Valid Solucoes SA

BOVESPA:VLID3

Earnings Call Transcript 2021-Q4

[Olavo Vaz, executive]

Good morning, and welcome to this webcast presenting Valid's 2021 results. I'm Olavo Vaz, Corporate Finance Manager, and I'll be the moderator in the course of this transmission. Before we begin our presentation, I'd like to make some important comments. This event is being recorded. [Operator Instructions] This webcast is transmitted with simultaneous interpretation into English. And the presentation is available at the Valid Investor Relations website at this webcast platform. Each participant can move up and down the slides in the presentation and replay this event immediately after its end. After the presentation, there will be a Q&A session. Questions may be submitted at any time during the event through the platform chat window indicated with a blinking light on the left-hand side of the screen.

Please note that any statements made during this presentation in relation to the company's business perspectives, operating and financial projections and goals represent management's beliefs and assumptions based on the information available today. They contain no guarantee of performance and involve risks, uncertainty and assumptions because they refer to future events, contingent on circumstances that may occur or not. Investors are cautioned that the industry's overall economic conditions and other operating elements may also affect the company's future results and lead to results that differ significantly from those expected. And I introduced the participants of today's video conference, Ivan Murias, CEO; Renato Tyszler, Chief Financial and Investor Relations Officer; and Ilson Bressan.

I now give the floor to Bressan. And good morning, Ivan; good morning, Bressan. Please go ahead.

[Ivan Luiz dos Santos, executive]

Thank you, Olavo. Good morning. I'd like to thank you all for your presence. I hope that you are all, all healthy. In this first segment, I will recap with you the key messages pertaining to the fourth quarter into 2021. Our EBITDA reached BRL 100 million in the fourth quarter, the largest ever. Our revenues closed the year at 2.2% -- BRL 2.2 billion and our EBITDA at -- closed the year at BRL 331 million. This result leads to 2 important issues. First, in the 2 final quarters of 2021 exceeded the [ poor ] half year -- first half year of 2021, but led to record revenue and EBITDA for the year. The second issue is that the EBITDA growth rate 5x higher than the growth rate in our revenue shows that we can now better increase our operating results, thanks to our efficient management, both operating and commercial in our core assets.

The Government Solutions segment has shown an enormous growth in our EBITDA. In the fourth quarter, we saw the largest volume of documents issue since the first quarter of 2020 before the pandemic. There is growth of 38% in volume over the year, but the company does not see in this volume, the implementation, the clearing of the backlog that we saw in 2020 during the pandemic. Government decision of November 2021 will lead to clearing depth backlog until August 2023.

In the Business Solutions segment, VBS, demand for smart cards and competition between banks, new banks and fintechs continue to drive our revenues up by more than 30% in 2021. Our EBITDA margin closed above 9% in consequence of a successful manufacturing reorganization process. This can be seen in the EBITDA margin for the fourth quarter, more than 12%.

In Digital Solutions, VDS we saw 39% growth in revenues with a positive EBITDA of BRL 12 million. Our focus in that segment continues to be continued top line growth for those business lines. But from the minus BRL 3 million negative EBITDA in 2020 and to the BRL 12 million positive EBITDA with a BRL 15 million improvement in 2021 shows our focus in continuing -- focus on strategies that are positive. We then feel that it's important that it is as important to abandon things that do not go well then as to find new avenues of growth.

In our International segment, Telco Global was the highlight with 13% growth in revenue and 38% growth in EBITDA. This was possible, thanks to better price, [ microchip mix ] and allocation and also with the reduction of our operating costs. Even with the diminished EBITDA in our U.S. business, the fact that Telco Global could generate about BRL 30 million in EBITDA per quarter. This shows that the company is able to diversify its sources of revenue inhibitor and also to manage its business in a very professional way and showing growing margins.

The overall horizontal of all of that is the fact that our net debt-to-EBITDA ratio has fallen by half, in the 18 months that the company has been managed by the current team. This gives us the comfort to look forward and to feel that the company will be in a much stronger position in 2022, showing better conditions to extend its debt maturity at lower interest rates, so that our capacity to turn EBITDA into earnings per share will be enhanced in the next few years.

Finally, I'd like to thank and to congratulate the Valid team. The results that I have described in the slides were the result of the dedication of our team in all business verticals and all geographies. So I'd like to personally thank each and every one of you.

I now give the floor to Renato, who will give you further detail on fourth quarter and 2021 results. I will then make a final comments and open the Q&A session. Renato, the floor is yours.

