CVC Brasil Operadora e Agencia de Viagens SA

BOVESPA:CVCB3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for waiting. Welcome to CVC's video conference to discuss the results for the second quarter of 2024. [Operator Instructions] This conference is being recorded and will be made available on the company's website, www.cvccorp.com.br, where the presentation will be available. [Operator Instructions] The information here contained and the operations that might be done during the video conference relative to the business perspectives, projections and operational goals and financial goals of CVC Corp. are premises of the company's administration as well as information based on information that are currently available. Future considerations are not guarantee of performance. They include risks, uncertainties and premises because they concern future events. Therefore, they depend on circumstances that may or may not occur. Investors should understand that economical conditions, market conditions and other operational factors may affect the future performance of CVC Corp. and leads to resource that differ materially to those that were here expressed. Here, we count with Mr. Fabio Godinho, CEO; and Felipe Gomes, CFO. I'll give the floor now to Mr. Godinho. Please proceed.

[Fabio Godinho, executive]

Good morning, everyone. This is Fabio Godinho, CEO of CVC Corp and I would like to thank you for your time and presence here. Another presentation of our results this time for the second quarter of 2024. This quarter is very important for us since we have completed one year of the new management in early June, so in the middle of the second quarter. And this year is when things start to mature, when we start to see in our figures, the most important, most notable reflections of all the strategies we have been implementing since the beginning of this last 12 months. Since the beginning of June 23, when we returned to the company. We made all the changes within those 4 pillars that we always talk about governance, culture, executive team and strategy. In terms of governance, as we well know, we now have a leader board than we used to have before. We have in-depth knowledge of the tourist market as well as of the financial market. Therefore, given much more assertivity and agility in the company's decisions together with management. And also important is the alignment of interest among all minority shareholders. Since today, we have the company's largest shareholders on the Board. This is, therefore, a very important alignment, something we value very much. Without proper governance, no other aspects could have a positive impact. Governance is key, and we have always had this vision. The first thing we organized in the company. The second point is the return of the appropriate corporate culture. CVC Corp culture has always had a strong sales culture, a very strong culture, focused on execution, closeness to the tourist market, to our master franchisees, travel agents and suppliers, mainly our team with a sincere in belonging by all our employees. So the resumption of this pride in wearing the CVC Corp Group brand shirt, whether in Brazil or in Argentina, governance therefore has been adjusted corporate culture adjusted, obviously, CVC's executive team. CVC is an asset-light company. The management team is this crucial to the company's results. It has been crucial so far for this turnaround in the company's results over the last 12 months. And it will certainly make a big difference within the strategy that we are implementing for the coming years. Therefore, all these changes that we made in the executive team had a huge impact, but not only in the first line of reporting to the which currently has 12 reports directly to me, but also in all 170 leadership roles, first second, third reporting lines. Today, we not only have a very strong executive committee with the best professionals in the market within each vertical line that they manage, but also at the lower levels. There's a very strong heirachial structure for the succession of these other positions is ready for the coming years. And lastly, strategy, as we always say, executive products, alternative pharma financing, sales model and stores in the countryside, exclusive products, little by little, we have been improving. And you'll see also again in this quarter, another significant improvement due to this and other actions in the generation of the company's operating cash. There has already been an improvement in the dynamics of the working capital that is important. Now in the second Q, we always say that there are 3 gears for the company's cash generation, take rate, expense/CapEx, CapEx and OpEx, and the working capital for the company's operating cash generation. Take rate, CapEx and OpEx had already been adjusted in the working capital, like the math takes longer to be adjusted. Although the working capital, this dynamic has already been much better in recent quarters. It had not yet been as positive as it was now in the second quarter. So largely due to the strategy of exclusive products, which not only improves the company's financials generation of operating cash as it is a proprietary strategic point of the company, very favorable that these are products that are only available at the CVC stores, exclusive negotiations for both air and land services, both dometic and international within the company's main destinations. Second key point of our strategy, which has also had some positive effect, will have more in the coming quarters but has already started to have some positive effect not only on working capital, but also on top line stimulus, mainly in B2C, alternative forms of financing, not only CVCs, penetration that we will not expand much in the future. We have a very low delinquency rate in our portfolio today. And we do not see an increase in risk, a very representative increase from what we already have today. But there are many banks entering in our marketplace, many additional forms of financing. Felipe Gomes will talk a little more about this later. So this is also stimulated by the dynamics of the working capital. We tend to reduce the exposure of the CVC desk and also stimulate sales since there are more people wanting to finance our clients, the packages for our clients, which is very important. So within the purpose of CVC, as we always say, we are a tourist company. And our objective is to provide assistance to our passengers. So within assisting them, they will have greater flexibility when paying for the package for a family, which today is a relevant average ticket for any Brazilian family. It is difficult for people to travel alone. So this bill comes from 1, 2, 3, 4 passengers. It is really an important ticket. And as a service to our passengers, it is also important for us to take this family of the credit card limit and not consume this limit that families currently use for their daily expenses and not for their annualacation trips. That is what we want from this differentiated form the financing and it's already happening. Third point, digital sales. We have been improving