Good morning, everyone, and welcome to our video conference to discuss the results of the second quarter of 2024. My name is Bruno Teixeira. I'm the Chief Investor Relations Officer, and it's a pleasure to be with you today. We have our CEO, Altair Silvestri, our CFO, Rafael Boeing, and our heads: the Head of Security, Paulo Daniel Corrêa, the Head of Communication, Henrique Fernandez, and the Head of Energy, Márcio Ferreira. To start our conversation, would like to inform you that this video conference is being recorded, and it will be made available at the company's IR website, alongside the slide deck, which is already available. So you can already download the slide deck right now, and at the end of the presentation, you'll be able to see the video.
For the Q&A session, we'd like to ask you to send your questions using the Q&A icon at the bottom of the screen. Please write your name, your company, and the language you're going to be asking the question in, and we will call out the questions in the order they were sent. When your name is called out, if you should wish, you can unmute your microphone to ask your question. The information contained in this presentation and any statements that may be made during the conference call about the business perspectives, projections and forecasts, as well as the operating financial targets for Intelbras, are based on the beliefs and assumptions of the company's management and on currently available information. Forward-looking statements do not guarantee performance.
They involve risks, uncertainties and assumptions as they refer to future events, and therefore, depend on circumstances that may or may not come to pass. Investors should understand that general economic and market conditions, as well as other operating factors, may affect the future performance of Intelbras and lead to results that differ materially from those expressed in such forward-looking statements. Now that we have clarified these items, we're going to formally start the presentation. So let's take a look at our slides, and we start with the financial highlights. This first half of the year was well in line with our perspectives for the year. We see a substantial increase in revenue year-on-year, 22.1%, amounting to BRL 1,185 million. EBITDA grew 15%.
We're almost hitting the BRL 160 million mark, and this is a 15% increase year-on-year. The net income is impacted by FX, but is rather stable in comparison to last year, and our ROIC is also well in line with the company's management expectations, so about 22.7%. It's important to look at the year-to-date results. Last year, we had decreasing revenue due to some specific challenges in specific segments, and now we have this 22% increase year-on-year, with an 11% increase year-to-date. And when we look at the operating results and our EBITDA results, we see an increase of 19%. So we see we're bouncing back, and we're increasing revenue, and we're delivering better results. We can see this quite clearly in the second quarter.
When we look at our EBITDA performance and we compare it to last year, we see a slight decrease in our margin that is impacted due to a challenge for supply in Manaus. When we look at the revenue coming into the results that can be seen, and the new inventory, the new materials have arrived in the course of the second quarter, and we had a higher exchange rate. So this had an impact on the gross margin. We see the expenses are in line with our expectations for the year. Expenses are growing at a slower rate than revenue, but we see a slight decrease in our margin. When we look at our gross margin, we ought to be careful and look attentively at our consolidated gross profit. We discussed these data in the first quarter in detail and would like to insist on this perspective.
Our gross margin is quite resilient. We see results that are even better than historical results. And if we want to look at more recent figures and look at the four quarters of 2023, we see there has been some fluctuation of the margin last year, but it ended at 31%-32% in gross margin. And we have to be careful because each segment will have different dynamics and different moments, and it's important that we look at the consolidated gross profit, and we understand that the company is much more resilient than the sum up of the segments, right? Than the combination of the segments. When we look at the first quarter, we see the margin even higher than it was last year, at 32.6%. This is the, the margin that we had for the first half of the year.
It's clear that we have stable gross margins, healthy gross margins for our operations, that are in line with what we expected for the year. Now, delving deeper into the segments, we start with security. That accounts for 56% of our revenue, and we see a substantial increase in our revenue here. That is due to the better availability in product supply. If you listen to the first quarter video conference, you will remember that we had pent-up revenue because of the lack of availability of products. In the Manaus plant, we were able to push forward more volume and unlock this revenue. It's important that we mention that, because this increase in logistics costs took place during the loading and the replenishing of materials in the plant, and that has an impact on the security margins.
