Cielo SA

BOVESPA:CIEL3

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, everyone and thank you for standing by. Welcome, everyone, to Cielo’s Second Quarter 2023 Results Conference Call. With us today, we have Mr. Estanislau Llobatera Bassols, Mr. Filipe Oliveira, Mr. Daniel Diniz and all of the company’s executive officers. This event is being recorded and also being broadcast live via webcast and may be followed through Cielo’s website at ri.cielo.com.br, A replay facility of this event will be made available right after its closing. Once again, participants, we’ll be able to send their questions via website. Those questions will be forwarded to our executives. Before moving on, we’d like to mention that forward-looking statements made during this conference call concerning the company’s business outlook, other projections, operating and financial targets are based on beliefs and assumptions of the company’s management and also on information currently available. Those forward-looking statements are not synonymous to performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not materialize.

Investors and analysts should have in mind that overall conditions, industry conditions and other operating factors might affect the company’s future results and thus lead to results that will differ considerably from those expressed in these forward-looking statements. Based on the presentation published on the company’s website, this conference call is open exclusively for questions and answers, which will be preceded by a message from our CEO, Mr. Estanislau Bassols with the quarter’s highlights. [Operator Instructions]

I now turn the floor over to Mr. Estanislau for his opening remarks.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Hello. Good morning, everyone. I’d like to thank you all for participating in our earnings call. Today, we’ll be presenting information about the company’s financial results relative to Q2 2023. Going to the advances and progress in the period and also share some of our strategies to move to a different level, first, I’ll be addressing the quarter’s results.

Let’s highlight the company’s ROE, which reached 19.4% in Q2. This number reinforces our strategy of cash generation in a consistent manner. We also registered the eighth consecutive quarter in recurring net profit growth to a tune of BRL486 million, a growth of 7% year-on-year. Including one-off effects, net profit reached the level of BRL709 million. To put these numbers into perspective, I’d like to share with you some of the main levers that helped these results materialize. The first one, discipline in prices, same thing we’ve done because it’s relevant in this moment, even as we face new norms.

Number two, expense control. Same thing we’ve been doing in monitoring with great responsibility and prudence across other company’s initiatives. Number three, product expansions, especially ARV, which saw its volume growth by 39% vis-à-vis Q2 2022, and also the eighth consecutive growth in terms of year-on-year, which shows we are right in diversifying our revenues.

Lastly, the Cateno’s performance, which continues to generate cash and positive results for the group. In addition to results, I’d like to talk about customer experience. You already have a very well-recognized position across large accounts. We are now adding results across all segments. – as we move ahead in better service for retail. The highlights I’ll show you are in line with our focus in maintaining our leading role in the industry offering what is best in the sector. I will start by service at the call center, we saw growth across different indicators. For example, 27%increase in clients served in up to 10 seconds. Our first car resolutions saw a 6% increase in 2023 and also the level of satisfaction with our human channel service, which grew by 5% since the end of 2022.

In logistics, our customers now are able to find more agility and convenience. Today, more than 30% of our terminals are delivered as they signed the contract to our sales force. About 90% of the installations happen in up to 2 working days. In large capital, we can measure that delivery in hours. That improvement leads to more satisfied clients. 89% of those services are considered or ranked as excellent. We’re also using more analytics since early in the year we have started using predictive models to change the battery of those machines, which are dying without interrupting service. The third point is as we continue to transform the company. We are happy with the financial results reached so far, but not totally satisfied. This journey has been great and allowed us to reach a great result level with an ROE of 19.4%. We are now investing to transform the company and reach a new level. To do that, we need to cover the whole company across 10 different work fronts. And help me mentioning all of them. Number one, client management and NPS, lifecycle products, innovation in our core and also in payments and also new growth avenues; number four, a leap in our commercial front; number five, to leverage our digital marketing, number six, analytics to value; and then number seven, our work model has become more agile by the book and to end across the company, number eight, ramping up our tech infrastructure, number nine, operating sophistication and lastly, an office help to be able to manage all those fronts in a single effort.

Now I’d like to highlight some of the initiatives of the ParacimoCielo. In the next quarters, we will hire up to 1,000 people to work in retail through our partner banks. They will work along with bank managers in about 8,000 bank agencies across Brazil. Those employees will offer customized service in line with the needs of those entrepreneurs, which will increase our success rate in our loyalty level as well.

