Locaweb Servicos De Internet SA

BOVESPA:LWSA3

Earnings Call Transcript 2022-Q2

[Operator]

Good afternoon, ladies and gentlemen. Welcome to Locaweb's Quarter 2, 2022 Earnings Conference Call. Today, we have here with us Mr. Fernando Cirne, CEO; Mr. Rafael Chamas, CFO and Investors Relations Director; Higor Franco, BeOnline and SaaS Director; Willians Marques, Commerce, Retail, Director; and Alessandro Gil, the Commerce and SaaS Enterprise Director. This meeting is also being simultaneously broadcast over the Internet via webcast and can be accessed at www.ri.locaweb.com.br by clicking on the link Webcast 2T '22. The slide presentation is also available for download on the webcast platform. This conference call is also being simultaneously translated into English for the convenience of our international investors.

Before proceeding, let me mention that any forward-looking statements made during this conference call relative to the company's business prospects, projections and operating and financial targets are based on beliefs and assumptions of the company's management as well as information currently available to the company. These forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions, and they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can affect the future performance of local web and may lead to results that differ materially from those expressed in such forward-looking statements. [Operator Instructions]

Now I would like to turn the conference over to Mr. Fernando Cirne to start his presentation. Mr. Cirne, you may proceed.

[Fernando Biancardi Cirne, executive]

Hello, everyone. Welcome to Locaweb's Quarter 2 2022 Earnings Conference Call.

Before I start, I'd like to thank our employees, our shareholders and the analysts who contributed for our quarter 2 results.

On Slide #3, I will start by saying that we continue to be very strongly aligned with the company's budget plan. And this is very strong in the company's culture to really comply with the plans that we established in the end of last year. We have been successful doing this. Our recurring e-commerce customer base, which includes tray, Bagy, Dooca and Bling continued to show consistent growth in quarter 2, reaching 143,400 subscriptions. And when I say consistent growth, it's continuous growth with no setbacks. This is very important considering the strong reopening of the economy. And this is also a result of the constant addition of new customers, which continued for the fourth consecutive quarter. Our net revenue was up 53.3% year-over-year and 13.6% quarter-over-quarter. This is an important increase quarter-over-quarter.

The Commerce segment already accounts for 61% of the Group's net revenue and this is actually accelerating in quarter 2, when compared with quarter 2 '22, we had a 45% increase in our net revenue. When we compare quarter 1 year-over-year, the increase was 44% and quarter 4, 42% year-over-year.

Now as for our margin, which is something that we are constantly seeking to improve. Our organic margins have been growing for 4 consecutive -- they are stable. Our EBITDA margins are stable for 4 consecutive quarters now. And the EBITDA margin of the acquired companies also have been evolving when we compare quarter 4 last year with -- compared with quarter 4 last year and quarter 1 '22. Our ecosystem generated BRL 12 billion in GMV.

On Slide #4, you see that we do have constant growth of our e-commerce subscribers. We have the chart here from quarter 1 2020, when we had our IPO, we had nearly 50,000 subscribers, and we have been linearly increasing this number, reaching nearly 145,000 subscribers.

And this is due to what we see on Slide #5. This is due to the consistent addition of new subscribers. We had lower addition, the base 100 from quarter 1 2020, then we grew during the pandemic. We were able to digitalize a large number of companies during the COVID pandemic and our purpose was not to decrease this rhythm. So we wanted to avoid any slowdown. And actually, it was the opposite. We saw an acceleration. And now with all our investments in R&D and onboarding, we have been able to maintain our levels of new additions. And this is actually a great achievement considering that we have been able to add new customers at very strong levels and also have margin increases since then. And this is an important achievement for the company.

On Slide #6, here we have a Rule of 40. This is a way to show the performance of high-growth company because it shows our capacity to be profitable. It is the sum of the percentage net revenue year-over-year and the company's EBITDA margin. So here, we have the Rule of 40 for the consolidated Locaweb operation, which is BeOnline and commerce. We had an increase of 33%, reaching 49% and which is a very good indicator.

Now moving on to Slide #7. Here, we have the Rule of 40 for commerce only. And the growth of our net revenue was 45%, and our adjusted EBITDA margin was -- was up 36%. So we reached a Rule of 40 of 81%. And this shows the strong capacity that Locaweb has to grow and deliver good margins. And this is very interesting.

On the next slide, we have the GMV of our operation. Our GMV year-over-year for the commerce platforms, as you can see on the left, was up 10%. And when we stratified this with our own stores, our own stores grew 15.3% year-over-year. And why we stores grow more than the general stores. First, because we have been buying companies that provide services for lead generation to our customers. For example, Squid, Social Miner, All iN and so on. And second, we have a new learning operation that empowers our store owners to use marketing in their favor. And finally, because we have been offering integrations that will help our customers sell more, for example, TikTok, Instagram, Facebook and others. And this always proof that we are empowering our merchants to take control of their business. So this difference from 15 to 10 is proof of that. And on the right, we have the total ecosystem GMV, which is the sum of the GMV of our own platforms added to our ERP, GMV and also our marketplace integrators. So it increased by 32%, and this is another interesting indicator because it's -- when we consider that the market has been growing at much more modest rate. So it's interesting to see that BRL 12.1 billion was the GMV for this quarter. This is a strong indicator. And if we multiply it by 4, a very simple calculation, we will get to BRL 48.5 billion, nearly BRL 50 billion throughout the year. This means that Locaweb has a very important share in the Brazilian e-commerce GMV.

