Allpark Empreendimentos, Participações e Serviços S.A. (ALPK3) Earnings Call Transcript & Summary

[Interpreted] Good morning, everyone, and thank you for waiting. This is Estapar's Fourth Quarter 2024 Results Conference Call. For those of you who need it, we have a simultaneous translation feature available on the platform. [Operator Instructions]. We would like to inform you that this conference call is being recorded and will be available on the company's IR website at ri.estapar.com.br, where the complete material from our earnings release is available. You can also download the presentation from the chat icon including the presentation in English. [Operator Instructions]. We will then start the Q&A session. We would like to emphasize that the information contained in this presentation and any statements that may be made during the conference call regarding Estapar's business prospects, projections and operating and financial targets are just beliefs and assumptions of the company's management as well as information currently available. Forward-looking statements are not a guarantee of performance as they involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect performance and then lead to results that differ materially from those expressed in such forward-looking statements. Today, we are joined by executives Emilio Sanches, CEO; and Daniel Soraggi, CFO and Investor Relations Officer. I will now hand the floor over to Mr. Emilio Sanches to begin the presentation.

[Interpreted] Thank you, Thomas. First of all, good morning, everyone, and thank you for joining us during this earnings release conference call. We are here to talk about the end of the year of 2024, third and fourth quarters, and we will also discuss what happened at the end of this year during, this is our last opportunity to talk about the results for 2024. So now let's jump to Page 5. Here, we will give you a general overview of the highlights of the year. We reached BRL 1.6 billion in revenues in 2024. This is a continuous growth. We've been talking about the company's growth in the past quarters. We recovered the company, I mean, in the last years after the pandemic. So therefore, this is, I mean, pandemic is already in the past. Fourth quarter, we posted another record revenue. So, throughout the year, we grew almost 17% vis-a-vis 2023. That was a very important landmark for the company. And we also grew 17.7% in managerial EBITDA. We reached over BRL 290 million, very strong and robust growth, not only attributed to new businesses, but also attributed to the performance of the several assets and the investments we made throughout the year. Now if we exclude amortization, we see managerial EBIT 40% up. So, meaning that we are generating very strong cash because of all of the investments made by the company. So, 2024, the fourth quarter and the whole year was very important. And we're very excited in terms of what is coming forward in 2025, and we are certain that we will also post robust numbers going forward. And our debt is also something that people monitor very closely. Our financial department is making assertive decisions. They were able to reduce the spread of our debt, our liability management this year posted a worth of BRL 350 million in debenture issuance. We were able to reduce the spread of the debt that we had, that we carried from the past. So, there was a drop of 2.35%. So regardless of the fact that the Selic rate is increasing, but we are gradually catching up in terms of reducing our spread. Also, we opened 82 new operations in 2024. And this really shows how strong the company is. On the operating side, we were able to inaugurate 82 new operations. This was thanks to great efforts from everyone in the company and we hope that in 2025, we continue on that same pace. And finally, another positive highlight was a 50% increase in our revenue, mostly coming from our digital platform, Zul+. And this certainly proves that this was a very assertive decision, meaning that we are bringing new revenue streams into the company. And further on, I will elaborate more on this subject. Not only parking lots, but all the digital products of the company are posting significant growth. And we hope that with that, we will bring more positive and robust results and everybody will be happy. It will be a win-win. And this year, we ended the year with 6.9 million users in 2024. But in January, this number had already reached the mark of 7 million using the Zul+ or the digital platform of Estapar. Therefore, we are ending the year on a very good note, and we are very hopeful that 2025 will also be excellent. Now moving on to the next slide. This is a highlight of the commercial operations that we inaugurated this last year. So, we are spread throughout the country. And here, I just have a few examples that show how spread out we are around the country. We have opened 585 parking spaces at Faria Lima Square. We also opened operations in Tocantins the shopping mall, Rio Grande do Sul, Paraíba, Goiânia. We are very strong in that geography as well. Therefore, we are always very attentive to new opportunities. We are all over the country. Our footprint sprawls in many directions, and