CSU Digital S.A. (CSUD3) Earnings Call Transcript & Summary

Ladies and gentlemen, and welcome to the CSU Digital's video conference to discuss the results for the fourth quarter 2023. This radio conference is being recorded, and the replay can be accessed at the company's website at ri.csu.com.br. The presentation is also available for download. [Operator Instructions] We would like to remind you that the content presented will be in Portuguese with simultaneous translation into English. For those who wish to follow the audio of this presentation in English, please chose the language through the interpretation at the bottom right of your platform.

It's possible by pressing the interpretation button presented on the bottom right corner of your platform and then choosing the language properly. You can also mute original audio for a better experience.

Now before we proceed, we would like to state that the forward-looking statements are based on the beliefs and assumptions of CSU Digital and the information currently available to the company management. These forward-looking statements could involve risks as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should keep in mind that events relating to the macroeconomic environment and the segment and other factors may lead the results to differ materially from those expressed in these forward-looking statements. Present at this video conference, we have Mr. Pedro Alvarenga, CFO and Investor Relations Officer; Mr. Fabiano Droguetti, CTO; in addition to the IR team. I would now like to give the floor to Mr. Pedro Alvarenga who will begin the presentation. Please, Mr. Alvarenga, you may proceed.

Good morning, everyone. Thank you. It is a pleasure to be once again here with our investors and other people interested in knowing a bit more about our company. Now I'd like to talk about our earnings results, not only fourth quarter 2023, but also consolidated for this year. A year -- that I'd like to comment, which, in fact, a celebration of much of what we started designing 3, 4 years ago. A plan that was drafted envisaging quite different future for the company. The future with much more reps in terms of products, bringing a technology increasingly more sophisticated and more complete for each one of our customers in the future, in which all the changes that we have seen within the financial industry, in some consumer industry. And also here in Brazil and abroad, increasingly bringing new challenges to companies, which is our case, companies that act operating a range that is relevant solutions for companies that actually want to provide financial solutions to their end users. So much of what we're going to talk about during this presentation today is the result of work that started 3, 4 years ago that we have been reaping the benefits of all those changes that we have proposed to make day after day in the company. Changes that have actually brought but relevant significant gains to the company from any viewpoint. Operational, when we see that the company consistently has been growing its user base, the number of accounts and cards, the company has had quite significant growth in a number of transactions managed on our platform as well as the financial amount transacted. All the stages of digitization of our solutions, which was a very relevant part of our strategy to bring efficiency, productivity, bring cost reduction to the company as a whole. And while enhancing the value perception of companies that hire us as well as end users. When we think about CSU PaCE, it's a business unit that has over 95% of transactions totally digital. CSU DX, we have an average of 71% of 2023. Likewise, I believe this year, we had extremely important news, which is renewal contracts, showing how customers actually see value in the deliveries, in the evolution of our business brings great security and confidence for us to keep -- and keep on investing in the solutions as we've done in the past years is to finance. The company for 18 consecutive quarters has had great performance with records in terms of financial metrics, EBITDA, reaching BRL 181 million, 9% growth, net income growing to about 20%. Cash generation of the company, which also grows very fast. Reflecting not only the evolution of results, but the high conversion of cash that we present vis-a-vis our results, profitability standing out. If we compare to other players in our segment, the company takes on a quite relevant positioning in terms of profitability and revenue gradually growing, capturing each one of these effects I've just mentioned. From the standpoint of platform, I think the main message here, we're going to explore some of those items during the presentation, is that the company actually goes into a totally new phase from this year 2023. The new solutions of CSU PaCE and digital payments in royalty or finance or they have been 100% completed in the second quarter of this year. All the part of hyper automation and processes that started being part of our portfolio. Initially very much prepared to meet the demands of financial services but today with a much broader array, meeting all demands from the standpoint of processes day-to-day of the various companies. And they make up this complete portfolio, a full-service company spanning out regarding the rest of the market to leverage the new businesses and bring even more speed of implementation, bringing more opportunities for growth from now on. So I believe the great summary of what we're going to talk about over the year , the date. We said that the company has gone through this cycle and now it moves into this phase of capturing increasingly more good results deriving from these new fronts that we have built over the past years. Speaking of our results of 2023. I would like to recap just briefly. CSU is a company of technological infrastructure for financial services, we work on this model, B2B2C. So companies use our services, our technologies, our structures to make these services available to their end users. So we -- our brand is always behind the scenes. We're working on the day-to-day to deliver high-quality service to those companies. And today, we take up a quite relevant space within this industry. Because we actually have a way that encompasses not only solutions of financial services as digital payments, loyalty, embedded finance. But everything that is necessary for financial transactions to automate these demands from financial services and to meet end users in those demands that come up. Every time they hire a service, they want to ask for an upgrade. Every time they want to clarify any questions and with their present closing the cycle and servicing customer end to end. We'd like to recap these topics because when we look at the results, it is extremely important that each one of the investors analyze these walls in a separate way. This is why we disclosed this to market. The verticals lived very different dynamics from the standpoint of growth and profitability in the past years. Likewise, because of the launch of new solutions, they also tend to have different dynamics of those periods, be it in the short term, mid and long term. So it's really important to make those analysis in a separate way. Talking about the units individually, CSU PaCE is our flagship. It's how the company was born. And it's actually a unit that year after year has been delivering very consistent significant results, based on any metrics, operational, financial, whatever is analyzed. When we talk about units registered on our basis, we closed the year of 2023, with almost BRL 37 million. We have accounts, wallet cost, et cetera, being managed by our system. So it's been an expansion of 3% approximately regarding the previous year. We bring a pace of 2-digit expansion of this operational indicator. When we talk about transaction volume, we're talking about an expansion that is even higher. The company today has a portfolio that encompasses solution for issuers, acquirers, transactions more linked to the new digital payment solutions like PIX Crypto Solutions, so the transaction volume growth at a pace that is quite strong as it's been happening in the Brazilian market. So we're talking about a growth above 20% in the past year this year. We had a growth of 24%. So the payment volume follows the pace that we see in the