Good morning, everyone, and welcome to Valid's Q3 2022 Earnings Webcast. My name is Olavo Vaz, I'm Head of Corporate Finance, and I'll be moderating this session. Before we begin the presentation, I'd like to make a few important remarks. We'd like to say that this event is being recorded and that all participants will be connected in listen-only mode during the presentation.
This webcast is being made available with simultaneous translation into English, and the video will be available on Valid's website, and also here on the webcast platform. A replay of this event will be available right after its conclusion. At the end of our presentation, we'll have the floor open for questions. Questions may be asked at any point during the event and must be submitted via the chat tool of the platform on the right-hand side of the screen.
We would also like to say that any statements made during this call with relation to the company's expectations, forecasts, and financial and operating projections are based on the assumptions of our management team as well as information currently available to the company. Forward-looking statements are no guarantee of performance.
They involve risks, uncertainties and assumptions, seeing as they refer to future events and therefore rely on circumstances that may or may not come to pass. Investors must understand that general economic conditions in the industry, as well as other operating factors, may affect the company's results and lead to earnings which are materially different than those expressed in said forward-looking statements. I would now like to introduce the participants of our webcast of today. We have with us Ivan Luiz Murias dos Santos, our CEO, and CFO, our IRO, Renato Tysler.
Now I'll turn the floor over to Ivan, and after that, we will open the floor for questions. Good morning, Ivan. You may please proceed.
Thank you, Olavo, and good morning, everyone. I'd like to thank everyone for joining us today. I hope you're all doing well. During this first part, I'd like to go over the main points about our earnings results for Q3 2022. We ended the quarter with BRL 667 million in revenue, the highest quarterly revenue on record for us, up 15% versus Q3 2021, and BRL 135 million EBITDA, up 37% over Q3 2021. It's important to stress a very important aspect. Our year-to-date result in the first Q3 of 2022 exceeds the EBITDA result for the entire year 2021, which had been Valid's highest EBITDA value in all of its history.
That in itself shows how consistently we have been generating results and everything that we had anticipated to the market that Valid would be able to achieve exactly one year ago as we released the earnings results for Q3 2021, as well as the efficiency instruments that we were able to introduce. That was only true because in Valid ID, our revenue grew 21% and our EBITDA 22%, coming to BRL 53 million during this quarter, a result of Valid's highest volume of documents. In the year-to-date, our revenue grew 25% and our EBITDA 57% in this vertical.
On the V. Pay vertical, even though the demand was weaker in Brazil, our revenue increased 21% because of higher value-added cards that we sold, as well as greater sales in Argentina, which led to an 80% higher EBITDA in Q3 and a 120% higher in the year-to-date. On the V. Mobile vertical, we increased 10% in revenue, and our EBITDA grew 9% in Q3 2022 with an absolute EBITDA of BRL 34 million, a result of a better mix of chips and better allocation across different locations, as well as the continued improvement of our operations. Even though the volume was lower than in 2022, our V. Mobile vertical increased its revenue 16% and its EBITDA 27%.
Now, moving on to the fifth box, it's important to say that regulating agencies in the United States have just given a go for us to move forward with our sales of assets in the United States, our ID and payment sectors to a German company, a transaction we expect to conclude later in November of this year. Once this transaction has concluded, the funds from this sale will be combined with the sales of our data assets in the United States, as well as the capital increase we had in September. Moving on to the sixth and last box, as a result of all of this operational deliveries, in the first Q3 of 2022, we've already reported a BRL 334 million EBITDA, again higher than what we had for the entire year 2021.
The sales of all those assets I mentioned before will be fully devoted to improving Valid's capacity, which in two years has gone from 3.2 times its net debt to EBITDA to 1.1 times, which is where we expect to end 2022. That combined with the strong operational efficiency for this year, the leverage we expect to have at the end of 2022 is the lowest on record for us in the last 10 years. I will now turn the floor over to Renato, who will give you more details about our earnings in Q3 as well as our year-to-date results till September. After that, I'll come back to answer all of your questions. Renato, good morning.
Well, first of all, good morning to everyone joining us in this earnings call.
Well, all of this that Ivan summarized in one page led to the privileged position that Valid achieved since 2021. Today, our leverage is 1.1x and could potentially go down in Q4 after we conclude the transaction in the United States and lower our net debt by about $2 million. In a scenario of extremely high interest rates, we see the reduced net debt as a potential way to generate more profits with a lower debt service. We have a cash position that's enough to honor all our obligations for 2023, not considering the funds from the transaction in the United States, with which we will settle much of that debt.