we are very strong in Brazil. We are very pleased with the assets of the company, and this really shows the potential that the company has to continue to grow. Now on Slide #7 is another Zona Azul operation that was opened this year. These are concessions, and we certainly depend on the government authorities. And we added another municipality, which will bring one more asset to our state of Sao Paulo portfolio. Now we are in the city of Maua and that covers the entire metropolitan area of Sao Paulo. This helps us with a digital platform thesis because it will bring more revenue to the company. And this is a 10-year concession, and this will certainly strengthen our strategy going forward. Slide 8. Here, we show you some figures related to our digital platform. As I said, we hit the mark of almost 7 million users. Net revenue was up more than almost 70%. We reached almost BRL 30 million. The number of transactions that we had throughout the year within that Zul platform. And not only I'm talking about Zul products, but I'm also referring to Estapar products, meaning parking space reservation, the fact that people can pay for parking lot through Zul+, the possibility of paying Zona Azul through Zul+, there were more than 50 million transactions that were posted in 2024, which is a very robust and significant number, and this shows the recurrence we have in our app. This really shows the capacity of our technical department to deliver, maintain and always come up with new products. And all of that accounts for almost 20% of the company's revenue stream. Our revenue, almost 20% of it comes from our Zul+ platform or the company's digitalization. We, I think you're monitoring all of the efforts we did throughout 2024 because well, we wanted us to give more visibility to this platform. Our marketing department did some amazing job in 2024, and they will continue to do even more in 2024. Not only this shows the number of downloads, but the number of transactions that were placed through the platform. Now moving on to Page 9. Our electromobility or Zletric company, in a very assertive way, we engaged in a very nice partnership with Eletrobras. We brought Eletrobras to join us and to be our partners in the electrification area. We almost got 50 new equipment with this partnership. We improved the experience in the Congonhas Airport in that hub, both Congonhas and Cinelândia in Rio de Janeiro, and we will be able to see more of that in our parking lots because we see an increased number of electric vehicles coming in. That's why we are focusing on this new kind of service that is now available in our parking lots. If you have an opportunity to park your car in the Congonhas Airport, you should pay a visit to our location. It's really cool. Now moving to Page 10. I mean, EV charging station network, we have more than 1,000 charging stations. And this is already considered, we already consider the largest player of charging -- in terms of charging stations in the country. We have over 1,000 charging stations, not only placed in the Estapar's parking lots, but also in some residential buildings and shopping malls from competitors that do not carry the Estapar banner, but they are inviting us to place Zletric charging stations. Revenue has reached BRL 6 million, still not very significant, but yet, that means over 60% growth vis-a-vis 2023. And we see that we are growing year-on-year, not only through partnerships, but we see that now people are willing to pay for it. Some years ago, people that used the EV chargers were not paying for it because it was just a convenience. But now for the past 1.5 years, people are already paying to charge their cars in parking lots, shopping malls, et cetera. Next slide, Slide 11. For quite some time, we are tackling several fronts. We are talking about new businesses, improving profitability, improving our debt position, reducing our debt, spread. So, we are working in several fronts. But at the same time, we are also keeping an eye on our employees. For the third consecutive year, we were awarded the GPTW award. We try very hard to be a very nice company to work. The company is very organized. We have over 6,000 employees. And this just reinstates that we're not only looking at numbers, but we look at sustainability and people. So, we are very happy to receive this award for another consecutive year. Slide 12. This is another big landmark of the company. We were chosen the best company in terms of mobility. Estadao, a very popular newspaper, a very major newspaper in Sao Paulo just gave us that mobility award, and this is just a result of a very assertive move that we did in the company, focusing on our employees, sustainability, cash generation and the fact that we also work diligently to reduce our losses and Daniel will talk about that in more detail. So, in 2025, we already see the company posting significant profits. We were able to conclude the year with very good numbers, and we are pleased with the results. And now we will talk a little bit about the numbers, so you can see the growth not only in the fourth quarter, but throughout the year 2024. So, I will come back to you later on. So, Daniel, the floor is yours.

