Locaweb Servicos De Internet SA

BOVESPA:LWSA3

Earnings Call Transcript 2022-Q3

[Unknown Executive]

Hello, and welcome to Locaweb's Q3 2022 Earnings Conference. I'm [ Graciela Silvia ] and joining me today are Fernando Cirne and Rafael Chamas, Financial Director and IRO. This event is being broadcast simultaneously online via webcast, which may be accessed at ri.locaweb.com.br. The slide deck will also be available on the website. The information are available in BRL and were prepared according to the accounting standard adopted in Brazil based on the statements, guidances and interpretations of the Accounting Statements Committee.

Before we begin, we'd like to state that any statement made during this conference relating to Locaweb company's business prospects, projections, operational and financial targets are based on beliefs and assumptions of its management as well as currently available information.

Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions in that they refer to future events and therefore, rely on circumstances that may or may not materialize. Investors must understand that general economic conditions, the state of the industry and other operating factors may affect the company's future performance and lead to results which are materially different than those expressed in such statements.

[Operator Instructions]

Let me now turn it over to Fernando Cirne, who will begin the presentation.

[Fernando Biancardi Cirne, executive]

Hello, everyone, and welcome to our Q3 2022 earnings conference. I'd like to start by saying thank you to our shareholders, analysts and employees, who helped us achieve the results that we will be showing you today.

So moving on to Slide 3. We have the highlights of this quarter. We are still in line with the company's budget result. And I'd like to state once again that this is very important to us. This is a target for the group something we've established at the end of 2021. And now coming to the end of 2022, we are still keeping up with those targets. Second, our customer base and e-commerce, including Tray, Bagy, Dooca and Bling, continued to grow consistently in Q3 with 151,000 subscribers.

This is important because it's the fifth consecutive quarter that we record consistent addition of new clients. So we have been able to be consistent and really resilient in that sense. And this has to do with our marketing efforts, with the investments we've made in our products and the company's willingness to not lose momentum as it invests in acquiring new customers. This has to do with the results that we're showing right now, which is our net revenue.

Our net revenue went up 45.5% between Q3 2022 and Q3 2021. So a very significant result. And when we talk about e-commerce, our net revenue has grown 87% quarter-over-quarter. And this is such a strong result that went actually year-over-year. And when we compare that to the previous quarter, we come to 14%.

Another important thing is we are building an ecosystem based business that is less and less reliant on GMV, so much so that we see, in some cases, GMV growing by a small share and ours growing by the tune of 45%, whereas our commerce is growing by 87%. This is a huge accomplishment, a huge achievement for the group. Because it's outgrowing the average for the group, Commerce is already accounting for 65% of the company's net revenue. Bearing in mind that when we had our IPO, it accounted for about 28% and is now 65% of the group's net revenue. So 2 major achievements.

With regard to our margins, our organic EBITDA margins with organic improvements, both in SaaS and Commerce proved better this quarter and the margins for the companies we've acquired are also growing consistently since Q4 '21, Q1 2022 and now into Q3 2022. And lastly, our ecosystem has reported a BRL 13 billion GMV, meaning we or better saying our role in the Brazilian ecosystem is increasingly more representative in terms of volume.

Moving on to Slide 4. Here, as I said, we have our volume of paying e-commerce subscribers. So subscribers for Tray, Bling, Dooca and Bagy coming up to 400,000 unique customers. This is consistent growth, which shows that the company's business model is really solid. And a new indicator that we are reporting to the market now, which is the number of unique clients for the Commerce operations overall, not only just our platforms. So this quarter, we came to 401,000 unique clients, which includes other operations such as Melhor Envio, Octadesk and so on and so forth. So 401,000 clients, a very, very significant volume as well considering the Brazilian ecosystem.

And then as I said, this increase in our Commerce subscriber base has grown consistently because the increase in subscriber numbers has seen no decline, as you can see since Q1 2020, which would be our base equal 100. We really took care so that there would be no decrease since the economy was reopened after the pandemic and that's what we've done. This is a huge accomplishment for the company. And as I said, this has to do with all of our marketing efforts and investments in our products.

Here, we have our consolidated net revenue. The group's net revenue came to BRL 304 million, with 65% of that net revenue coming from Commerce. As I said, we used to have 22% in 2020, and now we have 65%, so we expect to end the year with over two-thirds of the company's revenue coming from Commerce.

Here, we have the Rule of 40. This is a technique to measure high-growing companies. This is the year-over-year growth added to the EBITDA margin. We continue to see that in Locaweb. This would be the organic consolidated operations. So year-over-year, we would see a 24% growth added to the adjusted EBITDA margin of 30%, coming to 54%.