To wrap up, I’d like to highlight that the company has been investing in an agenda that stresses our increase in quality and value generation. We are sure that we are on the right back. Strengthening the company and leading us to the excellence level of access. Once again, thank you for joining us today.

[Operator]

Thank you. We will now start the Q&A session for analysts and investors. [Operator Instructions] Our first question comes from Yuri Fernandes from JPMorgan. Please sir, you may proceed. Once again you may carry on sir. Can you hear me?

[Yuri Fernandes, JPMorgan]

Yes, yes we can now. Thank you for taking my question. I would like to ask about your midterm PPV. I think the message in the previous quarter is that you would be looking for stabilization in Q3. The sales force will try to reduce churn, but the PPV was below expected. So what do you think things will unfold going forward in SMB? When should you expect to have some more stabilization in the PPV? And also, the headcount increase across all those bank agencies, 1,000 new workers. This has not affected this quarter yet, right? It’s for the future. So to try and make an estimate, what would be the cost pressure that we can see coming from that? Thank you.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Thank you for your question. I will start by stressing what you mentioned. We did say that we expect some stability in our PPV in Q3. That’s our outlook. I believe that this is something that we should address a lot more often. So I will be talking in broader strokes. This quarter, I believe that we have come to the peak or close to the end of the cleanup we expected to have in our entrepreneurs segment. That’s the first part of my answer. Now second, last quarter, I had also mentioned that we continue to operate encouraging our sales force based on profitability, but this has had an unexpected effect, which is the search from smaller clients in retail and those smaller clients have offered 2 effects, a lot of reactivation and also to avoid churn and to allow for greater profitability in this segment. We have redirected that those efforts, keeping that profitability. But even then, we have seen...

[Technical Difficulty]

Thank you for your question. I will start by reinforcing what you said. We have said that we expect PPV to remain steady in Q3, and we continue to expect that. And we believe that we will address that several times. So I will take your answer in broader strokes – this quarter, we have come to the peak close to the end of the cleanup we were doing in our entrepreneur sector, and that’s the first part of my answer. Now the second, I had also mentioned last quarter that we continued to encourage our sales force based on productivity, but that was to an unexpected effect the search for smaller clients in retail and these smaller clients provided 2 effects. You had to work with them very constantly for reactivation and to avoid churn. And we were also avoiding the mortality of that segment, which was one client industries. So we continue to work on encouraging our sales with productivity, but the volume of that we saw exceeded what we expected from mid- to late quarter. Now beyond that, Filipe and I have really stressed the fact that we had a deficit in our headcount compared to our share in terms of number of salespeople.

We expect it to bridge that gap only via productivity, and we came to the conclusion that we would need to increase our sales force. And we ran a pilot product that allowed us to see that because of our logistics support together with our partner banks, we had productivity that was almost 2x that of our door-to-door operations, which gave us a competitive edge because of the reach that we can have via our partners. So we are working significantly to improve our capacity in terms of digitalization of this journey, which allows us to bring in more clients and also lowers the churn rate. And we are already seeing making strides in that sense and also building on our communication to capture more customers in retail. So we do expect to see stability in – especially in retail PPV over the course of Q3, as we had said before. And we are at what we believe to be a significant turning point.

[Yuri Fernandes, JPMorgan]

Yes. I just wanted to make sure that price was not a factor. You really mentioned services, but is price not something that you are keeping in your rate on your radar?

[Estanislau Llobatera Bassols, Chief Executive Officer]

Well, we can mention a few things that we haven’t changed and were not changed. We are not looking for a change in efficiency. We are not looking for higher profitability. But most of all, we are still very active to increase the company’s profit. And in order to do that, we need to make adjustments over the course of the journey. We are seeing that price elasticity is still low. So we do not see room to change our pricing policy. And this is something that we hold very steady here in the company. Filipe, if you have anything to add?

[Filipe Oliveira, Chief Financial Officer]

Yes. I just wanted to go back to the sales force. A few things are important to mention. First of all, we are announcing up to 1,000 new headcount, meaning it might be less than that. We are launching the program in 3 tranches starting in the beginning of July. With productivity, with payback with the returns that we expected, we might be seeing another three tranches of up to 300 until the beginning of next year. If we choose to go as high as 1,000, that would mean about BRL180,000 a year with an impact starting next quarter. If we do launch those tranches, but considering that we go as high as 1,000, we will be seeing 170,000 more.

[Yuri Fernandes, JPMorgan]

That was perfect. Thank you, guys.

