Wiz Co Participacoes e Corretagem de Seguros SA

BOVESPA:WIZC3

Earnings Call Transcript

[Operator]

Good morning, everyone. You're welcome to Wiz teleconference for the second quarter 2021 results. Today, with us, we have Mr. Heverton Peixoto, CEO and Investor Relations Director; and Mr. Guilherme Aguiar, Directors of Market Relations and M&A. I'd like to remind you that this event is being recorded [Operator Instructions] This event is also being transmitted via webcast, and it may be accessed at ir.wiz.com.br (sic) [ ri.wizsolucoes.com.br ], where the respective presentation is available. Slides will be controlled by you. The replay of this event will be available right after the event is over. And I'd like to remind you that participants may register questions for Wiz during the Q&A session or after the conference is over.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the company and on information currently available to the company. They involve risks and uncertainties because they relate to future events, and therefore, depend on circumstances that may or not occur. Future perspectives involves risks and depend on circumstances that may or not occur. Investors should understand that conditions related to the macroeconomic scenario, industry and other factors could also affect the results differing materially from those expressed in such forward-looking statements.

I now turn over to Mr. Heverton Peixoto, who will begin the presentation. Heverton, you may begin the conference.

[Heverton de Melo Peixoto, executive]

Good morning, everyone. You're welcome to our teleconference results for the second quarter of 2021. After the opening, Guilherme will introduce the results for the period. During the second quarter of 2021, we were firm in our diversification strategy of businesses, innovating our deliveries and strengthening our corporate culture. In this period, we won a competition held by the Brazilian bank, BRB, and signed the contract starting the joint process of integration for the development of the joint venture, which will potentiate businesses along with clients of the bank, commercializing insurances, consortia, capitalization titles with exclusivity for 20 years. We celebrate this other partnership with and are aware that we can reach these results.

Another highlights would be bancassurance, which was a Bmg partner. We're also actively working to develop a reference operation in bancassure aligned to the bank's strategy, focusing on the generation of value in the long term. By means of Wiz Partners, we expanded our agreement with Itaú Unibanco and now offer real estate loans, along with our accredited network, which has over 17 sales points in a contract for 20 years of partnerships. We also find a contract with BB for consortia.

We expanded our credit portfolio and launched Wimo PJ with an option of loans with assets as a guarantee for legal entities, which provides simplified documentation. In the innovation scenario, we highlight the digital transformation process through which Wiz BPO has gone through, establishing its position as a full solutions unit for the insurance market -- insurance and credit market with technological support applied to the best solutions in the segment.

We have squads which tries to obtain market solutions to be applied in processes. And these are examples of investments. We have the Agroeasy platform, which includes a CotAgro tool aimed at contracting agribusiness insurance, risk management and a solution for monitoring and inspection of secure agriculture areas. Another example is WGarantia, another platform for the multi-calculation with quotes and online issuance of guarantees. Everything is provided in the same place in a simple and intuitive manner without bureaucracy.

We have concluded 48 years of major achievements based on our main asset, people, and that's why we highlight the strength of our corporate culture, a work that started in 2018 and has proven to be essential for us to reach our results and objectives. We have created a feeling of belonging based on merit, feeling of ownership, focusing on results, passion and teamwork. We believe that diversity promotes a self-performance culture. And that's why we apply the sense of diversity so that we can identify where we are and where we can improve to become more diverse and inclusive.

Result of this culture. Once again, we were considered by the GPTW rankings a Great Place To Work as one of the best companies to work in the Midwest and also one of the best companies for women to work throughout the country. And this makes us very proud. This is marked by power and resilience. That's why we have the slogan, "Never Bet Against Wiz." This has been used by Wizzers and demonstrates that we can make achievements -- great achievements together. We are closer and closer to the future that we one day imagine.

