Earnings Call: Q3 2023

Nov 14, 2023

Summary

Q3 delivered record adjusted EBITDA of BRL 159.3 million, up 54.4% YoY, and adjusted net profit up 60%. Growth in insurance and credit accompanied efficiency and cash-preservation initiatives, with management expecting lower rates to support 2024 results.

Good morning, ladies and gentlemen. Welcome to Wiz Co earnings conference call to discuss results for the third quarter of 2023. We have here today Mr. Marcus Vinícius Oliveira, CEO, and Mr. Lucas Neves, CFO and Director of Investor Relations. This meeting is being recorded, and all the participants will be in listen-only mode during the presentation. Then we will open for Q&A, when more instructions will be provided. This meeting is being conveyed only by the web, via webcast, and you can access it at ri.wiz.co, where you have the presentation. The selection of the slides will be controlled by yourselves. The replay will be available after ending the session. The participants can send their questions by the website. Questions that will be answered at the end of the meeting. Before proceeding, we would like to clarify that any statements that may be made during this presentation regarding the company's business prospects, projections, and operational financial goals are beliefs and assumptions of Wiz Co's management, as well as information currently available to the company. Future considerations are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore depend on circumstances that may or may not occur. Investors and analysts must understand that general economic conditions, industry conditions and other operational factors may affect the future results and may lead to results that differ materially from those expressed in such forward-looking statements. I would now like to give the floor to Mr. Marcus Vinícius. Good morning, everybody. Amidst the challenges that marked the first half of the year, such as high taxes and the reduction of the credit generation in Brazilian scenario, we are quite enthusiastic to share the excellent results we had during this quarter. After months of huge work and efforts concentrated to mature business and optimize our internal structures, we are harvesting the fruits of our commitment. In this period, our teams demonstrated resilience and determination in developing strategies that were bold and launching innovative products, putting our clients in first place. We advanced also in technology, launching Wiz Pro in such a way as to better serve the business units of Wiz and, optimize our investments. With the Brazilian economy showing signs of gradual resumption, we found a good earth for the growth of our results. Now we celebrate the amazing mark of BRL 159.3 million in adjusted consolidated EBITDA, adjusted in the third quarter, the highest performance in our history. This result represents a growth of 54.4% against the same period of the previous year, and 27% growth against the last quarter, reflecting our ability in making our business even more profitable. In this third Q of 2023, we had net profit above the total generated in first half of 2023, BRL 44.5 million against BRL 38.9 million. Fruit of the effort of all the team in the beginning of this year in expenses reduction and gaining efficacy, efficiency and insurance, we reached BRL 91.2 million in EBITDA. We are growing in all the business units. This is a result of strategic investment in technology, management, commercial strategy and in launching new products. We emphasize units, BRB Seguros and BMG Corretora, that achieved records in premium issuing and operational efficiency, generating margin gains. Within the segment Wiz Corporate, our vertical branch for legal entities deserves to be highlighted for the third consecutive quarter with amazing growth of 276% in EBITDA against the previous year. This performance reflects the put in action of a strategy centered in offering recurring products, besides the success we have achieved in offering products for legal entities and partner banks. In credit and consortium, we go on with our trajectory of expansion, having sold more than BRL 1.7 billion in credit in the quarter. Promotiva had a key role in the success. We reached BRL 1.9 billion in consortium letters sold, pushed by Wiz Parceiros with historical record in productivity in August, allied to the efforts implemented to strengthen operational cash generation of the company that already show results. We, in this period, took other important initiatives. I emphasize approval of reduction of the minimum statutory payout to 25% from 2024 on, renegotiation of the payment flow of installments in accounts payable of acquisitions, and re-adequation of the flow of payout from our subsidiaries receiving payout. These initiatives result in a cash projection in a parent company that is more comfortable to manage our business in the short run. We go to the coming quarter proud of