Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Intelbras conference call to discuss the first quarter of 2021 earnings results. Today with us are Mr. Altair Silvestri, CEO, Mr. Rafael Boeing, CFO and IRO, and Mr. Bruno Teixeira, Head of RI. We would like to inform you that during the company's presentation, all participants will be on a listen only mode. We will then begin the Q&A session when further instructions will be given. Should you need any assistance during the conference, please request the operator's help by pressing star zero. We would also like to inform you that the company's management will be presenting in Portuguese with simultaneous translation into English. This event is being broadcast simultaneously over the internet via webcast.
Before proceeding, we would like to mention that forward-looking statements that are based on the beliefs and assumptions of Intelbras' management and those forward-looking statements are also based on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to macroeconomic and industry conditions and other factors could also cause results to differ materially from those expressed in such forward-looking statements. Now I would like to turn the conference over to Mr. Bruno Teixeira. Please, Mr. Teixeira, you may proceed.
Thank you very much, and welcome to our 1Q 2021 earnings results conference call. This year started very well in line with our plans.
Today we are providing you this presentation to give you some more details, and at the end, we are going to be here to take any questions that you might have and maybe delve deeper into any subjects that you want to know more about. Now, initially, we would like to talk about four financial indicators, the most relevant ones for the company. Starting with net revenue. We were very close to reaching BRL 700 million in the first quarter, with a 56% growth year-on-year. Here I would like to highlight that the figures that we are presenting here have been calculated considering the financial credits. They are not included in the net revenue anymore. They are accounted for after gross margin. It is not included here in net revenue.
The financial credit is described in details in our explanatory note number 23, and it amounted to BRL 24 million this quarter. So if you want to do your adjusted calculations, you can refer to that note to see further details. Our EBITDA grew by 52% year-on-year in line with the net revenue growth, achieving BRL 102 million, and net income reached BRL 89 million, reflecting the good performance of the company and also reflecting the assertiveness of our hedge policy, which we're going to explore more details later on in the presentation. Now our ROIC. In the first quarter, we always consider the three past quarters, and you can see that our ROIC here reached 39.1%, 8.4 percentage points year-on-year. Now here we have some more highlights of the quarter. The revenue growth happened across all our selling channels.
Here we have the numbers for distributors, retailers, projects, and solutions as well. You can see that all of those channels grew. Distribution with 60%, retailers 82%, and projects about 32% in growth. Another point that I would like to highlight here is related to inventories. In our previous conference call, we said that the second quarter of last year, the second half of last year rather, was very accelerated in terms of bringing more products and increasing our availability even above the production plans that we had. In Q1 2021, we were able to recover our inventories. Here you can see the numbers of our inventory. We also adjusted inventories so that the suppliers' payment terms went back to the original cycles. We are now decreasing our forfaiting operations that we have built over the years in the company.
We have planned for those two different movements. Here we are highlighting the numbers that are in our balance sheet so that you are aware of the levels of our inventories now. I would like to talk about our EBITDA margin. It has been in line with the company's track record. Here you can see the movements over the past 12 months. You can see that we started with BRL 67 million and now we are at BRL 102 million, with a margin that's very close to 15%. I would like to highlight the financial result here. It didn't have an impact on our net income, which is very important for the stabilization of our results. Now moving on to the next slide, I would like to talk about our different business segments. Starting with security.
I am going to highlight the main points related to each of those segments, starting with security. Security accounts for 53% of our business. We have a very strong sell-out, very strong presence in the market with security. Here we are paying special attention to chipset supplies. I believe that in the previous call, we talked about networks, and we are also struggling with the supplies of chipsets, and that's why we are paying attention to that. But we have been able to manage it at a good level, and we don't have any problems with that right now. Seventh grew by 27% in terms of revenue and 41% in terms of EBITDA. So Seventh has been bringing recurring revenue, and it has a very good participation in our strategies. Now, in terms of revenue, I would like to show you the fourth quarter of 2020 in adjusted figures.
