Bemobi Mobile Tech S.A. (BMOB3.SA) Earnings Call Transcript & Summary

My name is Nicholas. I am IR Officer for the company, and we have Pedro Ripper, CEO; Andre Veloso, CFO; and Joao Stricker, our VP of Operations for Brazil and LatAm. As usual, we are recording this presentation. [Operator Instructions]. As usual, before we move ahead, I would like to remind you that any forward-looking statements that may be made during this call regarding our business outlook, operational and financial targets are based on the company's management expectations and beliefs as well as on information that is currently available to us. This involves risks and uncertainties as they are related to future events, which may or may not happen. Investors have to understand that the overall macroeconomic conditions in this industry and other operational factors may affect future results and lead to outcomes that differ materially from those expressed in such forward-looking statements. Let me now hand it over to Pedro. Pedro, good morning.

Good morning, Nicholas. Good morning, everyone. Welcome to the earnings release presentation for the second quarter of 2025. We usually have a very brief introduction. For the past couple of years, we've been using a different approach when it comes to payments. We combine software and payments in one integrated offering. We work with what we call vertical payments. This means 2 things. It is vertical because it is different from traditional payment players. We have an end-to-end journey. We integrate software and CX. It is client-facing with apps, our web channel, WhatsApp and others. So we deal with payments where clients are. And finally, we usually offer integrated solutions that integrate with the back office of the companies we're dealing with, like their CRMs. Our hypothesis is that this integration translates into better conversion, better results, less friction. Our second concept when it comes to being vertical is our hypothesis that we should become specialized in industries with similar pain points. So we are using recurring essential services here like telecommunications, utilities, education and insurance. We've made good progress when it comes to new clients. We have another 75 clients for this quarter. We have 1 big enterprise client. It is above BRL 0.5 billion in revenue. And we have 74 clients who are medium-sized clients. So we are close to 1,600 active clients. We are in 60 countries, and we want to have leadership in the biggest utilities companies in Brazil. We are working with 12 out of the 15 that work with recurring payments measured by revenue. We would like to highlight some qualitative elements as well. In this quarter, we had a very important launch. This carries lots of synergy with what we're doing in payments. This is a new agent, Grace. It focuses on AI, WhatsApp and integrated payments. So when we think about the relationship between our clients and their end clients, they need to do collection, they need to receive payments. And WhatsApp has become something ubiquitous in Brazil. However, the payment experience is still a bit fragmented. It's not seamless. So Grace was created to offer outstanding experience for that. We already have some clients who are using us. This is a highlight. We don't have a slide for this, but we have other highlights as well. We had innovation in payment methods. At the end of June and beginning of July, we launched the Automatic PIX. Bemobi is an expert in recurring payments. So we integrated the automatic PIX with the [ Multireo ] offering, where the automatic PIX goes together with other recurring payments. Our hypothesis is that we're going to have better conversion at lower costs. This is an innovation, and we've been preparing for this for over 6 months. What's also interesting in the evolution of the PIX transfer is that we may have been the first in Brazil to launch a PIX offering integrated with Google Pay. So if you have a digital wallet without necessarily using a credit card, you can integrate PIX with Google, and we support that in our checkout. These are highlights for products. We also have one highlight for clients, which is very iconic in 2 senses. For utilities in our vertical approach, we were exclusively focused on power distribution. However, in utilities, we have other subsets of activities like sanitation. We started focusing on that, and we got the biggest sanitation company in Brazil to work with us. They've been privatized for a year. This case is also a highlight because of another reason. We've been putting together a group of solutions that may be look like one-off solutions from the outside. We bought a company called [ Nam ], a year ago, focused on digital transformation and customer experience. We also bought an ISP business which ended up spearheading Grace. And we had lots of evolution with our checkout and our payment methods. I think the SABESP case is the very first one where we have all of these components in a unified view. This business had a very aggressive view on how to universalize services and digitalize customer experience, and we were able to integrate all of their main digital channels, the web, the new app, WhatsApp and in the future, we'll have more channels. And we took a 180. They were very focused on the Boleto payslip, and now they are very focused on the PIX transfer. They took a leap. This is a sanitation business with the most modern payment methods out there within under 3 months. In under 2 full months, their WhatsApp channel became a highlight. With the support of AI, they were able to collect over 100 million -- 3 million conversations. And this is very abstract, so let's make it tangible. We have a short video under a minute, and you'll be able to see how all of these movements have been playing out. This is the solution that we've been putting together, and this is how it translates into very good results for our end clients like SABESP. This is something that we've been trying to replicate to other clients, too. [Presentation]

