Earnings Call: Q3 2024

Nov 7, 2024

Summary

Results reflected growth in users and transactions, YTD gross income up 14% and net income up over 10%, alongside investment in AI, HaaS, and U.S. expansion. U.S. launch targets 2025, subject to partners and regulatory approvals.

Good morning, ladies and gentlemen, and welcome to the video conference of CSU Digital to discuss the results relating to Q3 2024. This conference is being recorded, and the replay will be available from the company's website, ri.csu.com.br, where you may also download the presentation. We inform you that all participants will be able to watch this video conference and follow the slides during the presentation. Later, we will begin the Q&A session when further instructions will be given. The content presented here will be presented in Portuguese with simultaneous translation into English. For those who want to listen to this presentation in English, you may choose your language by pressing on Interpretation on the lower right-hand side of the platform. It is possible by pressing the Interpretation button presented the bottom right corner of the platform and choosing the language properly. Before proceeding, we would like to clarify that any forward-looking statements are based on the company's assumptions and beliefs and on information currently available to the company. These forward-looking statements may involve risks and uncertainties as they have to do with future events, which depend on circumstances that may or may not occur. Investors, analysts, and journalists should take into account that events relating to the macroeconomic environment, to the industry, and other factors may make the results differ materially from those expressed in the forward-looking statements. Today with us are Mr. Pedro Alvarenga, CFO and IRO, and Mr. Bruno Costa, CTO and the IR team. I now turn the floor over to Mr. Alvarenga to begin his presentation. Good morning to all. It's a pleasure to be here again to present the results of one more quarter to our investors and others in the market. We are going to discuss the results of Q3 and the first nine months of 2024. You may have heard me talk about this slide, where I tell a little bit of our history, and obviously the context today is a bit different. Here we give a little bit of our journey, and this has to do with the way CSU operates on an everyday basis. Year after year, we defined our strategy. We define the journey that we want to pursue in time and given the possibilities in the market. In time, we have shown our ability to execute. Since the beginning, our proposition was to be innovative. We were the first infratech in Brazil. We work from end to end, and we complement the offering of services and solutions to add value and increase the performance of our customers. This has been consolidated throughout the years through innovation, and in the last 4 or 5 years, we embarked on a new phase to transform our business. Our DNA is the same. We are a tech company for financial services. We help our customers operate, but we do much more today. We operate in different fronts. We developed new products in the last few years. Today, we want to perform better with hyperautomation, artificial intelligence, and this has allowed us to lay the grounds for a new period of expansion in new business fronts, the possibility of new offerings, combining products, and we are focusing heavily on artificial intelligence, including in our international expansion. It is extremely important to emphasize our consistency in terms of our journey. We think things thoroughly and plan in view of our strategy, which is based on 3 major pillars. The first pillar has to do with expanding the possibility of making revenue. We expand our user base. To do that, we have to attract new B2B customers, new companies that want to use our service platforms. These companies bring together with them a growing user base, which is who we interact with indirectly. We also operate end-to-end, so we have solutions for each stage of the financial services that are offered, and this is one of our true differentials. We are able to approach new companies to operate in new industries and to offer our services. We bring in a lot of technology to decrease friction and improve customers' digital experience. Once we have a new user base, we have to encourage this base to be increasingly active and to use more services and different services. The beauty of our business model is that we grow according to the number of users who create new transactions, and this in turn allows us to improve ourselves. We increase the points of contacts, which brings us more intelligence, more data. We can then activate the base and build loyalty among our users. This is no simple thing. We have to be extremely efficient to operate in these services. Operational efficiency is our third pillar. This is what allows us to perform appropriately for the company and for our customers. We look deep into the back office, into the processes, so that we can better serve the users, improve the speed of our response, increase satisfaction, and bring in principality. These are the 3 pillars, which at the end of the day, create a virtuous cycle that creates value. We have been growing consistently. We have been creating more cash, more income, and this allows us to reinvest in the business and feed back into the cycle. Internally at CSU, we say that execution has strategy for breakfast. You may have a very well-designed strategy, but if you are unable to execute the strategy, it's no