nonstop. We have been gaining relevance in stores. Conversion has been increasing. The cost of lead acquisition has been decreasing, so we have been on a very important learning curve, positive in sales. It is also an important factor in this very good growth that we had in the second quarter, mainly in B2C, a lot due to the improvement of digital and lastly, stores in the countryside. We'll talk a little bit about this later. This implementation of this strategy is already growing rapidly because digital, together with new store models, enables CVC to move away from its previous strategy, the one we had before the pandemic, before COVID of being only in cities with 100,000 inhabitants because it depended 100% from customers physically entering the store to buy the travel package. Today, we can open stores in cities with up to 15,000 inhabitants. We already have several examples of stores that we opened at the end of last year and this year, successful stores in cities between 15,000 and 25,000 inhabitants, which was a new market for CVC, opening up a giant addressable market for CVC. We'll be able to open stores in almost half of the cities of Brazil, whereas before in the previous model that was 100% physical, not Fiji, we could open stores in a maximum of 10% of the citizen Brazil. We modified this addressable market by 5. So this was the second quarter, and we will start talking about the main highlights now. Moving on to the highlights of the second quarter results broken down to growth, profitability and governance. In this quarter, we opened 60 stores including Brazil and Argentina in the second quarter, surpassing the historic record for stores opening at CVC Corp never since the beginning of the company's history, all the companies together had we opened 60 stores in 1 quarter. And also in the semester, CVC Corp has 90 new stores, adding in the first and second quarters, which is also a record for the company. Closures. There was a normal of closer pace. 12 stores were closed, 6 in each quarter. Therefore, the pace of stores opening accelerated significantly. We have already broken the quarter record in CVC's history, we have broken half year record in CVC's history within the normal level of store closures. Another important figure, we opened 5 stores in Argentina in the first quarter and 6 stores in Argentina in the second quarter. It is very important to see this commitment from our franchisees in Argentina, even in light of all the monetary tightening of the local government, we opened 10% of new stores. Today, we have 125 stores in Argentina, where we opened 11 stores in the first half of the year, a semester of very turbulent economy, showing the resilience of our business. The highlights we had in terms of growth this quarter was 16% growth in confirmed B2C bookings. We were coming off a flatter quarter due to the difficult comps we had in relation to the first quarter of last year, we saw very high growth but with the negative margin. As we always say, we prioritize margin due to the growth we had in the first quarter of this year. And now we are back with profitability to imprint significant growth, 16% in B2C. We're talking about same-store sales in the range of 10%. That's considering all the figures, including all the problems that the catastrophe that Brazil had in the state of Rio Grande do Sul which hit the months of May and June. It got 2 of the 3 months. And within B2C, the stores and revenue represented 7% of our revenue. If we exclude the effect of Rio Grande do Sul, only sales, not excluding boarding, the loss of sales due to demado, this is not excluded, but only sales in stores and Rio Grande do Sul, the rest of the stores in Brazil grew 21% against the second quarter of last year. Also excluding the effect of Rio Grande do Sul, we went from a same-store sales of 10% to 12%. In other words, it was a month of very solid growth. And it is important to remember that according to an Atara capacity within the domestic market grew by around 3% in the yield of airlines in the domestic market in the second quarter fell by around 9.5%. So domestic market is experiencing a decline in overall revenue from aviation in the second quarter against the second quarter of last year and CVC is gaining 16%, which is already signaling an acceleration of gain in market share. The international market also saw a drop in fares of around 14%, 15% overall in the second quarter. So the market has been falling price throughout the first half of the year and then stabilizing at lower or flat numbers against last year. CVC is starting to show signs of gaining share, but with profitability that is adequate to the return on invested capital. This is something we respect and that we have always confirmed not trying to grow at any cost. We prepare ourselves with an adequate take rate with exclusive products within an adequate team and now we are starting to deliver better growth dynamics with adequate profitability and with better working capital dynamics. Will mention that later. Another important point to mention is the growth in net revenue, which is revenue that comes from the company's take rate, which grew 21% in 2Q '23 against 2Q '24. This shows a gain in market share gain with a recovery in the take rate. So increasing sales, increasing take rates. B2B is a clear example of this recovery. We are closing a gap due to that comparison with many users in the organization, we did at the beginning of last year. of the client's portfolio, delinquent clients that we removed, clients with very low or negative profitability that we also removed. At first, this resulted in a very significant drop in gross books, but that was not reflected in a drop in profitability, quite the opposite. So since we have the strategy of separating the brands, again, we gradually reduce the growth gap significantly. However, with profitability much higher than in the previous year. A good example here is obviously RA. In the first half of 2023, RA represented a negative EBITDA of BRL 2.2 million. In the first half of 2024, RA is presenting a positive EBITDA of BRL 58 million. This is just a difference from the first 6 months, even with a 10% drop in gross bookings, but with a 10% drop in gross bookings and a 40% increase in net revenue and also a reduction in expenses. So it goes from a negative EBITDA of BRL 2 million to a positive EBITDA of BRL 58 million in the first 6 months of this year. And now we no longer have this effect of the comparison with the flukinfires and also returning to gain momentum with the consolidation market. We should already start to present positive numbers month after month within the B2B segment in the third quarter and also in the fourth quarter onwards. In other words, as of the second quarter, we should already have positive top line gross bookings. Well, on profitability, the first point is the maintenance of the take rate at historical levels since we took it in the range of 9%. So growing 1.6 percentage points against the second Q of '23, and we have been positioning the company in this range since the third quarter of last year, a very