We are bringing the first quarter to the same basis. We are not including here the financial credit in our revenue, the financial credit related to the Informatics Law here. So here in the table at the bottom, you can see the margins evolution, and the differences that you see here are related to that. We had a gross margin of 39.5% in the first quarter of 2020, and now it is 33.5%. But we should remember that is related to the fact that the financial credit is not included here in the revenue anymore. You can see that in the year-on-year comparison margins are stable. But if you compare our margins on a quarterly basis, you can see that impact, especially because of the new way in which we are accounting for the financial credit related to the Informatics Law.
You can see that the quantities have been growing by 20%. Security is still growing and delivering margins, still growing in market share and delivering great results. Now moving on to our next segment, which is communication. Our communication segment accounted for 34% of the company's revenue. I would like to highlight the network unit, which is still very strong, growing consistently, and continuing that strong movement that we saw in the fourth quarter of last year. Networks are growing and delivering great results. The chipset supply still demands a lot of our attention. We had a slight disruption of production in late March, which did not affect the company materially. It didn't affect the network unit or the company, but we are paying very close attention to that so that we don't see any significant impact from that in our business.
The main point that I would like to highlight here, which is something that we always highlight when it comes to the communication segment, especially networks. The two segments, networks and communication as a whole, grew by over 60% this quarter. This bears witness to the fact that our strategy in the communication segment is being reinvented and bringing positive results to the company with very significant growth. Here the impact of the Informatics Law has an impact on the way we are accounting for our gross margins. You can see the numbers here at the bottom. You can see the growth in our margins in the year-on-year and the quarter-on-quarter comparisons. Our margins are close to 26%, 27%. You can see that slight drop from the fourth quarter 2020 to the first quarter 2021.
We decided to work on our volumes and work on our service and do not pass the cost on to consumers in the networks unit. The 2 percentage points difference that you see here is causing an impact on the network gross margin. Now I'd like to move on to the energy segment with the two units, which is energy and solar energy. Here I would like to highlight the growth of this business. It grew by 2 percentage points in our breakdown here of our revenue. It is accounting for 13% of the company, and it grew by 93% in revenues, almost doubled. The energy business grew, not only the solar energy business. The two units are growing significantly.
I would like to highlight the efforts that we made in terms of recovering our inventories, because we were growing so much in our solar energy sales, and we had low inventories. We were working below the safe level. Because of that, we recovered our inventories, and now we are prepared to have a very strong year in terms of solar energy. Here, as you can see, although there is an impact related to how we are accounting for the financial credits, the energy business suffers a less impact. The drop in margins from the first quarter 2020 to the first quarter 2021 is a bit smaller. Now, moving on to the next slide, I would like to highlight our net income.
We had a negative net income in the first quarter 2020, especially because of FX variations, and we were recognizing the BRL liabilities as expenses in the strategy that we had before, because of our ability to pass on costs to consumers. However, over the year 2020, we discussed a new hedge policy that would allow us to establish our net income better. Throughout the second half of the year, we built that policy and we executed it. Here we have a table that shows you, ladies and gentlemen, the results derived from our hedge policy. The main point here is about showing you that our hedge policy is protecting us throughout the terms that we have with suppliers. We are protecting the import volumes. Our policy is going to get us close to zero in terms of FX variation.
We do not want to have a long term in our hedge policy. We do not want to speculate on FX, but we want to protect our operations and bring net incomes, close to the operating revenues. Here we have the FX variation as of March 31, 2021, and you can see the FX variation without the hedge policy, and you can see the hedge effect as well at BRL 27 million, considering the hedge derivatives. The negative result was about BRL 7.8 million, and that allowed us to reach a very interesting net income for the period. In the total variation, you can see that besides the hedge policy, there is a certain mismatch. We still have some expenses being accounted for here.