good. What I wanted to bring here was a bit of this vision that the results we deliver confirm the accuracy of our strategy. We have been delivering on our commitments. In terms of the user base, this year we were able to attract 5 new B2B customers, 5 new companies who are using our platforms, and this benefits us in terms of the income in the next quarters. We're talking here about retail, financial, insurance, telecom customers, different profiles, which attests to our ability to serve different industries. This then goes together with a strong strategy to activate the base, and this has enabled us to grow the number of users. We now have 36 million users who use our platforms, of which 61%, that is 21.7 million, are active. They actively use one or more services that we provide. In addition to activating the users, we want the users to use our services. This in turn translates into the number of transactions, and they were in excess of 880 million transactions in the nine months to 2024. Our CAGR was 24% in the last four years. We want our users to use Pix, credit card, rewards, and this number has been growing exponentially. Four years ago, we had an average of 8 transactions per user, and we are now talking about 13 transactions per user. In terms of efficiency, we have been growing in terms of operational revenue, the gross profit grew by more than twice. As a result, the financial indicators, the margins are very substantial, and they are gradually growing. This is a slide where we show our strategy. At the end of the day, we want to ensure that we offer a complete experience of financial services to our users. If the company wants to offer a digital bank end-to-end, we can do that. The opening of an account, transfer operations, payments, payment of bills, cash in, cash out, card transactions, Pix. We can provide all of that. What we want is for customers to be served well, and we want users to have engagement and principality with that brand, and this creates a spiral of value for the company. We provide technology infrastructure, and we also help customers operate the technology. This is where we get better results, and this is our platform for growing. But we want to do more. We want to leverage our performance and take the company to new levels in terms of size, in terms of efficiency. Our avenues for growth, which are defined within the company, have to do with digital payments, embedded finance, hyperautomation. We provide full service. We have adaptable modular technologies and operational efficiency and quality. This is what makes us stand out in the market and maintain our leadership position. We do not want to stop here. We want to expand increasingly more internationally, and this is key to our strategy. We see a latent demand in different geographies, in the U.S., for example, in the United States, and all of that is going to be made possible by using artificial intelligence. I am not going to go deeper here. Bruno, our CTO, is here, and he is going to talk about our plans and about what we are executing. I will turn the floor over to Bruno. He is going to talk about artificial intelligence and internationalization. We have built a vision for the future, and we are now executing this vision. This has to do with our strategy in terms of applying artificial intelligence in all of our verticals and in our internationalization strategy as well. In terms of the employment of AI, we have been using it extensively in all of our business units. I am going to give you some examples. We have been working in terms of processes and payment solutions, and we have an open architecture, which can be used to meet the different needs of our customers. By open architecture, I mean that we can have different sources of data. This is data that sometimes we own, that are found inside our own data lakes. But we are also able to integrate with customer systems, whether they be legacy systems or new systems. We can integrate with public systems and partner systems. This allows us to employ different technologies in the digital services layer. We can use RPAs, APIs, generative AI, and we treat data so as to create results for our clients. This has to do with operational efficiency, but also hyper-personalized efficiency, greater security, data analytics, insights about our customers' operations, and this is very different from what our clients used to have. We employ AI to create real opportunities for our clients. When we look at how we employ artificial intelligence to manage processes, I would like to draw your attention to HaaS. We deal with the input, the information or demand, the execution of the business process, and then the final product, the output. On these three blocks, we have tools, state-of-the-art technology to treat this in the best possible way, which allows us to create operational efficiency. Quality of service, which is above the standards. We increase the resolution of problems for the end users faster, and this can also be done using technology that reduce human intervention. This allows us to be more efficient, faster, and with greater quality, which create NPS, frictionless experience, and we ensure principality for our customers in terms of the products they are offering to the market. We employ these technologies in different processes. We have a practical example, and I am going to show a video where we compare a traditional process on how we deal with a chargeback request in a traditional way, and then using HaaS. Optimization of chargeback processes. Here we have the comparison. This