important turnaround in adjusted EBITDA. But even so, with adjustments being much less representative, we had many adjustments to the balance sheet, cleanings, tiding up the balance sheet last year. And this year as well as the store closures, the adjustments in the P&L for the adjusted EBITDA incurring ones are much smaller. So for example, we presented here BRL 70 million in EBITDA within all the companies of CVC Corp, an improvement of BRL 87 million against last quarter last year. To give you an idea, in Brazil alone, the companies in Brazil, B2B plus B2C went from, again, negative EBITDA of BRL 30 million in the second quarter of '23 to a positive EBITDA of BRL 60 million in the second quarter of 2024, a turnaround of BRL 90 million, just in the figures for Brazil. In Argentina, it was a quarter that was the worst quarter of the year, a quarter in which consumption due to all the restrictive consumption measures to reduce inflation which have been successful. But logically, with a profound impact on the consumption of the Argentinian people. And obviously, within the travel segment, which is a discretionary purchase, it is impacted. Even though it was the worst quarter of the year, Argentina had a net profit of BRL 25 million in the second quarter of 2024 alone and positive cash generation. That shows the resilience of our business model in Argentina as well. A solid model that even in the worst quarter of the year, produced a very substantial figure of net profits generating important cash for the companies as well. In Argentina, we also had a drop in gross bookings in the second quarter, also in the first quarter. But because of 2 factors, let's say, more or less half of this drop was due to the drop in the effective sales volume in quantity, value and tickets. And the other half was due to the reduction in travel taxes. So taxes, this does not impact profitability and net revenue, which is just a pass-through in our P&L. But the other half, this one does have an impact due to the reduction in sales volume. Even though we have already seen in the last few months, in the last few weeks, some improvement. So we believe that the worst is over in terms of travel demand in the Argentinian market. In this year, we are not only seeing a recovery in volumes in the last few weeks and last few months. And this first half of the year, we had a significant gain in market share according to Yatadera. So when we recover, which is what we are filling now, we will have a position in terms of market share in the Argentina market that's much more important than what we had in the same period last year, 12 months ago. So this in relation to our operation in Argentina, cash generation of BRL 35 million, including cash generation from EBITDA, deducting CapEx expenses and also working capital variation, this is the highest number, the highest cash generation value for CVC Corp in the last 18 quarters. And at the end of it all, which is a very important agenda for the company's executives, the adjustment of the company's capital structure, deleveraging the company. So in the second quarter of '24, we also had a reduction of BRL 345 million in the company's net indebtedness against 2Q '23. In terms of governance, we like Matteo Bandera, who was already our Board member, very active, has been getting to know the market in CVC's business model better and better every day. He's very present, has participation in all the main discussions together with other Board members of GOL Sao Paulo, but very present together with management. We like Matteo as the new Chairman of the Board of Directors. And once again, CVC was ranked as having the best score of all tourist companies by RA1000 that is the reference of CSAT, which is Reclame AQUI. So CVC within its main purpose, which is to provide assistance to our passengers. This is an item that we value a lot being a liter in quality and customer satisfaction and CSAT for our customers. So we have now had the RA1000 CEO from Reclame AQUI for the third quarter in a row. It's also worth mentioning our solidarity campaign we ran for the victims of the strategy that struck the state of Rio de Sul as soon as we heard the news that Salgado Filho Airport was closing. It closed in the first few days of May. We only had 1 month left in the second quarter. We spoke to the CEO of GOL of Zhu, of LatAm and also in partnership with JMAF, one of the largest land transport companies in the country. We were in a campaign where all CVC stores function as collection points for donations for families in the state that were affected by the catastrophe in the state of Rio Grande do Sul. CVC organized itself as the largest private company point in Brazil for donations for the state of Rio Grande do Sul, launching the largest campaign in tourism segment, by far, one of the largest campaigns in Brazil retail. We raised more than 236 tonnes for families in Rio Grande do Sul. We had net growth of 41 stores in the second quarter of Brazil. and 69 in the first half of '24. The record of opening and within the normal level aligned with the company's normalized history of closing, which is around 6 stores per quarter. So we can already see that the store openings of this new generation or new batches are already exactly in line with our strategies. So the stores opened in '24 was practically 70% in the country side, which is where the population grows the most, where the GDP grows evolves where there is much more a difference to CVC brand, also systems, also in interest and demand for alternative forms of financing, combining physical sales with digital. So these stores have already been quite successful, especially our modular store, which is 150% to 200% above the sales curve that we expected. In the very good news is that over 50% of these new stores are owned by CVC franchisees, demonstrated the strength and credibility of our brand and our management with current franchisees. In this quarter, will bear much more yield in terms of the rollout of stores opening, several contracts that we are signing with hypermarket chains, wholesales plus retail change drug stores and other retailers to open stores in stores and also stores in parking lots or next to wholesale retail markets in hypermarkets as well. So several large chains in Brazil have been contacting us, and we have signed several partnerships that are already yielding results and will be much more stronger fruits in the coming quarters. Those were the general highlights of the second quarter of 2024, and important quarter in terms of top line growth, profitability growth, positive operating cash generation, store openings, continued cost reduction for the company. So there's a lot of good news in the second quarter of 2024. As a result of all the back to the basics we have done in implementing these strategies over the last 12 months that are yielding more pronounced results starting this quarter as well. Now I'll hand over to Felipe Gomes, who will go into more detail about the operational and financial results of each business unit of CVC Corp in the second quarter of '24. Best regards to all of you.

