Earnings Call: Q2 2024

Aug 9, 2024

Summary

H1 adjusted EBITDA rose 32.4% YoY, while Q2 adjusted net profit grew 37.9%. Insurance and credit/consortium expanded, and H2 margin gains are expected from seasonal volumes, operating leverage, and cost savings.

Good morning, everyone. Welcome to the Wiz Co video conference for the results of the second quarter 2024. For simultaneous translation, please click on the globe icon named Interpretation, located in the lower Zoom bar, and then choose the language of your preference, Portuguese or English. For English listeners, there is the option to mute the original Portuguese audio. Just click on Mute Original Audio. After the presentation of results, we will start the Q&A session. To participate, just send the question through the platform Q&A icon, and then it will be answered by Wiz Co representatives in the meeting. In case your question is not answered during this video conference, the investor relations team will contact you later on to answer your questions. Before proceeding, we would like to clarify that any statements made during this conference regarding Wiz Co business prospects, projections, operational and financial goals, constitute beliefs and assumptions of the company's management, as well as information currently available to the company. Future considerations are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events, and therefore depend on circumstances that may or not occur. Investors and analysts should understand that general conditions, industry conditions, and other operating factors may affect Wiz Co future results and may lead to results that differ materially from those expressed in such future conditions. Now to introduce Wiz Co team, today we have Mr. Marcus Vinicius Oliveira, CEO. Mr. Lucas Neves, CFO and investor relations officer, and Mr. João Resende, investor relations manager. I now turn over to Mr. Marcus Vinicius, who will start the presentation. Please proceed, Mr. Marcus. Good morning, everyone. Welcome to our result conference for the second quarter of 2024. Before turning over to Lucas, I would like to share with you a brief message. We closed the second quarter of 2024, proud of what we have achieved thus far. We reaffirm our commitment to discipline in the allocation of resources and reap the fruits of a clear, well-defined strategic plan that guides us to a future continuous success. It involves, number one, optimizing the profitability of business. Two, strengthening the capital structure, promotion of new businesses, and strengthening of our technological platform. Throughout the first six months of this year, we were determined to generate value for our channels to capture more and more earnings. We kept a high guard on cost control, and sought to optimize efforts to be more efficient. All of this without giving up looking at it from the perspective of our customers so that they always come first. That is why we celebrate a first half of the year with the incredible achievement of BRL 166 million in adjusted consolidated EBITDA. A result which is 32.4% higher than what we achieved in the same previous last year. Our ability to make our business profitable, even in periods of uncertainty in the country's economic scenario, remains evident. In the insurance segment, we broke a historical record of BRL 121.2 million in adjusted consolidated EBITDA performance, which is 73.6% higher than the same period in 2023 and 18.7% higher than achieved in the previous quarter. The good operational performance observed this period is directly related to consistent results of our unit. I highlight the growth records achieved by BMG Corretora and Wiz Corporate. In addition to Inter Seguros, a 100% digital operation, reaching a spectacular 2.6 million customers in the quarter, reaffirming its ability to grow recurrently and positioning itself as a worldwide success case. In the credit and consortium segment, we maintained a growth of 22.9% in net revenue compared to the same previous last year. We highlight Promotiva. It evolved 56.2% when compared to the second quarter of 2023. Our robust operating model with diversified operations allows us to create synergies that leverage results. In line with our goal to promote new businesses by reinforcing our entrepreneurial DNA, since 2023, we have already executed different businesses which continue to contribute with our operations and will work as a basis for us in the future. We remain attentive to the market to identify opportunities that are aligned with our purpose and where we can apply our value proposition to generate earnings for us and our partners. We know as well that the world continues changing at high speed, and we understand that technology will be the great binding point between today and tomorrow. Therefore, we continue to execute our digital transformation strategy through constant advances in the development of Wiz Pro, an innovative platform. In this quarter, we delivered multi-contractual payroll deductible loan. We also have delivered business engagement, and in terms of