Another way of looking at that would be to look at our organic Commerce operation alone. So we have a 60% increase in net revenue and an adjusted EBITDA margin of 37.9%, taking us to 98% Rule of 40, showing that Locaweb is still growing at an accelerated pace.

Now a little bit about GMV. As I said before, our growth is not really linked to our GMV, but it is also a KPI that we keep track of. So we saw an increase in our platform's GMV by 10%, Y-o-Y whereas our platform's GMV increased by 31.5%. Now that difference is precisely because we have encouraged our clients to invest more and more in their own marketing strategies.

We have created a faster interactions on social media, such as Instagram, Facebook, TikTok, WhatsApp. We have been teaching our clients to be -- take charge of their own marketing actions. So the platform's GMV tend to outgrow that of our platforms. So very significant when we look at our ecosystem's GMV. Here, we're talking about the GMV and our marketplace transactions. And marketplace in directions, which is significant growth when we compare that to other indicators across the market.

Now a little bit of our acquired companies looking at the 2 biggest ones. First, we have Bling. The GMV for invoices also grew by 38.4% year-over-year, going from BRL 19.2 billion to BRL 26.6 billion. So material growth year-over-year. And in the case of Melhor Envio, we look at the number of tax that we issued from 4.8% to 5.2%. But when we look at net revenue, we saw a 70% increase because of the change in our sales model in this business.

Now another acquired company that we combined with our payment model, we are talking about a TPV increase by 70.4% from BRL 747 million to million to $1.273 billion. So growth of over 70% in 1 year. That has been in part because of the synergies we found within the group and the use of these payment terms by companies which are part of the group. That has gone in Q2 2022 from BRL 327 million to BRL 369 million. So we are still investing in realizing synergies by using the group's payment method across the companies in our ecosystem.

Now how do we see the margins of our acquired companies moving forward. So the companies were talking about Bling, Melhor Envio, Squid, Vindi, and Octadesk. These companies margins will continue to increase because of their operating leverage. The smaller companies, how do we see them growing their margin. I'd like to give you a few examples.

Bagy and Dooca, 2 other e-commerce platforms that we are working are already in a merger process. This will naturally allow them to grow their margins as well. Ideris and Samurai, 2 e-commerce platforms that are part of the Tray Corp are actually being incorporated into the Tray Corp platform, and will also share the same structure. So we're talking about savings that will allow them to grow their margins as well.

And lastly, the entire Commerce Enterprise structure will be launching a unique brand and all operations within that Commerce Enterprise structure will have a unique marketing structure and also unique single channel. These are gains and synergies that will allow for the margins of our acquired companies to continue growing over the course of 2023. This is just to give you a north star because we understand that margins will continue to grow over the course of next year, and this is what the company is working on.

Now a little bit about integration. This has been something that we're working very diligently on. Integration has moved forward in a very fast-paced way. And we have structure that's dedicated to that to develop that integration. This is not something that our business units are willing into being there's actually a department devoted to that. We have KPIs to keep track of each of these integrations.

And we have several examples of these integrations and unique customer journeys within our ecosystem, which is why on the 18th of last month, we had our first Investor Day, which showed in practice how this journey and how these integrations are working. We had over 3 hours of video showing from the final client's perspective, from the store owners' perspective, where those integrations or how those integrations affect them, so the product buyer, how does he see those integrations?

And how store owners can make their lives easier by making the most of our ecosystem structure. I recommend you to go to our RI website and download those 3 hours of video. This is a long -- these are long videos, but if you watch all of it, you will not be able to say that there's no benefit to that. So I'd like to invite all of you to take a look.

And lastly, ESG, Locaweb company. I think there's a lot to unpack here. We are a great place to work, a certified great place to work since 2014. We are certified by FIA as an incredible place to work since 2021. We have been acknowledged by Você S/A Magazine as one of the best companies to work for 6 years consecutively. And we have a social character at Locaweb when we talk about helping companies to grow and prosper through technology, we are talking about how companies can be founded and grow and developed by using technology. That's in our DNA. We were named the third company in terms of ESG in the TMT ranking in Latin America among over 100 companies. This was a huge achievement for us.

And to reinforce our commitment with sustainable development, we've launched our Social and Environmental Responsibility Policy. In 2021, we began to consolidate our ESG indicators across Locaweb Company and on October 18, during our Investor Day, we launched our ESG report, and I also recommend that everyone download that, which shows in greater detail every item that we listed on this slide. Again, I think it's worth the read. And it shows how Locaweb or how committed Locaweb is with all of these practices.

