Earnings Call: Q4 2023

Mar 21, 2024

Morning, ladies and gentlemen, and welcome to the CSU Digital video conference to discuss the results for the fourth quarter 2023. This video conference is being recorded, and the replay can be accessed at the company's website at ri.csu.com.br. The presentation is also available for download. We would like to inform you that participants may not only watch the speakers but also follow the slides during the presentation. Ensuing this, we will go on to the question and answer session when further instructions will be provided. We would like to remind you that the content presented will be in Portuguese with simultaneous translation into English. For those who wish to follow the audio of this presentation in English, please choose the language through the interpretation icon at the bottom right of your platform. For those that don't speak Portuguese and want to listen to the presentation in English, it's possible by pressing the interpretation button presented on the bottom right corner of your platform and then choosing the language properly. You can also mute your original audio for a better experience. Now, before we proceed, we would like to state that the forward-looking statements are based on the beliefs and assumptions of CSU Digital and the information currently available to the company management. These forward-looking statements could involve risks as they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should keep in mind that events relating to the macroeconomic environment and the segment and other factors may lead the results to differ materially from those expressed in these forward-looking statements. Present at this video conference, we have Mr. Pedro Alvarenga, CFO and Investor Relations Officer, Mr. Fabiano Rosegatti, CTO, in addition to the IR team. I would now like to give the floor to Mr. Pedro Alvarenga, who will begin the presentation. Please, Mr. Alvarenga, you may proceed. Good morning, everyone. Thank you. It is a pleasure to be once again here with our investors and other people interested in knowing a bit more about our company. Now, I'd like to talk about our earnings results, not only fourth quarter of 2023 but also consolidated of this year. A year that I'd like to comment, which in fact, a celebration of much of what we started designing 3, 4 years ago. A plan that was drafted envisaging a quite different future for the company, a future with much more breadth in terms of products, bringing a technology increasingly more sophisticated and more complete for each one of our customers. A future in which all the changes that we have seen within the financial industry, consumer industry and also here in Brazil and abroad, increasingly bringing new challenges to companies, which is our case. Companies that act, operating a range that is relevant to solutions for companies that actually want to provide financial solutions to their end users. Much of what we're going to talk about during this presentation today is the result of the work that started three, four years ago, that we have been reaping the benefits of all those changes that we have proposed to make day after day in the company. Changes that have actually brought quite relevant, significant gains to the company from any viewpoint. Operational, when we see that the company consistently has been growing its user base, the number of accounts and cards. The company has had quite significant growth in the number of transactions managed on our platform, as well as the financial amount transacted. All the stages of digitization of our solutions, which was a very relevant part of our strategy to bring efficiency, productivity, bring cost reduction to the company as a whole, and while enhancing the value perception of companies that hire us as well as end users. When we think about CSU Pays, it's a business unit that has over 95% of transactions totally digital. CSU DX, we have an average of 71% over 2023. Likewise, I believe this year we had extremely important news, which is renewal contracts, showing how customers actually see value in the deliveries, in the evolution of our business brings great security and confidence for us to keep up and keep on investing in the solutions as we've done in the past years is to finance. The company for 18 consecutive quarters has had great performance with records in terms of financial metrics, EBITDA reaching BRL 181 million, 9% growth, net income growing to about 20%, cash generation of the company, which also grows very fast, reflecting not only the evolution of results, but the high conversion of cash that we present vis-a-vis our results, profitability standing out. If we compare to other players in our segment, the company takes on a quite relevant positioning in terms of profitability and revenue gradually growing, capturing each one of these effects I've just mentioned. From the standpoint of platform, I think the main message here, we're going to explore some of those items during the presentation, is that the company actually goes into a totally new phase from this year, 2023. The new solutions of CSU Pays and digital payments in loyalty or finance, they have been 100% completed in the second quarter of this year. Other part of hyperautomation of processes that started being part of our portfolio, initially very much prepared to meet the demands of financial services. But today, with the much broader array, meeting all demands from the standpoint of processes day-to-day of the various companies. They make up this complete portfolio, a full service company, standing out regarding the rest of the market to leverage the new businesses and bring even more speed of implementation, bringing more opportunities for growth from now on. I believe the great summary of what we're going to talk about over the day is that the company has gone through this cycle, and now it moves into this phase of capturing increasingly more good results deriving from these new fronts that we have built over the past years. Speaking of our results of 2023, I would like to recap just briefly. CSU is a company of technological infrastructure for financial services. We work on this model B2B2C, so companies use our services, our technologies, our structures to make these services available to their end users. Our brand is always behind the scenes. We're working on the day-to-day to deliver high quality service to those companies. Today, we take up a quite relevant space within this industry because we