operations, we have concluded the full accreditation functionality. With that, we have doubled to four the number of units in the group already using the platform in their commercial routine. As security and technology have to go hand in hand, I am happy to announce that we have achieved the renewal of our ISO 27001 certification, a seal that confirms the existence and compliance with very strict information security processes and controls, also demonstrating our commitment to ESG guidelines. In addition to our commitment to information security, we also use a consolidated methodology in the market to assess our ESG maturity. With that, we collect data that will guide our strategies. We are proud to inform you that we have joined the Brazil Pact for Business Integrity in the business area, a prerequisite for the renewal of our Pró-Ética certificate. We have strengthened our comprehensive health program, promoting the social, financial, mental, and physical wellbeing of our Wizards. In the second half of the year, we will implement governance month in all of Wiz subsidiaries, where we will develop things such as ethic conduct, risk management, combating fraud and corruption among others with the Wizards. Another highlight, the release of our 2023 sustainability report. This document brings to light the firm commitment that Wiz makes to the sustainable development and transparency of its operations. It is a genuine expression of our purpose to secure companies and people, thus generating a positive impact on business and society. We are prepared and committed to face with determination, discipline, and commitment, the challenges of the second half of this year. We also have a track record of over a half century in operation in the market. We also have a qualified team that makes us very proud to ensure the execution of the required actions. We remain as a reference in culture and people development. Once again, we thank all the Wizards who in the second half of 2024 have once again demonstrated their commitment, strength, and passion with the pursuit of results. Likewise, we thank the member of our board of directors and committees that continue reinforcing the decisions made by the statutory board of Wiz Co. Thank you very much, and I now turn over to our CFO and investor relations director who will talk to you about our results for the period. Lucas, I turn over to you. Well, thank you very much, Marcos, and good morning, everyone. I am going to start the presentation of the financial results with slide number 3, where I will start with the evolutions of our proprietary digital platform. We believe that investing optimally in technology strengthens our competitive advantages and ensures us the agility to reap increasingly consistent results in our distribution channels. The platform offers three modules: sales, management, and operations. In the last quarter, we had developments on all of these fronts. In sales, we integrated new products and implemented the multi-contractual payroll deductible loan margin consultation functionality. Under management, we integrate business engagement solutions into the system, and finally, in the operations module, we deliver full accreditation functionality that manage third-party sales forces. We have also doubled the number of units using Wiz Pro in the last quarter. Now, Paranaseguros, Promotiva, Wiz Conseg, and Wiz Parceiros have already adopted the platform to optimize processes and leverage results. Moving on, I would like to highlight an important milestone reached by Inter Seguros. We now have 2.6 million customers in our portfolio, and the company has consolidated at the front of digital product sales operations in the country. The result shows an evolution of 79.3% compared to the second quarter of 2023. We also had a record gross revenue of BRL 58.1 million, 50.6% above the same period last year, and EBITDA of BRL 30.6 million. A result which is 55.8% higher than in the second quarter last year. The subsidiaries business model combines a diversified portfolio, integrated experiences, scale, and profitability. I would also like to highlight that last month, we reinforced our commitment to sustainable development and have released our third annual sustainability report. Among the highlights of the document, it is worth mentioning that we were able to renew our ISO 27001 certification, which certifies our capacity in information security management. We have also achieved a Pró-Ética company certificate promoted by CGU and Ethos Institute. Also, for the ninth consecutive time, we have been acknowledged as one of the best companies to work for in the Midwest. I also highlight the reduction of Wiz net debt. A reduction of BRL 54 million, and now we have reached BRL 512.3 million. This result is mainly due to the payment of installments of accounts payable from acquisition. Now moving on to slide number 4, we highlight our achievements for the second quarter of 2024. We have had BRL 246.7 million in net revenue, a decrease of 21.7% when compared with the same quarter last year. The