Meliuz SA

BOVESPA:CASH3

Earnings Call Transcript

[Marcio Penna, executive]

Good morning, everyone, and thank you for attending another Méliuz's earnings results conference for 2024. Before we begin, I would like to inform you that this conference call is being simultaneously translated into English. I am Marcio Penna, the company Investor Relations and Corporate Governance Officer. We have Gabriel Loures, CEO and Director of Growth Strategy and New Business. I would like to inform you that this event is being recorded and will be posted jointly with a transcript in our IR website.

[Gabriel Araujo, executive]

Good morning. Good morning, everybody. It is a pleasure to be here today. We have historical results for Méliuz, and I will explain why, but it represents the end of a turnaround cycle related to our business. We had a difficult position since 2022 because of our negative results, but we have been able to show very relevant figures, especially in EBITDA and the consolidation of the turnaround that took place in the last few years.

First, before I begin, I would like to truly thank our team. They worked arduously during these 2 years. We had to make difficult decisions to change the results of the company. We're now very enthusiastic. We're ready to grow, and we want much more for 2025.

Very well. Let's go on to the presentation. I'm going to go through operating and financial statements. We will give more disclosure than we normally do. We're speaking about the end of the year, operating goals that are relevant for the success of the company. We're going to speak about product highlights, products that we believe in for 2024. Finally, I would like to refer to our strategic agenda for 2025, our focus and Marcio will speak about our treasury strategy at the end of the presentation.

As I mentioned, we went through an operational turnaround cycle that began in 2022. For those who have been following up on us, we had a model focused on the growth of our financial services. We were focusing on cross-sell, ensuring that our users would use our financial products. And from the viewpoint of profitability, we were investing aggressively construction of those products. And as any digital bank, we followed that S curve, the initial curve of losses to generate lucrativity. And that is the strategy we use for most of the year 2022. We had an adjusted EBITDA of BRL 93.5 million, with net revenue of BRL 54.1 million year-on-year until 2024.

We saw a change in the macroeconomic scenario and increase in the interest rate. And we decided to begin to change our business model to an asset-light model, where we offer financial services to the customers, generating value with sharing that value with a partner, which is the BV. So we disinvested and we changed to the asset-light model with BV. In this period since 2023, our focus is fully on profitability. We have reverted the EBITDA results, and we have been very successful. We have results of minus BRL 1.1 million adjusted EBITDA in 2023.

So more important than revenue generation, what was important was generating margins, enhancing products, a reduction of costs and expenses. And of course, the revenue growth was quite modest of only 2% throughout the year 2023, but necessary to reverse the EBITDA results. An analogy that I'd like to do is that we continue to grow. We made a pit stop to be able to grow further. And this is what we did in 2023 so that in 2024, we could resume growth.

In 2022, we again made investments with a positive ROI. We invested more with profitability. And we did not have a very efficient allocation of resources. We didn't reduce costs and expenses, but we guaranteed that we had a good yield and that we were maintaining consistency in our negotiation with suppliers in the definition of licenses and other business lines. The results were historic. The adjusted EBITDA of minus BRL 1.1 million went to positive BRL 54.1 million, consolidated a growth of more than BRL 55 million and the net revenue consolidated was 12% year-on-year. So we were able to consolidate this, and now we want to continue to grow.

If we look at the fourth quarter of '24, I think it shows you the end of the cycle and the consolidation of results. We reached consolidated adjusted EBITDA of 29% vis-a-vis the same period last year. Accounting EBITDA was BRL 40 million because of one-off impacts that we have explained in our release of results. And this is the adjusted EBITDA we're showing you here. But what is important is the EBITDA margin. In the fourth quarter, it was 20.1%, 4 percentage points higher than the EBITDA margin at the end of 2023.

Now this is very similar to what we were reporting in 2020 as margin of our business. But at that time, the consolidated revenue was BRL 25 million. In 2024, we are at BRL 356 million. So we have resumed the levels of EBITDA that we want to continue to grow the EBITDA base, but the revenues of the company have increased threefold in 2024 vis-a-vis 2020. Successfully, we have grown our results, our EBITDA and guarantee the resumption of these operating margins that were hampered in 2022.

Well, the slide that gives me greatest pride is this one. We show you the results that we and the team have achieved in the last 2 years. First, the consolidated version, the accounting one, and we show you the improvement of EBITDA quarter-on-quarter. We went from minus 22.5% in '22. We grew. And in 2024, we got to 54.1% of adjusted EBITDA. And every quarter, these results improved, showing consistent results is not the result of a quarter that was good. It is the result of the company as a whole, and this reflects on our EBITDA margin that went from minus 29.2% to 14.8% consolidated. And in the fourth quarter, this figure reached 21% of EBITDA margin. The results continue to improve throughout 2024.

