Locaweb Servicos De Internet SA

BOVESPA:LWSA3

Earnings Call Transcript 2020-Q2

[Operator]

Good afternoon, ladies and gentlemen. Welcome to Locaweb's Second Quarter 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; Mr. Higor Franco, BeOnline and Software as a Service Director; and Mr. Willians Marques, Commerce Director.

Today's live webcast and earnings release may be accessed through Locaweb's website at www.ri.locaweb.com.br. We would like to inform you that this event is recorded. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Locaweb's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events, and therefore, they 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'll turn over the conference to Mr. Fernando Cirne. Mr. Cirne, you may proceed.

[Fernando Biancardi Cirne, executive]

Good afternoon, everyone. I would like to thank our shareholders, employees and all attendees for participating.

Let's start on Slide #2. Locaweb had the best quarter of its history. As for the Commerce segment, following the accelerated digitization process of the companies initiated in January 2020, this quarter we had a continuous increase in the addition of new stores as well as a great increase in the GMV for the Commerce ecosystem. In respect to the addition of new stores, we had an increase of 274% in the number of stores compared with quarter 4 2019. In June alone, the increase was 282% in the number of stores compared with the monthly average of last year of the -- of quarter 4 last year. And in June, we've reached nearly 350% increase in the number of stores in the Commerce ecosystem.

Most importantly, the entry of new stores is not just a result of the pandemic, this is also due to Locaweb's investment and the low CAC that it has. Locaweb has been investing in new marketing efforts to accelerate the entry of new stores. So this is not just due to the pandemic, this is also an effect of the company's investment in the acquisition of new stores and also the quality of its platform because certainly, it is the leading, most complete performance for SMBs in the Brazilian market.

About the GMV, we also saw constant growth over the entire quarter in the GMV over last year. The average was 105% over last year or quarter 2 '19. And in June only, we reached 122% growth. So it's important to highlight that it's not just a 3-digit growth rate but growth that is constant month after month. And this also is not just due to the pandemic because we already saw this happening in January and February, precrisis. And our ecosystem really encourages -- I mean, from the business perspective, we really encourage our clients to sell more. Our clients are totally integrated with the marketplace, with marketing tools with ERP logistics. It's an entire ecosystem, which favors sales. So it's not just an effect of the pandemic. We have an entire environment, an entire ecosystem that favors sales. And this is something very advantageous to our clients.

Also as a consequence of the addition of new stores, our customer base increased by 60% this year only over the course of 6 months, which is fantastic performance. In the 3 first months of 2020 alone, we grew equivalently to the growth of last year, the entire year. So it's really, really very substantial. And I'm going to explain to you shortly how this converts into a guarantee of our GMV increasing over the course of the next 2 or 3 years.

Locaweb Commerce is still dominant in the market. We have very good productivity -- very good productivity and scalability. Our EBITDA margin for this segment reached 44% this quarter. If you've been following our road show, you know that this was something that we had expected, but not this fast. And this is only to support and corroborate how productive our operation is, how scalable our operation is and this is a promise that we are delivering on to our shareholders.

And finally, still about Commerce, we started in this quarter to intensify the brand marketing efforts to consolidate Tray as a leading platform for its segment in Brazil.

Now Slide #3. We have the BeOnline and Software-as-a-Service solution also performing really well. Both BeOnline and Software-as-a-Service, we are talking about an increase of 29% over quarter 2 '19. And this is in new sales, which is also very substantial. And it's not just for Software-as-a-Service, but also for BeOnline, for website hosting, which is a more consolidated market, bringing us more than 20% growth over last year. Cloud VPS, we had 3-digit investments, the Site Builder, e-mail portfolio. We're very happy to announce that we are offering the solutions in BeOnline and Software-as-a-Service with very good results.

Delivery Direto, our platform that offers applications for food services that want to have their own private solution to sell and deliver their meals to avoid being idle during the pandemic, and this will certainly be the most profitable source of clients for food services in the future, much more than brick-and-mortar stores or marketplaces -- food marketplaces. And we are selling really well. In the first quarter, we saw an increase. And in quarter 2, our sales increased fourfold. And this operation reached its historical record in terms of GMV this quarter. And we continue to develop new products and new features at the same speed that we used to have precrisis. And later on, I'm going to talk more about M&A in relation to this.

