Eletromidia SA
BOVESPA:ELMD3
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Ladies and gentlemen, and welcome to the Eletromidia Earnings Conference Call to discuss the First Quarter 2024 Results. Would like to share some instructing with you before we start. Should you need simultaneous interpretation, please click the globe icon at the bottom of the screen and choose Portuguese or English.
The slide deck of this video conference is available on our IR website ri.eletromedia.com.br and on the CVM website. The video will be made available later on.
[Operator Instructions]. We would like to inform you that forward-looking statements are subject to risks and uncertainties, which may cause these expectations not to occur or to be materially different from our expectations. These forward-looking statements are based on the beliefs and assumptions of the company on the date they are made, and the company does not need to update them.
With us today, we have Alexandre Guerrero, our CEO; and Ricardo Winandy, our CFO and IRO. I'd now like to turn the call over to Mr. Guerrero, who will start the call. Mr. Guerrero, you may start sir.
Good morning, everyone. And thank you for joining our earnings video conference to discuss the first quarter of 2024. We started 2024 with a clear vision and a clear strategy and we remain committed to our relentless pursuit of innovation, agile execution and data and indicator-based delivery. All of that is boosted by an accurate commercial strategy, which captures value and the main seasonal opportunities in the first quarter of 2024.
On our operating agenda, we maintained our disciplined execution, and we installed the 106 new digital panels. Our commitment to continue to transform cities is still solid. Strategic investment in technology boosted our position in the market, allowing us to offer new solutions and more advanced solutions in metrics and indicators to our customers. The realization of our assets, coupled with a databased approach stands out in the out-of-home market, offering brands a good way to reduce their CAC, their customer acquisition cost.
We have had a good start into the year. That's what the numbers have been showing. Our revenue was BRL 178 million, 42% higher year-on-year. Our EBITDA was BRL 77 million, 51% higher year-on-year. That can also be seen on our margin. Our margin was 32% in the first quarter. And of course, this is a seasonal factor. There are several trends that have boosted these results in the first quarter. And a very important piece of information I'd like to share with you is that our platform has now reached 53 million unique people. It reached 53 million unique viewers in the first quarter.
That was possible with our platform because we were able to deduplicate our audience, not only selling based on target but also understanding our real reach. The main projects or the highlights for this year are the Summer Carnival, Lollapalooza and Easter projects. Let me show you this video.
[Presentation]
Quite a start into the year. [indiscernible] lab, our center for technology and innovation developed the first immersive [ lumbi-lumbi ], where we had technology experience and creativity brought together. There was a whole new level of engagement with the audience, much higher than we were at [ Eletromidia ]. We had a total of 7,800 unique interactions that were added for one single person or up to [ 777 ] people. And we interacted with 15% of the total audience of the event during the 3 days of the festival. This is a real experience and technology, bringing our business to a new level of interaction.
So talking about de Renato lab. We have a number of other creative initiatives that allowed us to have a 84% rise year-on-year. That shows not only that the brands are more and more mature in creating, focusing on out-of-home, but that also shows that we have a power to execute on scale.
Now talking about concessions is a very important piece of news for this year. Eletromidia will now start in operating these Gentileza terminal, de Congonhas terminal in Rio De Janeiro that really underscores our presence in the transport vertical. With this concession, we touch on everyone's journey who is at the airport of Santos Dumont e Galea, and the VLT our the subway and Supervia, covering 100% of the transport market in with Rio de De Janeiro. That's the second largest advertising market in the country. And the gated bus shelter is also something like to talk about. We had over 2,200, over 2,200 calls made that really underscores our thesis that creativity, technology and truth can help the city to address important social matters.
When it comes to technology, our main expansion avenue. We continue with our innovation pipeline. Eletromidia ads that allow us for an experience and a purchase and out-of-home that is very close to the digital experience, and that can be seen in figures too. Speaking about the figures of this platform, I would like to say that in the first quarter, we had 4,035 million plans and over 7,000 materials that were sent through or via platform. That accounts for 62% of all of the materials from customers received the company. We continue to make progress and to keep our finger on the pulse, when it comes to these indicators because we have the same experience and the same speed as digital with that.
And SMB is small and medium businesses. SMB is also very important to us. In 3 months in 2024, we already had 66% of the total revenue we had in 2023. And the TAM, the total addressable market is BRL 25 billion. So we'll continue to invest not only in developing our platform, but also our team. This is likely to be the most important or one of the most important growth avenues for the company. We have stated some projects with logo. We're still at the very beginning and [indiscernible] was of one these first projects with a very good performance in sales.
For the first time we have brought Big Brother Brasil into the street with the street furniture now of Eletromidia. That allowed for people to have a unique experience. And remind you, we had over 25,000 coupons used with out-of-home that really underscores our thesis that context in the journey is a very important element in engaging the audience.