is a real-life example. Just to show you what you saw. On the left-hand side, we had the traditional chargeback operation with legacy systems, which are difficult to integrate, which are difficult to change, which are difficult to optimize. What we have is a solution on the right-hand side, where the operator just manages what is happening in an automated way, and the productivity is 3 times the productivity of the left-hand side. The automated system had dealt with 3 demands as compared with 1 demand. This is a model that we can employ in other processes as well. In terms of the application of AI in our payment solutions, I would like to give you another example where we look at creating hyper-personalized experiences in the credit card space and the financial services space. For us to be able to interact with users in a hyper-personalized way, we rely on relevant transactional bases. Our transactional base is huge. Over 1 billion transactions go through our systems, and this allows us to understand the users, and this makes us stand out in the market. We understand the preferences of users, their moment in life, and we are able to create interactions which are hyper-personalized and relevant for each user. To do this, we bring together the understanding we have of these users based on registration base, transactional bases, history of payments, and this is all available from our systems. We combine that with other products that the users have. For example, card brands, benefits provided by the issuer, and other products that are available to the users. We also have, for example, the destinations visited by the users, and this allows us to provide hyper-personalized services. We therefore have AI at the data level to generate knowledge about the user and to understand what is relevant for each user at any one point in time. Then we have AI when we interact with the users. That is when we talk to the user, be it in terms of an agnostic approach, in terms of channel. This could be through an app, WhatsApp, SMS, email, text, voice. AI ensures that we can interact using the best possible channel, which generates a bigger engagement on the part of the user with the products. Because the perception is that users are receiving something that is relevant to them. Now we have a video to show what this experience is all about. In this journey, the user is buying a ticket, and throughout this journey, users interact with us in a personalized manner. The user buys his or her ticket. International ticket bought. Benefits of the card used. Travel insurance, discount in hotels, discount in car rental. This is the message that the user receives: "You have three benefits of your card that you can use now. Travel insurance, discounts in hotels, and car rental. Good morning, Natalia. In the next few days- Prefer Mastercard. With it, you will have more time to pay your next bill. Good afternoon, Natalia. Keep an eye on the limits of your cards. Your Mastercard has now reached 90% of your use limit, and you have BRL 1,000 available. Hello, Natalia. Go to the VIP lounges available. You can sit down, rest and drink, and you'll have free Wi-Fi as well. Enjoy. Then the user reaches his or her destination. Welcome to New York, Natalia. There is a music festival and you have a 10% discount if you pay with Mastercard. AIA, CSU. Basically, we increase the perception of value on the part of users relative to the benefits that are available. This is always a pain for the issuer, because they need to translate that at the right point in time for their users. What we are doing is we are entering in this new era where we can use AI and hyperautomation in all of our verticals. These are two examples, but we do a lot more. We deliver value for the end users and for the customers. For the end user, we have limits that are shared among products. We have benefit suggestions based on transactional behavior. We have real-time marketing campaigns. We have personal financial advice so that users can deal with different financial products. What we aim is to create satisfaction and generate loyalty. Then what we deliver to the institutions, to our customers, is the ability to grow revenue and profit, be it with better approval rates in terms of transactions, the cross-selling of new products, cost reduction, automation of processes. I gave you the example of the chargeback. We also employ AI in risk prevention on our platforms. There has been an over 10% reduction in fraud relative to other tools in the market. Also we improve credit analysis, loyalty programs, and marketplace. Just to add a little bit to what Bruno has said, we can say that at the end of the day, operating financial services, we look at the architecture, all the technologies, AI. It may seem that life will become more complex, but no, that's not the case. Means of payment are now a passive tool. You can use different channels. You can make purchases or transactions, and then the financial institution cannot make use of that to encourage customers to make more transactions. So what we want to do is to create an experience where one transaction can give rise to more interaction. We want people to use the card, for example, to buy an airplane ticket, and the person could receive the benefits that they are entitled to, so that they feel like they are being looked after. They receive the benefit straight away instead of having to chase the benefits. So when people buy a ticket, they are aware that there is a pool of offer, chargebacks, and they can look for products to complete the