Cielo SA

BOVESPA:CIEL3

Earnings Call Transcript 2020-Q4

[Operator]

Good afternoon, and thank you for holding. At this time, we would like to welcome you to the Cielo results conference call referring to the fourth quarter '20. We have with us Mr. Paulo Caffarelli, Gustavo Sousa and Daniel Diniz. This event is being recorded [Operator Instructions]. This event is being broadcast live via webcast, and may be accessed through ri.cielo.com.br, where the presentation is also available. Participants may view the slides at their own convenience. The replay of this event will be available shortly after the closing. [Operator Instructions]

Before proceeding, we would like to mention that forward-looking statements made during the conference call are based on the beliefs and assumptions of Cielo management and on information currently available to the company. They involve risks and uncertainties as they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operating factors could cause results to differ materially from those expressed in such forward-looking statements.

I would now like to give the floor to Mr. Paulo Caffarelli, who will begin the presentation. You have the floor, Mr. Caffarelli.

[Paulo Rogerio Caffarelli, executive]

A good day to all of you, and thank you for joining us in the conference call for the fourth quarter '20.

The year 2020 was extremely challenging, marking the history of Cielo on 2 different fronts. First, regarding the consolidation of our strategy to guarantee profitability and a better experience for our clients; secondly, a startup for a digital transformation that will enable us to advance further in the leadership of this sector.

Our figures for the fourth quarter confirm that despite a very difficult year, Cielo did attain some highlights, the first of them, an increase of 15% in the volume of transactions vis-a-vis the previous quarter. Only in the SMB and Long Tail sector, the main focus of our strategy, the growth was 13% when compared to the same quarter last year, we reached 37% of representativity in these accounts.

You will recall that our aim is to have a balance between Large accounts and SMB accounts. We also had a record in prepayment products penetration, reaching 33%. In the fourth quarter '19, we had 26%. And 2 years ago, we had a share of 16% in that segment.

We also enhanced the productivity of our commercial teams that present 52% of the activations of the last month of the year. This productivity throughout 2020 simply doubled. And we continue enhancing the quality of our products and services, the growth of NPS with another growth during a quarter between June '18 to November 20, the growth was 7.5x in terms of NPS and all of our financial and operational indicators such as EBITDA, EBITDA margin and net revenue had an enhancement vis-a-vis the fourth quarter 2019. Gustavo will show you this very soon.

On the part of cost, Cielo continues to ensure that it will match the revenues to expenses. We have to be able to generate results. The normalized expenses had a drop of BRL 160 million vis-a-vis the previous year.

What I would like to highlight perhaps more than this nominal savings is the enhancement in the quality of the expenses. This reduction took place in a scenario of expansion of our commercial teams and other investments we are carrying out to enhance the quality of our services. We sold our stake in Orizon for BRL 129 million. This is emblematic for us. It is the first sale of assets that is linked to core business, and we will have other assets. This guaranteed net revenues of BRL 298 million in the fourth quarter. This amount is 35% above what recorded in 2019.

When we look only at Cielo, Cielo Brazil in isolation, our results had a rise of 82% vis-a-vis the fourth quarter 2019. All of this opening the way to further advance in digital transformation. This will aid us to have better results going forward.

Now for 2021, we have 5 main goals. The first of them is the construction of an ecosystem that will enable us to leverage the use of our data for us, data is an extremely important article. And we're using these data, we're monetizing the data, but ever more considering refining the data to build strategies for our clients. We will be working strongly on that in 2021. We would also like to expand our vision of an intelligent platform. This will enable us to deepen and broaden the relationship with clients and with the clients of our clients.

Besides moving forward in the prepayment products, considering the receivable registry, we're also going to move ahead in what we call [Foreign Language] in credit analysis that we carry out, ensuring that we can have a direct participation in this type of credit, maximize the customer experience. For us, this is a call of faith, and everything that we do herein has to be geared towards the client. Our product has to be monetized, and a better experience of the clients will lead to greater loyalty and an increase in our services.

And finally, along with our clients and through services with added value. This, of course, is important. Nowadays, you can no longer be simply an acquirer. You have to have a front, a -- arm that also offers value-added services day after day based on the needs of the clients. And this, of course, implies the opportunities to acquire companies, create partnerships, and this should reinforce the characteristic that Cielo has of being very close to its clients.