our results, believing in the potential of our business, and optimistic with the perspectives of acceleration of our results. We will go on focusing the consolidation of new business, the ones acquired in the last few years, in maintaining profitability, in using the strength of our group to generate more and more synergies, strengthening our campaign one plus one is more than two, since we know that together we are stronger. Thank you, and I give the floor to our CFO and IR, Lucas Neves, that will present the results for the third Q 2023. Thank you, Marcus, and good morning, everybody. Initially, or better, I would like to present the financial part with slide number 3, where I am going to be talking about defense and operational and strategic highlights in this period. Initially, I would like to paint in yellow the excellent operational results we met in this quarter. We got a consolidated EBITDA record of BRL 159.4 million, the highest result in our history. That comes from the record commercial performance in many units of the company, in focus in operational efficiency effect of the initiatives of optimizing structures that we took since the beginning of the year. We reached historical levels in selling insurance and credit, reaching BRL 2 billion in issued premiums and BRL 10.2 billion in sold credit and consortiums. Result of commercial strategies that are pointed at using the opportunities in our channels and launching new products. Also, initiatives are launching new products by our subsidiaries, I would like to paint in yellow, centered in serving better the customers. Our units put efforts throughout the quarter integrating new products in their portfolios. Above all, the operations of BRB Seguros, launched three products, BMG Corretora launched BMG Med, Inter Seguros launched Proteção Financeira Familiar, a family insurance, and also Paraná Seguros, they started to sell Sinap, which is personalized for personal accidents as products with telemedicine and many other benefits. Now about our technological advances we implemented with Wiz Pro. This digital platform offers sales, management, and operations in a unified way and a personalized way for the business units of the companies, leading to more connectivity among the operations and their business partners. Besides speeding up launching of new operations and integration of pre- and post-sales. With that, we intend to provide better experience in technology for insurance, consortium, and credit sales, optimize investment technology, agility, and effective results for the Wiz distribution channels. Also important are the many initiatives of strengthening the cash position of the company. We have advanced in implementing projects to reduce cost and tax efficiency, reflecting an increase of operational cash generation. We adjusted the flow of receiving payouts from the subsidiaries, and we approved the proposal to reduce Wiz payout to 25% from 2024 on. Administration has renegotiated at Banco Inter the flow of payment of installments of accounts payable from the acquisition of Inter Seguros, and also with the BRB Bank, we reduced the cap in BRB Seguros and approved the interim payouts. This transaction added to the distribution of interim dividends, generated BRL 61 million in cash for the parent company, 66% more than 2Q 2023. Now, slide four. We present the financial highlights of 3Q 2023. We had BRL 229.2 million in net revenue in this period, a 20.1% growth against the same period last year. Excluding the run-off net revenue of Caixa, it's BRL 182.9 million of revenue, 32% more than 3Q 2022. I also emphasize the highest EBITDA adjusted consolidator of the company, a total of BRL 159.3 million, 54.4% more when compared to the same period 2022. The adjusted consolidated net profit reached BRL 107.3 million, 60% above the same period 2022. Insurance segment had a revenue growth of 34.3% against the third Q 2022 closing with BRL 125 million reflects of record commercial performance in many units. I give the lights here to BRB Seguros with Wiz Corporate, BMG Corretora, Omni1. The segment of credit and consortium reached BRL 33.2 million, a growth of 174.9% against same period 2022, reflecting the nine months of operation Promotiva that added BRL 64 million in the year to date. In this quarter, the business units of Wiz sold more than BRL 749 million in premiums, a growth of 43.2% against the third quarter historical performance of the company. Year to date, it's more than BRL 2 billion in issued premium. We received a volume of BRL 3.6 billion in sellings of credit consortium, 131.9% higher than Q 2022. Slide six, summary of consolidated results. Increase of 13.6% of EBITDA against Q 2022, and from this year on, we include in calculation of EBITDA the lines, other revenues, expenses, and equity and earnings, representing historical data. In this quarter, growth of BRL 24.9 million G&A against Q 2022, is due