experience. The important thing is that if customers need support or they need something to happen and this takes 10 or 20 days to happen, or contracting credit, for example, it would be no use. You have to deliver end to end. So here with our infrastructure of products and platforms, artificial intelligence, hyperautomation, we are able to ensure that the experience is the best possible end to end. Yes, we need to ensure efficiency in the relationship with users and in all the processes, the internal processes required to meet the needs of users. We know that today in the market, there is greater competition in terms of institutions and products. Competition is a lot fiercer now. The need of financial institutions today is to fight for principality. This is one of the avenues we can pursue to achieve principality. Then, in terms of our internationalization, we should talk about the context. If we look specifically at the American market, we see that the market is not in a very comfortable position in relation to some years ago. There is inflation pressure. It has eased a bit, but inflation is still higher than previously. The interest rate is also higher, and the growth has been strong in terms of fraud and financial losses. These are all indicators that we, in Brazil, have been used to dealing with, and this makes us confident to operate in a market where these adverse conditions are present. In terms of the evolution of market solutions, we see not only in the States, but globally, that there are regulatory pressures in terms of evolution of payments, digital payments, frictionless payment, instant payments, the use of digital wallets. So there has been a lot of change in terms of technology to ensure that this industry is more secure and more agile. In Brazil, we know that we are ahead in many aspects in terms of the technology, in terms of the experience we have. Brazil is a benchmark in terms of technology for financial services. Our population uses digital technology. People are keen to adopt new technologies very early on. They use digital services in general and also for financial services. Brazil is the country that has the highest growth of online purchases. We are the second in terms of internet users who access also financial services. We have evolved very fast. This also allows CSU to be in a better position to internationalize. When we look at the American market, we feel we are very well positioned in terms of the technology architecture to penetrate this market. We have many competitors in this market. We have the incumbents who have been operating for a long time. They understand financial solutions and payments, but they are not so good in terms of the technology. There are mid-size players who have been trying to bring to the market modern solutions, but they are not so good in terms of the experience and the expertise about this market. We were able to bring these two things together. Our technology platform has evolved. We have a hybrid platform, which has mainframe, but can be 100% cloud services, APIs. We have more flexibility in terms of combining the 32-year expertise in the market and modern technology solutions. Also, one of our differentials is the breadth of our solutions. We do not only card processing, but also full service, which includes banking, acquirer processes, process efficiency, and our solutions for loyalty and CX. This is very unique to us and positions us uniquely. Additionally, we also use AI in all of our business verticals in terms of experience and management of operations. If we look at the size of the American market, it is 15 times larger than the Brazilian market in terms of financial volume transactions. Not only that, it has a number of financial institutions, potential customers, which is a lot larger than Brazil. In Brazil, we have 1,000 institutions. In the States, we have over 11,000 institutions if we bring together banks, community banks, credit unions. It is a long tail, and a considerable one. These institutions are potential consumers of our services. If we now look at what we have to offer, we want to offer not only our solutions to financial institutions, but also we can adapt to different geographies. We serve the Brazilian market with solutions that are known as global. Most of the times, it is an American product that is being made available to Brazilian residents. This market has been growing consistently. Last week, Brazilians spent BRL 66 billion abroad, and this was mostly in credit cards, BRL 45 billion, and this has been growing. In 2024, at the end of Q3, there was a 30% growth relative to last year. It is a relevant market. In Brazil, we see that there are global product solutions that offer a global account in dollars or multicurrency. These solutions also offer access to international investments, ATM withdrawals of cash, and it is mostly a debit card associated to the account. The opportunity that we see and our ambition is to unlock new possibilities for these Brazilian institutions. We want to offer global credit cards that Brazilian residents can use. To do this, of course, there is a roadmap. We have to analyze the potential within American institutions and Brazilian institutions. There are different stages for this geographic expansion. The first stage has been completed. We have analyzed the potential and competitive market. We are now working on stages 2 and 3 to define our business partners, our strategic partnerships, and local suppliers, which are required to make this kind of product come to fruition, and the due