number of transactions. But I'd like to draw your attention to the fact that from the financial standpoint, the company has been capturing great part of this growth. It's worth reminding you that this unit, the company as a whole, the company has been going through a relevant stage of digitization. As I mentioned in the beginning, to date 95% of transactions are digital and this, obviously, has a quite relevant effect when we think about price. So we end up growing about 12% a year. This year, the growth close to 5%. Reminding you that in addition to digitization effect, this year, we had a relevant agenda of renewal of contracts, almost all the customers that we have on our base. That was a stage that was quite important for us to be confident. Well, the next expansion cycle that we are living from now on with all the new solutions that I've mentioned previously. Even being a year in which we had renegotiations, important advances in digitalization, we had quite interesting growth in terms of bottom line and top line. When we talk about profitability, digitization has this great advantage. Even in scenarios where you let go price, you can capture margins that are much more relevant for the company, considering that the processes linked to digital products are much more efficient. The need for paper, red tape, demands that are handled manually, they dropped drastically, which allows us to capture a lot of value, regarding each transaction that we manage. So again, we've had an expansion more than proportional of the gross profit indicator when compared to revenue, helping us expand even more our margin debt ended fourth quarter with 52.6%. When we talk about CSU DX, many of the effects that I've mentioned previously on CSU PaCE, they're repeated here with greater amplitude. So digital transactions in customer service platforms, they actually have a component of efficiency that is relevant. Customers want companies that act in this segment to offer and to provide more volume every day to provide solutions that increase the quality perception of end users. But at the same time, the effect of cost for each interaction managed should be smaller. As you can see here, we had a relevant expansion in the number of interactions managed on the platform. The great difference highlight is because of the volume of transactions performed digitally through self-service apps, robots, chatbots, AI use, that exceeds 70% in 2023. Because of this effect of digitization added to a very challenging economic scenario in the beginning of 2023, especially between the first, second quarter, we had a retraction of revenue year-over-year on this vertical, that gradually will recover as the year second half and much higher than we had been presenting in the beginning of the year. So we had an expansion of 8% revenue accumulated when we talk about very fourth quarter 2023 compared to the second quarter of 2023. That's a point when economy starts catching up, and we naturally closed the year with a revenue below what had been presented in 2022. This effect, digitization -- economic effect, as I've mentioned, the start being got reduced, bringing good outlook for this service front of the company, especially regarding advances that we see in terms of digitization. I'd like to reinstate a bit of the agenda that Fabiano will talk about in a while, which is the topic of new growth avenues that are born to due the automation of processes and the use of AI in each business process, be it onboarding of customers, interchange, anti-fraud. Well, several new solutions that start making up CSU's portfolio from now on, that actually bring great outlook for the company, as they have a great addition, great adherence to the needs of companies with which we relate. Surprisingly, they have brought great perspective in terms of acquiring new customers. The commercial agenda has improved a lot because of this product and brings much more positive horizon for us on this vertical. More positive horizon from the standpoint of profitability. All the part of service has gone through this digital transformation, as I mentioned. And you can see it on the screen, on the right-hand side, where we see gross profit and margin. And we ended the year with a margin above 18%. It's a quite significant number for the segment. But again, HAS, which is our automation platform, tends to change this diagram as it has a component of productivity and profitability that is higher from what we deliver today in the service part. So access to -- so CSU DX is a great bet for us for 2024, helping capitalize the growth of CSU DX and feeding through cross-sell, upsell as the relationship with these companies is expanded on the day-to-day of our business. The combination of these effects makes the company to have ended the year with a slightly smaller revenue, as I've mentioned, because of DX and the consolidated with important evolution over the year. We had an expansion above 5% when we compare the beginning of the semester with the end of the second half. Reminding you that CSU PaCE is a unit that grows repeatedly, 2023 is not being different. And the relevance of this business unit, that is our core business, that is increasingly greater when we consider the whole picture. When we talk about the main financial indicators of the company and results, any metrics analyzed, the company grows at a much more significant pace than the very growth of top line. This is very much related to the evolution of productivity of our business units, very much linked to this stage of digitalization, as I mentioned. Very much related to this change in the mix from the standpoint of revenue of the company. Any metric that we analyze the company in the past 4, 5 years either double the results annually or tripled, which is the case of net income. And this is a process that is not interrupted because it's a technology company. It repeatedly captures the benefits both on gross margin, but especially in terms of EBITDA and net income because of the operational leverage. So we have fixed costing regardless of how much we grow from this operational standpoint, it leads us to be able to maintain the structure in line. That's what happened in 2023. We grew. We grew gross profit, but we don't tackle expenses, allowing us to leverage more than proportionately. The other result like we closed with record results, all the financial metrics this year, gross profit above BRL 208 million, almost BRL 209 million. CAGR of 18% a year, EBITDA of BRL 181 million with a margin of 34%, reminding you that this margin exceeds 35%. At year-end, we're showing this continuity of expansion and net income also record and the company reaching BRL 88 million with an expansion of 20%. Regarding previous year, the last quarter, exceeding BRL 24 million with a margin getting to 18%. And lastly, we're in this part of results. I'd like to highlight that CSU Digital is a company that is not the change between -- there has no detachment between results and cash we have. High conversion of results to our balance sheet. It means that if I grow 70%, 80%, if I double my EBITDA, I generate the same effect practically to my cash generation or operational cash generation. This is what's happened in the past 5 years. This year, we grow this operational cash generation practically 16% regarding last year, reaching BRL 152 million, which allows us to gradually settle our debt with banks, owners, debt paydowns. Our financial leverage today is 0. We have expanded investments in technology in the past years. We've expanded our distribution of earnings to shareholders. The indicator exceeds the BRL 34 million. And we're talking about a payout of about 50%. Reminding you that part of this amount will still be approved at General Shareholders' Meeting, but anyhow, this shows the robustness both operational and financial, that CSU has. And the company today has a capital structure that is well balanced also in terms of net cash, allowing us to continue investing so that we can increasingly capture growth opportunities that we have been seeking and prospecting in the market. I'm going to turn over to Fabiano, and the idea is to talk a lot about what we have been planning for this near future for the company. A lot of the sutures are already present on our day-to-day. Right, Fabiano, its a bit of that. Okay.