to a non-recurrent effect concerning the reversion of the provision of fiscal contingencies, generating a positive impact of BRL 42.7 million this line. If you exclude that, would have had a reduction of BRL 17.7 million in the expenses and a growth of BRL 61.7 million in EBITDA, 63.3% higher than last period. Now, consolidated net profit, we grew 7.4% comparing quarter-over-quarter, reaching BRL 73.3 million in the period. This was pushed by the operational results being partially compensated by the growth in the lines of depreciation and amortization in IR and social contribution. The net profit of the parent company reached BRL 44.5 million in the period, 14.8% less than Q 2022. Slide seven, we see the effects considered for our adjusted vision. We did not adjust this quarter in EBITDA. In 2022, the adjustment of BRL 42.7 million concerns the reversion of provision of fiscal contingencies maintained by the company throughout the judgment of the process on fiscal use of premium generated with the cooperation of companies, as detailed in our earnings release 3Q22. In the line more adjustments, we adjusted the values recognized in results concerning the adjustments in the installments of earnout to be paid in the acquisition of the BMG Corretora. If you adjust that, the consolidated EBITDA in 3Q23 had a growth of 54.4% against last year. In net profit, besides the effects mentioned in adjusted EBITDA, we adjusted non-reoccurring effects and with no impact in cash that happened in the lines below EBITDA. Therefore, we closed the quarter with adjusted net profit of BRL 107.3 million, a result 60% higher than the Q22. Going to slide 8, we assess the composition of the result of the controller company. The operational results come from the Run-Off Caixa and with Wiz Parceiros unit included in the parent company in the second quarter of this year. We also add preparatory expenses and equity and earning of the results from what was invested by Wiz. In this period, the parent company had a reduction of 14.8% of net profit against Q22, impacted especially by the effect mentioned above from the reversion of the provision of tax contingencies. If you exclude that, the company would have had a growth of 84.9% in net profit against Q23. In Q23 against 2022, the good result is a reflex of record commercial development in many units, achieving historical levels in selling insurance and credit, launching new products, strategy that captures synergies and focus in efficiency. In this quarter, the parent company registered BRL 36.4 million in equity and earning, 35.2% higher than what we saw last year. Now, slide 10, the broken down per segment results. Conciliation of the result and the consolidated result are in the attachment. In year to date, 76% were from the current operations with insurance represented 50% of our current result. This segment, mostly due to new operations, has long-term dedicated contracts with long-term and high potential of results generation. If you compare to the same period of previous years, we see a strong movement of diversification of the result, aligned to continuous growth in the revenue. That was only possible because we focus in the strategic objectives of the company. Slide 11, the operational performance of our segments. Starting with insurance, we reached BRL 125.1 million in revenue for commissions, 34.3% growth, if you compare to the previous year. This was because of record commercial performance of some units like BRB Seguros, that grew 37.2% or BRL 15.6 million against Q3 2022, issuing BRL 161.2 million in premiums, 34% higher than same period of the previous year. Resuming the product prestamista, also with corporate grew 71.4% or BRL 11 million against Q3 2022, pushed by important business that were acquired and the consistency of the portfolio in renewable and recurrent products. Performance of BMG Corretora that reached its second-best quarter in ex commissions net revenue, added BRL 26.5 million to us, and also the performance of Omni1, that added in the quarter BRL 9.5 million in net revenue ex commissions. Seguros registered EBITDA of BRL 41.2 million, 40.2% above Q3 2022. As a result of the commercial performance and incorporation of new business, and also more efficiency in operation achieved through the control of cost and expenses, resulting again in a 3.2 percentage points EBITDA margin. Slide 12, the units that act in consortium credit, Promotiva and Wiz Parceiros. In the period, we reached BRL 33.2 million in net revenue ex commissions in credit consortiums. A strong growth of 174.9% against the same period of the previous year. EBITDA of BRL 19.1 million, 360.7% above Q3 2022. This reflects the first nine months performance of Promotiva, adding BRL 23.1 million in net revenue, ex commissions in the quarter, representing 69.5% of consolidated revenue in the segment. In the quarter, we recognized BRL 0.7 million negative