[Renato Tyszler, executive]

Thank you, Ivan. Let's move now to Page 4, where you can see the evolution of our business for each business vertical. You see not only the growth in revenue, but also in the EBITDA. If you compare each quarter with the preceding one, and that shows the sustainability of our businesses. We highlight the improvement in our government document business, the ongoing EPS growth in terms of revenue and also now -- with EBITDA positive EBITDA and the significantly improvement in Telco margins. Only the U.S. have shown a poor result in comparison to 2020.

Page 5 shows us the increased enhanced performance in the fourth quarter 2021, with growth both in revenue and EBITDA and especially the greatest annual EBITDA for the company in the 1 year, BRL 2.2 billion in revenue and over BRL 300 million in EBITDA, 64% growth in annual EBITDA. Highlights were greater volumes of identity cards and driver’s license issues. So things have improved in relation to 2020 and that we now see volumes close to those in 2019 before the pandemic. We saw growth in volume and in margins for bank cards, VDS revenue growth by 39% in comparison to 2020. Now at a positive EBITDA margin. And finally, Telco showing 13% revenue growth and 38% growth in EBITDA in comparison to 2020, thanks to better product mix and operating enhancements.

Next page, I'd like to repeat something that I've mentioned in an earlier presentation of results, so that Valid once again shows its capacity to diversify [ interest form ] itself to reduce macroeconomic risks and to show more consistent operating results. You see here the evolution, the improvement only in 2 years, not only in terms of revenue, but also the better diversification of our EBITDA margins with greater participation of Telco, Digital and Smart Card units. As seen in the previous page, those units showed growing margins and consistent from quarter-to-quarter.

Page 7, we focus on our business units, beginning with VGS. You can see here the improvement in the course of 2021. with a strong recovery beginning in the third quarter. The fourth quarter shows volumes comparable to 2019, 6 million units issued. You see growth of 21% in revenue and more than 180% for EBITDA in the course of the year. EBITDA grew not only because of improved volumes, but also for more efficient productions, both in terms of physical production and services.

Page 8. Now looking at VBS units with strong growth, thanks to greater demand for smart cards. The segment has grown 63% in the course of 3 years, revenues growing from BRL 322 million to BRL 525 million, driven by the growth in new banks and fintechs and by the digitalization of traditional banks, growth of 31% in revenue and 20% in EBITDA in 2021, thanks to enhanced operating and commercial efficiency.

Page 9. Page 9 shows the performance of VDS unit with growth in 39% in revenue in 2021 and the EBITDA turned positive. All of that, thanks to better the digital certification revenues, growth Valid Hub, thanks to contracts with great banks, and we are making new efforts in all fronts.

Page 10, our international business shows positive performance, thanks to Telco with 13% growth in revenue and 38% in EBITDA, thanks to a better product and client mix with higher added values and better prices because of the short -- global shortage of microchip. Our U.S. business showed a mild loss in terms of the previous year. We sold a plant for BRL 5.5 million. This is not shown in our EBITDA, but it's important to reduce our fixed assets to increase our operating performance. You see here the improvements in our net income moving from a book loss of BRL 124 million to a book income of BRL 38 million, BRL 162 million improvement in the course of only 1 year, showing our ability to recover quickly. This was thanks mainly to EBITDA, but we had also small revenues in terms -- because of assets so in the U.S. You see here our cash flow with 3 negative effects pertaining to interest, CapEx and debt payments and 3 positive effects with new loans, capital increases and cash generated.

Our cash position increased slightly over the year. But it's important to note that the third quarter was negative and the fourth one was extremely positive with more than BRL 130 million in new cash generated showing great perspectives for 2022. You see here the structure of our debt, which shows no significant debt in relation to the third quarter. We have significant payments to make over the quarter, but we are in advanced negotiations to extend our debt at lower interest. We continue to carry a strong cash position in comparison to our pre-pandemic history, but this will be adjusted in the course of 2022 because the worst is now in the past. 77% of our debt is in local currency, but we can reduce this somewhat because a significant portion of our cash generation comes from operations in hard currency, especially in telecom. And you see here a leverage ratio with a fast ongoing reduction in each quarter going even under our average back track, now at [ 1.8% ].

Next page is just to show you, as nearly as an information, we report some events after the close of the year. Interest on owner's capital, BRL 31 million, BRL 23 million paid in January 2022. We have extended some $15 million debt and $33 million debt -- BRL 33 million debt, both at lower rates. We have our shareholders meeting now scheduled for the 20th of April, approved the program to repurchase 2 million shares. To this date, we have purchased already some 82% of that total. And finally, a portion of our warrants were converted last week. That amount was low as expected, but we expect a much stronger performance in September.