I think this video helps us understand it. When we talk about vertical payments, we're talking about a seamless offering, payments that are integrated to different features and different channels. We have a very vertical perspective in this case of utilities and sanitation. This is something we're trying to replicate in every industry. We're doing something similar in education with Agenda Edu. We do the same in telecommunications. So this is the difference between a vertical player in comparison to other traditional players with APIs and POSs. As usual, let's go through some KPIs. We keep growing. For most of new clients, we're completely focused on our 2 target areas. So these are mainly clients with payments and SaaS. And usually, these things go hand in hand. We're taking a step to the side with micro finance when it comes to the number of clients, but this was a good highlight for this quarter. And we didn't start any new carrier for digital subscriptions in this quarter. Even though in previous quarters, we had lots of progress with this indicator. When it comes to utilization KPIs or volume KPI, physical KPIs, we have one each one of our 4 business lines. TPV had very robust growth, like clockwork. We're growing around BRL 100 million on quarter. This is 30% of growth year-on-year. For SaaS, we had a small reduction quarter-over-quarter. But this has to do with a change in concept, and we had a 5% growth. The change in concept here happened because we have different SaaS licenses, and we have carrier platforms. For one of them, we have now an unlimited model. So to not distort this number upwards, we eliminated the number of unlimited licenses. So even though we only had 5% of growth here in revenue, we had more accelerated growth, which shows that the revenue per license is up. According to the same logic for micro finance and micro transactions, we have 2 different types of very diverse translations -- transactions here. In one business, we work with top-ups in voice data packages. Usually, we have a much smaller ticket for this. And we have a new business which is growing in an accelerated way, which is credit scoring transactions. In this case, we sell to banks and fintechs, the scoring of clients in countries where usually you have less information about players. So players like Nubank, American Express, BBVA, among others, use this information. This has been growing a lot, and the unitary ticket is much higher than the other business line. So here, we're growing. We reduced the absolute number of transactions, but you have a higher ticket. This completely offsets revenue and ARPU. For user paid subscriptions, we had a small increase in licenses. It's good quarter-over-quarter. And year-over-year, it is a 4% growth. In this quarter, we want to give you more visibility. So we're breaking it down here, like in ARPU or a take rate. It is easier to see it here with the take rate. Our take rate for payments has remained adjusted. So our TPV for payments is closer to our revenue. For SaaS, we have exactly what I was talking about. Our revenue per license increased significantly from BRL 3.8 to BRL 4.1 in a year, and we grew more in revenue. I think the biggest positive distortion is that in micro finance, since we have 2 different kinds of transactions, credit score really brings our ARPU up. And we have a blended change here. We go from BRL 0.3 last year to BRL 0.4 now. So even though we have minus 14% in volume, because we're changing the type of business we're doing, our revenue is up. And for paid subscriptions, we have a reasonably stable result. We now have BRL 1.9 , which means that our revenue grew above our user subscription base. We had 19% of growth for our normalized revenue with neutral foreign exchange, we would have grown 15%. The impact was basically marginal. The EBITDA growth numbers that Andre is going to show is slower because of the foreign exchange rate. Before I hand it over to Andre, let's zoom into the revenue. As we were saying, in this quarter, we grew 19%. So up until the first half of the year, we're growing at basically the same pace. We're accelerating a bit in Q2 year-on-year compared to Q1. It's a bit above. With payments, we've been very strong. We grew almost 26% for digital payments this quarter year-on-year. And if we look at the year-to-date numbers, we see something similar to the trends that we saw with revenue. We accelerated growth in this quarter. Now for our international mix and our domestic mix, our international operations are running really well. So we had a small gain here. We were able to be a bit better in our international operations. Some of it comes from the foreign exchange rate. But everyone was performing well anyway. And finally, we see a breakdown per business line. Here, we have a payment mix and SaaS is already the biggest part of our business with payments, so payments and SaaS. With payments, we went from 34.5% to 36.5%. With SaaS, we have stability. But by combining payments and SaaS, we have basically 60%. And other businesses are also stable, but they are growing at a slower speed. Let me now hand it over to our CFO, Mr. Andre Veloso, who is going to be commenting on financial indicators.