net revenue is BRL 197.3 million, an increase of 31.3% when compared with the same quarter last year. We also had an increase of 45% in our revenues. Also in the segment of credit and consortia, we had an increase of 22.9%. I would also like to highlight our adjusted EBITDA, with a growth of 32.4% when compared to the same period of 2023. Consolidated adjusted net profit was BRL 99.8 million, a result which is 37.9% higher than the same quarter last year. In slide number six, we have a summary of our consolidated results. In the second quarter, we had an EBITDA of BRL 263 million, 32.4% above the second quarter of 2023 as a result of the good commercial performance of our business units and also our focus on operational efficiency. Moving on to consolidated net income, we had an increase of 60.9% when compared to the same period last year, driven by the good operating result, as well as the excellent financial result for the period. The net income of the controller reached BRL 33.9 million in the second quarter of 2024, 35.8% higher than in the same period of the previous year with an expansion of BRL 9 million. In slide seven, we can see the adjusted results. This quarter, we did not have any adjusted EBITDA. We are presenting the adjustments made for 2023. In net profit, we have adjusted non-recurring effects on the lines below the EBITDA, a highlight to depreciation and amortization as you can see on the slide with an effect of expenses in intangible with the shares of the other business units. In financial results, we have adjusted AVP for future payments of the acquisition costs of the company, as well as the effect of the adjustments to fair price in payable accounts and also monetary adjustments and the currency variations that were contracted. In terms of taxes, you can see here the adjustments in the depreciation lines and impairment and financial results. Therefore, we have closed the quarter with an adjusted net profit of BRL 99.8 million, a result which is 37.9% higher than in the second quarter of 2023. Moving on to slide eight, we evaluate the composition of the parent company's result. In the second quarter of 2024, the controller had BRL 62.3 million in EBITDA, a 2.2% reduction when compared to the same period of 2023. The result was impacted, especially by the reduction of the net revenue from commissions of the Run-Off Caixa network operation. This has boosted the equity equivalents line. In this line, the parent company recorded BRL 41.8 million, a result which is 56.4% higher than presented in the second quarter of 2023 due to the better performance and interest in the results of subsidiaries in contracts to the recognition of equity equivalents of the realization of identifiable assets previously recognized in depreciation and amortization. In net income, the parent company reached 33.9%, representing a growth of 38.8%. This was driven by the better performance in financial results, mainly as a result of the reduction in financial expenses related to monetary adjustments of the acquisitions, the end of the postponement of the acquisition portion of BRB. Now moving on to slide 10, we will introduce the results by segment. The consolidated results is available in the attachment of this presentation and also in results. In the first quarter of the year, 79% of net revenue came from our current operation. The business unit is consolidated by Wiz and the insurance segment represented 55% of our current result. We continue observing a strong movement of diversification of results, combined with the continuous growth of revenue. This was only possible due to the focus on delivering the company's strategic objectives. In Slide 11, we continue presenting the operational performance of our segments. We reached this quarter with BRL 139.2 million in net commission revenue in the quarter, an increase of 45% compared to the same period of the previous year. This was a record commercial performance in some units, including BMG Corretora, a growth of 73.9% compared to the previous year's BRB Seguros, with a growth of 24.7%, Wiz Corporate, a gross revenue performance of BRL 35.1 million and a growth of 70.1% when compared to the second quarter of 2023, driven by the strategy focused on the sales of renewable and recurring products, and also in the average ticket of premiums issued by the unit. It is also noteworthy that Inter Seguros reached another quarter, followed by a record milestone, reaching BRL 58.1 million in gross revenue, an increase of 50.6% when compared to the second quarter of 2023, registering BRL 7.9 million in equivalence for Wiz in the period. In Slide 2, we show you the units that operate in the distribution of consortium and credit, Promotiva and Wiz Parceiros. This quarter, we reached BRL 36.2 million in net revenue from commissions in the credit and consortium segment, an increase of 22.9% compared to the same period in the previous year. EBITDA of BRL 21 million, 35.6% above the second quarter of 2023. This result reflects the good performance of Promotiva. Wiz Parceiros reached a net commission