This year, we began to invest heavily in relationship and the quality of our service with initiatives that have timely actions and consolidate us as what we call Cielo Digi. This is a concept that nowadays goes beyond the POSs, the PIN machines. And for this purpose, we have created a Vice Presidency for Client Experience that will concentrate the technology areas as well as operational areas, seeking synergy on those 2 fronts but also synergy with other areas of Cielo.

Now development, data, logistics service -- services, updated and customized products are fundamental in this better experience for the client. All of us associates at Cielo are assessed based on the customer satisfaction, the intensive use of technology in our processes and agile methodologies, the structuring of our teams enable us to gain productivity and speed in our deliveries.

We still have a drop in the intention of churn, the customer abandonment. In the last 2 years, we have had a drop of 50% in churn. We have hired an additional 500 trade executives that will work with those that we already have, reinforcing more specialized sales, focusing on the relationship and loyalty of clients. We also have almost 15,000 branches at Bradesco, Banco do Brasil and Caixa, that exclusively sell our acquirers, and we have financial elements such as PIX, open banking and the receivables registry. They will enable us to have new data on consumption and products, enhancing our productivity. But above all, it will enable us to have banking inclusion and inclusion in the means of payment.

Cielo, our company with a robustness of its 25 years of history, is fully aware of the relevancy of this role in this new construction. I would now like to give the floor to Gustavo, who will refer to our numbers and our performance in the fourth quarter '20. Thank you.

[Gustavo Henrique de Sousa, executive]

Thank you, Caffarelli. A good day to all of you.

We begin on the Slide #4 of our presentation, and -- we begin on Slide #4. We had a net income of BRL 298 million, a growth of 35% year-on-year. Cielo's total payment volume was of BRL 191 billion, 15% higher than what we saw in the third quarter '20. Specifically in the segment of SMB and the Long Tail segment, for the fourth quarter of '20, we had a growth of 13% year-on-year. And something we will highlight even further, further ahead, is that jointly, these segments gain ever more share in the total transaction volume captured by Cielo, once again, with a share of 37%. And these 2 segments, what we have is a new penetration of prepayment products. We have a gradual and constant growth in the fourth quarters with 33% of penetration. The commercial team productivity grew significantly. You can see this to the right. Our own channels represent 52% of all activations in the fourth quarter '20. Our NPS, when we look at it between mid-June to the end of 2020, had a growth of 7.5x. A substantial growth. And I will have some slides devoted to our new service model, some adaptations that we have done in our commercial model and the sale of their stake that Cielo had in Orizon, once again representing an increase of BRL 129 million.

We now go on to Slide #5. These 3 graphs have been used comprehensively during the conference calls this year. What we would like to show you is a comparison of the volume realized versus the volume of a base scenario without the impact of COVID.

The top graph is the graph of the nominal revenue for Cielo ICVA. We had a performance, of course, below the baseline, especially in April and May. Ensuing this, we had a recovery. We were closer to the ICVA in the fourth quarter, closer to the baseline. When it comes to the volumes captured, the behavior was very similar in April and May, once again moving away from the baseline. And in the fourth quarter, figures very close to normalcy.

And in Cateno , once again, this -- moving away from the baseline in the first quarter. And then in the fourth quarter, overcoming the curve of the baseline.

We go on to Slide #6 to speak about of our financial indicators. Net operating revenue of BRL 3 billion, 1.5% more than the same period last year. EBITDA with a growth of 16%, totaling BRL 768 million. Our EBITDA margin also had an increase, a growth of 25.4%. And our net income with an enhancement, and in the quarter with 9.9%.

In Slide #7, we see the recovery in our business units at BRL 298 million, broken down by business units. Cielo Brasil, our investment of 70% stake in Cateno and other subsidiaries, strongly represented by Cielo SA, which is our subsidiary abroad. And you can see an increase, consolidated increase. And in each of these business units, a generalized financial recovery.

We now go on to Slide #8. In TPV, BRL 190 million, a growth of 15% vis-a-vis the third quarter '20. Our active merchant base totaling 1.4 million clients. We had a quarterly drop of 1.4% due to a decrease in our client base and Long Tail or entrepreneurs. In 2020, Cielo adopted a more conservative strategy when granting subsidies to this group, and that is why we had this slight drop. But we also have a growth in our focus segment, which is SMB, with a growth of 4.6% for the quarter.

At the right, you see the behavior of our prepaid volume. BRL 119.5 million, a penetration of 52.7% vis-a-vis the third quarter.