actually have an array that encompasses not only solutions of financial services as digital payments, loyalty, embedded finance. But everything that is necessary for financial transactions to automate these demands from financial services and to meet end users in those demands that come up every time they hire a service, they want to ask for an upgrade, every time they want to clarify any questions and with their present, closing this cycle and servicing customer end-to-end. We'd like to recap these topics because when we look at the results, it is extremely important that each one of the investors analyze these walls in a separate way. This is why we disclose this to market. The verticals lived very different dynamics from the standpoint of growth and profitability in the past years. Likewise, because of the launch of new solutions, they also tend to have different dynamics over those periods, be it in the short term, mid, and long term. It's really important to make those analysis in a separate way. Talking about the units individually, CSU Pays is our flagship. It's how the company was born, and it's actually a unit that year after year has been delivering very consistent, significant results based on any metrics, operational, financial, whatever is analyzed. When we talk about units registered on our basis, we closed the year of 2023 with almost 37 million of accounts, wallets, cards, et cetera, being managed by our system. It's been an expansion of 3% approximately regarding the previous year, keeping a pace of two digit expansion of this operational indicator. When we talk about transaction volume, we're talking about an expansion that is even higher. The company today has a portfolio that encompasses solutions for issuers, acquirers, transactions more linked to the new digital payment solutions like Pix, crypto solutions, so the transaction volume grows at a pace that is quite strong as it's been happening in the Brazilian market. We're talking about growth above 20% in the past years. This year, we had a growth of 24%, so the payment volume follows the pace that we see in the number of transactions. But I'd like to draw your attention to the fact that from the financial standpoint, the company has been capturing great part of this growth. It's worth reminding you that this unit, the company as a whole, the company has been going through a relevant stage of digitization, as I mentioned in the beginning. To date, 95% of transactions are digital. But this obviously has a quite relevant effect when we think about price. So we end up growing about 12% a year. This year, the growth close to 5%. Reminding you that in addition to digitization effect, with this year, we had a relevant agenda of renewal of contracts. Almost all the customers that we have on our base, that was a stage that was quite important for us to be confident for the next expansion cycle that we are living from now on with all the new solutions that I've mentioned previously. Even being a year in which we had renegotiations, important advances in digitization, we had quite interesting growth in terms of bottom line or top line. When we talk about profitability, digitization has this great advantage. Even in scenarios where you let go price, you can capture margins that are much more relevant for the company, considering that the processes linked to digital products are much more efficient. The need for paper, red tape, demands that are handled manually, they drop drastically, which allows us to capture a lot of value regarding each transaction that we manage. So again, we've had an expansion, more than proportional of the gross profit indicator when compared to revenue, helping us expand even more our margin that ended fourth quarter with 52.6%. When we talk about CSU DX, many of the effects that I've mentioned previously on CSU Pays, they're repeated here with greater amplitude. Though digital transactions in customer service platforms, they actually have a component of efficiency that is relevant. Customers want companies that act in this segment to offer and to provide more volume every day, to provide solutions that increase the quality perception of end users, but at the same time, the effective cost for each interaction managed should be smaller. As you can see here, we had a relevant expansion in the number of interactions managed on the platform. The great difference, highlight is because of the volume of transactions performed digitally through self-service apps, robots, chatbots, AI use that exceeds 70% in 2023. Because of this effect of digitization added to a very challenging economic scenario in the beginning of 2023, especially between the first, second quarter, we had a retraction of revenue year-over-year on this vertical, that gradually was recovered over the year, a second half ends much higher than we had been presenting in the beginning of the year. So we had an expansion of 8% revenue in accumulated. When we talk about comparing fourth quarter 2023 compared to the second quarter 2023, that's a point when economy starts catching up, and we naturally close the year with a revenue below what had been presented in 2022. This effect, digitization, economic effect, as I've mentioned, they start being sort of reduced, bringing good outlook for this service front of the company, especially regarding- No, mate advances that we see in terms of digitization. I'd like to reinstate a bit of the agenda that Fabiano Rosegatti will talk about in a while, which is the topic of new growth avenues that are born due to the automation of processes and the use of AI in each business process, be it onboarding of customers, interchange, anti-fraud. Well, several new solutions that start making up CSU Digital's portfolio from now on that actually bring great outlook for the company as they have a great addition, great adherence to the needs of companies with which we relate. Surprisingly, they have brought great perspective in terms of acquiring new customers. The commercial agenda has improved a lot because of this product and brings a much more positive horizon for us on this vertical. More positive horizon from the standpoint of profitability. All the part of service has gone through this digital transformation, as I've mentioned, and you can see it on the screen on the right-hand side where we see gross profit and margin. We ended the year with a margin above 18%. It's a quite significant number for this segment. But again, HAS, which is our automation platform, tends to change this diagram as it has a component of productivity and profitability that is higher from what we deliver today in the service part. CSU DX is a great bet for us for 2024, helping capitalize the growth of CSU DX and feeding through cross-sell, up-sell as the relationship with these companies is expanded on the day-to-day of our business. The combination of these effects makes a company to have ended the year with a slightly smaller revenue, as I've mentioned, because of DX and the consolidated with an important evolution over the year. We had an expansion above 5% when we compare the beginning of the semester with the end of the second half. Reminding you that CSU Pays is a unit that grows repeatedly. 