revenue of BRL 5.5 million in the second quarter, 43.5% lower than in the second quarter of the previous year. In Slide 13, we show you the service segment, including the Wiz Concept unit and also Run-Off Caixa. In the second quarter, this segment had a decrease of 10.3% in net commission revenue compared to the same period of 2023. This was impacted by the reduction in revenue from the corporate solutions, credit solution lines, as well as the telesales line. The unit remains focused on profitability and ends the period with an EBITDA of BRL 2.5 million, BRL 2.1 million higher than in the second quarter of 2023, expanding its EBITDA margin in 9.2 percentage points, reaching 10.9% in the period. Finally, on the Run-Off Caixa, we present to you the result of the revenue inventory referring to sales made by February 14, 2021. In the quarter, this line added BRL 46.7 million in EBITDA to the company, a result which is 6.2% below the second quarter last year, due to the 5.9% decrease in operating revenue. Slide 14, I highlighted the main aspects for the corporate result and below EBITDA. The corporate general and administrative expense line totaled BRL 14.8 million, which is BRL 8.7 million lower than the same period of the previous year, resulting from extraordinary positive effect recognized in the second quarter of 2023. In the lines below the EBITDA, we present to you a financial result of BRL 24.8 million, which is BRL 5.9 million lower than in the second quarter of 2023, due mainly to a reduction in financial expenses for adjustments to present value in payable accounts of acquisitions. Our expenses with IR/CSLL in the period grew by BRL 19.6 million compared to the same period year-over-year. In the second quarter of 2024, we have a record effective rate of 38.6% mainly due to nondeductible expenses for purposes of calculating IRPJ, CSLL. In Slide 15, in investments, the flow of BRL 212.2 million results from disbursement in amortizations in accounts payable from acquisitions in the period. BRB Seguros with BRL 127.3 million, BMG 39.9 million, Inter Seguros 39.4 million, and Wiz Concept 6 million. We can see the flow due to the receipt of BRL 66 million from the loan agreement entered into with the shareholders of the company's control block, according to the material fact published on February 2, 2024. We closed the quarter with consolidated cash balance of BRL 276.6 million and BRL 37.5 million in cash in the parent company. With this, we close our presentation and start our Q&A. Thank you for your attention. I now turn over to Mr. João Resende, who is going to start the Q&A session. I would like to remind you that to participate, all you have to do is to submit your question to the Q&A, and it will be answered by the shareholders. Good morning, everyone. It is a pleasure to have you all here for Wiz Q&A. We already have some questions. We are going to start with the first one by Mr. William Barranjard. His question is the following, regarding the discussion of interest rates in Brazil, how do you see the evolution of insurance sales where interest rates will remain higher for a longer period of time? Will the same levels seen in the past quarters be maintained? Well, good morning, William. Here is Marcos. Thank you for your question. William, we already have our scenario hired for 2024, and therefore our interest environment is lower than in 2023, and this alone helps us a lot. The result of what we have sold and produced has also been hired and executed with our partners, especially in bancassurance segments. We also have the capitalization of our products, which generates recurring revenue. So in general, we do not see any surprises for the second half of the year. We are at a very comfortable position. We still have another question from William. He wants to know about the improvement in the EBITDA margin, and he understands that a relevant part of these improvement initiatives have already occurred, but he would like to understand whether we should still expect any other improvements. Well, thank you, William, for your question. The credit market has a seasonality with higher volumes in the second half of the year, and therefore, as we expect by analyzing our historical results to have a stronger second half, we expect that the top-line segment will help us leverage. We will have operational leverage that will help us have some gains in our margin when compared to the first half of this year. We also have some annualization in terms of cost savings in this half of the year. The main component for us to have margin gains will be operational leverage with revenue increase. I will add a last question sent in by William. He would like us to comment how we see the current scenario in terms of Wiz net debt for the company. Will this decrease open our appetite to make new movements in bancassurance? The first aspect to contextualize here is that we've concluded this half of the year with a net debt of BRL 512 million. So we had a decrease of our net debt. Also, another important aspect is that we've done a lot