from the result of equivalence of participation in the company in the subsidiary ben.up, that was totally transferred to LG, Lugar de Gente. The customers will be served with no loss. Slide 13, Wiz Concept and Run-Off Caixa operation. In Q3 2023, the segment for services had a retraction of 23.9%, negative BRL 0.7 million in net revenue, ex commissions in relation to Q3 2022. A dropback in revenue that came from the line Soluções Cooperativas Operação Cliente, which is outsourced, specialized and also in televendas. The most important impact was reallocation of the revenue in stock and renewal of the residential insurance by the former operation Rede Caixa for the run-off result. The unit in 2023 has focused in profitability, discontinued lines with low results, invested in improvement in customer relationship and excellence in serving, concentrating resources in areas that have more potential for growth. The reflex of the efforts is an EBITDA of BRL 2.9 million in the period, expanding 150.9% versus first Q 2023, expanding the EBITDA margin of 7.6. Run-Off Caixa had a result in revenue stock concerning the sales up to February 14, 2021. In the quarter, it added BRL 47.3 million in EBITDA to the company, a result that's 10.1 less than Q3 2022, impacted by the cost in G&A. Slide 14, the corporation result below EBITDA. In Q3 2023, the line of G&A totals BRL 5.7 million, 21.1 higher than first Q 2022 due to the atypical event of contingency reversion that has been pre-mentioned, generating a positive effect of BRL 42.7 million. However, if you compare to the previous quarter of 2023, the expenses had a retraction 21.8% or BRL 1.6 million against Q2 2023. That's due to the reduction of expenses of personnel and framing suppliers. These are reflections of reviews done by Wiz Co to optimize its strategies and aligned with the strategy of the company to look for operational efficiency and aligning the corporation structure to the business strategies of the group. Lines below EBITDA, increase of 26.7% in depreciation amortization, presented in 3Q 2023 against same period last year, is due to the amortization of the exclusivity contract of BRB, and it's the beginning of recognized amortization of intangibles, for exclusivity contracts for the units Omni 1 Corretora, Pernambucanas Seguros, Polishop Seguros, and Promotiva. Also look at the line, IR/CSLL, that had an increase of BRL 12.1 million, 52.4% against 3Q 2022 due to the incorporation of new business in the group and also because of the change in the tax regime of the subsidiaries, BRB Seguros and Wiz Corporate, that were transferred to Lucro Real. Also in this quarter, there was a positive effect IR social contribution because of the change in the understanding about deductibility and values paid on the long-run incentive for the executives. The effective alíquota in 3Q 2023 was 32.5% due to more companies that are controlled in the Lucro Real regime. For the next quarter, we expect that the payment of JCP will decrease the effective alíquota of Wiz. Slide 15, composition of our cash flow. Investment, BRL 34.2 million is from disbursement of BRL 41.8 million concerning the second installment of earn-out from the acquisition of BMG Corretora, BRL 7.6 million. Acquisition of remnant participation Wiz Concept in BRL 2.4 million in advance for future increase in capital in subsidiaries, ben.up in Wiz Benefícios e Vantagens. These were partially compensated because of positive effects generated in the cash flow from the adjustment of present value and updates and acquisitions by the company totaling BRL 17.6 million. In dividends payouts, negative variation BRL 53.1 million because of payout for shareholders, our non-controller in our controlled companies. BRL 19.5 million, interim dividends paid by BRB Seguros concerning the results from January to August 2023. BRL 28.6 million paid by BMG Corretora concerning the results in 2022. BRL 5 million in other subsidiaries. Loans presented concern the fourth parcel of the first emission of debentures in the company, BRL 17.4 million, and paying BRL 7.6 million in interest and amortization from the loan contracted by the subsidiary, Polishop Seguros, and BRL 2 million in interest concerning the loan by the parent company, partially compensated by the interest of debentures recognized in the results of this period, BRL 8.3 million. Under others, the flow presented concerns payment of BRL 41.3 million to BRB from the reduction of capital by the subsidiary BRB Seguros, total of BRL 82.7 million. This reduction capital aims to distribute the cash in the subsidiary as effect mainly of recognized amortization of exclusivity contract of BRB Seguros with BRB Bank. As a consequence, parent Wiz received BRL 41.4 million from this transaction. Therefore, we finish this quarter with consolidated cash of BRL 251.7 million and BRL 126.2 million in cash in the parent company. We close the