But when we look at the full picture, we see that Security has been operating as expected, and the growth in revenue in the quarter that can be seen in the sell-out is quite healthy. And it's important to mention as well, that there is an exchange rate component that we'll look at very carefully. And if we need to pass on costs, we will do that and adjust prices, so that we can keep our portfolio competitive and so that we can keep the company profitable. When we look at Information Communication Technology, which accounts for 23% of our revenue in the second quarter, 2024, we also see a substantial increase as a result of the new portfolio that we have. We grew 16% year-on-year, and 21% quarter-on-quarter. So we see an accelerating curve.
The dynamics that we have here is to price it, understanding the local production and manufacturing costs, so that we can put out an adjusted offer to the market, so that we have the production certainty at the São José plant and the products that are at adjusted price. We can see the performance is as expected. We have positive expectations for communication in the second half of the year, and we're also going to be seeing communication contributing to our revenue in the whole of 2024. And lastly, energy, that accounted for 21% of our revenue in the second quarter of 2024. We have a substantial increase year-on-year. The base for comparison was a bit weaker, so that was rather expected. The solar power last year was rather brisk in the first half and impacted the second quarter.
Now we see a more stable revenue in comparison to what we had last year. Our business focus here is on the growth avenues that we have in all of the energy businesses, focusing on profitability and consistent revenue growth. Energy in the first and second quarters of the year is also well in line with our expectations, and we expect it to continue to be so in the second half. Now, moving on to the last slide, we see our cash flow performance. Our operating cash flow is slightly lower than we would normally have, and that is because the company understands that in this moment where we're restructuring our inventory, especially the A curve inventory, so that we can rid ourselves of possible supply issues as we had in the fourth quarter, 2023 and the first quarter, 2024.
We are improving our inventory levels so that we can have all the material we need. And now, there may be a drought in the second half of the year, and that may impact the Amazon River and the transport. So that's why we're bringing it forward. And we remind you that the transportation problem is with receiving raw materials and not with transporting the ready products after they've been manufactured. So we are anticipating this problem, so that we can mitigate any risks to our operating cash. But this is what we see now on the 30th of July, 2024 . As for investments, what do we see? Well, we're at the end of an investment cycle. Our warehouse in São José is ready. It will start operating in August. It's going to open this week, so everything as planned.
So the expansion CapEx is going to go down in the course of the year. So the expansion CapEx should be lower in the coming 18 months than the recent history. And the expansion CapEx is also as per our historical data. And to conclude the presentation and start the Q&A session, we'd like to highlight the inventory approach. We should see the numbers slightly higher in the coming months than what we normally see structurally. And the message when it comes to pricing is also quite clear here in the company. As we understand that the FX rate is higher, we will adjust prices. We had a first adjustment made to the price list in June, and we're going to look at it again in August.
And if you're watching us closely, you know that if necessary, we make these adjustments, and we maintain our portfolio competitive, and we look after our business profitability. And the second half of the year is certainly going to deliver good growth in our three business areas. Our strategies are well in line. We have good perspectives for the new portfolios. The growth avenues are well paved and are being well delivered by our commercial and product teams. So we herald the second half of the year, moving towards an end of the year that is going to conclude in line with our expectations for the year, with an increase in revenue in our three business lines, and delivering results that are even better than the revenue growth. So this is the end of the actual presentation, and now we're going to start the Q&A session.
We already have a couple of questions, and I would like now to allow Marcelo Santos to unmute. Marcelo Santos from JP Morgan, please.
Good morning. Thank you, Bruno and everyone, and thank you for taking my questions. I'd like to focus on the gross margins. Looking at security, the pressure came from FX and from shipping costs, right? These problems seem to be temporary. You've already adjusted the pricing to match the FX rate, and shipping has been adjusted, right? It's back on track, back on track. So do you expect these margins to be better, or the competitiveness of the market won't allow for it? And the second point has to do with ICT. When can we expect to have local manufacturing help us improve margins as well? So production in Brazil.
