CSU Digital SA

BOVESPA:CSUD3

Earnings Call Transcript

[Operator]

[Interpreted] Good morning, ladies and gentlemen. Welcome to the CSU Digital video conference to discuss our results for the first quarter of 2024. This video conference is being recorded and can be replayed on our website. ri.csu.com.br, and the presentation is also available for download. Please be advised that all participants can not only watch the speakers, but also follow the slide presentation. We will then initiate the Q&A session when further instructions will be provided. I'd like to remind you that the presentations will be made in Portuguese with simultaneous translation into English. Those who wish to listen to the English audio can toggle the language using the interpretation button located at the bottom right of the platform. If you want to listen to the English audio, you can select English at the lower right bottom -- lower right-hand corner of the platform. Before we proceed, I'd like to take this opportunity to say that forward-looking statements are based on the beliefs and assumptions of CSU Digital's management and current information available to the company. Those statements may involve risks and uncertainties as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should bear in mind that events related to the macroeconomic environment to the segments and to other factors may cause results to materially differ from those expressed in the relevant forward-looking statements. Present in this video conference are Mr. Pedro Alvarenga, CFO and Chief Investor Relations Officer; Mr. Fabiano Droguetti, COO and CTO and the IR team. Without further ado, I now give the floor to Mr. Fabiano Droguetti, who will initiate the presentation. Fabiano, you have the floor.

[Fabiano Droguetti, executive]

