Locaweb Servicos De Internet SA

BOVESPA:LWSA3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, ladies and gentlemen. Welcome to LWSA's Q2 2024 Earnings Conference. Joining us today our CEO, Fernando Cirne; and Finance and Investor Relations VP, Rafael Chamas. For the Q&A session, we will also be joined by the company's senior management team. This conference is being streamed online via Zoom webinar with simultaneous interpretation into English and will be available for replay at ri.lwsa.tech. You can download the slide deck for this presentation at the same website's Results Center under the Financial Information tab.

The figures being reported are denominated in Brazilian real and have been calculated in accordance with Brazil's standard accounting practices as per the statements, guidelines and interpretations issued by the Brazilian Accounting Pronouncements Committee.

Before moving on, we'd like to mention that the statements contained in this document regarding LWSA's business prospects, operational and financial forecasts as well as future growth estimates are merely projections, and as such, are based solely on its management's outlook for the business. This outlook relies heavily on market conditions, the performance of the Brazilian economy, the industry and international markets and therefore, may change without prior notice.

Unless otherwise stated, all variations and rounded off figures here presented have been calculated in thousands of Brazilian reais. This business performance report includes both accounting and non-accounting data such as organic and pro forma operating and financial results as well as projections based on the company's management's expectations. The nonaccounting data have not been reviewed by independent auditors.

[Operator Instructions] I will now turn over to Mr. Fernando Cirne, who will begin the presentation, followed by Mr. Rafael Chamas. Please, Mr. Cirne, you may proceed.

[Fernando Biancardi Cirne, executive]

Thank you for the intro Paulo. Welcome, everyone, to LWSA's Q2 2024 Earnings Conference. I'd like to start by thanking all our collaborators, customers, shareholders and participants. I start on Slide #3, where we have the main takeaways about our quarter. We'll be talking a little bit about the company's fundamentals, which remain very solid. Then move on to the margins and cash generation. The focus on our growth acceleration and finally, on capital allocation.

Moving on to Slide #4. When we say that our fundamentals are still solid, one very important indicator for us is that of the Ecosystem GMV. Ecosystem GMV has accelerated its growth this quarter, reaching nearly BRL 17 million, up 22.5% versus Q2 of last year. So this is a very significant figure, outperforming what we're seeing in the market. And in simple terms, we are reaching close to BRL 68 billion in a year. Depending on the source, this accounts for nearly 20% of the Brazilian e-commerce at large.

As for our subscriber base, growth is still underway. It's reached close to 190 million subscribers, up nearly 8%. And last quarter, because of the Bagy product activation, we saw a decrease, but we have taken a turn now with over 5 new store owners this quarter, up close to 3% quarter-over-quarter. So a remarkable increase and platform subscription revenue has also grown close to 22%, and that's another very important fundamental for the company.

Moving on to Slide #5. Our own store GMV, this is when the store owner has its effort and our policy is to help our store owners to grow on their own. So own store GMV has grown close to 18%, and TPV has reached close to BRL 2 billion in Q2 2024.

Moving on to Slide #6. Here, we talk about the company's margins and cash generation. All of these indicators continue to grow. So starting with gross margin, we've reached 47.6%, up 1.5 percentage points. Our gross margin has been growing consistently over the course of the last few quarters. And this is a very relevant trend. It's also part of the company's strive to improve its costs and profitability. Then we have our EBITDA margin, which increased 22% year-over-year, it's reached BRL 65.4 million, which represents an increase by 2.4 percentage points to 19.5%. So another very interesting data point.

And our net profit has increased to BRL 18.3 million, so 5.5%. And I've been saying very often that our purpose is to grow our net profit more than our EBITDA and for our EBITDA to outgrow our gross margin, and we've been able to do that. This is not to say that we will not be seeking to improve the company's revenue.

Moving on now to Slide 7. Here, we talk about the company's growth. This time, I'm going to switch things up a little bit and start on the right-hand side. So when we talk about the company's Commerce business net revenue, excluding Squid, which is being restructured, growth has increased over the past quarter. We've grown by 17.3% this business. So we are accelerating, and we want to have more growth.

So we've grown 17% excluding Squid. When we look at the consolidated net revenue, excluding Squid, up 11.2%, and our overall net revenue has gone up 7.1%. So we have been growing and we want to grow in a sustainable way. And by sustainable, I mean, we want to grow our EBITDA more than our revenue and our net profit more than our EBITDA. But we have been striving to increase the company's profitability.