Another point that I would like to highlight related to the BRL 7.8 million is that we mark the contracts at market value at the end of the year. This movement, we believe, was very positive to protect our net income and maintaining our net income in line with our revenues. Now I would like to talk about our cash evolution on slide 11. We started the year with a very robust position with BRL 752 million, and then we had the IPO proceeds with BRL 724 million. Our net cash as of March 31 was in excess of BRL 1.1 billion. I would like to highlight the fact that we have already started our investments when we received the IPO proceeds. We started our expansion in Manaus and Minas Gerais, and also here in Santa Catarina, in the city of Tubarão.
We announced the acquisition of Khomp recently as well. The strategies that we talked about with our investors, they are being executed. Another important point is related to something that we talked to you in the IPO and in our recent meetings. We are going to reduce our forfaiting operations gradually. Because of that, we had a negative operational cash with BRL 166 million. In the months of April and May, we are still going to see a negative impact, but starting in June, the payment flows will be reorganized and will be in line with the new acquisitions strategy. We are going to see that the company is going to generate cash in a positive way and a robust way throughout the next months. Now, I would like to talk about our CapEx. In the first quarters, we always make lower investments.
Investments are a bit slower at the beginning of the year. This is very much in line with the company's track record in terms of CapEx. In the second quarter, we are going to see an acceleration. We are going to strengthen our expansion movements. You can see here that our CapEx is very much in line with our past quarters. Lastly, I would like to talk to you about some of our perspectives and how we see the year 2021 and the next quarter. We believe that this year is going to bring a very strong growth in line with our historical levels, with the deliveries that we have been making over the past years. In the second quarter, we are going to work in the integration of Khomp in terms of R&D and also the commercial teams. They are already working together.
We are taking advantage of the synergies, and we are now bringing to the market an even more robust solution now that we acquired 75% of Khomp. Another point that should be highlighted here is the launch of our home automation product line. The line was very well received by the market, including the main retailers and also the distribution channels. We know that this business is starting here. We are bringing this new opportunity to our resellers. They can now deliver a complete home automation line to our end consumer. We truly believe in the potential of this line, and the launch of the new line was very successful. Another point that I would like to highlight here is that we know that some regions had lockdowns in February and also in March. We followed that movement very carefully.
We monitored the situation very carefully, and our distribution channel performed very strongly. Although we had lockdowns in some regions, our channel continued to operate firmly and strongly, and we were there together with them, working together with them to continue the negotiations and our business in those regions. We saw a very strong sell-out. We actually had record-breaking numbers in some categories. The distribution channel was very strong in sell-out and selling as well. Lastly, the last point here, I believe this is going to be a recurring point in our next calls. Chipset supplies are still challenging our logistics and operations. We are able to deliver on our plans and bring these supplies to our plants and deliver the products without any significant impact on our business and on the channels. But this is still a point that really requires our attention.
We know that this industry goes through cycles periodically, and we are now going through a cycle in which demand is high and there is some difficulty in the supply side. We have to be very attentive to those challenges and monitor the situation very carefully. But we are delivering on our plans, and that's how we expect to continue throughout the entire year 2021. With this, I conclude our presentation, and now we can start the question and answer session. We are here to take any questions that you might have. Now our operator is going to give you some instructions about how to ask your questions.
Thank you very much. We will now begin the Q&A session. If you have a question, please press star one.
If at any time your question is answered, you can press star two to remove yourself from the questioning queue. Questions will be taken in the order they are received. Please pick up your handset to provide optimum sound quality when you ask your question. Now please stand by while we collect the questions. The first question comes from Mr. João Soares with Citibank.
Hello. Good morning, Bruno and everybody. I have two questions. The first one is related to the home automation line. I remember that in the roadshow, we talked about new products to increase the total addressable market. I want to know if that was one of these cases. Did the new product line put you in a new market? That is the first question. The second question is related to something that you put in your presentation and on the release as well.
It is related to the chipset supply. Do you think that is going to cause lower margins for this year? On the other hand, you might be able to deliver the most important lines, even though the supplies might be lower.
Hello. Good morning, everybody. I did not quite get the first question, but I can answer the second question. The lack of chipsets that we see now, it happens, it exists, but it is much better now than it was 30 or 60 days ago. Little by little, things are improving with all the efforts that we have been making with actions in terms of increasing the provision of those products. Of course, the lack of chipsets in the market causes an increase in logistic costs.