[Felipe Gomes, executive]

Thank you, Godin, for the floor. Good morning all. Moving on to Slide 7. We highlight the company's confirmed reservations net revenue and take rate. So looking at at the top left, where we talk about confirmed reservations in the second quarter of '24 against to '23, there was a 16% increment going from BRL 1.27 to BRL 1.77. Without the impact of Rio Grande do Sul, this growth would have been even higher at 21%. When we go to the top right, we also see a very significant growth in net revenue, going from BRL 126 million to BRL 249.5 million, an increase of 18.6% in the quarter. When we compare half against half, there was also a significant increase, 16.6%. In the bottom, we have the highlights for 2024. These highlights have already been worked for by Godinho previously. Now moving on to Slide 8 which is the B2B side, we bring here quarter-over-quarter and half over-quarter comparisons, both of reservations and off-net revenue in take rate. In the second quarter '23, the confirmed B2B reservations were EUR 1.66 billion in the second quarter of '24, BRL 1.35 billion. Godin has mentioned, we have the issue of frequent flyers, which the company decided to stop selling. The sales were being made until May of last year. So the comparison here is a bit murky and also the focus on profitability, where we resigned several contracts in B2B with agencies, which also brings a bit of the torture comparison quarter-over-quarter, but now mainly from June 24 into the third quarter onwards, this comparison starts to be more accurate. So in the confirmed reservation, the quarter, a drop of 4.8% also with the effects from Rio Grande do Sul. If we exclude the debt, it would be around 3.2%. And half-over-half, a slightly larger drop, 12.3%, and this has to do with as we said, that this comparison starts to become clearer in the second quarter cleaner than in the first quarter. That's why, and this mass impact is still a bit greater, a bit higher. When we look at the net revenue take rate, which is very much in line with what was said and the focus on profitability in the B2B segment, we see the significant increase in net revenue going from BRL 74.5 million in the second quarter of '23 to BRL 93.1 million in the second quarter of '24. And half year over half year, there was also a very significant growth of 22.4%, going from approximately BRL 145 million to BRL 177 million, a very significant increase in take rate going from 4.9% in the first half of '23. Again, where we had the managed sales, there were some contracts that we are not advantage for the company going to 6.5% take rate, which has a very high impact. On the bottom line, the highlights of B2B, which were mentioned by Godin. Now let's move to Slide 9, which is the slide for Argentina. As has been mentioned, we have been noticing an improvement in the business environment in the country, but there is still a reduction in the populations purchasing power which also directly impact sales. Although in recent weeks, we have been noticing an improvement in this regard as well. When we look at confine reservations, we see a drop of almost 38% from the second Q '23 to the second quarter of '24. When we look at the semester, this drop is greater, which, in a way, already begins to show an improvement 1Q over the previous Q in terms of confereservations. When we look at net revenue and take rate in net revenue, this drop is even smaller because there's also the aspect of sales with taxes, and this tax has been reduced. As Godin said, this is just a revenue pass-through. So this is also why the drop in net revenue ends up being smaller than confirmed reservation. The good news might be that the take rate is still rising from 6.4% to 7.6% Q-over-Q. When we look at the entire sense, we have a drop in revenue of about 22%, going from BRL 153 million to BRL 111 million. However, with increase in take rate of 6.5% to 8.1%. The big highlight here for Argentina is that despite this large drop in sales and the effect on EBITDA, the net income, the net profit has been strong in this quarter and the year, which, in a way, also shows the resilience of the business in Argentina. Now moving on to Slide 