It's important to say that one thing we focused over the last 24 months was in balancing our capital structure, lowering our leverage, and allowing cash generation to monetize our investments, paying JCP, announcing repurchase operations, and more importantly, opening up the possibility for future M&As, which our current balance allows us to do. In short, we are financially ready for the future. Moving on to slide five. Our Q3 was defined by a strong EBITDA of BRL 135 million because of the seasonal period for our international business. Q3 is usually weaker because of the lower volume in mobile in the United States. In LTM, our EBITDA is already BRL 155 million. Our revenue grew 15% over Q3 2021 and 14% versus year-to-date 2021.
Our EBITDA went up 37% over Q3 2021 and up 62% versus year-to-date 2021, with a positive impact across our businesses. I'll go into more details in the next few slides, but we saw a higher volume of documents. We saw a strong result from card sales in Argentina, as well as stable margins and profits in mobile. I would also like to say that our 2.3% margin in Q3 goes to 23.8%, not considering the operations in the United States, and reinforces our margins after this conclusion. Now, moving on to our business lines in slide 6, starting with Valid ID. We saw a record volume for this quarter, with 7.4 million documents being issued.
Bear in mind that this business includes portfolios, digital certification, digital parking, digital seals, as well as other adjacent businesses. Our revenue increased 21% over the quarter and 25% in the year-to-date versus 2021 in this vertical. Our EBITDA 22% in the quarter and 57% versus year-to-date 2021, much because of the lockdowns earlier last year. There's also a seasonal period in Q3 because of the greater number of working days compared to other portfolios. However, Q4 has fewer working days, considering that this year we will also have a World Cup, which will negatively affect that number of working days compared to Q3. Even despite of that, we continue to sustain strong performance.
In the next slide, we talk about the V.Pay unit, whose result was lower than in 2021, but with significant gains in EBITDA, much because of our operations in Argentina, which brought a strong volume and prices going back to healthy levels. In addition to that, we also saw gains in Brazil because of the operational efficiency we've been talking about over the last few quarters. Revenue went up 21% over the quarter and 16% in the year-to-date. EBITDA, in turn, was up 87% in the quarter and 120% in the year-to-date. As I said, most of this growth compared to 2021 comes from Argentina, which during this period last year was showing very low, even negative results in a few periods. Last but not least, our V.Mobile unit on slide eight.
Here we had another solid quarter of earnings with our revenue growing 10% over the quarter and 16% in the year-to-date versus 2021. Our EBITDA went up 9% over the quarter and 27% in the year-to-date versus 2021. Volumes were lower than in 2021 because of the shortage of semiconductors worldwide, which pressures the supply on the market and allows us to pass along price cost increases to end consumers, as well as increasing our portfolio in other regions. It's important to say that Q3 also had an impact in earlier purchases by operators which wanted to secure the volume for the end of the year. This tends to affect the volume in Q3 and the EBITDA for this business unit as well.
In 2023, we are beginning to see the shortage of chips be mitigated, which will bring, on the one hand, greater availability of volumes, but also a pressure on prices for this region. We are monitoring this on a day-to-day basis with our team in anticipation of what's to come next year. Moving on to slide 9, it's important to separate our net profit from everything that's one-off. We had a very significant impact because of the higher EBITDA compared to the first nine months of 2021. All of that coming from recurring revenue. However, we had two items that draw us back. The first one being our intercompany loans in Spain, which created a negative pressure earlier in the year.
Once we conclude the operations in the United States, we will settle that intercompany loan, and therefore, this will no longer be a recurring expense. We have the funds from the sale in the United States, which will also be a one-off revenue and will not continue to affect us. We would have BRL 900 million as a result at the end of the year, which will be very positive for the company. In net profit on slide 10, we can see the increment in our operational cash position of BRL 127 million, including the net finances, which are recurring. We generated BRL 100 million before the capital structure. That, and also the fact that our cash position is very comfortable, we decided to lower our debt by paying BRL 71 million over these first nine months of 2022.
As I said in the first slide that I presented, we will also lower the debt even more until the end of 2022 by prepaying the eighth installment, including the funds from the sale in the United States. That, not including our comfortable position. Moving on to slide 11, we have three items listed. One is the raising of EUR 4.2 million in Spain. The second is we concluded the purchase of 10% of our minority share in VSoft. This is something that we had already talked about in previous calls. Lastly, the excellent news as also mentioned before, that the regulatory agency in the United States, which oversees the sale of our assets in that country, which granted us approval.