And with the reopening of stores in some cities, we did not see any slowdown in the addition of new stores and the growth of our GMV. And this is because of 3 reasons: first, because we continue to invest in marketing; because we have a very complete, a very strong platform; and because we also need to put in place brand marketing efforts. And that's why we feel very comfortable, we know that this acceleration will be something permanent. We will be able to ensure continuity. This is not just due to the pandemic.

And one interesting thing is that we're expecting this to happen because of the soundness of our company and all our efforts to retain our talent. We know that the turnover in quarter 2 this year decreased by 45% compared with the first quarter. And this is very relevant because this means that we are retaining the right people. This also reduces our costs with rehiring efforts. And we are a company made of people, we are a result of the power of our people and this decreased turnover is a result of the efforts that we have been putting into retaining our talent.

Here, you see the evolution of the addition of new stores in our Commerce operations. Very strong acceleration. We started the year already really, really well. Compared with quarter 4 '19, almost doubling the number of stores precrisis. And in June, this increase was nearly fourfold -- a nearly fourfold increase in the number of new stores. And it's important to note that we prepared for this, and that is why we are doing this with very high quality. Our new clients are high-quality clients.

And in respect to the GMV, we also see constant growth. The average in the first quarter was a 44% increase year-on-year. And in June, we reached 122%. On the right side of the chart, we see the evolution of our ecosystem. As I said, it's the best and the most complete ecosystem for SMBs in the country. And we evolved even further in this quarter in this ecosystem. We already integrated with 22 marketplaces, 13 logistics solution, 8 payment solutions and 90 ERP systems. It's important to mention that this very positive result is not just a result of the addition of new stores.

Actually, the addition of new stores is a guarantee that our GMV will keep growing. Historically, what our client spends with us is a reflection of the GMV. And this actually increases sevenfold over the course of 3 years. So here I'm multiplying by 2, 3, 4x the entry of new stores over the first 7 months of this year.

So here, we are planting the seeds for the future of Locaweb Commerce. What I mean is that if these clients have the profile of our past clients and they have been showing that they do have this profile of increasing their utilization over the years, we will have guaranteed growth of our GMV for the next 2 or 3 years. So this chart on the left, that's what it shows, this guaranteed growth of our GMV. And this is very important for our future for the net revenue of our e-commerce operation.

On Slide #5, here on the right, we have the evolution of our customer base for e-commerce. You can see here that last year, our customer base increased by 20% whereas our GMV increased by 44%, and this is a result of this ecosystem. This ecosystem is what causes our clients to make more transactions than the average. That's why the customer base grew by 20% and the GMV by 44%. And this year, the customer base has grown by 60%, 1.2 to 1.9x. So 60% growth this year and the GMV increased by 122%. This is the power of the tool that we offer, which allows our clients to sell more and more.

Now Slide #6. Here, we talk about BeOnline and Software-as-a-Service. We have some examples here. It's important to mention that we are growing by 29% compared with quarter 2 last year. Hosting portfolio, cloud VPS, Site Builder and e-mail portfolio, some highlights. We are doing really well with this acceleration in SMBs.

And on the right, we see the evolution of the tool, Delivery Direto. Delivery Direto is an application for food services. Food services can control their customer base they can perform marketing campaigns, they can manage their volume and they have better control over their customer base. We bought this operation in September last year. And in less than 1 year, we practically doubled the customer base with very strong acceleration since March this year.

Now Slide #7. We have an advanced pipeline of acquisitions. We've been conversing with 7 companies with MOUs underway. Locaweb has a very fortunate history of acquisitions. We have a very unique way of looking for companies to acquire. We look for consolidated products, products with good recurrence, subscription products. We really look into the possibility of cross-selling in our operations. So we always buy companies that can be potentiated within our operations in addition to what they present to us previously, that's why we always like to keep the founders working with us. And we're doing this really well. We should probably be hearing some very good news in the short to midterm.