In the Holding company, this happened at a faster pace. We reached BRL 64.1 million in 2024. We grew fourfold between 2023 and 2024 with an EBITDA margin at the holding of 21.2% in the annual vision. Now this result in 2024 specifically was aided and abetted by a resumption of growth. When we look at our consolidated net revenue, it grew quarter-on-quarter as we saw with EBITDA. And year-on-year, this growth was 12% in consolidated net revenue.

For the Holding, this was ever more relevant. We went from BRL 260 million to BRL 324 million in 2024. And on this page, once again, I underscore the evolution of this in the year 2024. The net revenue of the Holding company grew 21% in the second quarter versus the same period in '23. And in the consolidated version, it had a growth of 43%. So the pace of growth in the second half was greater than the year as a whole, reaching a positive trend of growth in our results.

It's even clearer when we look at the GMV results for our core business. In the fourth quarter of '23, we had BRL 1.2 billion of GMV to BRL 1.4 billion. We grew 15% with GMV in our business line, but this figure increased through time. In the graph to the right, we grew GMV by 5% between '23 and '24. In the second half, we had a growth of 12% and in the fourth quarter, a growth of 15%. So the speed of growth of GMV increased throughout the year as well as the increase in revenue. And we did this with a very robust company. We did have some impacts on the net take but we maintain a level above 2%, which is the guidance we have for our business. So we have been able to grow, guaranteeing lucrativity. This result was only possible because we also grew significantly in terms of our user base.

If you look at the number of accounts opened, our accumulated base went from BRL 30 million in the fourth quarter of '23 to BRL 38.4 million in the fourth quarter 2024. This represents 44,000 accounts opened per working day. This is the fastest speed of growth, much faster than 2021, which had been our record in terms of growing user base. So this time, we have been able to grow the base in a consistent way with an impact in all of our business.

In the Shopping Mall, we grew 62% in the number of new shopping vis-a-vis the fourth quarter '23. Doubtlessly, this was fundamental because of the Black Friday in 2024. I spoke about the revenues and GMV of Black Friday. But all of this, this will allow us to continue to grow in a sound way.

Now users, when they come to us, we will continue to use throughout the year. They purchased for years. And so this user base is very important for the sustainability of our long-term growth. And the impact is much higher than the impact on a single quarter. We generated a growth of 62% in the shopping, but we also had a significant growth in financial services. We went from an accrued base of digital accounts of 0.9 million in the fourth quarter '23 to 3.5 million accounts opened, a growth more than threefold.

And in Credit Cards, we grew more than 4x. We began with 50,000 cards issued to 210,000 cards issued in the fourth quarter '24. So the growth generated through our app and channels as a whole did have an impact on our products, on the Shopping and our Financial Products and Services. Once again, we have very satisfactory results. We have the recognition of the company as the seventh most downloaded shopping app in Brazil. Now this compared to the retail [indiscernible] . We had a significant number of downloads in 2024.

What is more impressive is the growth in the pace of downloads. We have only 2 companies ahead of us, a Chinese giant, of course, and Mercado Libre, which is a giant throughout Latin America with a home in Brazil. So we are the third shopping company that most grew in terms of the downloads with results that are very relevant. And of course, this takes us to the graph to the left. We have a growth of more than 2x in our unique users assets in our app.

Now we had a growth of more than twofold in the users. And this is why we grew the GMV. We had a growth in revenue results and of course, a growth in our services and financial products throughout the year. Now remember that we were working with an operating turnaround been useless to grow if we had hampered cash generation EBITDA, but this did not happen. We opened a record number of accounts. We have the largest number of accounts opened above 321, 170% more than we had in 2023. We did this by spending 46% more -- 47% more than we had last year. We did say we were increasing our investments.

But to the right, you can see that we increased our investments focused on results. We went from BRL 3.3 for opening an account to BRL 1.8, a reduction of 46% when compared to the year 2023. Now when we look at 2021, the results are more evident. We had opened 100,000 accounts more, but we have spent much more. In 2024, we spent BRL 15 million. And formerly, we have spent BRL 100 million in marketing. This is the capacity to generate results growth with operating capacity. This is what I wanted to convey to you. We're extremely satisfied with the results. And this comes from the significant development of products that we had throughout 2024.

