Positivo Tecnologia SA

BOVESPA:POSI3

Earnings Call Transcript 2021-Q1

[Helium Rotenberg, executive]

Good morning, everyone. We're here to talk to you about the results we have for the first quarter. We're very happy with the results. It is actually a unique moment for -- it's a unique moment for the company, where all of our businesses have become quite significant.

Despite all of the problems we're facing today in the area of parts and supplies, especially of integrated circuits, the results are very good. They crown the efforts of the past few years.

You can see our numbers and the highlights. Our revenue was quite high, 85% higher than the first quarter of last year -- BRL 89 billion. Our EBITDA was BRL 61 million with a margin of BRL 9.1 million. The net revenue was BRL 65 million -- I'm sorry, the net income was BRL 55 million in the first quarter and exceeds the first quarter of 2020 by 1.175%.

At the end of March last year, we were affected by the pandemic and have very -- have had very good performance. We're very happy to say that we have concluded our portfolio of computers. Positivo had a very strong computer portfolio for the end consumer.

Now Positivo is very strong with a significant share demanded by the Brazilian middle class, we had VAIO. It was increasing in mid high. We're talking about prices of up to BRL 2,500, BRL 3,500 to BRL 3,800 today. But there was an area where we didn't have a significant share. It was low, below 6%. We had been negotiating with HP for a while, and now we come in with a Compaq brand. With that, we have concluded our computer portfolio. We're more and more a portfolio-based company.

We do the same with smartphones. We have one additional brand. We're doing quite well with this strategy just as we're doing well with our strategy in different avenues of growth.

Our growth is centered on consumption, but other areas have also grown. 162% is what we have had of increase in direct sales. We have also had an increase in publications -- public institutions. This market has grown a lot. We had an increase of 162%. And companies are reacting to the pandemic, are buying again, and we have had an increase of almost 13% in the corporate market. HaaS has also done quite well.

Digital transformation, it is doing really well. We have online channel sales both for our own and third-party online channels. They have maintained their expansion trajectory. And by means of our retailers, marketplace, we're doing really well. We have reacted, modernized all of our platforms, have reinforced our channels. Right now, we only have online sales or mostly online sales of 70% is to be on-site and 30% digital. And this is now -- has been inverted.

I have already talked about the brand portfolio. With the addition of Compaq, VAIO is doing really well. The increase of 92% and has become a very important brand. Sales have exceeded our expectations of growth. It is strong and a demanded brand for the AB -- A and B classes in Brazil.

In terms of our mix, we have an improved product mix. And despite the prices of pieces going up so significantly, we have a gross margin of 23.2%, which is greater than what we had in the first quarter of 2020. The demand is so high.

If we look at the demand, we see that it's a very high hybrid work is here to stay. I have no doubts about this. Everybody can see this. We're not -- no longer going to live the same kind of lifestyle, and the demand is going to continue high. The market is very heated. Perspective is that we'll have 360 million computers per year, according to the IPC. And it might be even higher than that. We are going back to the peak of computer sales we had in 2011. And this, combined to the demand of other sectors, which fight for the same integrated systems. Smartphones, tablets, televisions, they're all competing for the same integrated circuits. There are unbalances throughout the world with the prohibition of some Chinese companies to operate with American technology. And therefore, they have anticipated their purchases.

We have had some events of plants burning products. With that, we are lacking integrated circuits. The difficulty to buy a computer plaque is very high and integrated circuits for LCD because LCD is something demanded by the whole chain, all of the electronics, and that makes everything very expensive and it's very difficult to buy.

We could be selling a lot more than we are, if it weren't for the restrictions of supply. We have been able to deliver the minimum that we would like to deliver. And you can see very good sales numbers for the first quarter. We have been able to deliver the minimum required so that we can grow well this year in all of our channels.

Next slide. I'd like to repeat the graph here just to consolidate at this moment. We start explaining what happens with our 3 large division. We have a vice presidency for the different areas. So we have corporate public institutions. We are pursuing all the opportunities coming from the market. Computers is something that we sell for all of them, tablets for all of them, peripherals as well. We have the electronic balance, which is something that we are discussing publicly. We have the service, which do really well with corporate and public institutions, small retail.