Now I'll give the floor to Bressan, our ID Director, who will talk to you about our new national ID cards.

[Ilson Bressan, executive]

Thank you. Good morning. I'm Ilson Bressan. I'm Head of Valid's ID unit. I will now explain to you [ Decree 91077 ], which created a new identity card. This is a historic moment because it has changed the way civil identification occurs in Brazil. And this is a joint effort of the federal government, the industry and state governments that created new patterns of interoperability, safety and operating because this is not a completely new project, we feel this represents an enormous progress in relation to current civil identification practices.

We highlight the following: the new identity card is physical and digital. The physical model will be printed in security paper. The first one -- the first issue will be free, and there will be an option in polycarbonate, which will be charged. The federal tax number will be the primary number for the new identity card, integrating identity information for each citizen in the citizen information service, SIC. The new ID card will now have an expiry date. The physical version will contain essential information such as the citizen social name. The digital version will contain additional information, including at each citizen's request information such as health comments, blood type, et cetera. There will be -- and the digital value include a secure [ QR code validation ]. Each state identification app and the federal government app will be used for validation.

The federal tax number will be used as a single number as a single identification number so that it will no longer be possible for different identification documents to be issued in each state, because the numbers will be validated through different biometric criteria, the fact that a new card is issued will -- any new card issue will be deemed the duplicate of the first one, adding safety to the system. Furthermore, this will -- there will be additional security because there will be a federal identification chamber that will review the security and integration elements of the new identity card.

The decree has established that all documents will be valid for 10 years. And that all state identification units must be able to issue the new identity cards until March 5, 2023. For up to 12 years old, the documents will be valid for 5 years, from 12 to 59-year-olds, the documents will be valid for 10 years, and the documents will be perpetual for those older than 60. The new -- the paper version of the new identity cards will be valid for 10 years. So that beginning on March 1, 2032, new identity cards will be issued only in polycarbonate.

We're very optimistic about the scenario because we're the main player for safe identification document in Brazil. We've issued more than 60% of identity cards at some 80% of driver's license in Brazil. I think we will have a major role in this new effort. We're also especially optimistic because you see here a more attractive and promising market closely aligned with Valid's expertise in this segment. As our positive expectations in the future, are grounded on 3 elements. We expect increase initiatives in the coming years, not only because early adopters will want the new documents. But the documents for the whole population under 60 will have to be replaced within 10 years.

We also see an increase in the average ticket for each card issue because we expect the polycarbonate version to gain a greater share of the market, and it's more expensive. This average ticket will apply to 100% of new issues beginning of 2032 because the polycarbonate version will be the only one available beginning on that year. The polycarbonate version is a product in which we have expertise. And we now issue some 90% of volume of documents in that format in Brazil. We have, for instance, issued the professional ID badges for several clients such as the federal police, the federal regional, federal medicine and [ economic accounts ] of the Air Force, the House of Representatives and others.

Third aspect is that we already have recognized expertise to offer the product and services for [ sovereign ] government or quasi government entities were used to large volume and high complexity operations so that we can provide secure and integrated products to our clients. This product plus service combo represents an important competitive advantage for us, because the new identity card is an evolution of the existing one, both in terms of process, service and product. We're very confident of our capacity to gain a greater share of this market. So to recap, we have a very positive expectation for this.

Thank you all, and I give the floor back to Ivan.

[Ivan Luiz dos Santos, executive]

Thank you, Renato. Thank you, Bressan. So before we move to the questions -- the Q&A session, I'd like to review 3 key messages for you. First, refer to our deliveries in 2021. So to refocus on that, which we have discussed throughout this transmission, we have seen the highest annual revenue and EBITDA ever for Valid with especially good performance of our operating margins in the fourth quarter. We saw a revenue and EBITDA that were well balanced across regions and verticals. Not only it's important for us to see VDS and ID verticals to return to the historical levels.

But we also saw other verticals gaining a greater role in our company so that now our business are more better diversified. And the new -- the decree creating the new identity card is very important for us because it operates as a counterweight to the greater validity period for the -- for drivers licenses. ID cards are important because there are documents used for civil identification purposes. We will continue to do everything that needs to be done to provide civil identification documents in compliance with the rules of our clients and participating in the system as the leaders that we already are.

