Locaweb Servicos De Internet SA

BOVESPA:LWSA3

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon, ladies and gentlemen. Welcome, everyone, to Locaweb's First Quarter of 2020 Results Conference Call. Today, we have with us Mr. Fernando Cirne, Chief Executive Officer; Mr. Rafael Chamas, Chief Financial Officer and Investor Relations Officer; and Mr. Higor Franco from BeOnline & SaaS Director. Today's live webcast and earnings release may be accessed through Locaweb's website at www.ri.locaweb.com.br.

The slides for this presentation will be available for [Technical Difficulty] the information is available [Technical Difficulty] guidance and interpretation [Technical Difficulty].

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Locaweb management and on information currently available to the company. These forward-looking statements are no guarantee of performance. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that conditions related to the macroeconomic scenario, the industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I'd like to turn over to Fernando Cirne. Mr. Cirne, you may proceed with your call.

[Fernando Biancardi Cirne, executive]

I'd like to thank the investors for their participation and to the entire Locaweb team who are all very agile and efficient in this first quarter. Because of you, we have been able to deliver brilliant results in terms of our operations.

On Slide #2, let me start with the main highlights of quarter 1 2020. We have already seen some very clear signs of acceleration of the company's physical transformation, due to the coronavirus pandemic. We saw this particularly in our Commerce operation and BeOnline and SaaS product.

Another highlight is the strong growth of our GMV, which is 44% this quarter. And as early as April this year, you already saw a growth of nearly 80% over 2019. Still above e-commerce, we have also seen great acceleration in the new customers in the e-commerce platform. In comparison with quarter 4 2019, we saw a growth of 103%. Only March 160% growth over quarter 4 2019 and in April as [Technical Difficulty] we saw a growth over 250%.

In the BeOnline and SaaS market, we also saw our sales grow organically more than 20% which is also a reflection of this growth and stabilization, with highlights to a few products that I'm going to mention later, such as the Cloud VPS, which is our entry product for the cloud portfolio, the site builder and the e-mail portfolio.

Delivery Direto had a fourfold increase in the interim new customers, and there were also some temporary impacts on our margin. These impacts were from the foreign exchange irrigation. And we call them temporary because they haven't really compromised our trend of margin expansion.

And in the case of the dollar exchange rate, of course, this will be passed on to the product of our prices. And more than that, we believe that since the profits of our competition are also priced in dollars. This is an opportunity for our products to become even more competitive. We have products that are not linked to the dollar, so this creates a competitive edge before our competitors.

Now about the coronavirus pandemic, we have 90% of our operations working from home, our focus was on health and particularly on the quality of the [Technical Difficulty]. We have been doing this very successfully, particularly in [Technical Difficulty] service with no impact on our operations. We continue to develop new products at the same pace, and we are still seeing some very rapid evolution. I'm going to give you more details later.

Slide #3. Here on the right, we see how much our e-commerce ecosystem has evolved in this quarter. Here, we see that we reached 20 integration with marketplaces, which is very important for us, also 40 integrations with ERP software and also it's worth noting our integrations with logistics systems, which means that we have the best and the most complete e-commerce ecosystem, which is very helpful to our customers, and help them sell more on their e-commerce platform. This is very important, and this is what we have been making efficient of GMV in the past 12 months, BRL 4.9 billion, which is very high.

And if we compare with the Brazilian e-commerce GMV, for example, if we look at the 2019 GMV, there's roughly about a 6.2% difference. At the time of the roadshow, we talked about being close to 5%. We're already working at 6% of the Brazilian GMV comparing with last year's data. And on the left side, we see the evolution of the entry of new stores, the booking [Technical Difficulty].

Since we started this year at a very fast pace, in January, we already saw a 72.3% growth over the quarter 4 last year with the entry of new stores; then 78% in February; 160% in March; and in April, we were able to increase 2.5-fold the booking of new stores in our e-commerce environment.

