Valid Solucoes SA

BOVESPA:VLID3

Earnings Call Analysis

Valid Reports Strong Growth and Profitability in 2023

In Q4 2023, Valid's revenue soared by 32% to R$633 million, contributing to a total revenue of R$2.25 billion for the year, up 20% from 2022. All business verticals experienced double-digit growth. EBITDA reached R$147 million in Q4, a 9% increase, leading to an annual total of R$567 million, marking a 19% yearly growth. The company achieved a net income of R$36 million during the quarter, a robust 44% increase, resulting in an earnings per share growth of over 700%. While margins contracted slightly from 28.2% to 23.2%, largely due to the mobile sector's global price drop, a strong cash flow conversion rate and a leveraged position at an all-time low of 0.1x highlight a solid financial standing. Valid also returned 36% of its results to shareholders through dividends, reflecting a yield of nearly 5%.

A Strong Finish for the Fiscal Year

Valid concluded Q4 2023 on a robust note, announcing a significant revenue surge of 32% for the quarter, reaching R$633 million. This performance capped a financially successful year with a 20% increase in revenue to R$2.25 billion. All company verticals reported double-digit growth, affirming across-the-board strength. Furthermore, the annual EBITDA leaped by 19%, amounting to R$567 million—a continuation of a record-breaking trend for the third year in a row.

Cash Flow and Debt Management

The company flaunted an impressive cash flow performance, turning 109% of its quarterly EBITDA into cash. This effective cash management led to a 95% cash conversion rate for the entire fiscal year. As a result of such fiscal prudence, Valid reported a minimal net debt of R$72 million, maintaining a remarkable leverage ratio of 0.1x, the lowest since its IPO in 2006.

The Payments Segment Shines

A contributor to Valid's growth narrative was the payments segment, which delivered solid results, particularly buoyed by the Argentinian operations. This segment was crucial to reaching a total EBITDA of R$147 million for the quarter and R$567 million for the year, marking a 19% growth relative to the prior year.

Understanding Margin Dynamics

While achievements were plenty, Valid observed a dip in margins. Quarterly EBITDA margins fell from 28.2% to 23.2%, attributable to increased contributions from the lower-margin payments sector and a global downturn in mobile prices. Despite this, the annual margin remained close to the previous year's figure, at 25.1%.

Impact of External Economic Factors

Net income rose by 44% in Q4 to R$36 million, in spite of challenges such as significant currency inflation and exchange effects in Argentina, which alone accounted for a R$21 million negative impact. The annual perspective also depicted strong earnings, translating to a gain per share of almost R$2.70. The total annual net income reached R$233 million, climbing from R$567 million in EBITDA, despite a financial footprint from Argentina costing R$18 million. Depreciation and amortization costs stayed consistent year-over-year, while income tax expenses reflected an effective rate of roughly 23%.

Earnings Call Transcript 2023-Q4

[Olavo Vaz, executive]

Good morning, everyone, and welcome to [Indiscernible] call's announcement for Q4 2023, Valid. I am Olavo Vaz, IR and Treasury Head. Before we start I make some announcements. These events being recorded. We've been connected in listen [Indiscernible]. The slide desk is also being presented in English. The slides and materials can be found at our IR website. After the event, a replay facility will be made available in our website. When we finish, as usual, we'll have a Q&A session. Questions can be sent now or at any moment during the presentation. [Operator instructions]. Forward-looking statements made during this conference concerning the company's business outlook, financial and operating forecasts and targets are based on beliefs and assumptions on the part of our company's management and also on information currently available. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions as refer to future events and depend on circumstances that may or may not materialize. Investors should have in mind that overall economic conditions, in addition to other operating factors might also affect the company's future and does lead to results that will differ considerably from those expressed in these forward-looking statements. As you know, on February 19 we announced that as of April 1, Valid will have a new CEO as part of this transition process, which today we have with me. Ivan, our current CEO; Bressan, the Head of ID and Digital [Indiscernible] and future CEO; and our CFO, Rafael Ziggiatti. For his opening remarks, I'd like to call to stage Ivan. Good morning.