Now I would like to turn over to our Commerce Director, Willians.

[Willians Cristiano Marques, executive]

Thank you, Fernando. Well, good afternoon, everyone. Thank you for being here with us today. It's a pleasure to be presenting to you talking about our Commerce operations. And I would just like to stress once again -- well, Fernando said it really well. We had a record high quarter 2 when we had already been seeing an acceleration in the growth of the number of stores since the beginning of the year. So this is a result of all the preparation that we started in November last year when we started planning to accelerate our sales. We still had the possibility of investing much more in marketing, and this is what helped us reap the benefits now.

Then the pandemic came. And of course, it had a negative impact on physical retail and it brought about this digital acceleration of the market. So our e-commerce operation, because of everything we had done previously, was already prepared for this boost because of all the previous work that we had done. And that is why we have been able to meet this peak demand of the market with digital solutions. We have also been able to scale up our operations with excellence and high quality with no impacts to our customers. Our different departments are working really well even with the surge in demand.

In March, our team started working remotely and we've been working full time remotely. In April, we went back to hiring new people to our team. So we were able to mitigate any negative effects of the remote work in our operations and we even accelerated new hires. That is why we have been able to capture all these good opportunities.

We were able to scale up our operations, our Commerce operations, with a very good margin. And we are -- at the same time, we are growing our back office and our tools and our operations to support all this growth in terms of platform and payments. And we are also able to innovate by launching new features, launching new products at the very high speed that the market is requesting from us right now, which means that we are exceeding expectations. Even with this humongous growth that we saw this quarter, we were able to make it happen.

So marketplace is a very strong strategy for us. We, today, we understand the importance of marketplace for e-commerce. We have our own team. We are the only e-commerce platform with native integration with marketplaces, and we are now reaching 22 integrations. We had -- we integrated with Leroy Merlin and a fitness center, which is seeing a lot of category -- a category which has been -- which is seeing a lot of acceleration recently, which is homebuilding and -- and in marketplace, considering this better integration with Mercado Livre.

We launched the integration with Mercado Envios Flex, which allows us to offer our stores the possibility of delivering to their clients, which improves their margin and their customer service.

And we also integrated with B2W's marketplace in logistics, which also strengthens our strategy, and customers have 1 single solution to operate all their sales and all their channels so it's a true omnichannel operations. And with this integration, they can issue all their B2W labels using this solution, this tool.

We also had an integration with Correios or the post service in Brazil in click and collect. So this allows us to enable any physical store of the postal service in Brazil for store pickup by clients, offering an additional facility for online shopping. Sometimes people do not have any way of receiving their goods at home, so they can pick up their goods at a postal service station.

We also have our partnership with Yapay, which we used for -- to help the government distribute money during the pandemic. So this allows people who receive this financial aid from the government to use the money to shop, to buy goods. And this had a very high -- a very good acceptance.

We also have our Theme Shop. Our Theme Shop is an essential tool for small shops to start selling. With a Theme Shop, they can customize their small shop for free or for a very small investment. And we now have a total of 112 themes available and we have another 7 to be launched shortly.

Now the Yapay Showcase. The Yapay Showcase is one of the greatest launches of the quarter. This is used in the Yapay application for iOS or Android, and it's a simple solution for the audience that requires immediate digital solutions. This is for small businesses or individual businesses who are suffering a great deal with the pandemic. The Yapay Showcase is a very simple environment, it's much simpler than the Yapay store. And with a few clicks on a smartphone, a small business or an entrepreneur can publish a picture of their products, they can register the region they're going to service and they can start publicizing their products in social media, WhatsApp, Facebook, Instagram. And with this, they can resume selling. So even those stores who had to close down during the pandemic, they can quickly go back to selling using the Yapay Showcase solution.

The checkout system is totally integrated with Yapay and store owners can receive their payments online with all the security they need. This is the perfect time for this solution, and it is here to help small store owners -- small shop owners continue to sell even during the crisis.