[Interpreted] Thank you. Good morning, everyone. It's a pleasure to be here today with you to discuss our results and what we have been doing in the last few months. In this world, now so infused with dopamine. It's important for us to find time to discuss our results with you. So beginning on a very macro level, and I will soon give the floor back to Pedro for him to discuss our financial results. Just to recap that our business model is very much focused on pioneerism since the creation of the company in 1992, and we seek to democratize technology to democratize the complexity that the payment method systems involved so that companies can use those products to provide better services for the public in general to provide a better payment experience. This pioneerism brought us here and helped us keep us on our toes, always focusing on innovation, on technology that will allow us to offer new products to provide services to our clients. Looking at this image that you see there about an experience, a card payment experience, it shows very well our full-service model. We provide services since the -- from the -- since the very beginning of a proposal to a client that will offer cards or a benefit card, the payment card going through all steps all ovens full life cycle, validation of the credit processing payments so that we provide -- so that the client can provide a good purchase experience, identifying potential frauds, helping keep the whole ecosystem, the payment next system afloat -- taking care of the full experience of the client always looking in-house, especially in the middle and back-office processes, how can they occur digitally so that they are nimbly efficient so that they will actually provide value for the clients and will solve the clients' problems. Of course, we are very much focused on accountability, everything is regulated. So it's important that we provide the information to not only government authorities to accounting offices, auditors, et cetera. It's very important for us to provide accurate information. When some client has -- has failed to pay, it's important that we can access the client and provide some payment options. So the whole life cycle involved. It's important that we can cover it in a seamless way. This is our vision to provide to deliver a full service, even if it's composed of different models so that we are very much focused on providing services through APIs, which allow us to work in modules. But we're always very much concerned that we provide clients the [indiscernible] the a full service through our platform. This bones, this integration of our services, it's our differential. It's what we have to offer to the market as unique services. Moving ahead, looking here at the interest of potential clients. Looking forward, we see we see ourselves addressing a new market that was not included in our typical as it were portfolio. When you look at the DX vertical, we end up to focus only on the clients' experience ever more digitalizing that experience, which is what the market wants through chats, et cetera, that was already in place, but we've also -- we made a more significant leap forward using artificial intelligence and associated technologies and methods. So that automation of the process, that's why we refer to the product. It's HAS hyperautomation -- this puts us in a unique position in the market so that we're not only serving traditional marketing clients. We're now opening door to a new market because we see the platform is providing a potential to improve in digitalized services that very often were provided manually or semiautomatically. And this provides a significant impact for our final clients. This is our objective here to offer those new services and include them in our portfolio. But of course, we cannot forget a more traditional portfolio where a significant portion of our results come from with through loyalty programs, digital methods, financial services, embedded services, which offer our clients a unique service to the target market that our clients serve. So that our portfolio is fully integrated, and we can deliver to the clients, something which will actually digitalize payments into the service that the client provides to their clients. It is no longer something new to use today digital wallet. So those things which are not necessarily breaking news still provide challenges in terms of its implementation and management. the market [ leverage ] stops. So things constantly change, and we're always seeking to facilitate the payment experience. So our fully integrated portfolio provides that sort of service and offers a very complete and transparent solution to whoever uses our services. We've also have been including new services, of course. For instance, the fixed electronic transfer of funds method we use, for instance, pix of credit. We have been focusing on subsegments as the Central Bank expands tax coverage, we include different subservices in our portfolio so that we can always provide different options for the final clients to provide services to the market. As I said earlier, since the initial digitalization and including everything on our platforms, we are at the forefront with very important partners in the market. Companies that technology companies so that we can operate the most efficient way using those new technologies. And we see very interesting results, which we will discuss later on in terms of the generation of value. And we see this not only in our return in our results and our figures that Pedro will discuss, but also in some quality indicators, which are very significant to -- for a position in the market. Competition tends to be fierce in the financial markets, and we offer to our clients unique services that will help put those clients in a very comfortable competitive position. And I think this is very important for all of us. When we talk about the provision of a full solution, such as this one. We're talking about digitalization of the whole life cycle of the product from the client