We now go on to Slide #9 with some of the highlights of our prepayment penetration with SMB and Long Tail segments. We are attempting to balance our client portfolio to have greater representativity in the SMB and LT segment. Both of these segments represented 33% of the volume of Cielo in 2019. In the fourth quarter '20, they are now responsible for 37% of the volumes captured in the company. Both segments had a strong increase in prepayment product penetration. In the fourth quarter '19, this penetration with 26%. We have had a gradual and strong increase, reaching the fourth quarter '20 with almost 33%.

We now go on to Page #10, and you will see our revenue yield compared with the third quarter '20, we had a contraction of 0.04 percentage points, mainly due to the strong growth of volume which generates an impact on revenues, especially the lease revenues. And when we see this in the fourth quarter, this justifies this reduction in the quarterly comparison.

We now move towards Slide #11. Caffarelli spoke about the normalized costs. When we compare those of 2020 with a -- the 2019, we have a drop of normalized cost of approximately 10%. In the same comparison in a quarterly basis, fourth quarter '19, fourth quarter '20, the drop is significant of 18%.

We now go on to Slide #12 of the liquidity and leverage of the company. Cielo's total liquidity was BRL 4.2 million and BRL 4.8 million applied in NDV or RV. Now, our indebtedness is below our roof, which is 3x, and our leverage is 1.86x. Now, this increase in leverage is quite healthy as it represented an increase of investments in the company in receivables in the ARV or NDF.

We now go on to Slide #13, where we would like to speak about the company agenda in terms of digital transformation. We will see how this allows us greater productivity, efficiency and a better quality of service for our clients.

On Slide #14, some points that were already mentioned by Mr. Caffarelli. Bringing together 2 internal areas of the company, the Operations VP and the Technology VP, coming up with a Customer Experience VP. We recently announced the arrival of Mr. Gomes to this executive presidency, once again to work on customer experience.

What we have done and intensified is to work within the agile methodology, enabling us greater productivity and enhancing our time to market. Now, these resources of greater agility, when it comes to problem solving, has also had a very good impact on our clients. Whoever more use the digital channels and that use our Cielo app, and it has become one of the best in its category.

We now go on to Slide 15 to see some indicators that point to the quality of service at Cielo with substantial improvements in the last periods. We begin to the left at the top, we have the NPS evolution. Since 2018 until the end of 2020, the evolution was 7.5x. The level of complaints dropped more than 20% in 2020. At the end of 2018, until the end of 2020, the churn intention had a significant decrease of 50%.

To the bottom right left, you see that we have the best reputation of the industry in Reclame Aqui, and we're a second runner when it comes to service.

In Slide 16, our commercial expansion. We compare the negotiations productivity, which is the number of clients per day per associate in the commercial team. This productivity has practically doubled through the year 2020, and this increase in productivity in the period of recovery from the pandemic enabled us to grow our customer base by 5.6% (sic) [ 4.6% ] in SMB. In Own Channels, with our own commercial team, we're responsible for 52% of the activations in the company. And the last point of that page, the hiring of 50 sales executives that were hired recently, will enable us to offer good news throughout our next conference calls.

We now go on to Page 17. We're also making investments in technology and logistics to offer more weapons to our team so they can offer ever better services to our clients.

To the left, an investment in technology. We have an app that is called Cielo Expert, the app used by our sales team. It already creates qualified leads on retail customers, enabling the sales team to offer more adequate products to this. And in terms of logistics, a highlight, a pilot program where we're beginning in some cities to credit or sell relationship of clients with Cielo using the same method that we use in delivering POSs. This has been having positive results and should improve throughout the year.

We go to Slide #18, another highly important topic. And if you will recall, at the beginning of 2019, we began the hiring of hunters. We segregated the team, allowing the hunters to work with the origination of things and the farmers working in service. Now with logistic, with apps that support the customer relationship, we're going to bring together all of these functions, Hunting and Farming, and what we call business consultants.

Now, this combination of roles is accompanied by other features. The first, a decrease in the geographic area and the reduction in the number of customers per portfolio. So we will have a sales team with more weapons, technology, logistics, a smaller customer portfolio, all with the goal of putting the customer in the center.

To the right in terms of activation and churn, you can see that the pilot project gave us very positive results. Now this new model with the 500 additional sales executives will, of course, enhance these results that we will report.

To end the presentation on Slide #19, kind of accountability for the year 2020. We make the commitment of growing the SMB client base, and we saw that they do have an increase in share as part of the total TPV. Another goal was to increase the penetration of payment products. We did this in the SMB and LT segment. We strengthened the commercial performance, and of course, we have worked steadily on the quality of services.