Now on Slide #9, we have information -- more information about our GMV. Locaweb discloses GMV and monitors its GMV. It is an important indicator for us. But it is true that our net revenue has been growing at much higher rates than the market GMV and our own GMV and why? First, because we have a strong concentration of recurring revenue. And our recurring customer base has been growing very strongly, as you could see in the previous slides. Second, our revenue model does not depend exclusively on the GMV. Just to give you an example, we have the Tray and Bling platforms where customers pay a fixed monthly fee according to the volume of resources they have access to, and this volume of resources can increase and scale up and the value will increase according to the utilization. Also, our platforms grow faster than those of the competition. The fourth point here is that in businesses that have their monetization links directly to the GMV, for example, Vindi or payments, we are outgrowing the market. And we are adding value through internal synergies. And finally, we have been making some very good acquisitions that are delivering high growth, which is the case of Melhor Envio. The combination of all these factors is what causes the growth of our net revenue to detached from the growth of our GMV and that of the market.

On Slide #10, now as for our acquired companies, we always share with you the performance of the 3 largest acquired companies. But overall, all the companies we bought have been delivering good results and results according to the business plan. So growth acceleration and achieving profitability within 2 to 4 years. This is the business plan that we established for all the companies we acquired. It's a detailed business plan with the revenue line, customer acquisition, churn and synergies, and they are meeting their plans. The 3 largest -- the 3 major acquisitions Bling, Melhor Envio and Squid. Bling and Melhor Envio together account for 50% of our revenue, and they had a combined growth of 73% year-over-year. Squid also underwent a huge acceleration in quarter 2 '22 compared with quarter 2 '21, an increase of 59%.

Some indicators for these operations on Slide 11. We see that the GMV of Bling Invoices on and off-line grew by 51%, reaching BRL 25 billion in quarter 2 this year. And the number of tax generated in Melhor Envio reached BRL 5.1 billion in quarter 2. Melhor Envio's net revenue was also boosted by a commercial adjustment that we made, which was very successful and caused the net revenue to grow more than 70% quarter-over-quarter. Now a little bit about Vindi. Our TPV increased by 60.8% quarter-over-quarter, reaching BRL 1.15 billion. And of course, this is somehow attached to the GMV, but it contributes to our results, which are much above the GMV. 60% growth is very expressive. And another important point about the TPV is the contribution of Locaweb's internal businesses. So the share of our -- the share of the TPV that's been generated by our own synergies. And in this quarter, this reached 28%. And it's important to see how this is growing. In the previous quarter, it was 23.9% and in the quarter 4 last year, 18.8%. So our synergies are constantly growing. And we are going to talk more about synergies, but we have different ways to talk about our synergies, and this is one of the ways. And you're going to hear from our product team, our directors, our business directors, and you're going to hear the practical aspects of these synergies. But this is a numerical way to verify how synergies are being captured in the group.

And now I turn the conference over to our CFO, and he is going to go into more details about our financial results of the quarter. Thank you very much, and I'll be back before the end for my closing remarks.

[Rafael Chamas Alves, executive]

Thank you, Fernando. It's a pleasure to be here again presenting the results and the highlights for quarter 2. Just recapping some of the things Fernando already said. We had very interesting growth, 53% in the quarter for the consolidated net revenue of the company. We closed the period at BRL 282.5 million. The e-commerce revenue grew 105% quarter over -- year-over-year. But when we look at organic growth only, it grew by 55%. Our platform subscriber base reached 143,400 subscribers, increasing by 39%. Our monetization model, as you heard from Fernando, is not GMV dependent. So this is a great indicator for us. And our transactional indicators also went really well, 61% increase in our TPV, reaching BRL 1.1 billion, which is a very important monetization factor of the company. The GMV of our ecosystem reached BRL 12 billion, which is very significant in the commerce environment in Brazil. Our adjusted net income was BRL 39 million. We are progressing quarter-over-quarter in our ability to generate profit, and we closed quarter 2 with BRL 1.4 billion in cash.

On Slide #15, here, we have our net revenue. As I said, we had a 53.3% increase reaching BRL 282.5 million. The 2 operations with more than BRL 100 million in revenue. And the quarter for commerce, it was BRL 173.6 million, a 104% increase and BeOnline with more than BRL 100 million, BRL 108.9 million, a 9.5% increase year-over-year. So here, we highlight how we monetize the commerce net revenue. We have 2 main ways to monetize this business. First, the recurring revenue, which is our platform subscription revenue. So it was a 103% increase for our subscription revenue and also our capacity to expect extract value from our GMV from our ecosystem, which increased by 106%, reaching BRL 101.3 million. So there are 2 monetization possibilities. There are 2 monetization methods showing important growth this quarter.