Moving on now to Slide #8. Here, we talk about our efforts in terms of growth, with the state or the status of each pillar of this effort. As well as Squid where we talk about the operations trying to move it back to a profitable status. We start, number one, talking about Wake. This was the first year of Wake's operation, and it went by so fast. I think that the most important milestone here was attracting major clients in the market. This is important because with big names in our portfolio, we can more easily attract other clients. And I'll give you a few examples of those big names that we've been able to secure.

In terms of pricing, well, this is something that's ongoing. We have made some substantial strides, but there's still room for growth. We've had a few accomplishments, but I think the most important examples here are those of Bling and Melhor Envio. In cross-selling, we have also made some important efforts across business in the company. I think the most important strides made are in logistics and POS. We have also integrated our omnichannel operations, including Bling.

In financial services, the Brazilian Central Bank has approved us to act as a payment institution, we've consolidated 4 business units in LWSA fintech. So we are working under a large scope, which is very interesting. And by being able to operate as a payment institution will be able to launch new products, and I'll be talking a little bit more about that later on.

With regard to Squid, I think that the most significant share of what we had to do has been done. We have been able to streamline our operations by and large. We've also hired new people for our sales team. We've changed our commercial structure. And we can already see an uptick in revenue in Q2 versus Q1, as well as an increase in margins versus last year.

So I think there are a lot of gains to be realized, but it's a lot more about managing the operations and reaping the benefits from now on. I think that the bulk of the restructuring operation has been concluded, and we hope to have a better second half of the year than the previous period. Squid is not a source of acceleration yet, but because the worst is behind us, it now will work as a positive driver for our operations in general.

Moving on to Slide 9. Here, we talk about Wake. Wake is positioned as our third largest platform. We have Bagy as the entry platform, then Tray and Bagy were dismembered. We have Tray for some more evolved customers, and then Wake for the larger ones. And a few of the clients we've attracted over the course of this year. We have some examples of that on the screen. I will not be mentioning any of them so as not to exclude all the others, but these are very, very remarkable customers.

And we have many more other than those we have on the screen. And these names show how proficient this platform is. And these are obviously clients that will attract other clients in. It's a snowball effect, really. I think it wasn't easy to draw these clients in, but the healthy -- the health of the platform helped us and we will only move up from here. So this has been a year of great accomplishments for Wake, and we have a great path ahead of us, we believe.

Moving on to Slide #10. Here, we talk about our financial services. These will be operated from the Locaweb fintech. This is not an open market strategy that should be clear. And we have new products to launch here within our fintech.

Now how does the strategy work? Until not very long ago, we had what we called payments, which worked really well. So we would use Vindi's payment solutions to manage the receipts via platform, which is what we call cash-in. Now that we're a payment institution, we will be able to offer a digital account to support the operational management as well as all transactional needs of our customers' business. So cash-in and cash-out from the payments that were received. This service will be offered starting later this year, and we'll start the marketing -- marketing these services to our platform clients. And we'll also have our ERP platform.

Being able to offer that, we will also be able to offering a very integrated and easy seamless way our credit solutions, which will also be available later this year. We're talking about managing the entire credit operations to grow and expand the business with working capital, account limits and advance receivables.

So I think that on the payments institution side, having the license will unlock this entire process of financial services. This is not our complete road map. I would say that this is the more obvious road map that we can foresee for the near term. And once we have what we can see on the screen, we will also have the developments of that next year. So this is what would be more tangible for us throughout this year.

On to Slide 11. Here, we talk about capital allocation or stock buyback. I think it's important to have this accountability time in terms of where we are within this process. In June, we launched our third buyback program. The other 2 had already been concluded. Those were smaller parts of the program. So in June, we launched this larger program with over 30 million in shares. And until the date we had to suspend trading because of the blackout period, 65% of the program had been concluded.

Now once it's been completed, we will have 10% of all the floating stock in our possession. This goes to show how much we believe in the company's potential valuation. So this is what I had.

I will now turn it over to our CFO, Rafael Chamas. Thank you.

[Rafael Chamas Alves, executive]

Thank you, Cirne. Moving on now to Slide 13. Here, we have an overview of the company's revenue from a business by business perspective comparing to last year and to the previous quarter.

