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

Good morning, ladies and gentlemen. Welcome to CSU Digital's webcast to discuss the second quarter 2024 results. This session is being recorded, and you can access the replay on our website, ri.csu.com.br. The presentation slide deck is also available for download. All participants can watch the speakers and follow along with the slides during the presentation. Afterwards, we will move into the Q&A session where further instructions will be provided. Please note that the presentation will be delivered in Portuguese with simultaneous translation into English. If you'd like to listen in English, click on the interpretation icon at the bottom right of your screen for those who don't speak for Portuguese. Before we proceed, I want to highlight that forward-looking statements are based on CSU Digital management's beliefs and assumptions and information currently available to the company. These statements involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should note that macroeconomic conditions, industry factors and other influences can cause actual results to differ significantly from those expressed in forward-looking statements. Joining us today are Mr. Pedro Alvarenga, CFO and IRO; Mr. Fabiano Droguetti, COO and CTO; and the IR team. Now I'll hand it over to Mr. Fabiano Droguetti to begin the presentation. Please go ahead, Fabiano.

Good morning, everyone. It's very important for us to have sessions like this so that we can share our results, our performance and our plan to execute the strategies that we set last year. So thank you very much for your time and for your availability. It's very rewarding for us to be here to be sharing our performance with you. Before going into the facts and figures, I'd like to just frame the discussion talking about what we do every day, what -- so our core business. And that's related to making something very complex and rich in detail and comprehensiveness into something simple, into something easy for companies to enjoy and provide services to the end clients because we always operate in B2B2C systems. So providing services to large companies and start-up companies and fintechs, who will then serve their end clients. Irrespective of the industry, we have a number of products today that can be useful not only in financial markets, which is our original business basis, but also retail, telecom, utilities, consumer goods. So it's a very comprehensive portfolio of services that can be offered to different verticals. And this is something that we've achieved over time, and we will go into more details soon. So it's a very complex portfolio of services, also very comprehensive financial services, loyalty services, customer service. So this complexity, we encapsulate into services that are delivered in a way that it's easy to understand and offer to end clients. And the scope includes the beginning of the customer relationship of the capture of documents, onboarding up into collection of services, payments of services or activation of campaigns and the complementary offerings and so on and so forth. So investments are diluted by all customers. And then complexity is supported by this architecture. This is a highly regulated market where there's governance regulations, great concern with the data security. And one of our goals, one of our principles is to be very serious and professional and profound in the way we address all of that, delivering to customers the quality that they demand. This architecture was not designed by chance. In the last past years, we've been working hard, tirelessly on this, including new services now. And later on, we will talk about portfolio acquisitions that we've performed for many hours of work, sweat, but based on very important assumptions, we lead with seasonal and high transaction demand. So over the day and over the year, there are some important diligence. There are some important assumptions here. For instance, when we talk about robust and security, this is key. This is key for us and also to our customers' business. But it is also a very competitive market, and therefore, we need to be able to personalize our offerings. We need to be flexible in terms of the technology. So as to support the creativity of product teams and business teams so as to be able to better serve end clients. Recently, we've been introducing lots of automation. We use hyperautomation as a concept that creates value in the business processes. And we've been also introducing more AI, so as to be able to develop new things and to come up with business insights, to make new products feasible, and we will tell you more about what we've been doing and about what we are planning for the future. So this is -- it is key that this architecture has all of these features so as to make possible for us to offer what we want to the market. And the performance is a consequence of that. Our operating performance is supported by this architecture in this technology strategy. And that's why we can be more competitive and the figures reflect that consequently. So we've been talking about this architecture for a long time. If you've watched our presentations before, we stand with us, and I can go into more details -- in case you still have any questions, and I can go into more details. But we have different services represented by the dots in this scheme. And these are software modules that provide different services. And this is abstracted by an orchestrator from the external world. So this complexity is not experienced or seen by the end client, irrespective of the channel or the arrangement of the financial service. So there's a number of financial services that are available in different arrangements, including the different credit card brands and new things being developed by the central banks as a fix or cryptocurrency. So we can have different communication channels, be it voice or data or chat or WhatsApp. So this is all abstracted into this software layer, which is the orchestrator and then the expert platforms provide the services. On the top, there is a very important component in this type of