The future today, it's here now. But actually, when we look at our market, we noticed that the revolution, it's not the transformation that is happening, its quite present. And we're going to explore this over the presentation. Actually, when we talk -- get an example like this on our day to day mode of payment method using credit cards as a basis. For example, we've managed to transform all this process into digital, as Pedro mentioned, and an operation that is very robust in a sense. And slowly, we incorporated new technologies that allowed us to make it even more robust and the flexibility is also very important for our customers to compete in the payment benefit market. It's always very hard. Our customers have a great challenge to gain relevance in their customer portfolio. So we [indiscernible] makes sense being more flexible, faster and nimble as possible. When we bring these technologies and format appropriate rather for this quality, the result that Pedro mentioned, here are a natural consequence. This digital experience to end this transformation that has been happening incorporating new technologies, has brought us not only efficiency from the standpoint of cost, but also it has brought us new markets. We're going to dive into that in a while. New possibilities for action. Always with the same DNA. We've always had the goal of democratizing what is complex, what it is more difficult to be implemented, and we bring this in a simple way.to our customers, to the companies that hire us so that they have the best in the financial world, in the operational world available to them. When we take examples here, just to give you a simple example. Helping onboarding of a customer. We have the verification of a document of proof of life. [Go to that ] life cycle.so that customers can render accounts. Government and shareholder. We deliver technology platform, the expertise that has been developed by our team, deliver control processes that are very robust. Information security processes that is in the agenda of everyone. The sum of it all ends up being a service that is complete, end-to-end delivering with quality, something that is very relevant to our customers. Just briefly, the whole market has been talking about AI. So how do we apply that to our day-to-day? This is what we're going to delve into. When we had a problem in the past, the company faced problems. There was scaling, there was a growth, there was a need and then what was born was cloud computing technology that enabled and leveraged growth, several businesses that were being digitized, increasingly more based on the internet, the digital relations. And the solution was given by the market through cloud computing. Now we are living something -- somewhat similar with the growth of businesses and growing complexity and challenges that come up in each market, causing or leading to disruption in certain models with all this complexity and speed. There is a need of applying more sophisticated computational models to the companies. So all of that we denominated AI. So a great umbrella that helps companies speed up their digitization, quality service for their customers. This market transformation in the market is happening at a speed that is unprecedented. This is reality for our companies. We see in our customers. We see it in here, and you certainly experience this in your companies, too. Again, at a speed that is higher with much greater complexity. All of this brings us challenge. How to deal with it? What happened that we have been noticing to our searches in the market is that there is a detachment, a gap of investments in the shop window and sales to customer connection to end customer, that has been very much prioritized naturally. But there is a gap regarding the investments of what works indoors. This gap is leading to an experience problem with greater error margin, growing dissatisfaction when we take on challenging companies in the market. They end up having an advantage because they do not have this gap. They are hand in hand because they were naturally born and prepared for this complexity. The challenge is how we can support our customers reduce this gap and perhaps bridge totally the gap, bringing a much better experience for the end customers. The answer to this is the following. We've been using 2 major umbrellas, technology, several tools embedded, one that is in the base, which is hyper automation. So the market has gone through the period is adopting automation of small task, very much softer robot, RPAs. But this alone has not proven enough for the challenge that has been put. For that, technologies have evolved, software manufacturers and services. Service companies have prepared to deliver this additional thing, and that is hyper automation that brings a chain of product with much greater results from the standpoint of delivery with a very fast time to market. This is very important. Anyhow, you can resolve a problem developing a new system. It will take 12 months to develop, 6 months to implement. Here, we propose based on this technology. On this platform, we propose something with much faster results. Less than 3, 4 months, we can bring significant results. We're going to show you that in a while. On top of it, we've noticed that it was able to implement hyper automation that is quite significant. It was still possible to enhance these dynamics of hyper automation of processes. And then we used AI techniques to bring additional results to businesses. Of course, it is important. We have great [ base ] not only within CSU. The whole market has seen this and we elected 3 major strategic pillars for the adoption of AI. AI is very strongly based on data and in our case, sensitive data, financial data, registry and high sensitivity data. So we have to train our models and the AI algorithms very strongly on data that are internal. I cannot have this based on public data or generic data. We run the risk of providing terrible service. AI may bring very poor results, if it is poorly fed with an appropriate result. Obviously, I have to have great clarity in my purpose of use. Asking the wrong question to an AI platform is going to give you an incorrect answer. AI is not so intelligent to the point of being the level matrix being answering everything by itself, only present. We must have objectivity when we use it. We must have clarity as to how to use AI with very concrete and specific cases and little by little, this is expanded. This is how we have adopted this item as a strategic pillar. Speaking of accountability and security, there's a very important item there. When you train an AI model, we have the potential problem of your database to have certain bias. The bias may be agenda, [indiscernible] race. We may have political biases. There may be several different biases according to the base you are handling. From the bias you're going to deal with the target of this AI in a biased way. So we have great accountability on the training part. And when we talk about security, we're very used to dealing in the financial scenes, banks, very sensitive data, and this security framework is a strategic pillar. So that all the framework developed, platform develops security as basic assumption at all steps. This is a key success factor that we have found. We have some examples here that we bring to set context and give you a bit more color. We've seen it in many other markets. So that I understand that the customer will potentially be a churn in a while because it had 2, 3 interactions with my company that have been some kind of conflict. We need to understand this likelihood and make a differentiated offer to that customer, bring to the customer something that turns the turn more likely for me to act in anticipation. This has huge value. So this is one of the examples in which we can apply the companies that deal