So starting with our consolidated revenue. As Fernando said, we've grown 7% year-over-year. Excluding the Squid effect which ultimately dilutes the revenue, we went up by 11%. And it's interesting that when we compare to Q1 2024, the company's consolidated revenue has gone up by 5% versus Q1 '24, which only goes to show the trend of acceleration that we are on when it comes to our results.

Looking at the Commerce business. Obviously, the results are better than our consolidated results. So we've grown by 10% year-over-year. Excluding the Squid effect, our year-over-year growth was by 17%. And when compared to Q1 2024, we've gone up by 6%, ending the period with BRL 230 million. And our BeOnline business, we've grown by 1% year-over-year and 2% quarter-over-quarter. So we ended Q2 2024 with BRL 105 million in revenue.

Moving on to Slide 11 -- Slide 14, sorry. Here we have the company's gross profit and gross margin. And it's interesting that we have grown our productivity and profitability. We show that our gross profit was by BRL 160 million, 11% higher than last year and 5% higher than last quarter, ending the period with a 47.6% gross margin, with a wider margin in our Commerce business, 52.3%, which is a progress when we compare it to last year, both in nominal terms and in net terms as well.

Moving on to Slide 15, we have an overview of the company's EBITDA. We ended Q2 with BRL 65 million, a 19.5% margin in consolidated terms. So 5 percentage points or 22% when compared to last year. One driver for the -- or this has been a driver of our product profitability gains.

In Commerce, we ended with BRL 41 million, up 5 percentage points or 53.6% growth versus Q2 2023. And the BeOnline business ended the quarter with an EBITDA margin of 24.4%, (sic) [ BRL 24.4 million], a 9% decrease over the year, but it's a purely seasonal decrease, as I'll say later. We've mentioned last quarter the trends per business. And the trend goes on when we look at it from a year-over-year perspective, this will become clear later.

And still on the BeOnline business, as I was talking about Q2, when we look at it from the first half of the year in consolidated terms, here's what we can see the trend. So we end the first 6 months of the year with 52.8% (sic) [ BRL 52.8 million ] adjusted EBITDA, up 7.7% versus the last year in nominal terms. In Commerce, it goes on, up 33% year-over-year. So BRL 73 million have been generated would take us to a consolidated result for the first half of the year to BRL 126 million, a margin of 19.3% and an excellent increase by 21.3% when compared to the first half of 2023.

Now over to Slide 17. Here, we talk about the company's net profit. We end the first -- the second quarter with BRL 18.3 million, a margin of 6.5% or BRL 42.8 million in the first half of the year. There are very interesting elements. We have our financial expenses going down. The actual tax rate is now below 25% for the company. So these are operational elements that lead us to this profitability for the company.

So moving on to Slide 18. Here, a few relevant profitability elements, I'll be showing you the final figure in the next slide. But here, just to talk about a few components that led to a very significant cash generation. On EBITDA, we've already talked about this in previous slides. Now other relevant elements, the company's use of CapEx. As you can see in the green curve, it has been optimized when we look at it as a percentage of our net revenue. We start the series with 9.3%, and we've ended this quarter at 7%. So you can see a clear trend of a reduced demand for CapEx being as we are in a business that doesn't require as much investment, which is very interesting when we think about cash generation.

Another important thing to mention, our financial expenses, which we used to fund the payments operation working capital, does not show a significant increased trend. So we had as much as BRL 49.2 million in Q3 2022. This has improved consistently, and we ended the last quarter at 0.54%, which obviously benefited the company's cash generation as we'll see in the next slide.

So moving on now to Slide 19. Here we see the company's cash flow after CapEx. In Q2 '23, that was close to 0, and we ended Q2 2024 generating BRL 28.7 million in cash, all because of the contribution of those elements we mentioned in the last slide. So better profitability, better CapEx generation and a reduced financial expense with the advance of receivables. All of that in Q2.

Moving on to Slide 20 now. Still on cash. We ended the month of June with BRL 565 million in cash. This is our net cash, but because the company does not have any debt, this is the actual cash, including the lease liability of minus BRL 73 million and net cash in IFRS terms of BRL 492 million.

It's important to say that the amount of earnouts to be paid off has decreased because in Q3 were paid last year. So BRL 552 million had been paid with Bling, Melhor Envio, Squid, CPlug and Bagy going into -- playing into that and the buyback program that Fernando mentioned, for that BRL 31 million were used to buy shares and also 60% of those purchases were made until June 30 when we had to suspend it because of the blackout.