2023 is not being different. The relevance of this business unit that is our core business, that is increasingly greater when we consider the whole picture. When we talk about the main financial indicators of the company and results, any metrics analyzed, the company grows at a much more significant pace than the very growth of top-line. This is very much related to the evolution of productivity of our business units, very much linked to this stage of digitization as I mentioned, very much related to this change in the mix from the standpoint of revenue of a company. Any metric that we analyze the company in the past four, five years, either doubled the results annually or tripled, which is the case of net income. This is a process that is non-interrupted because it's a technology company. It repeatedly captures the benefits both on gross margin, but especially in terms of EBITDA and net income because of the operational leverage. We have fixed costs regardless of how much we grow from this operational standpoint. It leads us to be able to maintain the structure in line. That's what happened in 2023. We grew. We grew gross profit, but we don't tackle expenses, allowing us to leverage more than proportionally the other result lines. We closed with record results all the financial metrics this year. Gross profit above BRL 208, almost BRL 209 million, CAGR of 18% of year, EBITDA of BRL 181 million with a margin of 34%. Reminding you that this margin exceeds 35% at year-end. We're showing this continuity of expansion and net income, also record, and the company reaching BRL 88 million with an expansion of 20% regarding previous year of the last quarter, exceeding BRL 24 million with a margin getting to 18%. Lastly, for this part of results, I'd like to highlight that CSU is a company that has no detachment between results and cash. We have high conversion of results to our balance sheet. It means that if I grow 70, 80%, if I double my EBITDA, I generate the same effect practically to my cash generation or operational cash generation. This is what's happened in the past five years. This year, we grow this operational cash generation, practically 16% regarding last year, reaching BRL 152 million, which allows us to gradually settle our debt with banks on our debt pay downs. Our financial leverage today is zero. We have expanded the investments in technology in the past years. We've expanded our distribution of earnings to shareholders. The indicator exceeds BRL 34 million, and we're talking about a payout of about 50%, reminding you that part of this amount will still be approved at general shareholders meeting. Anyhow, this shows the robustness, both operational and financial that CSU has. The company today has a capital structure that is well-balanced, also in terms of net cash, allowing us to continue investing so that we can increasingly capture growth opportunities that we have been seeking and prospecting in the market. I'm going to turn over to Fabiano, and the idea is to talk a lot about what we have been planning for this near future for the company. A lot of the futures are already present on our day-to-day, right, Fabiano? It's a bit of that. Okay. Thank you, Pedro. The future is today. It is here now. Thank you, Pedro. The future is today. It is here now. Actually, when we look at our market, we notice that the revolution, it is not the transformation that is happening, is quite present. We are going to explore this over the presentation. Actually, when we get an example like this on our day-to-day of payment method using credit card as a basis. For example, we have managed to transform all this process into digital, as Pedro mentioned. I have an operation that is very robust in a sense, and slowly we incorporated new technologies that allowed us to make it even more robust. The flexibility is also very important for our customers to compete in the payment method. Competing market is always very hard. Our customers have great challenge to gain relevance in their customer portfolio. Being more flexible. Instead being more flexible, faster, and nimble as possible. When we bring these technologies and format appropriate products with this quality, the result that Pedro mentioned here are a natural consequence. This digital experience end-to-end, this transformation that has been happening, incorporating new technologies, has brought us not only efficiency from the standpoint of cost, but also it has brought us new markets. We are going to delve into that in a while. New possibilities for action, always with the same DNA. We have always had the goal of democratizing what is complex, what is more difficult to be implemented, and we bring this in a simpler way to our customers, to the companies that hire us, so that they can have the best in the financial world, in the operational world available to them. When we take examples here, just to give you a simple example. Onboarding of a client. We help digitally. From the onboarding of a customer, we have the verification of a document, a proof of life. Life cycle, the financial and tax report that we must generate so that the customer can- Go through the life cycle so that customers can render accounts to government and shareholder. We deliver the technology platform. We deliver technology platform, the expertise that has been developed by our team, deliver control processes that are very robust. Information security processes that is in the agenda of everyone. The sum of it all ends up being a service that is complete end-to-end, delivering with quality, something that is very relevant to our hiring customers. A quick context. The whole market has been talking a lot about AI. Just briefly, the whole market has been talking about AI. How do we apply that to our day-to-day? This is what