onboarding until the final [ contract ] -- payment of the pills or even in negotiation in case of loan payments. And we've had very positive experiences using IA in that sense. Though some of those experiences have been integrated into our service, and we will discuss this later on. Let's now move on to the next page. Talking about technologies. which is really my focus. You see here in schematic drawing showing how we designed the architecture of our systems so that they could, on the one hand, the fully integrated using cutting-edge technology to provide the services included in each vertical. But on the other hand, so that it could be also structured in a model moduled way so that the client can choose the specific services that the client finds interesting. I think this is important -- it's important for us because it helps us provide a robust integration platform, and it helps the -- for us to integrate data, it's a process stated within the whole ecosystem, including from partner financial companies to companies that operate with cryptocurrencies, which have already included in our system using several channels, voice, data files, API, every sort of channel, WhatsApp, we use very often in our interactions with the end customer. All of that provides us to offer a multicountry, multicurrency, multiproduct platform. So this multi-everything, -- the purpose of that is exactly so that we can offer a wide range menu of services to our clients.And this creates a volume of data, which is very significant and rich. And this shows us the behavior of a consumer in a certain region, for instance, and we use that wealth of information to the benefit of our clients to provide insights, changes that we can propose to some products, what the market is demanding so that we can assertively propose solutions to the clients. One of the insights that we found is exactly that -- sorry, that the hyperautomation can be used to digitalize also the back office systems and all processes which are in-house. That hyperautomation applied to the operation has given us excellent benefits. And other than that, we can, of course -- we shouldn't forget digital services used to analyze data and to provide insights from machine learning so that we can extend those benefits and that information to the client in support of the clients' decision-making process. So we're very proud to say that our platform is 100% operational, and it has 3 characteristics, which I think are key to any provider of digital services. First, stability platform supports a full-time 7-day week critical service has, of course, to be operating because any failures will affect the final consumer, the final clients will not be able to use an important financial service. Then number two, scalability, which is also a critical key pinkie dates usually provide a volume of transactions that sometimes exceeds that of the whole rest of the month. So the fact that we can quickly scale up our transactions is key so that we can fully support the transactions of our clients. The market is very dynamic. We see that. And Pedro will discuss operating information later on. We will see a constant growth and technology platforms must be ready to support that. And point I'd like to mention is the fact that our platform is fully integrated using APIs. This may seem technical. But at the end of the day, it opens the possibility for the clients to customize their final products. What they will offer to their clients, which they think will be more important to their clients. And this is absolutely key. The fact that our platform can be adapted and can mold to the need of a certain clients. At the same time today, it adapts to a different client that have very different needs, providing the stability and the scale that I just mentioned, I think this is very significant. So those 3 components without a doubt, are key for our success. Now next page, please. Now quickly mentioning our results, I just spoke about our automated processes using Internet using artificial intelligence. So we see here some actual information from our clients. We see here especially the fraud prevention and integration of different networks. Those are very common in our markets, which involves significant volumes. And when we -- since early on when we began doing this, we saw very positive results. We've been using more advanced solutions, but we expect those results to become even more significant. And I'd like to focus on one, the fact that we reduced operating [ areas ] by 95%. It's something which is extremely valuable. Why? Because this means this translates rather in experience. The experience to the final -- the end clients, which will enjoy a better, faster service, and we are ever less patient. So it's important that our services are provided in a very, very accurate way. Of course, the productivity gain will also enhance the economic efficiency of the market -- of the transaction of the process, which is very important in such a competitive market. But here, I'd like to focus on this reduction of areas, which I think is something of superlative importance in terms of the quality of our services. And as I said, this application, we're talking about an actual case. But it goes much beyond this in the payments markets. We hopefully will have very good news for you soon. not only for the payment means in financial markets, but also for retail, utilities and insurance, we see those markets is very, very attractive. And we -- if you look down there at the description of the processes we've been focusing on. You see the repetitions there cost different characteristics in each of those markets. But you see that at the core, they're very similar so that we note that we can very much leverage our operation, focusing on hyperautomation, providing great benefit for our clients and of course, better results for us here at CSU. Now Pedro will discuss our figure results, which are very positive. And I think you will now be very happy with what you're going to see. So Pedro, you have the floor now.