Now the first is Méliuz Prime. This is our subscription program, if you did not know, we're increasing the incrementality of the purchase by users. We want users to subscribe, but we want to increase their purchasing behavior, enhance their purchasing behavior inspired on the programs of Amazon, iFood and other large players in the Brazilian market that we have had very successful growth in this product. And I can say that we grew our base of subscribers almost 10x between 2023 and 2024.

Now the revenues that this generates in terms of subscription is being consolidated in our results, and it has an impact on B2B and B2C. In B2B, it allows our partners to reach a qualified base with a higher ticket that buys a great deal through e-commerce. They can sign a loyalty program. And, well, we offer our partners the possibility of exclusively being able to reach that user base. Now these partners do want to reach that user base. They want to generate sales to this base that has a better purchasing behavior. Now they want to have those clients and customers in their base as well. This makes sense for several of our partners. So Méliuz Prime is not only an opportunity in B2B, but also in B2C.

And in B2C, we have delivered results. First, concentration of the share of wallet, the percentage of purchases carried out using this Méliuz Prime. As they subscribe, they have an increase of 35% after the subscription. It's not that miraculously the person will begin to buy more online or physically, the purchases they had offline are now coming online because their behavior has changed, and they're concentrating their purchases in Méliuz because of the benefits they receive.

Additionally, we have also been able to enhance the retention of users. Our users on average purchase 3x more when it comes to frequency. Now this is important. We wanted our number of users to grow, and we wanted to offer new opportunities, not only in Shopping, but in our other products, allowing the users to have visibility and interact with them.

Besides Méliuz Prime, I would like to highlight our road map of Financial Services. In the third quarter, we have concluded our offers. We announced this in the fourth quarter, we consolidated this product. We have enhanced the average balance invested. And this is for people who are not used to investing their money, but who can convert their cash back into investment. And they can have special benefits to have liquidity, but also have yield in terms of their money. This is in synergy with the rest of our system, especially with cash back, and we have worked significantly to enhance this.

Alongside this, we have 2 new verticals, the insurance vertical. We will have portfolio insurance to protect users in all of their cards, not only the Méliuz card and a new avenue for recurring revenue to make Financial Services more profitable for Méliuz and for BV. And we're launching an investment on CDBs that have a different liquidity profile, a different return. We have more qualified investment in the longer term. And we already have an idea of the dimension of the return of investment products with lower liquidity. And this product will enable us to generate revenue and cross-sell for our system. We're very enthusiastic with this road map for Financial Services. And of course, we're debating this in partnership with BV.

To conclude this, I would like to speak about our vision for 2025, which is our focus and how this ties up that cycle that we began in 2022. We went from a negative BRL 93 million in 2023 to BRL 54 million positive in 2024. Now this also happened in the year 2024. If you compare the results of the first quarter of '24 with the second quarter, there is a trend to accelerate our results. Our adjusted EBITDA was BRL 20.9 million, went to plus BRL 33.2 million, a growth of more than 59%. Adjusted EBITDA margin went from 12.3% to 17%, a growth of 4.7 percentage points.

In the fourth quarter, that adjusted EBITDA margin was 20%. The revenue growth year-on-year was 9.1% in the first quarter. It grew 9.1% vis-a-vis the first quarter '23. There was an increase of pace to the second quarter, went to 14.2%, plus 5.1 percentage points. And we had the growth of new buyers. We went from 16% year-on-year in the first quarter. It was 16% higher than the first quarter of '23, and we went to 45.8%.

Now this is a figure that will allow us to grow going forward. It has launched growth, and it has allowed us to see how our growth will be and how we have to build that base going forward with a delta of 29.8 percentage points in terms of shoppers. Now this has allowed us to head towards our goal in 2024. The focus is to grow in a healthy, sustainable way, but we want to speed up the growth we had in 2024.

We have 4 pillars that we're going to focus on. First, with the growth of e-commerce. We want to continue to focus on a sustainable acquisition of users and their retention. Despite the 13 or 14 years of Méliuz, we still find opportunities in the shopping when it comes to customer experience to understand activation rate flow. All of these points are relevant. We carry out tests during the year to improve our retention 10%, 15%. Of course, this is relevant for our results, and we want to maintain our focus and exploit this in our business.

We're also going to focus on the business experience, guarantee that the users have the best experience in shopping and tracking their purchases and our partners end up winning as well. They will have better results. And finally, we want to reinforce our B2B avenue. We're launching relevant programs with our partners. For example, Itaú Bank, I will come back and explain this to you. But we're creating several business models to increase the addressable market for e-commerce. And we want to increase sales with the retailers and the industry, always generating more value, showing that we're more efficient than competitive channel.