Thank you, Pedro. Thank you for being here, everyone. I'm happy to be here for another earnings release presentation. Let me start my share of other P&L lines. We have our gross profit here. It grew a little bit more than revenue, 21% in this quarter with a slight increase in our gross margin, a little bit above 73%. This is the fruit of a better revenue mix for this period. Year-to-date, we had very robust growth around 19% because of the very same reasons. Now to support the number of opportunities that we've seen in the last quarters. In this quarter, we were doubling down on our expenditure, not only with personnel because of the new business units that Pedro was mentioning at the beginning of his speech, but also expenditures with IT. We also had reinforced doubtful accounts, which increased our OpEx for this quarter. Year-to-date, we're not growing as much. It's not 18%, it's 16%. So when we look at our EBITDA and we take into account our operational leverage, we're able to expand our margin to a bit over 34%, both for the quarter and year-to-date. So our respective growth was 24% and 19%. This is very robust growth for our EBITDA. Now when we talk about net income, we have a small low light here for this quarter. For our adjusted net income, excluding the swap, we see a minus 16% result. This happens basically because of 2 things. First, in the second half of 2024, we had a positive impact from the tax benefits from our own capital interest or from our interest on equity. So we had a negative result here from a financial standpoint. These 2 things are almost BRL 13 million, and this is why we saw a slight decrease of minus 16% in this quarter. Since we're making progress with our dividends policy and yesterday, we announced this distribution of BRL 30 million in interest on equity to be paid at the end of August, then this impact will actually be observed in the third quarter of this year, and we're going to make a correction of this effect from a tax standpoint. Now when we look at our operational cash flow with the adjusted EBITDA minus our CapEx, this is the biggest highlight for the quarter. We have 27% of growth, both quarter-on-quarter and year-to-date. Our cash conversion is above 75%. It's really robust. We're almost at the end, and I think it is important for us to leave you with a comment. In our last Investors Day, we focused a lot on return for our investors in trying to optimize our capital structure. In this sense, in the past quarter, we were able to work with an innovation credit line with the BNDES. It is a 10-year debt with 3 years for the settlement of the principle. We have interest paid every 6 months. So we are working on optimizing our capital structure. If we look at our cash balance for this quarter, in spite of good cash generation, we see that overall, we had a minus BRL 28 million in our cash position, which is more than explained by the payment of BRL 59 million in dividends for this period. We also had 2 effects here. We had profit sharing of BRL 19 million, which is offset by the new loan. And we had a bit of devaluation of our cash acquisition abroad at around BRL 10 million. We have almost BRL 500 million in cash. We still have a little bit over BRL 111 million to be distributed in the short term after our statements are approved for this period. With this cash balance, we're very comfortable. We can move ahead with our strategy. This also has to do with lots of M&A opportunities that we have, and we have always been assessing them. Let me now hand it over to Pedro for his closing remarks.

Thank you, Andre. Let me wrap it up, and we'll start the Q&A. Let me put this into perspective. We've spent basically 1.5 years accelerating. In the first quarter of 2024, we had a flat growth, kind of negative growth. So we started with 3%, 9%, 11% and now we're around 20% of growth recently. And we're talking about 25% to 26% of growth in our EBITDA. So we are gaining traction. Our strategy is creating echos with our clients. We're performing well in our business lines as well, especially in the ones we focus the most. Payments have had very consistent growth with this vertical payment approach. We won many clients in the past few years, and they are starting to yield results. We have lots of industries. We have power. We have our first utility outside of Brazil, which we talked about in the last quarter. We have Salta, a big educational business. And now we're going into sanitation. With this mix and with other clients that we are closing a deal with, we are accelerating a lot. I've already talked about our EBITDA. We're very happy with our operational cash generation. We're very diligent. We know that cash generation and accounting indicators go hand-in-hand. And our cash position, our cash balance is really strong. So we can have an aggressive policy for paying dividends without our DNA, which is related to M&As. We are still actively looking for assets. Of course, we're looking for assets that are going to add value to our strategy. We most likely have something to announce very soon. Regarding products, we had a number of important launches. We had many in payment methods as we were discussing. We now also have our conversational payment agent. This is growing a lot in Brazil and many of the countries where we operate. We believe not only that this is going to be a growth factor for our payments, but also for SaaS and a new line of revenue for our businesses. Finally, we used one client as an example here in the last bullet, but other clients could be an example here. SABESP is a good showcase of how we're able to go into new segments and to also put together different elements to offer a very special end-to-end experience compared to what businesses have been doing in Brazil so far. Let me now stop sharing my screen, and we're going to have a Q&A session. Nicholas?