business, which is our ability to prevent fraud and operate efficiently. And this underlies all of the services, all of the platforms. And there's a component below in the architecture that is the data provider, which is a large repository of transactional information and database. And based on that, we can come up with a number of services and some simple services, such as sending push message in an app of the clients saying that the transaction was authorized or else there was a problem in the transaction, but also some more sophisticated products as well using AI, for instance, to generate insights and design new offerings for the clients and in different use cases and different situations. So there's all of the different service levels that are available and that will be designed. But anything we do is based on this architecture. So we had 32 years of experience in this market. We are very proud of that. 32 years of this start-up. And if you like a start-up every day, we are born, again, every day. We reinvent ourselves every day. And experience for us is a strength and not a weakness. This is very important. It's not an anchor. And we combine the available technologies today. We combine that with the experience and knowledge we've acquired in 32 years, the knowledge of critical mission, being able to deal with the financial market, knowing how to deal with the financial service. So this combination is very fruitful, and we are very proud of it. You see some operating figures and Pedro will go into more details, but it's nearly [ 27 million ] accounts and cards in our databases, working with more than 1 billion transactions with a TPV that is more than BRL 370 billion today. So these are significant figures if you look at the Brazilian market. And we feel very confident when it comes to taking the next step. We've mentioned before, our geographic expansion, but also the expansion into new products or introducing new technologies into this platform. So we are always very open to reap what we knew yesterday and embracing the new, but always based on our experience, which makes us more confident in dealing with the critical mission businesses. So let's have a look at what we see as next steps. We focus heavily in the use of new technologies. And of course, today, everybody is talking about AI. And we see that as not just a fad, but something that does indeed create more value in this business. And in this diagram, we see the -- how we see the use to the left. There is a number of databases that are available, be them our own or partners or market databases. So it's very important that we use these databases so as to come up with new products or enable our customers to increase their revenues. There is an example of real-time events being worked with AI, and there's a concrete experience, for instance, a cardholder then, and we apply AI to that and then we can realize that there is a need. And then a relationship channel, be it the app or WhatsApp, whatever it is, we can generate insight that may be useful for a client. This insight might be an offering. This insight might be a way for the clients to better use their card or something related to limits, credit limit, maybe a client has more than one credit card, and it might have credit limit available in one card or a wrong password that they entered. So issues that might lead this client to use a different payment method. And instead of that, we offer a solution and using information and data in the available databases, working with partners and using generative AI. Generative AI is a perfect fit here. We say that ChatGPT has come to shake something that has been happening for a while in the technology market, but to bring that all closer to clients and users. So we've been using AI in a safe way, in a controlled way with the very strong data governance to avoid any deviations there. AI is also used in automation. We've developed in-house for ourselves, but then we realized that, that would be something interesting for customers as well. We've developed a platform that is not intrusive. I can plug this platform -- this process automation platform and no investment is required in the customer's own system. This is very important because different companies will have their different technology priorities and oftentimes being a priority in the context of -- context that is hard. And the business areas won't have the automation they require. So the HAS platform is there to address this type of issue. Also, we use available data with the structured data or not to help business decisions. We can read data from different sources, APIs and systems or robots that we read unstructured data so we can capture information so that a business process can be run. So this is also another important point. And we needed to offer a very comprehensive platform with open architecture so that we can plug in new skills and competencies that will be useful for different business cases, for different use cases and different industries. So there's a chassis, so to speak, that is shared by everyone, but there's also very specialized assets, and we can create value to specific industries and in specific processes within the different industries. So we do believe in the path we see ahead for this platform as one of a lever for growth and a very efficient services that can be offered quickly and simply. And the deployment project is really fast and one that can offer important benefits in process execution efficiency and also in terms of error margins and even oftentimes in the satisfaction of the end client. It's not by chance that we've been talking so much about AI because it does have great potential of transforming businesses, and we see that more and more. When we look at our product, we are talking a lot about this interaction with the end clients and the use of -- means of payments, be it card, digital transference or Pix. An example of cards, we'd like to mention the example of something that happens very often. When you use your credit card and when you have more than one credit card in your wallet, you might have a Visa, AMEX, Mastercard, and then