In 2021, we will maintain these priorities, grow the SMB client base, increase the prepayment penetration, everything to increase our operational efficiency and the continuity of products, channels, in terms of digital transformation and expand data monetization initiatives.

Thank you very much for your attention. We will now go on to questions and answers.

[Operator]

At this point, we will go on to the answer-and-question session. [Operator Instructions].

Our first question is from Giovanna Rosa from Bank of America.

[Giovanna Rosa, analyst]

I have 2.

You have a competitive business for the credit card. And I would like to know if you can share with us your volume, and if we should think about this competitive process as a process for profitability or simply to maintain volumes?

[Unknown Executive]

Thank you for your question, and welcome.

We showed interest when we observed there was a movement in this direction. Of course, we were interested in participating, and once again, we're fully willing to participate in this bid by Caixa.

I cannot speak to you about volumes because of our commercial confidentiality.

[Giovanna Rosa, analyst]

Very well.

Now, if you could speak about what you expect for 2021 for Cielo in terms of revenue yield, volume and expenses? If you could give us an overview, please.

[Unknown Executive]

Thank you for the question.

We don't have a guidance in these items. We're speaking in a very general way. But you can be sure that this movement in terms of operational efficiency will continue on during 2021. We do have some initiatives that will still be altered, but will be implemented in the first semester.

To give you a vision of volume, once again, we are unable to do this, especially because of what is happening. We are not sure if we will have a new impact with the same intensity that we had last year with the pandemic. It is not what we have observed so far. Once again, we prefer to be somewhat sparse when it comes to guidance, and we're going to see if we have an impact in the economy when it comes to volume. But you can be sure that this is one of our priorities.

Regarding the last point that you mentioned, the revenue yield, we have to accompany the market movements. If we look at 2020, until midyear, we had a recovery and a price stability. But at the end of the year, we had a slight reduction, and this is something that we follow up on practically every week at Cielo. And the price, of course, will depend on the competitive environment.

Our absolute focus is on SMB. Now, we will have an adequate pricing offer with a highly qualified team and appropriate products for that segment. We'll see what will happen in terms of pricing throughout the year.

[Giovanna Rosa, analyst]

If I understood correctly, at the end of the year, you observed an increase in competition. And therefore, going forward, perhaps there will be new revenue pressure. Is that it?

[Unknown Executive]

Yes. The yield has a certain stability. We came out of stability in mid-year, and at the end of the year, we did observe more competitive movements. Nothing critical, but we will be following up on this during 2021.

And the price variable, of course, is at the mercy of the competitive environment.

[Operator]

Our next question comes from [indiscernible] from Bradesco BBI.

[Unknown Analyst]

Caffarelli and Gustavo, congratulations for your work during the last few years.

From Gustavo, I would like to hear about planning in terms of the company's leverage, considering the maturities we have in June and some maturities in 2022. And in this context of capital and debt, I would like to hear from you your vision of MerchantE. It had almost BRL 40 million in profit last year. If you expect the same trend this year, a very general overview of your vision of leveraging indebtedness, and if MerchantE can perhaps bring a relief in this case.

[Gustavo Henrique de Sousa, executive]

Victor, thank you for the question. And yes, we would like to speak about leveraging.

We end the year with a liquidity at a very robust level, a comfortable liquidity, not only because of the amount that we have in cash, I'm also referring to the amounts that we have in terms of applications in RV and RD. They're short term. At the end of December, we had 47 days, which grants a significant flexibility of using this as a lever to change our indebtedness based on the pricing that we give to our clients. This ARV is a tool used by large accounts that work with large products, which is our absolute reality.

Now as you mentioned, in mid-year, we have the maturity of the FIDC quotas. We have been following up on this, and the market is favorable for new emissions, new instruments. So we're looking upon that with significant attention, and we may make use of this mechanism to seek new financing and rollover.

And what I would like to reiterate here is that the end of the third quarter, our leverage was 1x. We had an increase to 1.86x because of our opportunistic allocation on ARV. Predominantly very short term, we concentrated these new ARVs in 30-day operations so we can make use of this to continue to increase the penetration of Receba Rapido and the SMB.

Your question regarding MerchantE is important. We have indebtedness in dollars with a maturity in November of 2022. Now this indebtedness is somewhat less than $500 million, and of course, can be addressed through strategic movements at MerchantE. When it comes to MerchantE, we have a negative result because of the restructuring period. And because Cielo USA has the debt that I just mentioned, it is our understanding that the turnaround movement of MerchantE is coming to an end, and we can strategically assess the company. Once this happens, we may even assess the possibility of an anticipated elimination of this indebtedness back to the dollar for this asset.