presentation, and I will give the floor back to Stephanie, who will moderate the session of Q&A. Thank you. Thank you, Lucas. We are now open for Q&A. To ask questions, send your message pushing the icon that is in the platform of the webcast. Questions will be answered as they come. Please wait as we select the questions. Question by Ricardo from BTG Pactual. What can we expect regarding the growth rhythm of revenue for the coming quarters? We see good revenue connected to commissions from Prestamista. Is this a recurring moment? Ricardo, this is Lucas. I am the CFO. Thank you for the company. Yes, we understand that we came from a first half with Selic that was very high, and that generated restrictive credit. We expect that as Selic reduces, we will have better transactions at the banks. So more bank activity and hence selling insurance will become more important. We think next quarter will be better than the first half of the company. We have some seasonability in our business. Usually, the second half generates more revenue, and we expect that next half and next year we will generate more sales and therefore more revenue from Prestamista. Thank you for the question. Also from Mr. Ricardo Gospigo, "After the restructuring influencing reduction payout, can we expect some good deal to be done next year, or is the idea to preserve the cash position?" Good morning, Ricardo. It's Marcus Vinicius, CEO. Thank you for the question. Inorganic growth in the short run will keep focus in operational efficiency in maturing the business that we have in-house, increasing the profitability of our operations, aiming at cash preservation and generation. Interest in acquisition opportunity will be taken forward within the structure of the company, going through the governance organs and the way we can structure a possible new acquisition. But it's going to be seen in time with opportunistic view. Third question, William Barranjar from Itaú BBA. "Good morning. Thank you for the call. Congrats for the results. We have two questions. The first one is about the sequential improvement of Prestamista, especially BMG Corretora, BRB Seguros. There is more appetite of credit in general. Can we anticipate that this will be maintained or maybe the effect was not so recurrent?" I think I addressed part of this question already. Thank you for the question. We have not seen any non-recurrent result in the result of BMG and BRB. Remembering that they have a consignado volume that's important. We do Seguros Prestamista there. As we see a reduction in the interest rate, the credit will be cheaper and the clients will come to the banks, and then they can have a higher credit as interest reduces. So we expect that the results of BRB remains in good levels as we have less restriction in credit. Thank you. "You had a growth in commission higher than in net revenue. Could you comment on that? Should we expect something similar in the coming quarters?" William, that has to do with the mix of business. We had a good result of BRB that does not have as much repass as other businesses, so it affects this mix. I don't think we can give an answer for the future because it depends on the performance of each one of our businesses. The best way of look at it is in a broken down way, especially operations that will generate more value, which is Promotiva, BRB and BMG. If you look at them standalone and modeling them forward, you can see whether this mix of commission is more or less representative. Thank you. Guilherme Grespan from J.P. Morgan. Good morning. Congrats for the result. Two questions, and I'm going to separate the questions. First, could you further elaborate on other revenues and expenses on anticipation of Omni with Zurich? What and when is this result is going to be recognized? We have two large effects on that line. First one is that part of the revenue of Prestamista BRB Seguros is on that line, so we should see that every month from now on. So it's recurrent. Second, anticipation of commission of Omni Zurich, that's a five-year operation. So we expect to have amortization of that operation. That has been done, and the result now is in the P&L of Omni1, and that's for the next five years. Second question by Guilherme Grespan, I believe one of the focus of the company has been tax planning, and we see a higher alíquota. Looking at 2024, can we expect a reduction in taxes? What level would be reasonable? Thank you, Guilherme. We had a strong quarter, much influenced by the results of BRB and BMG, that are two operations that pushed the liquid up. Our internal view is that this year, in this quarter, we have the smallest effective liquid. We had around 37, 38 when we look at consolidated. We have less this quarter. We expect to see more reduction, and the mix will impact on that. If we have a result of BRB and BMG pushing the results of Wiz for the coming years, maybe the savings will be smaller. But