So I'd like to give Paulo the floor and then Henrique to answer your questions.
[Foreign Language]
Good morning, Marcelo. Thank you very much for your question. We had a larger impact in logistics, as you said. Bruno mentioned that at the start of the presentation, talking about replenishing our inventory, and there was also the FX rate issue. We understand that our margin will be in line with what we had in the first half of the year, so there is room for an improvement, but we should between-- we should be close to the average of what we had between the first and the second quarters this year. The impact we had in logistics, and the start of the year had an impact on the second quarter, 2024. Thank you for your question, Marcelo.
Good morning, everyone.
[Foreign Language]
We expect margins to improve in ICT.
As Bruno said, we're priced correctly in comparison to the market, so we have the battleground set, but we have the wrong costs. But that took place because of mismatches in FX rate, because of air shipping and local production, which has to do with your question. We have already started the production in our factories, so we will see an improvement in the third and fourth quarters. So this is in our plans.
All right, thank you. Thank you, Marcelo, for your question. Felipe Cheng from Santander. Can we unmute him so that he can ask his question? Good morning, everyone, and thank you for taking my questions. I'd like to understand the dynamics for security revenue growth. Can you talk a little bit about the sellout dynamics? I understand there was an impact in sell-in in the first quarter, even though sellout was healthy.
In the second quarter, was there any mismatch between sell-in and sellout? So just wanted to understand how this is faring, so that we can understand what we can expect for the coming quarters. Paulo, please.
[Foreign Language]
Hi, Felipe. Thank you for your question. What we saw in the first half of the year was very positive sellout ratio and rates, and this will continue in the third quarter. There was no mismatch between sell-in and sellout, and the market performed well. So the sales we had in the second quarter could be seen in that sell-in and sellout went hand in hand, and that's quite positive. With the second quarter production and manufacturing, we were able to replenish the market, and we had sellout happening naturally without additional inventory.
So both sell-in and sell-out performed as we expected and hand in hand, as we replenished raw materials and finished products into the market.
All right. That's clear. Thank you. Bernardo from XP is also here with us. Hello, everyone. I've got two questions. Thank you for taking them. The first question is, has to do with ICT. We see this improvement in revenue, and we'd like to understand how the new partnerships contributed to this improvement and what we can expect when it comes to the new SKUs in the coming quarters. Would growth come from more maturity? And is there an increase in this portfolio? Is there a pipeline of new products to be launched in the second half of the year? And my second question is to Paulo.
We hear there is a Chinese player coming in a bit more aggressively in some product lines. Is the company concerned about that? Could that have an impact on our margins? Hello, Bernardo. Good morning. Well, there are, there's both things, right? There are new products helping increase revenue, but there's also the acceleration of existing products, so a bit of both. The acceleration of existing products is what contributes the most to growth. We're well in line with what we had forecast, which is a gradual increase in growth in the first half, a bit slacker in the first quarter, stronger in the second, and even stronger in the third and fourth. And this also is connected to our partnerships. What I can tell you about the partnerships is that it's allowing for more and more growth, but I can't give you an exact figure.
We don't have a breakdown on these figures to present here. It's also important that we understand that as operations adjust, there's more availability, and what the commercial team sells starts to improve as well. You see more growth in the second quarter and the third quarter, as we had said would happen in the first quarter with these new partners coming in and helping our revenue. And Paulo, please. Hello, Bernardo. When it comes to competition in the market, we've always had to deal with competitors. A year ago, two new players joined the market, and of course, we're always watching the market. We always understand how competition is playing, and we respect every competitor.
But I believe that the increase in revenue shows that we're well in line with what we had planned, so we will continue to work with competitive pricing, good deliveries, good solutions, nothing very much different than what we have had to deal with in the past. So it's not very much different from what we have already seen. Of course, we're always watching the market carefully, always looking at what the other players are doing, so that we can maintain our position and our levels. And Bernardo, we're quite clear on the challenge we had in the first quarter in revenue because of the lack of products, and now we have products available. So it isn't pricing that is going to improve revenue, rather the reverse. We have had to make adjustments.