with large volumes of customers. When we look at the most famous AI player because AI is generative. So those that generate from giant database, a lot of information variables. They generate content, be it text, video, images. We have seen films being generated by AI, based on very simple assumptions. Chatbots were born as a very simple technology to be able to bring automation to more day-to-day transactions, but with its evolution, it's quite surprising. When we see the interactions of generative AI that is well trained, it is exceptional to see the results, and we've seen this in various ways, not only in direct action with end customers, would still faces challenges. The development still requires some kind of pathway. There are still some long -- some way to go. Especially when you look at AI as supporting human beings as an additional arm as lever for human beings to better service end customers, bringing information on that customer, relationship history. For example, and the operator can go straight to the point. "Well, Mr. Alvarenga, I know you've called it 3 times, you've had this problem. We made you a differentiated offer. How can I help you further?" So you provide totally different service and AI is quite impressive in this sense. In the product sales, more technical sales of products, that has a lot of specific features, AI may bring to operators more information, examples, comparison with competitors, market intelligence to contribute to that interaction. So here, we can think about a myriad of things, we didn't know, but we used AI. We have been using AI for many years. When you go into -- when you access a niche market to buy product, and it offers you similar product, people that bought this product, they also bought that other. That is machine learning applied in practice. That's one of the art of AI, when we seek people, when we search people, there is machine learning algorithms, showing people that you may know AI and the accuracy of that is increasingly stronger. When we go into a video streaming platform, the safety, you have movie that you have seen, and it takes the features of the movie and many others you've seen and it starts proposing films that match your taste and preferences. This has been used for many years. Now we're bringing this in a broader way, more day-to-day businesses although what is behind is complex technology that is not mastered by all, but CSU has proposed it out to be a pioneer in this business, and we're working hard on to that. A clear example of this, not only we have been addressing, we have been developing products and features that deliver end users, companies that hire us, values that are totally different from the traditional ones that we've been having. When I assume a customer with 2, 3 cards in the wallet that I can make this life customer or his life easier. Yet again, better use their cards at the time of the transaction, this brings great value, generates more business to company, generates loyalty for the market issuer. Bringing this example, we see how the use of AI may leverage businesses. I can provide based on previous purchases, I can provide additional points as like e-market does in transactions of credit or debit, we could do something like this. For example, I buy an air ticket and I offer travel insurance, it as a benefit of the card itself or complementary service that can be provided by the company. Interesting. When I have a loyalty program, I use the point of real time during a purchase to make that purchase easier. So these are examples in which we could -- so we're working on this already. We could be improving a lot the lives of customers. Looking at the hiring companies, so there is a huge number of possibilities. So one of them is preventing fraud, financial risk. When we work with large volumes of financial transactions, frauds are always present, and we have to avoid that. We've seen real examples here with the reduction of the level of financial losses that has been major with the improvement in the approval rate of transaction. Meaning that the company is circulating more cash through that payment arrangement, and this is good business for all at lower risks losing less in fraud. This is an apply AI in a very objective way, as I've mentioned previously, with training based on major amount of data to make it more efficient. Another important point, that when we talk about process automation, results incredibly significant. We cannot deny that in all fronts, we bring something that is important. When I bring hyper automation to process AI, and I add AI to part of the automation or what makes sense, the real results here -- real results that we bring of operations that we have already implemented. From the standpoint of quality, significant growth in the reduction of operations and the time of service. This is a satisfaction. I bring a different NPS for that operation. This quarter is totally different for that, for that end customer make it the customer increasingly more loyal. So this tackles directly pains that we have noticing in our customers. It helps in a very direct way. As a consequence, we have cost reduction. Not only in terms of productivity gain, reducing our retraction rates or renegotiation. We reduce operational costs for any repetitive process. Here, we are leaving a revolution once again. I reinstate that, that is very important because these days, I was talking to our team, we are comparing this to the Industrial Revolution. Let's imagine a craftsman making 10 pairs of shoes a month. And certainly, there is a plant with a steam machine that makes 1,000 pairs of shoes a month, almost at no cost. This is more or less what we're living here. It's a parallel or analogy, a great impact to companies and quality of service. This applies not only to the world of cost, the one we are used to, not only to the financial world that we are more used to, when we look at telecom, retail, utility service companies, insurance companies, this has been very welcomed because there are problems that are somewhat similar. Even though there are different markets, the problems are somewhat similar. The process automation from well-structured platform of hyper automation and adding AI techniques to speed it up has been extremely important for our future. Looking ahead, we're going to go through this in our various business fronts, not only on the base, DX or CSU PaCE. And when we talk about finance the same, loyalty, this has transformational power, that is extremely important. Just to wrap up. Our strategic planning has brought several possible items we prioritized for growth avenues. One of them related to geography, our seeking market in the U.S., we started structuring this project in 2023. We have -- we should have several news -- pieces of news over 2024 because we have the dedication of time, effort, product, technology, legal issuance, et cetera. We are working hard on that, without forgetting what takes us ahead here in Brazil, which certainly will be very appreciated when we start operating in the U.S., which is applying all those hyper automation techniques, especially AI and the various portfolios we have today. When we talk about digital payments, I mentioned the intelligent card, a product we're working hard on. When we talk about automation, we mentioned hyper automation bringing to customers a much more fluid experience, much better quality at lower cost. When we talk about embedded finance, we're talking not only fraud prevention, but talking about credit management, loyalty and marketplace and AI solutions. So this -- all of this is going through important modernization. And with this, we bring new products possibilities. With these great growth avenues strongly based on technology since we are a service infrastructure company, we believe that we have a great 2024 ahead. Isn't it, Pedro?