[Unknown Analyst]

Gustavo. And once again, congratulations for your work.

[Operator]

Our next question comes from Kaio Da Prato from UBS.

[Kaio Penso Da Prato, analyst]

I have a question.

In this quarter, Cielo reported a non-rig current item of BRL 16 million. Could you please give us more color on that? And I would like to know about the company's strategy in terms of granting credit. Cielo participated in origination through a partner. What is happening with this, and what can we expect for 2021?

[Unknown Executive]

Kaio, thank you for the questions.

We did sell that portfolio. We found a person to structure this through a competitive process. We're referring to non-payable credits, most of which arise from lease of equipment where we were not able to receive the revenues or payment for the lease. Now, if we take into account these receivables that are difficult to come, they represent BRL 500 million. That is why we sold that portfolio, carrying out an operation that represented BRL 16 million net.

Now when it comes to credit, granting credit, as Caffarelli remarked earlier on in his presentation, we have the authorization of our Board to move ahead to request a license for SCB. We're concluding our request with the regulator. Now in the past, we tested the model of working capital credit. We understand that this model was a success. But with the adaptations and with the obtention of a special license, we should become more relevant in this type of operation at the beginning of 2021.

[Operator]

Our next question is from Gustavo Schroden from Goldman Sachs.

[Gustavo Schroden, analyst]

Caffarelli, Gustavo, and congratulations for the quarter.

My question refers to expenses and costs, mainly. Now, there's a positive highlight here when it comes to costs as well as expenses, which aided the results as well. How can we think about this going forward? Perhaps this was an exercise, a stronger exercise for that specific quarter? Or is this going to become something structural in the future? Your marketing expenses, OpEx, what is it that we can expect?

I'm asking this to know about the evolution of your expenses, all of the investments in digitation and other investments to grow. My intention is to understand if you can maintain this good level of cost and expenses going forward compared to the growth of investments you will need to make as you presented in the conference call.

[Unknown Executive]

Thank you, Gustavo.

I'm not going to give you a quantitative guidance. I'm going to give you some general guidance. And Schroden, if you could look at the release as well as former releases, we try to show the net figure of non-recurring events, and I draw your attention to the normalized costs or expenses.

In sequence, in our quarterly releases, we have proven to be very efficient in those items. Please look at this -- to avoid the effects of consolidation or the exchange rate, look at the results of Cielo and take away some of the expenses that depend on volume, on banner sales or something that we eliminated in 2020. That instrument of remuneration to the partner banks of Cielo because of the origination of clients, all of this depends on volume.

When you remove all of this, you will see that we have a very good path when it comes to cost reduction. We're going to continue on in this trajectory, but we do have some costs underway for structural changes in terms of efficiency. So far, we haven't quantified this, but the best way to mention this is that without a doubt, this is one of the great company priorities. And this drive will not be a restriction for enhancing service, enhancing solutions and working on new developments. We can bring these things together, invest where it makes sense on software, service and the sales team, but also seek efficiency whenever the opportunity arises.

[Gustavo Schroden, analyst]

Okay. That's very good.

Simply a follow-up question, if you could. Well, I'm not asking you to quantify what you're doing, but in those studies that you're carrying out, which are the items or areas that you're thinking of where you have room for improvement in the company?

[Unknown Executive]

Schroden, we work at the company based on a matrix and zero-based budgeting. With each exercise, besides using this methodology, we already have an efficiency item in the 2021 budget, and we're now questioning this budget. We have 2 vice presidencies that we put together, Technology and Operations, and this will enable us to fully revisit our contracts. It's a structural effort as you mentioned, and -- when we begin this work that is underway in all of the accounts and expenses of the company.

[Gustavo Schroden, analyst]

Wonderful. Gustavo, and congratulations for the results once again.

[Operator]

Our next question comes from [indiscernible] from JPMorgan.

[Unknown Analyst]

Caffarelli, Gustavo, congratulations for the quarter as well. Two very short questions.

First, regarding cost. In truth, this was a very strong quarter. And those 500 additions in your headcount, will they have an impact on 2021? And to continue on with the vision of your outlook for 2021, that vision that you can continue to deliver, this level of efficiency, if it already includes this additional headcount you're planning for this year?

The second question refers to prepayment products. There has been an increase, but there has been volatility in truth. If you could speak about why the spread has so much volatility, and which is a segment that will be the focus in 2021?