Paulo has been making the adjustments in the first month of the third quarter as well, or will be doing that, rather, but we are keeping a weather eye out. And Paulo, we're still standing strong with our market share. There is no change there. Thank you, Henrique, Paulo, Altair, and Bruno. Thank you, everyone. Have a great day. Now, I'd like to ask you to unmute André from UBS. Good morning, everyone. Thank you for taking my questions. My first question has to do with security. You showed strong acceleration in the second quarter, comparing it to the first quarter. Some of this increase may be arising from the orders placed in the first quarter, but they were only billed in the second quarter because of the logistics challenges you had in the first quarter. Is my understanding correct?
And if it is, can you try and give us more color on how much growth stemmed from this pent-up orders in the first quarter? And you mentioned the expansion CapEx cycle has come to an end. The company should then be generating more cash in the coming quarters, right? So what is the company expecting to do with this increased amount of cash? Paulo, you may answer the first question, please. Some of that happened from the first quarter to the second quarter, but that is not very significant. That is not the reason why we had the growth we did. So I wouldn't say that revenue grew because of that. A lot of sales took place in January and February, and it happened or it didn't happen.
The second quarter, when you look at sell-out and the resulting inventory from distributors, we see that these are sales that took place in the second quarter. So there wouldn't be an impact on the second quarter because of what happened in the first quarter. Rafael, can you please answer the second part of the question? In the second half of the year, we don't expect to see cash go up, yet. The inventory restructuring that we had recently is still to be paid, so there will be that. And we also anticipated issues due to the likely drought there may be in Manaus. It may be even more challenging than last year. So because we have been working on reorganizing our inventory, we shouldn't see any substantial increase in cash in the second half of the year yet.
As for the CapEx cycle, our expectation for the future is that expansion investments should be much smaller in the future in comparison to the last two and a half years, three years. So no major investments in sight to increase capacity. We have all of our plans, we have enough storage, we have everything we need as per the plan. Thank you, Bruno, Paulo, and Rafael. Thank you, André. César also wants to ask a question. Hello, everyone. How are you doing? There were some negative surprise in SG&A, an increase that was bigger than expected. Could you please detail out what happened there, if it was just a one-off, and what we could expect when it comes to a normalized margin? Margin was higher in the first quarter, lower in the second, so what can we expect for the future?
May I start answering, Mr. Altair, and then you can complement it? César, when we look at revenue and expenses in the first half of the year, when it comes to revenue, we have a bigger increase than the increase in expenses. If you look at history, you see the expenses are bigger in the first, pardon me, in the second quarter. In the second quarter, activities really gain traction. There's no use for events in the first quarter. The market is still warming up after the end of year holidays. So our expenses are well in line with what we had in the forecast. Now, when we look at the EBITDA margin, we see that the margin is higher than historical data. The first quarter is performing or performed better than expected.
We try to say that we, we didn't expect the margin to be like that in the rest of the year. The second quarter had its margin impacted by the gross margin, as Paulo already explained. But we expect margin to be higher than historical, our historical margin. And the first half is a good reference for the results when it comes to what to expect in the second half of the year. There should be an increase in revenue, and there should be an increase in operating results. Mr. Altair, would you like to say anything else? No, you, you said it well. There's no surprise there. There were just some, well, spot adjustments for costs and logistics, and due to FX rate. And we expect to perform better than the historical margin. All right. Thank you, everyone. Thank you, César, for your question.
And then we're drawing to a close. We have two questions from Verena in writing. I think Paulo should maybe answer the first question. She's asking about our sales performance and profitability in bigger projects. That's one of the growth avenues, I believe, and that's gonna be supported by the ICT line. So, maybe Paulo can complement that answer. Hello, Verena. When it comes to the projects, as Bruno said, this is an important measure that started with security, but it's also strengthened now with our new ICT portfolio. It's strengthened our results, allowing us to grow stronger than the other sales trends. Profitability is also quite, quite healthy, and we have positive expectations.