[Ivan Luiz dos Santos, executive]

Good morning Olavo, and good morning to all of you being here with us for our calls and results announcement. On my behalf and of the Board, I'd like to announce the final results for 2023. I'd like to leave a special word of thank you to our employees' continue to tirelessly seek a new and stronger Valid. We'll start the presentation with the highlights of Q4 in the year 2023. We closed the quarter with revenues of R$633 million, a growth of 32% when compared to the same period of last year, 2022. In the year '23, the company posted revenue of R$2.25 billion, a growth of 20% when compared to the previous year. It's important to emphasize that all the verticals where we operate saw a growth in double digit of more than 10% year-on-year. And in EBITDA terms, we had R$147 million in the quarter, a growth of 9% when compared to '22, and we closed 2023 with R$567 million in EBITDA which marked the third consecutive year of record-breaking results. Annual EBITDA grew by 19% when compared to 2022. And in terms of margins, Valid -- the indicated of 25% which had already shown last year. Moving on to net income. In the quarter, we had R$36 million of income, leaving the year-to-date number to R$213 million, which represented an annual margin of 9%. The R$213 million gained represents an earnings per share of almost R$2.70, an increase of over 700% when compared to 2022. It's was mentioned that throughout 2023, Valid restarted periodically paying out dividends, having paid out 36% of its results through the JCP, which accounts a dividend yield of almost 5% on the value of the share at the end of 2023. In the next slide, we'll give more detail of the details of the main contributors for that strong result. We start by cash conversion. Since the call, we had about Q2 results in 2022, we have reinforced that all the company's efforts are geared towards maintaining a high level of profitability as we would improve our working capital management in the fourth quarter. That was no different and it was special actually. We reached an indicator of cash flow conversion of 109% of the EBITDA in the quarter which led to a [Indiscernible] number of 95% in the year. Down the road, we're going to talk about gains across the different lines that make up our working capital. A high conversion of EBITDA into cash led Valid to close the year with a net debt of only R$72 million, therefore, a leverage of 0.1x. That level is the lowest ever or since its IPO in 2006. We'll now go into more detail for the numbers. I'm going to call Rafael Ziggiatti, our CFO.

[Rafael Ziggiatti, executive]

