Meliuz SA

BOVESPA:CASH3

Earnings Call Transcript 2024-Q1

[Fernanda Tolentino G. Matoso, executive]

Good morning, everyone, and thank you for joining us for another Méliuz Conference Call. We will now begin the webcast on the results of Méliuz in the first quarter of 2024. Our conference call is being simultaneously translated into English. And for those who wish to change the language, please click on the interpretation button at the bottom of your screen.

My name is Fernanda. I'm part of the Investor Relations team here at the company. Today, I'm joined by Marcio Penna, Director of Investor Relations and corporate governance and Gabriel Loures, Director of Growth. Before I give the floor to Marcio, I'd like to point out that this event is being recorded and will be published along with the transcript on our IR website later on.

Additionally, the slide deck presented here is already available on our website under the Results Center tab and the CVM portal. After the presentation, we'll have a Q&A session. [Operator Instructions] So I would like to wish you all a good call, and Marcio, I will now hand the floor over to you.

[Marcio Penna, executive]

Thank you. It's a pleasure to welcome you all this morning. Good morning. I'm here to present the results for the first quarter of 2024. Now I'll show you my presentation. Just a moment, well, our results for the first quarter was pretty well welcomed by the market. Some were surprised by the EBITDA we achieved for us here at Méliuz, we received our results very positively, obviously. But for us, it was less of a surprise because we've been transforming Méliuz trying to achieve a better margin for at least 1 year and a quarter that we've been retaking and changing our strategy.

So for us, this was a pathway that show that we would reap the results in this year of 2024. So the -- these results show that everything we say and do in these past quarters is aligned and is being consolidated with our performance. We know there are cycles and external issues, but we have always been -- we've been always reliable on our front on and our work with even better features and characteristics today.

We have a much better app, which was presented back in the IPO today, they have a user base that doubled. It was 15 million users, and now it's over 30 million users. We have many products and our feedbacks are overwhelmingly positive, also positive feedback from our partners. So we improved the generation of sales for them. And thus, this partnership is something that may remain for the long run. So this is our environment. This is our scenario, our base to generate this win-win between users and partners and keep on generating results for our shareholders.

We are absolutely sure that we are on the right track. The results for the first quarter is a sample of this. We are confident for the better results of other quarters in this year. So we had EBITDA. It's nice to tell you that in this first quarter, there was no extraordinary items. So when you see adjusted EBITDA and EBITDA, these are for previous ones. We had no extraordinary items for this quarter. So we have 12.8% of our EBITDA, especially in this quarter, that is seasonally weaker, the weaker quarter, especially for e-commerce and we managed to perform to achieve a very positive EBITDA.

In the consolidated scenario, we also delivered a very good EBITDA, BRL 5.8 million. What is the difference between the parent company and the consolidated EBITDA? Basically, the difference is the FIDC. FIDC, we hired for our portfolio of our own cards back when Méliuz had no partnership with BV. And notably, FIDC, the parent company it enters in financial results. It doesn't have an impact on EBITDA and for consolidated results. It's on operational expenses and other costs. So it's an accounting rule, so there is a difference between the parent company EBITDA and the consolidated EBITDA.

Obviously, now that we have a partnership with BV and our own cards, tend to zero, this FDIC tends to be zero in the next few quarters. So this difference between the parent company and the consolidated EBITDA tends to decrease in the next few months in the next few quarters. Now if still talking about EBITDA, it's nice to show to you the -- something about the LTM, the late 12 months, especially when you talk about seasonality we've been improving our margin within the company.

In the parent company, we come from less than BRL 83 million meaning in LTM and after a year, it's BRL 36 million in the positive side. So it is an improvement that happens quarter-after-quarter. So it's less surprising to us because we knew where we were headed, and we knew where we wanted to get. So it's a pleasure to let you know about these results of what we've done in the previous years. In the consolidated, the LTM adjusted EBITDA is a little bit different, that is the FDIC explains this difference. But we have -- we went from less BRL 83 million -- less BRL 86 million getting to BRL 11.6 million in the past 12 months. This is a market improvement aside from the seasonality in our e-commerce sector.

When you talk about borderline and net income, we still have a good improvement of our financial results and more and more will be less representative because of the cash margin that will be growing. It will be very important for the company from now on. And we have a bottom line of BRL 19.1 million in the consolidated with a liquid margin of 23.2% and our parent company EBITDA was 19%. The net income is 23.2%. So it shows then we are truly confident we would -- by following our strategy, the idea was to be back to margins. We showed to the market back in the moment when we went IPO. And the intention here is to keep on improving.