And now I'd like to turn the conference over to our CFO and IRO, Rafael Chamas. Thank you.

[Rafael Chamas Alves, executive]

Thank you, Fernando. It's a pleasure to have all of you with us. So moving on to Slide 16 where I have a few of the highlights for this Q3 2022. Fernando has gone over a few of these, but I'd like to reinforce all of them.

A first figure, we had BRL 300 million of net revenue in this quarter alone, which accounts for a 45% increase year-over-year. The net income from Commerce grew by 87% year-over-year in this period. And another interesting thing to me is to compare the net revenue of Commerce with Q3 2020 or Q2 2022, and we had a 14% increase. So this is something that grew a lot in this period. And one of those things that help to explain that, the platform subscriber base has grown by 32%. So we have 151,000 subscribers and our TPV went up 70%. So we ended the quarter with BRL 1.3 billion, which shows what a great engine for growth, this is for the company.

Another very significant highlight, our EBITDA margin. We ended this quarter with an increase in our year-over-year adjusted EBITDA margin and a 2.3 percentage point increase versus Q2. I will be talking about this in greater detail, but we had an increase in organic margin in both businesses and both showing increase over the previous period, which is in keeping with what we have been saying for several quarters now, which is this allows us to see an increase in our EBITDA margins, both in absolute terms and in our margins. We ended this quarter with an adjusted net profit of BRL 33 million. I will be detailing this later, but our cash position, our net cash position was BRL 1.4 billion.

Now digging a little bit deeper into the details, starting with our net revenue, the $304 million that I talked about in the consolidated and Commerce accounting for nearly two-thirds of the operation, growing by 87% and our BeOnline/SaaS grew by 3.1% ended this period with BRL 106.7 million And I think the explanation is due here. You'll see that organic growth has gone up. And one thing that happened with that was reduced growth. We made a decision in our corporate structures to slow this down, bringing in lower revenue, but looking for more profitable operations. And you will see the details of that when we look at the company's EBITDA and profit figures that this was a concrete initiative and allowed us to widen our margins very significantly.

Now a little bit more color on what moved our Commerce net revenue and another concrete data about how healthy our platform has been in terms of profitability and growth of these BRL 197.6 million. In Q3, we had BRL 118 million with our ecosystem and BRL 79.4 million with subscriptions. As you can see, the ecosystem revenue went up 130% and 46% in the platform subscription revenue. So this shows that growth has come from several different fronts as opposed to only platform subscriptions. In 9 months, this led us to ending this period with BRL 835 million in revenue. That's up 50.7% versus last year. And Commerce accounting for $515.4 million of that, so up 105% (sic) [ 101.5%. ]

Now about profitability, as I mentioned before, we have more concrete numbers now. As you can see, all our 3 business lines have grown. Our organic Commerce operations ended Q3 2022 with a 37.9% margin, which is an increase from Q2, which was 36.1%. Our BeOnline/SaaS, as I said, the other side of the increase in margins is lower growth, and we're talking about 23.6% margin, and our acquired EBITDA margin minus 5.1%. So when we did our changes in Q4 '21, the margin was minus 12%. And every quarter, we are seeing this curve go up, and we ended 2022 with a minus 5.1% margin. So a significant increase when we compare it with Q3 2021.

Now looking at absolute figures with what happened with the company's adjusted EBITDA. As I said before, the 16.6%, which represents BRL 50.4 million EBITDA are a 50.2% increase in our EBITDA back in Q3 '21 when we had BRL 33.6 million. So we increased our margin in our consolidated results and a 50.2% increase over this period. Our Commerce ended the quarter with BRL 27.7 million from 16.7% (sic) [ BRL 16.7 million ], up 66.1%. And BeOnline/SaaS up 34.4% to BRL 22.7 million. So an increase in our organic operations and operations allowing our overall EBITDA to grow over 50% during this period, Q3 '22.

Looking at our profits on the left, we had our accounting profit and on the right, our adjusted profit. Bearing in mind that the adjustments that we're showing, and there's an absolute conciliation of these figures and anyone interested can look at our release for the details, but we have the amortization of intangibles and the cash for that, particularly figures with -- for NM (sic) [ NI, ] which are adjusted for the forecast that we had in our -- so we had a loss of 71% in this period, which take us to a profit by BRL 11.4 million in 9 months. And when we look at the adjusted profit, so excluding the M&A that we had over this period, we had BRL 33.4 million over the quarter and BRL 101.9 million over the year, so up 75%.