For reasons for this fantastic performance in our e-commerce environment, first, as I just mentioned, we have the best e-commerce ecosystem for small and medium-sized businesses [Technical Difficulty] we had 2 competitors that left the market, which was also positive for us.

And the third point, it perhaps also helped us, that we were able to invest in new customers. We hit a low cap, and we invested this low cap to bring customers within -- the customers that were not at very profitable levels, but we were able to bring them up for customer portfolio.

And we -- and #4, we also set an acceleration of the entry of new stores and stores that want to become digital stores that want to sell online. These 4 factors together were accounted for this 2.5-fold increase [Technical Difficulty] so this entry of new customers is now fully responsible for our GMV growth of about 60% in April.

This booking of new customers is what will pave the way for our growth in the 2 or 3 next years. Because if we look back, we see that when new customers join, looking in the first 3 years, and with this very high volume of new customers entering our system, we will see much more profitability than we saw in the past.

So this growth of about 44% of the GMV that we saw in quarter 1, this was due to being in consumption with the current portfolio and the new customers will ensure the future increase in our GMV. So this is very good news for the coming years in terms of e-commerce operations. And then on the bottom left, we have the GMV growth, as I said, it was nearly 80% in April [Technical Difficulty] so to reassure our investors, we see the same trend for May.

Next chart, Chart #4, you see a very interesting performance of the BeOnline and Software as a service. And for a more mature products at the closing, we've seen some very positive performance this year with growth above 20%. We launched 2 products which are popular with them and we're seeing growth above 20% over the same period in 2019.

For the corporate e-mail portfolio today, we offer the most complete corporate e-mail portfolio in the market, also with gross values above 20%. Also the site builder, the Cloud VPS. The Cloud VPS is growing more than 50% over the next -- the last year. Most of our staff and BeOnline products, we're seeing some very interesting numbers. And this is all organic growth even considering the efforts of last year. So this means a very good performance for BeOnline and SaaS.

Another product, which is showing very strong performance is Delivery Direto. Delivery Direto, if you don't know it, is a platform -- I'm on Slide #5 now. So it is an app solution for restaurants. So restaurants are no longer dependent on marketplaces like iFood, and they don't have to pay those very high commissions.

They can have access to the data bar of the buyers, they can conduct their own marketing campaigns, offer discounts, and they can control their marketing campaigns, and we are seeing a very high number of restaurants interested in this application because they don't want to be an online market. So we have increased fourfold the entry of new restaurants per day, and this was during the second half of March.

You can see here on the right that we have -- we were already seeing very expressive growth in mid-2019. Then in March and April, we were able to increase those numbers. And we understand that this growth is here to stay.

Now moving on to Slide #6, here, we see some of the improvements that we make for the platform. Let's start with e-commerce. [Technical Difficulty] we are still with that platform with the best integration technology [Technical Difficulty]. I highlight to Mobili, Mobili is the largest furniture market in Brazil, we are now [Technical Difficulty]. We are also -- now we have the platinum certification with it.

There are only 2 partners with a platinum certification system. They wanted 2 top partners of Mercado Livre, we have the new administration with the quantity, average ticket, sales channels or inside the platform. We also have the Yapay application for iOS and Android, and this application [Technical Difficulty] financial management, accounts receivable, transaction status and so forth.

And item #5 here is the payment-linked generator. The payment-linked generator is the first step of our strategy to increase our customers' capacity to sell on social media. So with this linked, our customers can use this payment link to sell on WhatsApp and social media.

This is the first plan that we're giving our customers to help them increase their sales on social media. If you've been following our conversations, you know that we are investing a lot in social network, and we decided to do this stage by stage. So this is the first stage and our customers can already increase their revenue with this payment linked generator.

And finally, the Yapay's partnership with other e-commerce platforms. Yapay is not just for Locaweb, Yapay is a platform, it's an open platform and it is used with other e-commerce platforms. We have now integrated it with 4 more platforms that are listed here, and it is our strategy to increase the penetration of Yapay. And we've seen a lot of evolution thus far.

Next chart, now I'd like to turn over to Higor. He's our BeOnline and SaaS Director and he will talk about the performance in quarter 1.