That's it. Before we move on to the Q&A session, I'd like to sum up the main topics we've addressed over the presentation as Fabiano mentioned, quite a lot, quite intensely. We actually have clarification of any of the questions we have, I'm an economist. When we hear people talk of technology -- talking about technology, it's always a great lesson. So it's been great to hear all the details. Today, we are a company that already delivers results. So it's always important to share this confidence for those that are our investors, those that want to become investors in the company that we are building a future, a new expansion cycle very much based on the platforms, hyper automation, AI, new payment systems, new banking services. But we are a company that delivers results today. These results drive from a long trajectory. We've been in the market for 31 years. It's not a company that has come up overnight that started the journey now. It's a journey that has been built, planned, thought about, adapted, and we actually today move into a level of results that reflect of this track record of this lessons learned in our journey. So the level of digitization, synergy of our portfolios, all of this represents and justifies each one of the indicators that we have been attaining. We are very much endued to making the new cycle that has been built with each one of those solutions that we've mentioned to be increasingly more promising that actually helps analyze growth, revenues of company operating growth just as the growth in profitability. Again, we are a company that has scale gains that are quite relevant. We are very confident on this journey. Because we have our network that is very sound. We generate a lot of cash and allows us that we have great missions for the forthcoming years. The company has, as its normal practice, to keep attractive remuneration for investors. This ends up being a consequence of this network that we have. And this should continue to be a practice of the company for investors. It is actually very interesting for you to have cash-ends over time, not to have to wait for many years to have some return on the investment you made. Anyhow, for those that are following more closely our shares, our shares have been having relevant evolution in terms of performance. And this performance, in our view, is very much related to an adjustment in the symmetry to CSU as a company that delivers a level of profitability well above the industry. We're talking about 2, 3x higher the average both in Brazil and in the U.S. market, but it also has a challenge from the standpoint of bringing visibility, knowledge, and light to all the deliverables we have and everything we are building to get to the capital markets. The market has stopped acknowledging our evolution in the delivery of the company. If we take this period from last year, we had a high of 77% [Technical Difficulty] Ladies and gentlemen, please wait a little while, while we reconnect our speaker. So once again, we would kindly ask you to wait a little while, while we reconnect our speaker.