And lastly, our net cash position. So we currently have EUR 1.4 billion of cash in our operations. Obviously, we have commitments that have been reported and the fair value, which now account for several million reals. So thinking about the net cash with the better predictability that we have for the obligations we'll be settling, the company's net cash discounting future profit is BRL 0.5 billion, BRL 499.4 million.

With that, I'd like to -- thank you very much for listening, and we will open now the Q&A.

[Unknown Executive]

My name is [ Leticia, ] I'm with the IR team, and I'll be mediating this Q&A session. [Operator Instructions] Our first question comes from Vitor with Goldman Sachs.

[Vitor Tomita, analyst]

Good afternoon, everyone. We have 2 questions. The first question about Q4, could you give us a little more detail about your expectations for the Black Friday period and for the overall seasonal impacts of this last quarter and how that could affect the margins that you guys have delivered. And the second question is about the increase in client education efforts. Could you give us a little bit more color about how that has impacted the purchase behavior of your clients, especially in terms of adoption and use of new solutions within the ecosystem?

[Fernando Biancardi Cirne, executive]

Willians will answer about Black Friday and client education and I could talk also a little bit about the margin. So please proceed.

[Willians Marques, executive]

Thank you for your question, Vitor. Well, about Black Friday, we are already seeing our store owners make their moves. We see there's a lot of anticipation. We had a few initiatives to make banners available specifically relating to Black Friday, we saw huge adoption. We believe that our customer base is really with great prospects. And we see that the market actually in general expects better sales.

And I think it's important to remember that our revenue is not fully dependent on GMV. So we do expect to have a good quarter, but a large share of our revenue, especially when we think about subscriptions and platform, that's SaaS, that's Software-as-a-Service. So it will not be substantially impacted by Black Friday. Of course, we have part of the revenue, such as payments and logistics, which may show some seasonal effect and that would be easy to compare if you look at last year, 2021.

So we can't give you any guidance about how much that growth impact will be. But I think that if we look at the previous years, especially when we look at organic growth, it will be easy to estimate what that impact will be. Of course, it will depend on the macroeconomics factor. But again, most of our revenue does not depend on GMV. So this is really a limited result that will come as a consequence of this factor.

Now moving on to your second question, education. We have been making investments as was said earlier in our other earnings conference and in our Investor Day. This has occurred in several fronts. In addition to education, our e-commerce school, we also have our live streams and webinars. We also invested massively on the platform itself on the technology to have a new onboarding as we showed during Investor Day. Today, we have a very user-friendly platform. So whenever users want to log in and start using the software, it's very easy. And then I think this was the main point of your question. We do see a few very interesting metrics.

First of all, we've been measuring the clients' engagement with our onboarding tool. And we see that over 70% of our new stores, they take our onboarding process, they really look at those tips and so we have the engagement metric, which was low in the past but is now up over 70%. And it shows that especially clients who are starting to work with us are using our onboarding tool. Those who don't use it are mostly clients that come with migration or those which are not really engaging and ultimately leave the platform.

Another metric that we have been seeing over the last few months, and this is an internal number, so I can't show you, but we are seeing it's very interesting. It's the time of sales. So with all the improvements we had in integrations with Marketplace and Facebook and Google, we are noticing that our clients are selling faster. So they set up a store. And in a few days, they had their first sales. This is a very important figure for us. This is not publicly available, but I can tell you that we are seeing improvements. So our efforts on the onboarding side of our platform are bringing benefits.

[Fernando Biancardi Cirne, executive]

Okay. So round out your first question, this is Fernando speaking. About the margins, you're right. The fourth quarter is one that does tend to push our margins up, especially with those operations that help what we call operational leverage. So operations such as with Melhor Envio, Octadesk, Vindi, they include a transaction-related component, and therefore, they will be favored by the greater volume. But our commitment to our margins is more of a long-term one.

And I'd like to talk a little bit about how we're seeing our margins grow not only in the fourth quarter, but over the course of next year. We have a commitment to continue to widen our margins not only throughout this year, but also in 2023 and 2024. So we have already been delivering consistently on our margins, but what we're seeing is our major operations will expand their margins with that operational leverage, which has already been taking place, as I said before, these are operations that do not depend on the customer base.

