Wiz Co Participacoes e Corretagem de Seguros SA

BOVESPA:WIZC3

Earnings Call Transcript 2020-Q3

[Operator]

Good morning. Thank you for waiting. Welcome to Wiz Third Quarter 2020 Results Conference Call.

We have here with us, Mr. Heverton Peixoto, CEO and IRO; and Mr. Guilherme Aguiar, Market Relations and M&A Managing Director.

This event is being recorded. [Operator Instructions] This meeting is also being broadcasted via webcast, and you can access it at www.wizsolucoes.com.br, where the presentation is available. Slide selection will be controlled by you. The replay will be available shortly after the event is concluded. [Operator Instructions]

Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of with management. They are premises by the management of the company as well as informations currently available through Wiz. Further considerations are not guarantee of performance, involve risks, uncertainties and premises because they are involved with future events and depending on circumstances that may or may not occur. Investors and analysts should understand that conditions related to other many factors may affect Wiz results and may lead to results that are materially different from those expressed in forward-looking statements.

Now I give the floor to Mr. Heverton Peixoto, who will begin his presentation. Please go on.

[Heverton de Melo Peixoto, executive]

Good morning. I bid you welcome to our conference call for 3Q '20. After the opening, Guilherme will present the results of the period.

With the end of the third quarter of one of the most remarkable years in ours -- in our country's history, I would like to start this message acknowledging the dedication of our team in the search for excellent results, in the construction of a solid and inspiring corporate culture. We believe that our strength comes from people. They are in the core of our operations and on the focus of our business.

For this reason, we have, as one of our goals, the creation and constant maintenance of a work environment that makes our Wizzers proud to this and to invest and work on team development, leadership training and promote initiatives and programs towards diversity and social inclusion.

In recognition to the development of this work, we were, once again, placed as 1 of the 150 best companies to work in Brazil in a survey prepared and made public by the global consultancy, Great Place to Work. This award fills us with pride and give us the confidence that we are on a successful pathway.

Operationally, I would like to highlight the performance of bancassurance operation in the quarter. As a result of the work carried out at Rede CAIXA to resume activities after a period of impact on results due to the effects caused by COVID-19 pandemic in the first half of 2020.

I also emphasize the performance of our Wiz Parceiros unit that, for one more quarter, achieved the highest historical result in volume of letters of consortium sales. The unit continues to focus on expanding its operations, adding new partners to the commercial network and working to diversify its product portfolios.

At the strategic level, we have resumed our inorganic growth agenda aligned with Wiz's vision of growth in the context of extending and diversifying our operations.

We reinforced the prospecting and negotiation of new counters that have the potential for profitability through the sales of insurance and financial products, to be yet exploited by Wiz's know-how and expertise.

This is our core business and where we can add value, while also maintaining synergy with all the already existing structures in the company fully aligned with the vision of growth of our conglomerate.

Under these premises, we concluded this quarter the acquisition of CMG Corretora, adding to Wiz's operational partnership metrics one of the most important Brazilian banks, BMG. We made important progress during this quarter in this new operation, and we are working intensively in mapping opportunities and setting a short-, medium- and long-term strategic planning.

We strongly believe in the potential of this partnership, which will bring important value to everyone involved in the transaction. We remain focused in working on daily basis to build the future of Wiz, purposeful in being an innovative and diverse company, contributing both to building a prosperous and sustainable business environment and to achieve increasing consistent results.

[Guilherme Aguiar, executive]

Thank you, Heverton. Good morning, everybody. I'm going to begin the presentation of the financial part with Slide #3, where I'll be talking about the events and highlights of this quarter.

In continuity to what we told in our last call, last Tuesday, we closed the acquisition of 40% of the capital of CMG Corretora after fulfillment of all precedent conditions for the closing, among them, the approval of the CADE transaction. CMG Corretora operates in selling of insurance, in financial products, consortium, capitalization and pension plans by the distribution channels of the BMG Bank.

Closing this transaction, we paid the first partial of the cost amounting BRL 22.4 million, which will reflect in the company's results in the next quarter. The company will exercise control over CMG Corretora. And from November 2021, we'll consolidate CMG's results.

We have celebrated for the third consecutive time the -- to be among the 150 best companies to work for in Brazil organized by the global consultancy, Great Place to Work. We celebrate this achievement, understanding that the success achieved is a reflection of the investments made by the company to establish integrated drivers, inclusive and original corporate cultural practices. We focus on providing the best experience and development of our main asset, our people.

We would like to paint in now the celebration of the new agreement with Inter Seguros and Liberty. With exclusive acting of Inter branch, the new contract will run for 15 years, and it will maintain the previous percentages. And Liberty will pay Inter Seguros BRL 368 million divided into upfront and earn-out installment because of the exclusivity. We believe that this partnership will provide Inter Seguros even best results, even better than last year when, after partnership between -- with Inter, we achieved solid growth in sales, constant pace of new product launches and improvement of already existing products.

And in this quarter, we saw nonrecurring impacts in our results related to a lowering of intangible assets related to discontinued products. In our release, we present details in the adjusted results for the period.

Now Slide 5, summary of results. I would like to emphasize our EBITDA that had a growth of 29.4%, vis-à-vis, the third quarter of 2019. First, by the growth in our revenues, as I will detail further on, our EBITDA margin was 53.6%, what we consider healthy for our company.