diligence. We are now doing the due diligence. Then we will move on to the implementation of the operation with all the certifications, the permits which are needed, the homologation and certifications, and then we are going to launch this, we believe, during 2025. It's not simple, but if we bring together all the knowledge that we have, our track record over 32 years in an industry that has become a benchmark worldwide. Brazil has the benchmark in terms of payment solutions and financial services. This makes us confident that we can move into the U.S. We know our competitors, so there is no surprise there, we don't think. Speaking about our results, just to recap. We have created a virtuous cycle of growth. We have always worked this way. We grow, create more results, create more cash, and then we reinvest, and this is how we have been able to grow in terms of the company's finances. So just very briefly, the company has been growing consistently year on year in terms of operational and financial volumes. Our revenue has had a CAGR of 6%, 7% per year. But we have to look at the verticals as well. So when you analyze our balance sheets, our financial statements, you should look also at the verticals because they function in a different way. CSU Pays has been benefiting from the expansion of the payments market in Brazil and the financial industry as well. Not only because we have been able to include new users, but also because we are giving access to more products to more people. Not only card, but also Pix and other types of transactions. So CSU has been growing very strongly on this vertical. 10%, 11%, 12%, 13%, 14%, 15%, depending on the operational indicator that you use. So we are talking about over 20% in terms of growth year on year. We are growing the number of billed units, managed units, transactions, TPV, and so on and so forth. This year, we grew in the region of 10%, a little bit over 10%. When we look at the 9 months to date in line with our performance in the last few years. So very relevant expansion. We have a road ahead of us in Brazil. We are now developing the operations in the U.S., but it is a segment that still has a lot of room to grow. This market is growing. There are new players coming in every day, new products, which are offered by companies or are required by the regulatory agents. But we can capitalize on that. In terms of our finances, we worked not only to have a broader portfolio, but to have also a better performance. So we eliminate red tape, legacy systems, manual processes, paperwork, and we operate 100% digitally. So in terms of profitability, we went from 42% in 2020 in terms of gross margin, to 54%, 55% in terms of gross profit and gross margin. We see no reason for this growth trend to change, and this profitability is at a very different level in relation to some years ago. In terms of CSU DX, just as space, this unit has changed. We have transformed our service, and we now serve the users in a very different way. Over 70% of the interactions are digital. It is important to stress that we see the effect of transformation, which is not as direct. If you move from traditional services and you use tools, at the end of the day, the production chain as a whole benefits. Our customers benefit from lower prices, we benefit from greater profitability, and the end user has better quality services. We went through a very deep transformation in the CSU DX area. The transformation is now at a slower pace because 72% is now digital, and we have been growing our revenue at this vertical with greater profitability. In the future, what is going to change are these new solutions, the HaaS. With artificial intelligence, we have signed new contracts, one specifically in this quarter. With this, we are going to accelerate the growth from now on. The profitability of this type of product is a lot better, which leverages the performance of this business unit. Because of this effect of growth with greater profitability, the company has had much better results financially. If we look at all the indicators, gross profit, EBITDA, net income, they have more than doubled in a short time, and we have reached profitability levels which are extremely good. 42% in terms of gross margin, 35% and 36% in terms of EBITDA margin, and 18% in terms of net income. All the indicators have grown by two digits. Gross income has grown 14% in the year to date. In terms of net income, we have grown over 10%. We do believe that we have a promising future ahead of us when we talk about our wish to expand into the U.S. There is demand on the part of the companies that hire us to provide services. We see the market in the U.S. They are looking for alternatives. There is a window there, a window of opportunities, and we want to position ourselves to take advantage of these opportunities. We are investing heavily in terms of CapEx, so that we can move on as fast as possible. As I said before, we think in terms of self-funding. We focus and prioritize cash generation. Our operational cash generation has been growing. We are talking about more than 84% of the EBITDA, which is converted to cash. That can be reinvested in the company. We have no financial leverage. We have been increasing CapEx and also the return of the surplus capital to the market. We have over 50% in terms of payout. This year alone, we have distributed over BRL 20 million. Despite the increasing investments and the payout to the shareholders and paying our debts, we still have been able to accumulate cash. We are very confident that the execution