Thank you, Ivan, and good morning, everyone. As we showed previously, 2023 was a special year with Valid. Revenue grew by more than 20% in the year and 32% in the quarter. Our segments contributed for this growth. Payments units is worth mentioning throughout the year, it presented a strong results led by the Argentinian operation. We'll be talking about that in a moment as we move forward with the presentation. As for EBITDA, Valid presented R$147 million in the quarter and in the year, we have reached the mark of R$567 million, an increase of 19% year-on-year. As for margins, there was a drop of 5 percentage points when compared to Q4 2022, moving from 28.2%, down to 23.2%. That drop can be explained by 2 reasons: an increase in the share of payments and the consolidated results and mainly driven by a global drop in prices in mobile. And as we resumed pre-pandemic price levels as expected and I had already mentioned that in previous communications. This high share of the payment units and an environment where we had more pressured margins for mobile is expected to remain in 2024. Still, Valid closed the year a margin of 25.1%, in line with the 25.4% filed in 2022. On the next 2 slides, we will be talking about the path from EBITDA to net income, both in the fourth quarter 2023, ending the year to date. In the quarter, we moved from R$147 million in EBITDA to a net income of R$36 million, an increase of 44% when compared to the same period of 2022. If we follow the bridge on the slide, we had R$43 million of financial numbers in negative numbers. That number was especially impacted by the inflation and foreign exchange scenario in Argentina. Only in the fourth quarter of 2023, Argentina impacted negatively with R$21 million, therefore, half of the results achieved in the quarter. As for depreciation, we have kept the levels we've seen in previous periods. For others that came out at R$42 million in the quarter can be explained by about R$20 million relative to different asset write-offs and R$10 million in the -- in adjustments in the fixed assets. Q4 usually has higher amounts because most of the recovery happens at the end of the year. And lastly, we had IR and CS tax credits because of a compensation of tax losses that affected the deferred tax rate and the payment of the JCP, which impacts the current tax level. Moving on to the annual view. We moved from R$567 million on the left to a net income of R$233 million. As Ivan mentioned, represents a gain per share of almost R$2.7. The financial results in the year had an impact of R$18 million coming from Argentina. In the previous slide, I had mentioned that in the Q4 Argentina's effect had been negative by R$21 million, an amount slightly higher than what was observed throughout the year. For depreciation and amortization, the amount of R$104 million in the year is about the same as we had in 2022 at R$100 million. Under others, which came out at R$69 million in the year, we had in addition to events mentioned on the previous slide, about R$8 million which were allocated in diverse contingencies and the amortization of a surplus of about R$30 million. Finally, income tax, the amount was R$62 million which represents an effective rate of about 23% in the year. Valid had the benefit of tax reversal in Q4 as I mentioned in the previous slide and also now counts on lower rates because we operate across different geographies. In addition to the bridge from EBITDA and net income, it's important to understand where those contributions are coming from that led us to move from R$24 million to R$213 million in EBITDA last year. We had contributors coming from 3 main groups: EBITDA itself, the results from discontinued operations and as we improved our financial results. For under others and depreciation and amortization, the amounts of 2023 were in line with those in 2022. And under taxes, we had a larger collection base. If we go into detail for the 3 main positive contributions, we see a progress of R$89 million EBITDA, which is made up of an increase of R$33 million in ID, R$73 million under payments, and the total result can be attributed to Argentina and a drop of R$17 million mobile. The fact that Argentina is going through a hyperinflation period requires because of accounting standards, IAS 29 and CPC 42 that we make adjustments that I have to add to the EBITDA number, about R$20 million in December alone. As for discontinued operations, the progress of R$82 million can be explained by the fact that we no longer have a unit in the U.S. in 2023. As for the financial results, we had a drop in financial expenses and we were less impacted by foreign exchange variations. In summary, with lower debt and more cash Valid was less subject to financial expenses. And as in 2023, the company had many intercompany loans and foreign exchange remained flat. The foreign exchange result saw an improvement when compared to 2022. Excluding the effects from Argentina, the financial results would have seen an increase of R$88 million when compared to 2022. However, when we add Argentina's effects, the increase remains at R$68 million. The 3 main reasons to explain Argentina are with the restriction of international payments imposed by the local government, the cash remains longer at Valid, which leads to higher profitability. As for accounting, we need to update books because of a hyperinflation environment, as explained. The depreciation of the peso vis-a-vis stronger currencies, especially after the [Max] devaluation in December also has an important impact. We continue to analyze potential scenarios involving our local operation because of frequent changes that have been announced by the government. The possibility already announced that an improvement in the international payment and flow, especially to suppliers, should increase competitiveness in the country, and we believe that this will happen as of the second half of this year. I now will cover the main journey for the value indicators throughout the last years. We had evolutions in EBITDA and income since 2020. In terms of performance, Valid saw in 2023 an increase of return on invested capital of 22.5% and a return on equity of 15.8%. In the last announcement we talked about a more profitable company, but another indicator that we are now monitoring and have included in our executives target is operating cash generation. In 2023, we closed the year with a cash generation that amounts to 95% of the EBITDA reached in the year. On top of that operating generation, we had a year with a CapEx at R$70 million. The financial result was negative at R$109 million, which was a drop of about R$70 million when compared to 2022, as I showed in the previous slide. We also had a reduction of R$143 million in our gross debt and we realized almost R$100 million in payments throughout the year, reaching a final cash of R$619 million. Now briefly talking about our working capital, especially in the second half, the teams have thought to improve indicators under receivables, inventory and payables. We have reached important progresses across all accounts with an improvement in working capital of about R$150 million since Q2 2023, reaching levels that we consider to be balanced and in fitting with our operations. As we mentioned, 2023, we closed the year with R$690 million cash and a net debt of only R$72 million. In other words, 0.1x in terms of net debt over EBITDA ratio, value that is well distributed across bilateral operations to market and international. And today, we have about 1/4 of our debt in the short term and the remaining in the long run. The cash position is enough to settle all obligations for this year and 2025. In addition to that, we have recently had an increase by Moody's of our corporate ratings and because of our 9 debentures and mission, which are now at AA- for the company and AA for our debenture, AA. For our performance in capital markets, 2023 was a year where we recognized with 2 years of work, appreciating by more than 140% and remaining above main indicators such as Ibovespa and the small-caps index. In addition to our increase in share, we paid about 36% of our payout with a dividend yield of 4.7%, considering the prices for 2023. Also important, the liquidity of our shares has increased having closed the last quarter with almost R$9 million in traded volume a day, twice as much as we had in 2022. I'd like to call Olavo back to talk about the results of our main verticals. Thank you, and over to you, Olavo.