we're going to delve into. When we had a problem in the past, and the past company faced problems of scaling and growth, there was a need. What was born was cloud computing, technology that enabled and leveraged the growth of several businesses that were being digitized increasingly more based on the internet, on digital relations. The solution was given by the market through cloud computing. Now we are living something somewhat similar with the growth of businesses and growing complexity and challenges that come up in each market, causing or leading to disruption in certain models. With all this complexity and speed, there is a need of applying more sophisticated computational models to companies. To all of that, we denominated AI. A great umbrella that helps companies speed up their digitization, quality service for their customers. This market transformation and the market is happening at a speed that is unprecedented. This is reality for our companies. We see in our customers, we see it in here. You certainly experience this in your companies, too. Again, at a speed that is higher with much greater complexity. All of this brings this challenge of how to deal with it. What happened that we have been noticing to our searches in the market is that there is a detachment, a gap of investment in the shop window and sales to customer connection to end customer that has been very much prioritized, naturally. There is a gap regarding the investments of what works indoors. This gap is leading to an experience problem with greater error margin. Growing dissatisfaction when we take challenging companies in the market. They end up having an advantage because they do not have this gap. They are hand in hand because they were naturally born and prepared for this complexity. The challenge is how we can support our customers, reduce this gap and perhaps bridge totally the gap, bringing a much better experience for the end customers. The answer to this is the following. We've been using two major umbrellas in the technology, several tools embedded. One that is in the base, which is hyperautomation. The market has gone through a period of adopting automation of small tasks, very much software robots, RPAs, but this alone has not proven enough for the challenge that has been put. For that, technologies have evolved, software manufacturers and service companies have prepared to deliver this additional thing, and that is hyperautomation. That brings a chain of product with much greater results from the standpoint of delivery, with a very fast time to market. This is very important. Anyhow, you can resolve a problem, developing a new system. It will take 12 months to develop, 6 months to implement. Here we propose, based on this technology, on this platform, we propose something with much faster results. Less than 3, 4 months, we can bring significant results. We're going to show you that in a while. On top of it, we've noticed that it was able to implement hyperautomation that is quite significant. It was still possible to enhance this dynamic of hyperautomation of processes. Then we used AI techniques to bring additional results to businesses. Of course, it is important. We have great debate, not only within CSU. The whole market has seen this, and we elected three major strategic pillars for the adoption of AI. AI is very strongly based on data, in our case, sensitive data, financial data, registry, and high-sensitivity data. We have to train our models and the AI algorithms very strongly on data that are internal. I cannot have this based on public data or generic data. We run the risk of providing terrible service. AI may bring very poor results if it is poorly fed with inappropriate results. Obviously, I have to have great clarity in my purpose of use. Asking the wrong question to an AI platform is going to give you an incorrect answer. AI is not so intelligent to the point of being the level matrix of being, of answering everything by itself, omnipresent. We must have objectivity when we use it. We must have clarity as to how to use AI with very concrete and specific cases, and little by little, this is expanded. This is how we have adopted this item as a strategic pillar. Speaking of accountability and security, there is a very important item there. When you train an AI model, we have the potential problem of your database to have certain bias. The bias may be gender, color, race. We may have political biases. There may be several different biases according to the base you are handling. From the bias, you are going to deal with the target of this AI in a biased way. So we have great accountability on the training part. When we talk about security, we are very used to dealing in the financial scenes with banks, very sensitive data. This security framework is a strategic pillar, so that all the framework developed, the platform developed, has security as basic assumption at all steps. This is a key success factor that we have found. We have some examples here that we bring to set the context and give you a bit more color. We have seen it in many other markets, so that I understand that a customer will potentially be a churn in a while because they have had two, three interactions with my company that have been of some kind of conflict. For me to understand this likelihood and make a differentiated offer to that customer, bring to the customer something that turns the churn more likely for me to act in anticipation. This has huge value. So this is one of the examples in which we can apply in companies that deal with large volumes of customers. When we look at the most famous AI, they are here. Because AI is generative, so those that generate from giant databases, a lot of information and variables, they generate content, be it text, video, images. We have seen films being generated by AI based on very simple assumptions. Chatbots were born as a very simple technology to be able to bring automation to more day-to-day transactions. But with its evolution, it is quite surprising. When we see the interactions of generative AI that is well-trained, it is exceptional to see the results. We have seen this in various ways, not only in direct action with end customers, which still faces challenges. The development still requires some kind of pathway. There is still some way to go, especially when you look at AI as supporting human beings as an additional arm, as lever for human beings to better service end customers, bringing information on that customer. Relationship