[Operator]

Thank you. Our next question comes from Kaio Prato with UBS.

[Kaio Prato, UBS]

Hello, everyone. Good morning and thank you for taking my question. I would like to talk a little bit more about your strategy on your sales force. I have two questions actually. You are talking about bringing in as many as 1,000 people in your bank agencies. But on the other hand, I think that one of your distinguishing factors with regard to independent actors is precisely the distribution of your sales force across banks, I think that might be considered a distinguishing factor. And I understand that you pay your banks via that channel. So adding more people to this channel, wouldn’t that be relying more on those bank tellers and more along those lines. Do you believe that, that also increases those transfers to banks or adding more people would not add even more expenses in that sense?

[Estanislau Llobatera Bassols, Chief Executive Officer]

Thank you so much for your question. I mentioned a few operating indicators and some logistics indicators as well – about one-third of our facilities would be affected in order for this to be leased alongside our partners as well as we would need logistics and sales support. So part of that comes from our sales operations, but also from our logistics operations to allow us to have an installation in the point of sale or close to that to provide more comfort when it comes to decision-making from those people who are at that moment of purchase. At that time, we will really affect our operations. So we modeled a few figures and both for our branches or when you’re supported by our rent when you combine all of them, productivity goes up. If you have a bank that provides a season that’s important, if you remove that, sales goes down.

And the in-person channel door-to-door to provide that logistic port, we ultimately had productivity that was twice as high as that door to door. All of that allows us an extremely favorable economic result. And those operations are still independent. We continue to provide sales support but mostly on the logistics side, and this might be one of the most important parts, all small retailers at that time at the moment of sale are receiving some support. That’s what we’re trying to operate and branch managers still have their sales pitch opportunities, addressing situations that we usually can’t address. So we rent pilot project and saw that FX would be positive across the board. Would you have anything to add?

[Filipe Oliveira, Chief Financial Officer]

Well, picking up on the pension – with those incentives on our sales channel One important point here is that the benefits that the client is bringing remember that is a better NPV a better churn or anything else, it makes up for the risks to an option 2.5 degree.

[Kaio Prato, UBS]

That was very clear. Thank you.

[Estanislau Llobatera Bassols, Chief Executive Officer]

I just wanted to add another point here, Kaio. In some of these cases, membership is affected by the branch. And in some cases, we are conducting that, but in other cases, they are doing that. Yes, we started by reinforcing that when we’re going over to the upgrading figures, we highlighted a few things which are not as important, which is having the ability to install the machine at that point.

[Kaio Prato, UBS]

That was very clear, thank you. Just adding to my previous question on spending, you mentioned the impact on the sales part, which was here. In addition to that, in your release, you mentioned the transformation program. And I would like to know whether there is anything truckable for the next year that could have any impact on that increase of your sales team? And lastly, from my side, you talked a little bit about competition, but could we consider that we’ve reached the peak for card revenue this half of the year, that would be a ton. Thank you.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Well, on the spending issue, I think it’s important to point out that we, in this quarter, are already at a very strong cycle. We have seen mostly the totality of our investments for this period have already been paid. When we look at general expenses, we had an increase by 21% in SG&A, all because of our transformation program, also sales and marketing. One of the initiatives that we have is for our digital channels and the investments we’ve made are already is [indiscernible]. Looking forward, we’re trying to highly optimum level of investments also looking at tools improvement, but much of that is already included in the program. It’s not included is what we’ve mentioned before. We still see a very small spending policy to only invest in programs that provide returns to our shareholders, so in terms of investments and we continue to adopt that discipline so that the expenses will bring returns to our shareholders. Going to your second question, we still understand that there are still room for investment with mill LBP. What we’re seeing in the market, despite a few communication pieces from the competition, we’re seeing more room than what we did before. We didn’t see utility by some players, which we would like to have seen before to continue with our marine outward. So we’re still very disciplined. Profitability is a priority. It’s hard to say whether that has peaked or not. But right now, we’re not seeing any movement that’s been planned for the new fit.

[Kaio Prato, UBS]

Thank you. Thank was very clear.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Thank you, Kaio.

[Operator]

Our next question comes from Thiago Paura with Banco BTG Pactual. Sir, you may proceed.