[Interpreted] Good morning, and thank you for joining us. It's always a pleasure to talk about Estapar's results. This is another quarter and another year, and this was a very fantastic year for the company, another fantastic year, and we are very proud of our deliveries. So, I will start with Slide 14. Slide 14 shows the evolution of our parking spaces and operations. In the fourth quarter of 2024, in December, we ended the year with 754 operations, almost 0.5 million parking spaces. This is 6.5% growth when compared to the same quarter of the year before. I mean this is a growth in a segment where we usually say that this is our core segment, and this is where we focus our attention, especially in the lease and manage parking spaces. We grew a lot this year. And all of the other segments will continue to be relevant for the company. This is the portfolio that is strategically important for the company. On the chart on the side, we show churn. In the quarter, that was 0.12% and, in the year, 0.61%. Not only we are bringing on board new businesses, but we are always, we've been very successful in terms of renewing our contracts. We never lose a contract. What does it mean having a churn of 0.12% at 0.61% in a year. It means that even though we may lose a few parking spaces, they are not very significant because percentage-wise, they are very low vis-a-vis our entire portfolio. This reinstates the growth of the company because we have good operations that post good margins. Now moving to Slide 15. This is a result of the growth of our operations, and this is translated into revenue. In the fourth quarter of 2024, our revenue reached BRL 430.5 million. This was the fourth consecutive quarter where we posted record revenues. And I would like to congratulate the entire company, even though there was a seasonality factor and other setbacks, we are posting growth every year. In the year, that revenue was BRL 1.6 billion when you run an annual comparison. This is because our operating base is growing. It comes from new businesses and new revenue streams. As Emilio said it himself, our digital platform, our digital business, and we have revenues coming from vehicle fines and tax and insurance. In the year, that platform contributed to almost BRL 30 million. And so, we hope to post the same growth in the coming quarters and years. Now moving to Slide 16. Here, we show the growth of cash gross profit and the gross margin of the company. In the fourth quarter of 2024, our cash gross profit was BRL 106.2 million, growing 9% and a margin of 24.7%. In the fourth quarter of 2024, we had a one-off impact in the quarter, referring to something that occurred in the third quarter. In our last conference call, we said that the company invested in the migration of ERP, and this migration occurred on July 1, 2024. This kind of migration in a large and complex company like ours with so many transactions. I mean, it's not unusual for us to face integration challenges. And in the fourth quarter, we recognized operating costs at BRL 7.5 million referring to previous months. Therefore, this gross net profit is impacted by expenses from previous periods. That's why there was a slight reduction in the margin. But if we were to go back to that cost, which would be like a one-off cost in the quarter, we would have grown around 16% and the margin would have been stable. I mean, I say this because this was a one-off event in the quarter, and we do not expect to see that in the coming quarters because the ERP integration was concluded in 2024. So, at the end of 2024, our cash gross profit was almost BRL 420 million and margin 26%. So once the margin is stable, this number will then reflect the growth of our operation. Now before going into EBITDA, and of course, this impacts the cash profit. And this also has to do with the change in our mix. We show in this slide the evolution of the operating mix or the mix of parking spaces in our portfolio. The first bar in blue shows how much the lease and management segment represent in our portfolio. It went from 46% or 50% to over almost 60% of our portfolio. It means that our company has organic growth and our operations bring, I mean, lower margins when compared to other margins. But nonetheless, it's a margin where we changed gross margin and gross EBITDA by something much more profitable, which we will see in the next slides. On Slide 18, we show our managerial EBITDA. In the fourth quarter, we ended with almost BRL 73 million with a margin of 16.9%. So, this is a very strong growth. And in the year, we reached BRL 291.6 million in managerial EBITDA and annual EBITDA margin and the annual EBITDA margin was 17.4%. If we look at the previous slide, this is what we expect