sometimes you, as a client, you don't know what your credit limits are for each card, what's the best date for you to buy something. It's a complexity that it might be difficult for people to manage. So we've been designing AI-based solutions to help clients so that in real time, I can offer insights to clients. So for instance, don't use this card, use the other card you have because you're going to have more time to pay your balance. You're close to the credit limit of this card. So you might use this other card where you still have available limits. So this is -- as if you were acting as an online financial consultant to clients. And we do believe that this is a very nice use case for AI applied to our business, applied to the business of our customers, combining a little bit of consulting services and campaigns as well, additional product offerings that can be designed. So if someone buys an airline ticket, for instance, it's likely that this person is going to travel. So you can offer this person some travel-related products such as travel insurance, for instance. So we can do that in a very straightforward manner and the initial experiences have been very compelling and fruitful. Looking at our direct customers, we see very interesting benefits, increasing revenues, increasing profitability and even risk prevention. AI can be applied to transactions, improving risk margins, you can approve more transactions with lower risk, fewer false positives, also improving the end clients' perception, be it the cardholder or the account holder. Also combining this with loyalty programs is always very compelling. You can grow clients' loyalty, decrease your churn rates. So these are the benefits we are driving at when developing these products. Again, AI enables us to do all of that in a very efficient way in terms of cost and the deployment time. So this is what we've been doing here. So this is where we see the future, massive use of information and information being worked by AI correctly, offering benefits to customers and clients. So it's been very interesting to see what we've been developing in the past few months. And we already have some real-world use cases. So moving on to the meat of the matter, right? Yes, let's talk about results.

Yes, but it's important to speak about the business and strategies before we look at the figures. So thank you very much for Fabiano for your presentation, and good morning, everyone. I'm happy to be here once again in this earnings call with you. So my challenge now is to tell you a little bit about the progress we've made in the past few months and share with you our vision for how all of this change in platforms and technology is related to the figures and indicators of the company. So to start us off, I always like to summarize a little bit our products and how we are organized at CSU Digital so that you will be able to better understand our figures. As Fabiano was mentioning in his presentation, our major challenge at the end of the day is to develop solutions and having a nice technological framework, monitoring all of the market dynamics and monitoring any fraud possibilities. And so this is what we do. We organize everything into packages, enabling other companies to offer the genuinely digital experience of financial services to their own clients. Overall, we offer a number of solutions every day. But in broad strokes, there are solutions that include digital payments, like card, Pix, Pix on installments or digital accounts and marketplaces for other products and loyalty and incentive as well. So all of the loyalty incentive programs of companies and their clients, and this is all integrated and organized and architected so that each one of these solutions can be acquired, and there is an overlap, and they can drive even more business. So this is what we call CSU Pays. The CSU DX, which is the way I make sure that this experience that begins being of a digital financial service is also -- is digital up until the end. So if the user needs to interact with that company or if the user has any financial service requirement or demand that all of the steps there. So all of the interaction in terms of submitting documents or all the onboarding process for new clients or clients buying new services, it's going to be very seamless, enabling an end-to-end digital experience. So this is how we break our services down, but everything is very integrated at the end of the day, everything is interconnected, just like communicating vessels. We like to look at this Venn diagram because it's just one thing in terms of our work, but that we break down our results into these 2 verticals because the 2 verticals do have different dynamics. So our recommendation to analysts and investors is that they review the results having this Venn diagram in mind. I think that the most important message here when it comes to our results is that of consistency in execution. In the past 5 years, we've undergone great transformation in our business. And as Fabiano was saying, there's new products, new solutions, new addressable markets, new geographies, but also we need to be able to revamp what we were already doing in the past so that we can become more efficient, so that I can scale up more quickly, so as to be able to meet emerging market demand. So it's important to understand that. Every time we talk about digitalization, at the end of the day, this is a win-win situation for the whole chain. Everyone benefits. The end user will have a much better experience when using financial services. They will relate more to the brand. They will feel more embraced by the company. And the company that is offering services, in the case our customers, our customers can generate new revenues and be more efficient and cost effective in their operations and us, we can make our operations more profitable because we can grow volume, we can cross-sell and upsell between different business units, and the profitability can be better because the efficiency in process execution is more -- is higher. So the -- in summary, it is more cost effective for everyone to operate. So for our customers, our prices