And also for those operations where we're growing our base, such as Bling, for example. The base is growing and the margins will also expand because of that. Also, we are streamlining our organization. So I think this is the best word I have for you. Locaweb did acquire several companies. This is not a company that's easy to understand by the market. And so that simplification is not just about to make it simpler to understand. The operational simplification will allow us to share cost structures and expand our margins as a result of that.

For example, Dooca and Bagy are merging. They will share their structure. Ideris and Samurai also are merging. They're in the process, actually. This is not a promise, but this is something that is underway. Right now, Alessandro is working on that. We are already seeing that with Tray Corp.

And also Commerce Enterprise will be stand-alone brand with matrix structures. We know that commerce and retail, this is not really a reality, even though that even though in the case of Bagy and Dooca, that will be the case, but the concept of having a simple, a single network will become a reality. So we will have a single brand that will include the entire Tray Corp and Bling so that will also generate a lot of savings in terms of costs and also increase our leverage on sales.

So this simpler organizational structure will really affect what we call gains of scale. So if you simplify and you acquire gains of scale, that will be the driver for next year. So, yes, we will see some effect of the holidays and Black Friday on Q4, but we expect that with -- by simplifying the structure and leveraging our results, we will have long-term growth. And this is something that's already underway, as I said. I think we should break even very soon, and we'll continue to move forward to have a 2% margin on our inorganic side.

[Unknown Executive]

Thank you, Fernando and Willians. This was perfectly clear. Our next question comes from Bernardo Guttmann with XP.

[Bernardo Guttmann, analyst]

I had 2 questions. The first has already been answered about the margins. Now my second question is about the competitive environment. And making a link with the platform's churn rate because when we look at Locaweb's churn rate, it's obviously natural that we see the so-called death rate, but there's also the churn caused by the competition. So I wanted to understand what the competitive environment looks like if there's any rationality on the part of other players? This is what I would like to know.

[Fernando Biancardi Cirne, executive]

Willians, if you could please take this one, I may add to your answer later. Thank you, Bernardo.

[Willians Marques, executive]

Okay, Fernando. Thank you for your question, Bernardo. Well, I think it's important to start with the figure that you mentioned by dividing our churn rate. And you're right, more than 90% of our churn rate in retail in these entry clients are coming from the mortality of projects. So about 90% and only 10% in some months, even less than that, these are clients that moved to a different platform. And I think that the concept of migration in Commerce is very important in this case because it is complex for any client to move to a different platform. So this affects both on the positive side and the negative side for us. So for the client to leave our platform to go to the competition will require them to rework their layout and re-upload their product information.

So this is not a simple thing to do. And it's even a sort of lock-in strategy. So we don't really lose that many clients. So what we're planning to do is invest on client marketing so that we have a strong lock in. And we do see that happen in practice. As I said, over -- almost 90% of our churn rate is due to mortality. Now without naming names, we don't see any change in the competitive environment.

Quite the contrary, we are seeing an increasingly favorable environment for our environment and our products much because of everything that we have been developing. So we have launched initiatives with the BigText with Google and Facebook. And this is something no competitor offers. And this is something we've been doing for several months.

We have Marketplace integration, which is something no other competitor, the same size as us in retail operations do. We have operations in over 800 MTs and we see that our competition has much fewer integrations and apps. We have one competitor that has no local operations and is still not focusing their operations in Brazil has not been adjusted for the local market.

No car with CPF and the option to pay via PICs. So we see that the competition on the platform level is still very favorable to us. Not because of its core, but because of the ecosystem that we built and the value that we generate for -- that we create for our clients. So we see very strongly in the acquisition of clients as we reported a growing number of clients and a constant increase in the number of clients even after the pandemic and I think that goes to show our strength in terms of client attraction acquisition. So that combined with a difficult churn and difficult migration between platforms really works in our favor. I hope I was clear, but feel free to ask if you have any other question.

[Bernardo Guttmann, analyst]

Now that was very clear.

[Unknown Executive]

Our next question comes from Fred Mendes with Bank of America.

[Frederico Mendes, analyst]

I also have 2 questions. I will try to summarize them in 2 questions. The first of them with regard to BeOnline, you mentioned a change in strategy, if you could detail that change a little bit more. It seems really interesting and positive seeing as this is a business with a lower churn. But I wanted to understand it a little bit better. And why was it that this change was not communicated before? I mean, you had a great Investor Day, but it was not in our minds, even in the back of our minds that this change was coming. So this is my first question.