[Olavo Vaz, executive]

Thank you, Ziggy. I'll briefly talk about each one of our verticals, starting by ID. We had the issuance of 7.1 million documents, 3% above what we had in Q4 2022. With that, we closed the year issuing 29 million documents, the highest level for the company. Remember that throughout the year, we had the benefit of the extended calendar for the maturity of drivers license which closed in August 2023. The ID vertical showed in the period a growth of 23% in revenue and a drop of 9% in EBITDA, with an operating margin of fleet 31.9%. As I mentioned in the previous call for the third quarter, this year, we have in our exam activity, 20 million with a lower margin debt of documents. That led to a worsening of our margins when compared to the same quarter of 2022. In the year-to-date, revenue for ID reached R$747 million, a growth of 17%. For EBITDA, growth of 50%, reaching R$252 million. Even that -- even though margins in Q4 have been lower than the same period in the previous year, Valid closed the year with the margin level at 34%, quite close to what we had achieved in the previous year. Now moving to payments. This was where we saw highest growth in sales and EBITDA, having acquired higher share in consolidated numbers, even though the number of cards have remained stable year-on-year. Today, 30% of the volume of cards of Valid is produced in Argentina. Sales in Q4 reached R$258 million, a growth of 44%. EBITDA reached R$56 million in the quarter, an increase of 58%. As we mentioned before, that growth has happened mainly because of our results in Argentina, which only in December had a positive contribution of about R$20 million in EBITDA. The positive effects in our operational side has -- should be analyzed in conjunction with higher financial expenses because of foreign exchange losses and accounting adjustments due to the hyperinflation scenario. In the year that vertical saw sales of R$892 million, up 30% when compared to 2022 and EBITDA of R$191 million, up 62%. We closed the year with an operating margin of 21.5%, an increase of 4% when compared to 2022.  Speaking about our outlook, we believe that the process of interest rate cuts starting 2023 might lead to an increase in our credit base, which would drive a higher emission of cards in Brazil or issuance, but that increment is gradual and will happen in the mid-run. In Argentina, the change in government happened in December brought about regulatory changes that tend to make a better local business environment. For example, a drop in the deadline for imports payments. But the scenario in the country still requires caution with a very devaluated local currency, high inflation and high interest rates, so structural changes tend to take longer to materialize. And now I turn to the mobile. In the quarter, we saw a growth of 29% in terms of sales and a reduction of 10% in terms of EBITDA with a margin of 15.4%. We closed the year with a revenue of R$670 million, 11% above what we had last year and R$124 million EBITDA, a drop of 12% with a consolidated margin of 20%. As we mentioned in previous calls, this is a segment that had global volumes impacted during the pandemic which led to an increase in prices. Valid maintained that higher price situation in the first half. As of Q2 '23, we started to see a more intense recovery in the offering of chips and a start of a slowdown in prices and margins, which became clear in Q3 and Q4. We still see, especially in geographies where we had less value-added chips, and we do not see any change in that dynamic anytime soon. We will maintain our focus on the optimized allocation of chips increased where we operate. As the year unfolds, we'll have more clarity in terms of volume, price and unit costs. Before finishing my participation, I'll briefly talk about 3 events that happened recently. One of the -- the focuses of our team has been a constant assessment of our portfolio so that it can have in the company, activities, services and geographies that present high competitiveness and potential to grow in the market. Along those lines, late last year, we announced at the company, the IOT company, Cubic Telecom, in which we held 6% share received an offer to buy the control by [SoftBank]. Our share was minority was bought by EUR 10 million in 2016 and was assessed now at EUR 54 million. With the sale -- in the selling process, which was concluded in Q1, Valid will receive approximately EUR 32 million, and we will maintain a 2.4% stake at the company. Part of the result coming from that sale will impact in a nonrecurrent way, the results for the coming quarter. We also had the conclusion of the sale of a real estate property we had in Sao Benardo and the sale of our stake in the Serbet Digital Parking company [Indiscernible] happening there. Now I'll now turn the floor over to Ivan to Brian, who will continue, and I'll be back for the Q&A.

[Ivan Luiz dos Santos, executive]