Our sales in the first quarter last year were to 160 retailers. This year, we had over 700. So this project where we permeate the whole Brazilian retail has worked out really well. Smart HaaS continues growing significantly. The demand for automation -- for residential automation products remains high. We're also exploring the corporate market with that -- with intelligent offices. And also sales for construction companies, Educational Technology is not doing so well. The schools are still closed. The priorities are other.

Digitalization of education has become necessary, and we believe that this area will grow a lot. Rental continues growing. This is true for corporates and public institutions, and payment solutions where we're selling to other clients.

And just to talk to you about our revenue, how they were broken down. You can see 55% per consumer, 15% for corporate, 21% for public institutions. When we break down, according to the different projects, our main projects are computers and then mobiles, tablets, almost 14%; mobiles, 24%; servers, 3%; services, 4%; and other, 9%.

We continue investing in start-ups. We have just closed a deal with EuNerd for maintenance and services. We already used EuNerd services in the past. It's a very interesting company. We have made an investment in this company and now have 11 start-ups in our portfolio.

And next slide, please. And now talking more specifically about the consumer market. I've already talked to you about the computer market. We have 357 million units in 2021. A computer has become personal and essential in our lives. We can all see that historic levels at retailers are still low, even lower than in 2020, demonstrating that we still have a lot of opportunity to grow. We have sales opportunities. This market will balance out eventually, but we have the supply issues as well.

Brazil has had -- in Brazil, 20% more sales than in 2020. And this was limited by supply. Otherwise, it would have been much higher. And our gross revenue reaches BRL 500 million, indicating a growth of 152% when compared to the previous year to 2020. And so we have merged with Compaq. Our purpose is to provide technology to leverage lives in Brazilian families, Brazilian lives and Compaq complete our product portfolio.

In corporate, we're happy with the growth when compared to the first quarter. Almost before the pandemic, the market was almost so normal in the beginning of last year. Even so, we've grown. Companies are buying again after a very strong V-curve last year with a pandemic, where companies closed their doors, reducing investments, companies already show their budgets, they're ready. Employees need to have computers. Companies are providing infrastructure to their employees.

Notebooks are the major trend because of the mobility required by hybrid work. So everything is done by notebooks, not desktops. And we are ready to grow this portfolio for the corporate market.

Public institution, we've already shared this graph. Our backlog for the delivery of computers used to be BRL 690 million, and it is now BRL 932 million with a significant growth. We grew 43% in the first quarter. This market is very seasonal. We have a lot of requests. And basically, this is true for the whole year, indicating a stronger growth when compared to last year in the public institution market.

And just to review the results of the first quarter, we had some large bids in the Ministry of Finance. We had a large tablet tender processes and that really leverage the public market. And we are still observing the same strong growth. Right now, we have a very high delivery backlog because of our supply bottleneck. It -- we also have the electronic ballots it's not included in this figure of BRL 932 million. We have already been hired for 225,000 [ URNs ] and sales of approximately BRL 925 million. So this is what we imagined, but we have some supply limitations. The project is doing really well. And most of the deliveries will take place next year for the 2022 elections.

Next slide. Financial highlights, I turn over to Caio, our CFO. He will talk a little bit about this.

[Caio Moraes, executive]

Thank you very much, Hélio. Financial highlights for the first quarter. Gross revenue, as Hélio mentioned, we have had robust growth of 85%. We have really gone to a different level. And in the fourth quarter, we had a gross revenue that has led us to a differentiated level when compared to the past.

When we analyze the gross revenue for the business, we can see growth in the Consumer segment mainly, but a public institution has reacted and the first -- in the fourth quarter last year, it was 21%. And it is now 23%. Corporate has also reacted, but it's still lower than what it was last year.

When we analyze gross revenue per project, we can see notebooks growing a lot because of the mobility and desktops are going down. We have an interesting mix here, and we have had an increase when we look at tablets and mobiles. Servers was a little lower.

We also had an increase in HaaS because our revenue volume has grown a lot. We had an increase of 26% in our gross revenue even though the percentage results are similar.

