Wiz Co Participacoes e Corretagem de Seguros SA
BOVESPA:WIZC3
Earnings Call Analysis
Summary
Q3-2023
Wiz Soluções announced record results in 3Q'23 with a consolidated EBITDA of BRL 159.4 million and a net profit increase of 60% year-over-year to BRL 107.3 million, driven by record sales in insurance and credit products. Net revenue grew by 20.1% to BRL 229.2 million, or 32% excluding Caixa run-off, backed by significant growth in insurance segment revenue, up 34.3%. The consortium segment also saw growth, adding BRL 64 million year-to-date. Initiatives such as the digital platform Wiz Pro were highlighted, aimed to boost technology experience, optimize investment, and increase connectivity among operations. Cost reduction and tax efficiency projects have been implemented to enhance operational cash generation and strategic moves to strengthen the company's cash position, like reducing Wiz payout to 25%, have contributed to a 66% increase in cash for the Parent Company over 2Q'23.
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Good morning, ladies and gentlemen. Welcome to Wiz Co Earnings Conference Call to discuss the results for the Third Quarter of 2023. We have here today Mr. Marcus Vinicius de Oliveira, CEO and Mr. Lucas Neves, CFO and Director of Investor Relations. This meeting is being recorded and all the participants will be in listen-only mode during the presentation. [Operator Instructions] This meeting is being conveyed only by the web via webcast and you can access at ri.wiz.co, where you have the presentations. The selection of the Slides will be controlled by yourselves. [Operator Instructions]Before proceeding, we'd like to clarify that any statements that may be made during this presentation regarding the company's business prospects, projections and operational and financial goals or beliefs and assumptions of [indiscernible] management, as well as information currently available to the company. Future considerations are not guarantees of performance. They involve risks, uncertainties and assumptions, as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts must understand that general economic conditions, industry conditions and other operational factors may affect the future results and may lead to results that differ materially from those expressed in such forward-looking statements.I would now like to give the floor to Mr. Marcus Vinicius.
Good morning, everybody. I'm amazed that the challenges that mark the first quarter -- the first half of the year, such as high taxes and the reduction of the credit generation in Brazilian scenario. We're quite enthusiastic to share the excellent results we had during this quarter. After months of huge work and efforts concentrated to mature business and optimize our internal structures, we are harvesting the fruits of our commitment in this period.Our teams demonstrated resilience and determination in developing strategies that were built in launching innovative products, putting our clients in first place. We advanced also in technology, launching Wiz Pro in factories to better serve three business units and optimize our investments. And with the Brazilian economy showing signs of gradual resumption, we found a good earth for the growth of our results.Now we celebrate the amazing mark of BRL 159.3 million in adjusted consolidated EBITDA adjusted in the third quarter, the highest performance in our history. This result represents a growth of 54.4% against the same period of the previous year and 27% growth against the last quarter, reflecting our ability in making our business even more profitable. In this third Q of '23, we had net profit above the total generated in first half of '23, BRL 44.5 million against BRL 38.9 million, fruit of the effort of all the team in the beginning of this year in expenses reduction, in gaining efficacy -- efficiency and insurance. We reached BRL 91.2 million in EBITDA. We're growing in all the business units. This is the result of strategic investment in technology, management, commercial strategy and in launching new products.We emphasize units, BRB Seguros and Bmg Corretora that achieved records in premium issuing and operational efficiency, generating margin gains, within the segment with corporate, our vertical branch, [ fordigo ] entities deserves to be highlighted for the third consecutive quarter with amazing growth of 276% in EBITDA against the previous year. This performance reflects the put in action of strategy centered in offering recurring products. This has the success we have achieved in offering products for legal entities and partner banks.In Credit and Consortium, we go on with our trajectory of expansion, having sold more than BRL 1.7 billion in credit in the quarter. Promotiva has a -- had a key role in the success. We reached BRL 1.9 billion in consortium letters sold, pushed by Wiz Parceiros, with historical record in productivity in August, aligned to the efforts implemented to strengthen operational cash generation of the company that already show results.We in this period took other important initiatives. I emphasize the approval of reduction of the minimum statutory payout to 25% from 24% on renegotiation of the payment flow of installments in accounts payable of acquisitions in re-education of the flow of payout from our subsidiaries receiving payout. These initiatives resulted in a cash projection in a Parent Company that's more comfortable to manage our business in the short run.We go to the coming quarter, proud of our results, believing in the potential of our business and optimistics with the perspectives of acceleration of our results. We will go on focusing the consolidation of new business, the ones required in the last few years in maintaining profitability, in using the strength of our group to generate more and more synergies, strengthening our campaign, 1 plus 1 is more than 2. Since we know that together, we are stronger.Thank you. And now I give the floor to our CFO and IR, Lucas Neves that will present the results for the third Q '23.