In the ICT portfolio, we understand that we'll be able to deliver solutions that are better integrated, not only in security, but also bearing in mind the end customer's well, needs, whatever they, they need, what, they need to be done. So with security and with the improvements and complements that we had in ICT, we gain more traction, and we're sure we're going to perform even better than we have been performing recently. Would you like to complement it, Henrique? No, absolutely not. Looking at ICT isolatedly, thinking about major projects, Paulo mentioned the Intelbras solution, which is for all our business lines, right? So security and ICT. And when we look at ICT isolatedly, there is an IT-focused market, right? We have a partnership with the Chinese market leader, and we're working on that. We're training a number of integrators.
We have brought a number of integrators to our base. We're also training our partners on how to sell, and we see more and more steps being taken and a pipeline being built, development of a number of projects and solutions that are going to merge into the SMB pyramid. So the full IT solution for our whole market with cutting-edge quality. All right. Thank you. And Verena had a second question around the competitive environment. I think we have addressed that already. She asked more specifically about the price adjustments. Paulo, would you like to say anything else? I think that question has been answered already. And when it comes to price adjustment, you also mentioned that we have had the adjustment in the pricing for this year. The competition did, too. So the competition has been doing the same as us. All right.
Thank you for your comment. I think Thiago, the Itaú BBA analyst, has a question. Maybe can you unmute him? ...
[Foreign language]
Hello, everyone.
[Foreign language]
Can you hear me?
[Foreign language]
Yes, we can.
[Foreign language]
All right.
[Foreign language]
Thank you for taking my question. I have got a single question.
[Foreign language]
And it has to do with marketing and sales expenses.
[Foreign language]
We see that they are diluting, but with the accelerated expenses, I think this dilution was a bit smaller. I'd like to hear from you. In the past three quarters, this was an important line to help you with the margin expansion. So what do you expect? Do you expect more dilution in the future? Could that have an impact on the EBITDA margin in the course of the year? Thank you.
[Foreign language]
Thank you, Thiago. I'm going to start, and, Rafael or Altair can complement my answer. Well, in the second half, we expect revenue to go up.
[Foreign language]
Paulo, talk a little bit about the gross margin and how it should perform.
[Foreign language]
If we want to extrapolate the margin from the first half of the year, we could suppose that it's going to be close to the average of the first half in the second half. And with expenses being controlled, we'll see an increase in, we'll see an increase in our EBITDA. We want to deliver EBITDA margins that are better than historical margins.
[Foreign language]
With an operating result that is better than the revenue. So this is also well set to take place in the second half of the year. I'm just going to say it again, that commercial expenses are always higher in the second quarter, but we don't expect them to be higher in the third quarter than they were in the second. So we could see some fluctuation in the course of the second half of the year, but lower than these, this, this increase will certainly be lower than our revenue increases. So you can use the first half as a base for comparisons.
[Foreign language]
I have some comments, but I'll save them for the final remarks.
[Foreign language]
I don't think we have any... Oh, so we do. There is one question here in writing.
Márcio had been speaking a lot in previous calls, but now he's been quiet the whole day. In energy and power, what is our expectation for the stabilization and profitability of the segment when it comes to solar energy and others? So if you can tell us a little bit about the initiatives and what you expect for the second half. Good morning, everyone, and thank you for this opportunity. The person asks anonymously, right? But, well, we did our homework in solar power, and we stabilized our margin and our inventory.
Our numbers have been growing faster than the other businesses in the company, and our gross margin is going to get stronger and stronger, and our forecast is that it's a bit more conservative than what we had this year, but better than historical figures, especially when you exclude what happened in 2023. So we did our homework. Power has been going up, and as I always say, power and energy is not only solar power, and power has been doing its share more and more so that we can get the stability we expect to have in margins. Thank you, Márcio. Excellent answer. There is one question from João, ORI Capital analyst.