Those questions can be sent using our Zoom platform. Please send over to you. Thank you, Ivan, Rafael and Olavo and to all of you with us this morning, it is a pleasure to be here at this call with. I'd like to offer a snapshot of each of our main business lines, which represent our footprint in ID, digital government payments and safe connectivity, showing the view of what they have ahead of us across those 3 verticals. Before, however, I'd like to highlight an important point in addition to the [Indiscernible] just presented. I'm talking about the ENPS indicators just measured in our most recent internal poll, where over 2,000 employees gave us a score of 73 in the item will refer this company to work, 20% above what we had in 2021. An organizational culture work that leads us -- makes us ready to face internal [Indiscernible] as we grow or try to grow our revenues. As Peter Drucker said, culture as its strategy for breakfast. Looking back, some external factors, especially the pandemic and the chip shortage in paying mobile plus the Argentina effect, combined to an internal capacity of the team and made it possible for us to deliver the financial numbers we have just presented. Now we move on to a new phase where new challenges are present and results generation levers are different. When we look at mobile, I'd like to highlight the following points. Our results in the short and midterm 2021. In 2022 saw a slower drop in SIM cards volumes. The volume dynamic in the short run might increase, but in markets with lower added value, and as a consequence, lower margins. We saw a similar behavior as we transitioned to digital, slower than expected even though we already see signs of a slight acceleration in 2024. Our consolidated position across the main 5 players in the globe with an approximate 10% market share allows us to look at this vertical with a strategic view that we may say. For Sim cards, our focus is to maintain high levels of services and focus on markets with better margins, trying to bring in more Tier [Indiscernible] clients on their platforms. So we [Indiscernible] develop portfolios. We already have about 100 platforms implemented, which allows us to migrate to digital with a strong footprint in the market, very close to [Indiscernible] market share we have in sim cards. In O&M, we have created a commercial team in China. We are developing relationships with the main Chinese manufacturers. We are one of the main partners of the 2 largest chipset providers in China, which position us very well in the local market in IOT. We have a partnership with [Indiscernible] providers to deliver [Indiscernible] for companies such as Volkswagen and Uber, this way, we're maintaining our strategic view of continuing to invest in this transition to digital through OEM and IOT platforms as well as in [Indiscernible] short-term dynamics for [Indiscernible] to maintain our good service [Indiscernible] and to grow Tier 1 clients. When you look at the banking ecosystem and the payment ecosystem, we have basically 3 main elements observed; number one, the market dynamics in Brazil where we have a higher [Indiscernible] market share. And as we try to -- as we saw a drop in volume and pressure in all places about fixed cost because of the [Indiscernible] idleness, [Indiscernible] is to maintain market share and the position with higher card agency banks. The dynamics in Argentina, where we are absolute leaders in cards can always present surprises. We had a positive surprise with the numbers presented in 2023, and we see the same situation for the [Indiscernible] run in the first half of '24. It is likely to see an improvement in the competitive pricing scenario in the second half, but our market share in that market allows us to continue capturing value in a significant manner. [Indiscernible] aspect in payments has to do with the [Indiscernible] of innovation in Brazil, in addition to digital revenues through billing and communication platform, which we already have 2 new fronts are being [Indiscernible] now. [Indiscernible] digital onboarding platform as we acquired Flexdoc to last year, where we developed a program to be more and less to cover commercial opportunities. And number two, the benefit management platform made possible through our citizenship part for our digital government journeys on with cities and states. Both initiatives keep gaining traction in '24 and our focus to find [Indiscernible] within this segment. For the ID and digital government front, it continues giving -- issuing documents and have started to deliver [Indiscernible] of the government. [Indiscernible] the documentation, [Indiscernible] of issuing the new national ID card, which is gaining traction and [Indiscernible] as we move on throughout the next year. As we look at the short run and comparing that with the issues of RGM both January and February compared to 2023, you already see an increase of 10% on that front. As for [CNH], the driver's license [Indiscernible] 2024, but a strong reduction as of 2025, which is known by all because of the pandemic and the change in renewable deadlines from 5 to 10 years. What we've seen in terms of new potential revenues under digital government, has proven to be enough to cover that [CNA] gap. Speaking specifically about the digital government, here, we have a very profiting front. We already have the [Indiscernible] platform ongoing, which -- and we have the identity provider for the state and we have already started to deliver the CRR state digital government. The amount for the next 30 months is of about R$98 million. Our focus there is to convert more opportunities from the sales pipeline with different states and signing new contracts throughout the year. We now intensify the search for strategic alliances such as the one signed with [Fibronetica] so that our portfolio can be expanded and be more [Indiscernible] to meet the growing demand from different states as they seek to digitalize services for citizens through digital attorneys or cybersecurity initiatives. Lastly, as a measure that applies to all reports, having now a cash position -- a debt position, much more favorable than in previous years, we continue to look cautiously to up growth opportunities both organic and inorganic, so that new revenues coming through innovation, looking more meaningful going forward, both in core and its parallel sources. With these new market challenges as we have achieved a solid cash position, all of this allows us to look for new results in expansion with a focus on innovation and on the clients. Thank you all, and back to you, Olavo, and I remain available for Q&A or comments. Thank you.

[Operator]

We are back, everyone, for the Q&A session. I'm here with Bressan, Ivan and Ziggy. Questions can be send via the Zoom chat. And the first question comes from Philippe.