With that, I conclude my participation and turn the conference back to Ivan so that he can give his final remarks about this quarter.
Thank you, Renato. Well, everyone, before we move on to the question and answer session, I'd like to stress two very important messages to you. The first one has to do with our deliveries in 2022. This is the fifth consecutive quarter that we delivered strong and consistent EBITDA and revenue results. We see a higher top line and even stronger growth in our EBITDA because we see the company structurally more prepared to structurally leverage its core operations, and as a result of the effective introduction of an efficient management operation as well as an efficient commercial operation.
On V.Mobile, even though our 9-month result was really strong, close to what we had in 2021 as a whole, it's important to warn you that we are still cautious about the global shock in semiconductors, especially in the telecommunications industry. Lastly, excluding the United States, which is how we will begin to look at the company starting in 2023, our quarterly EBITDA has come to about 23%, and our year-to-date margin has exceeded 24%. The second point is our capital structure.
We take a lot of pride in having worked so hard on our capital structure for the last two years, because precisely at the time where the environment in Brazil comes to the peak of its monetary tightening cycle, we here at Valid are running in the opposite direction and expect to deliver the lowest leverage rate in the last 10 years this year. This was because of the discipline that this administration adopted in the last three years and will allow the company to stand in a very privileged position. Starting in 2023, we will translate all this turnaround in earnings per share, seeing as expenses in debt amortization will decline significantly in the next fiscal year. Lastly, before turning the conference back to Olavo, I'd like to thank and congratulate Valid's team.
Everything that we were able to report during this call is a result of everyone's efforts in our different businesses and different locations. I'd like to personally thank every one of you with the entire team. With that, myself, Olavo, and the rest of the team are available for any question or anything you guys would like more details on. Olavo, you have the floor.
Thank you, Ivan. Thank you, Renato. Well, everyone, your questions must be submitted using the platform's chat. I will start to organize them, and next, we will start by reading the first one, if you can give me just a couple of seconds. Well, Renato, we will start with Fabio's question. He says, "Good morning. Great job on the results. We have two questions.
First of all, without giving us any guidance, could you please tell us what do you expect for Q4 2022, Q1 2023? Second question, looking at the profit for the end of 2022, in this fiscal year, will we see any vesting of shares?
Good morning, Fabio. Well, starting with the guidance issue, of course, we cannot provide any guidance in our calls. If you've noticed over the course of my presentation, I gave you a little bit of color about especially Q4. When we look at our operations, historically, if you consider the operations in the United States, in the U.S., we usually have a Q4 and Q1 very weak and a Q2 and Q3, they're very strong. If we had the U.S.'s results with us, that would be the case.
Also, our mobile business also has a stronger seasonal period in Q2 and Q3. In this year specifically, we also had what I mentioned during the presentation, which was there were purchases made earlier in Q3, which is why our volume in Q3 was a bit lower. That combined with the semiconductor shortage leads us to the lower volumes. What we brought to Q2, we were not able to trade in Q3. Now, also with regard to Q4, we have the issue of fewer working days. Q4 traditionally has fewer working days, but this year we on the one hand have the holidays on the weekend, but we also have the World Cup with the matches taking place during the week, which also means people leave the house less often to deal with their documents.
These are issues that may affect Q3 with some seasonal effect if compared to Q3. With regard to Q1, 2023, we will continue to see strong daily volumes in identification. Also on the cards business, we will see figures going up more strongly later this year and early next year. On mobile, we also expect to have a strong Q1 in volume, but still within the limitations of the semiconductor shortage, and also with a strong leverage precisely because of that shortage. Starting in Q2 next year, we are beginning to see a relief in that chip shortage. If that turns out to be true, we will have the impact of greater availability, but also both cost and margins could be lowered, could be narrower.
We will have more clarity about all of these impacts over the course of Q1 of next year. In a way, this is what we can expect and what I can tell you in a more generic way without providing any guidance. From the distribution standpoint, just to remind you, this January, we paid BRL 23 million for the JCP payment that we had for 2021. Next year, if we can pay via net profit or via our reserves, we will also communicate the market if that's the case by December of this year, with payment taking place early next year. That's a possibility. Another possibility, as I said over the course of the presentation, we may return to our shareholders via repurchase operations. That would be an indirect way to compensate our shareholders.
Yes, if we have the opportunity from a balance sheet standpoint, we will also have that compensation in a similar way as we had in January of this year.