10. Consolidation of CVC Corp's results with a lot of emphasis here on the increase mainly in EBITDA quarter-over-quarter. Continue here on the top left, we show net revenue and take rate. 2Q '23 net revenue was BRL 269 million. Now to Q2 '24, BRL 294 million 9.2% increase in the first half of this year, reaching BRL 611 million, 8.2% growth compared to last year. Take rate went from 7.4% in the first half of '23 to 9.3% in the first half of '24, which reflects the company's strategy of focusing on business profitability. On the top right, we also have fixed expenses and an indicator related to net revenue in Brazil. Here, we are talking about the business in Brazil. So expenses fell from BRL 156.6 million in the second Q '23 to BRL 142.4 million in the second Q '24, which causes a drop of fixed expense to net revenue rate from 71.1% to 58.7%. When we analyze semester-over-semester, there was also a drop from BRL 329.3 million to BRL 283.4 billion in fixed expenses with a drop in the indicator from $78.1 million to $57.7 million. On the bottom, we provide an analysis of adjusted EBITDA in the quarter highlighted here. So the company at large CVC Corp goes from minus BRL 16.2 million in adjusted EBITDA in '23 to positive BRL 70.3 million in adjusted EBITDA in 2Q '24, an increase of BRL 86.6 million in EBITDA, going from a margin of minus 6% to a margin of almost 24%. When we break it down between Brazil and Argentina, in Brazil, we go from an EBITDA of minus BRL 31.3 million in 2Q '23 to an EBITDA of BRL 60.8 million in the second Q '24, an increase of BRL 92.1 million. In Argentina, we have a drop of BRL 14.9 million in EBITDA from the second quarter of BRL 23 million to BRL 9.5 million in the second Q 24 reflecting drops in sales that we saw in the previous slides. The accumulated adjusted EBITDA for the semester, we have an increase in relation to last year of BRL 149.5 million. We go from BRL 11 million in the first half '23 to BRL 56.5 million in the first half of '24, increasing the margin from 2% to 25.6%. Now Slide 11, which is the last slide of the presentation, where we present the company's cash flow and overall indebtedness. On the left side of the cash flow, the big highlight for us here is operating cash generation. There is in the second quarter of '24, we had an operating cash generation of BRL 34.7 million, which is the best cash generation for the company the last 18 quarters since the third Q of 2019, we closed cash in the second Q '24 with BRL 244.2 million, a drop compared to the second Q of '23, explained by all the debt service that the company made in this period and with a policy of low anticipation of receivables, which is clear in the table on the slide which is the general indebtedness stable. So in this table, if we go line by line, in the first line of gross debt, a drop of practically BRL 93 million quarter-over-quarter, going from BRL 191.9 million to BRL 79.2 million. The cash that we just mentioned going from BRL 646 million to BRL 244 million. And when we look at this metric of net debt increase of BRL 309 million. However, explained by the advances on receivables, which are the next 2 lines. So when we look at the nonadvanced receivables, that is the balance of receivables that a company has to use to advance an increase of BRL 380.9 million, going from BRL 116.4 million of balance of non-advanced receivables in the second quarter of '23 to BRL 497.3 million in the second quarter of 2024. When we look at the balance of prepayment of receivables, that is, the amount of credit card receivables advanced. We also noticed a significant drop going from BRL 1.51 billion in the second Q '23 to BRL 778 million in the second quarter of '24. In other words, a balance of prepayment of credit card receivables lower by BRL 273.2 million, which is reflected in this last line, the sum of the company's net debt plus the receivables balances, where there is a significant drop from BRL 1.81 billion in the second quarter of '23 to BRL 836 million in the second quarter of BRL 244.8 million. In other words, a reduction in general debt of BRL 244.8 million. This concludes the presentation. We'll be now available for questions. Both Godin and myself.