Technology. Let me tell you. Okay. This is the B plan. We're okay.

We can hear you all right.

Okay. We are live. As I was mentioning here, the company has had significant appreciation of results, 78%, 128% of total shareholder return. We have a broad coverage it's is quite significant. And likewise, our customer base is not only expanding, a number of shareholders in the company is greater than previously, but also we have institutional investors in our base that are supporting us and betting in our future that the company has created in the short, mid, long term. Let's move on to Q&A. Thank you very much.

[Operator Instructions] First question is from Bernardo Guttmann from XP.

The company has been very vocal on talking about AI, artificial intelligence. Prior to your business. How transformational, actually, this agenda can be? Does this help to the results of the company? Or is it just one additional feature?

Okay. I'll start and then you complement, Pedro. As I mentioned, it's a revolution for the market as a whole. For us, it has been very transformational, no doubt. It's not just a feature. There will be many features that we'll generate from that. And here I turn over to a bit, of course, from the results standpoint. We've mentioned how much, both automation and AI may bring to our figures and they start bringing that. This is related to digitization of our operations for our customers and ours as well. Of course, we drink from our own spring, obviously, our remedy. And this is something that has a great impact. It's not a marketing fee. That's something that we are using and building on our day-to-day. Thank you for the question, Bernardo.

Just adding what Fabiano mentioned, I think that for us, perhaps it's even more comfortable to talk about this topic than most of the market because in branches, we have applied each one of those components to our operations, on our day-to-day. [ How does that ] look at a company that has moved from a margin of a bit of 20% to 35%. This has not happened magically or at random. This actually -- there is a construction in this building started from bringing our portfolio to an environment that is more digital. And from here, we recreated the whole process dynamics. We think today, the management the product that we're very used to, which is credit card. Broad analysis in the past, there were people that basically were their analyzing process of the process manually, accessing several systems. Our systems of our customers, so that we could assess whether it was a fraud attempt, if it happens, if it happened where? When we talk about today, management systems of certain incidents, we're talking about processes that are greatly automated that use algorithms to make the analysis. So this brings to us the capability of scaling that is much greater. This is what ended up reflecting each one of our operational indicators. I gave an example of the fraud, but this applies to routine scenario that are as simple as you are sending to a customer, sending a bill to a customer. So I think this is what ends up changing, and we are applying them to our day to day, and this is what's happening and making us to grow. Most importantly, the new cycle is no longer technology to improve efficiency, but to be actually a product. As this future becomes a relevant revenue source for us from now onwards, not only on revenue because I prove more today than before. But it has also captured revenue because the customer has internal processes today. They also need to obtain efficiency, better operations and quality. It's a relevant change for the company in terms of business evolution.