to see in our results, organic growth, sustainable growth with stabilized margins. And this can only be positive when we look at the next indicators, which is EBIT and the net income of the company. So now let's look at Slide 19. Here, we show EBIT numbers. Here is where we place depreciation numbers. And this is what happens when you change the portfolio. We are trading depreciation and amortization expenses by operating cost. So, when we look at the nominal growth and marginal growth of EBIT, this is the response that shows that our thesis is very assertive. Managerial income, it was almost BRL 30 million with a margin of 6.9%. And in the year, EBIT was BRL 122 million, 40% growth when compared to the previous year. We grew 7.7% in the quarter. And this is where we know for sure that investing in the Lease and Management segment is what will make the company even more profitable. Now going to the last KPI because our obsession here is net income. In the fourth quarter of 2024, we reported loss -- accounting loss, IFRS of BRL 3 million. But when we look at the annual net loss, we had a company that was reporting losses of over BRL 20 million. And now loss is only BRL 8.7 million. So, when you compare it to 2025, we recovered almost 90% of our previous scenario. When we see this reverse, the reverse scenario means that the company is in a very clear trajectory towards becoming a very profitable company. So, in the second and third quarter, we reported profits in the fourth quarter for reasons already explained because we had to do the migration of the system, we didn't post such excellent numbers. Otherwise, if we weren't for that, we would have posted profits in the fourth quarter of 2024. Now moving on to Slide 21. Here, we show the cash flow in the fourth quarter. We started the quarter with BRL 271 million in cash and cash equivalents and cash equivalents at the end of the year was BRL 218 million. We had BRL 69 million in terms of cash flow from operating activities, a high EBITDA level. I mean, CapEx was BRL 46 million, and we also had net payments of BRL 44 million and interest payments of BRL 31 million. I mean, we always honored all of our financial commitments. And this is what allows us to be very credible in the market, and this allows us to execute our liability management, which I will refer to in our next slide. The company has financial debt, and it's okay to have financial debt if you know how to manage it well. I mean, managing it well, it means that you have to have a fair cost with maturity dates that are balanced with your operating cash generation. And this is what we've been doing, liability management. In 2024, we had several operations, but I would like to mention 2 debentures. These are transactions with higher amounts. This was the 12th issuance of BRL 200 million. It occurred in May. The cost, the interest cost was CDI plus 2%. And now in last December, we issued more debentures of BRL 150 million and CDI was plus 1.5%. With these transactions and operations, we were able to reduce our average cost of spread in CDI. At the end of last year, our cost of debt was CDI plus 2.8%. But in 2024, it was CDI plus 2.35%. It was almost a 50-basis points reduction. And this is something we do year-on-year. It will never stop. But I usually say that year-on-year, things become less complex as our P&L is improving and our cost of risk is lower, we are able to have better conditions for the company. Not only we are reducing the cost with these transactions, we make advanced payments. And if you look at the duration of the debt, we went from 2.28 to a duration of 2.49. I would like to remember, to recall that if we don't do anything, this would go for 2.2 to 1.2. I mean we not only, I mean, we are recovering the duration of the debt. And if you look now at Slide 23, you see what happens to our debt strategy and how our results get materialized. We maintain a very flat net debt, our debt has been flat for a few years, around BRL 750 million. And in the fourth quarter, it went to BRL 810 million because of investments that we did in the company, good investments. And we show that if you look at the margins, we invested in working capital and also in some liabilities, we increased the net debt, but this was really beneficial for the company. Average cost, we went from 3.5 to 2.35. And amortization schedule has been very balanced. We have in cash more than BRL 206 million. And if you look forward, this is very compatible with our investment plan. So, with that, I conclude my presentation. I would like to thank you all for joining us, and we will soon talk about it again in 2025. The year started on a very, very good note. So, I will reconvene with you during the Q&A session.