Now talking about our capital structure. We saw a significant reduction in our leverage in 2021 so that we begin 2022 in a much more comfortable position, which gives us an optimistic opinion in relation to 2022. Certainly, we're in a better condition to extend our debt at lower rates with a significant impact in our capacity to turn our EBITDA into earnings per share for our shareholders throughout this process. And we have resumed paying interest on income on owners' equity. The first payment was made now in January 2021. And finally, we have a cultural transformation through a new visual identity under a definition of our values.

And it's very important that we change the company's visual identity to mark our new moments. We have created new departments, people and culture and governance and compliance as important as attracting new talent is how to combine those new talents with the retention of talent that we already have here that know the company. This combination is extremely powerful, and we'll continue to make our company a better company. And thank you, we have resumed our stock option program, now including mid-level managers. We have approved this program in a special shareholders meeting occurred in April 2021. More than 90% of our senior managers have adhered. And this shows the ownership feeling of our senior managers.

That said, myself, Renato, Bressan, the rest of the team remain here at your disposal to discuss any issues you may wish to focus on.

[Olavo Vaz, executive]

Thank you, Ivan, Renato and Bressan. We now open our Q&A session. [Operator Instructions] Renato, we now have the first question from [ Cristian ], BBA. Congratulations on your results. I'd like to better understand the dynamics of the government's vertical. We saw -- could you please give us more detail?

[Renato Tyszler, executive]

I'll begin answering first mentioning that when we talk about VGS, the government business units, we're not talking only about cards, drivers licenses, identity cards. That still is the core business of that vertical, but we have other sources of revenue. So when you see the volume of issues growing in the course of the quarter, this, of course, will drive EBITDA up. But just to give you an example. But for instance, we have other government-related services or products, which gave us, for instance, a very significant revenue in the third quarter.

So if you look at the fourth quarter and eliminate the difference in terms of other products the fourth quarter revenue would have been practically the same of the third. And our EBITDA would have been greater than in the third because we're looking not only at top line in terms of volume, better volumes and prices, but we're also continually focusing on operating efficiency to decentralizing our government operations. We have been very successful there.

So then even in the quarter -- in the fourth quarter, whose top line result was slightly less than in the third quarter. Our EBITDA for the fourth quarter was better. So again, our government business includes other product lines, but we have other digital products that have to be taken into account. So when we look at volume and EBITDA, we have to remember that the correlation between them is not 100% is not perfect.

[Olavo Vaz, executive]

So next question from Fabio. Congratulations on the quarter and year results. Please give us some news on the sale of the Sao Bernardo and Rio plants? And how is the integration of operations at Sorocaba?

[Unknown Executive]

The Sao Bernardo do Campo plant. We have completed the transfer of operations in the fourth quarter last year. This asset is now in the market for sale so that its book impact, the accounting book representing some BRL 8 million was already felt in the last quarter. The Rio plant. We are still transferring operations, and we expect to complete this process in the second or third quarter this year. And then this asset will be immediately put up for sale.

Both plants together will probably create a cash effect of some BRL 15 million, I'd say, the Caju plant we'll probably have no book impact because it's essentially been fully depreciated. So generally speaking, that's it. The integration of operations at Sorocaba, especially from [indiscernible] has been completed very successfully, and we're very happy with the integration and with the efficiencies that provided.

[Olavo Vaz, executive]

Ivan, next question from Condor Insider. We have 3 questions for you. First, how do you see the U.S. markets in 2022? Do you see many problems with the microchip supply? So to repeat the U.S. market, microchip problems. And what's the EBITDA margin you see for VDS for 2022?

[Ivan Luiz dos Santos, executive]

Yes, we see an improvement, a very significant improvement in terms of operations because due to the microchip shortage and also because of some restrictions that we see in the U.S. market to certify microchips from China. So this further restricts supply and we have to focus on non-Chinese suppliers. But so far, we have been able to obtain the necessary volumes. Our plants, this is an important factor because the microchips have to be received timely. And if the microchips are not available, you lose capacity, which is difficult to recover later. So that we have improved significantly our logistics.

The card -- the market for cards, it's -- the U.S. market is much more mature than Brazil. We don't see there the competition that we see here between traditional banks and fintechs and the number of cards, each U.S. individual already have already 3x higher than in Brazil so that we don't expect a significant -- such a significant increase in terms of volume as expected for Brazil.

[Olavo Vaz, executive]

Tying into what Ivan just said, there's another question about -- asking for you to please elaborate.