Now moving on to Slide 21. I talk about a very important issue for us, which is the goodwill benefit we have. As I mentioned, as many of our earnouts ending, we now go into a process of streamlining the company's corporate structure, which will lead us to incorporate many of the companies we've acquired. These incorporations provide a benefit not only because of the simpler structure, but there's obviously an interesting tax benefit as well, seeing as those acquisitions add up to BRL 2.2 billion in goodwill, which generate a tax asset for us when it comes to the payment of our corporate tax. So, we now begin the incorporation at the end of August with 3 companies, Bling, Tray and Etus.

Together, these companies will generate BRL 838 million in goodwill. So a significant share of what we had to incorporate, which will unlock a tax benefit of BRL 284 million. Some of that will be realized in 2025 as we begin the incorporation with benefits over the course of the next 5 years, so from 2025 to 2029.

This is what we have planned for August, but there are obviously other incorporations that we have planned for. These will have to be very careful because they're operational in corporations. But over the course of this year and in the next few years, we have other incorporations planned for, and we'll bring all the information to the market once we have that more better structure, better saying.

So with that, I conclude my presentation, and we'll move on to our Q&A session.

[Operator]

[Operator Instructions] The first question comes from Marcelo Santos with JPMorgan.

[Marcelo Santos, analyst]

I have 2 questions. I wanted to understand a little bit better. What are the next stages of the pricing efforts that you've been making and what we could expect for the next quarters?

And also I wanted to hear about Melhor Envio. We saw a better trend this quarter than we had in previous quarters. I just wanted to understand what elements have played into that and how sustainable this increase is?

[Fernando Biancardi Cirne, executive]

This is Fernando speaking. Well, let's dive into it. When it comes to pricing, we have learned that what it takes is small and steady steps. So our efforts have not come to an end. We do not plan to end them. So what we want is to continue to work without affecting our customers. So what we've been doing, especially with Bling, Tray and Melhor Envio is to preserve virtually 100% of our subscriber base, which is a great accomplishment.

Our last move was in Bling in the month of June. What we did was to activate the marketplace use franchise touching on the subscriber base. And there will obviously be other steps and other phases. But we have been choosing a more conservative path to be able to work for a long period.

And so far, this strategy has worked. So this is the third move we've made with Bling. We've also worked with Tray before. And to your other point, before that, we do not plan to conclude that for as long as we understand there is still room for it and it won't hurt the subscriber base.

And now going to your second point about Melhor Envio. The very positive result not only in terms of revenue but also profitability for Melhor Envio, which is a very profitable operation. Well, that has to do with pricing, but there are other reasons behind it as well. And I'd like to ask Willians, who is the Manager behind that to detail what I'm talking about, but pricing is not the only reason.

[Willians Marques, executive]

Thank you, Fernando. So adding to what Fernando has already said, Melhor Envio has had a fantastic result when it comes to acceleration. And I would attribute that to 3 factors. First of all, the migration of the revenue, which was focused on Tray. And we switched that to use the Melhor Envio solution.

So there are 2 effects here. Clients shift their volume to Melhor Envio right away. So we increased the revenue from -- to Melhor Envio, that went down a little bit in Q3. But in addition to that, the clients that had before only 2 transportation companies now have 8. So we're seeing an increase both in average ticket and in orders per customer. So they now have a more complete solution. So this will be the first factor.

The second factor, Marcelo, I would say, is the continued migration that I mentioned with cross-sell. So in addition to that subscriber base that already use the logistics solution, with the increase in the number of transfer companies with the wider base in Tray, we've been able to increase the market share with the penetration of our own stores and additional efforts, especially in Bling. So the penetration of Bling has been increasing with Melhor Envio logistics. So the cross-selling effort has already been leading to better results as well.

And the third, I think it has to do with pricing as well, but it's a lot more about the service mix that we're offering. So Melhor Envio has been launching more transport companies. As I said before, there are transport companies that have come into the country, so they're new players. And we have a higher take rate in some of these areas. And we have not increased prices to the end seller.

So we've been careful to maintain those prices, but we've been able to reduce our operating costs, meaning the direct cost with transport companies. And Melhor Envio has this effect where the transport cost is what's attributed to revenue. So the less we pay for transportation, the better the revenue that we have. So we have this mediation system. So this new mix has helped us to advance our revenue as well.

So to your point, the combination of these 3 items is what explains the growth by over 30%.