On the next slide, we show the company's capacity to recover its EBITDA margin. So the chart that we show every quarter here, we break down the way we monetize the business in 3 main lines. In blue, we have organic commerce; in red, we have organic BeOnline and SaaS; and in yellow, we have our acquired companies. We have yet another quarter with very consistent margins, which have been happening since 2021, and that's what we told the market that this will be our purpose. So we closed with 36.1%. We closed the quarter with 36.1%. The same stability can be seen in BeOnline and SaaS at 17.4%. And our acquisitions, which we always say, for example, in our business plans, we always say that quarter after quarter, we want better monetization of the businesses without losing growth but gaining operational scale and bringing better and better profitability so that we can reach a maturity level within 3 years after the acquisition. In quarter 4 '21, we have our latest acquisition until quarter 2 this year. So minus 12% was minus 9% in quarter 1, and now we closed at minus 6%. Here, we have our adjusted EBITDA. We closed the quarter with some stability compared to last year, 41.3% to 40.4%, a little less coming from commerce, 22.6% and BeOnline with a 17.8% share with a slight drop due to our acquisitions.

On Slide 19, here, we see the adjusted net income. So our adjusted net income reached BRL 38.7 million, a 63% increase year-over-year. And when we look at our net income, we go from BRL 3.6 million in quarter 2 last year to BRL 13.3 million, a 270% increase. And talking about the nature of these adjustments, there are the adjustments that we always have to consider. So they are noncash adjustments such as the recognition of expenses from derivatives in our by action plan or other expenses that are attached to the company's M&A plan. Also, CPA, BRL 9 million and the adjustment to present value of acquisition earn out of BRL 18.2 million. And in quarter 2, we also paid some earn-outs. And of course, these payments, we provisioned for them, but we will never have a provision that is exactly that equals the earnout value exactly. So that's why we make these adjustments in our net income so that we can understand what's happening with the business without these oscillations. So we have here a minus BRL 2 million for earn-out adjustment. So this means that we had a positive impact on our net income when compared to our provisions. So with the same dynamics, I can remove this from my adjusted net income.

Now looking at the company's cash flow. In quarter 2, we had an operational cash generation of BRL 58.7 million. We have BRL 25 million in CapEx for the period. So the post-CapEx cash generation is BRL 33.7 million. Here, we also have a payment of BRL 139.2 million that we had due to the payment of earn-outs or in the case of KingHost, we had the definitive payment, and you have the details on the right. So today, the provision balance in quarter 2 for future earnout is BRL 811.8 million. And due to these payments, we had a reduction in the net cash position of the company of BRL 106.5 million in the period.

Now looking into more details on Slide 21, we closed quarter 2 at BRL 1.4 billion in cash. The company practically no longer have debt. So it's the same net cash after loans. And on the IFRS and with all the discounts, we have 1,347 -- BRL 1.347 billion in cash. And considering our earn-out commitment, we have BRL 811 million, so our net cash is BRL 536 million in the period.

And now we're going to hear from our other directors, Willians, Higor and Alessandro talking about the highlights relative to the integration of our acquired companies and how our M&As are leveraging our offer to the market.

[Willians Marques, executive]

Thank you. Rafael. I'd like to thank our investors and clients and all the employees who have been helping us show these very good results.

On Slide 24, here, we have our commerce ecosystem. So here, we have the 3 dimensions that will support the small stores, be successful online. So starting with our unified solution on the left, as you heard in previous meetings, we always have novelties, and we are strengthening more and more our ecosystem through the solutions that we incorporated after our M&A. So here, we have several integrations with other companies in the group always focusing on providing our clients in a unified and integrated way all the tools they need to sell online. From logistics with Melhor Envio, to marketing and sales which is one of the previous highlights here, and I'm going to show you more about what we are doing to help our clients sell more. So omnichannel integration of the OctaDesk, Vindi payments, financial services with Credisfera and ERP management with Bling. This all brings our SMB customers, an integrated tool, very powerful to help them manage their business. On the right, it's very important to stress that although Tray deliver solutions to the group, it also has the elasticity to allow other companies in the Brazilian ecosystem to connect with our merchants. And that's why we are reinforcing this layer of partnerships in our ecosystem. We recently launched an application store. We have our open APIs.

We launched our services store, allowing agencies to offer creative services and marketing online -- and online marketing and media services to our clients. And our third dimension in order to support this unified solution is education. Education is a pillar that has always been one of our top focuses. We have always invested in online events. And now we're going back to in-person events. We have the commerce school, which is our free of cost online portal with million of accesses from our customers and also non-customers. We use Whatsapp, Facebook and other portals to strengthen our education initiatives. We have our customer success team that helps customers understand how to better optimize and grow their business. And we have the on boarding area, which received a lot of technology investments and is now another differentiator of our platform, and focusing on marketing and sales.

Well, within our platform, marketing and sales is the area that we have been investing the most in the past quarters to help our customers sell more. So both in terms of technology investments and also content in our education portals. Also the integration with marketplaces and Tray is the only platform that has more than marketplace -- more than 30 marketplace, is natively integrated, and its dashboard we are also investing in integration. We had the first integration in Latin America with the new Facebook KPIs also Whatsapp integration. We were also the first in Latin America with the official API. So the first commerce platform that has integration with their official API, Instagram, TikTok, drop shipping, which is a very important functionality for our customers to sell with no stock, conversational commerce to help our customers convert sales within messaging platforms.

Also, we help our customers find the right digital influencers through speed. And we are very happy to bring this as an integration that can really change the lives of our SMB customers. And I'm going to show you in my next slide, the incredible results that we have with the integration of Google PMax. And we are also advancing and adding artificial intelligence and customization to our SMB customers to the products that we are developing with All iN.