Thank you, Marcus and good morning, everybody. Initially, better, I would like to present financial part with Slide #3, where I'm going to be talking about our defense and operational and strategic highlights in this period. Initially, I would like to paint in yellow the excellent operational results we met in this quarter. We got a consolidated EBITDA record of BRL 159.4 million, the highest result in our history that comes from the record commercial performance in many units of the company and focus in operational efficiency, effect of the initiatives of optimizing structures that we took since the beginning of the year.We reached historical levels in selling insurance and credit, reaching BRL 2 billion in issued premiums and BRL 10.2 billion in sold credit and consortiums, result of commercial strategies that are pointed at using the opportunities in our channels and launching new products, also initiatives on launching new product by our subsidiaries, I would like to paint in yellow, center in serving better. The customers, our units put efforts throughout the quarter, integrating new products in their portfolios.Above all, the operations on book insurance, BRB Seguros launched 3 products, Bmg Corretora launched Bmg Med, Inter Seguros launched Protecao Financeira Familiar, a family insurance and also Parana Seguros, they started to sell SINAB, which is personalized for personal accidents as products with telemedicine and many other benefits.Now about our technological advances, we implemented Wiz Pro. This digital platform offers sales, management and operations in a unified way and personalized way for the business units of the companies, leading to more connectivity among the operations and their business partners, besides speeding up launching of new operations and integration of pre and post sales.With that, we intend to provide better experience in technology for insurance, consortium and credit sales, optimize investment technology, agility and effective results for the Wiz distribution channels. Also important are the main initiatives are strengthening the cash position of the company. We have advanced in implementing projects to reduce cost in tax efficiency, reflecting an increase of operational cash generation. We adjusted for receiving payout from the subsidiaries and we approved the proposal to reduce Wiz payout to 25% from 24% on.Administration has renegotiated at [ Winter bank ], the flow of payment of installments of accounts payable from the acquisition of Inter Seguros and also with the BRB Bank, we reduced the capital in BRB Seguros and approved distribution -- the payout, the interim payout. This transaction added to the distribution of interim dividends generated BRL 61 million in cash for the Parent Company, 66% more than 2Q '23.Now Slide 4, we present the financial highlights of 3Q '23. We had BRL 229.2 million in net revenue in this period, a 20.1% growth against the same period last year. Excluding the run-off for net revenue of Caixa, it's BRL 182.9 million of revenue, 32% more than 3Q '22. I also emphasize the highest EBITDA, adjusted consolidated of the company totaled BRL 159.3 million, 54.4% more when compared to the same period '22.The adjusted consolidated net profit reached BRL 107.3 million, 60% above the same period '22. Insurance segment had a revenue growth of 34.3% against the third Q '22, closing in with BRL 125 million, reflects of record commercial performance in many units. I give the lights here to BRB Seguros, Wiz Corporate, Bmg Corretora and Omni1. The segment of consortium reached BRL 33.2 million, a growth of BRL 174.9 million against same period '22, reflecting the 9 months of operation, Promotiva that added BRL 64 million in the year-to-date. In this quarter, the business units of Wiz sold more than BRL 749 million in premiums, a growth of 43.2% against the third quarter, historical performance of the company.Year-to-date, it's more than BRL 2 billion in issued premium. We received a volume of BRL 3.6 billion in sellings of credit consortium, 131.9% higher than third Q '22. Slide 6, summary of consolidated results, increase of 13% -- 13.6% EBITDA against 3Q '22. And from this year on, we include in calculation of EBITDA the lines, all the revenues, expenses and equity and earnings representing historical data.In this quarter, growth of 29 -- BRL 24.9 million G&A against third Q '22 is due to a unrecorded effect concerning the reversion of the provision of fiscal contingencies generated a positive impact of BRL 42.7 million this line. If you exclude that, would have had a reduction of BRL 17.7 million in the expenses and a growth of BRL 61.7 million in EBITDA, 63.3% higher than last period.Now consolidated net profit, we grew 7.4% comparing