[Marcelo Santos, analyst]

That was perfect Willians. I just wanted to dive into the migration of the revenue from Tray. So has all the revenue moved -- shifted to Melhor Envio? And I just wanted to understand whether that migration has been concluded?

[Willians Marques, executive]

Well, it has. This was the last quarter. And it ran at about BRL 2.5 to BRL 3 depending on the seasonal period in reais, I mean. And I can't really pinpoint it, but there was still a little bit in this quarter, but it's been concluded now. So starting in the next quarter, virtually the entire revenue with logistics is no longer with Tray, but rather with Melhor Envio. So that's where the impact came from.

[Operator]

Our next question comes from Leonardo Olmos with UBS.

[Leonardo Olmos, analyst]

We have 2 questions from our side. If you could please talk a little bit about the margin breakdown. We saw the EBITDA come very much in line with what we expected, but there was a huge chasm with what we expected from BeOnline and Commerce, with a substantial decrease in BeOnline. We -- based on what we've seen before, we expected the margin for BeOnline to be close to 25%, and it was now at 23%. So if you could talk a little bit about the margins with the BeOnline business, that would be great.

And then we would like to talk about the TPV. We saw a slowdown that was significant in TPV and a takeoff from your GMV. Is that a one-off effect? Or is that anything more structural that we should talk about? And I know that the revenue was not bad. So I just wanted -- the revenue from pay was not bad. But if you could talk about that, that would be great.

[Higor de Araújo Franco, executive]

This is Higor speaking. I will start by talking about BeOnline/SaaS and then I'll ask Rafael to add up to your margins. And overall, you also talked about the Commerce business, so he can give you an overall view. But just to talk about the BeOnline. In our last conference, I had mentioned that this is a business where seasonal shifts are very dramatic.

One example of that was last quarter where our margins were exceptionally high, really an outlier standard, but what we've been seeking in this business and what we've been done is -- what we've been doing is to go for close to 25%. So if we look from -- at a longer horizon, looking at the first 6 months of the year, we'll see that the adjusted EBITDA margin is close to -- closer to 25%. And when we compare that to the same period last year, we see wider margins up 1.6 percentage points versus the first quarter of '23.

So it's what I always tell you. This is a business where margins increase in the long run, which we have seen. But within every quarter, we may have contracts that will weigh heavier during that period, which might lead to this effect that we saw this last quarter.

I'm not seeing any change in our trend from what we've been telling you, which is we should stay at around those 25%, gradually increasing over time. But obviously, any more of a long-term perspective. In the second quarter of this year, what happened Leonardo, that I can share with you really is the one-off effect of discounts that we offered the clients from Rio Grande do Sul in an effort to retain and help that customer base. This is probably the only impact that is worth mentioning that I can share with you. But I'll let Rafael add to my answer with a more macro view.

[Rafael Chamas Alves, executive]

Well, looking at the business from a wider perspective, what we've been showing over the last 2 years is a very important way to increase the company's margins with growth. Obviously, we had a huge challenge in the past with all those acquisitions to expand our margins. That has been done. I think that we've seen significant corporate issues to continue to realize our synergies. But at the same time, the company has also grown in the more profitable businesses.

So all of these components combined, and I'll stress, not only our EBITDA, but also the company's cash generation, which is very healthy in this quarter. So the efficient use of CapEx, a better working capital use trend, all of that shows that we went through a very important time of investments, both organically and inorganically to build a robust ecosystem. We have the time where all of that is selling down in a more consolidated corporate structure. And then all synergies now begin to emerge.

The BeOnline business is one component, but every quarter, we see significant headway being made in the company, which I believe is a result of the consolidation of this entire cycle of investments that we've had in the last few months.

And now I will ask Cassius to talk a little bit about the payments operation because TPV and payments has to do with what he's been working on. Please, Cassius.

[Cassius Schymura, executive]

Hello, good morning everyone. Thank you for the question. Our payments business has now great penetration in our client base. Our goal is to always stay at around 70% when it comes to penetration, and we've been working steadily on working our solutions to our clients by also improving our -- or also -- while also improving our profitability. So the management of our working capital, the safety of our operations better operability and offering new products all play into that. And we've been very successful when it comes to that.

And also as customers or clients come in and go out, we have been able to manage stay on target when it comes to serving about 70% of our subscriber base with growing profitability, and that has been our focus.

[Leonardo Olmos, analyst]

That was great. I had also asked about the TPV.