Our next question is from Malek Zein from TC. Malek?

I have 2 on my side. First, if CSU PaCE this year, the growth in the segment, but I believe part -- well, it's quite different from the volume transaction. I think it's related to the renewal of contracts. I'd like you to comment on that. What should we expect for 2024? Are you growing volume 20% a year? And we imagine base growing 10% is off 2024? The second mid long-term expectation of new businesses [indiscernible] what do you have in terms of '28, '29? For 5-year period, how do you see that maybe the revenue expected for you? What is the growth margin, SG&A in incremental and long-term view? What do you have in terms of contracts to be signed? What would be tangible and margins in this beginning of ramp-up, if you could comment on that?

Let me take this one. Thank you, Malek. Nice talking to you. Starting with CSU PaCE regarding 2023. Yes, your reading is correct. This year, we have had to effect rather than one especially first half -- first, dynamics of evolution of digital products. So this ends up generating a gap every time I read [indiscernible] analog spans to digital one. We had a different and we had some advances in terms of percent points of relevance compared to digital vis-a-vis analog. And suddenly, it is the renegotiation of [indiscernible] impacted a bit more regarding price. We basically just bringing a bit more details on that. In 2023, that was one of the metrics or the goal to renew contract that was an active process led by CSU. It was not passive one and customers called us to renew contracts. It was much on the contrary. And this move derives from a decision from the standpoint of business management for us to ensure the contract would be valid for another 4 or 5 years. So we had contracts that were expiring 1, 1.5 years. So we expanded time, giving us the opportunity to keep on working on the new business front that the company has developed over time. So we wanted to [ tap on this ] very positive moment for the company in which we have a new portfolio to present to the companies. And we have lots of news to present and bring this agenda. Well, we have a lot of new businesses that now renew the [indiscernible] at the end of the day so that we can keep working and prioritizing the new fronts that we have ahead. Basically, when we have this difference in terms of operations and revenue, 5%, 5.5%, great part to arise from that. Ahead, I would say that we tend to see CSU PaCE moving closer and to -- we see operational evolution, if you take the history, longer on the unit grows at CAGR of 12% a year. It varies from 10% to 15%, sometimes 20%, and I don't see any reason as we've concluded this renewal, and we also have this stage of digitization is very advanced. We don't see those indicators going back to this pace. That is the recurring of our business, 2-digit growth. When we talk about new businesses again let me start from bottom up. Talking about margin. The margin of the 2 products are much more similar from the standpoint of growth margin than with CSU PaCE. When we think about HAS applied to today, we're talking about margin evolution in this vertical that is expected for the company. When we think about from the standpoint of future -- this actually [indiscernible] or a product with a higher margin. So we have a lower margin on the product. This is something important to be followed by the market. And in terms of growth, I think we're going to give very different dynamics. I've been reinforcing that at every earnings results. Calls are market dynamics. They have different ways of happening. The VIS, the embedded finance product, they have an identical feature to what we have today in digital payments. Why is it identical? When you identify a potential customer from the time you offer a product, you have a step between your going there, prospecting and actually placing the product at a stage of scale. There is a ladder to that. We have to define a project of the customer. There will be customization that you implement. Then once you implement, you see whether there are adjustments to be made after the adjustments. You place that to the market. Usually, customers just want to have soft launch. They say, "I want you to open 10,000 accounts. I want to now -- after 3, 4 months so increase that to 50,000. Now that I see it's running well. Let's get 3, 4 months that move up to 200,000 accounts." And then you have this ladder to go up. That's why we have sort of clock -- growth -- or clock term growth of the numbers because of that. So we see no reason why we should see changes in this because the product has this nature. The product that will grow gradually. We even recently announced a new customer with us, not only product but also customer in insurance. Always starting to get more traction to this product. That was launched like 9 months ago. So I think we'll keep on seeing the vertical payments growing with this nature. When we talk about HAS, this is slightly different. Fabiano talked a lot about that during his presentation. HAS brought us capability of exploring new markets. This is the silver bullet that we have ability to offer that to our base. We're talking about our pattern banks, financial institutions, operators, retailers, [indiscernible] but this has brought a much greater array. I can apply solutions that companies that were not part of my map or were not in my radar before. So HAS tend to grow faster in the beginning than Banking as a Service, because I'm opening new markets and I am accessing new customers and I am accessing customers that already have transaction volume. So we do not have the PaCE of sub launch. They have their operations that are running and costs X to them, and they take this operation and applies to the pluses. So they tend to have slightly faster growth in the short term, then mid-long term, we have no doubt. CSU PaCE will always be the most relevant unit. But in the very short term, we may have a lack of balance that and this tends to be very relevant. So in the last official guidance for our platform, they tend to be very relevant considering the whole company.