And my second question has more to do with the strategy in terms of the acquired companies and their margins. We understand that what we see in the spreadsheets is different from real life. But what we understood was that your acquired companies were already scaling their growth, at least thinking about Melhor Envio. And with that, we should see an increase in margins. We pride the contrary, we saw margins. Those margins growing, but less so than we expected. So I was thinking about what is it that we're missing? I wanted to understand what the trend will be moving forward and if there's anything that we are not seeing or reading in the wrong way?

[Higor de Araújo Franco, executive]

Thank you for your question, Fred. This is Higor speaking. I will start by talking about BeOnline and SaaS and then my colleagues will add to my answer. I think it's important to remember a few things. First of all, in our previous conference, we said that the margins for our BeOnline/SaaS operations is a lot closer to 20% than, for example, last quarter, when it was in 17%. This quarter, we moved to 23%, which already shows our ability to stay within this mainstream margin, so to speak. And that's what where our bets are being put, and that's where our efforts are being devoted to expand the BeOnline and SaaS margins. These margins are made up of 2 components.

First of all, this is a business that highly seasonal. And that also reflects on our margins. This is a business whose costs over the year, see seasonal behavior. There are contracts over the course of the year where renovations are sort of one-off, which is why we see some fluctuation in that EBITDA. This is the component number one.

The component number two has to do with the change that we had in the profile of our clients. And to answer to your question as to why we didn't bring this during Locaweb Day, well, at that occasion, we wanted an agenda where we could open as much as we can about our strategies for our products as opposed to how these products are performing in economic terms. So what we realized was there was an opportunity for a set of clients of larger corporate clients and for that set of clients, we could improve the margins, which means essentially to review our contracts, which is what we did over the quarter.

Of course, these are contracts that do not involve such a quick negotiation. It involves an effort that's really not simple. So this is something we've been working on for a while, and we were able to conclude and I'm referring to this set of clients whose margins were not within what we were aiming for. So we have now concluded those negotiations and we're able to adjust that during this quarter.

So this is a work that we have been doing for a while now, but whose results only came during this quarter. So this really changes our expected margins for a few of these corporate clients. This is sort of the makeup of the margins that we see for BeOnline and SaaS for this quarter. We expect to continue to pursue that strategy. And in the medium term, that those margins will continue to improve.

This is something that we understand will appear in the long run, but we can never forget that the seasonal aspect will also be there. So we may have a slightly lower margin than what we consider mainstream and there will be quarters such as this one when we will be slightly outperforming that mainstream, but we will always aim for a constant organic growth of those margins in the medium term. I'm not sure if I was able to answer, but feel free to ask more questions if you so want.

[Frederico Mendes, analyst]

Of course, I'm sorry, if I could follow up. Your answer was really detailed, but I just wanted to understand, considering that this structural change occurred, and I understand the seasonal aspect, but at least those 16%, 17% we saw in the last quarter, that is not expected to occur again regardless of that seasonal aspect that you already explained.

[Higor de Araújo Franco, executive]

Well, Fred, it's difficult to set that in stone because a few contracts have more significance to our business. So they have a greater weight. So I cannot tell you that we will never be under 20% again. But if we were to establish the median over time, we will be further and further away from this level of margins that we saw last year. Again, Fred, that is a business that has no pressure on margins. This is a business that generates a lot of cash that does really well on their margins.

So regardless of that seasonal aspect that I mentioned, if we look at a little bit longer horizon, we see that this is a business that is constantly delivering healthy margins. So it's very difficult to set that in stone. But in the long run, we are extremely confident that this business will deliver very healthy margins.

[Frederico Mendes, analyst]

Well, now that we're talking about margins. This is Fred speaking and already bringing the next question.

[Rafael Chamas Alves, executive]

I think Fernando brought a few issues that helped to explain that. So when you talked about the difference between a spreadsheet and reality, not to say that these are linear, but what we have been seeing in practice and what we have been detailing in our budget for 2023 makes that really clear.

Companies that are already at a healthy revenue level, we can already see some gains of scale. So when we look at B2C, for example, we still see a trend of greater margins. And we're talking about a significant share of our revenue and -- which are very strong as we made very clear. So there's already a positive margins in that sense.

But there's another level of companies, which are the smaller companies we've acquired, which do show some cash burn. And in that case, operational gains take a little bit longer to emerge because of the investments in products and so on and so forth. So all those initiatives that Fernando mentioned, help us to take those companies that take a little bit longer to mature to have gains of scale and the sharing of resources and operational optimization, tend to accelerate that process.

So it is the combination of these 2 things that really make us confident that the group's margins will continue to grow.