[Guilherme Aguiar, executive]

Thank you, Heverton. Good morning, everyone. I'm now going to start with Slide #3, where I will talk about our operational highlights and strategies. As we announced on July 20, Wiz Board of Directors approved the first debenture insurance, including 250 simple debentures in a single series, and this is due on August 18, 2026. The nominal value will be BRL 1,000, amounting a total of BRL 250 million on the issuance day. And the process is going to have stricter distribution efforts pursuant to CMV Instruction No. 476 (sic) [ CVM Instruction No. 476 ], and we will announce the total number of quotas.

The other characteristics of the offer are available at CVM website and in our Investor Relations website.

Another important fact in this last quarter was a partnership with BRB, where we purchased 50.1% from a new insurance company that will be constituted by BRB. The acquisition is estimated at the total price of BRL 585 million, including one amount in the order of BRL 300 million to be paid now and then other installments with variable amounts estimated at BRL 38 million. The new company will be able to commercialize exclusively in the distribution network controlled by BRB all of the products and services related to insurances, consortia, capitalization and private insurance. This is going to follow the usual rules for this type of transaction.

Also in this quarter, the Wiz Parceiros unit, which sells credit products using indirect channels, celebrated 2 important partnerships: a commercial agreement with BB Consórcios and the expansion of the scope of operations with Itaú, incorporating the real estate financing product. Wiz Parceiros, after this agreement is signed, will distribute products in their respective entities using its business partners. The Wiz Conseg unit formalized a partnership with Caoa Corretora for the commercialization, distribution and dissemination of insurance products in the auto dealership network of the CAOA Group, except for the [indiscernible] and São Paulo units, Santos and Campinas, and this is valid for 12 months.

And finally, we highlight this quarter that for the sixth time, we were awarded as one of the best companies to work in the Midwest. This only shows our commitment to develop our corporate practices and culture, which are established in the diversity, inclusion and focus on the development of our main asset, which are people. Furthermore, in the second consecutive year, we were awarded by GPTW as one of the best places for women to work in the national ranking, and we were among the first 35 companies. The ranking acknowledges the inclusion of women.

And then in Slide #4, we present the financial highlights. After a transition period and the review of our operational and strategic model, we concluded the second quarter of the year by adding BRL 59.9 million to the gross revenue of the company representing 24.3% of our total gross revenue, which represents a growth of 65% when compared to the first quarter of 2021. Wiz Parceiros reached 114 (sic) [ 714 ] partners in the quarter and totaled BRL 1.6 billion with a growth of 67.6% when compared to the second quarter of 2020. In terms of gross revenue, the unit reached BRL 13.9 million, a growth of 27% when compared to the same period in the previous year. Inter Seguros had an expressive growth and reached 532,000 clients in our portfolio, which represents a growth of 342% when compared to the second quarter of 2020. And we had improved results in this period.

And now moving on in Slide #6. The consolidated results indicate that the gross revenue had a growth of 44.5% when compared to the second quarter of 2020, an increment of BRL 75.4 million. The performance results from the acceleration observed in the core business segment, especially due to the incorporation of Bmg Corretora and also the development of Rede Caixa, which added BRL 18.2 million to our gross revenue. We also have a highlight to the development of the Wiz Parceiros unit.

The company's EBITDA had a growth of 37.3% in the quarter when compared to the second quarter of last year, a retraction of 3.3 percentage points that suffered the impact of the costs related to the Bmg Corretora resulting from the expansion of operations in the other units of the group. As a result of the operational results and the equivalent results related to Inter Seguros in the amount of BRL 5.9 million, we had a net profit of BRL 55 million (sic) [ BRL 75 million ], a growth of 5.6% (sic) [ 120.6% ] when compared to the same period last year.

And moving on to Slide #7, we can see the adjusted results. The adjusted EBITDA shows an amount of BRL 2.3 million in the second quarter of 2021, and this is related to the tax recovery in the period. In the second table, for the adjusted net income, we have adjusted the effects of the acquisitions made by the company in the last years as well as the impacts on the EBITDA adjusted to the net income. The explanation is detailed on the earnings release. And so we concluded the quarter with an adjusted net income of BRL 84.7 million, a result which is 66.8% higher than what we had in the second quarter of 2020 and a adjusted net margin of 38.4%.