Thank you, Renato. I'd like to remind everyone that you must ask your question using the platform's chat tool. Our next question also comes from Fabio, and I'll ask this one to Ivan. He asks: Could you please tell us how's the eSIM consolidation and how does Valid versus telecom operators versus device manufacturers? Hi, Fabio. Good morning. The pace of transition is slightly slower than we have predicted a year ago, especially because of the global supply shock in the semiconductor business. It makes no sense because of the shortage, add a chip to a device that will not be activated because the market is not adapted yet, MNOs are not adapted yet.
However, more recently, we are starting to see good signs in that sense, both in terms of the adoption of devices that are already adapted to eSIM and also other things in the United States. With these chips, we are already seeing Brazilians purchasing devices outside of Brazil and coming back to enable their eSIMs. This journey is now starting to be created by domestic telecom operators. Looking at that, internally, our V. Mobile team is not only paying attention to that, but prepared to remain relevant in that transition, which is to say we have for a while been building a strong relationship with those OEMs, selling physical chips to these manufacturers.
However, we are transitioning in our relationship with MNOs, which will no longer be based on physical chips, but now focused on the creation of orchestration platforms, which we are already selling to some of our clients. When we look at the medium to long term, we plan to continue selling physical chips, but also adding to that volume the orchestration of platforms, which is a more technological business, so with a lower volume but a wider margin. Those two revenues combined will allow us not only diversification, but also continued relevance within this business.
Thank you, Ivan. Renato, the next question comes from Alexander. He says, "Good morning. Congratulations for the great cash generation.
Could you assess the market in terms of competition and potential M&A opportunities?"
Well, Alexander, we have been looking very closely at the market on our core business industries, and we are looking at opportunities to acquire companies that would complement both our ID business as well as our pay and mobile businesses. We just announced the conclusion of the minority acquisition of 10% of Vsoft that's already completed, and we will in partnership with Vsoft developing solutions to grow the company and also increasing our share of the market. Just as Vsoft, we have been looking at several companies in these three business verticals to see what would make sense for us from the business standpoint.
I think this is something that you are seeing and the market is seeing, which is we have greater cash generation for acquisitions. This, in a way, tends to help us balance the prices for these acquisitions. We had in 2021 and early 2022 significant adjustments in pricing, which reflects how the market is doing. I believe that this correction is coming precisely at a time when Valid is prepared from the standpoint of leveraging its balance sheet to make further progress in terms of looking at M&As, but now at much more reasonable prices. We are still looking at that. We have Valid Ventures, which we announced during our event in June.
We are still looking at that and several others, but now at a much more favorable market from the pricing standpoint. We see that as very positive.
Thank you, Renato. Let's move on to this next question. It comes from Eduardo Rocha. He asks, "Good morning. Congratulations on the results. My question is about, revenues moving forward. You were able to recover your EBITDA margins to about 20% plus. This is also an interesting increase by 15%. How do you see your margins developing moving forward? Can you expand it even more? And in revenue, can we accelerate growth?"
Good morning, Rocha. I think that on the revenue side, absolutely, we can continue to accelerate our revenue growth. We have, especially in the ID vertical, which is a business that you are looking very closely here.
We have the national ID and driver's license, and we have the agency changing the expiration date for these driver's licenses. At the same time, we also have in the ID vertical the regional register, the another Brazilian ID. We will see the beginning of the polycarbonate cards being issued, and that will also affect our average price and at the same time touch the value pool of this vertical in general. I think on the other verticals, we are seeing the same trend as what we have been presenting here.
Our team has been paying close attention in terms of looking at our clients in different locations, both in terms of higher added value products being added to locations and clients that we are working with for longer, as well as internally on operational efficiency. I think what we're seeing now in the United States will only help because it goes via measurement, and we are still focusing on all three verticals much more closely than we had over the last two years. There's a real possibility that we will not only continue to grow our top line, but also sustaining the healthy margins and profit levels that we've had in the last few quarters.
Thank you, Ivan and Renato. Next question comes from Patrick.
He says, "Could you comment a little bit more about your cash cycle this quarter in terms of suppliers and clients?"
Yes, absolutely. What we've done over the last few quarters since mid last year is we are progressing on how we see the business from all of these perspectives. We are now moving forward to look at our ROE, and ROIC, and also that from the perspective of how much we can convert our EBITDA into cash. When we start looking at the ROIC, naturally, we have to look at our suppliers, our inventories, our receivables. All of that helps us to improve our cash cycles. From the receivable standpoint, for example, we are now working on a short leash from the standpoint of any delays, and we are trying to avoid any type of accumulation.