[Unknown Executive]

So we think that the implementation of 5G will help us in terms of churning because you see the carriers in Brazil with very positive expectations in terms of revenue because the entertainment platform will gain significance when 5G is implemented, but this is according to GSMA data that's very incipient as 5G represents some 5% of the international market in 2021 in the U.S. market. The U.S. market is at the spearhead of that movement, represented some 85% of the world market and 5G penetration with U.S. was 36% in the U.S. versus 5% for the world average. But of course, with onboard -- because onboard ships carry more technology, this represents an opportunity, not only in terms of churn, but also that we first to sell products at higher average prices.

But again, we have been seeing this strongly, very strongly in the U.S. in our U.S. operation in other geographies. This is a trend that will probably get a speed through time from -- we saw a transition -- an 8-year transition from 2 to 3G, then some 6 years from 3 to 4G, 5G began around 2019, 2020, and we expect that process to take some 5 years to be completed worldwide, then of course, with different rates and different geographies. We expect the market. To improve over time in the next few years, we expect that in 2025. We expect to see 26% to 40% penetration for SIM with a world average of 30%. We have then 75 carriers have already initiated their -- is in services and 80% of carriers see that as a priority in their pipelines. And we now have approximately the 50 smartphone model is SIM-enabled, all Apple models, but some models for Samsung, Motorola, Qualcomm, et cetera.

On the consumer end, on the other hand, we saw a lower awareness only some 20% of consumers understand and because China and as China releases smartphones with -- is SIM enable then perhaps the penetration rates will increase. But again, this is beginning. We expect some 30% penetration in 2025, and we are preparing ourselves to continue to be an important player in that transition to.

[Olavo Vaz, executive]

Next question, Bressan, [ Enrico ] from Focus Capital. You said you have one were awarded contracts in Piaui, Minas and Espirito Santo. Could you please give us some details on those new contracts?

[Ilson Bressan, executive]

Indeed, we have -- we're implementing our operations for those 3 states, a bit further along the round for Piaui and Espirito Santo radian operation. Piaui will officially release its new features for its identity cards. Next Tuesday, the 15, Minas Gerais, the time schedule for Minas Gerais, we'll see the next -- the initial stages in April in terms of volume. For those 3 states, we expect them to represent some 2 million units issued documents -- additional documents issued [ prior ]. Minas Gerais represents a bigger share. Piaui and Espirito Santo because they have smaller populations, they will, of course, create smaller volumes. Those contracts includes -- that the prices for those contracts are tacked to inflation, and they're very similar to our other current contracts.

[Olavo Vaz, executive]

Next question. Fabio asks what will be our strategy in terms of the increased interest rates in Brazil, what's your expectations for the next quarters and for early 2023?

[Unknown Executive]

We're following the strategy that we have created in the next -- in the last few months. So now that the company has been showing much stronger results than in the past. Our strategy is to extend the maturity of our debt and to reduce its costs. And we are also studying -- we're also exploring the potential increase of the participation of foreign currency in our debt mix because of the increased interest rates in Brazilian currency.

Our cash generation. We have significant cash generation in U.S. dollars, of course, mainly from our U.S. operation. And this gives us room to increase the participation of foreign currency-denominated debt. We're looking at rates. And we've been in conversation with several banks. As reported, we have obtained fresh debt from the U.S. at very competitive rates in the U.S., a 3-year long debt. We have initiated the process to renew that that will come due now in the second quarter.

So we're very comfortable in terms of the expectations for the second quarter, and we're confident that we'll be able to extend the -- our average maturity date in the next few years.

[Olavo Vaz, executive]

Renato, next question from Gabriel. The question is, with the improved cash generation, does the company expect to paying dividends?

[Renato Tyszler, executive]

Yes. We do have a policy now. 2 things I'd like to focus on. First, the tax reform and interest and owners' capital. So some people were afraid that interest on owner's equity could have been terminated 2022. But if it remains in place, it will be more tax efficient for us to pay that interest. But even if that door is closed, then we will, of course, pay dividends, which need to be based on our net income, both dividends and interest on owners' capital are calculated based on our net income and not necessarily related to our cash generation.

[Olavo Vaz, executive]

Next question, Bressan from Ricardo. At quarter 1, so from a regulatory standpoint, how will the contracts for new IDs be awarded? Will a single player be retained to issue the new IDs across the country?