[Pedro Alvarenga, executive]

[Interpreted] Thank you, Fabiano. Good morning, everyone. It's a pleasure to be here today, again to discuss our results for the first quarter. And just segueing from what Fabiano just said, I think that CSU is a company that through the years has gone through an expansion of growth, a transformation process. And it's, in my opinion, very often, we look at the cold figures which, in our case, are very positive. But for us who are here inside the company, we know how significant this transition has been for a business. First, to imagine that payment means that until then were a, shall we say, a static product because the end user has already taken the decision to buy something and then he or she is going to use that method that payment means just to pay for that product. And now that is -- that becomes something much bigger, thanks to the information that it's the data that it's generating. And everything is used to enhanced growth to approve transactions. So we think that the experience -- we never -- it was difficult to think years ago that the experience of the end user could be transformed not only at the end, but also throughout the whole process, the whole cycle. Thanks to digitization and also very much in what the users sometimes does not see the back office, the support structure, which are day in, day out processing documents, reviewing potential risks of fraud and sometimes for the end user, this is not visible at first. But when [indiscernible] springs up, then, of course, the pain occurs for all of us, consumers. So this is a very important cycle for the industry and CSU prepared to be able to spearhead that change and to be a heavy user agent of innovation in the market. So let's look now not only about the future, but what actually happens. So let's go through our indication through our operating and financial indicators along this presentation. The first thing I'd like to say about our first quarter results is that CSU has been growing consistently year in, year out. As observed earlier, we went through a very significant cycle of transformation within the industry with heavy digitalization, everything which is done cards stopping issued physically in plastic. Now they are virtual processes, service customer relations were 100% human. Now it's there automized as far as possible in using human capacity for that which cannot be digitalized. So everything is being transformed. I think that the end result is that our company has been generating significantly higher volumes of different businesses. And this, of course, allow us to consistently, repeatedly every year, show a very consistent result despite an environment in which because digital services are cheaper and more efficient for our clients, even in that scenario, where we have been able to continuously grow our operations and even better to see our revenues -- our annual revenue is growing. So we began -- we closed the first quarter at a bit over [ BRL 139 million ] in net revenues, growth about 5% in relation to the last year, and I'd like to draw your attention to a significant portion of that growth came from our core business, which is CSU Pays, which has been gaining ground in terms of representative in the whole. Now representing 65% of the total. And I will discuss each vertical individually because they've gone through very different dynamics in terms of growth and profitability. But I'd like to highlight the fact that each business is providing a positive contribution in CSU Pays was benefited from a very robust growth of the financial industry. So it's been growing faster than CSUDX. Now looking at each business vertical individual, CSU pay new components were added, new products were added to that vertical, and that explains a very significant growth that we saw in that vertical in every metric, both operational and financial. So we closed the first quarter of 2024 with a bit more than 37 direct -- million direct users registered, which somehow will indirectly use our platforms, CSU Pays platforms. So that growth was 9% in relation to the first quarter of last year, showing that the industry has been creating new ecosystems which managed to attract new consumers and users, offering both niche and wider solutions for each customer. So -- but not only at the -- from the perspective of the user, the beauty of our model of our business model of our full-service model, as Fabiano already well explained is that from the same user base, we can generate new sales because often a user that has -- that, for instance, uses only cards, and then we offer other types of transactions. For instance, a purchase through a marketplace, which is embedded in another solution. We can offer, for instance, point programs for that company to use, and we can manage those loyalty programs. And of course, those end users will use those points to obtain benefits. So the multiple vectors, which our company uses to generate higher volumes of transactions for our business. I think this is the great beauty of our successful model regardless of what happens in terms of the quantity of users, we continue to grow -- to show even greater growth in terms of volume of transactions and the purchase volumes seen in our -- the payment volumes seen in our platform. All of that combined with an accelerated and consistent growth in our annual revenues, which have allowed us to provide the results that we mentioned earlier. So I'd also like to stress that a significant portion of that growth came from new products, which are considered purely digital products. So if we managed to see 8% growth in these verticals overall revenues. In terms of the purely digital growth, purely digital programs, the growth was 11%. So that the driver of our growth of this -- in this expansion cycle, it's very well grounded, and it operates as a driver of growth for [ vertical ]. Last thing I'd like to say about CSU Pays is that this growth that we discussed, it occurs in much more -- it occurs much more efficiently than 4, 5 years ago because when we're talking about digitalization, we're not focusing only about the product. We're also talking about the digitalization of processes. So the management of a process, the exchange of information, the prevention of fraud, et cetera, in an environment, which is its digital permits inception. The whole thing is much more efficient, which explains the profitability gains that we have been showing in year out. So if you look at, say, a 5-year window, we -- gross income more than double, which means growth of more than 20% per annum for the last few years for that vertical. And if we grow if gross income is growing faster than revenues. This means that our profit margin is becoming higher, it's growing. So by the end of the quarter, it was more than 55%. So that this vertical is providing better results for the company as a whole. Looking at the CSUDX operation, many of the effects that we see at CSU Pays, they also occur here, but in a different way. our operations have -- which went from the traditional service model where there would be people available to provide human