Another important avenue is our growth in programmatic advertising. We had a total of BRL 33 million in revenue in this first quarter, that was either through DSP and Global for the DSP for Google DV360. That shows an 8-fold increase year-on-year. These are very robust figures, very important growth that really underscores our discipline and our journey.
Now I would like to give the floor to Ricardo for the financial details and highlights. Ricardo, please.
Thank you, Guerrero. Good morning, everyone. First and foremost, thank you very much for your interest, and thank you very much for joining me in this video conference to discuss the most recent results. And let's look about the figure shall we. In this first quarter of the year. We had BRL 278 billion in revenue. That accounts for a 42% rise year-on-year. This improvement shows not only how relevant and important the company is, but it also shows how much we've grown in the Brazilian territory.
We ended the quarter with BRL 76.5 million EBITDA with a 32% margin. This is 51% higher year-on-year. And there's a or 4.5 percentage points improvement in our margin. The adjusted net profit is BRL 22.1 million in the quarter, which is sixfold higher year-on-year and BRL 18.5 million increase with a net margin of 9%. Our EBITDA conversion to operating cash was 153%.
Let's now look at the inventory we had for the quarter. We had 66,700 advertising panels 48,400 of which are digital, the 73% of our network. That accounts for a 2,900 asset increase in the last year, mainly digital. We have added 815 new digital panels in comparison to 2023 with now 1,877 digital street venture adhesives. That is a 70% rise year-on-year. Now when we talk about the growth in the building vertical, we had 32,700 screens with 2,200 lifts having been installed in the last year. and that is a 7% increase year-on-year. 753% of these installations in lifts having been made in the last quarter alone.
In this quarter, in transport, we installed the assets in the Santos Dumont airport, the concession that was announced in the second half of last year. We also have the intermodal terminal Gentileza, Congonhas that was just mentioned by Guerrero. And we have also made progress in the rail advertising front in Rio de De Janeiro with the super [indiscernible] and we have 110 new digital panels in this vertical and with that, we have had a very good pace in expanding our network in verticals and like buildings and transport. All of these initiatives underscore the commitment we have with out-of-home, always in line with the demands of our customers and the market.
Now when it comes to sales, we had a significant increase in sales, [ BRL 178 million ] in the quarter, 41.8% higher year-on-year. In the past 12 months, our revenue totaled BRL 1.130 billion, that's 20% increase year-on-year. This performance is due to the better recognition we have had in the [ setting ] our efficiency and commercial strategy also due to the new operations we have had and the progress and the maturation of our new investments.
When it comes to streets in this vertical, we had a 45% increase year-on-year. In buildings, we have a 61% rise year-on-year. That is mainly due to the increase in residential buildings, also programmatic advertising or programmatic sales rather and also our organization to service small and medium businesses. In transport, we had a 31% rise year-on-year, also showing the good results that we have in rail advertising and airport advertising, including the new contract we have with the Santos Dumont airport.
In shopping malls, we had a 17% increase. That shows that we have seen the real -- the economy -- the retail bounce back. This sector has a very clear seasonality, and the first quarter normally has lower revenues due to the start of new marketing campaigns. Historically, this quarter normally accounts for 20% of the total revenue and the last quarter accounts for 35%. Due to added performance in sales and due to our controlling costs and expenses, we have had a margin of 31.6%. We have had an EBITDA of BRL 76.5 million in this period, with a 31% margin. We can see that our -- we had a -- we can see that the results had a 51% improvement year-on-year as well.
This performance led to BRL 372 million in our year-to-date EBITDA, rather in the last 12 months EBITDA, a 37% rise year-on-year. The operating result, combined with the leveraging of the debt in the year reflected in an adjusted net profit that was BRL 22.1 million and a net margin that was 9%, and that's a number that is over 6x what we had in the last year, when we had BRL 3.5 million in our profit and we also had a 7 percentage point increase in net margin and the total accounting profit was EUR 30 million in the period.
Now talking about the cash flow analysis. We had a conversion of 153% of our EBITDA and operating cash. management totaling BRL 117.4 million. After paying interest, the operating cash was BRL 51.2 million. That was due to the payables from last quarter as well. When we look at investments, we had BRL 25.4 million in the quarter, mainly due to new devices being bought, new equipment being bought for, furniture concessions and also for the building [indiscernible]. We have realized amortizations in debentures and loans and that was BRL 141 million in the first 3 quarters. Our cash was over BRL [ 68 ] million in the period, and the net debt was BRL 292 million, representing 1.3x.