On Slide 23, we have the highlights in onboarding. Here, you can see -- well, I know it's too small. But here you see the onboarding journey of our customers. when they first joined a platform. And in the past quarters, we made a lot of innovations in this journey. And today, we have personalized onboarding for each customer. The customer is setting up their first online store. Our own boarding system will bring specific activities to the customer that will help them open their first store. If the customer already has an All iN store is migrating to Tray. We have activities on the onboarding dashboard that will help the customer migrate. So we have activities focusing on product migration, account transfer marketplace. So the onboarding system adapts to the moment the customer is going through. We also recently launched the turbo button, a very innovative capability that combines everything that Tray has from integration with marketplaces, integration with Big Tax and also content tools that will help our customers sell more through a button that will help customers boost their store. And recently, we also launched a mini player, which is a contextualized help.

So on the page, the customer is visiting. They have access to materials and online content to be able to make the most out of this platform. So we there, for example, registering products, and they have questions about how to register products, they can access a short video to better understand how they can do this in the best way possible. So they're learning as they use the platform.

On the next slide, Slide 25. Here, we have all the tools with which we already have integration. And the focus here is to show you that this is already operating within our customer dashboard all integrated with the same game. They don't have to change the screens. They don't have to use another user name and password. So we have the Samurai drop shipping. We have a credit solution with Credisfera and operating for all customers. With Vindi, we have an innovation in our payment area, a plugin that allows customers to -- in addition to operating all their payments, they can also use features that they actually had to visit Vindi's website to use. So document verification or withdrawals.

And today, all the payment functions are also integrated into our single dashboard. We also have integration with All iN, this which involves a lot of artificial intelligence and personalization. And we have 2 new integrations with the BeOnline area, the OctaDesk chat and CPlug invoice issuer, and you're going to hear more about them from Higor.

Now on the next slide, here, we have these new integrations with the big tax for traffic generation so to generate demand for our customers. Although today, we have the best integrations with marketplaces. As I mentioned, Tray is the only platform with more than 30 native integrations. We are also investing greatly in the past few quarters in creating the best integrations with the big tax with the companies that today concentrate most of the public who shop online. So Facebook, TikTok, Instagram and Google. Facebook and TikTok are integrations that allow our customers to display their products and to run campaigns for social media customers and Google PMax is a new Google technology, very innovative, and I'm going to give you more information about it because I think that, here with Google PMax, we found a way to further accelerate our -- the businesses of our SMB retail customers. Who had a lot of difficulties running smart campaigns and now it's much easier for them.

So on the next slide, I show the integration between Tray and Google PMax. Google PMax is a new Google technology that concentrates all the campaigns that can be run in Google, either search campaigns or display campaigns, which is advertising and content websites or Google Shopping campaigns, which is when customers are searching for product and also the more segmented campaigns that Google offer. So Google created an artificial intelligence engine to help SMB customers not have to worry about which campaign will bring them the highest return. The PMax technology with the integration with Tray allows customers to make all their products available. And Google will use its intelligence to reach the highest conversion rate possible, the highest return possible. The great highlight here is that the integration between Tray and Google was the first one with the PMax technology. So this is already a case in Google.

We're very happy with the results that we are seeing. And with this innovation that we're bringing to our SMB customers who until now didn't really have the means to pay for an agency or have someone focusing on running the best campaigns.

And on the next slide, I'm very happy to share with you the first numbers of the PMax integration. So we have more than 9,500 merchant accounts using the integrated Google account through the Tray integration. And among these 9,500, 6,000 of these accounts were created specifically through the Tray dashboard. So these customers had never run ads in Google and they created their first Google ads account through the Tray dashboard and through this integration. And these campaigns that our customers today can run from the Tray dashboard have generated BRL 115 million in GMV generated by Google ad campaigns at Tray. So this is specific of these campaigns.

And the most striking data here is that the PMax campaigns that use the Tray Google integration are performing over 40% conventional campaigns. So the ROAS has reached up to 4.3%, whereas conventional campaigns reached close to 3%. So this means that we are delivering to our SMB customers a very strategic tool. And 36% of the accounts had their first Google Shopping campaign, filings of this integration with Tray. This number is very relevant because these were clients that didn't use to use Google for their media campaigns before the change of integration.

Now I'm going to hand it over to Higor Franco, and is going to talk about the SaaS solutions, which are also adding a lot to our commerce ecosystem.

[Higor de Araújo Franco, executive]

Thank you, Willians. Good afternoon, everyone. Here, I'll share with you some more details about the integrations that Willians already announced as part of the presentation, the SaaS integrations that take place within the commerce customer journey.

On Slide #30, on the left of this slide, we see the integration between Tray and OctaDesk, which contemplates everything related with conversational commerce and all the channel management and interaction with customers, all available now within the Tray dashboard transparently through what we call the Tray chat. So the Tray customer now can use different solutions in the market for customer service, but natively within the Tray panel through OctaDesk, we created a Tray chat function. So with a few clicks, the customer can interact with their customers on Instagram, Facebook Messenger, WhatsApp or using the chat bot on their e-commerce page within Tray. So via OctaDesk in a fully white label process, the Tray customer now has access or has the conditions to connect their entire product catalog from their e-commerce platform to the interactions with their end customers. So the e-commerce customer service operator can or consultant can interact with the end customer using the products registered within Tray. This is what the market today is calling. And actually through this feature. We are offering this to all Tray customers. This is what we call conversational commerce. So we are consolidating a very important offer to create customers via OctaDesk and this is already operating and available.