services, human support to our clients. Now we use digital solutions such as boats, the multiple solutions, digital solutions, which are used to manage front-office operations, meaning the contact immediate direct content front-end contact with the end user. Now all those processes are heavily digitalized. We're talking about 73% of interactions occurring digitally in our business. Of course, when you do that movement, as I said earlier, -- sometimes you have to sacrifice price because the operation will become more efficient and cheaper. But on the other hand, is that the results, which is left for the company is much more healthier. Since last year, we have been able to maintain this volume is driven of this level of digitalization around 70%, 73% which of course which causes our results to grow in a more stable way. So the growth of this vertical has been around 6% -- 6% in terms of growth. But looking at earlier time periods will show how intensive analog to digital movement was -- we see here these movements very mature now, and we offer a product which is much more profitable looking in the same time window. We expanded the provision of services and our margin increased by 4.4% from 0.7 percentage points. So that I think that the last comment I'd like to make about this vertical, which is something which have been already observing with the market is that we are a frontier now. Our business, our service business was transformed and is now showing signs of stability -- which allows us to -- as the volume growth, we still see some growth in terms of revenue at a higher profitability level. But we decided to offer new solutions to include them in our portfolio. So when we're talking about HAS-H-A-S, it is a key element of our growth strategy for that vertical because it is a completely new product, which is very closely aligned to the reality of the businesses of our current customers, clients. It allows us to reduce costs to make those product make those processes more efficient, less error prone. They become more time efficient. This offers a very significant benefit for the end user for our clients, and of course, for CSU -- that vertical shows a very significant potential in terms of revenue growth. And it's which is -- in its profitability is even higher than what we see now. All of that combined allowed us to offer very significant profitability results this year. So we were growing at 5%, 6% in terms of revenue. Now when we look at earnings, both gross and net income growth has been much more significant through time. This is the result of the digitalization process that I mentioned. So our gross profit practically doubled our EBITDA is growing at a fast clip in this very short period of time, which means the company is now a much more healthier company that provides much better results for all of us and for its shareholders. Our profitability in the same way has been growing [ suponentially ]. So we closed the first quarter of this year, showing 16% growth in gross profit, 11% for EBITDA, 20% for net income. So there are margin is so that our margins are 58%, 48% and 24%. Those are very significant indicators in the context of our company at record levels. Our business model is geared so that in the end, we provide a technology and services, full services provide a platform to our clients. Our business has been very predictable. The scalability of our growth, our ability to scale up is very significant. And because we see this recurrence in our model, there is no misalignment between the generation of results and cash. So in practice, every time that our results increases it, we see -- we see a reflection of that in our capital structure. We are now cash rich -- and that is very much the result of the growth that we saw in our results in our cash flow. 85% of our EBITDA now automatically turns into cash. This allows the company to delever. Currently, now this is very significant given the current economic situation, we massively increased our technology investments. Of course, we are a company that's always very much geared than always innovating into adding solutions to our portfolio. And other than that, we were able to provide results, which was enough to cover those investments in to provide a very significant profitability to our shareholders. So we have already paid [ BRL 6.5 million ] as -- from our results as interest on shareholders' equity. Now I'd like to briefly summarize what we have discussed. CSU is a company that already provides very good results. We have very important projects, which will create an expansion -- significant expansion for us. We see very attractive opportunities, but it's important to stress that we already provide today very significant results. And those results, they tend to be -- they tend to be supported only by new solutions but also by the efficient and massive use of data and intelligence. And not only from CSU Pays to increase the number of transactions, but also from HAS, which helps us to manage -- to better manage the processes, the business processes of our clients. We expect this expansion to this growth to be even more significant. Our balance sheet is very solid, as I said earlier, which is the result of a very significant, very strong generation of cash. This puts us in a very over positive position, which will allow us to continue this growth. So we have already paid through the years, [ BRL 215 million ] to our shareholders so that we have provided -- we provide a very significant, very positive returns to those are and wish to be our shareholders. Last thing I'd like to comment is that this whole movement is all transfer business transformation movement that the company did to capture new markets to increase profitability. All of that, in some way, is not completely -- has not been fully absorbed by the market in terms of the price of our stock. So CSU ROE today is around 22%. The company is currently in average, defined 9.7%, which is a very significant difference. In ROIC, the difference is even greater. We are at 21.7%. The market is at a 7.1% average, and we're talking an average that includes different types of technology companies, both in Brazil and in the U.S. Similarly, the remuneration the profitability that we offer to our shareholders. We're way ahead of market averages. But although the price of our stock has doubled, we're still were 2 to 3x below the market average, which shows that there is an asymmetry in terms of the perception of everything that the company has been doing and delivering along the last few years. You see here this is something which we have been focusing on in the last few quarters. We're trying to address to somehow correct that asymmetry. There's a number of analysts that different institutions that cover our company. We maintain an intense schedule of meetings with the markets to attract not only individual but also institutional investors -- we're now -- institutional investors now represent 48% of our stockholders, and this somehow benefits the price of our stock. So this is what I had to say. Thank you very much for your participation. Now we'll open the Q&A session.