quarter-over-quarter, reaching BRL 73.3 million in the period. This is pushed by the operational result, being partially compensated by the growth in the lines of depreciation and amortization and IR social contribution. The net profit of the parent company reached BRL 44.5 million in the period, 14.8% less than 3Q '22.Slide 7, we see the effects considered for our adjusted vision. We did not adjust this quarter in EBITDA in '22, the adjustment of BRL 42.7 million, concerns the reversion of provision of fiscal contingencies maintained by the company throughout the judgment of the process, on fiscal use of premium generated with the cooperation of companies as detailed in our earnings release 3Q '22.In the line more adjustments, we adjusted the event as recognized in results concerning the adjustment in the installments of earn out to be paid in the acquisition of Bmg Corretora. If you adjust that the consolidated EBITDA in 3Q '23 had a growth of 54.4% against last year. In net profit, besides the FX mentioned in adjusted EBITDA, we adjusted nonrecurring effects and with no impact in cash that happened in the lines below EBITDA. Therefore, we closed the quarter with adjusted net profit of BRL 107.3 million, a result, 60% higher than the third Q '22.Going to Slide 8, we assess the composition of the result of the controller company. The operational results come from the run-off of Rede Caixa and Wiz Parceiros unit, including and the parent company in the second quarter of this year. We also had corporate expenses and equity and earnings of the results from the -- what was invested by Wiz. In this period, the Parent Company had a reduction of 14.8% of net profit against 3Q '22 impacted especially by the effect mentioned above from the version of the provision of tax contingencies.If you exclude that, the company would have had a growth of 84.9% in net profit against 3Q '23 and in 3Q '23 against '22. The good result reflects of record commercial development in many units, achieving historical levels in selling insurance and credit launching new products, strategy that captures synergies and focus in efficiency. In this quarter, the Parent Company registered BRL 36.4 million in equity and earning, 35.2% higher than what we saw last year.Now Slide 10, the broken down per segment results. Consolidation of the results and the consolidated result are in the attachment. In year-to-date, 76% were from the current operations, with insurance represented 50% of our current result. This segment mostly due to new operations has long-term dedicated contracts with long-term and high potential of results generation. If you compare it to the same period of previous years, we see a strong movement of diversification of the result, aligned to continuous growth in the revenue. That was only possible because we focus in the strategic objectives of the company.Slide 11, the operational performance of our segments. Starting with insurance, we reached BRL 125.1 million in revenue for commissions, 34.3% -- if you growth -- if you compare to the previous year. This was because of record commercial performance of some units like BRB Seguros that grew 37.2% or BRL 15.6 million against 3Q '22, issuing a BRL 161.2 million in premiums, 34% higher than same period of the previous year, resulting the product Prestamista, also Wiz Corporate grew 71.4% or BRL 11 million against 3Q '22, pushed by important business that were acquired and the consistency of the portfolio in renewable, recurrent products, performance of Bmg Corretora that reached its second best quarter in ex-commissions net revenue added BRL 26.5 million to Wiz and also the performance of Omni1 that added in the quarter BRL 9.5 million in net revenue ex-commissions.Seguros registered EBITDA of BRL 41.2 million, 40.2% above 3Q '22. As a result of the commercial performance in cooperation of new business and also more efficiency in operation achieved through control of cost and expenses, result in a gain of 3.2 p.p. and EBITDA margin.Slide 12, the units that act in consortium credit Promotiva and Wiz Parceiros. In the period, we reached BRL 33.2 million in net revenue ex-commissions in credit consortiums, a strong growth of 174.9%, against the same period of the previous year. EBITDA of BRL 19.1 million, 360.7% above 3Q '22. And this reflects the first 9 months performance of Promotiva, adding BRL 23.1 million in net revenue, ex-commissions in the quarter, representing 69.5% of consolidated revenue in the segment.In the quarter, we recognized BRL 0.7 million negative from the result of equivalents of participation the company and the subsidiary, ben.up. That was totally transferred to LG Lugar de Gente. The customers will be served with no loss. Slide 13 with concept and run-off Rede Caixa operation