history, for example, and the operator can go straight to the point. "Well, Mr. Pedro Alvarenga, I know you have called us three times. You have had this problem. We made you a differentiated offer. How can I help you further?" So you provide totally different service, and AI is quite impressive in a sense. In the product sales, more technical sales of products that has a lot of specific features, AI may bring to operators more information, examples, comparison with competitors, market intelligence to contribute to that interaction. So here, we can think about a myriad of things we did not know, but we used AI. We have been using AI for many years. When you access an e-market to buy a product and it offers you similar products, people that bought this product, they also bought that other. That is machine learning applied in practice. That's one of the parts of AI. When we search people, there is machine learning algorithms showing people that you may know AI, and the accuracy of that is increasingly stronger. When we go into a video streaming platform, the same thing. You have a movie that you have seen, and it takes a few features of the movie and many others you've seen, and it starts proposing films that match your taste and preferences. This has been used for many years. Now we're bringing this in a broader way, more day-to-day to businesses, although what is behind is complex technology that is not mastered by all. CSU has proposed itself to be a pioneer in this business, and we're working hard onto that. A clear example of this that we have been addressing, we have been developing products and features that deliver end users, companies that hire us, values that are totally different from the traditional ones that we've been having. When I assume a customer with two, three cards in the wallet, that I can make this customer's or this life easier. That they can better use their cards at the time of the transaction. This brings great value, generates more business to company, generates loyalty for the market issuer. Bringing this example, we see how the use of AI may leverage businesses. Based on previous purchases, I can provide additional points as e-market does in transactions of credit or debit. We could do something like this. For example, I buy an air ticket, and I offer travel insurance, be it as a benefit of the card itself or complimentary service that can be provided by the company. Interesting. When I have a loyalty program, I use the points in real-time during a purchase to make that purchase easier. These are examples in which we could. So we're working on this already. We could be improving a lot the lives of customers. Looking at the hiring companies, there is a huge number of possibilities. One of them is preventing fraud, financial risk. When we work with large volumes of financial transactions, frauds are always present, and we have to avoid that. We've seen real examples here with the reduction of the level of financial losses that has been major with the improvement in the approval rate of transactions, meaning that the company is circulating more cash through that payment arrangement. This is good business for all at lower risks, losing less in fraud. This is applying AI in a very objective way, as I've mentioned previously. With training based on major amount of data to make it more efficient. Another important point, that when we talk about process automation, results are incredibly significant. We cannot deny that in all fronts we bring something that is important. When I bring hyperautomation to a process and I add AI to part of the automation for what makes sense, the real results here are real results that we bring of operations that we have already implemented from the standpoint of quality. Significant growth in the reduction of operations and the time of service, this is satisfaction. I bring a different NPS for that operation, promoter score, totally different for that end customer. I make the customer increasingly more loyal. This tackles directly pains that we have noticing in our customers. It helps in a very direct way. As a consequence, we have cost reduction. Not only in terms of productivity gain, reducing our retraction rates or renegotiation, we reduce operational costs for any repetitive process. Here we are living a revolution once again, I reinstate that. That is very important because these days I was talking to our team, we're comparing this to the Industrial Revolution. Let's imagine a craftsman making 10 pairs of shoes a month, and suddenly there's a plant with a steam machine that makes 1,000 pairs of shoes a month, almost at no cost. This is more or less what we're living here. It's a parallel or the analogy, a great impact to companies and quality of service. This applies not only to the world of cards, the one we are used to, not only to the financial world that we are more used to. When we look at telecom, retail, utilities, service companies, insurance companies, this has been very welcomed indeed, because there are problems that are somewhat similar. Even though they're different markets, the problems are somewhat similar. The process automation from a well-structured platform of hyperautomation and adding AI techniques to speed it up has been extremely important for our future. Looking ahead, we're going to go through this in our various business fronts, not only on the base CSU DX or CSU Pays. When we talk about finance, the same loyalty, this has transformational power that is extremely important. To wrap up, our strategic planning has brought several possible items. We prioritize four growth avenues. One of them is related to geography, our seeking market in the U.S. We started structuring this project in 2023. We should have several pieces of news over 2024, because we have dedication of time, effort, product, technology, legal issues, et cetera. We're working hard on that without forgetting what takes us ahead here in Brazil, which certainly will be very appreciated when we start operating in the U.S. Which is applying all those hyperautomation techniques, especially AI, in the various portfolios we have today. When we talk about digital payments, I mentioned intelligent card, a product we're working hard on. When we talk about automation, we mentioned hyperautomation, bringing to customers a much more fluid experience of much better quality at lower cost. When we talk about embedded finance, we're talking not only fraud prevention, we're talking about credit