And on the right of this slide, we have another important offer of our SaaS portfolio that is part of the Tray customer journey, which is our invoice issuer of CPlug. The CPlug Invoice issuer now integrated into the Tray customer journey or the Tray panel. And through this functionality, Tray customers will now be able to issue invoices using the invoice module of ConnectPlug within the Tray panel. This was an important gap because Tray customers have to integrate with external solutions, other ERPs or external solutions to be able to issue invoices within Tray. And now all Tray customers with a few clicks and some very easy settings, very low touch, they can have the option to issue their invoices within the Tray platform.

Thank you very much. I stop here, and now I hand it over to Alessandro Gil.

[Alessandro Gil, executive]

Thank you, Higor. I want to thank our investors and everyone attending this call. It is my first time in our earnings results call. And I would just like to note that we have a new area now. Commerce enterprise which includes companies that we already had in our portfolio Tray Corp, All iN, Squid, Ideris, Samurai and now our latest acquisition that was announced last Friday, Síntese. And what we want here is to capture synergies and service larger customers.

The first topic here is very important for us. We created 2 new areas. One is partnerships and channels. which will take care of relationship management with our strategic partners and also the agencies that will implement our solutions. We have -- we brought an executive from the market, Adriana Mesquita. She worked in Meta, Adyen and I'm sure she's going to do incredible work in Locaweb in partnerships and channels. Now to take charge of sales and relationship. We brought Roberto Ameriot. She has worked in IBM, Linx and Oracle. And Roberto comes with the purpose of helping us look at customers with this one single view. And tap all the synergies that we have between our products.

Another very important point is the acquisition of Síntese that we announced last Friday. Síntese will join our ecosystem, and we're going to capture the most synergies we can't really imagine a common solution detached from our brick-and-mortar stores operation, and this is their specialty. The specialty of Síntese Soluções to bring retail customers to have to give retail customers access to omnichannel solutions. We are also working on consolidating all our enterprise brands. This process is underway.

And in the coming quarters, we will perhaps be able to announce our new brand, which will encompass all the companies of the group and tell this new storytelling and this new position that we will announce to the market.

Now a little bit about the synergies, which are very important. The largest -- the larger our customers, the more we can capture these synergies, and the more important they become. So Ideris becomes now the official integration driver of marketplaces at Tray Corp. Ideris was an acquisition that we made a little over 1 year ago. And today is one of the main integrators in Mercado Livre. And Tray Corp already had its marketplace integration module. So we actually eliminated the duplicity here, and we are now promoting Ideris as the official integration driver for marketplaces. We are also boosting our efforts with 2 Samurai products: one is sellers, the seller center and Tray Corp already has a marketplace feature in and Samurai's marketplace, Samurai seller center is very important to help us maximize our results. So we're going to put a lot of energy in the developing and enhancing of the seller center. Also, Samurai already had an integration bus integrating Locaweb products with other market platforms, other ERPs and other tools. And we also believe that this is a very strategic product that we want to have in our portfolio. And Samurai is putting increased energy into consolidating this product from now on. We are also consolidating all the engineering products of Ideris and Samurai in the Tray Corp team. This way, we'll be able to unify our product road maps and tactile synergies between these 3 products.

And finally, all in just launched a CDP or a Customer Data Platform, so we are changing our positioning dramatically. So we are no longer an e-mail marketing firing platform. We are now a platform that offers much more to our customers because we can have unified and individual view of each of them.

And now I'd like to hand it back over to Fernando for his final remarks.

[Fernando Biancardi Cirne, executive]

I'd like to thank Alessandro Gil, Willians and Higor. As you could see, in 1 quarter, we had a lot of deliveries in terms of products and also our integrations are advancing really fast. So just some final remarks on my side.

On Slide #34, I think the most important takeaway from this presentation is that the company is very committed to its budget plan. This is the culture of the company, Locaweb, and we will keep striving to deliver and we will keep striving to deliver according to the plan by the end of the year. And our company is always generating growth, but our growth is always focused on profitability. Our acquisition plan was very assertive we bought the right companies at the right time, and they are bringing a lot of contributions to the company's growth.

We also have monetization that is not so GMV dependent. So this means that we are delivering growth. We are monitoring the GMV, but we are able to deliver growth well beyond the GMV, both our own GMV and the market GMV. Our ecosystem model has been really assertive. It brings us higher profitability, good retention of clients. It helps us expand our addressable market, and it also adds new sales channels through the new companies. And finally, we have been showing high integration capacity given that most of our acquisitions were completed less than 18 months ago.

So I stop here. I'd like to thank -- once again, thank everyone that contributed to these very good results, and now we can open the floor for questions.

[Operator]

[Operator Instructions] Our first question is from Bernardo Guttman sell-side analyst of XP.