[Higor de Araújo Franco, executive]

Good afternoon, everyone. Let me just mention a few highlights. These are some of the items we have been working on that we have been able to deliver and which were very important for our good results in quarter 1. I'm sure you remember in the last conference call, I mentioned that in quarter 4 last year, we launched some important products for BeOnline and SaaS. These products [Technical Difficulty] both the results of quarter 1 2020.

So in quarter 1, what we chose to do was to continue investing in the growth of the products. We also invested a lot and we use the ability of our products, increasing the easiness of reusing to avoid premature churn for many of our products. And of course, as we have always done, we are always paying attention to the launch, and this is also what we did in the first quarter this year.

So here, I have some highlights in the Site Builder. The site builder had an uplift of some of its feature. So we delivered more functionality to increase the ability. For example, the checkout features were reformulated to make it easier for customers to enter their products in the virtual store of our site builder.

Another thing that we did for many of our products is related with the content. We expanded the onboarding content of many of our products also to make it easier for our customers so that they can get going faster and start using our products much faster with this enhancement.

The second item here is about our VPS product. This is a launch to place right after [Technical Difficulty] and the VPS hosting product is towards customers that require superior processing capacity. We have customers that start with a very simple platform, and then they gain access as they gain reach, and they start having more transactions.

And then all of a sudden, they have to expand the functionality of the website either in terms of number of transactions or more advanced functionalities. So this is the way to do that. They can hire the VPS hosting products to have more robust operational resources to improve the robustness of their website.

And this is a product that was very popular in the first quarter. It was an absolute success, and we are now continuing to scale up the use of this product. And we have a very extensive roadmap of new functionalities coming in the next month for this product.

The other point that we focused on in the quarter was strengthening our relationship with our partners. And in this case, a very relevant fact was the partnership with Amazon Web Services. For our corporate customers or customers that require more advanced technology services, and we service these customers through our corporate structure.

And we were able, through this partnership with Amazon, we were able to reach the status of managed service provider, which means that we have proven technical capacity, proven by Amazon to provide excellent services in the migration and the maintenance technology products on the cloud.

So this is a very strong milestone for our corporate segment because it confirms our excellence and competence. And it allows us to work with much more complex projects, very relevant that and we should celebrate together.

So these were the highlights that I wanted to share with you today. Now I turn back over to Mr. Cirne.

[Fernando Biancardi Cirne, executive]

Thank you, Higor. On Slide #8, we talk a little bit about our CEO. We always mention our people during our conference calls because we understand that our operations are totally dependent on our people. And now with the pandemic, people are becoming even more important for us.

So since the start of the pandemic, we set up a corporate crisis committee comprised by the CEO and the company's executives. And we make daily assessments of what's happening with the pandemic. The focus has always been the continuity of our business.

Most of our employees, today, over 97% of our employees are working from home. We are providing allowances to support them with expenses with electricity and Internet services. We also have a mental health program called Connection Cloud, which is helping keep their mental health during these difficult times.

For people that are working outside, we are taking all the necessary measures. We have hand sanitizer available and so on and so forth. And we believe that after this period, we will be able to contribute to the acceleration of the company's digital transformation. We will be able to help companies accelerate this digital transformation. That's why we have been able, and we intend to keep up with the pace of development of our products.

And for now, we do not intend to have any cost reductions or any -- we don't have any plans in this sense based on salary reductions, reduction of staff, nothing like that. What we want is to truly help other companies in this process of digital transformation.

And in respect to the return to work, we are not in a hurry. Locaweb was actually very fast in putting people working from home and keeping their business running. We're able to continue launching products, continue launching new features. So we're not in a hurry to return to having people working at the office. And this is something that I've been telling not just our investors, but also our employees.

Now moving on to Chart #9, a little bit about M&A. So carrying on with this line or form. If we want to be a fundamental part of the digital transformation of companies in Brazil, we will continue to look for good opportunity [Technical Difficulty]. At the start of the year, in February, we had 36 companies with an MoU signed. Now we have 7 companies at the pre-MoU stage, which means that we have a lot of opportunities inside and we will continue with this strategy.