we have almost 4 percentage points reductions in this quarter. Also, something important that we put in the release, the economical benefit of JCP only happens when we pay it, and most of it is in 4Q. We remind you that to ask questions, send your message by the Q&A icon available at the platform. Question by Leonardo Roma. "How is the partnership with Polishop?" Thank you, Leonardo. With Polishop, it's a little bit below what we expected. Retail as a whole has suffered a lot, and Polishop is part of that context. It's not an operation that from this standpoint, that it will impact the whole net profit of Wiz. But we want it to go right, so we don't like to look in the short run to see whether it was good or not. We come from a Selic rate that was very high, that impacts on retail. So it's worse than what we expected, but we think it's too soon to take a conclusion. Thank you. Mr. Gilmar. "Good morning. Congratulations for the results. We saw approval of minimal mandatory payouts reducing to 25%. That reinforcement, how is the payout for the coming years?" Good morning, Marcus Vinícius here. The reduction of mandatory payout to 25% intends to improve the capacity of financing the cash flow of the company, strengthening the financial capacity of Wiz. So we have today a transactional indebtedness, that's there, and it's going to be finished in four years. After that, we will evaluate where the succeeding cash will be used. If we have good opportunities for investment, we're going to use for that. Otherwise, we will still question and verify the possibility of increasing payout. Thank you. Gilmar, that's the care we have. We had to bring scale to the company. Now we have that, so it's always a decision that we have to be very careful about where to put the capital. Can I pay better the shareholders with good investment? This dynamic will happen from now on in a recurrent way. Mr. Carlos. "Does the company have any perspective of rebuying actions?" Thank you, Carlos. We do not have that in the horizon for payback. We have some indebtedness, so it's a quite high capital that we're putting in that acquisition. First care we want to take is to have a debt profile that we can use the cash generation well with these reimbursements. Then we will think if we're going to do an M&A or payback. Mr. Assis. "How is the company going to deal with the financial results for 2024?" Hi, Assis. We expect a better result in 2024. The company is reducing its leveraging and the interest rate is going down. Our businesses are growing. Making a summary of this year, we reduced payouts to generate more cash. We generated savings of almost BRL 40 million. That will increase the cash. We postponed M&A, and the interest rates are going down, and we decreased financial expenses. We expect better results for 2024. Fabio Carvalho, "What's the participation growth of insurance for" For loans, for real estate. Fabio, this is Stephanie. I am going to answer that. Basically, we have in three subsidiaries, we have this product with the Run-Off Caixa that represent 40% of Caixa run-off. We also have from Inter Seguros and BRB Seguros. In these last two, it is not a product that is so much represented in results, but it has been growing its portfolio throughout time. Question from Caio: How does Wiz expect to of the results from technology? Caio, Marcus will also add to this answer. This is one of the subjects that we expended the most energy this year, and we have many nice things to show to the market, especially insurance and credit market. This is the question that is the core of Wiz. How do I go to the channel and I make it sell more, be it for credit or insurance? Basically, what is my value proposal? In technology, we generate a competitive differential in this proposal. It is a technological framework that will make products to be launched quicker, insurance penetration will be larger, portfolio will be larger, the rate and price will make more sense, so it can offer a larger portfolio of products. Much of this discussion took our time this year, and we brought that as operational highlight, as Marcus will mention. We brought together every solution we had into a platform that is Wiz Pro. It is important to mention that this Wiz Pro platform means an advancement of technology that we wanted to bring to our partners, to our subsidiaries, meaning the implementation of a digital platform with sales, management, engaging, and operational modes in such a way that we can personalize our activities with these business units. It is not a plan for the future. The platform is ready. It is being implemented, it is being used, and we intend with this platform and other actions that we are taking in technology, we intend to scale more possibilities for our partners, engaging and fostering more sales for our businesses. We now close Wiz Co teleconference. We thank you all for participation, and have a nice day.