[Interpreted] To conclude, I will go to my final remarks. Daniel talked about our cash position and the fact that we ended 2024 with more than BRL 200 million in cash. And if we have the expectation of generating EBITDA, I mean, EBITDA is almost like cash because we receive everything. We collect everything. Everything is almost cash. So, if we repeat '24 with almost BRL 200 million in EBITDA, our cash under our management will be over BRL 500 million in 2025, something we never experienced in the past. So that BRL 500 million will make us even more competitive and will help us make more assertive decisions. I mean, we have to make the interest payments. I mean, this year, and as Daniel said, that we are very assertive when we revisited our debt, and we are constantly reducing our costs. And with that, we will have some leftover cash of almost or more than BRL 300 million. We will reduce the debt or make further investments that will certainly generate better results for the future of the company. Therefore, we see 2025 with very assertive CapEx decisions, and these decisions will make the company grow further. We are very excited about what 2025 has in store for us. And the consequence is a reflection of all the work we did. Our EBITDA margin is quite high. We expect to continue to grow. Our EBITDA margin has gone beyond 18%. Debt reduction by the end of the year with all the transactions and operations we did will, I mean, improve our spread position. And so as for the rest, we grew our digital platform, and we hope that 2025 can be another winner. We had a very strong January and also February. We are quite excited with what the future holds. I would like to congratulate our entire Estapar team, our operating team of more than 6,000 employees, parking lot operators, our cashiers and our operators are constantly taking care of our clients and users, either B2B, I mean, the client that hires our app, we changed the system. And every time you change from one system to another, things are rough. I mean we went from a legacy system to a very, very modern system because we want to improve the accuracy of our results. And all of these changes are what will prepare us for another winning year. The investments that we're doing on the digital side, there will be a lot of new things coming throughout the year for users that use Estapar. They will see other benefits coming. All of the monthly users, they will see things happening more automatically and more fluid. We will be in a much better competitive position. Certainly, I mean, what we want is at the end of the day, the users want to have Estapar present wherever they go. We want Estapar to be their platform of choice, not only because we have excellent professionals, and they know the business very well. And with digital that we brought on board a few years back is bringing great results. Our commercial and operations department are very robust. And all of the numbers are just showing that we are a winning company. With that, I would like to thank you all very much for joining us. And now we will open the floor for Q&A. And we hope that we will bring you an excellent number for the first quarter of 2025. Thank you very much.