[Rafael Chamas Alves, executive]

I can take that. So on TPV, what you're seeing is a mismatch between TPV and GMV yes, and the effect on GMV. Well, so if you run the numbers, you'll see how we've recovered our take rate which speaks to our profitability and obviously, the reduced working capital and financial expenses as well. So ultimately, what we're seeing is now a trend where we're prioritizing the more profitable operations in clients.

Historically, we have a 70% penetration of TPV, which is what you probably saw in the last quarters. At one point, that became clear in an attempt to tackle larger clients or larger operations, which ultimately compromise our working capital. And we're now coming back to what we understand is a normalized level, which is closer to 70%, which is the sweet spot when it comes to how the operations are set up currently.

So when we look at year-over-year trends, we ultimately see this mismatch between growth in TPV and GMV, but that has to be seen from a penetration perspective. So if you're attending -- if you've been attending our conferences and you know that the 70% is what's reasonable when we consider the profile of customers we tackle, especially when considering profitability. And we're seeing that both in the take rate of the operations and on the working capital and financial expenses as well.

[Leonardo Olmos, analyst]

Okay. That's perfect. So that's why we see the revenue from ERP with no slowdown, and we shouldn't expect that as either for the near term, right?

[Rafael Chamas Alves, executive]

Yes, perfect.

[Operator]

Our next question comes from Silvio Doria with Safra.

[Silvio Doria, analyst]

I have a question with regard to CapEx. Where do you believe that demand for CapEx will stabilize? We're seeing a decrease as you have stressed during the presentation, but should we expect it to continue to decrease, seeing as there are still investments to make on the payment institution side?

[Rafael Chamas Alves, executive]

This is Rafael speaking. Well, there are 2 trends underway in our operation. One part of the CapEx is focused on the others line. So all our data center logics. Now that part of the CapEx will certainly grow a lot less seeing as the dynamics of the industry are lower, and we also can use that. So that CapEx tends to grow a lot less than for the rest of the company. And the other part is more on R&D.

So payments and otherwise, those obviously tend to look more similar than the trend of revenue growth. But when we look at our cost and R&D, obviously, the trend is for that to be diluted when we think about it as a share of revenue. But CapEx and R&D are still the company's top priority, and we're very much focused on that. So the decrease is very much because of the dynamics in the web host service.

[Operator]

Our next question comes from Daniel Federle with Bradesco.

[Daniel Federle, analyst]

My first question is about the trade-offs that you're seeing between margin and growth, what the risks that you believe you're running when it comes to marketing or R&D, what are you setting aside to prioritize your profitability? I just wanted to understand what's on your mind when it comes to that.

And if you could also detail on the Squid side, you've reported a negative EBITDA by BRL 8 million, and you expect to reach breakeven by the end of the year. I just wanted to understand where we are on that path.

[Fernando Biancardi Cirne, executive]

This is Fernando. Well, it really is tempting to try to outgrow by destroying our profitability, but the premise for our Board is we want to grow more, and that's clear when we will. But always while preserving our EBITDA margin and while increasing our cash. So I always say in our conferences that we will generate more cash than EBITDA and a higher EBITDA than growth rate. So our work has been to find new avenues for growth and the new avenues are clear now. Which are cross-selling, pricing, financial services and Wake, those are clear.

And little by little, they will boost the company. We have outgrown ourselves in the first quarter. We're working to again, grow more than in Q2, but what we want is to grow in a healthy way. That's the premise under which we are working. So it's not on our plans to grow to the detriment of profitability and without generating cash. So that's where we're working. That's where we are.

And now that you've raised the issue, I'd also like to mention that, it's very important to remember that we're investing in avenues for growth that are already growing. So Melhor Envio, for example, is a mature front, but which is also still growing. And when we talk about investing in migrating in Tray or in cross-selling, those are interesting, but, let's talk about other ones which are mature already. Bling, for example, is one avenue that's going really well. We have a mature product on the market, and we have 200 engineers at Bling, working on improving the product.

LWSA has over 200 engineers working on the company's core products. So I think it's a mix of all these 4 fronts, but also while keeping what we understand is our core, which is the case of Bling, of Bagy. So there are a number of those avenues. It's also the case of CPlug, which is a huge product. So there are elements we don't mention that much, but I think we should touch on now because the improvement, the update and the increased competitiveness of what currently sustains our organic Commerce business.