Now talking a little about cash. We have an especially robust cash. We -- last year, we had BRL 174 million. The financial results helped complement this in the first quarter with BRL 17 million. We had positive results from the consolidated cash operation in BRL 8.2 million, and there is a cash series referring to participation of Méliuz employees because it's provisioned in 12 parts. So there is this cash that is given to this. So we have a BRL 676.7 million in the cash, cash margin and BRL 210 million were given to capital reduction. So as a result, we still have BRL 466.7 million in cash, cash equivalents and securities after capital reduction. And we have to consider the acquired companies that would be paid in the second quarter of 2024.

So certainly, when we are here when we get back here in August, this number of BRL 466 million will be below that because there will be a balance concerning this -- the beginning of this year outside of financial results and operational rate, which will impact positively the company. Basically, how have we gotten to this positive results. We have some drivers here that led to this improvement in our results. The first driver is the improvement in our core business in the Brazil shopping margin. If we analyze quarter-after-quarter, quarter against quarter, it looks like shopping -- Brazil shopping, there was a drop of 8%, but there is an uncoupling -- timely uncoupling because of the GMV and the net take rate and how it impacts the results of the company. So to exclude this uncoupling effect we show here on the right, how would be the net revenue in the past 6 months.

So when we have here more impact of GMV in the first quarter that we have this impact for financial results. So if you sum the last quarter of '22 and in this past 6 months, we would have BRL 126 million. In summing these 2 quarters, we have BRL 123 million. So the difference would be reduced to only 3% drop. So considering GMV, they dropped a little, but we have managed to mitigate this with multiple products that are part of our portfolio, Méliuz portfolio and Fiscal Méliuz. So there is this seasonal uncoupling. And if you consider that we have very good numbers, figures and margin.

The margin goes from BRL 49 million to a margin of BRL 56.4 million, an increase of 15%, which is the most important thing and the focus of our company. As you can see, in spite of the drop in GMV, we had a growth of net take rate of going from 2.2% to 2.4%, and we also presented a growth in the take rate in this first quarter. Another important driver for these results we presented is the partnership with BV. This partnership has been positive, and we have opening of digital account that has been growing quarter after quarter in a robust way. The same applies to credit cards that are issued in the results is a net revenue from financial services that becomes more important in Méliuz as a whole.

We show very transparently in the fourth quarter of last year. In the first quarter of this year, we had a percentage of income that comes from digital -- Méliuz digital cards and digital accounts. And now we also show a partnership with BV. And on your right, you can see that the operation on itself with a partnership with BV goes from BRL 12.3 million going to BRL 14 million. There was a good growth we consider that we are in the cruise flight that will give us good results in the next quarters with new products and so on.

And the last driver last but not the least to for our good results for the first quarter of '24 is to maintain our costs and expense structure in a very lean way. We have been showing this in the past few quarters. There is no doubt about it. But today, we consider that we have achieved a level of cost and expenses that is a comfortable level for the company for the remaining of this year. There is a level that we consider to be safe and is in line with our planning for the year. Obviously, there is a percentage of these expenses that are related to cashback expenses, so there is seasonality around here, but other overhead expenses and costs, they are in a very comfortable level for the company. There is room for improvement, but the main point of improvement have already been implemented.

And now we are to maintain them. We need to maintain them. The improvement we have presented here in terms of cost and expenses reduction was very strong. We basically had a reduction of -- a quarter of reduction with a variation of percentage of -- percentage of 20%, a reduction of 20% in the LTM consolidated operating expenses. And so let me tell you that we remain on track with our objectives for 2024. We are -- we maintain our pillars for 2024, basically talking about the growth of Shopping Brazil. It's the challenge of this company for the next quarters to maintain this positive margin and also focus on growth there's no silver bullet here. We have new products, products that are growing in our portfolio. And this will certainly help us to achieve our goal in 2024.

The innovation in our core business, which is the launch of new products the ramp-up of financial services are also mentioned. We are accelerating our account and card offering our partnerships with BV we'll soon launch new financial services. And last but not least, as the pillar of this 3 goals of this year is the operational efficiency with the maintenance of a discipline in controlling the company's cost and expenses, especially in the core business for the remainder of this year.

With that, I end my presentation and our call Fernanda, so we can start our Q&A session.

[Fernanda Tolentino G. Matoso, executive]

[Operator Instructions] The first question we have here comes from Camilla Zaved from UBS.

[Unknown Analyst]

Hello, everyone. Thank you for welcoming us and congratulations on your earnings and results. My question is regarding the evolution of GMV. We can see that there is a negative growth since the fourth quarter of '22. When can we expect an acceleration of GMV and which are the initiatives you have implemented to accelerate this? What can we expect for '24?

[Marcio Penna, executive]

So Camilla, the first thing is to say is that we need to grow our core business with profitability. We will have profitability and take rate and we have worked really hard to revert this trend of GMV. We can divide these 2 major levers. First, improvements in our core business, in users and partners alike. In terms of users, we have a dedicated team working on improvement in experiences, how to improve retention metric, indication of our business. And in terms of partners, more and more, we bring more partners to invest to participate in our promotional campaigns and bring consequently an increase in margin in revenue, I mean, in our core business and also in the [ Méliuz apps ].