[Thiago Paura, Banco BTG Pactual]

Hello, everyone. Good morning. [Indiscernible] to Daniel, the entire Cielo team. I have two questions. The first of them is about the penetration of the deadlines. We had another very strong quarter in that sense. You’ve virtually maintained your penetration level recorded in Q2. But I would like to understand, moving forward, if you have any target or any ambition when it comes to penetration and even considering things other than the opportunities the market has been providing, is there anything more organic coming from within the company that you believe would help you increase that penetration level even further. Thank you.

[Daniel Diniz, Investor Relations]

Hello, Thiago, thank you for your question. Well, you mentioned ARV, which really has exceeded the expectation. Another opportunity that the market has provided this the improved performance that we have seen since early last year. So we are planning for improved performance. We don’t know whether the market will remain as favorable as it has been. But within Receba Rapido, I think it’s a different story. We understand that, yes, there is room to grow there, and that will be in a more organic way. Indeed, we believe that we will have to make more moves on the commercial side to reach more customers. And we believe that, yes, there is room to do that.

[Thiago Paura, Banco BTG Pactual]

Thank you. Estanislau, if you take second question going back to spending. I believe you answered about the sales dynamics moving forward. But if we look at Q2, we saw that your SG&A did go up a little bit more than expected, cap expenses as well. On the other hand, you saw a more positive operating expense dynamics than expected. Could you talk a little bit more about some of these expenses? You mentioned the change in ISS, but just so that we could understand what we could expect – what range we could expect moving forward that would be great.

[Daniel Diniz, Investor Relations]

Thank you. Thank you, Thiago. Daniel, here. Do you hear me?

[Thiago Paura, Banco BTG Pactual]

Hi, Daniel. Yes. I can hear you well. Thank you.

[Daniel Diniz, Investor Relations]

Alright. Great. So yes, there were a few one-off impacts on our spending side. I believe that overall events have much to do with how the market performed in keeping with what we had been communicating, we saw dirt behaviors there. So staff expenses were a bit stronger and other operating expenses were even more positive if you consider it the last decade. What I would say is our other operating expenses included some allowance with taxes, which helped, but we saw a positive performance overall despite a few one-off components. But on the other hand we also saw one-off impacts on that side as well, such as spending on layoffs, people who left our team at the beginning of Q2. With adjustments that we had in our business operations that collect an expense of over BRL200,000. So we do not believe we are at a level that we believe would be recurring. And even though we’re still investing very much the transformation program that we miss might bring us to that level. The only thing that could affect that is the sales expansion.

[Thiago Paura, Banco BTG Pactual]

That was very clear. Thank you.

[Operator]

Thank you. [indiscernible]

[Unidentified Analyst]

Well, good morning, everyone. I’d want to go back to you mentioned price that I’d like to understand that makes sure the [indiscernible] further impact that as we see in changes in the customer base across different segments. I’d like to understand whether that mix will impact going forward.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Thank you for your question. Yes, there was a significant mix impact in this last quarter because we had significant losses. As it was mentioned before, our strategy is to recover – start recovering in the retail. So we will have a more positive mix in terms of yield going forward. Also important to emphasize in terms of mix that we have credit growing faster than debit when you look at the market. And of course, this will impact yields positively two different mix effects that tend to bring higher yields. It’s a bit early to say what’s going to happen in the next quarters, you’ll depend on the level of performance we achieve, but those effects should push yields on retail base.

[Unidentified Analyst]

So do you still see room for that to happen? Do you have positive numbers going forward?

[Estanislau Llobatera Bassols, Chief Executive Officer]

We couldn’t hear your question. If you could rephrase your question, please? You’re saying that what accounts are you talking about couldn’t hear what you said.

[Unidentified Analyst]

When you have accounts with profitability, which are still relevant or the question is, are they still relevant in your base? Is there room for that to happen to push your yields up? Or has this driver been used up? That’s the question.

[Estanislau Llobatera Bassols, Chief Executive Officer]

There are accounts with lower yields. Yes, of course, it’s not in our plans to lose accounts even though they have lower yields, they have still impact on our bottom line. I do not see as a good thing to move an account even if it’s only a marginal contributor. That could happen, of course, that we will do everything we can to avoid that.

[Filipe Oliveira, Chief Financial Officer]

Just to complement, the dynamic of large accounts is a bit different. But I believe that right now, where we are due to most of the PPP that we’ve lost was a sort of a carryover from Q1. We do not know how this will unfold going forward in terms of large accounts. But right now, we are suffering the impact of losses that had happened in the last semester actually.

[Unidentified Analyst]

Thank you.