This is a focus of Locaweb with our internal development. M&A is a strategy for us and we're looking for companies with recurring revenues, companies with a high cross-sell rate with our operations, companies with consolidated products and companies with high-quality human resources that want to continue working with us after we buy the company. These are the 4 drivers that we focus on. And these 7 companies that we're now advancing towards an MoU, I can assure you that they meet these 4 criteria that I just mentioned.

Now Chart #11, now our CFO, Mr. Rafael Chamas, is going to talk about our results. Thank you.

[Rafael Chamas Alves, executive]

Thank you, Fernando. Good afternoon, everyone. Once again, we have very solid results, and I say solid because we've been able to show growth. We have 2 segments that brought significant growth not just in the quarter, but as Fernando already said, the operational data of the quarter show that we are in a comfortable position and teaming with this strategy, that is bringing on growth as we saw the booking of the stores, the GMV situation, 20% organic growth that we saw for our BeOnline and SaaS products. Everything shows that we are on the right track towards growth.

We have the capacity scale as we are going to show you. We had a 3.5 percentage points of growth in the EBITDA margin of e-commerce. So our capacity to generate cash resulting from -- is change in capital model, our operations, everything is very solid. So let's look at the numbers [Technical Difficulty] quarter 1, with a growth of 23.6% year-over-year. The 2 segments have very good growth, 21% for the year 1, clinically grew by 20%. So it is a growth factor for the company.

E-commerce, we had already seen growth of more than 40%, and now we have another 31.8% growth. One of the factors that was really helpful in this growth of the e-commerce revenue was the GMV, BRL 1.2 billion, an increase of 44.4%. And as Fernando mentioned, we have the capacity to help our customers sell more. And of this 44% GMV increase, 23% is with our partners.

And looking to April, where the growth was nearly 80%, it was more than 50% for our customers. So this ability to make our customers sell more added to the more than 250% increase in the number of new customers in April shows that we're still expecting a lot of growth, both in terms of subscriptions and also payments from now on.

And on the right side of the chart, during the roadshow, we talked about e-commerce that we were still expecting a lot of growth and margin gain. And now we see the results of quarter 1 with about 41.3% or 3.5 percentage points over the same period last year. The profit -- net income was BRL 4.4 million.

Cash generation was very robust BRL 15.8 million. And later, I'm going to explain, but this number compared with the previous year was minus BRL 3.2 million. There was a contribution of the CapEx dynamics and how it was done last year versus how it was done this year.

But particularly leverage -- the segment has been growing e-commerce and SaaS, and they are CapEx light. So we don't have to grow the CapEx to support this growth. And finally, the net cash positioned BRL 433 million. We closed the quarter with a bank debt of BRL 97.3 million and BRL 130.7 million in cash.

Slide #12. Here, we see the growth of the different segments and the drivers. We closed the fourth -- first quarter with BRL 104.5 million and an increase of 23.6%. For commerce specifically, we closed the quarter with 22.9%, which means a 31.8% increase. And the contributors, as I said, were the GMV growth of 44.4% with same store sales of more than 20%. And of course, the TPV for which only 3% growth quarter-over-quarter, but we're going to see an acceleration of that growth in that quarter.

So for TPV, the growth was 60.7%. The reason here was that we were able to accelerate [Technical Difficulty] for our core operations throughout 2019, particularly in the second half of the year. This may or our TPV growth proportionately grow more than the GMV. And for BeOnline and SaaS, 81.7%, an increase of 21.5% and that number of clients, 25.8%, more clients by nearly 366,000 active clients in our base.

Now Chart # 13. Here, I see the company's adjusted EBITDA, BRL 25.2 million, a 3.1% increase year-over-year, margin dropped from 28.9% [Technical Difficulty] I mean -- we haven't really had any loss of productivity drop in the [Technical Difficulty] is mainly linked with the temporary impact of the pandemic.