And in terms of new products in our core business, I think we can mention 3 main examples is Méliuz apps, which has been growing. We have we have grown and later in the fourth -- in the third quarter, we've been growing this, and we need to prove this to our partners, it's better than in other comparable channels. This will enhance the business of Méliuz apps and this will improve the revenue of Shopping Brazil. Besides that, Méliuz Prime is a product that we launched in the second quarter of last year generates income per se, but the focus here is to increase and to be -- to increase the user, the participation of categories and users use to buy it to retain better these clients in their wallets and our goal is to have a better impact and improve the experience of our best users.

And the third example the Melius Invoice or Melius or Méliuz Nota Fiscal, which has been growing very well and allows our users to get cashback in partnership with the industry in every physical store they buy at. This will impact our revenue results in Shopping Brazil from now on. So these are the 3 main leverage products or the GMV in the next few quarters, I can say that we are working very hard to start growing again, focusing on our core business. If I can, Gabriel and Camilla, just add a common point to what -- to the excellent answer given by Gabriel, I would say that we could generate a better GMV, if you wanted to. We have done this in the past already.

So our focus today is not GMV. It is margin. So it would be really easy to get a good part of the commission that we get from the partners distribute that in form of cashback to our users. And certainly, our GMV could be doubled, but this is not the strategy of our company at the moment. It hasn't been for the past year. We had that strategy back in '21. We had that strategy so our focus is on margin.

We are more concentrated on that instead of the growth of GMV, and we will continue to do that as Gabriel said.

[Fernanda Tolentino G. Matoso, executive]

The next question comes from Carolina Gomes from Morgan Stanley.

[Carolina De Mula Gomes, analyst]

Good morning, everyone. I'd like to ask about the international operation. Can you give us more details about it, how -- do you expect to have an evolution of representativity of cashback operation from now on? And also on financial services. How do you see the evolution of account opening? And can you confirm if the migration of Méliuz cards accounts were 100% performed in this first quarter?

[Marcio Penna, executive]

Thank you for your question. In the international shopping, we follow the trajectory of migrating the coupons margin, the legacy income in the long run, we will follow this trajectory. We are focused in the international business in order to improve traffic and improve income. Consequently, our results are behind what we can achieve. So we are working hard to improve this income in parallel we are also thinking about how to expand our operating results in the company, reduce the burn out of cash. This is our objective for international service.

In terms of accounts migration, we have migrated the totality of accounts that we planned. And in cards too, I believe that the migration process is finalized by now, and now we are focused on financial services to create new services. We are with this new partnership, creating cards and accounts, and we are to accelerate the new launching of products, safe products, investment products in account -- investment accounts in these partnerships with BV and also continuing to issue cards and accounts as we have done.

[Fernanda Tolentino G. Matoso, executive]

The next question comes from Rafael Nobre from XP.

[Rafael Nobre, analyst]

I have a quick question on the number of users. I saw that in the historical spread sheet you stopped separating this user. So the number of BRL 31 million is the consolidated between Méliuz and Picodi? And if not, what about the drop in the international users, please?

[Marcio Penna, executive]

Hello, Rafael. Thank you for your question. What is in the spreadsheet shows as Brazil, Shopping Brazil and the retroactive data, we didn't show the open Picodi accounts for this quarter. So what you see in the spreadsheet is the sum of Picodi and Shopping Brazil up to this moment. In the opening to the last quarter in the release and also in the spreadsheet. We didn't show Picodi open accounts in the spreadsheet precisely because of what Gabriel mentioned before. Our focus is to increase Picodi organic traffic and reduce the burn of cash this year.

So we are focusing on qualified organic graphic and also to get cash burn to zero. We see no reason to continue disclosing the opening of new accounts. That's not our focus. But -- if you look at the spreadsheet, you have the consolidated for Picodi and new openings. Rafael, these are the accumulated new accounts that were opened by the operations, okay?

[Fernanda Tolentino G. Matoso, executive]

Well, we now wrap up our Q&A session. I would like to hand the floor over to Marcio for his closing remarks. Please, Marcio.

[Marcio Penna, executive]

Well, so these numbers are very transparent, no extraordinary items. Numbers were well received by the market. My message -- my take-home message is that this is the beginning of the results that comes from our strategy. We know that we are confident in the results of this year. There is no silver bullet, there is no magic. Everything we work on all the products we've been created are improving on. They will take their time. And in time, they will bring the expected revenue to our company. So we call you, invite you to keep on following the results for our next quarters. Our goals will be achieved, and Méliuz will bring very positive results for this year. Thank you for this call. Thank you all for joining us in this webcast and see you next quarter.

[Fernanda Tolentino G. Matoso, executive]

Thank you all for joining us in this webcast of the Méliuz results in the first quarter of '24. See you next time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]