[Unknown Executive]

Well, to begin with the team, the executive team for 2021 -- I'm sorry, in 2020, we did not have these additional expenses. We had an increase of BRL 4 million in the month of December. There truly was no increase because of our headcount, but we will have this beginning in January 2021. And our goal is to deliver efficiency even if we have an increase in cost for our sales team, and we will offset this with efficiency measures.

Your other question refers to the ARV. And I'm going to remind you of a conversation we had in the second and third quarters. We mentioned that there were 2 events that were important to understand the movement of the ARV. First, our priority is to increase penetration of prepayment products and SMB, and the effect of the pandemic in the first and second quarters. When we were at the top of the impact of the pandemic, in terms of liquidity, Cielo prepared itself for a scenario that did not materialize. We try to work on costs as much as possible. Now, this did not happen.

By bringing together these 2, what did we do to de-allocate the anticipation of receivables that we had with large accounts that have high volumes, but with a profitability that oftentimes is merely marginal? And in the structural de-allocation, we left some segments that we deem to be riskier during the pandemic, and this brought back a great deal of money. We went from FIBC and that came back to the Cielo Cash. Now that money that is working for the more difficult moments in the market will now be used in a growing allocation of resources for Receba Rapido.

As that market moment did not materialize, what did we do? We thought of a more opportunist allocation. When you work with large account clients, there is no contractual commitment, but we have to have a transparent relationship. Say we're going to provide resources in the medium or long term, are we or are we not doing this? We got ready to allocate resources in SMB and Receba Rapido. Now as this negative scenario did not materialize, we allocated the RV on that 30-day plan, something more timely. Now this timely allocation will depend on our appetite and the interest of the client, and that explains the spread volatility.

It was a long answer, but I hope this clarified your question.

[Unknown Analyst]

Yes, extremely clear.

And by looking at 2021, your tactical allocations will continue. Therefore...

[Unknown Executive]

Yes, the strategic and structural allocations will be for Receba Rapido. Those tactical opportunistic allocations will continue until we transfer that allocation or the ARV to Cielo Cash and then to the Receba Rapido.

[Operator]

Our next question is from Daniel Federle from Credit Suisse.

[Daniel Federle, analyst]

The first also refers to the good performance in terms of SMB. And the invoicing per year is approximately BRL 30 million for SMB. So are you concentrating everything on that, or are you concentrating your BRL 200 million up to BRL 300 million in terms of invoicing per year?

And year-on-year, you show a mix of other revenues with a negative result in the base point. In the mix, it's favorable. I would like to understand, if the mix did not help, which are those accounts that hamper the revenues?

[Gustavo Henrique de Sousa, executive]

Thank you, Daniel, and thank you for the question.

Let's begin with the revenue yield question. And I'll look at the material revenue yield and the comparison of the fourth quarter '20 and the fourth quarter '19. This reduction in the mix is when you compare the share of the debit product, which was even greater in this quarter vis-a-vis 2019. And in the fourth quarter, we have a growth of debit because of the increase of sales at the end of the year. Since the pandemic, the growth has been higher and continued ever since the second quarter where we have more use of debit more than we had historically. And all of this comes from the mix. It doesn't depend on large accounts, SMB and in terms of debit.

I'm sorry, Daniel, I forgot the first question as I answered the second one. Caffarelli, help me here?

Well, I had help from several people here.

To go back to your first question, the increase in share of debit. When we look at the share of debit in our financial volume in the fourth quarter 2019, it accounted for 40% of the total volume. In the fourth quarter '20, it represented 45%. Now, Daniel, simply to explain how this happened, the fourth quarter '19, 40%; first quarter '20, 40%; second quarter '20, 44%; third quarter, 45%; and fourth quarter, 45%. Since the second quarter with the pandemic, we had the share of 4% to 5% more in the debit volumes.

Now to answer your first question, our SMB segment with annual invoicing between BRL 120 million or BRL 15 million and the growth that you see is concentrated on average invoicing of BRL 2 million, this is the average of most of the volume of the new SMBs that we're working with.

[Operator]

Our next question comes from [ Felipe Martinoso ] from Morgan Stanley.

[Unknown Analyst]

Very quick question. The sale that you referred to of BRL 16 million, did they have an impact on the bottom line of the company for the quarter?

[Unknown Executive]

Your -- I'm sorry, we were not able to hear your question.

BRL 129 million, I'm sorry, with a gain of BRL 5 million that was recognized in the month of January. So this will happen in January. This is from the sale of the stake of Orizon, and not the BRL 16 million.