And now we're going to talk a little bit about our operating expenses. We have had increases, but we have more expenses with marketing, freight. However, we can see that there has been a very good control. We went from 14.7% in 2020 to 12.9% in the first quarter of 2021. For G&A, we see a stability, demonstrating a very good control of the fixed costs of the company and the company will keep doing so.

Next slide. I will talk a little bit about the financial results. Even though we had larger gains because of the changes in the currency rate. The dollar rate went up, and it closed at 5.7% last year when compared to the BRL. But our financial operations are very well controlled. We are financing a higher operation. And even so, our results are quite aligned to the first quarter of 2020.

And then in the next slide, I will talk a little bit about our profitability, net income. Here, we can see the EBITDA. We went from losses of approximately BRL 3 million in 2020. And our results were positive this year, quite significantly, 61.4%. And we have had a strong management of fixed costs, trying to control the adjustments of the currency rate. We went from BRL 4 million to BRL 55.8 million in net income. EBITDA and net income are quite aligned. Demonstrating that, in the first quarter, when we didn't have recurring events and their comparable this year and last year, we can see that the company has had very good operating results. The EBIT was BRL 40 million. All of the operational figures are aligned at very high levels.

And then in the next slide, we're talking about cash and indebtedness. We have a very comfortable position. It is better than it was in the first quarter of 2020. Also, our indebtedness is very comfortable and very well controlled. It changes a little bit. We went up to a higher level. We are financing a larger operation. But when we compare our performance, we can see that it's very good. We went from 1.6x to 1.1x, which is a very comfortable number, demonstrating a very good control of our debt.

In addition to that, we're doing our homework in terms of the management of our liabilities and profile. And you can see that in the end of the first quarter of 2021, we can revert the proportion of short- and long-term debt. We go to -- from 53% to 46% in the short term. This is different from what we had in 2020, and we have a mean duration of 23 months, which was used to reprofile our liabilities. We exchanged short-term debt to long-term debt with a very interesting result, and we're also able to maintain a very well controlled cost of our debt.

And we're now going to try to give you a perspective of what is happening and what is going to happen. In the Consumer segment, the pandemic will extend. Home office will expand. And we cannot think that even after the pandemic, this will leave no traces. Home office hybrid work in the future, all demonstrate that this segment will continue very high, the Computer segment.

With the high exchange rate we have this year added to the high price of components indicate that we will have an average ticket of 15% to 20% higher than that of 2020. The demand remains high. When we have high demand, this is good news for the company. We have a lot of consumers, of course. But the costs incurred by the increase in exchange rate and also the increase in the part of components has to be taking to the client. Our ticket -- our average ticket will be 15% to 20%.

We have complete portfolio with 3 brands that are well positioned. Our home automation category should continue to grow. The demand is very high for remote controls. We have just launched a light switch. You change it and you control the whole room using your smartphone. If you change the light switch in one room, you can turn lights on and off or schedule them at any time. It's very nice and simple. Also electronic gates, locks where doors are opened by smartphones. We have a very complete portfolio and are very excited with it. And this expansion of small retail we have different sales points since first quarter in a project that is doing really well throughout Brazil -- we are spreading throughout Brazil. We used to be very strong within the largest 100 retailers, but we are now spreading to smaller ones and working really well with the smaller retailers.

In corporate, the renovation of the park and the exchange for notebooks to obtain more mobility for hybrid work leads to more optimistic projections. Banks are still buying for their employees. They have this concern. Not every company provides computer to their employees, but they allow their employees to use their own computers. But this combination of consumer and corporate is very large, even though the growth in corporate has been smaller in the order of 12.5% year-over-year.

The trend of increase in 2021 average ticket is in a range of 15% to 20%. We have had also a switch from purchase to leasing. The demand for servers and storage also remain high. And therefore, we have a very good performance here, too.

Public institutions. We have a scenario of tender processes of large volumes of notebooks, tablets. So we have Ceará, Fortaleza with tender processes, and they have required tablets in large amounts. In São Paulo, also, we have had some notebooks and we have had -- actually, we still have a lot of other tenders coming our way. This will continue growing this year and in the upcoming years.

Also, we have already mentioned the Ministry of Finance. They have had their largest bid in the last 3 years. We won a few lots. We are beginning to deliver the computers products is another example. They had a large tender process. There are different ongoing processes and some that have already taken place. We have higher number of sales this year and have an order guarantee of BRL 932 million.