[Operator]

Thank you. Next question comes from the English participants. Question is important is as well translated to our next question from Tito Labarta, you may...

[Tito Labarta, Goldman Sachs]

Hi. Can you hear me, okay?

[Estanislau Llobatera Bassols, Chief Executive Officer]

Yes, we can hear you.

[Tito Labarta, Goldman Sachs]

Alright. Thanks. So very hard to hear the English translation in the beginning, so sorry if I repeat any questions here. But I guess maybe if you can talk a little bit about the competitive environment. I mean just given the slowdown that we are seeing in TPV, particularly that you experienced this quarter, combined with the increase in headcount. So, I mean do you see competition is getting more intense. Do you think one that you will need to continue to increase headcount? And how difficult will it be to sort of grow TPV in this current environment, particularly with the industry slowing down? And what are your latest thoughts on what the industry can grow from here? Thank you.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Okay. I can start from here. So, let me start Tito what we are not changing. One is our pricing, second, the way we are looking for efficiency and the way that we are looking for profitability. Having said that, we can foresee a stabilization in our base for the second half of this year. And why I am saying that, the first point is we have almost completed the cleanup of our long tail base that we have been talking about since last year. The second point, we are working to increase the profitability. As we have mentioned before, the company market shares are higher than the share of the sales that we can see in the industry. We try to increase the productivity a lot. But now we are in a point that we do believe that we can increase the volume of sales reps to increase our volumes on the retail. But the way that we are doing this is having the sales reps that are supporting in terms of logistics and sales, the bank, our partner banks because you can see that the productivity of these people are two-fold or three-fold on working directly on the Door-to-Door segment. And finally, we have been working on the digitalization of the company, what helps a lot, not only on the acquisition of product, but also in churn. All-in-all, we do believe that we are in the right path. And what we are foreseeing on this is, I would say, opportunities to reach clients in regions, in different regions, in different segments. So yes, we are in a very competitive environment, but I can see opportunities all over the place, small opportunities. But when we put all together, we can grow a little bit more, but not increase the competitivity or you see any kind of work in the segment. I cannot see that so far. I don’t know, Filipe, if you want to add something?

[Filipe Oliveira, Chief Financial Officer]

Yes. No, I think your question was very good, Tito and I think Estanislau covered most of it, but it is complicated when you have decelerating market that’s getting increasingly more competitive. So, the commitment that we have here at Cielo is that we are now expanding our headcount in order to reestablish equilibrium in this industry. But we are fully aware that we should not be too aggressive in prices for – in further expansions in order to generate a competitive environment. So, that is an equilibrium that we are always seeking and we are seeking to reestablish Nacala [ph] right now because we are at the moment not satisfied with our performance, especially in the SMB segment.

[Tito Labarta, Goldman Sachs]

Okay. Thanks for that. That’s helpful. And just what are your thoughts on the growth for the industry for the year going forward? And maybe just one follow-up, right, because I mean, I understand you want to kind of maintain your prices, but the competition is showing up with having to increase that sales force. So, what do you see is more important for your clients, having that better service, which could mean more costs, or if competitors start to lower pricing, particularly as rates come down and fighting a bit for TPV, would you be forced to match even if you may not want to just understand a little bit that dynamic as well.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Yes. First, industry growth, we currently believe in high-single digits industry growth for the year. We were in the low-double digits before, and we believe that we will probably see some deceleration this quarter. We will probably see some deceleration in the quarters after this. So, that’s on growth. Regarding prices versus service and versus distribution capability, when we look at what’s more effective in bringing more clients comparing to the cost or the revenue that we don’t have, if we lower prices, we understand that lowering price is the less efficient lever that we have. So, that’s not one that we should use unless we exhaust the other levers that we have, which are increasing distribution capabilities and increasing service level.

[Tito Labarta, Goldman Sachs]

Okay. Great. Thanks Filipe and Estanislau.

[Filipe Oliveira, Chief Financial Officer]

Thank you.

[Operator]

[Operator Instructions] Our next question comes from Antonio Ruette from Bank of America. You may proceed sir.

[Antonio Ruette, Bank of America]

Good morning. Thank you. I would like to deep dive in the competition from, if you could talk about it. You mentioned that the competition and the loss of share in this quarter was not only the long tail, but also in the SMEs. If you could please explore the client profile, the size of those clients, and why do you think you are losing those clients? Is it a matter of pricing? Is it a matter of service? Is it competition that is branding more pressure from bank controlled competitors, not listed, whatever you can share in terms of competition and that loss in this quarter would be great? Thank you.