in third Q '23, the segment for services had a retraction of 23.9%, negative BRL 7.7 million in net revenue ex-commissions in relation to 3Q '22, a drop back in revenue that came from the line [Foreign Language] which is outsourced, specialized and also in Televendas. And the most important impact was reallocation of the revenue in stock and renewal of the residential insurance by the former operation Rede Caixa for the run-off result.The unit in '23 has focused in profitability, discontinued lines with low result, investor improvement in customer relationship and excellence and serve and concentrating resources in areas that have more potential for growth. The reflects of the efforts is an EBITDA of BRL 2.9 million in the period, expanding 150.9% versus first Q '23, expanding the EBITDA margin of 7.6%. Run-off Rede Caixa had a result in revenue stock concerning the sales up to February 14, '21. In the quarter, it added BRL 47.3 million in EBITDA to the company, a result is 10.1% less than 3Q '22, impacted by the cost in Q&A.Slide 14, the corporation result below EBITDA. In 3Q '23, the line of G&A totaled BRL 5.7 million, 21.1% higher than first Q '22 due to the typical event of contingency reversion that has been pre mentioned, generating a positive effect of BRL 42.7 million. However, if you compare to the previous quarter of '23, the expenses had a retraction 21.8% or BRL 1.6 million against 2Q '23, that's due to the reduction of expenses of personnel and of hiring suppliers.These are reflections of reduce done by Wiz Co to optimize its strategies and aligned with the strategy of the company to look for operational efficiency and aligning the corporate structure to the strategy -- business strategies of the group, lines below EBITDA increase of 26.7% in depreciation and amortization, presented in 3Q '23, against same period last year is due to the amortization of the exclusivity contract of BRB and it's the beginning of recognized amortization of intangibles for exclusivity contracts for the units Omni1, Corretora, Parceiros, Parana Seguros and Promotiva.Also look at the line IR/CSLL that had an increase of BRL 12.1 million, 52.4% against 3Q '22 due to the incorporation of new business in the group and also because of the change in the tax regime of the subsidiaries, BRB Seguros and Wiz Corporate that were transferred to Lugar.Also in this quarter, there was a positive effect IR social contribution because of the change and the understanding about deductibility in value stage on the long run incentive for the executives. The effective rate in 3Q '23 was 32.5% to more companies that are controlled in the real profit Lugar regime. For the next quarter, we expect that the payment of JCP will decrease effective [indiscernible].Slide 15, composition of our cash flow. Investment, BRL 34.2 million is from the reimbursement of BRL 41.8 million concerning the second installment of earn out from the acquisition of BMG Corretora, BRL 7.6 million, acquisition of remaining participation Wiz Concept and BRL 2.4 million in advance for future increase in capital in subsidiaries ben.up and Wiz Beneficios Varejo. These were partially compensated because positive effects generated in the cash flow from the adjustment of present value and update and acquisitions by the company totaling 17.6%. And dividends payouts, negative variation, BRL 53.1 million because of payout for shareholders that are controlled in our controlled companies, BRL 19.5 million interim dividends paid by BRB Seguros concerning the results from January to August '23 BRL 28.6 million paid by Bmg Corretora concerning the results and the -- in '22 and BRL 5 million in other subsidiaries.Loans presented concern the fourth parcel of the first submission of debentures in the company, BRL 17.4 million and paying BRL 7.6 million and interest and amortization from the loan contracted by the subsidiary, Polishop Seguros and BRL 2 million in interest concerning the loan by the parent company, partially compensated by the interest of debentures recognized in the results of this period, BRL 8.3 million. And under others, the flow presented concerns payment of BRL 41.3 million to BRB from the reduction of capital by the subsidiary BRB Seguros total of BRL 82.7 million. This reduction in capital aims to distribute the cash in the subsidiary as effect mainly of recognized amortization of exclusivity contract BRB Seguros with BRB Bank.As a consequence, with parent Wiz received BRL 41.4 million from this transaction. Therefore, we finished this quarter with consolidated cash of BRL 251.7 million and BRL 126.2 million in cash in the parent company. So we close the presentation and I'll give the floor back to Stefania, who will moderate the session of Q&A. Thank you.