[Operator]

[Operator Instructions] Now we go to the first question, which is by Ford of Bank of America.

[Robert Ford, analyst]

What are you thinking about demand for tdomestic trips, bookings take rate for next half of '24. And also continuous activity. How should we think about this deleveraging?

[Fabio Godinho, executive]

I'm going to answer this first half. That has to do with the capacity dynamics for second half. And Felipe will come in to talk about the indebtedness. What have we seen in this first half of the year? It was the SK of the domestic trips that was flat, net was 1% growth of ASK not ASM, not miles as in the U.S., however, not miles, but clutters in Brazil and 15% growth of international. So it was important capacity of growth for international flights and flat in Brazil, where the industry expected that the market would drop a little bit because we expect that GOL would lose more aircraft than it did go ahead excellent renegotiation and the capacity was not very effective. So redimensioning their merch did not get any worse. In the half, new deliveries of Boeing that were delayed. So in this expectation by GOL, we expected it would lose more aircraft, but that was not confirmed. So the other companies accelerated the inclusion of capacity. So what should have been negative in terms of capacity in the first half grew 1%. And since the economy in Brazil and interest inflation as everybody knows, was not as strong as industry imagined, it don't have that much impact. What happened was that the yield when you pay per each 100 kilometers flight Brazil, in Brazil it dropped 5% and international 15%. So this is a dynamic for leisure trips that is positive. You have growing capacity in the market, be it marginal domestic, port and international. However, this drop in the mean rates will stimulate our clients to decide to buy. And we believe these dynamics will go on for the second half. We see international sales growing 15% and domestic ones positive, low single digit within the second half with flat rate fares or maybe slightly negative, what is very positive for our dynamics of sales. We had this first year of management. We got very close to the air companies, the most support or partners of CVC, the national ones and also international ones. We really got close. And today, we have conditions that are entirely different from what we had last year. competitiveness of prices of CVC today for domestic as well as the most important international destinations is entirely different from what we had last year. And then we have the results we saw in the second Q. Growth of bookings in B2C, 16% growth with important growth of 1.6% intake rate. So growing and gaining share, increasing margin. And we believe that these dynamics may go on throughout the second quarter. This dynamics of the market will go on.

[Felipe Gomes, executive]

I'll mention the debt here. It is really a relevant item on our daily basis. And the idea is that throughout time with cash generation that we are already seeing that's getting stronger and reducing more and more the leverage of the company. And also, we have reduced the debt. We want to reduce the debt, and there was a change of the profile when possible. We have talked a lot with we're going to migrate from the profile of debt we have, which is mainly debentures. And that goes mind to the dynamics of the company, better rates for CVC. This is our idea throughout the coming quarters, reducing leverage.

[Robert Ford, analyst]

And also about bookings and boardings for July, please?

[Fabio Godinho, executive]

It was a positive month, very important. The third quarter, it's a very relevant EBITDA and aligned with the growth that we expected for National as well as for international. Even with the product of Rio Grande do Sul, to give you an idea, our stores regards the recovery has been so strong that even during June, July, even without a date for the opening of the airport. Now today, we know that half the flights we operate from October on, and the other half in the middle of December. Even before knowing that, we sold. So 90% against July last year. Without having the data of the airport, only selling flights from January on. So we had a positive dynamics in July considering what we imagined.

[Operator]

Our next question comes from Victor Rogatis from Itau.

[Victor Rogatis Trevisan, analyst]

I have 2 questions. The first one was partially answer dynamics of bookings for the second semester. Could you comment about Brazil? If you could share the expectations you have for Argentina that we will improve and also about financial results. That was a very good surprise when I looked at it. If possible, could you comment about sustainability of this line for the coming quarters?

[Fabio Godinho, executive]