Also, we made larger investments in back office by changing our payment processing systems for bank slips and different system operations to ensure that this increase in GMV and CPV in the first 2 quarters of this year would not have any impact to our end customers. We were able to reduce the processing return times by 50%. And this improvement was mostly for food delivery for which we had an instantaneous response, a very good response for this acceleration of payment processing.

Another solution, which is a hard -- we have the big solution and we were approved by the Central Bank with all our integration layouts and our application was recently approved by the Central Bank. And now we are planning to add PIX as one of the payment methods in -- on Yapay. And not to fully replace bank slips, but to be another money transfer option available 24/7, which should be rolled out in early November as a new payment asset. This will improve our conversion and cash sales, because it's much easier to make payments than using bank slips. And this also generates cost reduction because it's totally integrated, so there are financial advantages when compared with bank slips. So this is an opportunity for a larger number of businesses with lower cost.

And now we're going to hear about BeOnline and Software-as-a-Service.

[Higor de Araújo Franco, executive]

Thank you, Willians. Good afternoon, everyone. It's a pleasure to be here. Fernando went over the excellent quarter that we had in BeOnline and SaaS. We really reached some historical milestones, and let me share with you some of our accomplishments this quarter.

I will start by highlighting one important optimization in our e-mail marketing solution. Just out of curiosity, our e-mail marketing solution during the pandemic had a very strong acceleration in our SaaS portfolio. Many companies wanted to publicize their new operating hours, their new service modalities. So they created campaigns focusing on attracting new customers. So e-mail marketing saw a very positive impact of the pandemic, and we saw this very expressively in the growth of the customer base.

And we used this time to deliver a feature that was planned since the beginning of the year, which is the optimization of contacts that are brought into the platform. So e-mail marketing is when the customer brings their contact base to the platform -- to the solution and they can run campaigns using this list of contacts. So the feature that we created was allowing customers to have better visibility about the quality of these contacts -- of this list of contacts they are creating. This allows clients to better understand the nature of this list, the profile of their contacts. And of course, this allows for an optimized use of this customer base.

We even expected to become a separate solution because many companies have this problem, the qualification of the contacts they have. So this is still incipient, and for now, it is coupled to our e-mail marketing solution, but in the future, it could even become a separate solution.

Another significant advancement that we made was integrating Delivery Direto with the Yapay payment structure. And here, we are talking about that cross-sell agenda that we have been pursuing and that we talked about in other conference calls in the past. This cross-sell agenda gained a lot of relevance in the company recently. We have a dedicated team 100% focused on expanding our cross-sell capacity. And in this quarter, in quarter 2, we were able to connect the entire Delivery Direto payment operations with Yapay.

This already allowed us to capture in this quarter a very large volume of GMV from Delivery Direto's customers inside the Yapay platform, and this rollout is still ongoing. We're still bringing more stores into Yapay. It is now at an advanced stage. We already have 700 stores making transactions within Yapay. And very soon in the future, we will complete this rollout and we should have a beautiful business case of cross-sell between not just BeOnline and SaaS, but also BeOnline and another business unit, in this case, Yapay.

Another important advancement that we had in Delivery Direto was to create an exclusive module for pizza places. We have a huge base of pizza restaurants in our customer base, but in the layout was not customized for pizza delivery. So we made an important change in the flow for this specific type of product and this is now operating. And this allowed us to attract other chains of pizza restaurants because of this new module, which is fully customized for pizza restaurants.

Another addition, which was one of the greatest focus this quarter was the integration of our PABX, our voice telephony solution, with Desk360. Desk360 is widely used by trade customers for service management. So when clients have their stores and they need to manage customer service, that's when they use Desk360. It's a SaaS solution to improve the effectiveness of customer service, monitoring, structuring, everything is based on tickets and SLAs. And the voice telephony channel -- the voice telephony solution is now added to this platform. So we have this virtual telephony solution and it is now offered to the Desk360 solution.

With this integration, customers will be able to manage their service queues. They will manage the minutes. They have the use of the platform. So this is an important addition in terms of service management now with the PABX voice telephony product of Locaweb. This is another case of expansion of our cross-sell operations, in this case, BeOnline plus Commerce.