in a very short period of time. Part of the stronger growth we've had in the first half will be used to focus on the generation of value to our partners, extracting as much value as possible. We are looking at the M&A market, but we are also looking at other opportunities with a very careful approach. We've been able to grow organically and therefore, we are not in a rush for M&As. It has to be according to the return criteria that we expect, and also when we discuss with our board and our controllers, it has to be in compliance with the commitments that we've already made. We now have a question by Mr. Pedro Calisto. He congratulates the company for the results and asks us if we still consider the possibility of follow-on. Thank you very much, Pedro. There's an important aspect here. When we talk about capital structure, this is not a decision by the management of the company. We have to take into account the control block, the Administrative board, and we've been able to do a good work in the company in terms of reducing our net debt. When we think of leverage, we are decreasing our debt while increasing our EBITDA. When we consider our net debt and the EBITDA, we've had improvements this year, and we understand that whatever the capital structure we have, we must have a destination, and that has to do with our M&A strategy. Wonderful. Okay, now we have a question by Mr. Renato Ramos from Santander. The question is: what are the main aspects for the future periods? Another question has to do with the efficiency agenda, which was very strong in the past year. Do we still have any room for internal efficiency gain? Wiz' history has to do with channel management. When we look at the companies, we have three segments: insurance, credit and consortium, and services. Historically, we have the main results from our insurance segment. Most of Wiz' growth comes from this segment and therefore, when we look at the company for the first time, we can see that our main segment is the insurance segment, and this is where we believe that we still have a lot of opportunities in the Brazilian market to extract more value. The second question regarding the efficiency agenda, well, this is continuous work. Last year, we knew that we had more work to do, and this is something we've been pursuing quarter after quarter, half of the year after half of the year. We want to do better, and we've been pursuing all of these opportunities with more accuracy. The important adjustment we made last year was good. We think that there's always opportunity to do better, but most of our cost reduction took place last year. I have a question by Jomar Filho, an investor. He says, "Good morning," and congratulates us for our results. He says that he understands that Wiz's growth has already been contracted for the future years, but he would like to know what we're going to do to change the view of the market on the company. Well, thank you for your question, Jomar. An important work we do, or I do as investor relations, something very important that we've done here is to simplify our narrative to the market. As of last year, Wiz has focused in three large segments, and we understand that in a more simplified narrative, it's easier to understand the company. We know that the current situation of the market ends up penalizing our small cap shares because they are not something sought after in the market. But we understand that this has to do with the market and the moments that the market is going through. But in the long run, the price of the shares will follow the performance of the company. I would like to complement something here. It's important to highlight as well, Jomar, that what we have today and also based on the assessment of all banks, is that in a more favorable moment in this market, we will have a natural growth in valuation of these shares. We definitely have a negotiated volume and share price, which is below what it should be. This is a fact. Okay, wonderful. I have a last question by Alexandre Bastos from Akuda Capital. He congratulates everyone for the results. In this quarter, Wiz Parceiros was a detractor. Can we consider this result as a recurring result? Alexandre, this is Lucas again. Thank you for your question. I would like to contextualize something. Wiz has different business. When we have different segments in a company as big as Wiz, we always have to take into account that we have a large agenda that we've been dealing with at Wiz Parceiros. We have to make sales so that the client remains, and partners who do not have this profile, we've removed because we believe it is structural over time. We do not expect this result to be a recurring result. There's a lot to be done with Wiz Parceiros, but in general, we see that there's room for improvement there, but we are very happy that the profit of the company grew 83%. The balance is very positive. Wonderful. With this, we end our Q&A session and we are going to close this video conference. I thank you all for your participation and wish you a wonderful day. Thank you very much.