As Bruno said, the network unit did not pass on cost to consumers, not because of the BRL, but because of the cost increases that we believe are temporary. This is a very critical moment. We bring the components, the raw material, through air transportation. Of course, since we had delays in the entire chain, we have to use air transportation, which is much more costly than the normal ships that we usually use with sea transportation. The cost of raw materials is higher. We also have losses in the production because we have to change the way we operate in the production plants when we get the new components. We really have to juggle all of those factors in order for us not to cause an impact on the end consumers. Of course, demand is still very good.
The problems that we had were related to the lack of components. We could have performed better if it were not for that shortage of components, but we feel that things are improving. In the second quarter, we are still seeing that improvement. Now your first question, I did not get it. Can you repeat it, please? Just as a complement before you repeat your question.
Yes. Of course.
Go ahead.
The first question was related to the introduction of our IoT and home automation line. Are we considering a larger addressable market? The IoT market is still in its early stages here in Brazil. We do not see any impact in terms of market share when we start considering that new business in our market share measurements.
Indeed, we are still beginning. Yes, this is just the beginning. We are actually creating that market.
We believe here at Intelbras that with our network, with the thorough, the complete line that we have, and the great technicians that we have in the field and who are highly trained, we believe that we are going to create that new market, a market that is growing around the world. But here it is still a new market, and we are going to create it. We are going to spearhead that movement. We are going to generate that need in consumers for home automation and automation for small businesses as well.
Okay. Thank you very much. That is very clear. Now, if you allow me, I have one third question related to M&A. You just acquired Khomp, which is going to expand your SaaS and hardware as a service channel. But I would like to know your priorities for the coming months.
Are you going to focus on expanding your portfolio in terms of hardware or software? What are your perspectives in terms of acquisitions?
Well, in our negotiations and conversations, we see many different possibilities, and they can be found in all units. Usually the targets are small companies with up to BRL 100 million . But we also have conversations with much larger companies. But we always focus on companies that are going to add to our portfolio. We are going to continue working with our network, with our logistics skills in terms of acquiring raw materials, and this was the case for Khomp as well. We believe we are going to be able to strengthen Khomp's logistics capacity and production capacity as well, and also sales capacity. We are going to increase their reseller line, that reseller network.
Now, of course, we are strengthening the corporate IoT line with Khomp. Khomp invested in that line two years ago. It is launching the new line now. The other targets that we are looking at, there are many of them. There are software companies that we are looking at. It is really our goal to bring more recurring revenue, more security to the business. But we are looking at targets in all of our segments. We have advanced conversations with many targets so that we are able to strengthen our channel, to strengthen the entire company really, through products that will bring us recurring revenue, especially.
Okay. Thank you very much, Mr. Altair. Thank you, Bruno.
Thank you, João.
Now the next question comes from Gabriela Moraes with Itaú BBA.
Good morning, everybody. Thank you very much for the presentation.
I have some questions here related to the energy segment. We saw a very strong growth in the quarter for this segment, but I would like to know more about solar energy. Could you give us some more color about the growth of the solar unit specifically? Also, I know that you expect this segment to continue to grow, but I would like to understand whether or not it is going to keep the strong levels that we saw in the first quarter. One last point about energy. We saw the margins growing quarter-on-quarter, and I would like to know your perspectives for the margins of the solar business with 24%, or do you expect that margin to increase throughout the year?
Well, starting with your question about the margin, we expect to keep that margin.
As we said during the roadshow, we believe that this unit demands lower expenses. Because of that, our EBITDA remains at the same level of our historical numbers at Intelbras. The energy segment is for sure going to continue with very aggressive growth considering all the projects that we have. We actually had that growth, but we did not really have the ability to go too aggressively to the market because we did not have inventories. One week ago, we started some tests here in southern Brazil, and those tests are using great results with very high demand. So we believe in this sector. We are prepared to tap the opportunities that we are going to find in this market, and we expect to see great results this year for this segment.