[Fernando Biancardi Cirne, executive]

And just adding to that, this is Fernando speaking. We could accelerate our margin growth. But for example, if your operation is doing well and Bling is a good example. Bling is doing really well. I mean -- but could it accelerate margin growth, of course. We could invest in marketing and infrastructure. But is it worthwhile to increase cost in such an important part of the group. So you have to really weigh those 2 things against each other.

So you could have a business so much in the future. And if I cut investments right now to gain a few points -- a few margin points in the short term, maybe in a few years, I could have a much smaller business. And I know that there's demand in the market for wider margins. And we hear you, and we are delivering wider margins.

But as a manager, I need to look what the potential size of this business in 2 to 3 years. That's really important. So we really have to put these things on the scale and look at margins without restricting that company's growth for the next 2 or 3 years. And I usually joke that this is a trade-off that we have to do every day in that we need wider margins, but while still respecting the group's potential growth for the next 2 or 3 years.

[Unknown Executive]

Our next question comes from Marcelo Santos with JPMorgan.

[Marcelo Santos, analyst]

Good afternoon, everyone. Fernando, I wanted to talk a little bit more about the BeOnline/SaaS issue that Fred mentioned. First of all, I wanted to understand, is this more about renegotiations at BeOnline? Is it the SaaS services? What package was being negotiated? And second, with regard to structural widening of margins. If you have a contract that's going to continue over the next quarters. And I don't want to hear what margin would be for the next quarters. But if we could think in general terms, should we expect wider margins considering those renegotiations and considering that those contracts will continue to be valid for the next few months?

[Fernando Biancardi Cirne, executive]

Well, let me answer from the last question to the first. Well, to your last question, yes, we do expect those margins, as I said before, grow over time. And we could say that we do expect it to improve, of course, respecting the seasonal aspect. So again, if we look at these margins, over a longer period of time, of course, we will see those margins improving, but there will be quarters when those margins will not be on or above their average growth rate.

And just to give you a little bit more color about our contracts, these are not regular SaaS contracts usually. These contracts that we renegotiated are corporate client contracts, where we provide extremely high value, high value added for a number of corporate clients. So these are services where we have human resources, IT and technology.

And in some cases, can negotiate those contracts to expand our margins. But in other cases, where I can't renegotiate those contracts, I need to pass along those increase in costs to some clients. And some of them receive that well and others don't respond well or not. So in a few cases, we did not move forward with those contract negotiations.

And we decided to not go forward with those contracts where the margins were not within what we understand to be healthy. So these are not SaaS contracts in the traditional sense. These are contracts with bigger clients. And we have a range of clients that's reasonable that have these services with us, and it was with this group that we operated more significantly.

[Marcelo Santos, analyst]

Yes, you just mentioned the average. My question is about this average. With this change, did that average change? Because I understand that before that would be 20%, has that increased with the change in strategy? Or was it more that this quarter, you were at the top end of the range? I'm trying to understand what exactly the average is and not what the next result will be precisely.

[Fernando Biancardi Cirne, executive]

Well, we said last quarter that, that average would be 20% and that improves from one quarter to the next one, from last quarter to this one. But I have to tell you that those 20% are still on the table, and we expect to see that margin improve beyond 20%. I cannot give you any concrete figures because that would be -- that wouldn't be right on my part, but we tend to believe that in the future, those 20% will no longer be 20% so to speak. We are still working to stay within those 20% because of the seasonal factor, but we understand that we can have better than 20% already.

[Unknown Executive]

Our next question comes from Thiago Kapulskis with Itaú BDA.

[Thiago Kapulskis, analyst]

Hello, everyone. Good afternoon. Can everyone hear me?

[Fernando Biancardi Cirne, executive]

Yes, we can hear you well, Thiago.

[Thiago Kapulskis, analyst]

All right. Thank you for the opportunity to ask a few questions. There have been a number of very interesting questions. But I wanted to explore a little bit more of the margins, but not on BeOnline. I would like to go back to Commerce, which is where I at least see a higher demand for that. If I could separate things a little bit. I haven't been keeping track of the company for a long time, so I need to eat a little bit of humble pie.

But I'm trying to think, and I feel that there are several people confused about the fact that acquire, client acquisition is going forward and there are people who think there should be an adjustment. But I think that maybe there's a better way. And I'm trying to understand if maybe we could separate the margins for the software business, where I see most synergies, where you can deliver everything that you're talking about on an operational sense.

And the greater penetration of client acquisition, which is a very profitable profit according to my experience of looking to those companies, those payment means companies. So if we were to look only at those companies, excluding those payment companies, what would that -- what would those margins look like from the integration that you guys are operating?