management, loyalty, and marketplace and AI solutions. All of this is going through important modernization, and with this, we bring new product possibilities. With these great growth avenues strongly based on technology, since we are a service infrastructure company, we believe that we have a great 2024 ahead. Isn't it, Pedro? That's it. Before we move on to the Q&A session, I'd like to sum up the main topics we've addressed over the presentation. As Fabiano Rosegatti mentioned, quite a lot, quite intensely. We actually have clarification of many of the questions we have. I'm an economist. When we hear people talking about technology, it's always great lesson. It's been great to hear all the details. Today, we are a company that already delivers results. It's always important to share this confidence for those that are our investors, those that want to become investors in the company, that we are building a future. A new expansion cycle very much based on the platforms, hyperautomation, AI, new payment systems, new banking services. But we are a company that delivers results today. These results derive from a long trajectory. We've been in the market for 31 years. It's not a company that has come up overnight, that started the journey now. It's a journey that has been built, planned, thought about, adapted, and we actually today move into a level of results that reflect of this track record, of these lessons learned over our journey. The level of digitization synergy of our portfolios, all of this represents and justifies each one of the indicators that we have been attaining. We are very much imbued to making the new cycle that has been built with each one of the solutions that we've mentioned to be increasingly more promising, that actually helps catalyze growth, revenues of company operating growth, just as the growth in profitability. Again, we are a company that has scale gains that are quite relevant. We're very confident on this journey because we have our net worth that is very sound. We generate a lot of cash and allows us that we have great ambitions for the forthcoming years. The company has as its normal practice to keep attractive remuneration for investors. This ends up being a consequence of this net worth that we have. This should continue to be a practice of the company for investors. It is actually very interesting for you to have cash-ins over time, not to have to wait for many years to have some return on the investment you made. Anyhow, for those that are following more closely our shares, our shares have been having relevant evolution in terms of performance. This performance, in our view, is very much related to an adjustment in asymmetry. CSU is a company that delivers a level of profitability well above the industry. We're talking about 2, 3 times higher the average, both in Brazil and the U.S. market. It also has a challenge from the standpoint of bringing visibility, knowledge, and light to all the deliverables we have and everything we are building to get to the capital markets. The market starts acknowledging our evolution in the delivery of a company. If we take this period from last year, we had a high of 77%. We have lost the sound. Ladies and gentlemen, please wait a little while while we reconnect our speaker. Once again, we would kindly ask you to wait a little while we reconnect our speaker. Plano B aí, Pedro. Fala, pessoal. Essa tal de tecnologia, vou te dizer, hein. I know. Technology. Let me tell you. O plano B conseguiu. Okay, this is the B plan. Desequilibrou aqui. Mas vamos lá. Está audível já. Estão conseguindo me ouvir bem? Está audível. You can hear me all right. Okay, we can hear you. We are live. [Foreign language] As I was mentioning here, the company has had significant appreciation of result. 78%, 128% of total shareholder return. We have a broad coverage. [Foreign language] These are quite significant, and likewise, our customer base is not only expanding, the number of shareholders in the company is greater than previously, but also we have institutional investors on our base that are supporting us and betting in our future that the company has created in the short, mid, long term. Let us move on to Q&A. Thank you very much. Obrigado. Thank you. Iniciaremos agora a sessão de perguntas e respostas- We will now start a Q&A session for investors and analysts. If you would like to ask a question, simply click on the raise hand option at the bottom of your screen and wait for further instructions. Or if you wish to submit your question in writing, please enter your question, your name, and the company you represent in the Q&A field. Wait while we collect questions. Nossa primeira pergunta vem de Bernardo Guttmann. Our first question is from Bernardo Guttmann from XP. The company has been very vocal on talking about AI, artificial intelligence applied to your business. How transformational actually this agenda can be? Does this help to the result of the company or is it just one additional feature? Thank you. Posso puxar aqui, Pedro, e você complementa? Por favor. Okay, I'll start, and then you complement, Pedro. As I mentioned, it's a revolution for the market as a whole. For us, it has been very transformational, no doubt. It's not just a feature. There will be many features that we'll generate from that. Here I turn over to Pedro, of course, from the results standpoint, we've mentioned how much both automation and AI may bring to our figures, and they start bringing that. This is related to digitization of our operations for our customers and ours as well. Of course, we drink from our own spring, obviously, or remedy. This is something that has a great impact. It's not a marketing piece. That's something that we are using and building on our day-to-day. Thank you for the question, Bernardo. Just adding what Fabiano mentioned. I think that for us, perhaps it is even more comfortable to talk about this topic than most of the market, because in practice, we have applied each one of those components to our operations on our day-to-day. Those that look at a company that has moved from a margin of a bit of 20% to 35%, this has not happened magically or at random. Actually, there is a construction. This building started from bringing your portfolio to an environment that is more digital. From here, we recreated the whole process dynamics. We think today the management of a product that we are very used to, which is credit card. Fraud analysis in the past, there were people that basically were there