In Slide #8, we show you the composition of our net income. I highlight the financial results with 64 percentage points lower than in the previous year. This is result of the greater expenses impacted by the acknowledgment of AVP because of the acquisition of the Corretora. We also have BRL 5 million related to the participation in the company in the results of Inter Seguros, a growth of 239.6% (sic) [ 239.7% ] when compared to the second quarter of 2020.

In Slide 9, we show you our consolidated cash flow. We had a negative cash, especially due to increases in the balance to receive. We also had a payment of BRL 28 million related to the runout and the costs for the acquisition of the Bmg Corretora and also with the acquisition cost of Finanseg that was partially compensated by the positive effects generated in the cash due to the AVP and the monetary adjustments made by the company in the order of BRL 7.8 million. In terms of dividends, we paid BRL 15.2 million for the first payment of the net profit in 2020 of BRL 0.3 million for the noncontrolling shareholders. So we concluded the quarter with an adjusted final cash balance of BRL 285.9 million.

In Slide 11, we are going to present the results according to the business units. Regarding the consolidated accounting result, the management criteria affect the opening of the 3 business units, but they do not change the EBITDA or the net profit. This allows us to analyze based on the interpretation of the management. And then for the results, we can see the consolidated results according to the different business units and also the consolidated accounting results.

Starting with the core business segment, you can see the results for Rede Caixa. We have the different results with a growth of 21.4% when compared to the second quarter of 2020. This performance was led by the sales of residential products. The EBITDA of the run-on was impacted by the costs remaining to work in the activities resulting for the -- from the transition contract. For the run-off, we can see the stock of incomes related to the sales made by February 2021. We had a growth of BRL 1.1 million when compared to the second quarter of 2020. This was leveraged especially because of the housing products and sales made throughout 2020 and also the annual adjustments in insurance premiums.

In Slide 14 (sic) [ Slide 12 ], we can see the other results for Wiz Conseg and Corretora. We added BRL 59.5 million to the total revenue in the second quarter of 2021. This result was caused by the sales of Prestamista CAIXA and Vida products, which added BRL 24.9 million and BRL 30.7 million, respectively, to the total gross revenue in the period. After the review period of the strategic and operational model, Bmg closed the second quarter with important resolutions: Strengthening the performance of the company to the bank's strategy, improving its efficiency, implementing an important change in the focus for the sales of products, generating revenue, and consequently, long-term value. For the EBITDA, the unit reached over 22.3%, impacted by the commissions set.

In Wiz Conseg, we had a gross revenue of BRL 2.2 million, 66.2% (sic) [ 65.2% ] higher than we had in the second quarter of 2020. The highlights would be for the Prestamista product, which added BRL 2.2 million to the unit's revenue. We also had an increase in penetration rate of the project in the funding and also to the volume operated in the period.

In Slide 13, we will present the Enablers segments and also Accelerators segment represented by Wiz Parceiros. Wiz BPO reached BRL 26.2 million of gross revenue with a growth of 12.2% when compared to the second quarter of 2020. The highlights here would be for the solutions in credit and solutions in mass insurances. The unit had an EBITDA of BRL 2.7 billion, a decrease of 14.9% when compared to the second quarter of 2020, especially due to the increased costs in the period.

Wiz Parceiros reached a gross revenue 27% greater than the same period last year. It was positively impacted by the revenue related to the sales of the Consortium product. In the quarter, the unit sold BRL 1.6 billion in consortium, which is 11.3% higher than that obtained in 2020. Also, there was an impact by the sales of Santander Consórcios, and that added BRL 0.1 million related to the sales of BRL 27 million of consortia letter in the product.

And finally, in Slide 14, we can see the Enhancers segment, represented by Wiz Corporate and Inter Seguros. Wiz Corporate had a gross revenue of -- that was 3.4% greater than what we had in the second quarter of 2020. We had a growth of 28.5% (sic) [ 25.8% ] when compared to the same period in last year. The EBITDA for the unit was BRL 0.6 million, and that was caused by the best -- better performance in net revenue.