As a reflect of this excellent operational result, we reached a net profit of $30.4 million, a growth of 38% as compared to same period last year. And we closed this quarter with a cash flow of BRL 22.5 million.

Now on Slide #6, we see the effects considered for our adjusted view. In EBITDA, we have adjusted in the 3Q '19 a total of BRL 31.6 million concerning tax recovery for that period. We -- our intangible and fixed assets were lower in impact because of accountable reviews in the company.

In the second table, on net income, we have adjusted the effects of the acquisitions by the company, so the effects impacted EBITDA adjusted to net values. The explanation of this adjusted is detailed on the document of the release. Therefore, we closed this quarter with an adjusted net profit of BRL 100.2 million, result 63.7% more than the same period of last year.

Now Slide 7, we detail the result of gross revenue per unit. This revenue was pushed mainly by the acceleration noted by bancassurance operation, with the highlights in [indiscernible] credit and mortgage. They had results to -- that were impacted by COVID-19 in first half of 2020.

I also emphasize the Wiz Parceiros unit that grew 12.2% in gross revenue as compared to the third quarter last year. This result comes especially because of the increase in letters that were sold in the last period, having reached on this quarter, a record result of BRL 1.6 billion in volumes of sold or traded letters. And this is a reflect of the focus of the unit of extension of the commercial network, an increase in productivity and quality in sales by partners with actions of activation, training and improving internal systems and giving support to operations leading to more efficacy for the partners for sales.

Besides that, the result of this quarter was impacted by the beginning of the revenue due to service for the other partners that were credentialed in Caixa consortium.

And also from March on, we consolidated the revenue of Wiz Conseg partnership. In this quarter, our new unit added BRL 1.5 million to the net revenue of the company. In relation to the participation of the companies in total revenue, we noted on this half, 3 percentage points growth in the participation of bancassurance in the result of the company due to acceleration of the result of this unit in this quarter.

And at last, we reached a revenue stock of a result that was 5.2% higher than the same quarter 2019, and this is from the revenues from the previous quarters, what generates impact in the cash of the company, especially when new sales affected by adverse factors.

Going on, now on Slide #8, we'll be talking about cost. The first quarter 2020, our cost presented a drop of 15.6% as compared to the same period last year. This result is mainly due to a drop in 43.4% or BRL 10.4 million in the cost with bancassurance operation majorly because of the heritage of the agreement with these [indiscernible]. And these teams that are allocated in the CAIXA's branches. This economy was partially compensated by incorporation of the cost of GR1D and Wiz Conseg that were consolidated by the end of last year and beginning of this year, respectively.

Now we'll be talking on Slide 9 about our expenses. General expenses and administrative expenses grew BRL 28.3 million in this quarter as compared to last year, and this was due mainly to what happened in personnel where we had nonrecurring expenses of about BRL 26 million. And this expense is due to a review done by the company and its accountable premises of managers in other revenues and expenses. We increased to BRL 10.4 million in expenses due to a decrease in fixed assets and intangibles of the companies.

Now Slide #10, we present the result of equities in Inter Seguros. And this portfolio of clients increased a lot, 180,000 customers, a growth of more than 362% over last year. And this performance as well as the growth of almost 70% in net premium reflects the maturity in the digital projects and increase in these products in Inter Seguros portfolio, making our revenue sources [ wider ]. We had a growth of 105.8% in gross revenue with emphasis in digital projects. And the net profit, 171%, vis-à-vis, the same period of last year.

In this period, we had an equity earnings of BRL 2.2 million. I emphasize that it was one month late in relation to the result by the Inter Seguros.

In Slide #11, distribution of net profit. In this quarter, we had BRL 1.7 million effect of impairment cash done for the goodwill registered with the acquisition of GR1D Finance and loss of capital of investment of control companies. In financial results, we had a performance that was worse than last year, impacted mostly by the increment of expenses in adjustment of current value and monetary update of current parcels due to the acquisition that the company did.

And to close, we go now to Slide 12. The most important variation that impacted the cash flow of the company in this quarter were in working capital and investment. In working capital, we have a positive flow of BRL 39.3 million due to the provision of assets due to contract of the executives of the company in a backwards way and increase in the -- of the company with more expensive participation in profit and results and increase in payable taxes due to the format that the company adopted.

In investment, we had to spend BRL 7.5 million concerning part of the third installment of earn-out because of that one acquisition. This was partially compensated by the positive effects generated in cash flow due to the adjustment that we had of current value and exchange updates in the acquisitions of our company.

And finally, we closed this quarter with an adjusted cash flow of BRL 222.5 million.

So we close the presentation of the financial part, and I'd like to give the floor to Heverton that will begin Q&A.

[Operator]

[Operator Instructions] We then close Q&A session. I would like to give the floor to Mr. Heverton Peixoto for his final considerations. Please proceed.

[Heverton de Melo Peixoto, executive]

So I'd like to thank you all for being here and tell that the company is well positioned, has a good stat. We have a positive cash flow. The team, as you liked and committed to close one more strong year, and go to continue the growth of the company, looking at new opportunities in a very optimistic way. I reinforced the thanks to the team that has been dedicated. It's a complex year, what shows the strength of our company. Thank you all, and see you in the next call.

[Operator]

So this conference is closed. We thank you all for participating, and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]