I'm going to give you details about each of the impacts. Looking at the pandemic impact, we have 2 different types. One is customer [Technical Difficulty] either through credit loss or discounts that we had to provide. Very important to mention that our corporate operations accounted for approximately 15%.

And we only had the credit loss problem in this part of the operation. In retail, with 80% -- 85% of our customers is prepaid. So we don't have the problems with credit in this portion of the business. So the credit loss is limited towards more part of the operation.

Another impact that is related with the pandemic is the currency depreciation. We have a software base and we -- some of the supplies and licenses are paid in dollars. So we had an impact of nearly BRL 1.5 million in the quarter, which is 1.3 percentage points of our margin comparatively quarter-over-quarter. But we are trying to offset this in the price, the subscriptions or in the new prices for new entrants. So we understand that these are not permanent impacts. These are temporary impacts and they don't really affect our trend of margin expansion.

When we see a resumption of the economy or when we transfer this to the prices, it still be neutralized. So the 2 other factors are the reinforcement of the cybersecurity structure we had already mentioned here is we invest that [Technical Difficulty] we still see this effect with an impact of 1.7% March. And with the post-IPO change in the administrative structure, we had to hire -- we had to set up the [Technical Difficulty] to set up a governance fee. And this had an impact of 0.7 percentage points in our margin. But with our future growth is dropped, the impact will be totally diluting.

Now Chart #14, we see the behavior by segment. Even with the high growth we have had the capacity to expand both our EBITDA margin and gross margin, 41.3% year EBITDA margin compared with 37.8%. In quarter 1 last year, the absolute growth was 43.9%, which makes performance for nearly 37%. The impacts that I just mentioned linked with pandemic, they are concentrated on BeOnline and SaaS and that's why we see this drop of 26.6% to 19.3%. But once again, these are one-off events that do not change our trend towards margin expansion.

And Slide #15, here we see the adjusted net income [Technical Difficulty], an increase of 29.7%. Here, we have the compensation on the adjusted net income. Two points here. We have the stock option plan and the expenses with the IPO, which are one-off events post-IPO and in terms of stock option plan. Before the IPO, we granted stock options to the top management company. And that purpose of retention or the purpose here was retention by the lead executives, that's why we had an increase in the provisioning here. But this is adjusted in the net because it is a noncash position [Technical Difficulty] adjustments we closed the quarter with BRL 4.4 million.

Now Chart #16. Here, we have the cash generation on the left is the cash flow and the role that had a lot of variation, but this is totally within plan which is the working capital. Some of the sources of resources in the IPO was to inject capital and payment operations. And it was in our plan to have a discount in the host, up until March, it was BRL 44.4 million of equity operations, and that's why we see this variation in the working capital. But in fact, it was just a change in the financing services.

Another highlight is the CapEx which went 4.5% to 6.2%, and this is what we have especially the annualized value for quarterly basis is the same. And this drop over last year, is that last year, we concentrated our purchases in the first quarter anticipating some of the orders that we placed in the end of the previous year. So last year, we had a lot of concentration in the first quarter.

However, I would like to stress that we have been growing with SaaS and commerce, which are CapEx light. The CapEx that we needed basically for product development. So we will see some leverage in the CapEx with the growth of these 2 segments. And on the right the variation of working capital. And due to the concentration of orders in 2019, it was negative BRL 3.2 million now it's BRL 15.8 million cash generation.

Now I'd like to turn it over to Fernando for his final comments.

[Fernando Biancardi Cirne, executive]

Well, on Slide #18, our final presentation. A little bit about the expectations. Very important to highlight that the company is very well positioned. The company is ready to go in the e-commerce and SaaS segment, the data from March and April show that we are truly ready to help in the digital transformation of the country and of our customers. We have the most complete portfolio for digitalizing small and midsized businesses.

Our company is very well capitalized. We have a very strong and consistent cash generation. We have a clear strategy, a winning strategy, very consistent, very robust in terms of M&A. This has been proven efficient in the past, and we will continue to use it from now on. We have the ability to launch products, we -- and this also increases the possibilities of cross-selling and up-selling within our different business lines.