[Bernardo Guttman, analyst]

Can you hear me? Actually, I have 2 questions. The first one is about your consolidated margin. I think this was the main highlight of the quarter. You showed an important recovery. So can you give us more information about the second half? Should you continue to see -- will you continue to see a ramp-up of the synergy capture? And also if your CAC is contributing to your margin recovery.

And the second question is about your BeOnline and SaaS performance. I want to understand your seasonality, particularly for your organic margin and the trends looking forward.

[Frederico Mendes, analyst]

Can you hear me? I'm sorry. We had a small technical glitch. Thank you, Bernardo, for your question. So I'm going to answer and then we're going to give you more details about BeOnline. So it's always important to stress that our consolidated margin dynamics has 3 major vectors with different dynamics. We have our organic margins from commerce and BeOnline SaaS and we have the margin from our acquisitions. So for a few quarters now, we have seen good margin consistency both in commerce and also organic BeOnline and SaaS.

And when I say consistency, of course, there are some quarterly oscillations, but we have some clear trends. And the recovery of our consolidated margin will be through 2 vectors: the commerce segment, which is growing more and the revenue numbers make it really clear. So you have a mix effect that is contributing and will contribute continue to contribute. It's a mathematical effect.

And we have a second relevant point, which is acquisitions that are gaining scale. We always make it really clear that our acquisition plans. Initially, they require investments. And of course, there's a margin -- there's a logic because the margin will recover as the companies grow and gain scale. This is what you have been seeing in the past quarters and the business plans are being met. So these are effects that will have a positive effect on the consolidated margins of the company.

And your second point was about the CAC. I think we have CAC dynamics that is similar to our additions continue at a very high speed. We have been bringing a consistent customer base, very similar numbers to what we had in the past few quarters. Also the organic customer base growth and without having to increase the CAC. But we are -- have a CAC dynamics that is similar to what we are seeing in the past quarters. And now Higor is going to talk about BeOnline.

[Higor de Araújo Franco, executive]

Thank you for your question, Bernardo. We understand that the BeOnline margin will always gravitate at about 20%. The trend is that this margin will oscillate discretely but it will always be close to 20%. And these oscillations quarter-after-quarter are totally natural due to the nature of the products. BeOnline depends much more on the IT infrastructure, third-party software and cybersecurity than commerce. We have cloud computing products and technology services that are more dependent on this type of cost. And of course, these costs will oscillate due to seasonal aspects. We have contracts being renewed in that quarter. or a negotiation cycle, which is a little more consolidated in the quarter, for example, with Microsoft and other large vendors, that's why we see more fluctuation in our margins. But our expectation is to have these margins much closer to 20% looking forward.

[Operator]

The next question is from Marcelo Santos sell-side analyst of JPMorgan.

[Marcelo Santos, analyst]

About Squid, I want to know what is Squid's capacity to work with the smaller customers? And can you please talk about the acceleration we saw in Squid this quarter?

And the second question is about Melhor Envio. Can you give more details about the change in the commercial model that you mentioned?

[Fernando Biancardi Cirne, executive]

Marcelo, I'm going to start answering then Willians will answer your second question about Melhor Envio. Thank you for your question. In quarter 2, we had an important resumption of larger advertisers. We have an important strategic process here to consolidate the product so that it can also meet the needs of smaller customers. we have an initiative that we are expanding in the past 2 months to service commerce platforms focusing on performance and not just branding. So we have the high expectations for the growth of this market in the coming periods.

[Willians Marques, executive]

And thank you for your question about Melhor Envio. But just to recap, the business model of Melhor Envio is to establish contracts with the carriers, wholesale contracts with the carriers and then pass on to merchants a higher discount than they would have compared with the conventional fee. So we have a spread that is kept by Melhor Envio view. So Melhor Envio business is the spread between the cost of the carrier and what it passes on to the customer. So the change in the commercial model that we mentioned was that we created a new technology to be able to segment this pricing because until then the spread and the discount was the same regardless of the size of the customer. So now we are in view can segment the customers and smaller customers with a lower shipping volume will now have a higher price. So the discount will be lower and the spread that Melhor Envio keeps and then the recognized revenue increases.

And on the other end customers that didn't used to use Melhor Envio because the discount was not so good. Larger customers can have higher discounts. And although what we keep is lower -- is less in these cases, we are seeing new customers starting to use Melhor Envio with a better discount. And now we're working with clusters and in some of these clusters had an increase in the margin that we recognized as revenue, which is the spread.

[Marcelo Santos, analyst]

Perfect. Just a follow-up question about Squid. What is the expected time frame until you see a larger share of smaller customers considering your strategic initiatives.

[Fernando Biancardi Cirne, executive]

Yes. Right now, we are having the MVP of the product. Of course, we are making the adjustments because the markets are totally different. So we don't really have a specific time frame that we can give you. But in our next earnings call, we will be able to give you a better estimate of where we are heading.

[Operator]

The next question is from Fred Mendes sell-side analyst at Bank of America.

[Frederico Mendes, analyst]

I have 2 questions. The first question, I want to understand a little bit more the dynamics of Vindi. We saw the financial impact of BRL 11 million and the delta of BRL 7 million for -- compared with quarter 1. And when I look at the Vindi revenue, it was BRL 9 billion with a delta of BRL 1 million only quarter-over-quarter. So I want to understand what is the dynamics of the Vindi product and the accounting impact that you mentioned?