Our EBITDA in the past 12 months, in the last 12 months. That is comparable to 1.8 fold what we had last year and 1.5 what we had quarter-on-quarter. The gross debt was reduced to BRL [ 217 ] million compared to BRL 195.3 million in the last quarter. We had another quarter with very solid results with substantial growth, and we focus on execution. And we have reached 1.3, which is a record and the reduction of our leveraging.
In the ordinary general meeting in April, the distribution of dividends or dividend payout rather was approved in the amount of BRL 12.05 million. This is the first year where we'll begin to be having a dividend payout approved at 100% of the legal limit due to the reversal we had in the previous quarters. And I'd like to give the floor to Guerrero for his final remarks.
Thank you, Ricardo. It's great to see our company starting to pay out dividends. There are 3 main points that I think we should highlight here just before we start the Q&A session. We see substantial growth in revenue, 42% year-on-year. And we see that our EBITDA grew 51% year-on-year. And our net profit was 6x what we had last year.
Eletromidia ads and the SMB platforms have been making very important progress and they have allowed us to position our company in a new level -- and then we put new interaction with the brands and with the agencies and it has also allowed Eletromidia to scale up our business.
We can deliver value to our customers. We have projects that are ever more based on data and metrics. We continue to be very enthusiastic and very excited, but also very disciplined in our execution. And I'd like to wholeheartedly thank our Eletromidia team, who has been working hard to allow Eletromidia to climb on to a new level and where it also helping us make history in out-of-home in Brazil. And I'd like to thank our Board of Directors and our partners, who support us in all businesses and we'll start the Q&A session.
[Operator Instructions] Our first question comes from Bernardo Guttman from XP.
Even though seasonality is worse at the start of the year, you have had very important growth. I'd like to try and understand the demand and the activities. Have you noticed that there has been an increase in the number of advertisers or has the share of wallet of current customers growing.
My second question has to do with your footprint. The company already has a substantial audience very much focused on the capital. How do you consider tapping into other cities that are not capital. Are you looking into new concessions? What are your plans?
Bernardo. Thank you for joining the call. As for the performance of our first quarter. I think it's important to say that the expansion of a company, especially in the Northeast, opening up brands in [indiscernible] with Triton fertilizer that allowed us to capture value into -- couple of the main events we had in the year, summer and carnival. So this expansion, coupled with the seasonality of the period and the Lollapalooza and Easter moment were the main traction moments, the main drivers, they allowed our companies to grow in this period that seasonally is the weakest in the sector.
Now as for the share of wallet. I think we have been making progress in the 3 main fronts. First, customers that have been investing with us for a long time. October last year, we had our tomorrow event. Our sales upfront event. We signed all of our JVPs, the annual agreements, contracts that we have with the brands. These contracts are more and more mature. They continue to grow. We can continue to grow even with brands that have more maturity than others.
Second, their clients are customers that have less maturity. And these customers, they're either starting to build JVPs with us or they start investing with more consistency now, allowing for them to grow. And last but not least, when we look at customers that haven't yet tried as out-of-home or SMB clients, that's still a small share of the total revenue, but there is a very large TAM. So I think these 3 avenues have been well served by our commercial teams.
Growing with strategic clients, also developing new clients and gathering new clients and also generating experience in long-term. Now your second question regarding expansion. Our business was developed looking at the main cities or the main metropolitan centers and the main media or marketing and advertising centers. Now the second round that looks at smaller towns is natural for the growth of an industry like ours.
We believe that when we look at the 20 or 30 largest cities in the country. There is still a substantial road map in public and private concessions, especially in street furniture, airports and also some other in the transport vertical. But when we look at the second layer or the second tier of cities and towns, then there's a lot of room for growth. Our company is probably going to start looking at these businesses soon.
The structural matter is ever clearer. We have governance rules for compliance and governance for new concessions and new bids that are really well structured and that is an opportunity for our companies when we can't really join these purchases when they start taking place in smaller cities and other towns. I think this is an overview of the 3 points you raised.
Our next question comes from Eduardo Rubi from UBS.
Congratulations on your results. First could you talk a little bit more about our margins and what you expect for the future? And these expenses in these new markets, what could you expect on that front?
Thank you for raising these points. We ended 2023 with a substantial increase in our margin at 6 percentage points, to 37% EBITDA margin. And we started this quarter with 32% comparing to 27% in 2023. We continue to expand considering our assets and costs and expenses.
New concessions will allow for new operations, and there will be some costs and expenses. And in the very short term, that could decrease our margins. And we're rolling out a number of concessions this year, and we continue to invest in our technology projects and we aim to sustain margin at 37%.
And we have seen that we have had very good performance with companies that we purchased and individual examples.
Our next question comes from Cristian Faria from Itau BBA.
Congratulations, Ricardo and Guerrero on your results. My first question is, can you talk a little bit more about the dynamics of the growth for Eletromidia, but from an advertising perspective? From an advertiser's perspective.