Pedro, can we match it in 5 years, revenue, we're talking about the other business, 10% of the revenue, consolidated? Do we have any metrics that we can take in terms of the market?

I'd say that new businesses tend to be 10 to 20% of our market.

What's a great difficulty?

Just to give you an idea. HAS [indiscernible] we looked at some companies through the M&A lens and we were selected as the best. Today in this horizon of 4, 5 years, they have a revenue of about BRL 100 million. So it is horizon -- there are quite relevant. So we have products that may be very relevant in the future.

Our next question comes from Victor Kitzman from Porto Small Cap.

Congratulations on your results. On new products, how much has CSU have relative cost to them in the current results? It's expensive without revenue. What level of extra working capital do you envision? How much do you expect these products to represent in the company's EBITDA over the next 3 years?

I'll take this one, too. So if you like, you may add. Victor nice talking to you. Thank you for your words. Trying to answer each one of the questions. When we talk about cash, revenue because of new products, although we had this evolution in terms of profitability, this came from the transformation we already -- what we already did. So if we stop to think about this margin indicator, 5%. "are not efficient". I have people, systems and things made to my Banking as a Service, that there were not so dynamic. I have costs linked to the part of programming that today also have small relevance. So there's an important component today that we tend to capture increasing margin over time, that being happening repeatedly. Every time I move forward a bit in my operations, the margin grows more. Regarding working capital. I don't see great needs ahead being very pragmatic, not only for working capital but investment volume as well. The company has a great convergence. Cash, we all have a long-term repayment of payment terms are very stable. This is very stable. Our conversion rate in cash was 84% this year. So you take an average 5 years. This number is identical. It hasn't changed at all. So we don't see the need of additional investment in terms of working capital. In terms of CapEx. We invest essentially a lot of our revenue, and I don't see reasons or this to change in the short term. All of the new systems that come up, all new systems for protection, against fraud, et cetera, that must be constantly evolving. So I think we have some time of -- invested about 12% of revenue. We have some time to keep this dynamic in the long term, natural for things to change. I think we have a lot of questions about the EBITDA. Again, it will depend very much. It will depend on the evolution of HAS and others -- other products. And obviously, we think that there is base for us to improve our margin.

Our next question is from Alex Andre from MSX Invest.

Congratulations on the resulting exceptional work of the IR team. How much margin increase should we expect with the ramp-up of HAS adoption?

Alex, again, thank you for your words. I think I've mentioned over the presentation, something about the topic. Again, HAS a feature that is much closer to CSU PaCE than we see today in the DX unit. So it's in this transformational space. And we have growth opportunity, it's transformational from the stability standpoint. You will see the margin evolving significantly because of HAS.

Our next question is from Andre Branches.

What is the capital structure that is ideal? The company is regarding the scenario of interest rate reduction in the country?

Fabiano, I am taking them all.

It's okay.

But basically -- well, capital structure, that's always a debate. That is -- well, we have a formula and you need to calculate, I think, all the time. Capital structure that we have today, where we have no financial leverage, but it's a company that accumulate a lot of cash. So we naturally will always be discussing opportunities of increasing CapEx, of making reductions and opportunities to best reinvest within what we already do. Moving into new markets, things that we have been addressing. Today, we don't see any needs. For example, let's go into debt to be able to make a greater movement. We tend to follow with the strength of our balance sheet. Obviously, in the -- if we have a drop in interest rates, it becomes more [indiscernible] for you just think about more alternative capital structure, but it will depend on what happens to the market. So if we may have a faster M&A agenda, we're certainly looking to alternatives. So if we have to consider to speed up CapEx, well, it's good. We have lower interest rates. It brings us more opportunities. more breadth. And we, again, will communicate that according to the evolution of each one of those opportunities.

The Q&A session is closed. I would like to turn over to Mr. Pedro Alvarenga for his final remarks. Please, Mr. Alvarenga.

Well, thank you very much for your participation. It's always a pleasure to be here, talking to our investors, a bit of our strategy, of our market. Unfortunately, the time is short, but we're always available for clarification of any additional questions you may have. So you may contact us, both myself, Fabiano, will 100% available. I'd like to thank you once again. And I wish all of us a wonderful 2024. Great day to all of you.

The CSU Digital video conference is now closed. We thank you for your participation, and wish you an excellent day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]