And also, we have an important cybersecurity solution, which is the Let's Encrypt. The Let's Encrypt is a solution that allows our clients who have websites hosted by Locaweb to get better scores in search engines such as Google. Let's Encrypt assures the security of a website and position it really well in terms of qualification for search engines. Here, we already had a previous security solution, which was really very strong, but it's different from Let's Encrypt because it delivers a very broad security level.

But from the standpoint of democratization of access for SMBs so that they can have their website with the right level of security during the crisis, during the pandemic, that's why we accelerated the rollout of Let's Encrypt. Let's Encrypt is an SSL solution with fewer resources, but very effective. So now we offer this solution to our customers so that they can quickly put their websites on the web using Let's Encrypt to make it secure.

So these are the main highlights. As you heard from Fernando, we had an incredible quarter with very good deliveries. And we will keep on expanding our cross-sell capacity between our different units and our different products.

Now I'd like to turn it over to Rafael Chamas. Thank you all.

[Rafael Chamas Alves, executive]

Thank you. Good afternoon, everyone. We already heard plenty of good news, so I have a few more for you. On Slide #12, we have the 8 highlights of our numbers and I'm going to go into details later. But on the left, we have our net revenue, an increase of 25% and this is mostly based on Commerce. 69.5% was the increase in the net revenue for Commerce. Specifically, BeOnline and SaaS, also double-digit growth. The GMV nearly doubled year-over-year. So it's one of the main drivers for Commerce revenues, and we're going to talk more about that in the next slide. We also had an increase in our margin, both consolidated and Commerce, 3.7 percentage points.

The fact that we optimized cash generation in the company through our growth in noncapital-intensive segments helped our cash generation. Here, we talk about BRL 19.7 million, but in the first half of the year, it was BRL 35.5 million, which is an increase of 128.9% versus the first half of '19. And the net cash position is BRL 444 million in this period.

Now Slide #13, we look at our net revenue. On the left, we see the consolidated revenue of the group. So it grew by 24.8% totaling BRL 117.3 million. And it's important to highlight how Commerce became even more representative. We went from 20%, which was what we had last year, and this quarter, it's nearly 28% of representativeness.

Of course, this was due to the acceleration. You can see on the right side here, 69.5% more. And the representativeness tends to be larger and larger over time in the consolidated numbers of the group.

Still about Commerce, it's important to highlight that growth has been accelerating and we're really interacting with the market about the dynamics of the revenue of Commerce because part of this revenue is based on subscription, on MR. And it benefits directly from the take rate growth in payment operations. But at the same time, when there's a decrease, it's very resilient. And with this massive addition of new stores, you already saw the charts that Fernando showed you. Very impressive numbers, doubling the customer base over last year, more than 30% increase this quarter alone. So this has been allowing our recurring operations to grow.

And this is not the only one growing. You can see that the GMV also increased by 105% versus quarter 2 last year. And this, of course, is a result of the new customer base and the new additions, but also the robust growth of the sales of the customers that were already in our base. The same-store sales increase in this period was nearly 70%. So of course, there is an increase in the sales of the existing customers and the massive addition of new customers. And the new customers have been performing really well and this all has been contributing to this increase in our GMV.

It's also worth mentioning new clients and these new clients are very high quality and they are selling really well. The churn pattern in the cohort is very similar to what we saw last year. And when we combine all this, this will allow our GMV and revenue to continue expanding in the future.

And finally, the TPV was BRL 377.8 million, nearly 150% increase. And the TPV is growing faster than the GMV, and there are 2 reasons for this. We are having an increase in store sales, which is much above average, and that is why our payment revenues are growing really well. And we also have payment operation outside the e-commerce platform, which is also expanding. That's why we saw a larger acceleration of the TPV than the GMV.

And on the bottom right, we see the growth for BeOnline and SaaS, 13.2%. Fernando already said that we are having substantial sales of BeOnline and SaaS for SMBs with very robust growth rates and this has been contributing to the growth of this division.

