that because there will be a balance concerning the beginning of this year, outside of financial results and operational rate, which will impact positively the company. Basically, how have we gotten to this positive result? We have some drivers here that led to this improvement in our results. The first driver is the improvement in our core business in the Brazil Shopping margin. If we analyze quarter after quarter against quarter, it looks like Brazil Shopping, there was a drop of 8%, but there is a timely uncoupling because of the GMV and the net take rate and how it impacts the results of the company. To exclude this uncoupling effect, we show here on the right how would be the net revenue in the past 6 months. When we have here more impact of GMV in the first quarter, then we have this impact for financial results. If you sum the last quarter of 2022 and in this past 6 months, we would have BRL 126 million. Summing these 2 quarters, we have BRL 123 million. The difference would be reduced to only 3% drop. Considering GMV, that dropped a little, but we have managed to mitigate this with multiple products that are part of our portfolio, Méliuz X, Méliuz portfolio and Méliuz Nota Fiscal. There is this seasonal uncoupling, and if you consider that, we have very good numbers, figures and margin. The margin goes from BRL 49 million to a margin of BRL 56.4 million. An increase of 15%, which is the most important thing and the focus of our company. As you can see, in spite of the drop in GMV, we had a growth of net take rate of going from 2.2% to 2.4%, and we also presented a growth in the take rate in this first quarter. Another important driver for these results we presented is the partnership with BV. This partnership that has been positive, and we have opening of digital account that has been growing quarter after quarter in a robust way. The same applies to credit cards that are issued, and the results is a net revenue from financial services that becomes more important in Méliuz as a whole. We showed very transparently in the fourth quarter of last year, in the first quarter of this year, we had a percentage of income that comes from digital, Méliuz digital cards and digital accounts. Now we also show a partnership with BV. On your right, you can see that the operation on itself, with a partnership with BV, goes from BRL 12.3 million, going to BRL 14 million. That was a good growth. We consider that we are in a cruise flight and that will give us good results in the next quarters with new products and so on. The last driver, last but not the least, for our good results for the first quarter of 2024, is to maintain our costs and expense structure in a very lean way. We have been showing this in the past few quarters. There is no doubt about it, but today we consider that we have achieved a level of costs and expenses that is a comfortable level for the company for the remaining of this year. The level that we consider to be safe and is in line with our planning for the year. Obviously, there is a percentage of these expenses that are related to cashback expenses, so there is seasonality around here. But other overhead expenses and costs, they are in a very comfortable level for the company. There is room for improvement, but the main point of improvement have already been implemented and now we are to maintain them. We need to maintain them. The improvement we have presented here in terms of cost and expenses reduction was very strong. We basically had a quarter of reduction with a variation of percentage of 20%, a reduction of 20% in the alternative and consolidating operating expenses. Let me tell you that we remain on track with our objectives for 2024. We maintain our pillars for 2024, basically talking about the growth of Shopping Brazil. It's the challenge of this company for the next quarters to maintain this positive margin and also focus on growth. There's no silver bullet here. We have new products that are growing in our portfolio, and these will certainly help us to achieve our goal in 2024. The innovation in our core business, which is the launch of new products, the ramp-up of financial services are also mentioned. We are accelerating our account and card offering, our partnerships with BV, and will soon launch new financial services. Last but not least, as the pillar of these three goals of this year is the operational efficiency with the maintenance of a discipline in controlling the company's costs and expenses, especially in the core business for the remainder of this year. With that, I end my presentation and now I call Fernanda so we can start our Q&A session. Thank you, Marcio. We will now start the Q&A session. If you wish to ask a question, please click on the raise your hand button that is located on the bottom of your screen, and I will enable your mic. The first question we have here comes from Camila Azevedo from UBS. Camila, please, you can go ahead. Hello, everyone. Thank you for welcoming us, and congratulations on your earnings and results. My question is regarding the evolution of GMV. We can see that there is a negative growth since the fourth quarter of 2022. When can we expect an acceleration of GMV, and which are the initiatives you have implemented to accelerate this? What can we expect for 2024? Thank you. Perfect. Thank you for your question, Camila. Marcio can later complement. Camila, the first thing is to say is that we need to growth our core business with profitability, where we'll have profitability and take rate, and we have worked really hard to revert this trend of GMV. We can divide this into major levers. First, improvements in our core business, in users and partners alike. In terms of user, we have a dedicated team working on improvement in experiences, how to improve retention metrics, indication of our business. In terms of partners, more and more we bring more partners to invest, to participate in