So there's this other building block, which is to make our existing businesses even more competitive. Which is why without Squid, we are growing by close to 18% year-over-year. And last quarter, that grew by 6%. So that's already a healthy level of growth.

Do we want more? Obviously, but we're talking about these avenues for growth. So this is how the company will grow. It's what we mean when we talk about sustainable growth. We want to continue investing on what's already works, the 17%, 18%, which is going up. And these avenues are those we'll grow without consumer profitability.

With that, we will see higher and higher EBITDA and more and more profitability. So I think it's very clear to shareholders what we want to deliver when it comes to profitability versus EBITDA margin. Now moving over to Squid. I'll turn the conference to Gil, who owns the operation.

[Alessandro Gil, executive]

Thank you, Fernando. Just to recap, what we did in Q1 was basically we revisited the contracts that we saw as healthier. And over the second quarter, what we did was not only streamline the team, obviously, to make it adjusted to the operations, but also to focus on processes and workflows that work for the operation. So more than anything, we started looking at ways to be more efficient even when it comes to our product so that we can realize and generate more value in what we're selling.

So looking to the future, we're still optimistic. I'm monitoring this operation very closely, and it is in line with the plan that we laid out at the beginning of the year.

[Daniel Federle, analyst]

Can you open -- break down the numbers as you did in the first quarter?

[Alessandro Gil, executive]

No, we can't, unfortunately, but we did a lot better than in Q1. And also importantly, it was increasingly better month by month during Q2. So as we said, structured as the operations are, if we maintain the levels of this quarter, it will do even better. And then any level of increments to our cash will be seen and reflect -- will be reflected in our results, because we have no debt. And that's how we're going.

[Fernando Biancardi Cirne, executive]

Yes, just to stress it, we are in line with the plan that we set out.

[Operator]

Our next question comes from Thiago Kapulskis with Itau.

[Thiago Kapulskis, analyst]

Can you all hear me?

[Fernando Biancardi Cirne, executive]

Yes, we can hear you very well.

[Thiago Kapulskis, analyst]

We have 2 questions from our side, and they're a bit different. The first was we have very positive news when we heard that you were able to integrate all of those 3 companies and generate some value for shareholders. I just wanted to understand whether we can expect more movements like that with material value generation as we -- as it was the case for these 3 companies that you mentioned?

And my second question is more from a macro perspective. I just wanted to understand a little bit better what you're seeing? Maybe your growth levels are not as exciting as expected, maybe because of the macroeconomic situation. I just wanted to hear from you if you have any better prospects for the future? And if you could talk a little bit about that, that would be great.

[Fernando Biancardi Cirne, executive]

Well, I'll start with your first question. And to your point, if we should expect more, I'd say absolutely. It is part of our plan to structure our operations really well. And I always like to say that incorporations are not merely corporate act. It's about internal organization. It's about systems. It's about the workflow with suppliers and customers. So there's a very fine balance for us to really unlock value with an incorporation. So this is an important plan. I'm relying on several very competent people working with us in this restructuring work, which is why this is careful work that we have to do little by little.

We started with a very important work with Bling and companies like Tray and Etus also help us to improve the operations. This alone has unlocked 36% of the goodwill that we will have with those operations. We expect to have other important ones by the end of the year. We expect to have over 50% of the goodwill unlocked by the end of the year. And that's what we have for 2024, for the main acquisitions whose earnouts have already been paid.

Starting next year, as you heard, we have BRL 200 million payable until the end of the first half. And with that, we move on to a new cycle unlocking those benefits in 2025, but you can absolutely expect more of that later in 2024.

Thiago, with regard to growth, I think there are 3 sources. First of all, going back to my answer to Federle, we do have a guidance which is to not corrode profitability and cash generation. So if we have that as a guideline, we have been able to grow more, but we will not trade off -- we will not trade in profitability, for cash generation and EBITDA. But we have been able to do what I said.

And as I mentioned, we will not -- we're not refraining from investing on those already profitable operations such as Bling, CPlug, Melhor Envio. We are the greatest generator of products for marketplaces. Bling is a market leader. Tray is also a world leader. So we are being able to keep high levels of investments without crushing our products. And those 4 additional growth avenues, there's a lot that's been consolidated.

So, Wake has completed its first anniversary with many major clients. We are now increasing the number of agencies that will be reselling products. So we have been able to increase the penetration of Wake. And cross-selling is already a reality for the company. In the case of Melhor Envio, as was said before.