Thank you, Pedro. We're now going to start the Q&A session. [Operator Instructions] Okay. We see some hands that are raised, and I'm going to unmute Luis from XP.

I have 2 questions. First, capital allocation. When we look at dividends, it feels like the company is very comfortable with the '25 guidance based on your net income for the first quarter. How do you plan your payout for 2026? Could we have 100% of payout for 2026? Regarding capital allocation, what is your vision regarding M&As? Do you have anything in your pipeline? Now another question is related to micro finance. I would love to double click on credit score. We saw strong results. So what kind of factor explains this kind of stronger transaction volume in Mexico? Is it pent-up need from the first quarter? Did you change anything there? If you could give us more detail on your pricing model, that would be great. I'd love to get some outlooks on the changes in microfinance as well.

Excellent questions. We haven't set a policy for dividends in 2026 yet. But I can share a rationale with you. And as we make progress, then yes, we'll be sharing beneficial policy. But here's what we're thinking. As we feel comfortable with our business growth with the kind of acceleration that we have right now, and we want to continue in the accelerated path. As we have M&As that are compatible to our cash balance and our cash generation, then yes, we expect to have a more aggressive policy of 100%. With the data that we have right now regarding performance and the type of our M&A and the mismatch in cash, we could have this ambidextrous strategy of high payouts without compromising on our M&A ambitions. By the way, we're going to announce that when the time comes. And this is always going to be subject to our business perspectives for cash generation and the specific M&A deals that are available to us. Regarding more specific information on M&As, right now, we have some better defined areas, which we believe would be neutral expansions for us. We see businesses that make a lot of sense to us in the new steps in vertical payments. When and how is, of course, something that we couldn't talk about yet. Also, M&As are binary, and they can only be announced when they are 100% confirmed. What I can tell you is that we're extremely active. We have lots of negotiations going on, and we are in line with what we've been doing so far. You see that every acquisition we have is connected to our strategic perspective for the future. Now microfinance. We have 2 phenomena in the figures that we shared for this quarter. One is a continuation of what was already happening. The other one is a one-off effect. And I think that it's a kind of one-off effect because we're going to see it again in the upcoming quarters. First, we see the effect of having 2 different business lines under one umbrella. One of them is more mature with advanced credit and with data and top-ups for carriers, it is more mature and it grows less. And the other one is the credit scoring business. The latter has a higher ticket. So as this grows, you see a mismatch because you see a growth in the average ticket. The trend is that we keep on growing a little in our average ticket as the second business line gains momentum and space. In the second quarter, we were experimenting with a different business model. We had a nonrecurring project with a fintech to test out this new model. So instead of selling the scoring, we would help them do a digital campaign with preselected clients who are approved for the scoring model so that we're able to gain clients that have been preselected or preapproved. This offering offers higher added value. This was a pilot. Most of it was executed in Q2. For now, this is not a recurring revenue business line. But if it is possible for us to replicate this, and it feels like it is, this could be a recurring engine of revenue generation from now on. This project was heavily focused on Q2, but the good news is that the pilot was really successful. And it feels like this model could be relocated so that we keep on having good growth. Now regarding Mexico, we have operations in Mexico and Colombia so far. We do have the option of going to other countries, but the highlights for these countries is that we still have lower levels of digitalization and access to banking services compared to Brazil. And they have lots of fintechs and digital banks like Nubank who are making a bet in the growth of these countries. Since their markets are not as mature when it comes to access to banking services, they also are not as mature when it comes to credit. So we see fintechs and they have appetite to make these countries more mature. It is what happened with Brazil a few years ago, and we are interested in being enablers for this growth engine. So these are 2 good bets, and our challenge is to find other similar countries for the future. Was this clear, Luis?

Yes.

Next question. We now have Leonardo Cintra from Itaú BBA.

Congratulations on these results in your presentation. I have a question about the TPV. You had 29% of growth year-on-year, very strong growth. In the release, you said that this comes from an increase in penetration with current clients, the ramp-up of new clients and progress in small- and medium-sized schools. I'd love to understand how much each one of these 3 elements contributed. And if you think the TPV is going to deaccelerate in the second half of the year because of local consumption. Secondly, what about the margins ahead? We see that you have been increasing your share in the mix of revenue for some business lines. What do you think for the gross margin and for the EBITDA, especially for the EBITDA margin where AI initiatives are probably going to bring traction for the next quarters?