And then my other question is, how is Yapay service doing in terms of penetration before the earlier payment of dividends in your competition, if you're seeing it going up or down? So how do you see that?

[Rafael Chamas Alves, executive]

Thank you for your question, Thiago. This is Rafael. So we have a few things to say here. The platform margins, it's news to no one that at the end of the pandemic, when this took a dip, we lowered our organic margins. And here, I'm talking about our margins for our platforms specifically. So the 2 structural increases in cost that we had at that time would encourage capturing new clients for the platform, and obviously, following the classic dynamics for the business and investing in items such as what Willians mentioned with the new onboarding tool. So investing in the platform itself.

So the margins for that moment were affected by these 2 strategic decisions, which have to do with the perpetualness of our business. And this has been going on for over 1 year. When we see those improvements, the seasonal improvements as we've had in this quarter, those outpaced those 35% that we had on our guidance we're sometimes slightly below that level.

And that has to do with transactional revenues, but we are seeing the margin stable. Now what's our challenge in this case? Much of this list of new products that we're offering, which are integrated into our platforms, which are a way of upselling, they actually upsell on our clients' LTV. This has nothing to do with the platform's margins that generate cash. But ultimately, it's about the client that comes from this shift in the economy that we can upsell, increasing their time with us and consequently their LTV. So the ecosystem gains more relevance in the group in general.

[Thiago Kapulskis, analyst]

All right. If you could talk a little bit about how Yapay has developed and how the -- in terms of new clients, that would be great.

[Rafael Chamas Alves, executive]

Of course, just to remember, Yapay now merging with Vindi is a subpayment system and the revenue that we have are for payment gateways within our own platforms. And here, we have very high penetration. We have about 70% of our entire in-store TPV captured with payments. So this is one major driver of the operation. But we've been making it very clear that there's part of our TPV that comes from synergies.

Now what do I mean by that? With all of our operations, our logistics operation are software operations. We have a lot of GMV that we could capture with those payments. With this software itself as a billing and payment software involved a lot of money. And part of that, which amounts to nearly 30%. This overall GMV that we have in payments comes not from direct integration into the platform, not in e-commerce itself, but actually from synergies within the ecosystem itself.

Bearing in mind that this is also another profitable transaction. These are transactions that are taking place within our environment. So the penetration in e-commerce platform is very high at about 70% and a stable share for a long time. And this also has a lot to do with the profile of clients which are using what's simpler to them, those SMB clients. And good leverage that we had with the synergies across all of the group's operations.

[Thiago Kapulskis, analyst]

All right. If I could have a last follow-up. Within Yapay's clients or for the ecosystem in general, does a significant share of those are already having earlier transactions with you? And is that share growing?

[Rafael Chamas Alves, executive]

No, we have no direct anticipation with the client. We only have intermediation. This is the economic model of that we have with Yapay.

[Unknown Executive]

Our next question comes from [ Luma Pius ] and Leonardo Olmos with UBS.

[Unknown Analyst]

Hello, everyone. The margins discussion was very extensive. So I'd like to focus on something else. If you guys could go back to the issue of early receivables payment in your financial results, you made it clear in the release, and we've been discussing that for a while. But just to update us, it's gone up to BRL 16 million. So what are the factors affecting this advance? And how do you see that figure developing in the next quarters?

[Rafael Chamas Alves, executive]

Of course, this is Rafael again. And Thiago's question was really opportune because it shows what the nature of these receivables is. So just to remind you, this operation has been growing a lot, and it's public knowledge that our operations have doubled in size. And to fund that growth, you need working capital because of the intermediation dynamics that's part of how the business works. And it is strictly the company's capital decision in terms of how to fund that working capital. That's where the receivables come for. This is what you mentioned before, the BRL 15 million.

And how have we seen that process moving forward. If you -- with working capital, the tendency is that we do not see higher investments. So in percentage terms, these expenses tend to behave in a much shorter way because this will be diluted with -- by the operation itself.

[Unknown Analyst]

Okay. That was very clear.

[Unknown Executive]

With no further questions, we conclude our Q&A session and turn the conference over to Fernando Cirne for his final remarks.

[Fernando Biancardi Cirne, executive]

I'd like to thank all analysts for the questions. I think they really helped to clarify what we didn't cover in the presentation. These were really opportune questions. So thank you for that. And I'd like to thank our employees, shareholders, analysts for the results that we reported, and we should meet again in a couple of months to talk about the consolidated results for 2022. Thank you so much, and have a great afternoon.