This is a pre-election year, meaning that we will have more bids. And we'll have more in the second quarter for deliveries in 2022. And then during the elections next year, it will be more difficult because it's not possible to buy or to have tender processes according to the law. And so the government is anticipating purchases. This is a very optimistic market. Computers are personal. The demand is high. We have increases in electronic ballots, intelligent or smart homes, educational technology, we think that, that is also going to improve. All of these segments are doing well. This is a unique moment for the company. We're very happy to disseminate these results today.

I thank you all for your attention, and I now open for Q&A.

[Caio Moraes, executive]

Very good. First question we have here, Hélio, is from [ Marcos Nascimento ]. The capacity to expand -- can you expand the current activities? And how can you expand your manufacturing plant?

[Helium Rotenberg, executive]

Well, this far, we do not need to expand. We used to work with 1 shift, sometimes with 2 shifts. We're now working with 2 shifts, and we still have a third shift to work if we need to. Most of the lines are current or peak production in 2002 to 2013. We have a lot of production capacity for smartphones, tablets. We're doing quite well in terms of our production capacity, and we do not need to expand right now. Of course, we must make some investments, and this is something that we are anticipating some BRL 10 million to BRL 12 million in investments because the technique to test computers has changed. We're buying some things. But in terms of our plant park, we're doing really well. We're doing really well with Bauru and Manaus. We have a computer plant in Manaus, another one in Curitiba. In this footprint, we already have enough to meet the demand.

[Caio Moraes, executive]

Very well. Second question from [ Volmer Schmidt ]. Do you have any M&A consolidation strategy or are you going to develop start-ups and have organic growth?

[Helium Rotenberg, executive]

Well, we do not have any good example on our growth. We have service that were purchased in the end of 2018. We bought a server company. We have nothing against organic growth. We have nothing against inorganic growth. We always look at the different opportunities. Our avenues for growth are well consolidated.

We know that our strategy has been defined. We will always try to analyze what is best, organic or inorganic growth. This means that, yes, we are looking at opportunities. We have not closed anything, but we are looking at opportunities.

[Caio Moraes, executive]

Very good. A third question from [indiscernible]. Two questions, actually. We are in the middle of the second quarter thus far. What are the trends you see for this quarter? And how do you see the rest of the year? Will we have any recovery of the activities?

[Helium Rotenberg, executive]

Well, the second quarter -- we are 1.5 months into The second quarter, and I can tell you that it's very strong as well. The perspective is to keep it strong with robust numbers. We also see the third and fourth quarter. We have had requests from the government. We have closed some deals with the retail, and I believe that this is going to be a very strong year.

[Caio Moraes, executive]

Very good. We have [ Ricardo Pachino ] from [indiscernible] Investment. What -- do you still have worsening? Is the worst gone? How do you see the second half of the year with normalized supply?

[Helium Rotenberg, executive]

I think we are at the peak of the worst moment in terms of supply. I don't think that it will be much worse than it is right now, but I don't think that it will improve fast. Some components will get better only in the beginning of next year and some in the second half of next year. So I believe that we are at the peak right now. Perhaps, prices are a little bit higher for some components in the upcoming months, not as much as it was in the past. But the amount that is produced and allocated will not change.

[Caio Moraes, executive]

Next question, Hélio, from [indiscernible]. He asked has the following. The revenue growth in tablets was significant. Can you sustain this level of sales?

[Helium Rotenberg, executive]

I would say that we had a one-timer that will be expanded to the second half. We had sales for the government, deliveries to a retailer that sold units to the government. And that may have changed it a little bit. I don't know whether that will be maintained for the second half. I do not have the exact figures right now. But yes, it will remain strong. I don't know whether it will be exactly like it was in the first quarter. I can't guarantee that.

[Caio Moraes, executive]

We have no further questions. Let's wait a little to see if any other question comes up. We have no further questions. Would you like to make any final considerations?

[Helium Rotenberg, executive]

I think we've already talked about our optimism. Sales have been good. We have had a strong year, and we'll continue at a high level. We hope that we will always be able to share such good news as we did now. Thank you all for your attention.