So there are some clear avenues for growth. It's just a matter of time, and that's already clear. So we're talking about strategies for how to growth. We're saying that we are pursuing these avenues. And we can also say that our Commerce is growing by 18% inside a country that's not growing by 18%, not even close to that. And also, we're not in a specific business.

Marketplace, for example, which is a business that's growing more. We're growing -- we're working in several different sectors. We work with logistics, we work with payments. We work in a very encompassing ecosystem. So we're working as a player that's in several different points of the supply chain. But ultimately, our operation also encompasses the entire market, which is a safer way when -- as an investor, when you look at that, it's safer.

So if you invest in Locaweb, you're not investing in a company that works only in one business. You're investing in logistics, in ERP, in platform, in marketplace, in lead generation. So we're a company that operates across the chain, especially with small and medium businesses.

So I believe that we have healthy growth and more than that, we're also planting a seed for the future because our customer base is growing, and we're investing in our products. So this is a bit of my perspective. I'm not saying we're happy with our growth levels right now, but we're happy with where we see the company going into the future. Thank you for your question, Thiago.

[Operator]

Our next question comes from Lucca Brendim with Bank of America.

[Lucca Brendim, analyst]

We have 2 questions here. You've already talked a little bit about your growth prospects and also the avenues that you have moving forward, but there are 2 points that you mentioned would be important for acceleration in the next few quarters. You mentioned Wake and payment or rather financial services. So if you could please talk a little bit about where you see those? And has there been any change in terms of how much those avenues will impact your results in the next few quarters? Or if maybe when it comes to financial services, we should expect that later next year, that would be great.

[Alessandro Gil, executive]

Thank you for your question. Yes, we're still sticking to the plan that we announced before. We're seeing solid growth with the new clients that are coming in. We still have a large number of stores to upload, which will increment our platform GMV very significantly. We see of several shifts in the market where everyone is trying to improve their profitability and better manage their business, and that's what we are investing on. And the new acquisitions, we're very much focused on increasing our omnichannel strategy.

We are seeing several companies that are coming in that have online stores and need to explore the entire potential that a brick-and-mortar GMV can offer. So over the next 12 months, we will see even more benefits from the investments that we made in the last few months, bearing in mind that there's some time to invest and then the time for the company to start selling. Once the store goes online, it starts to generate more revenue for us.

And now I'll turn it over to Cassius to talk about our financial services, please.

[Cassius Schymura, executive]

Hi, good morning again, everyone. Thank you for the question. Well, I think that you placed financial services results very well in your calendar. 2024 has been a very important year when it comes to restructuring. And in payments where we had very solid operations, we're working, as Rafael Chamas mentioned earlier to monetize and offer our services correctly to the correct audiences in a profitable way. And I think that we've been very successful at that as our figures show.

There are several opportunities to be seized in payments, but until the end of the year, we are working alongside the platforms to improve our clients' experience, so as -- so that our payments experience is better integrated to all our platforms. This is what we call embedded finance. What we want is to have our payment solutions inside our offerings.

In digital accounts, the Brazilian Central Bank has authorized us to become a payment institution. So in the first half of the year, we invested a lot on the regulatory side and in structuring the account and as you know, also on the safety side of the operation. So now in the second half of the year, we're at a time when we already have the license to embed that service to integrate our digital account into our platform via Bling, Tray and Vindi. And we expect to see some growth in account numbers this year. But again, we believe that acceleration will be more -- will be clearer in 2025.

And lastly, when it comes to credit, our strategy for credit is to offer credit at risk with collateralized by receivables and in the short term. So we will operate on credit, always focused on short maturity and collaterals. And those collaterals will have their domicile and our accounts with receivables that we can manage in a way. So we'll be integrating our payment service with our digital accounts and our credit offers so that we have a lot more information, collateral management and always working in a risk model with short maturity.

So our digital accounts accelerating in '25, we expect our credit operations to also thrive a little bit more clearly next year. I hope I answered your question.

[Fernando Biancardi Cirne, executive]

Well, I don't think we have any other questions. This is Fernando speaking. We are also running out of time. So I'd like to thank everyone for joining us for this conference. Once again, thank you very much. And we'll meet again in about 3 months for the earnings conference referring to the third quarter of the year. Thank you very much, and have a great day.

[Operator]

LWSA's Q2 2024 earnings conference has now concluded. Thank you to everyone for joining, and have a great day.

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