[Operator]

[Interpreted] Thank you. [Operator Instructions] Our first question comes from XP's Bernardo Guttmann.

[Bernardo Guttmann, analyst]

[Interpreted] Do you see any imminent risk of a slowdown in the financial service market, which could impact CSU Pays due to market saturation of overlap between financial agents?

[Pedro Alvarenga, executive]

[Interpreted] Bernardo, it's a pleasure to have you here with us today in relation to saturation, the Brazilian payment markets, the financial industry as a whole has been going through a very significant growth cycle in the last few years. We saw a very fast growth in terms of the number of the population that uses bank services -- we went from more or less 65 million individuals who had some sort of interaction with financial -- the financial industry. Now we are at 190 million. So that growth -- the size of the market has essentially tripled in a few years. And digital payments are now they already are the most used payment methods. Years ago, people would use cash checks. And now we use fix credit cards among other payment methods are now dominant. But now -- but if you look at the details of those indicators, we still find the markets not to be mature, strange that may seem. The revolution occurred very much at the basis in terms of transactions. So the number of digital accounts grew significantly. The number of digital payments grew very significantly. But the credit markets and other aspects such as open finance Pix on Credits, which is just beginning. So there's a number of different movements that began years ago, but they're now are still very far away from being able to be deemed mature. Just to give you one example, Brazil today is the largest market in Latin America or -- just to give you an example, for -- so Brazil represents about 25% of that market as a whole. But when we look from another angle, Brazil represents 35% of the Latin America's GDP. So you see there already a significant gap in terms of how much value -- economic value we create and how much -- and the volume of transactions that you see in the banking environment. So this is an indication of how underdeveloped our market is. Looking at another angle and still talking about banking as a service is that the estimated potential for Brazil -- for Brazil's – [ BRL 16 billion ] in terms of accounts. I'm not talking about credit. This is essentially extrapolating industries that operate banking as a service vis-a-vis companies that not as yet use it that use analog functions. So the potential of that potential, only 20% was actually achieved. So there is a chasm there in terms of the potential of that industry and what we actually see it doing now. So to sum up, I think that those products are new, they're still going -- they're still going through a progressive ripening process. And as technologies become more mature, those products tend to evolve and -- and they will -- they are still to show their full impact in those verticals. And innovation never stops. You see today the technology being used in different ways so that the same transaction mechanism is used in Brazil and in other countries, cross-border. You see, for instance, Drex, which is the regulated Brazilian digital currency. So what I'm really saying here is that companies will continue to create their ecosystem, their financial ecosystems or cause the existing financial ecosystems to become more digital and users who have greater and greater access to new products. That's why we see in year out, our operation growth -- operational growth in terms of 20%, and we expect that growth to continue for the next few years because of all those new things that we see happening in the market. And just to complement, , we're not looking only at that market, the one you mentioned. We're also talking about new markets, new geographies so that our strategy is not anchored only in the -- in our current position in the Brazilian market.

[Operator]

[Interpreted] Your next question came from Melanie [indiscernible].

[Unknown Analyst]

[Interpreted] What growth do you expect in the next quarters in pays embedded – [indiscernible] finance provides new volume? And what about HAS for DX?

[Pedro Alvarenga, executive]

[Interpreted] That's an excellent question. So in relation to growth for the new -- for the next few quarters, as we've been saying in this presentation, we see a number of possibilities, including at a faster clip for the next quarters. CSU Pays grows repeatedly at an almost constant speed and that dynamic comes exactly from this moment in the market, but also from the very nature of the business, it's -- we are a platform as a service company. So the client essentially engages us to manage a specific user base and a certain volume of transactions. So bearing all of that in mind, we see no reason for that dynamic to significantly change over time. So it's a carryover model. The client will create a new project with us, it will begin small, then there's a setup, then it grows through time. And that user becomes used to that payment method, and we'll use it more and more. And then you see this almost clockwork growth over the years. So what may change significantly the -- our growth dynamic as a whole is H-A-S, HAS, which comes from CSUDX. It's a product with a humongous growth potential because it's applied to several processes to multiple businesses. So as Fabiano said, we don't have -- we're not limited to sell to the companies that we already -- in industries we already operate with. We now have a much wider range of potential businesses and clients, not only in the financial sector and banks, retail, but also other businesses such as utilities and pharmaceuticals. So this opens us very important avenues for potential growth. And I also like to add that we're talking about a hyperautomation process, which is applied to existing processes. Companies already have onboard certain processes. They have fraud prevention provinces. They all -- those processes are already there, but they are expensive. They're slow, they're error prone and we provide a solution for that. So this will probably provide very significant extra volumes at very favorable profitability. So I think that our company is going to continue showing this growth that we have seen, perhaps even at a faster rate in is I think we are still continuing to capture in term -- to add percentage points to our margin, thanks to the greater efficiency of the HAS, but also because of the scalability of our business.