[Estanislau Llobatera Bassols, Chief Executive Officer]

Let me try to address this question in a more effective way. I will start by mentioning several numbers from ROE to net profit. Those numbers reflect one of the consequence of our incentive policies for our sales force. Throughout the second half of last year, we ran an incentive policy for our sales force that was focused on profitability. I have mentioned last quarter that an effect – unexpected effect of that was the capture of client, retail clients in retail, smaller clients around BRL10,000 a month. And that raises some questions because those clients have a higher mortality rate higher than average. That’s number one. Number two, those clients are more cater, you need to be closer to them on a more consistent manner for them to remain active. Combining all of that, this equilibrium, this balance between profitability and volume, we have changed our incentive to the sales force. We still emphasize profitability, but we also focus now on the volume, so profitably for the larger accounts. You can see that in our product mix now. You can see payment installments, raising its share vis-à-vis the bank purchases. At the same time, this is a more gradual move. We also mentioned in the last two calls that we had – that our share of sales reps compared to our market share was looking 8% and 10% below what was expected. And we are trying to cover that gap by increasing productivity. We increased productivity to a very high level. The difference between the first quartile of the sales growth and the fourth quartile, and we see that, that difference is going down. We are getting close to the full capacity in terms of productivity that you can read. And as we see this reality, we decided to understand from that pilot program that we ran across our portal banks that there was a huge opportunity there. Number one, the productivity coming from sales combined with logistics, the cost is similar, but the results are much higher. Number two, we can also cover larger distances, reach out to agencies, which are in places in Brazil, which are underserved. And that of course brings about more a larger geographic footprint. And when we look at the results of those actions, and as I have said, this was a pilot, we realize that there is a new market for our core and which is very interesting as well. So, this will bring about interesting competitive advantages to doing a way to address that with the sales force is healthier, we believe that allocating sales exactly across more places. This will only increase the company, so this is in new channel showing results that can increase, as I have said, diversify trajectory footprints. So, that will allow us to resume growth in retail in a different manner. Have I addressed all your points?

[Antonio Ruette, Bank of America]

Yes. Thank you.

[Operator]

Thank you. Our next question comes from Juan Recalde from Scotiabank.

[Juan Recalde, Scotiabank]

The impact and how much of this was passed to clients? And also going forward, how much of this of the positive impact do you think that will be passed to clients in the future, if anything?

[Filipe Oliveira, Chief Financial Officer]

Hi Juan, this is Filipe. Thank you for your question. So, regarding the cap of the interchange fees, the total benefit in this quarter was around 4 basis points in our revenue yield. And we have seen very little passing through of this price in other segment, either large accounts or the SMBs. Of course, large accounts, you eventually have a little bit more pressure, but we have seen a very little passing through. And the main reason why we have seen little passing through is because when you look at the interchange rates that were charged for the segment before that were included in our pricing, they were based on debt at interchange rates, which were 50 bps and the cap is actually at 70 bps. So, there is not really a lot of benefit to be passed through. It’s just so this is a fast distortion that was corrected by the regulation. So, because of our former pricing was already made, including lower interchange rates, we don’t really see a reason to pass through. And we have seen the market behaving in a similar manner with other players as well.

[Juan Recalde, Scotiabank]

That’s very useful comment. Thanks for the color.

[Filipe Oliveira, Chief Financial Officer]

Thanks Juan. You may proceed.

[Operator]

[Operator Instructions] Thank you so much for joining our Q&A session. I would now turn over to Mr. Diniz for his final remarks. Please sir, you may proceed.

[Daniel Diniz, Investor Relations]

Well, I would like to thank everyone. As I have said before, this was a special quarter where you had net revenue that we hadn’t seen since Q4 2018 at a level current net revenue, BRL20 million and ROE that has reached 0.04% in recurring terms. When we would look at these results, really excited us in terms of what will come in the future, but we know that we will reach a new level profitability and volume is our best ambition. We want to generate value for our shareholders, which is why we are launching this new program within Cielo to invest in initiatives that will bring substantial results in our focus of operations, one, more specifically within our sales force is an interesting example because it’s not only an increase in our representatives, but also increasing what sets us apart and this will bring up not only company’s results, but will make us stand out in general. Thank you so much and have a good day.

[Operator]

This concludes our conference call for today. Thank you all very much for joining us and have a great day.