You get Brazil and Argentina the bookings dynamics. What we see in this first half is what we knew was going to happen. From the first quarter, we're going to focus on profitability. B2C grew flat. We had comps for the first Q of 23% against 22%, 50% with negative margins. What happened? We grew nothing in B2C. However, with very good margins. So we said it's possible to have this level of sales with a higher take rate generating EBITDA results that are much more representative. That's what happened. in the second quarter, what happened? It grew again a lot. We really had growth of 16% in B2C, maintaining the strong growth of take rate. So we sold more, we gained share. We increased the rate, 3 at the same time, on the second quarter. And that's what we imagine to maintain this line of take rate throughout around 9%, also growing in the B2C dynamics. Remember that B2C, we finished last year with about 1,100 stores in Brazil at the end of the quarter, with 1,185 stores. If we repeat the same performance in the third Q, considering what we opened in the first half, this is 15% more stores. So if we have same-store 0, we would grow 15% only in Brazil without growing the same-store sales, and we delivered the same-store sales of 10% a month, even considering flat in Rio Grande do Sul. So we have a good perspective for the B2C in Brazil. It's in B2B. It's nothing more than what we have mentioned. We topped frequent flyers in delinquent clients, from a profitability standpoint and credit standpoint. So in the first quarter last year, it was 15% drop in bookings. However, a huge increase in profitability in net revenue. What happened in the second quarter decreased the gap of drop from minus 15% to minus 5% with 25% increase in net revenue. As I said, RA in the first quarter of '23 against the first half of 24%, bookings dropped 10% and increased 40% net revenue. This a company that has BRL 4 billion at per year. So we went from an adjusted EBITDA in the first quarter of last year of minus BRL 2 million to BRL 64 million positive of positive EBITDA in the first half of this year. In what we imagine now for the second half, we want to compare with frequent flyers, then we will see a growth within B2B likewise. So growth in B2C, growth in B2B. Argentina, we are much more focused in maintaining positive cash generation and maintaining positive net profit in this recessive moment. In the second quarter, we have BRL 25 million of net profit in Argentina, positive cash generation, BRL 25 million. Even with 37% drop in bookings, and flow through in the results that reduced taxes over sales, so it was 25% less. What we expect is a recovery step-by-step, they think recovery will be like an search with drops, then it recovers towards growth. That's what we have seen. In this market drop, we gained a lot of market share in Argentina. We were very swift technically wise in this difficult moment in these first 2 quarters, we gained relevant share, maintaining this throughout the second quarter. In recovering market, we believe that we will only go back to the level of '23 in '24. Most likely, we're going to have negative figures in the second half of this year. However, not as impacted as the drops we had in the second quarter that was most likely the worst quarter of the year, even so generating positive EBITDA and cash, BRL 25 million of net profit. So this is what we see as trend for the second half of this year.

[Felipe Gomes, executive]

About your question on financial results. Sustainability throughout time. We see that it's sustainable the way it is. So it is a trend of improvement. If you talk about expenses, the idea is to keep reducing and reducing taxes over receivables also, we have good negotiations with different players. And we have a mix of debt that is changing, bringing. Maybe where we have the most uncertainty is the other financial revenues because of dollar asset in Argentina. The expectation is that it goes as it is, no reason to have a change in those figures for the coming months. And also red contracts varies a bit depending on exchange rates. And it's a sustainable continuous change.

[Operator]

Next question comes from Rodrigo from Rick Capital.

[Unknown Analyst]

Two questions. If you could comment on the expectations of revenue drivers for 3Q considering trajectory of sales in 2Q. And also July, how do you expect the escalations of take rate to understand how the most important drivers is to the progress? And if you could comment on your expectation of revenue growth if it enables you to maintain your trajectory of expense drops and also about operational leverage and EBITDA margin per quarter.

[Fabio Godinho, executive]

The drivers for 3Q, as we mentioned, within B2C, we go on, on a very positive trajectory of opening stores, where we opened in this first quarter, 85 stores. I believe that we will repeat this second half in the third quarter of this year. So very positive dynamics of opening points of sales, not only Brazil but also in Argentina. Argentina, we opened even with all the recession and monetary situation. We opened 11 points of sales in the first half, and we should open at least the same in the third quarter. So that's an important driver, growth in the number of stores. And we should go on increasing same-store sales, even considering the drop in Rio Grande do Sul, we had 10% of same-store sales in B2C. So 16% growth that we had in the confirmed reservations that naturally will become consumed bookings throughout the third, fourth quarter. So third quarter, we already have almost 70% of it has been sold. So we can have good visibility. We could foresee that's going to be a quarter that's according to our expectation. Fourth quarter, we still have to sell a lot. And the air companies have given stimulus. They are having sales and so on. So the curve of demand on an real versus forecast is going down. So they make the sales for this curve to go up and similar the market we see benefits from these movements. So you have this drive and we also have additional capacity coming from the domestic market, considering the restructuring of gold that was more positive, much more than we imagined. So UN have with a weaker economy inflation, et cetera. You tend to foster to the price, what's always possible for leisure market and also positive for CVC. B2B, we end up growing, as we said, because we cannot compare the base with mileage and we are gaining share. That's clear. When we stopped recently our sales, we had compared to Yatas rankings. In Brazil and Argentina, 1 year ago, when we started the work, we were the second in ranking and now we are by far the first in the ranking of issuing tickets in the international market in Argentina. That's 85% of trips in Argentina, Malaysia. That's very important. Different from Brazil, in Argentina, most travel abroad. In the leaders in Argentina took over this year. In Brazil B2B, as we written down the delinquent customers step by step with the correct take rates and reducing expenses step by step, we're recovering our place. And we are now every month, especially along with most of our companies. We are, again, the first company regarding issuing in consolidation market. So we have this positive drive that should endure. In Argentina, we opened many stores in the first half, and we should repeat this in the third quarter, just like in Brazil. The market is recovering Brazil, and it will only go to the same level of last year next year. So we should reduce negative gap, however, not grow throughout the second half of this year. And July, comes along with our expectation. Regarding expenses, Felipe Gomes could comment but there should be a drop regarding the percentage over net revenue, not so much nominal.