[Operator]

Our next question comes from Eduardo Nishio from Genial Investimentos.

[Eduardo Nishio, analyst]

Caffarelli, Gustavo. Congratulations for the results.

A follow-up in your expense structure. Conceptually, if you look at the structures of the incoming customers, the costs are very good vis-a-vis the fintechs. I would like to know if you have been able to map this cost difference? If it's only in the part of renegotiation with service providers, if this is the greatest differentiation? And what is it that you can do in this? Because there's still a great deal that you could cut off. If you could very generally map the part of costs?

And of course, this also refers to systems. You have legacy systems interacting with the new systems, and I would like to know if you to be able to advance in terms of system integration in 2021, or if this will continue on during the coming years, upcoming years?

And finally, regarding your strategy for the prepayment products, you've never moved away from the 15% or 20% in terms of penetration. You have always been along that range, and sometimes reaching more than 20%. If you could spell out where you would like to get to with the newcomers and give us some guidance in terms of what you intend for the company? It seems that credit -- short-term credit is one of the strategies that you would like to focus on in coming years, and which is the penetration that will enable you to do that? And your portfolios that are under a test structure for 2021, which are the portfolios, therefore, that you will focus on?

[Gustavo Henrique de Sousa, executive]

Nishio, thank you for the question. I will begin with the costs.

The work that we do here, Nishio, well, at this point in time, will not increase. Now, it doesn't mean that we won't have additional efforts in terms of efficiency. When I speak about our present day work, it's intelligent work focused on revisiting all of the contracts that we have. And another review that we carried out in terms of cost and a better synergy, we have just spoken about the merger of 2 units in the company. Imagine the efficiency gains and the better solutions for clients when you bring together the Operations and Technology area in the company.

Now, the comparison, Nishio, is very difficult to quantify. But directly comparing a company like Cielo with an incumbent is not correct because the client base is different. We have reached a share that is close to 40% among SMB and LTs. The larger the size of the clients, the more investments in technology and availability, and the more investments. So all of this will have a cost difference. Now, can we turn this into a deficiency? Yes. This is one of our challenges when it comes to expenses.

Now, in terms of the prepayment product penetration, we have been successful in the origination of new clients that already accept the product called Receba Rapido. We have had treasury movements to have more resources available. We don't have a guidance for that. We do know the level that would be acceptable for the company. Our expectation for 2021 is to grow in terms of penetration speed and level, at least twice similar to what we grew in 2020.

What you saw in terms of the penetration percentage growth at Cielo, we would like to grow twice in 2021 because of the emphasis that we have on this product with the sales team. And I can't quantify the product. I will give the floor to Caffarelli, who would like to complement to the answer.

[Paulo Rogerio Caffarelli, executive]

Regarding the Receba Mais, what is important is that, first of all, we have the authorization of the controlling company to create that. I say we not only focus on acquiring, but also focus on banking products, and credit is a part of that, and aggregate solutions of services that can be offered to our clients.

Now when it comes to Receba Mais, which is our most important product, we will be working with funding with a partner of approximately BRL 300 million.

[Eduardo Nishio, analyst]

That's excellent.

If I may remark on the systems that you have already delivered, they're 100%. The integration process is running. If you could further remark on this?

[Unknown Executive]

Now, this process has been underway for 2 years. Now, we had great expectations that the system could absorb some problems. This did not happen. We had invested a great deal. We do have our own system with the SEC, but this system has been built in layers and tiers, and nowadays, we're more focused on developing solutions based on our present day needs in this system through these layers or tiers.

I don't know if Diniz would like to comment on this? We'll put Júlio, who is the new VP for the Client Experience, here.

[Júlio Almeida Gomes, executive]

We're coming up with a streamlining process in some of the layers of our architecture at present. We do have that streamlining project, and part of it is to address the deficiencies in the system in terms of our products and markets.

[Operator]

Our next question comes from Daniel Alberini from CTM Investments.

[Daniel Alberini, analyst]

I have 3 questions.

In the Board yesterday, there was the approval for the buyback process, and this has to be approved by the CVM or the Brazilian SEC. If you could comment on this, I'm not sure if I said something wrong or if there is something complementary in your buyback program? Caffarelli and Gustavo spoke about Cielo Digi. And we see other segments, the SMB segment, the loyalty program, the cash back, [indiscernible], online sales, e-commerce. We see all of these companies and agents making enormous efforts for payment means for the integration of payment and to capture payment means.