[Foreign language]
He's asking about Mr. Altair's successor. So who is to take over in the future?
[Foreign language]
Well, the succession is going on as planned.
[Foreign language]
I've recently spoken to my team, this morning, actually.
[Foreign language]
The board-
[Foreign language]
... and the family have decided to take it easy. I'm going to continue to be on the board, so, we don't need a very lengthy transition period.
[Foreign language]
So this time is being taken advantage of, so that we can make a very good choice. So there is no concern on that front.
[Foreign language]
They're very, very good applicants for the position, right? So it's a tough choice, but everything is going as planned.
Thank you, Mr. Altair. Marcelo Santos, JP Morgan, asked for a follow-up question. I think we could do that. There's still time. Marcelo? Oh, thank you, Bruno. Just to make sure I understand it correctly. César from Santander said, asked a question, and you answered that the first half of the year would be a good reference for the margin of the year, of the year. Are you talking about EBITDA margin or gross margin? Just to make sure I understand. I spoke about the EBITDA margin just now. Paulo spoke about the gross margin, and he said that the margin of the second half should be somewhere where the margin of the first quarter was. We have our history of our gross margins in the presentation, and we feel very comfortable about our gross margins, profitability of the business, and all.
We're quite comfortable. Every segment has its moments and differences when it comes to supply, competition, and the market, but we're not concerned that the margin is going to fluctuate between what happened in the first quarter and the first half of the year when it comes to gross margin. The EBITDA margin could have the first quarter margin as a reference. Paulo talked about security, and we have three business lines that move differently. They behave differently. Paulo spoke about this expectation around the fluctuations. We know that energy has been fluctuating within certain stable interval in this first half of the year. We all know that one business line is more volatile.
Marcio mentioned that we're being a bit more conservative when it comes to margins, but if you factor that all in into the revenue growth that we expect in the second half, we see that the margin will fluctuate very little and seem to be matching what we had in the first half of the year. So what we had in the second quarter as a bottom reference and what we had in the first half as another reference for us to fluctuate between. Thank you very much for your question. Thank you very much for taking my question. Thank you for asking your question. So we're drawing to a close for the second quarter, 2024. No further questions, so Mr. Altair is now going to make his final remarks. Mr. Altair, please. Hi, everyone. It's a pleasure to be here again.
This year is behaving as we expected it to. It's a very positive environment. If we compare it to times past, we'll see that the setting was different. This quarter specifically performed slightly lower than we expected it to, but it was just one-off issues such as the FX rate, the dollar pricing increase, right? We always wait for a 5% accumulated change to make a change to the pricing list. Our growth avenues continue to stand strong, as we said during the conference call. Projects department has been growing more than the rest of the company, and we have more and more investments made there. Our partnerships in ICT, which, in spite of having good, large portfolio that leads to additional costs and production, we see it stabilizing in the coming months, and it's going to be another growth avenue.
New technologies in security products now taking advantage of AI, tapping into new possibilities in the market, and energy with substantial growth and new products coming out. Consumption as well, which is products from our three BUs that we focus on to really have a clear focus on this market. So it, it is also performing well with growth rates higher than the rest of the company. Expenses are well controlled. We already expected it to contribute to better revenues this year. We have had some structural changes this year to focus on strengthening the BUs. We have the departments being managed very efficiently by our heads of departments. The sales partners, ever more loyal, and we have had our initiatives for better inventory levels so that we have no product unavailability, and our brand continues to be strengthened. There's nothing there concerning us.
So our plan is coming true. You all know what our objectives are. Our EBITDA is going to grow a bit more or even a lot more with expenses being controlled than this percentage of the expenses. So it's a good environment. There are some one-off issues like we had this half of the year, but we're very excited. Thank you very much for joining our video conference, and we'll see you at our next video conference, and you can call us whenever you need us. Thank you, Mr. Altair. So we thank you for joining us, and this is the end of the second quarter 2024 earnings video conference. Thank you, everyone. Thank you. Thank you. Bye-bye. Have a great day!