is good and that we should continue to focus on our ambitious growth plan. Very briefly here, we are seeing on the part of those who monitor the company and understand our challenges, we can see that the market understands our initiatives, our results, and this has been translated in the price of our shares. Our shares have increased since 2022, and we have almost doubled in terms of the return for the shareholders. More people are looking at us, are talking about our business. We have an investor base that knows the company and participates and believes in the company. Investors feel reassured because they see what we have been building. We have institutional investors, and more recently, we were recognized by the market. We achieved a very good ranking in terms of the seven categories that we were assessed on. We saw this increase in the prices of share, but there is still a mismatch. We have been working closer to new investors so that they understand what we have delivered. When we look at the return indicators, the company is much above the company performance, and we also have to think about the future. Just to wrap up, I think we must stress that the company has very strong current results. We are not talking about the future. Investors should understand that the company is committed to delivering today whilst looking at the future. We have a new expansion cycle, which increase with the expansion of our portfolio, new functions, which are now maturing and generating results. We have new avenues for growth, new geographies and artificial intelligence. We have a very strong balance sheet that allows us to pursue our plan. We can make investments and also pay out dividends to our investors. For those who believe in CSU, they should look at the multiples in the market. We know that sometimes we have window of opportunities that allow people to become shareholders. We see a very bright journey ahead of us. We can now move on to the Q&A session. Thank you. We will now begin the Q&A session for investors. To ask a question, please raise your hand and wait for instructions. If you prefer to send your question in writing, write your question in the Q&A feature, stating your name and affiliation. Our first question comes from Mr. Alexandre from MSX Invest. I have a question, actually four. What is the market potential for HaaS? What are the best bets in terms of business processes? Which industries does it serve better? A question that I have: Why should I hire CSU and not Accenture or one of the Big Four to optimize processes? I will take that question. When we speak of HaaS, we should focus first on what it is. HaaS, and what we deliver in terms of solution to our customers, is not only consulting where somebody would hire us to use a certain process. What we do is take on the responsibility for managing the process. Traditionally with HaaS, we have a business model where our customers pay for each demand that we treat, and then we employ hyperautomation and artificial intelligence to ensure that the process happens in an efficient manner. It is a perennial relationship. It is not like they hire us to look at the problem, solve the problem, and bring indications on how to deal with that problem. No. We own the process, so to speak, to ensure continuous efficiency in the process. In terms of where it is better employed, whenever you see a company that has to relate or interact with millions of clients, these companies have a significant number of processes that they have to deal with. We are talking about major financial institutions, telecoms, utilities, retail, insurance companies. These are all industries that could use the HaaS solution. In terms of processes, although in terms of processes, the solution can be employed to any process, we chose those processes where we have more expertise so that we can generate results for the customers in the short term. These are fraud prevention processes, chargeback, onboarding, and credit. We can also employ HaaS to monitor the quality of these operations. We have different processes, and then we have the quality monitoring of these operations. The market potential is huge. When we look at these different sectors, it is in excess of BRL 6 billion, and we think that the potential is huge because we can tap this synergy. We operate in similar processes in different industries. For example, when a customer challenges a certain amount, this is something that happens in different industries, so we can build on what we have created already. Just to add to what Bruno said, we have priority business processes, and this is what allowed us to accelerate our business agenda. That is why we were able to get the first contract. HaaS can be employed in different business contexts and different processes. This is the major advantage of HaaS. Internally, we made some choices, and then in time, once you have worked with a specific process within a specific client, you can offer new options. This creates a virtuous cycle in terms of new sales. We changed a little bit the business strategy to accelerate the capture of results. Our next question comes from Mr. Roberto Fulgraff from Legado. He asks, "In CSU DX, did the new contracts create a temporary inefficiency? What is the average time required to reverse that?" I think there are two key points relating to DX. Whenever we implement processes for a new customer, we have to wait until we generate the income, the revenue, but we incur expenses, so there is a mismatch. Sometimes you have to bring in back-office teams. You have to adapt