analyzing process after process, manually accessing several systems, our systems of our customers, so that they could assess whether it was a fraud attempt, or if it happened, if it happened where. When we talk about today as management systems of certain incidents, we are talking about processes that are greatly automated, that use algorithms, AI to make the analysis. So this brings to us the capability of scaling that is much greater. This is what ended up reflecting each one of our operational indicators. I gave an example of the fraud, but this applies to routines that are as simple as you are sending a bill to a customer. So I think this is what ends up changing. We are applying them to our day-to-day, and this is what is happening and making us to grow. Most importantly, the new cycle is no longer technology to improve efficiency, but to be actually a product. As this feature becomes a relevant revenue source for us from now onwards, not only a revenue because I approve more today than before, but I also capture revenue because the customer has internal processes today. They also need to obtain efficiency, better operations, and quality. It is a relevant change for the company in terms of business evolution. Our next question is from Malek Zain from TC. Malek. Good morning, everyone. Thanks for taking my question. I have two on my side. First, if CSU Pays this year had growth in the segment, but I believe part, well, it is quite different from the volume transaction. I think it is related to the renewal of contracts. I would like you to comment on that. What should we expect for 2024? Are you growing volume 20% a year? Can we imagine pace growing 10% as of 2024? The second mid, long-term expectation of new businesses. HAS plus BaaS. What do you have in terms of 2028, 2029, four or five-year period? What do you see that may be revenue expected for you? What is the growth margin incremental and long-term view? What do you have in terms of contracts to be signed? What would be tangible and margins in this beginning of ramp-up, if you could comment on that. Thank you. Good. Let me take this one. Thank you, Malek. Nice talking to you. Okay, starting with the CSU Pays regarding 2023. Yeah, your reading is correct. This year we have had two effects, relevant one, especially first half, first dynamics of evolution of digital products. This ends up generating a gap every time I release analog spans to digital. One, we had a different, and we had some advances in terms of percentage points of relevance compared to digital vis-a-vis analog. Certainly, it is the renegotiation of contract that impacted a bit more regarding price. We basically just bringing a bit more details on that. In 2023, that was one of the metrics or the goals to renew contracts. That was an active process led by CSU. It was not a passive one, and customers called us to renew contracts. It was much on the contrary, and this move derives from a decision from the standpoint of business management for us to ensure that the contract would be valid for another 4 or 5 years. We had contracts that were expiring 1 year and a half. We expanded time, giving us the opportunity to keep on working on the new business fronts that the company has developed over time. We wanted to tap it at this very positive moment for the company in which we have a new portfolio to present at companies, and we have lots of news to present and bring this agenda. We have lots of new businesses. Let's now renew the files at the end of the day so that we can keep working and prioritizing the new fronts that we have at hand. Basically, we have this different in terms of operations and revenue, 5.5%, great part that derives from that. Ahead, I would say that we tend to see CSU Pays moving closer and we see operational evolution. If you take the history, longer one, the unit grows at K curve 12% a year. It varies from 10% to 15%, sometimes 20%. I don't see any reason that we've concluded this renewal, and we also have this stage of digitization is very advanced. We don't see those indicators going back to this pace. That is the recurring of our business. The two-digit growth. When we talk about new businesses, let me start from bottom up. Talking about margin, the margin of the two products are much more similar from the standpoint of growth margin than with CSU Pays. When we think about as applied to day-to-day, we're talking about margin evolution in this vertical that is expected for the company. When we think about from the standpoint of future, this actually be it mix or a product with a higher margin. We have a lower margin on the product. This is something important to be followed by the market. In terms of growth, I think we're going to have very different dynamics. I've been reinforcing that at every earnings results calls. Our market dynamics, they have different ways of happening. To BaaS, the embedded finance. The BaaS, the embedded finance products, they have an identical feature to what we have today in digital payments. Why is it identical? When you identify a potential customer, from the time you offer a product, you have a step between your going there, prospecting, and actually placing the product at a stage of scale. There is a ladder to that. You have to define the project of the customer. There will be customizations that you implement. Then once you implement, you see whether there are adjustments to be made. After the adjustments, you place that to the market. Usually, customers just want to have soft launch. They say, "I want you to open 10,000 accounts. I want to now, after three, four months, increase that to 50,000. Now that I see it's running well, let's get three, four months. Let's move up to 200,000 accounts." Then you have this ladder to go up. That's why we have a sort of clock growth or clock time growth of the numbers because of that. We see no reason why we should see changes in this, because the product has this nature. It's a product that will grow gradually. We've recently announced a new customer, new with us. Not only product but also customer in insurance. Always starting to get more traction to this product that was launched nine months ago. I think we'll keep on seeing the vertical payments growing with this nature. When we talk about HAS, this is slightly different. Fabiano talked a lot about that during his presentation. HAS has brought us a capability of exploring new markets. This is the silver bullet, that we have ability to offer that to our base. We're talking