[Interpreted] [Operator Instructions] Our first question comes from Christian [indiscernible] individual investor.

[Interpreted] I've noticed that there was a reversal of rental liability that reduced the cost of the company. Well, however, if you remove the reduction, I see the costs were above the revenue and this impacted the margin. Is this lower margin should be considered a new reality?

[Interpreted] Christian, thank you for your question. Well, this is a bit of what I said when I talked about the cash net income. Because of the ERP integration, we had some previous costs that were mostly concentrated in the fourth quarter. If we eliminate that from the calculation or whether we normalize things, the gross margin would grow around 16% just as revenue growth. We are saying that the gross margin and the EBITDA margin would have been flat or stable. I mean, now there are no cost increases. What we had was just a one-off aspect in the fourth quarter, and we already solved that within the year. This, I mean, we are halfway through March, and this was not repeated in the first quarter of 2025. So, this should not be repeated throughout 2025. That was it.

Next question from [ Luis Filipe Jamega, ] also individual investor.

[Interpreted] What about the company's market share today? Do you see the possibility of posting inorganic growth?

[Interpreted] Well, Luis, the company's market share, amazingly enough, is still low. Our estimate is something around 8% to 8.5% according to the last survey conducted by McKinsey in 2019, prior to the IPO. This is also part of the material we handed to the investors. And I think maybe we grew a little bit because the market is growing a lot. I mean, there are new things coming. And this is good because it shows that we have room to grow inorganically and organically. Brazil is a very vast country. I mean, we show that we are now in Tocantins and Goiania. We didn't have a very strong footprint in these geographies. Sao Paulo is still a very vast market in the South and Northeast. So, we see that we still have a lot of room to grow. And by the same token, we will then increase our market share. Inorganically speaking, the same. As I said before, with the cash position that we have now, we are more comfortable to move forward more aggressively. We just want to be very straightforward. We want to invest in things that will bring value to investors and the company. We see the possibility of an acquisition probably in the long run. We don't have anything in the short run, but we are looking at it more attentively. And then we will have to make a decision whether we will reduce the gross debt. Certainly, we would do that throughout the year. Well, organic growth, investing in long-term contracts maybe, maybe not high amounts, but probably contracts and agreements that will have a 10-to-15-year duration. That's a possibility or maybe we could acquire a company with certain operations as long as they are attractive enough and return on the invested capital has to be good and be good for us and also the seller has to be happy as well. We will not do anything crazy, but we are very attentive because we want to continue growing in 2 digits year-on-year, increasing the company's ROE, bringing more profitability. Therefore, we hope to have new things for you soon.

[Interpreted] Our next question from Daniel Veloso, buy-side analyst from Meta asset.

[Interpreted] Given the new interest rate level, what is the leverage level that the company feels comfortable with?

[Interpreted] Daniel, thank you for your question. Here is Daniel as well. Your name is sake. The company has a high financial debt. This is nothing new, and we are trying to manage it the best possible way. Even though we were very successful in reducing spread, we are still struggling against headwind, which is the Selic rate that is increasing. One thing that is very peculiar of the company is our discipline in capital allocation. Whenever we make an investment decision, we look at the debt and we look at the interest rate curve, if there are more interest payments, then I have to look at my company, and I have to offset that or maybe balance finances. So, the first message is total discipline. In terms of the leverage level, we do not disclose guidance. We do not work with that number. At the end of 2024, our leverage was 2.7x net debt over EBITDA. And everything business as usual, if we grow as we plan with this allocation discipline, this leverage should be like around 2.3x. This is not a guidance. It's just a mathematical consequence of what we are doing in terms of the fact that we are making a better allocation of resources. So, what we have to do is just execute our growth investment plan, looking at allocation. Thank you for your question.

[Interpreted] Next question also from Daniel Veloso.

[Interpreted] The question is 2025 and '26 are important years when you will have renewals of contracts. What is the status of these negotiations? Should we expect higher churn?

[Interpreted] Hi Daniel. No, we are not expecting a higher churn. I think churn should remain the same. If you look at the average number of contracts, most contracts have a 5-year term. So, I think we have about 150 contracts that we have to renew every year. Therefore, the average of renewals remains the same. Our success rate is high, more than 99% renewals year-on-year. But we always have to work on that because it's part of our core business. Not only we have to get new contracts, but also renew the contracts we already have. We've been very efficient. Therefore, we do not expect any changes. Maybe there should be a slight increase or a slight decrease, but the level should be the same. I mean, the contracts that matured in January and February were almost all of them were renewed. There was, I don't think there was any contract that was not renewed. All of them were renewed. So therefore, this is not a problem for us. You shouldn't worry about it.

[Interpreted] The Q&A session is now concluded. The IR department is available to answer any further questions. For all of those who joined us in this conference call, we would like to inform you that our next earnings release call related to the first quarter of 2025 will take place on May 8. So, Emilio, you may conclude.

[Interpreted] I would like to thank you very much. 2024 was a very successful year. As Daniel said, we are not yet totally content because there is still a lot more to do. We have new contracts to acquire, renewals, and we have a lot more to do. Therefore, we continue to focus on our results, focus on the numbers and most of all, focusing on our growth. So, we hope that soon enough, we will give you more good news. 2025 will be better than '24. And I would like to thank the entire team of Estapar for all of their performances and the fact that they were able to face challenges very well. And together with the Board, we know that we still have to face more challenges going forward. But we have a very robust and resilient team and not only the investors, but also the company will be satisfied with the numbers of the company. Thank you all very much. We concluded now 2024. And very soon, May is right around the corner. And in May, May 8, we will bring you the numbers for the first quarter of 2025. And I'm sure and we hope that the numbers will also be very robust. Thank you very much for joining us. Have an excellent day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]