When it comes to the billing, the Nota Fiscal, we want to guarantee that everybody will begin using this and we'll continue to use it. And we want to make sure that our users will have better experience buying offline. We spent 13 years guaranteeing that they would have the best experience buying online, and this is something we would like to underscore for 2024.

Now for Méliuz and BV, we're going to continue to evolve with the accounts and credit cards. We're going to increase the amounts invested in these accounts, and we're going to work arduously on the launch of new products, once again, sharing all of this with BV. And I need to refer to operating efficiency. We can't speak about revenue if we don't maintain healthy EBITDA margins. We're going to guarantee that our revenues generate good margins. We're going to be very stringent and disciplined when working with our suppliers. We're going to carefully assess the number of licenses, our cloud capacity and other indicators that are reflected in our costs with suppliers. And we want to have very good criteria in allocating investments. We want to make sure we invest efficiently in 2025. This is the summary for 2025. We're very enthusiastic. There are plenty of opportunities.

And I will give the floor to Marcio, who will now speak about our treasury strategy.

[Marcio Penna, executive]

Thank you, Gabriel. Excellent results, and we're enthusiastic about 2025. Now, the information on this slide is already -- has already been disclosed to the market. We had an attachment of 20 pages, explaining the strategy that we have underlying this treasury strategy. We want to make Bitcoin a currency of our treasury and to ensure it will offer value. We're not going to be a trader or accumulate Bitcoin. We believe in that currency. We think it is well correlated to the Real. It's limited, it's scarce. So there is no problem with the inflation as we have with the Real. And it's an alternative to traditional investment.

If we look at the last 5 or 10 years, it has offered a higher return than traditional investments. We carried out an initial purchase of 10% in Bitcoin of $4.1 million. We created a strategic committee for Bitcoin, and they have a certain term, and then we will return to the market to announce the potential expansion of this strategy. We're very enthusiastic. Nothing has changed since last week.

And within that term, we will once again go back to the market within the next 45 to 60 days to announce the expansion of this strategy.

Very well. With this, we would like to end the presentation.

[Marcio Penna, executive]

We already have a person on the waiting list, Alexandre from Morgan Stanley. Thank you for your attendance.

[Unknown Analyst]

We have 2 questions at our end. The first referring to the comment that you made in the presentation and the release. You said that this year, you are focusing on accelerating sustainable growth. We would like to gain a better understanding of what this means for this year. If you're planning to speed up the growth of GMV? Or does it refer to something different?

The second question refers to the expenses with personnel and G&A vis-a-vis our estimates. These are the 2 line items that have a significant drop year-on-year, and they are below what we had projected. Expenses with personnel, you said that there is a base of comparison because of your bonus provisioning. But I'm asking you for help if you could speak more concretely about these 2 line items, which would be the recurrent amount in these 2 line items going forward?

[Gabriel Araujo, executive]

I'll get the first question, and thank you for the question. Our focus in '25 is to continue to grow and speed up growth. We want to increase revenue. This reflects differently on our business lines. We want to allow Méliuz to grow between 2022, '24, we reduced costs. We made the company a healthy one. We took the company to healthy EBITDA levels, and we want to maintain those margins and speed up our growth. This is what we want to do in 2025, and you will see this in all channels in the user acquisition and other course at different intensities. And we will also be launching new products.

Marcio, could you answer the second question?

[Marcio Penna, executive]

Thank you, Alexandre, for the question. In terms of operating expenses, we have the variable and fixed ones. The variable ones are related to our cash back expenses. The more revenue we generate, more cash back we generate. So we have to maintain good margins for the company. This is impacted vis-a-vis the GMV and other variables that will exist during the year. The fixed expenses, especially with personnel, don't expect anything different when compared to 2024.

Of course, we will have inflation. Software, we have some contracted products. But if we take away inflation, we're very confident that the fixed operating expenses will end the year 2025 aligned with what we had in 2024.

And Alexandre's question was the only question for the day. Because of this, we will end the Q&A session and return the floor to Gabriel for the closing remarks.

[Gabriel Araujo, executive]

We have fulfilled a historical year for Méliuz. We're very enthusiastic with this. We were the 7th in downloads in Brazil, the 3rd -- Shopping the most grew in Brazil. Our user base is ever more active, engaged with Méliuz, and we're doing this with controlled costs. The year 2024 was very good, and we're confident in the year 2025 will be even better for the operation. I would like to thank the team, thank all of you for your attendance. And with this, we conclude.

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