This has been a successful strategy. Actually, in the last 12 months, we have seen substantial and material sums as we've disclosed with high aging. After a lot of negotiation, we were able to internalize. This was very positive, and we also expect to recover the last PDDs that we had. From an inventory standpoint, there's also an issue where we accumulated more semiconductors in our inventory, even anticipating ourselves to what we're already hearing that there would be a shortage of chips. We increased our stocks so that we wouldn't be affected by that shortage. Because what we prize is to be able to serve our clients with the highest service level. That's a basic platform that we work with.
To avoid any disruption in supply, we chose to start the year with high inventories. Now moving to the end of the year, we expect to see those supplies go down significantly. Also what we are working day in, day out on is to have better negotiations so that our cash cycle is increasingly healthier. We will continue to pursue this strategy. We are moving further and further across the organization to look at the ROIC and cash generation, because ultimately that is what will bring down our leverage ratio and will allow us to have a healthy balance sheet and enough cash to take the next steps and grow even more.
Thank you, Renato. Ivan, the next question comes from Victor.
He says, "Which of the three business units are expected to grow the most in the next Q3 , and what is the company's biggest bet?"
Good morning, Victor. I think that over the course of the last Q5 , we have reported EBITDA of over BRL 100 million. More recently, that EBITDA has stabilized in a much higher level, around BRL 100 billion and up. That is the result of a significant effort in the company's transformation I talked about opening. This is a transformational power that's very intense, that was very intense over the last 24 years. When you are changing at this pace, it's natural to see a few factors for the company to reorganize and use a few tools to continue growing.
That being said, when we look at our three verticals, we believe that V Mobile and V Pay are already at extremely high levels already. Especially because of that shortage, we at the same time as our volumes went down, prices saw significant increments, and we had to maneuver that in our GPOs and S&OP processes internally dealing with the lower volume, but also seeing prices that were going up. It's a slower or a less intense pace because we will depend on this chip shortage, and we'll have to see how prices will behave now that the volumes will be larger. On the other hand, I think the logic is the same of my answer to Eduardo Rocha. We expect to see higher growth in CNH, the driver's license, and also in substrates with a higher average price.
I think that Valid ID shows a short- to medium-term prospect that's a bit brighter. In V. Mobile and V. Pay, there's a trend that we still have to better understand as we look at the volumes and prices and how that develops over the next few quarters.
Thank you, Ivan. Renato, next question comes from Talles. If you could make it clear, the potential net debt at the end of the year with the funds coming in from the transaction in the United States would be just over $300 million?
Yes, Talles, you're right. We estimate something between $300 million and $400 million. That seems very reasonable, yes. Talles also asked another question, which was, What are the digital initiatives growing the most in the company currently?
Talles, I think there are two important verticals in this case.
The VID vertical, as Renato said just a few minutes ago, we had that investment in Vsoft. We have VHub, which is our contract or real estate sale contract manager, and that combined with our corporate venture capital. VID and businesses that are close to the government are businesses that make use of the company's internal capabilities and where we have greater potency and abilities. On the other hand, as I said before to Fabio, is also a digital transformation, so we are turning a business that was essentially based on chip, physical chip sales to the management of a change in platform. Both in the VID and in the V.Mobile vertical, there are significant digital changes, and these are part of the results that we are already reporting. We expect to see those margins improve over time.
Thank you, Ivan. Our last question comes from Alexander. He says: Would you consider a goal to expand internationally, especially in Latin America?
Good morning, Alexander. Well, again, there are two ways of answering your question. In V.Mobile, we already have operations not only in Latin America, but on a global scale. We serve MNOs across all five continents, especially in Latin America, several of them in the Caribbean, Mexico, the South American, Caribbean, and also South America. We already have those operations, which are still strong and significant within our business. In the VID vertical, we already provide a few identification and card systems to a few Latin American countries, such as Argentina and Colombia.
On the VID vertical, I don't know if your question had that bias as well, but I think it's important to mention because we have a significant mastery of government contracts in Brazilian states, and that's something that's difficult to replicate in other locations. At the same time, there is a lot of opportunities we could explore in Brazil. In V.Mobile and V.PAY, I think we could explore the possibilities that we already have on the table and where we can still grow. In the VID vertical, I don't see anything in the near term in terms of expanding our operations to other countries.
Ivan, Renato, and shareholders that have joined us, thank you so much for being with us.
We will remain available to you via our IR channels, and all of this material will be made available on our website over the course of today. Thank you so much, and we'll see you next quarter.