[Operator]

[Operator Instructions] [Interpreted] Next question from [ Bruno Rader ].

[Unknown Analyst]

[Interpreted] So first of all, congratulations on the results, [indiscernible]. Could you please elaborate on the internationalization of services, especially to the U.S. and what costs do you foresee for that? And could you also comment about the M&A -- about the M&A trends for that industry?

[Unknown Executive]

[Interpreted] Okay. We aim at initiating our operations in the U.S. In 2024, we are looking at the establishing the partnerships that we need so that we have something on the ground working. In terms of cost, we feel that those investments will not be too great in terms of we're using the same platform to provide services abroad. We are ready to operate with this multicurrency, multi-language reality. We would have to adapt this or that in terms of legal reporting, the accounting -- different accounting systems. So there's always some adjustments to make, but there will be one-off and not significant. So -- we see very much more a front office investment for us to be able to access our clients to provide sales services, et cetera. But in terms of the operating -- the more significant operating core, I think we're essentially ready to address to serve other markets. So adding to what Fabiano said, this is something that involves a number of steps. And of course, we begin -- and it's something which has to be done slowly. The potential, potential of the U.S. market is gigantic. It's 10 to 15x greater than the Brazilian market. And depending on what year you look at in terms of the number of institutions or the volume of transactions. It's a market which is not at all concentrated. It's very spread out in terms of number -- the number of smaller financial agents, which opens the opportunity for us to compete. And it also demands more and more solutions that we already have in Brazil. So Brazil, it tends to be at the forefront of that market to the industry because we are a very challenging market in terms of -- because of high inflation because of the significant number of high volume of frauds. So on the other hand, this makes us able to provide sophisticated solutions, which are very much in demand in the U.S. market. So we see that as a very significant possibility for growth in the next few years. But we have to address it slowly. So we're already incurring some costs -- so to open an office to hiring employees, some technology investments, licensing -- not necessarily directly -- perhaps indirectly through partners. We're doing that step by step. So the costs tend to be small, very closely connected to this process. There tends to be cost shots. So we are not as yet creating recurring costs, but we are step by step, adding bricks to build this building to put it up from the ground up so that we can gain traction very soon. As soon as we have the definitions that we need in terms of strategies, the targets and how we're going to move with all of that, we'll -- of course, we'll disclose that to the market. In relation to M&A, this is an attractive possibility in terms of the U.S. market, which can perhaps give us a significant time to market. So for instance, to obtain the licenses to operate in the U.S. market is a very complex and slow process. So both on the side of creating channels, licensing, establishing your brands or just perhaps how to reach our clients. This is something which we are looking at attentively to those possibilities. But again, we are also very careful when we do that because this would be a very significant movement for us, and we don't want to make any mistake. We want to do this in the best possible way in terms of results and the potential for growth. So we're very carefully looking at that. And if we do find an attractive asset at the convenient size and a convenient price, then we may, yes, follow that route.

[Operator]

[Operator Instructions] [Interpreted] So if there are no more questions, I'll give the floor to Mr. Pedro Alvarenga for his final comments. Pedro, the floor is yours.

[Pedro Alvarenga, executive]

[Interpreted] So I'd just like to thank you all for your participation. 2024 will be a very important year for us because of the possibilities that we see, thanks to the completion of several projects which were planned for 5 years ago. So both myself and all our Investor Relations team, Fabiano too at your service. If you want to ask any questions, if you want any further information. Thank you all for your participation, and goodbye.

[Operator]

[Interpreted] The CSU digital video conference is now closed. Thank you for your participation, and goodbye.