[Unknown Analyst]

Congratulations with the results. We had the material fact and as they have reached a net cash position. At the same time, you have a R$700 million gross debt position. Can you talk about your liability management?

[Ivan Luiz dos Santos, executive]

I'll start [Indiscernible] in Q1. Philippe you are correct. Yesterday, we had this material fact being announced. As we concluded the transaction we announced last year, we have received those EUR [Indiscernible] million in Europe, as you know. So we have now reached a net cash position. As for that, as you mentioned, we have about R$700 million in debt total, R$500 million here in Brazil, R$200 million abroad. Half of the Brazilian debt has to do with our debenture issuance, which is CDI plus 3, which we understand is way above the level that the company should be, especially when you look the amount those products are being traded at the secondary market. So we have been working with some banks to improve those conditions. We have recently made a prepayment of a bilateral debt that we had with a financial institution here in Brazil, and that's a bit of the strategy that we have. The company does not need new resources, new funding, so the [Indiscernible] should extend terms and improve guarantees. And the same goes for our -- that abroad. We've been talking to banks in Spain, Itau and Santander to try and improve the conditions around that debt. And I believe just to add, observation in Brazil, average cost debt is about CDI plus 2.3 to 2.4, and we could improve that by about 50 basis points. I'm sure. Anything else?

[Unknown Analyst]

No, that's it. Right on it.

[Operator]

Second question from [Fabio Gabe].

[Unknown Analyst]

I'll ask you to Bressan. After the restructuring for 3 years without any guidance, what would be your growth strategy for the next years? Will it be a more aggressive or more conservative as it has occurred in 2022 and 2023? Has the company been analyzing M&A operations for this year or next year?

[Ilson Bressan, executive]

Good morning, Fabio, good morning everyone. Thank you. If we could choose a word between aggressive and conservative, that's where we would be, halfway as we look at the company's growth strategy. We can only reach net cash or to reach business conditions that we have now because of all the turnaround we have implemented throughout the past year. So we now have reached a better position to improve using the same criteria. Criteria is the buzzword, the right procedure to choose potential M&As. We have been focused on growing digital government or digital onboarding or AI. So we'll be following along those lines, which are close to our core, close to our expertise, and that allows us to grow our portfolio with our plants. What happened without a doubt, the innovation line inside because we have a good client base and once those clients have needs that were able to meet. So these internal MGT's, internal innovations, this should be encouraged so that we can fly away to expand portfolio based on our core capabilities and grow from there. So those are the pathways for the next call, we're going to be giving you more visibility around those. But you can be sure of something we are maintaining very strict and [Indiscernible] criteria to ensure that whatever steps we take to use this available cash that we have now will be very cautious as we choose [Indiscernible] investments.

[Unknown Analyst]

Thank you  Fabio has another question. I'll read you Ziggy. For 2024, what can you expect in terms of dividend payout close to 22% or close to 23%? And then a follow-up, R$173 million, which were announced yesterday, are they part of this year's cap, I can say yes, but Ziggy, over to you.

[Rafael Ziggiatti, executive]

Thank you, Fabio, for your question. Yes, it's already part of the cash as Olavo mentioned. And as we also mentioned, we already net cash as of today. Yes. And to your question about payouts, yes, we expect 2024 to be very similar to what we had last year. In 2023, we paid out about R$100 million paying a JCP basis, R$77 million. And this year, we intend to continue on the same path. We are still deciding -- we decided during our General Shareholders Meeting, '24 [Indiscernible] as we saw yesterday, and we intend to complement that through the payout of JCP to the legal limits.

[Operator]

Once again, if you have a question, you can use the chat facility of the Zoom platform. We have another question from -- 2 questions, which are similar, we are consolidating those questions. Rafael and [Indiscernible] asked similar questions. Congratulations on the results. I'd like to know what's your mindset about now the high cash level you have today? And you're going to be receiving more resources from the Spain sales. We have already announced dividend payouts, do you expect to have more payouts? Do you intend to look at M&A or to have more investments?

[Ivan Luiz dos Santos, executive]

We have already touched upon those issues as we answered the previous questions, right? Late last year, there was a slight adjustment in legislation about JCP that does not have a significant impact on 2024. So based on our accounts, we would be able to pay out through JCP of about R$75 million. As Ziggy mentioned, next week, the Board will decide extraordinary dividend payout of R$25 million or interim dividend payout. As for that, we are working with the banks, as I said, to try to extend our debt profile to improve guarantees to provide longer great periods next year and so on. And as for M&A, we are paying close attention to opportunities that may come up in the market. As Bressan mentioned, we have been very cautious, very selective. There's no material possibility now, the M&As we have announced are things that complement our portfolio and for now, that's what we have. Anything else to add from you guys?