Thank you, Lucas. We're now open for Q&A. [Operator Instructions] Question by Ricardo from BTG Pactual. What can we expect regarding the growth rhythm of revenue for the coming quarters? We see good revenue connected to commissions from Prestamista. Is this a recurring moment?
Yes, we understand that, we came from a first half with SELIC that was very high and that generated restrictive credit. So we expect that SELIC reduces will have better transactions at the banks, so more bank activity. And hence, selling insurance will become more important. We think next quarter will be better than the first half of the company. We have some season ability in our business. Usually, the second half generates more revenue and we expect that next half and next year will generate more sales and therefore more revenue from Prestamista.
Also from Mr. Ricardo Buchpiguel, after the restructuring, influencing reduction payout, can we expect some good deal to be done next year? Or is the idea to preserve the cash position?
Inorganic growth in the short run, we'll keep focus in operational efficiency and maturing the business that we have in-house increasing the profitability of our operations, aiming and cash preservation generation. In interest, the acquisition opportunity will be taken forward within the structure of the company going through the governance organs. And the way we can structure a possible new acquisition, but it's going to be seen in time with opportunistic view.
Third question, William [ Bahaja ] from Itau BBA. We have 2 questions. The first one is about the sequential improvement of Prestamista, especially Bmg Corretora, BRB Seguros. There is more appetite of credit in general. Can we anticipate that this will be maintained or maybe the effect was not so recurrent?
I think I addressed part of this question already. We have not seen any non-recurring result in the result of the Bmg and BRB. Remembering that they have a consolidated volume that's important, we do Seguros Prestamista there. And as we see a reduction in the interest rate, the credit will be cheaper, the clients who come to the banks and then they can have a higher credit as interest reduces. So we expect that the results of BRB remains in good levels as we have less restriction in credit.
You had growth in commission higher than net revenue. Could you comment on that? Should we expect something similar in the coming quarters?
William, that has to do with the mix of business. We had a good result of BRB that does not have as much repasses other businesses. So it affects this mix. I don't think we can give an answer for the future because it depends on the performance of each one of our businesses. The best way -- look at it is in a broken down way, especially or operations that will generate to more value, which is Promotiva, BRB and Bmg. If you look at them standalone and modeling them forward, you can see whether this mix of commission is more or less representative.
Guilherme Grespan from JPMorgan. Two questions and I'm going to separate the questions. First, could you further elaborate on other revenues and expenses on anticipation of Omni with Zurich, what -- what and when is this result is going to be recognized?
We have 2 large effects on that line. First one is that part of the revenue of Prestamista, BRB Seguros is on that line. So we should see that every month from now on. So it's recurrent. And second, anticipation of commission of Omni Zurich, that's a 5-year operation. So we expect to have amortization of that operation that has been done and the result now is in the P&L of Omni1 and that's for the next 5 years.
Second question by Grespan, I believe one of the focus of the company has been tax planning and we see a higher liquid. Looking at 2024, can we expect a reduction in taxes, what level would be reasonable?