And the second question, actually, I want to test the hypothesis that has to do with Bernardo's first question. When you acquire a company, of course, after you buy a company, you make the investment. And after you finish paying the investment, the margin will be sometimes even lower than before you bought it because then you can scale up, right? So when I look at Bling plus Melhor Envio accounting for 50% of the revenue of the acquired companies and growing 20% quarter-over-quarter. This -- it looks to me that you are in an escalation phase. So you should see an acceleration in terms of improvement of your margin in the second half of the year, considering the base points that you had in the first half versus the end of last year. So I want to test and see if this hypothesis makes sense.

[Rafael Chamas Alves, executive]

Fred, this is Rafael. Your audio was picking up a little bit, but I heard 2 questions. One about the product dynamics for Vindi and the second one about scale gain in acquisitions. So let's start with Vindi. What is the dynamics of the Vindi operation. In Vindi, we have had this operation for a long time now as Yapay. It was always an operation that had reasonable stability. It had to take rate dynamics, working capital and acquiring cost. When we bought Vindi, one of the strategic factors in terms of synergy was to plan a lot of TPV to the group and be able to transaction this TPV within our solutions, always following a logic of offering technology solutions and leveraging the GMV that these technologies allow us to capture with our sub acquisitions and we showed some charts that showed that more than 1/4 of the TPV or it comes from the capture of synergies. And of course, these products have different dynamics when we compare purely with digital of the acquisition.

For example, for the foods and beverages market. We have different dynamics. The take rate follows a different logic, so we can have a lower acquisition cost, but you also have a lower take rate. So at the end of the day, these are very synergic operations, very profitable because at the end of the day, we don't have the acquisition cost. But they are no longer just purely the capture of acquisition or sub acquisition as a payment intermediator for the commerce platform, but a potentiation of the TPV throughout the entire ecosystem of the company.

And your second question, you're right, growth will bring us scale. And I don't want to go over the second half itself, but I go back to that concept. Our recoveries or margin accelerations in all our acquisitions, they are dependent on growth and scale gain as a consequence. The cost basis for practically all our acquisitions, except for 1 or 2 businesses that have intermediation is through the hiring of people. Its cost with personnel and technology and this cost you end up diluting when you grow. So what you can expect is that we will keep going for profitability and margin gains as we gain scale.

[Frederico Mendes, analyst]

Perfect. Rafael, it's very clear. But I have one follow-up question. When I look at the commerce margin. We saw some acceleration in the growth and increase in your margin. So I want to understand is that more or less the current structural margin because when I look at the history, you've had numbers of nearly 40%, but this had a strong correlation with COVID, with the positive impact you had during the COVID pandemic codependent. So when you had the numbers of over 40%. Of course, your cost will be the same and the growth will help the margin? Or did you have any effects of cost reduction during the COVID pandemic that helped you expand your margin?

[Fernando Biancardi Cirne, executive]

Fred, this is Fernando. During the COVID pandemic, what happened afterwards was that we wanted to maintain the addition of new stores, thus maintaining the consistent growth of our recurring subscription base for commerce. So what we did was increase our investment in customer acquisition and new product development. And in this call, you see that we spent a lot of time, both Higor and Willians spent a lot of time showing how much we're delivering in terms of products. And this is already a consequence of these higher investments that we had starting in quarter 3 last year. So it's not that we cut costs during COVID. What we did was we increased the investment in products starting in quarter 3 last year. So we increased our investments in marketing, which led to this decrease of 42% to 35% in commerce. So we are working now closer to 35%. And and probably for next year, the end of next year or this month, we reached 36% and these are natural oscillations that we see.

As you heard from Higor, natural oscillations that we have for BeOnline and SaaS, 34%, 35%, 36%, and the same thing for BeOnline and SaaS. We don't even say there was an increase when it goes from 35% to 36%. we don't even highlight that increase. So we're working with 35%. And by the end of this year and beginning of next year with the operational leverage, we expect this to start showing some margin increase.

So it wasn't really a cost reduction during COVID. but actually, it was the marketing investments and product investments that we made. And this is actually a huge merit because with the reopening of the economy, we keep selling at the same levels we were selling during COVID, even with the reopening of the economy, our commerce store base is growing linearly and strongly. So this was the -- actually -- there was this -- we -- our margin went from 42% to 35%, but we did this in exchange for constant growth.

[Operator]

Our next question is from [ Luma Pies ] sell-side analyst at UBS.

[Lucas Chaves, analyst]

This is Lucas Chaves from UBS. My question is about the competitiveness of your commerce division in the second half of the year now that you're implementing new initiatives. Are you expecting increased competitiveness due to that or increased competition due to that? And how are you positioning the company for that Willians, can you answer that one?

[Willians Marques, executive]

Yes. Thank you, Lucas, for your question. We have been making all these investments, particularly with the integration so that the Tray platform can more and more become the top offer in the market. And I think that this is something that this is a target that we are achieving, maintaining the share of acquisition of new customers, maintaining the same cap. So we expect that in the second half, we will continue to see the same levels and then continue to grow in acquisitions. And this doesn't really affect the customer acquisition because the platforms that compete with Tray didn't really undergo any changes.