[Felipe Gomes, executive]

Rodrigo, as Godin said, we have been commenting, the company went through 2 major changes until the beginning of this year, cutting expenses. And now what we are doing is doing everything to maintain these figures in absolute numbers, maintain them stable. When you drop expenses and you have to pay those that were laid off, et cetera. But does this bring in the ad, the percentage, the rates of expenses over revenue should drop. When you ask about operational leverage, what we have, again, this large movements that we have done, it's a work that's much more of fine-tuning, renegotiating providers, projects of technology that will help us in the company, but there is a lot to be done. The good news is that we have a lot to do so maintaining the expenses in absolute numbers, growing the revenue for the third quarter. So this indicator of expenses over revenue dropping for the coming quarters.

[Operator]

Rubin Cuoto is no longer connected so we go for the next question by Niklas Larrain, JPMorgan

[Nicolas Larrain, analyst]

Most of my questions have been answered. However, I have a general one. I would like to understand how you see the financial health of the clients because when we look at companies listed in Brazil, nobody sees a significant improvement in consumption. How do you see financial health of your clients? And how do you believe that could change in the second half of the year?

[Fabio Godinho, executive]

Within this expansion we did. In our credit desk, we are seeing delinquency that's quite controlled. Of course, will not accelerate much more from the working capital that we have. We have another movement, which is more and more replace our credit line with other banks. Santander did other alternative forms of financing continue with the financials that we have and using FGTS consignated credit, et cetera, et cetera. Credits in Mercado Libre, Finance by Mercado Libre. So you have many avenues. This is our priority. The clients do not remain using the most of their credit cards. So they can finance their trips in an easy way without interfering in their credit card use. Everybody is running after the limit. We want to serve on this Blue Ocean and have an alternative form of financing. And quarter-over-quarter, we decreased the share that we have of credit card in our sales. However, you asked about financial health of the clients, we increased the credit desk in the last quarters. However, we see a delinquency that's under control, about 2% and dropping. We were really careful about how much give of credit after boarding because that's the risk. If you give credit before boarding, you just canceled the trip. And we're being restrictive. In the meantime, yes, no negative surprise. And as the air companies and the hotels have a additional capacity and the economy does not respond in the same speed that the players who have the assets expected, which is the demand, what happens? What happened in the first quarter. In the first half, the prices go down. Domestic national yield have gone down because they have more capacity available, more than demand. And this is an environment where CVC has favorable demand. So we stimulate leisure and within leisure, 52% of Brazilian people think about CVC. And then we capture strongly this demand within the stores that we have and also the new stores that we are opening in the countryside with much success.

[Felipe Gomes, executive]

This is something I think in answering generically wise, we follow the rates of the consumers. And in CVC, in our world, which is tourists that is trips, we feel resilient demand that reflects in confirmed bookings July as of today, the figures we have is a very strong month. We are in a structural change wanting consumption per spirits versus consumptions against material assets. So on our end, in spite of some drops of trust and consumption, we don't feel anything. More specifically, financial health, Godinho has explained well. We go on with our rates of delinquency that are well controlled and even with some drop in it. So that's what CVC thinks.

[Operator]

Now I would like to inform that Q&A session is now closed. And I would like to give the floor for the company for their final consideration. Mr. Godinho, please proceed.

[Fabio Godinho, executive]

Thank you. Thank you all for being here. And we had a very positive result for the first time. Although in the next quarters, we reduced a lot negative cash generation. But finally, in the second Q, we have cash generation, discounting working capital, discounting CapEx, EBITDA, we delivered cash generation that is positive, BRL 35 million, important growth of B2C, growth in same-store sales, in take rate, the growth in net revenue and positive profitability, quite important. B2B with 5% minus, but that will most likely be transformed in growth. As we said in the previous quarters, now in the coming quarters, it's going to be positive dynamics of B2B. In Argentina, quite focus on profitability, numbers of generation of net profit positive, gaining share, that was quite important. And as the market recovers throughout the second path, we will close this growth gap, always looking at cash generation and profitability as priority in the Argentina market. And we also see the growth and the commitment with our franchisees in Brazil following our aggressive plan of expansion that we had for this year being confirmed in Brazil and also in Argentina. So thank you so much, and see you next quarter. Thank you.

[Operator]

This conference call regarding second quarter of 2024 CVC Corp. is closed. The International Relations Department is available to answer other questions. Thank you all the participants. Make sure you have an excellent day.