[Unknown Analyst]

Okay. Let's move on to the next. It's similar [Indiscernible] but also Argentina. I'll split the question between Bressan and Ziggy. The question from Rafael [Indiscernible].

[Unknown Analyst]

If you can talk about Argentina, what's the volume and the cash there? And what's the outlook you have? It's important here to say the following. Bressan, if you could talk a bit about the dynamics in Argentina and also the operational side and then Ziggy would complement with what we have been doing in terms of cash and as this -- how this affects the controlling shareholder.

[Ilson Bressan, executive]

We pay close attention to that because of the risk associated to the country. There can always be a surprise, positive or negative. We expect that the environment there becomes better in the second half, more competitive, and this will lead to a drop in prices because in the last half of the year, as we showed, all local players, we're talking about 4 local players, and we are the leaders, without a doubt with a market share of above 50%, close to 60% actually. So because of the instability of the last half of the year, prices went up. Of course, the number efficiencies of cards, not only through banks but to provide handouts to population and the volumes last year were very high volumes, about 16 million cards were issued. We look at our first half now where the first quarter, upto April, we are totally booked in our factory. May and June will be along the same line, close to what we had last year. But as of the second half of this year, as we have a clearance and import, international payments, that dynamic will change and we should resume previous levels because of average prices. As for cash, I'll turn it over to Ziggy.

[Rafael Ziggiatti, executive]

Okay. As for cash we closed the year with [Indiscernible] 10 million cash in Argentina without the expectation of moving the cash from there until we have more news about [Indiscernible]. And that was [Indiscernible] the government ... it will be able to [Indiscernible] international supplies and valuate Brazil suppliers that they have in you, we all expect to be paid for [Indiscernible] payments. And we are now going to be third round of negotiations with those bonuses have been working, worked well, and we have been able to settle those invoices. So we see a positive evolution of that on.

[Operator]

Now the next question from Gabriel.

[Unknown Analyst]

Congratulations. Results have turned around, great year. I'd like to start with the results coming from the different business divisions. ID, strong drop in volume from CNH, and it was benefited by Argentina. What is going to be the impact of increased competitiveness in the second half? And as we see chips' prices going down, how can that affect? And if you could comment the impact on revenue and margins for each one of those verticals?

[Ilson Bressan, executive]

Gabriel, we have 3 different dynamics, and I've touched upon them as I presented my snapshot of those 3 verticals, that posted to the end of my presentation. But anyway, we have a very specific dynamics, which is in third part of Brazil as we try to expand revenues across [Indiscernible] government. That's a place where you have a lot of confidence. It seems to be enough for us to cover [Indiscernible]. It's a law of [Indiscernible] enacted in 2021 and will be valid [Indiscernible] that doubles the deadline, the maturity for driver license in digital acquisitions of CNH [Indiscernible]. But we're getting revenues from the government that will be enough to offset that drop in CNH issuance. As for the same dynamics, a growing [Indiscernible] dynamics until now, Brazil has issued 4.3 million new sim documents valued -- issued on payment those 1.5 million, we have not even captured for high [Indiscernible] states, some [Indiscernible] with them. So [Indiscernible] in the first [Indiscernible] remain same as we have been previous. So that's very clear with stability from the point of view of standards. We talk [Indiscernible] dynamics unfold second half, especially on prices. This margin of that, as I said before, our [Indiscernible] as leaders in the market to also capture more value given the circumstances. There's no move, trending or a down trend. In fact, we can manage them, no problem. As [Indiscernible] very vertical that we see with some concern, this is a [Indiscernible], especially in Asia we will try to hire [Indiscernible], but we are not depending on their price markets. So we go for volume, but we [Indiscernible] margins. We're also expanding to be able to gain [Indiscernible] global [Indiscernible]. As for Europe and Latin America, we have already seen a curve where SIM cards like drops and [Indiscernible] then we got [Indiscernible], we have a sharp drop that never happened. It only started in 2024. At this time, the transition to -- with platforms and [Indiscernible] gives us ability for us to [Indiscernible] slightly higher [Indiscernible], still following [Indiscernible] curve, but little by little the transition we'll be spitting up a bit. [Indiscernible] to maintain market but on -- we have been working to innovate [Indiscernible] because of the transitional OEM plus what's happening in [Indiscernible]. In addition to [Indiscernible] we have talked [Indiscernible], [Indiscernible] some efforts of our teams will be in [Indiscernible].