So we see that our offer is becoming stronger and stronger. And there's no other platform in the market that has free of cost integration with marketplaces. And in Tray, we have all the M&A integrations that were already completed. This was very well consolidated and integrated into one single dashboard. So I believe that we will continue to see this very good performance, and we don't read see and increased competition. We are actually distancing ourselves from our competitors because our product is a distinct product and has a lot of differentiators in the market.

[Lucas Chaves, analyst]

And I have one last question. In BeOnline and SaaS, you've defined your margins really well, but how do you see your customer base looking forward? Do you see stability? This has to do with the first question. So do you see stability at about BRL 398 million.

[Higor de Araújo Franco, executive]

This is Higor. We think that the customer -- the BeOnline customer base in quarter 2 had an effect of [indiscernible] because there was a mix change of paying customers for free of cost solutions. And in be online, we only show a snapshot of the paying subscribers, right? So that drop is due to that migration, which started in the beginning of the year and intensified now in quarter 2. So we understand that this movement, customers moving to fee cost solutions is slowing down now. So we already start to see slower speed in this migration compared with a few months ago.

So we expect to find a point of stability, the SaaS products are growing at a very interesting pace in line with that of the market. So there should be an offset, and we should be some balancing of the customer base in the coming months.

[Operator]

The next question is from Thiago Kapulskis sell-side analyst of Banco Itaú.

[Thiago Kapulskis, analyst]

Can you hear me? I have 2 questions. My first question is about Performance Max. I covered Google for a while. So I'm very aware of the product and the feedback that I got was that this product was very appealing for small and medium businesses and was a good competitor for Meta. So I have 2 questions here. Do you think this product is truly competitive for this type of merchant. And do you think that this could be a relevant driver in the top of your funnel to bring new customers and new revenues. And also, do you have any partnerships with Meta in this sense considering that the target is about the same.

[Willians Marques, executive]

Thiago, this is Willians. Let me answer your first 2 questions about PMax. Yes, we have been seeing very satisfactory results and receiving positive feedback from our customers who say they're very happy. And this is mainly because our integration optimizes the investment. So their products leave their inventory with an integrated method in real time, and that it stops being published in the Google network. And also the development and innovation that Google is offering, prioritizing higher conversion advertisements. So in addition to the campaign aspect, there's also recognition of the results. So for every sale, we'll let Google know that a product was sold and Google will understand what is the best customer profile for that store and optimize campaigns.

And what can this bring in the long term? It is certainly a great differentiator for small merchants because larger merchants can have an agency or a team to make these manual adjustments when we talk about small merchants, they don't have the means to do this type of management and many of them were even campaigning on Google.

So this is indeed a great differentiator. We don't have any revenue directly attached to the results of the campaign. And this has no cost for our customers. But we have 2 growth drivers. First, increased acquisition. The platform becomes more attractive because of the tools it offers and we expect this can help us consolidate it as the main platform in the market. We already are the main one in GMV. So we want to become stronger and stronger and also an improvement in the churn and maturity of our customers when they start to sell more. So we have 2 indirect effects that can improve our revenues.

And about Meta, we do have a strong partnership with Meta in many of their products. For example, Facebook, we also have integration with the latest APIs, Facebook ads, Facebook shopping and also Instagram. And recently, we announced an integration with the official WhatsApp API, and this was a partnership with the all-in team. They developed this integration, and they brought to our SMB customers, the integration with all in that only our large customers had access previously. So we have this integration of intelligence behavior. And I'm going to give you an example, which is an idle news campaign if the customer doesn't visit the store for 30 days. A day we can activate this customer through WhatsApp also abandoned shopping card campaigns. If the customer leaves products in their shopping cards, we can, in 30 minutes, talk to them on WhatsApp and invite them to buy, offer them a discount using templates that have been homologated by Meta. So today, we have a strong partnership with Meta, Google and all the big techs, and this will further increase our sales in our own stores. And of course, this will lead to increased revenues, like I mentioned, in the case of PMax.

[Thiago Kapulskis, analyst]

Very clear. And one last question, a very brief question about the CDPs. I was in the U.S. earlier this year, and I saw a lot of companies trying to enter the CDP business. There were some problems with the cookies, but I want to just better understand the rationale. If the rationale is to have a solution so that the company can have their own data maybe a data repository that will bring more synergy gains between customers. And if you have this larger data repository if you can think of data analytics strategies in the future.

[Alessandro Gil, executive]

This is Alessandro. Thank you for your question. We are always. The tool is already prepared to receive 3P data but we are not ready to enable this type of integration because right now, we're very focused on data from the retailers themselves, not just online data, but also offline. So today, CDPs already prepared to receive buying behavior, shopping behavior information for virtual and for commerce and also for brick-and-mortar stores, and it will return you behavior analysis, consumer behavior analysis based on that. in the future, we should advance with those features that you mentioned, analytics and also other types of data.

[Operator]

With no further questions, this question-and-answer session is now closed. And now I hand the conference back over to Mr. Fernando Cirne for his final comments.

[Fernando Biancardi Cirne, executive]

I'd like to thank our shareholders, our employees, our customers, sell side by side and everyone who helped us achieve these very expressive results in quarter 2 and now see you again in 3 months to announce the results of quarter 3. Thank you. Have a great day.

[Operator]

Locaweb's Quarter 2 2022 earnings conference call is now over. Thank you all for attending. Have a great day.

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