Slide #14. Here, we highlight in the company's EBITDA the 23.8% growth against quarter 2 '19, which led us to close the quarter with BRL 32 million in EBITDA. On the bottom part of the chart, we have our consolidated numbers in first quarter. I shared with you some of the impacts that led us to have a decrease in our margin. But from quarter 1 to quarter 2, we had an expansion of 3.2 percentage points in our margin and this has a mixed effect. The Commerce operations has higher margins. And since it grew in relevance, of course, this will bring the margin up. And the BeOnline and SaaS operation also had a recovery of its margin against the first quarter of this year.

Now specifically for Commerce, the EBITDA growth was very robust, 85%, and we ended the period with BRL 14.5 million. And this margin evolution can be seen quarter after quarter and this is a result of this focus on SMBs. So 40.5% in quarter 2 '19, 41.3% in quarter 1 '20 and 44.2% in quarter 2 '20. And we're gaining margin without stopping investing in the quality of our product and this was highlighted by Willians. We are taking on all opportunities to capture new customers so our direct marketing and brand marketing efforts are really strong.

And the margin expansion in this operation does not mean at all that we are stopping our investments in our operations. And for BeOnline and SaaS, of course, there was an impact in quarter 1, which caused a drop to 19.3%, but we have recovered and we closed quarter 2 with 20.8%. And it's important to note that there was still -- a great impact of the foreign exchange depreciation, but this was compensated because of the growth of the SaaS operation, which has higher margins. And it's also important to note that in quarter 1, I talked to you about the PDD, which was an exceptional move in the first quarter. As you could read in the release, we did not have to increase the company's provisions. We have been having very good performance from the standpoint of payments and delinquency. So we didn't really need any PDD initiatives. This was a one-off effect in quarter 1 and the margin expansion continues now and it can be clearly seen in our segments.

Slide #15. This all led to a very expressive growth in the company's income. The net income closed at BRL 12 million against BRL 4.8 million in quarter 2 '19, which is very expressive. We closed the period with a margin of 10.2%.

On the right, we have the composition of the adjusted net income. And here, we see the same characteristics and concepts that we have been seeing since the IPO, and this is what we want: to always maintain this consistency in our income adjustment so that this, in the end of the day, can reflect in cash conversion of this accounting profit.

Slide #16, cash generation. On the left, we have the direct cash flow. So there are 2 points here that I highlighted in yellow. The first is the working capital. In quarter 1, we had a high consumption of the working capital in the company. And just to recap, this was because we changed the way we finance the working capital for payment operations. Before the IPO, we used to do it through discount of receivables. And with the IPO funds, we injected capital in Yapay and this led to a greater growth in assets and liabilities. So that's why it showed this consumption of working capital. I had told you that this was a one-off effect. And I think it is clear now because in quarter 2, we see cash generation. And this is the pattern that you're going to see from now on in our quarter-by-quarter comparisons.

The second point to highlight here is the CapEx. We have an immobilized fixed CapEx, which is very much focused on the BeOnline operation. So we say that the leverage of the business is from cash generation and from the robust growth that we have in the segments that are non-CapEx dependent. The quarter shows a growth of BRL 3.6 million to BRL 7.4 million. However, this is not an indication for the entire year. The first quarter of '19 was nearly 70% of all the CapEx invested that year. That was because of market condition and the FX depreciation, that's why we thought it was best to make the investments at the time.

But if we look at the CapEx over a 6-month period, we spent BRL 21.8 million so far in software development, which is already a decrease of 37.5% versus the first half of '19. And if we look at the entire CapEx for 2019, which was BRL 47.7 million, so far, we have invested BRL 21.8 million, which is less than half of that, which shows that our growth this year will not require the same level of CapEx expansion.

And when you look at the cash generation chart, which is a very important target for us, the adjusted EBITDA minus the CapEx, so from BRL 15.5 million in the first half of '19 to BRL 35.5 million this year. Of course, this shows an increased EBITDA, but also this CapEx effect that I just mentioned.