Inter Seguros in the second quarter of 2021 reached a portfolio with a growth of 323% in sales of insurance products. This performance explains the growth obtained in operational gross revenue. The unit had a net profit with a growth of 256% when compared to the second quarter of 2021. And furthermore, in May 2021, we celebrated 2 years of the Wiz and Winter (sic) [ Inter ] insurances. This partnership has a high potential and solid strategy with expressive results in all areas, as shown by the different periods.

And therefore, we conclude the presentation. And I would now like to turn over to Stefania, who is going to moderate the Q&A session. Thank you very much.

[Stefania Fernandes, executive]

Thank you, Guilherme. [Operator Instructions] The first question is from Ricardo Buchpiguel from BTG Pactual.

[Ricardo Buchpiguel, analyst]

Congratulations for the result. First of all, could you comment about the strong Bmg Corretora results in this quarter and whether we should see something closer to that for the next quarters? Or is the expectation of this pace going to remain for the rest of the year?

[Heverton de Melo Peixoto, executive]

Ricardo, we have similar questions from Vinicius and Alan. What we understand is that Bmg captured what we call the first wave of value, where we implemented a series of improvements, especially in terms of distribution of products in a unified and mass product and indirect channels. In the next month, we will try to consolidate this pattern of business channel, and we will stabilize at this level of performance before we try to implement the second wave. So the main focus now is on the stabilization and consolidation of this operation in the stages that we were able to capture, and that demonstrates Wiz' power in the sector.

[Stefania Fernandes, executive]

Thank you, Heverton. Now moving on to the second question, also from Ricardo, BTG Pactual.

[Ricardo Buchpiguel, analyst]

Could you also comment, please, what will the cost and expense lines evolve throughout the year? Is there any operational efficiency to be captured related to the end of the operation with CAIXA?

[Heverton de Melo Peixoto, executive]

Ricardo, yes, we still have some capture. As you know, we have a series of liabilities and contracts in the transition contract. This will be valid until this third quarter, and we also have some opportunities to capture. Also, when we demobilized the resources, Wiz retained its main talents, and they are now being allocated to new operations and are being prepared for the expansion to be made by Wiz in new products. And so this will lead to some gains in our cost matrix, but most of it has already been captured in the second quarter, beginning of the third quarter.

[Stefania Fernandes, executive]

Okay. Moving on to the third question from [ Mr. Anderson Breza from Vivaro Investments ].

[Unknown Analyst]

Could you comment about the revenue of Wiz Parceiros in the second quarter of 2021? Why was the revenue lower than in the third quarter, whereas you sold more than in the previous quarter?

[Heverton de Melo Peixoto, executive]

[ Anderson ], your understanding is correct. We have had an expansion of Wiz Parceiros' actions along with other companies, and that generates a volume of letters that are sold. But the other companies have a different system in the cash pattern, and some of them also have a receipt timing with larger windows. And therefore, we have established it as the largest 100% open platform in Brazil, and not necessarily the revenue will have the same behavior as the sales. The philosophy of Wiz is to create value more than just receiving cash flow. And so for us now, the focus is to create future value, create receivables. And that was strategic actually for the current moment of the company, the so-called run-off. So this has been our view of present value for the generated clients.

[Stefania Fernandes, executive]

[Operator Instructions] We have a question from Alan Cardoso, Santander Asset.

[Alan Cardoso, analyst]

It calls my attention, the high percentage reached by Inter Seguros. What should we expect in terms of increased penetration looking forward? Also, could you talk about the strategies and how they will impact the average ticket of Inter Seguros?

[Heverton de Melo Peixoto, executive]

Inter Seguros has kept its strategy to be the largest and best platform for the digital sales in Brazil. Inter has been extremely successful, especially with the crossing and penetration in the client base. That generates a decrease in tickets as we explore relationship, products and monthly premiums.