In terms of people, our people are 1 of our most important [Technical Difficulty] we have programs to develop, retain and attract the best people, even those working from home. We will continue to focus on the development, retention and attraction of our talent.

People working from home will not change our focus in this sense. We are using our low CAC to accelerate customer acquisition. We have been able to more than double the booking of new stores and e-commerce over 4 months. The CAC is one of the reasons for that. This shows that we are able to tap this low CAC to boost the company without compromising the company's margin.

We will continue to service our customers at each marginal sale that we bring, our sales that meet the profitability criteria that we have established. And finally, we will be a strong contributor to the market digitization post-COVID pandemic. Digitization is here to stay. This is not temporary. Companies in Brazil will need to become digital and Locaweb will be a strong contributor to this process.

Thank you very much. I'd like to thank our shareholders, I'd like to thank our employees, and we'll see you next time in our next conference call. I think now we can start the Q&A.

[Operator]

[Operator Instructions] The first question is from Susana Salaru, Itaú.

[Susana Salaru, analyst]

My first question, could you please tell us more -- you talked about low exposure of e-commerce because in e-commerce, most of the customers are prepaid but incorporate they are postpaid. So can you tell us more about the prepaid portion. What is the churn looking like from the start of the year until now? This is the first question.

And the second question is about the acceleration of the acquisition of new customers and commercial costs. Fernando touched on this very briefly now in the end. So what are the new initiatives? And what do you having side for the next -- for the second half of the year. Do you think that you will enter a new CAC level?

[Fernando Biancardi Cirne, executive]

Thank you for your questions. First 1 comment, so 85% is the BeOnline and SaaS. 85% of BeOnline is for smaller customers, prepaid customers and the rest is corporate. So it's still about your question, what we saw is that for April, specifically, we started to see some delay in the payment rate.

We conducted many activities, many actions to recover this rate, and we have been able to recover our payment rates. We haven't seen any significant increase in the churn. Of course, we will keep monitoring this and we have a contingent plan to be able to be close to our customers and quickly control our base. But the focus here is not to lose any customers. So we will continue with our initiatives, but we don't see anything concerning at least not so far.

And Susana, your second question, how do we plan to acquire new customers and also about the CAC. Many of these new customers are coming without costs.

[Susana Salaru, analyst]

Sorry, I didn't understand.

[Fernando Biancardi Cirne, executive]

Many of these customers, this expressive increase in the number of new clients, all of them have a very low cost. For example, those that come from the competition. And as I said, 2 of our competitors left the market. So these are sales that are very low cost for us and also because of the pandemic.

The pandemic brought us a lot of passive sales. Passive sales, clients that already have a marketing department that already had a contact with us, and this helped us close these deals. So we didn't have to add any incremental effort to close these sales.

Also, we have incremented our marketing efforts and particularly on social networks and Google. And that's where the CAC was essential because we boosted our marketing. We did more marketing but always measuring if the marginal sales were profitable within the criteria that we find reasonable.

So I say that I increased 2.5 fold my sales. When I say 2.5 fold, we had some sales that were very cheap, very low cost. Those that came from competitors and due to the pandemic. And there were others where we had to ad marketing, investments and social media and Google. So these sales cost a little more for us.

[Susana Salaru, analyst]

You just mentioned [Technical Difficulty] this is specifically for e-commerce, right?

[Fernando Biancardi Cirne, executive]

Yes, the 2.5-fold increase was the booking of new stores for e-commerce.

[Operator]

The next question is from Vitor Tomita, Goldman Sachs.

[Vitor Tomita, analyst]

I have 2 questions. The first question is about the PBT line export was regarding corporate clients I'd like to know whether you are conservative growth in the first quarter, anticipating the financial report in the coming quarters, or can we expect more provisions in more than any quarters?

And the second question is for the commerce. What is the churn looking like in May, considering the significant addition of new stores if we consider that new stores tend to have higher churn in the short term.