our promotional campaigns, and bring consequently an increase in margin, in revenue, I mean, in our core business and also in the Méliuz X. In terms of new products in our core business, I think we can mention three main examples. Méliuz X, which has been growing. We have grown a little in the third quarter. We have been growing this and we need to prove this to our partners. It is better than in other comparable channels. This will enhance the business of Méliuz X, and this will improve the revenue of Shopping Brazil. Besides that, Méliuz Prime is a product that we launched in the second quarter of last year. It generates income per se, but the focus here is to increase the user, the participation of categories and users use to buy and to retain better these clients in their wallets. Our goal is to have a better impact and improve the experience of our best users. The third example is the Méliuz Invoice or Méliuz Nota Fiscal, which has been growing very well and allows our users to get cashback in partnership with the industry in every physical store they buy at. This will impact our revenue results in Shopping Brazil from now on. So these are the three main leverage products for the GMV in the next few quarters. I can say that we are working very hard to start growing again, focusing on our core business. If I can, Gabriel and Camila, just add a comment, a point to the excellent answer given by Gabriel. I would say that we could generate a better GMV if we wanted to. We have done this in the past already. So our focus today is not GMV, it is margin. So it would be really easy to get a good part of the commission that we get from the partners, distribute that in form of cashback to our users, and certainly our GMV could be doubled. But this is not the strategy of our company at the moment. It has not been for the past year. We had that as a strategy back in 2021. We had that strategy. So our focus is on margin. We are more concentrated on that instead of the growth of GMV, and we will continue to do that, as Gabriel said. Thank you very much. Well, the next question comes from Carolina Gomes, from Morgan Stanley. Carolina, you can go ahead, please. Good morning, everyone. Thank you for allowing me to ask a question. I would like to ask about the international operation. Can you give us more details about it? How do you expect to have an evolution of representativity of cashback operation from now on? Also on financial services, how do you see the evolution of account opening, and can you confirm if the migration of Méliuz cards accounts were 100% performed in this first quarter? Thank you for your question. In the International Shopping, we follow the trajectory of migrating the coupons, margin, the legacy income. In the long run, we will follow this trajectory. We are focused in the international business in order to improve traffic and improve the income consequently. Our results are behind what we can achieve, so we are working hard to improve this income. In parallel, we are also thinking about how to expand our operating results in the company, reduce the cash burn. This is our objective for International Shopping. In terms of accounts migration, we have migrated the totality of accounts that we planned, and in cards too. I believe that the migration process is finalized by now, and now we are focusing on financial services to create new services. With this new partnership, creating cards and accounts, and we are to accelerate the new launching of products, safe products, investment products in investment accounts in these partnerships with BV. Also continuing to issue cards and accounts as we have done. Thank you very much. Thank you, Carolina Gomes. The next question comes from Rafael Nobre from XP. Rafael Nobre, please. Good morning, everyone. Thank you. I have a quick question on the number of users. I saw that in the historical spreadsheet, you stopped separating these users. So the number of 31 million is consolidated between Méliuz and Picodi? If not, what about the drop in the international users, please? Hello, Rafael. Thank you for your question. What is in the spreadsheet shows Brazil Shopping and the retroactive data. We didn't show the open Picodi accounts for this quarter. So what you see in the spreadsheet is the sum of Picodi and Brazil Shopping up to this moment. The opening to the last quarter in the release and also in the spreadsheet. We didn't show Picodi open accounts in the spreadsheet precisely because of what Gabriel Loures mentioned before. Our focus is to increase Picodi organic traffic and reduce the cash burn this year. So we are focusing on qualified organic traffic and also to get cash burn to zero. We see no reason to continue disclosing the opening of new accounts. That's not our focus. If you look at the spreadsheet, you have the consolidated for Picodi and new openings. Rafael, these are the accumulated new accounts that were opened by the operations, okay? We now wrap up our Q&A session. I would like to hand the floor over to Marcio Loures Penna for his closing remarks. Please, Marcio. These numbers are very transparent. No extraordinary items. Numbers were well-received by the market. My take-home message is that this is the beginning of the results that come from our strategy. We know that we are confident in the results of this year. There's no silver bullet, there is no magic. Everything we work on, all the products we've been creating or improving on, they will take their time, and in time, they will bring the expected revenue to our company. So we invite you to keep on following the results for our next quarters. Our goals will be achieved, and Méliuz will bring very positive results for this year. Thank you for this call. Thank you all for joining us in this webcast, and see you next quarter. Thank you all for joining us in this webcast of the Méliuz results in the first quarter of 2024. See you next time.