the technology. There is an implementation phase where we incur expenses to ramp up the contracts. In general, it takes between 3-4 months to implement a contract and for the revenue to come in. Then 3-6 months until we have the full income, the full revenue. This is the curve in terms of performance improvement. Specifically talking about Q3, because we have a lot of digitization of processes, we reduce the structure. In Q3, we have one-off expenses in terms of the restructure of certain areas. BRL 1.5 million was the impact on SG&A. In Q4, this is not going to happen. We will see a better curve on these two fronts because we will have implemented these new customers and the expenses will have gone. Our next question comes from Mr. Fernando Guttman from XP. He asks, "All companies are talking about AI. I am not sure where the differential is. Could you clarify, please?" I will take this question then. When we look at the market, all companies are talking about AI. The thing is how we employ AI in our business units. We are not offering AI as a tool or as a platform that our customers will use. What we are doing is we are employing AI within our business units. In the payment unit, for example, we take this mass of very relevant data that we have in our data lakes, and we can employ AI on a private database, and this requires training the AI. The AI has to learn. It is machine learning, but we do that. We are not outsourcing that. We are not outsourcing it to the customer. No, we do it ourselves, and this is a perennial relationship, and this in turn creates a product. The product is not the artificial intelligence. No, it is a personalized relationship, a more efficient process, a hyper-personalization of the service, better quality of the service. The AI is just the enabler of all of that. We brought the AI to deal with solutions that are very practical for our customers. The next question is from Mr. Roberto Fulgraff from Legado. We see an expressive increase in SG&A way above the revenues, which are explained by the AI initiative and the U.S.A. projects. When are we going to see an equivalent increase in the company's top line? Thank you for your question, Roberto. Just to recap, we had three major impacts in SG&A. We had the restructuring, which was a one-off thing, and we have these greater investments that we are making to strengthen our project technology and commercial teams. This is required not only for AI and U.S.A., but for all the other initiatives. We have new digital payments, of course, we need to strengthen departments in the company to support the growth. This is a process that evolves. We have been making investments according to the growth in the top line. We were able to accommodate this expansion without hurting the gross profit or the income in terms of EBITDA, for example. We have been working like that, and this is a vegetative growth for the business. These initiatives are already maturing. The revenue that we generate today comes from a sales process that started six months or a year ago. Of course, these things are diluted, and we expand and contract according to the top line. The U.S.A. project is being funded by the revenue generated in Brazil. We do not have any revenue generated in the U.S., so it is not possible to self-fund in the U.S. We are investing the surplus from Brazil into the U.S.A. initiative. As Bruno said, we have a very clear roadmap in terms of executing this project. We are looking for partnerships. We are looking for the licenses. Some of these variables are not up to us. We depend on the regulator. We do our best, of course, to have things in the shortest possible time. But of course, this depends on other factors. The U.S.A. probably will perform as of the second half of next year. Obviously, we are going to try and do things as fast as possible, but this is what we have in mind in terms of seeing the first results. The next question comes from Mr. Sidney Nascimento, and he is going to ask his question live. Good morning. Can you hear me? Yes, that is very clear. I would like to listen a little bit more about your margins. The margins have been growing. In a previous call, you said that we might be reaching a more stable phase in terms of the margin. Do you think that the current level is the level that we could expect going forward, or do you think there might be a gain? You said that 72% of the operations have been digitized, so is there going to be much change? Also the expansion abroad, especially in the U.S., are you going to see the same margins? Is the competition there more difficult? Then in terms of lead time, you talked about five months from when the customer starts relying on you and you deliver the service. I'll take the first part of the question, then I'll pass it over to Bruno for the implementation time, because it depends on the level of service, on the product, and so on. In terms of the margins, when we talk about the dynamic today, we have services that are today available to the market. When we talk about Pays, it is very close to the recurring level in terms of margins. There, specifically, we have revenues that are close to 96% digital. In that unit, the growth will be marginal. The percentage points that we can capture. There is always room. We always have AI and other tools that will allow us to improve the performance in terms of profitability. What we now want to do in that unit is increase the conversion rate, the volume, not really performance. Most of the digitization has already happened. But for DX, there is a lot of room