are lower than they used to be. But on the other hand, we have access to greater volumes in terms of operations. And we look at profitability, we see that the operations today are healthier, both for us and our customers alike. That said, the company has been consistently showing growth in their operating indicators and consequently, its revenue as well. So our multiproduct strategy is very important to enable us to grow sustainably over many, many years. When you introduce new products and solutions, you have new sales opportunities. But on the other hand, every time you look at economic or financial cycles that can differ and because the products are interrelated, oftentimes payment operation, if it's not as fast as it is, it might have a loyalty or a collection service, being greater demand in difficult markets. If the market is very positive, you see that the payment in account solutions will have greater demand and then collections might be lagging behind a little bit. So our company today is being moving forward consistently and driven in part by this product diversification strategy. We've been growing our operating profit. You're going to see 20%, 30%, you'll see the figures in the coming slides, every year. And this is something that will benefit our performance as a whole. This quarter, specifically, there was a growth in our revenue when compared to the same period last year. We saw a roughly 10% growth, having a record-high net revenue, more than BRL 141 million, so nearly BRL 142 million of revenue. Most of that being driven by our core business, which is financial services, 75%. Looking at results, our business model because we have recurrent services. Our customers use our platform to provide services to their clients, and we've been having recurring gains of scale. And the digital transformation project that we mentioned before enabled us to have these considerably better results as we see on the slide. So in a short period of time, we've nearly doubled our gross profit, EBITDA being growing considerably every year in the past 5 years and net income as well more than doubled in a very short time interval based on our operating leverage. Also, we've been able to increase our margins consistently. So this is a company that now has more than 41% gross margin, EBITDA indicator of more than 34% and net margin of more -- of close to 16%, 17%. So these are very strong indicators, showing the consistency in execution of our plans, which is changing and revamping our old services and also coming up with new growth avenues at the same time. Looking at our cash operation, we see that there's no decoupling between results and cash. So you're moving ahead in strides in profitability. At the same time, we've been growing our cash generation. And 84% is our conversion of net -- so we've been generating more cash every year and we've been making more investments in new technologies because of that. We have no financial leveraging today. And with that, we've been able to pay more dividends to the market, and we are a great asset to be assessed from the point of view of investment portfolio. Looking at our business units, more specifically, which is, I think, is an important point to be reviewed when investors and analysts are modeling. CSU Pays has been growing considerably in the past few years. So we see 10%, 20%, 25% growth depending on the operating metric you're looking at. Net revenue growing at 2 digits consistently. Q2, we ended at 11% growth when compared to last year. And we go into continuous expansion growth because today, indeed, we have a portfolio that is unique in the market when you look at the solutions that we offer. We can indeed offer services to new companies, new -- that want these type of solutions, and that's why we've been placing our bets on this avenue. Another highlight here is that we've been growing significantly in terms of revenues. At the same time, we've been increasing significantly our results in the unit. Very good gains of scale. Our gross profit is more than [ BRL 100 million ]. It's a 18% growth when we compare this quarter to the second quarter last year, having a margin of nearly 55%, very healthy margin to support this expansion cycle we are experiencing. Now looking at DX. What I want to draw your attention to is the continuity of the transformation -- the digital transformation of this business unit. And there will be new chapters in the story with the introduction of HAS. In this quarter, we announced 2 new customers for this business unit, a first contract with one of the largest telecom companies and fiber services operating in Minas Gerais, Parana, Rio Grande do Sul and Santa Catarina states and another important contract with the financial arm of one of the most traditional retailers in Brazil. So again, in tune with what everything we've been saying every quarter the company has been investing in products, new features, new markets, at the same time, we've been revamping what we were offering before, and we see the results. New customers and the revenue of this business unit is picking up as digitalization becomes more stable, and the margin is much healthier than 4 or 5 years ago and it is roughly 17% now. And my conclusion for now and for what we expect in the future is that it is very clear to us that this world of financial services is expanding in Brazil and elsewhere. There is a challenge, and there's an important goal of companies and central banks and other market players want to foster the capitalization in this market and cost reduction in operations so that we can make sure that this market will grow exponentially in different geographies, not only in some specific countries. And this is our major bet. We've been investing heavily in digital payments, embedded finance solutions and AI is going to be increasingly important to -- as a catalyst in this market, but just more than being a catalyst, being able to personalize services, being able to design more assertive offering to users, who at the end of the day will be happier when using services. At the same time, you can be digital [ outwardly ] and that's no use if you