[Ilson Bressan, executive]

Those contracts continue to be awarded as they usually were. The decree for the new identity card establishes a nationwide standard for the new cards, but each state continues to award contracts separately. So the issue is decentralized in each state. And the tenders for those contracts remain as they were because the decree has created a new product, the polycarbonate cards, which will be the only physically available as of 2032. What will happen is that naturally -- each state will add that product to its request for proposals. And the earlier regulations already included the polycarbonate versions, so that perhaps we'll only need to amend some of the existing contracts so that we will issue these cards as soon as we're able to do that. And possibly, the integration processes that have to occur between the identification entities for each state governance with other federal entity, identification entity with the Federal Revenue Service will go on.

We're the key player, the major player to issue those documents. There is no regulatory requirements. The requirements come from the market. We continue in a leading position. So we don't think that issues will be centralized in a single player has happened for instance, passports. We think that the current procedures will evolve in our opinion, perhaps this market will be professionalized somewhat outsourced because in some states today, do they continue to use their own entities and structure to issue those documents. The government themselves purchased a paper and have their own facilities to issue the cards. We think that state governments will focus more on technology, to -- so that they have stronger databases. So that we think that once we have only the polycarbonate version, it will make no sense for each state to continue to do that separately because the investment required is not feasible if the volume is small. So we think this market is very promising. The decree establishes changes for the identity card, but we see the contracts continuing to be awarded by each state government.

[Olavo Vaz, executive]

Ivan, another question from -- could you please give us more detail in terms of the sale of U.S. assets?

[Ivan Luiz dos Santos, executive]

In the course of our work we've been last year, we have been continuously reassessing our assets, especially our international assets and among those, especially assets that which are more significant in terms of our operations -- of our manufacturer operations, not only in the U.S., but also our assets in Argentina and Colombia. Our focus is on our ability to win. And on the strategic importance, how those assets feed back into our future strategy. So we continue to review those assets. But at this point, we have no specific guidance both for the U.S. and for assets and for assets in other countries.

[Olavo Vaz, executive]

We have now a few questions from [ Alexandre ]. How do you see themselves as a company in the financial industry, retail industry, or technology industry? Another question. What sort of sustainable EBITDA margin you see for VBS? And finally, the smart city strategy has shown success. I believe this will -- do you think this will be important for Valid's future in terms of revenue and margins?

[Unknown Executive]

We see ourselves as a trust powerhouse. Any manufacturer service process that involves security information and data are included in our scope of action. This currently includes a very significant manufacturer aspect for bankcards, a very significant service aspect for documents, in which the immediate government is the government, but the ultimate client is the -- each citizen so that this has a somewhat retail component.

And of course, we're very much focused in technology not only in our current products, but also in products -- new products that we are developing, for instance, digital certification in, for instance, some contracts involving some products involving bank operations and the register of deeds for real estate transactions. So we see ourselves as a [ trust per house ], a very significant technology service and manufacturer aspects.

In relation to EBITDA margins for the VDS business, we continue to be very happy with the -- for having brought those business to a positive EBITDA level, choosing very well what we want to do and what we do not want to do. I still don't expect a very significant growth in EBITDA for the next few years. In other words, I'd rather continue show progress as we choose what not to do so that we focus on initiatives that are successful so that EBITDA will continue to improve. But I'd rather focus on gaining new markets and top line so that solutions such as Valid Hub, they gain market share following certain dynamics that will be much more similar to the technology industry. So the vendor locking will allow us to bring new contracts and to create a natural improvement in our EBITDA margin.

And finally, in relation to smart cities. Valid in the recent past, made 5 significant acquisitions, one of which Blue Bay, it was an initiative that we have now discontinued in another extreme Valid Hub is an initiative that has been very successful, and we're very happy with its performance. [ 3 ] other acquisitions, Mitra, [indiscernible], some of which -- 2 of which refer to the Smart City segment. We are now reviewing in-depth 2 of them, those businesses individually show operating very interesting, very attractive operating and performance perspective, but we are not certain about how to scale up those markets, so that now we have no specific guidance in relation to the significance that those efforts will gain. But myself and our team are very closely reviewing what marketing strategies we can implement. And of course, if results are positive, we will scale up faster. And if the performance is not successful, then we may even discontinue those efforts, and we will report on that in the next quarters.

[Olavo Vaz, executive]

So we are now closing our Q&A session. Ivan, would you like to make any final comments, before we wrap up.

[Ivan Luiz dos Santos, executive]

Thank you, Olavo. So once again, I'd like to thank you all for your participation, for your questions. All of our Investor Relations team led by Renato and Olavo and all our senior management, we are available. If you'd like to discuss one-on-one, anything, if you're interested. So finally, again, I'd like to say that we are very confident in terms of Valid's future. So thank you all for your participation. Goodbye.

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