And finally, moving on to Slide #17. Here is the company's cash position. We closed at BRL 535.7 million. These resources will massively be used for acquisitions because the injection that was required was done right after the IPO. We have a gross debt of 91.1 -- BRL 91.6 million. We don't have derivatives in the company that are not for protection against the debt that we have. So our debt are from 3844, 4131 operations which are necessarily hedged at the time we contract them.

So it's BRL 123.7 million, but the assets of BRL 32 million, so the banking debt of the company is BRL 91.6 million, which leads us to a net cash position of BRL 44.1 million (sic) [ BRL 444.1 million ]. We also have the IFRS 16 effect leading us to a final of BRL 371 million in June 2020.

And now I turn over back to Fernando for his final considerations. Thank you.

[Fernando Biancardi Cirne, executive]

It's very important to highlight that Locaweb did a very good preparation work for this year. We knew this was going to be a big year for digitization. We had good services, good products and that's why we have such great results for quarter 2 this year.

And these good results will continue. We will continue to deliver good products, and we will continue offering the market and delivering good products throughout the year. The company is prepared for this new market reality, which should continue this year.

COVID-19 was -- had an impact on all our segments. We are very well positioned and we are very relevant in 2 segments, which is e-commerce -- which are e-commerce and SaaS. We have the most complete portfolio and the fastest evolving portfolio in Brazil.

The company is capitalized with the funds from the IPO. The company has strong cash generation, which makes our shareholders very comfortable.

We will continue to accelerate our sales irrespective of the pandemic. One example of that is that we will continue to invest on our low CAC to accelerate the acquisition of new customers with highly profitable additional efforts. This is what we have been doing since the beginning of the year and we will continue to do in this quarter and as long as we think it is worth doing.

We will consolidate Tray as a leading platform for SMBs because we have the best quality product in the market. We have scalability and we are now putting all our efforts in brand marketing. And we will consolidate our leadership in the market with the Tray e-commerce platform.

We have a clear strategy and a robust M&A pipeline.

And with everything I said in terms of the preparation work that's being done by the company, this will all contribute to supporting the company's growth in the coming months. And we have programs to develop, retain and attract the best talents. And this has been proven in the decreased turnover of the company, and we will continue to see good results in this sense in the future.

We had a great start this year and we had everything -- and we have everything we need to continue to deliver good results from now on. I would like to thank our shareholders, our employees and all attendees. And now we will open the floor for questions. Thank you.

[Operator]

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

[Susana Salaru, analyst]

Congratulations for the results. My question is about the do initiative of investing more to continue to accelerate the company's growth. I think that with this, we will expect a higher pressure on the margin because of this effort. So this is my first question.

And the second question is about the profile of customer that you are attracting to your customer base. Our perception is that this is not the same profile that you used to have in your base, that you're changing the profile of your customers. So what is the churn of this new client profile? And how are you dealing with this?

[Fernando Biancardi Cirne, executive]

Thank you, Susana. When we talk about investing more in CAC, this is work that's been done since the beginning of the year. Our sales cost is very small in relation to our revenue. So even if we increase our investment in marketing, the margin is increasing. So we still have space to increase our investments without any effect in terms of margin reduction. So this is what will happen. We have room to invest more in CAC without any deterioration of our margin. What I'm saying is that we will control our CAC until the point in which our marginal margin becomes negative and that will be no problem.

And also because of the COVID pandemic, we continue to have a large volume of sales with a low cost -- a low sales cost. These are passive sales with no marketing requirements and this allows us to increase our revenues with no marketing. That's why we're not really under pressure to reduce our marketing investments. And Willians will tell you more about the profile of new entrants. I think Willians is the right person to answer that question.

[Willians Cristiano Marques, executive]

In respect to these new clients, what we're seeing is that it is somewhat different this profile. Now we have more clients with physical operations because of the limitations of operations of brick-and-mortar and physical stores. But this is an advantage for us, because these clients are more mature in retail. And although they are not really familiar with e-commerce operations, they're not having a hard time adapting because they know retail very well.