[Technical Difficulty].
[Operator Instructions].
So my question was can you try and clarify your growth strategy or dynamics, thinking about number of advertisers [indiscernible] whole and also how that correlates to price. How CPM has been behaving in these past moments. And my second question has to do with SMB.
There are some details in the presentation already, but there was a new version that was launched recently. So I would like to understand a bit better how that start of these new operations have been going. And also what your expectations are for operations in other segments? Thank you.
Thank you, Cristian, for your participation. Talking about ad spend. Whenever we have geographic expansions, we can increase our reach -- also when we digitize markets that we already operate on -- and when we increase our reach, we increase our impact. This figure, 53 million unique viewers, unique people that we reach every month that already contributes to this view.
The first point is that we don't believe in either or we believe in the one plus the other. So digital plus out-of-home, open TV and out-of-home, the CAC, the CAC, customer acquisition cost indicators have been very positive. And also been noticing in our analysis is that our CBM continues to be very competitive in every environment to be due to new geographies or digitization in markets that we already operate in.
So it's a positive agenda that should continue to grow. I think the industry as a whole still has tailwind in the next 3 to 5 years, continue to develop in geography, reflecting also our ads platform looking at data and metrics. Now SMB is a start-up within our company, but there's a blue ocean right? It's a gigantic total addressable market. The out-of-home has never really tapped into it. There are very positive results. Of course, we look at the more robust growth rates because it's still at the very beginning. We have basically been making investments in people and technology, be it AI or data scientists and the results have been rising month after month be it due to the platform or due to our sales team.
Purchase recurrence is also something we've been monitoring and we have been keeping a close eye on the indicators so that we can have more improvements made to our platform and also to -- I mean, if we go to market with other channels with partnerships with companies that already work in this ecosystem that is already ready. Digital has already built it -- and what we're doing now is we're looking at this development track, and we're building our business. So there's a lot of opportunity for us to seize.
2023 was a year packed with learnings and robust growth. We do not give any guidance, but clearly, this is a vertical that has a lot of room for growth, more than other verticals also because to the level of maturity it has. And -- when we look at our business verticals, we have buildings, lifts and shopping malls. And when we look at rail and airport transport, they are still the 2 last ones, where SMB should gain more momentum also because of the characteristic of the business. So when we look at both questions, I think this is an overview we can give us an answer.
Let me ask a follow-up question. You mentioned the first dividend payout. There has been a lot of growth. There has been a lot of financial leverage. How is it that you see return on investment for shareholders in the future?
Yes, we announced now the first dividend payout and in 2023, we executed 100% of the accounting net profit available for distribution. We have a dividend policy with the 25% payout and the net profit of the period and we're going to continue on that front with our results.
Gabriel [indiscernible] is going to ask this question.
I've got 2 quick questions. First, there's a follow-up to the question that has already been asked. 42% growth and growth revenue is what we reported. How sustainable is that and margins, you have 4.5 percentage points and that is not exactly sustainable in the variable that you have, but let's try and understand the sustainability of these results.
My next question is about the debt, 1.3 is what you believe is sustainable for the company going forward, right? Or what is your opinion.
Thank you, Gabriel, for your participation. Every year has its own dynamics. 2023 had a new government taking office, there were some events that may have impacted companies confidence. Like the credit crunch that we saw at the start of the year. So we expected better growth this year in comparison to last year.
The LTV the last 12 -- the LTM, the last 12 months growth was also good. The quarter -- the first quarter normally performs worse than the third and fourth quarter. So we really have a smaller base to start off of.
And with our operating leverage, we have a better margin expansion at this [indiscernible] when you can expect for the year as a whole and 1.3x. I mean, we're a company that generates a lot of operating cash, so that can be seen in our EBITDA to cash flow conversion historically. And as we deleverage, we have more availability to sustain investment. We see 2 to 3x net debt to EBITDA as sustainable as given to the company had it in the past, of course, considering a number of factors also the level of interest rates and the banking spread. Thank you, everyone.
[Operator Instructions] If there are no further questions, we will now conclude the Q&A session and turn the floor back over to Mr. Guerrero for his final remarks.
Thank you, everyone. I would like to specifically conclude send my warm regards to everyone in [indiscernible] we know how difficult the situation is out there for many of you.
And thank you, everyone, for joining this call, we're still very enthusiastic and excited about our business, very disciplined in our execution and we believe there's a number of opportunities out there for our company. So thank you very much. We hope these materials we have put together will help you have an ever better analysis of our company. Should you have any questions, just go to our RI website or call [indiscernible] team. Have a great rest of the week. Thank you.
This is the end of Eletromidia's earnings call. Should you have any queries, please send your questions to the IR website, using the ri.eletromidia.com.br. Have a good day.