about our pattern, banks with financial institutions, operators, retailers. But this has brought a much greater array. I can apply solutions that companies that were not part of my map or were not on my radar before. HAS tends to grow faster in the beginning than banking as a service, because I'm opening new markets, or I'm accessing new customers, and I'm accessing customers that already have transaction volume. We do not have this phase of soft launch. They have their operations that are running, that costs X to them, and they take this operation and applies to the platform. They tend to have slightly faster growth in the short term than in mid, long term. We have no doubt CSU Pays will always be the most relevant unit. But in the very short term, we may have a lack of balance in that. This tends to be very relevant. In the last official guidance for our platform, they tend to be very relevant considering the whole company. Pedro, can we imagine in five years revenue, we're talking about the other business, 10% of the revenue consolidated. Do we have any metrics that we can take in terms of the market? I'd say that new businesses tend to be 10%-20% of our market. What's a great difficulty? Just to give you an idea. HAS. We looked at some companies through the M&A lens, and we selected as the best. Today, in this horizon of four or five years, they have a revenue of around BRL 100 million. It is- Horizon, they are quite relevant. We have products that may be very relevant in the future. Okay. Very clear. Thank you. No problem. Totally available. Our next question comes from Victor Kitzman from Porto Small Caps. Good morning. Congratulations on your results. On new products, how much has CSU have relative costs to them in the current results? Expenses without revenue. What level of extra working capital do you envision? How much do you expect these products to represent in the company's EBITDA over the next three years? Thank you. I'll take this one too. If you like, you may add. Victor, nice talking to you. Thank you for your words. Trying to answer each one of the questions. When we talk about cash revenue because of new products, although we had all this evolution in terms of profitability, this came from the transformation of what we already did. If we stop to think about this margin indicator 5%, quote unquote, "I'm not efficient." I have people, systems, things linked to my back ends, so that they were not so dynamic. I have cost linked to the part of programming that today also have small relevance. There's an important component today that we tend to capture increasing margin over time. That being happening repeatedly. Every time I move forward a bit in my operations, the margin grows more. Regarding working capital, I don't see great needs ahead, being very pragmatic. Not only for working capital, but investment volume as well. The company has a great convergence of cash. We all have long-term repayment. Our payment terms are very stable. This is very stable. Our conversion of EBITDA cash was 84% this year, so you take an average. Five years, the number is identical. Hasn't changed at all. We don't see the need of additional investment in terms of working capital. In terms of CapEx, we invest essentially a lot of our revenue, and I don't see reasons for this to change in the short term. Always new systems that come up, always new systems for protection against fraud, et cetera, that must be constantly evolving. I think we have some time. We invested about 12% of revenue. We have some time to keep this dynamic in the long term. Natural for things to change. I think we have a last question about the EBITDA. Again, it will depend very much. It will depend on the evolution of HAS and others, other products, and obviously, we think that there is space for us to improve our margin. Our next question is from Alexandre from MSX Invest. Good afternoon, everyone. Congratulations on the results. Exceptional work of the IR team. How much margin increase should we expect with the ramp-up of HAS adoption? Thank you. Hi, Alex. How are you doing? Again, thank you for your words. I think I've mentioned over the presentation something about the topic. Again, HAS has a feature that is much closer to CSU Pays than we see today in the DX unit. It's in this transformational space. We have growth opportunity. It's transformational from the stability standpoint. You will see the margin evolving significantly because of HAS. Our next question is from Andrea Practice. What is the capital structure that is ideal the company sees regarding the scenario of interest rate reduction in the country? Thank you. Hi, Andrea. Thank you. Good afternoon. Fabiana, I'm taking them all. It's okay. Basically, capital structure, it's always a debate where we have a formula, and you need to calculate things all the time. Capital structure that we have today, where we have no financial leverage. Zero. It's a company that accumulates a lot of cash. We naturally will always be discussing opportunities of increasing CapEx, of making reductions, and opportunities to invest and reinvest within what we already do. Moving into new markets, things that we have been addressing. Today, we don't see any needs. For example, let's go into debt to be able to make a greater movement. We tend to follow with the strength of our balance sheet. Obviously, if we have a drop in interest rates, it becomes more attractive for you to think about more alternative capital structures, but it will depend on what happens to the market. We may have a faster M&A agenda. We are certainly looking to alternatives. If we have to consider to speed up a CapEx, it was good to have lower interest rates. It brings us more opportunities, more breadth, and we, again, will communicate that according to the evolution of each one of those opportunities. The Q&A session is closed. I would like to turn over to Mr. Pedro Alvarenga for his final remarks. Please, Mr. Alvarenga. Well, thank you very much for your participation. It is always a pleasure to be here talking to our investors, a bit of our strategy, of our market. Unfortunately, the time is short, but we are always available for clarification of any additional questions you may have. You may contact us, both myself, Fabiano. We are 100% available. I would like to thank you once again, and I wish all of us a wonderful 2024. Great day to all of you. The CSU Digital Video Conference is now closed. We thank you for your participation and wish you an excellent day.