for us to increase the margin, be it in terms of customer experience. When we speak about digitization, we have changed the channel, the format, but there are relevant elements where we can use AI to increase the margin. We use AI in terms of deep learning, but we don't use AI in terms of generative AI. In CX, we can capture gains. But that's not where the margin is going to grow in this unit. The growth is going to come from HaaS. HaaS is a product that delivers greater performance in terms of results for us and for customers. The HaaS margins are way above 35%, 40% in terms of margin, which is very different from the margin of 18%, 17% that we have currently at DX. So there is a lot of room there in terms of gross profit. The EBITDA is inefficient because we grew the structures. As the volume grows and the numbers attest to that, the SG&A will be diluted. So there is room there for some incremental productivity. Anything else on margins? Yes. In the States, yes. I'll turn it over to Bruno then. In terms of the timeline for implementation, we have great flexibility in terms of building solutions for our clients. This is one of our differentials. We don't talk about shelf products. Oftentimes, we have to integrate customer systems. We bring in information. For example, and I'll give you an example. One of our customers pays commission to their resellers, and they want to integrate that in our platform, in our payment app. All of this adds a little bit more of personalization in the project and requires more time. In terms of standard projects, I would say three months. In terms of personalization, you have to add to these 3 months. This is for CSU Pays. For DX, the implementation is more simple, and the time frame is shorter. In terms of the U.S., we are still at the assessment level of all the conditions that will be on the table. We do not have enough information yet to establish the margins. One of the most relevant factors is that we will carry out the operation in the United States based on what we have installed in Brazil. This gives us a benefit, and our thesis is based on that. We will have a benefit by operating from Brazil. This will depend on how aggressive we want to be at first to attract customers and grow in the market. It depends on our appetite for giving up margins at first. Something very relevant is that we are going to offer solutions from Brazil, and this brings us a benefit. There is an arbitrage aspect here for developers. For example, we pay half year relative to what we pay in the States. This is a matter of choice. If we want to have a larger margin or if we want to accelerate growth. We are still thinking about it and how we are going to do that. Was everything clear, Mr. Sidney Nascimento? It is not really related to that. I do not know if you have disclosed the percentage that your biggest clients account for in your P&L, the top 10 clients. We disclosed this in terms of reference, so the largest customers account for 80% of the revenue, the top 10. It is relevant. No customer accounts for more than 15% of our revenue. It used to be a lot bigger, so this is being diluted now. Thank you. We remind you that to ask questions, you should raise your hand or write your question in the Q&A feature, stating your name and company. Our next question comes from Mr. Rafael Canuto, individual investor. Good afternoon. Given the macroeconomic scenario of the market and the opportunities that the company has with its customers, is M&A a feasible option? Would it be better than the current strategy to prospect new clients? Thank you, Rafael. I would say these are complementary strategies. No company can live thinking that they can do M&A all the time. Otherwise, you destroy your cash position. These are complementary strategies. We prioritize organic growth. This is how we have been growing throughout our history. We have done very few M&As. In the last few years, we have turned on our radar because sometimes we can bring forward a cycle that would otherwise take too long. A clear example is the American market. We have been looking into this agenda, trying to understand the market, looking for partners, and it is just natural that you might find opportunities to make a strategic move. So yes, our radar is on. In terms of the possibilities, we would look at an acquisition more from a geographic point of view rather than a consolidation in Brazil. CSU is a relevant company in Brazil. Again, M&A is not a variable that we should include in our modelings. It is very uncertain. You have to find the right assets in terms of technology, client portfolio size. You have to find, then, the willingness to sell on the other part and at the price that we want to pay. Too many variables. Yes, we are actively looking at what is available on the market, but our focus is to develop this initiative organically. If there is a good opportunity, we do have the balance sheet means to do it. Since there are no further questions, I would like to turn the floor over to Mr. Pedro Alvarenga for his final remarks. Thank you so much for attending this video conference. It was a bit longer than usual, but we thought it was really important to make our strategy clear so that you could see the growth that is going to happen ahead of us and the timeline as well. Again, thank you very much, and please use our email, our channels to be in touch with our IR team, should you have any questions. Thank you very much. The video conference of CSU Digital is now ended. Thank you very much for attending, and have a lovely afternoon.