From Cielo, I would like to understand if you have something along the way instead of only focusing on credit or receivables, considering Cielo Digi and cash back and credit possibly in the first semester? If there is any expectation of acquisitions or M&As to contract cashback loyalty programs or something similar? Those are my questions.

[Gustavo Henrique de Sousa, executive]

Thank you for the questions.

Let me begin with the buyback program from the company. Whenever we have this disclosure, the goal is only one: to work with the variable remuneration of the Cielo employees. The remuneration rate is paid through shares, and this is the only reason. There's nothing beyond that, and this is something we do periodically.

Regarding M&As, I'm going to respond part of the question. We received another question from another analyst, and he sent the question by WhatsApp, a question from BTG also asking about M&As.

Yes, we do have some alternatives that are under analysis, and our analysis is in software that can complement our service offers to our clients. Software that can help us in the management of customer establishments, help us in sales management and much more. We don't have anything very advanced, but our M&A agenda will focus on that type of opportunity.

Now to focus on payment means, I would like to give the floor to Caffarelli.

[Paulo Rogerio Caffarelli, executive]

Daniel, and this also applies to the question about Cielo Digi. We have to work very well in the payment, and this refers to the customers' best experience. So for us at present, we tirelessly seek the improvement of our work, the -- excellent with customers.

Concomitantly to that, we have to undergo that great digital transformation. It has begun. We have a product that is about to be launched more intensely, which is Cielo [indiscernible]. This will allow us to go deeper in the relationship with small companies, and this relationship goes beyond the company. It go -- extends to the client of our client, and all of these movements of e-commerce, cash back, all of this is part of what we call the digital transformation here, and this digital transformation has to happen concomitantly with everything else we do. And if we don't do this digital transformation, we are going to have an impact going forward. So both things are working in parallel at present.

And for digital transformation, everything is changing. The acquiring world is changing, and we're highly connected to all of these changes. And going forward, we're going to be the champions of this transformation where we continue to play a fundamental role in means of payment in the country.

Now the first question referring to the buyback, we were quite clear. What was approved by the Board was the buyback as part of the capital budget foreseen by the company for 2021. Now when the company begins that program for the variable remuneration, it will announce something more specifically for this year. What was approved was an allocation of the company capital. Now, if the company does execute this plan, they will communicate this, and Cielo does this usually because of the variable remuneration of its associates.

As I have the floor, I have just received another question from BTG. He was unable to pose a question. He asked about the receivables OTC, what is happening at Cielo and if we're prepared for that scenario? I will give this to Thiago Stanger, who is the Head of Treasury and coordinates this.

[Thiago Stanger, executive]

Thank you for the question, our greetings.

Since the beginning of this project, we began the project in September of 2019, and we have been working on 2 fronts. One, compliance with regulations where we discuss the evolution of the system with the market. We're preparing procedures and processes, and at this point in time, [ Rodman ], the Cielo test 100% are integrated with SIP. There is no further issue in terms of these tests.

What happens is that interoperability still has some issues that should be addressed by the market and by the registry, and that is why we have entertained 100%. We're deploying all of the possible efforts in Cielo and in the registry so that we can attain that maximum percentage.

We remind you that the deadline set forth by the regulator that all companies, financial and non-financial companies that use receivables for operations or for credit, should be apped, should send communication that they are ready on the first of February. Additionally, Cielo, since the beginning, has structured its products and solutions so that when the receivables registry becomes valid, which will be on February 7, Cielo can make the most of the opportunities of this market, acquiring receivables captured by other companies. And in the future, when we have credit, collects this credit regardless of the crediting company that captured that transaction, that is to say, lock that receivable to guarantee that we will receive.

So going forward, we're very close to concluding the part of compliance with regulation. And when it comes to Cielo, we're 100% ready, awaiting the test. And from the viewpoint of business, we're ready for when this process will come into effect in February, and we will make the most of the market opportunities.

[Operator]

[Operator Instructions]

As we have no further questions, at this point, we end the question-and-answer session. We return the floor to Mr. Paulo Caffarelli for the closing remarks. You may proceed, sir.

[Paulo Rogerio Caffarelli, executive]

I would like to thank all of you for your participation, and I know that we have very little time. Should you have any doubt, please do not hesitate in contacting us through the IR team. We can clarify anything about our strategy, and we want to ensure that Cielo becomes ever more competitive.

Thank you very much, and have a good afternoon.

[Operator]

The Cielo conference call ends here. We would like to thank all of you for your participation. Have a good day. Thank you.