[Rafael Chamas Alves, executive]

Good afternoon, Rafael. Yes, we've been conservative. We, of course, monitored some clients that could be more exposed, but in practice, we haven't really seen any problems. So of course, we're not talking about provisions right now. For now, we don't have any signs that this will happen. Things are very well under control.

In respect to the churn, in terms of control, it's very important to highlight that before accelerating our sales and this started in the end of last year, we equipped all the areas and departments in the company that are linked to the launch of the store.

So everybody related with the onboarding of new stores, we improved the structure. So everything related with the launch of the stores was equipped before we started accelerating our sales. So when I say that we increased 2.5-fold, the number of new stores in April and in May, we're seeing the same numbers we were not caught unguarded.

We were prepared to receive this larger number of orders. This is very important. There was a whole preparation work before we started accelerating our sales. That's why we don't see the churn we have been measuring the cohorts. We already have results for January, February, March and April, but for April, it's still a little early, but for the cohorts that we already have for January, February and half of March, we don't see any significant increase in the churn of these new stores. So we have been able to maintain our churn under control. And this is due to the preparation work that was done beforehand.

[Operator]

The next question comes from Pedro Fagundes, XP Investments.

[Pedro Fagundes, analyst]

I have 2 questions. The first question is along the same lines of the last one about retention. It's clear that the structure that you created, the presale structure that you created or the onboarding structure is very clear.

But can you give me more details? How can you make sure that the customers will continue to have a good experience with your platform? So what are the new initiatives related with the retention of this very high volume of new customers in the after sales or in your customer service?

And the second question, I'd like to know what are your expectations for the margin Nobody had anticipated what we're living right now. And perhaps this is an excellent opportunity for you to tap on the gas pedal and tap the momentum and have the vacuum that was left by the competitors that left the market, perhaps even invest more than you were expecting or more than what we had discussed in the part of the year? So these are my questions.

[Higor de Araújo Franco, executive]

Vitor (sic) [ Pedro ] good afternoon, this is Higor. Let me try to answer your first question because actually, it has to do with commerce, but also BeOnline and SaaS and the entire company. So we have 2 effects here. The first effect is that naturally, the clients that are joining now, they are concerned with their survival. So they naturally have this greater concern of maintaining their business online.

So many of these clients are clients that already have a high level of qualification. Customers that are now in need and they have a higher -- naturally have a higher permanence rate. So they are not just here for the short run, they're here for the long run. But this is one of the effects.

I have another thing that I want to share with you. We have a very large e-commerce program, and we are now scaling up this program for BeOnline and SaaS. For example, we have an area in the company which ensures that our clients are successful using our products.

So for example, when you look at e-commerce, this area is very well structured for commerce. And in BeOnline and SaaS, we started scaling up this area since January or February this year. So it's still at a pilot stage for some of the products, but it has already been proving efficient, and we already started to see some results in March and April.

As I said, we're still in the scaling up stage, the ramp-up stage. But in general terms, this area takes care of the customer in different areas, in different aspects. So they make sure that the customers meeting their needs when using our products. So sometimes, it's not about being successful activating email marketing, but it's about being successful in increasing your sales.

So this is a division, this is a department that has been growing Locaweb. And for these specific segments, it has been very consolidated and very mature for a longer while, but now we want to expand the work of this area with content, with online platforms, with help desk for the customers during onboarding so that they can be successful and reach the results they want with our products.

So this is in sum what we're doing in this sense. This answers your first question. The second question, what's important is that we are accelerating our sales and saying that we have increased 2.5-fold the entry of new customers. And in BeOnline and SaaS, we have a growth over 20%. These numbers are very important. And we will further accelerate the sales with no prejudice of our profitability because our CAC, as I said, our CAC is very low.

And even if we double our marketing investment for some products, we won't have any profitability loss. For example, in April or in March, we more than doubled our marketing investments, but the response was so positive that it was offset, it didn't do anything to our profitability. So we will accelerate.