We had a strong quarter, much influenced by the results on BRB, Bmg. There are 2 operations that pushed the liquid up. Our internal view is that this year, in this quarter, we have the smallest effectively quote. We had around 37%, 38% when we look at consolidated and we have less this quarter. We expect to see more reduction in the mix will impact on that. So if we have a result of BRB and Bmg pushing the results of Wiz for the coming years, maybe the sales will be smaller, but we have 4% -- almost 4% of points reductions in this quarter. And also something important that we put in the release, the economical benefit of JCP only happens when we pay it and most of it is in 4Q.
[Operator Instructions] Question by [ Leonardo Roma ]. How is the partnership with Polishop?
We -- with Polishop, it's a little bit below what we expected. Retail as a whole has suffered a lot. And Polishop is part of that context. It's not an operation that from this standpoint that it will impact the whole net profit of Wiz, but we wanted to go right. So we don't like to look in the short run to see whether it was good or not. We come from a select tax that a rate that was very high, that impacts on retail. So it's worse than what we expected, but we think it's too soon to take a conclusion.
Mr. [ Zumar ]. We saw approval of minimum mandatory payouts, reducing to 25% debt reinforcement, how is the payout payment or the payout for the coming years?
The reduction of mandatory payout to 25% intends to improve the capacity financing, the cash flow of the company, strengthening the financial capacity of Wiz. So we have today a transactional indebtedness that's there and it's going to be finished in 4 years. After that, we will evaluate where this exceeding cash will be used. If we have good opportunities for investment, we're going to use for that. Otherwise, we will still question and verify the possibility of increasing payout.
And Zumar, that's the care we have. We had to bring scale to the company, now we have that. So it's always a decision that we have to be very careful about where to put the capital. Can I pay better the shareholders with good investment? This dynamic will happen from now on in a recurrent way.
Mr. Carlos, does the company have any perspective of rebuying actions?
We do not have that in the horizon for payback. We have some indebtedness. So it's quite high capital that we're putting in that acquisition. First care we want to take is to have a debt profile that we can use the cash generation well with this reimbursement. And then we will think if we're going to do an M&A or pay back.
[ Mr. Assis ], how is the company going to deal with the financial results for 2024?
We expect a better result in '24. The company is reducing its leveraging and interest rate is going down. Our businesses are growing, making a summary of this year, we reduced payouts to generate more cash. We generated savings of almost BRL 40 million that will increase the cash. We postponed M&A and the interest rates are going down and we decreased financial expense. So we expect better results for '24.
[indiscernible] what's the participation growth of insurance for loans for real estate. This is Stefania. I'm going to answer that. Basically, we have in 3 subsidiaries, we have this product with the run-off from Caixa that represent 40% of Caixa run-off. And we also have from Inter Seguros and BRB Seguros. In this last 2, it's not a product that's so much represented in result, but it has been growing its portfolio throughout time.
Question from [ Kaio ]. How does Wiz expect to -- of the results from technology?
Kaio, Marcus will also add to this answer. This is one of the subjects that we expanded the most energy this year. And we have many nice things to show to the market, especially insurance and credit market.
This is a question that is the core of Wiz. How do I go to the channel and make it sell more, be it for credit or insurance? Basically, what's my value proposal and technology will generate a competitive differential in this proposal. It's a technological framework that will make products to be launched quicker, insurance penetration will be larger, portfolio will be larger. The rate and price will make more sense. So we can offer a larger portfolio of products.
Much of this discussion took our time this year and we brought that as operational highlight, as Marcus will mention.
We brought together every solution we had into a platform that is Wiz Pro. It's important to mention that this Wiz Pro platform means an advancement of technology that we wanted to bring to our partners, to our subsidiaries, meaning the implementation of a digital platform with sales management, engaging in operational mode in such a way that we can personalize our activities with those business units. It's not a plan for the future. The platform is ready. It's been implemented, it's being used and we intend with this platform and other actions that we are taking in technology, we intend to scale more possibilities for our partners, engaging and fostering more sales for our businesses.
So we now close Wiz Co teleconference. We thank you all for participation and have a nice day.