So what we are seeing is an acceleration in the time to launch of their e-stores and an acceleration in the GMV curve when we look at the cohort of new entrants as of March. So March, April, May, the GMV has been growing faster. And the churn, as Rafael already said, even when we look at the cohort of new entrants, it is on average so far and we believe that it will continue to be this way. The churn -- the new clients have a real need of starting their online operations, so they are doing everything much faster.

We invested a lot in usability in a friendly layout for e-stores to facilitate their operation. And we are reinforcing 2 areas. One is a new area that we created, which is customer success. We used to do that for medium-sized and large clients in the past, but now we are reinforcing our team. When we see that a new store -- a new customer is not selling, they can actively help them sell. And our customer service team is also holding live videos and online sessions practically on a daily basis with groups of starter clients to answer questions and give tips about how to use the platform.

So we have intensified our onboarding efforts and our interaction with new clients. And we've been having a very good surprise because these are customers that are more mature. They have been in retail for a longer time.

[Operator]

The next question is from Diego Aragão, Goldman Sachs.

[Diego Aragão, analyst]

Congratulations for the very strong results. My question is about this very competitive environment. What is your take on this new proposal to try to accelerate the growth of your e-commerce platform? And how do you see the current situation of the market, the competition between the main platforms, the main players? So how is the competition in this segment? This is my first question.

[Fernando Biancardi Cirne, executive]

No. We haven't really seen any change in our market. In our SMB market, specifically, when we talk about e-commerce, the ecosystem is still the same. There was no change. The movements that we've been seeing in the market do not really affect SMBs and we continue to be very well positioned.

Our platform is still a leading product and most complete product in terms of integration. We do offer the most complete system. And now we're even reinforcing -- we have an interesting position because we have the right scale -- we have scalability. We have productivity. We have a very interesting margin. And now in order to reinforce this positioning, we are investing in brand marketing. That's why we are in a very distinguished position and we have the best quality product for SMBs.

So we are -- and this doesn't mean that we are in a comfort zone. No, we will continue to work towards making this product even more solid. But what we want with these brand marketing efforts is to make it really clear that we are the best platform in this segment. And this is all supported by the M&A process, which is advancing and I'm sure will further strengthen this ecosystem. So we are in a very comfortable position and a very sound position in this segment of SMBs and e-commerce.

[Diego Aragão, analyst]

And my second question is about Commerce. If you look at the profile of new entrants and your customer base or how your existing customers are performing, what is the outlook in terms of growth in the next 2 or 3 years? We know that this involves many factors that are shaping the industry and even forcing the industry to face a new reality, so I understand that it is more like a brainstorming work here. But how do you compare this current base with the previous base? And what is the performance of the older customers in your e-commerce operations?

[Fernando Biancardi Cirne, executive]

Diego, there are 2 interesting points here. As Willians said, we have a very high-quality customer base. Of course, that it's too early to say that it is higher quality than the previous customer base, but it's at least as good as. And this makes me very comfortable to say that we will see the same trend in terms of GMV increase than we had with the previous base. As good as at least, and that ensures that sevenfold increase in our GMV over the course of 3 years. So if we had been growing at 40% per year, can you imagine what's going to happen now that we had a 70% increase in our customer base over 1 year? So we're very optimistic in this sense.

And also, as Willians said, we are adding new processes to the company to support these new customers. They already come with a very good quality and we are supporting them either with content or onboarding interactions or support. So we are further supporting these clients, so I'm sure that there will be no churn. So these customers will be successful, and they will increase our GMV even faster than the previous customers did. That's why we're very comfortable about the future prospects of growth of the company in e-commerce.

[Operator]

Now I turn back over to Mr. Fernando Cirne for his final remarks.

[Fernando Biancardi Cirne, executive]

So once again, I'd like to thank our shareholders, our employees and everybody present. I would like to acknowledge each and every one of you who helped us build these very strong results for quarter 2 this year. And I'm sure that we'll continue to deliver good results and grow throughout the rest of the year.

Thank you very much, and I'll see you in our next conference call 3 months from now. Thank you. Have a great day.

[Operator]

Locaweb's quarter 2 results conference call is now closed. Thank you very much for attending. Have a great afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]