And even if we greatly increase our investments in marketing, the percentage of our revenues that is spend in marketing is still too low. For example, the marketing expenses in some of our operations do not -- they do not reach, they don't get even close to 5% of the revenues.

So if we consider that we are increasing our revenues by 40%, we are in a very privileged situation. We can invest as much as we want in marketing. We can increase our marketing investments substantially with no prejudice to our profitability because in parallel to this growth, we are also improving the scales, also gaining scale in our operations. So profitability will keep growing year after year.

First, because SaaS and e-commerce are gaining share in our operations and also because we are gaining scale in our operations. So there will be no prejudice to our profitability, and we will keep accelerating our operations.

[Operator]

[Operator Instructions] The next question comes from Eric Huang from Eleven Financial.

[Eric Huang, analyst]

We want to understand what you think about the cross-sell trend. Did you see any deceleration in cross-selling? Or have you been able to maintain the numbers? What are the trends in general for cross-selling?

[Higor de Araújo Franco, executive]

Eric, this is Higor. We've seen steady numbers. We see the same trend that we had before in cross-selling with the advantage that our BeOnline base has been increasing. We have been very successful attracting BeOnline clients, and this is a bridge for cross-selling with other products. So despite our cross-sell rate being steady, with this acceleration and the acquisition of BeOnline clients, we are building the basis for a better rate in the future with the entry of these new clients, new clients for BeOnline specifically.

Our SaaS growth, well, as I said, we don't have the cross-sell rate, but what gives a better perspective was the entry of new clients. These new clients are looking for solutions to expand their communication channels with their customers. So what I can tell you is that our cross-sell rate is steady, but we have a very good prospect for the future due to this acceleration in the entry of new clients, particularly for BeOnline.

[Operator]

The next question is from Diego Aragão from Goldman Sachs.

[Diego Aragão, analyst]

I'd like to understand the trend that you see for e-commerce. For example, is there any type of seasonality? Should we expect any seasonality as we progress throughout the year? And is this seasonality relevant for us to understand the business?

And the second question is about the growth in your top line. In the past, when you presented a strong growth of 45% year-over-year, and now we see a deceleration, a major deceleration with 32% year-over-year in the first quarter.

So I'd like to know if this level of 30-something percent is a natural and expected level for this year, considering the context of the current scenario. Or is there any upside or downside that we should take into consideration right now?

[Rafael Chamas Alves, executive]

This is Rafael. We have to break down e-commerce in 2 parts. One driver is based on the GMV or TPV growth because it's not about the subscription. Our business has a fixed monthly subscription rate and then the customer can upgrade. For GMV, GMV is a proxy of the revenue growth. So these are 2 different dynamics.

Seasonality takes place when retail is growing. For example, Mother's Day is a moment when the GMV is higher, and then we tend to have a proportionally higher revenue, but nothing that changes -- suddenly changes the trend of the operations.

For example, the first quarter, we don't really have any of those events in the first quarter. But for subscription, what drives growth is the entry of new clients, the entry of new clients, and of course, the upgrades of these clients.

So what we saw particularly in late March and in April, was this massive entry of new clients, and this will contribute for the compound number of subscriptions and payment to lead to a higher growth for e-commerce. Of course, we need some time for the customer to evolve. They recently joined our customer portfolio. Usually, their average ticket growth threefold over 3 years, but with this massive entry of new customers, we should see growth year-over-year. And the component of the revenue with direct influence from GMV will grow and this will lead to a compound growth in the second half of the year, which will be much higher than what you saw in quarter 1.

[Operator]

[Operator Instructions] Since we have no further questions. I'd like to turn over to Mr. Fernando Cirne for his final consideration.

[Fernando Biancardi Cirne, executive]

I'd like to thank our shareholders, our employees, our management, the analysts who participated in this call. And I hope to see you in our next conference call 3 months from now in August. Thank you very much.

[Operator]

This concludes today's Locaweb's first quarter 2020 results conference call. Thank you very much for participating, and have a great afternoon.