The main focus of Inter Seguros right now is to generate recurrences, penetration at the base and also to define a base of client. More specifically, regarding new products, health insurance have a lot of potential because of the long duration that generates increases in ticket but also long-term revenue. Right now, we should think about steadiness in this growth. It calls attention because the initial that came in was very large. But as the client basis is consolidated, it reduces a little bit in comparative terms. But the steadiness is present now and will remain so looking forward.

[Operator]

We have another question from [ Mr. Luca ] from Inter Asset.

[Unknown Analyst]

Congratulations for the results. Could you please update us quickly on the pipeline of new partnerships and what your expectations are?

[Heverton de Melo Peixoto, executive]

[ Luca ], in response to you but also to many other similar questions that were observed, what we can say is that Wiz remains very active in trying to generate value.

I apologize. We have some Internet oscillation here. But going back, Wiz is active in the pursuit of inorganic opportunities. And it has done so with a lot of vision of its quality. Of course, we are negotiating with selected players. We believe in their culture. We foresee a lot of opportunities, and there's a lot of similarity with our vision of people. I apologize. Going back to the answer, we continue investing in this inorganic growth to generate opportunities by means of M&A, but we do this in a consistent manner. And we are certain that we will have a recurring track record that has to do with our DNA. It's no use for us to expand really fast and not deliver afterwards. And therefore, the credibility, track record and our consistency are strategic values for Wiz. And so I believe that when we analyze the second quarter, we can see that, we can see what we believe in. We will exchange opportunities of M&As that we cannot see this alignment and this value generation. We have less opportunities but with a lot of perspectives.

[Stefania Fernandes, executive]

One last question from Vinicius Figueiredo, Itaú BBA.

[Vinicius Figueiredo, analyst]

We have seen an increase in the margin when compared to the last quarters. What would be the stability level for the profitability of this operation? Would a margin expansion depend on the distribution network?

[Heverton de Melo Peixoto, executive]

This is another excellent question. We talked a lot about the first Bmg wave. This first wave can assist us in the capture of values and opportunities in the lives -- in the Vida portfolio. It does have a lower margin because of the high cost of the business channel. We were able to stabilize that at levels that we consider to be healthy in the order of 20%, 25% of EBITDA margin. And this allows us to do it, and at the same time, guarantee all of the other factors.

This has also a relationship with the improvement in the portfolio, where the bank will focus on relationships and digital as well. And this has been the DNA of the company. And as these things take place, and this is what we call third wave, this will start unlocking our margins as well. It is very important that Wiz investors realize that the different operations also have different quality, different characteristics. And that does not mean that the operation is better or worse. We are not rejecting or accepting 115% of EBITDA margin. We have to understand the nature of the channels so that we can establish a right target of what we should go after.

[Stefania Fernandes, executive]

Thank you, Heverton. We now end our Q&A session, and I would like to turn over to Heverton for his final considerations. Please proceed.

[Heverton de Melo Peixoto, executive]

Well, I would like to apologize for the problems we had in our neighborhood with the Internet connection. But the most important thing is that the energy in our team is very consistent and very strong. We do believe that when we have people with our own DNA, people who are passionate about the company, people who are passionate about the project that we're developing, with a high level of understanding that one has about the market, about the way we deliver, all of this combined to good partners, good businesses, will help develop a company and a platform that is unique in the Brazilian insurance market but also in the global market.

Our strategy is well positioned. It is unique. And we continue capturing value based on a plan that we established 3 years ago. We are very motivated. People are united, and everybody is looking at this in a humble manner. We are aware of the challenges that will face us. We know that these challenges after the fourth quarter will be higher, but we are also very confident about our planning. And therefore, I thank all of the investors, and especially all of the Wizzers who are making this dream come true. I wish you all a good day, a good Friday.

[Stefania Fernandes, executive]

Wiz teleconference is now over, and we thank you all for your participation. Have a great day.

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