Also we are making great efforts in terms of training our network of resellers and installers. Oftentimes, technicians have to be trained. They have to acquire confidence in their work with a new segment, but we see a very high speed in this movement right now. Just as a complement, we expect to see a growth in this segment of above two digits for sure.
Okay. Thank you. Thank you very much. That was very clear.
Ladies and gentlemen, if you want to ask a question, please press star one. We have a question sent through the webcast from Gustavo Fabrício with SPR Capital. Good morning. Could you please talk some more about the higher levels that we saw in inventories in the first quarter?
Well, that was the result of a strategy that we adopted in late 2020.
Since we saw a shortage in components and our inventories were very low, we invested more in purchasing more components. We expected to sell more than we had planned for, but the lack of chipsets, the shortage of components really caused our inventories to be unbalanced. We expected to have higher levels of inventories. It was also a strategy in our solar business. We invested in our inventories, waiting for the sales to accelerate. We virtually had no solar inventories. So it was really the strategy that we adopted in late 2020 to get ready to tap and seize opportunities for faster growth.
Next question comes from Webcast with Gabriel Coelho. What solutions does the company have to overcome the challenges posed by the shortage of chipsets?
Well, the strategy is really about having a very close relationship with the owner of the technology.
Not really the manufacturer, but the American companies that provide the technology. We have a very strong relationship with them, and that is being fruitful. We are managing to get them to influence the Chinese manufacturer in the delivery of the components, and this is what we have been working hardest on in the past months. We are working on that strategy, and this shortage affects everybody in the market, and we try to get ahead of the competition and get a larger portion of the supply that we have in the market, so that is what we have been doing. As I said earlier, this shortage is much better now than it was 60 days ago. We can now see an improvement in this scenario.
In the second quarter, we are still going to have a shortage, but we hope that in the third quarter that supply will have improved significantly.
We have a question here on the chat from T. Rowe, and the question is related to the year-on-year growth. The growth that we saw in this quarter, can we expect that level to be the same over the next quarters?
That is a very good question. Well, of course, for the next quarter, we are going to see a comparison and a year-on-year comparison that is going to be a little bit different from what we had in the previous years, because the second quarter 2020 was when the pandemic started. We saw a decrease in sales and then an acceleration in the third quarter and the fourth quarter.
The second and the third quarter and this last quarter of the year should be analyzed by ourselves and the market as an average. Because now we cannot really celebrate the growth that we are going to see in the third quarter, because I believe that we should really consider the average of the quarters. Because last year there was a change in the behavior starting in the third quarter, and the demand was held back for a while, and then it started accelerating. But in the average of the year, we are going to review our budget, and we believe that we are going to be able to fulfill the plans that we made according to the conversations that we have had with the market.
The next question comes from the webcast, from Lucas Roberto Amaral de Figueiredo with Garin Investments.
With the growth in the solar energy business, are you going to focus more on larger companies or maybe partnerships with companies that are present in the solar energy business?
Well, doors are not closed, of course. But as we always said, our strategy is focused on smaller businesses and homes. This is where we have a strong presence with our brand, with our installers, the resellers, the distribution channel. We believe that we have a differentiating factor here with our brand. This is our focus.
Ladies and gentlemen, if you wish to ask a question, please press star one. With that, we conclude our Q&A session. I would like to turn it over to Mr. Altair Silvestri for his final remarks.
Well, thank you all very much for watching our presentation and asking questions. This was the second conference call. We are perfecting our communication.
Our strategies and projects aimed at growth continue, and they are being executed. And we hope that in the second quarter, the next time we talk, we are going to bring even more good news. And once again, thank you all very much. I would also like to tell you that we are very confident, although we have been struggling with the chipset supplies, which is a problem that has been here since late 2020. But we are managing that difficulty very well, and we are confident, we are very firm in our investment projects and our strategies. And we believe we are going to see significant growth. Thank you all very much.
This concludes Intelbras conference call. Thank you very much for your participation. Have a good day.