[Ivan Luiz dos Santos, executive]

Can I complement? [Indiscernible] more digitalizing of the mobile software. That cannot take a drop at an increasing margin because you're talking about [Indiscernible] component that has a [Indiscernible] smart than cards or SIM card. So [Indiscernible] adopt sim around the world actually. What we're expecting as of '25 is that we are well positioned to meet those demands and to offset potential margin impact on [Indiscernible].

[Operator]

Once again [Indiscernible]. [Indiscernible].

[Unknown Analyst]

Congratulations. Give us some more details on the [Indiscernible] in the past few years, [Indiscernible] and cards made by retail, there was an increase in the [Indiscernible] in the future [Indiscernible] to the long run.

[Olavo Vaz, executive]

Thanks for the question, [Indiscernible].  We had some [Indiscernible]. They could [Indiscernible], of course, the future takes a long time here. We have a significant [Indiscernible] cards dropped significantly. Another [Indiscernible] a couple of years when we [Indiscernible] check [Indiscernible] business volumes drop since [Indiscernible] it took as a long time to [Indiscernible] that vertical. So some of those dynamics, not think about [Indiscernible]. We're concerned about drastically drop in [Indiscernible]. Some factors might even improve, for example, credit expansion would [Indiscernible], for example, and have [Indiscernible] for content and then they'll issue new cards. There is this give and take from [Indiscernible] to another, fintechs are actually bring higher volumes, which are lower during the [Indiscernible] because of market conditions, but we see those volumes as it decreases very slowly, we have room to try to expand and [Indiscernible] by other [Indiscernible] we have paid those [Indiscernible] too. For example, [Indiscernible] cards for each season, where we're going to have ID [Indiscernible] benefits. There is a very large [Indiscernible] segment to be able to be serviced. The project, which is already [Indiscernible] with an [Indiscernible] being run, and we hope to see traction there soon. Other example would be transportation cards. That's something we [Indiscernible] -- to extract value from -- for a long time from a [Indiscernible]. Just to comment, our [Indiscernible] it would be worth looking at our last Investor Day, [Indiscernible], he was very vocal thinking that the market moved from [Indiscernible] stock [Indiscernible] cards to 800 million cards. That dynamic, as Bressan mentioned, of removing those cards throughout and still ensures important scalability levels for that business. Incumbent banks vis-a-vis fintechs like bank process, [Indiscernible] the number of [Indiscernible] or the branch need a new card to be sure [Indiscernible] also mentioned the cost of the card vis-a-vis the lifetime value of the client. A card makes a relationship possible with the institution. It is a very low cost compared to life and value. So that dynamic is expected to win. And on the market side, both the company, ourselves, and our manufacturing side, if we do not have any entrance and there are no [Indiscernible] and as long as we do not have irrational CapEx expense, just maintenance and efficiency as long as price will not deteriorate significantly, those 3 factors combined, if they remain constant, the business remains very interesting, generating important cash levels in the coming years. Well, everyone I think with this last question, I have reached the end of our earnings call, I'd like to remind you that all our team, our IR team remains available for any additional comments or questions you may have. I'll just turn it over to Ivan for his final remarks. Ivan, over to you.

[Ivan Luiz dos Santos, executive]

Thank you, Olavo. So this is my thirteenth earnings call. It's been a pleasure for the past 3.5 years. On behalf of the whole team, on behalf of the company, it's been a pleasure to report the results, the evolution that the company has seen for the past 3.5 years. Record-breaking numbers in terms of results, top line, margins, EBITDA, net income, cash generation, earnings per share. So actually, the company has a very different level compared to where we were 3.5 years ago, and that's the result of the work of all of you, all of us. Thank you so much. Also thank you to the Board of Directors, the executive management here with me and also the ones who are not here, our colleagues of the whole group that we have called GX, the senior leadership of the company, GX, everyone was fundamental in transforming the company as a whole, our assets as a whole. Valid existed 63 years before I got here, right? So for the past 3.5 years, if I was able to lend my energy, my soul, my life to the leadership of the incredible team was an incredible pleasure, a very special moment in my professional history. I leave the company physically, but I'll continue to monitor, to follow up on you on your achievements and the glories that you will sure to achieve. Thank you also to investors, market analysts who always had very thought provoking remarks and questions. Thank you so much. Thank you, my colleagues here, and see you next time.