are analog in-house. So it's important to automate processes and hyper automate, these are important elements and this is what we've been focusing in the short run because we see things like that as being able to transform our CSU and DX businesses, and at the same time, fostering the growth of CSU Pays. Some takeaway messages before we conclude. We've been delivering very high profitability indicators. It's important to highlight that. You see the highlights there comparing ROE, ROIC, and some other indicators that you see there show that we are indeed a company that stands out when compared to other market players in Brazil and abroad. And every day, we've been working more closely with the market as a whole, including companies in the industry and competitors, but also the capital markets so that people see who this new CSU is. We still have challenges going forward. Even if the returns are much higher than in other markets, our pricing is still far from the value that is associated to companies similar to ours. We see that our share prices have appreciated in the past few years. So the market starts to see that there's a value associated to our growing results, which is really important, but at the same time, noticing the value in our new initiatives. We always work with analysts and other players in the industry. Today, we have a very good coverage of our actions. And we've been able to attract more and more corporate investors and long-term investors that want to be with us along this cycle and in the future as well. And a testament of that is that for the first time CSU Digital was featured in the Institutional Investor 2024 Latin America ranking. This is one of the most important publications in the financial market. So we've been ranking first or second in the categories where we competed non -- which is small cap financials, nonbanks. So again, people are looking at us and monitoring and understanding the challenges and opportunities we are faced with. Just my final remarks before we open for questions. In sum, the company has been executing its plans consistently and delivering strong results. We've entered into an expansion cycle, having our new initiatives [indiscernible] HAS or digital payments or embedded finances. We've been able to attract new customers, and our current customers are also buying new services. AI is an important piece in our strategy. AI can multiply our performance, be it from the point of view of profitability or from the point of view of growth. The company is ready. Our figures are very solid. We're ready for different market cycles and ready to position as an industry consolidator. If you want to invest in this company, we pay very attractive dividends. 50% is the average payout this year, more than BRL 13 million have been declared and paid. And we see that shares are still -- are discounted when related to peers, and we deliver all of these results and we seize many opportunities. And naturally, we expect that these figures will converge in the mid-run. That's it for me. Thank you very much. We can now take your questions.

[Operator Instructions] The first question is by Alex Andre from MSX Invest. Can you tell us more about how do you see HAS market potential and how that product will change the ex-results dynamics? What is the addressable market for that project?

So Alex, thank you for your question. And we think that HAS is indeed something that can change the growth dynamics of the company. HAS is a solution that can be integrated into different processes in different types of companies. And with that, naturally, we will be able to very quickly attract new customers. It's a 100% new product, was launched late last year. And since then, we've been able to close deals with 2 important customers. So it's a very good business appeal because it addresses many pains of some customers who have inefficient processes, friction with users and that would require expensive solutions. And so when you offer this type of solution that does not require many adaptations in the company's systems, so it's just not intrusive. We can very quickly deploy it and start capturing gains and also offering the unique user experience. It means that it becomes a very compelling product. So it has the business appeal. And also this product can help us bring existing transactions into our platforms, driving growth even faster. So once this is deployed by customers, gradually, you can capture the benefit even in a quicker pace when you look at some of the CSU Pays projects. So it can be a powerful catalyst, changing the growth dynamics of our business. From the point of view of profitability, it is also very important. It's a product that delivers results both to our customers and us in terms of margin. So it will also benefit -- it will benefit our margins in the coming years. In the long run -- the mid and long run, we see that DX is also an important new business driver for CSU Pays. And we are not the only ones who say that. This is also what our customers suggest we do, beginning with automation and then learn more about our processes, learn more about the user dynamics and then you can offer financial products being more assertive. So we really believe in this product. For the coming quarters, of course, growth is gradual. It doesn't happen overnight, but it's important given this dynamism that it brings to our business.

Just a comment here. As we work processes on HAS, we grow in scale. And the same process -- of course, each client is unique, but you don't have to re-implement the whole -- process of the wake back of business. So just small adjustments. So as we attract new customers and as we include new processes into the platform, we intend to gain more in terms of speed and scale. So it is a very interesting product for us undoubtedly.

Next question by Bernardo Guttmann, XP. It's about your internationalization agenda. Could you give us more details on your strategy and the rationale of moving into the U.S. market? And what are the benefits and risks you see in that initiative?

The Brazilian market is really complex from the point of view of regulations, from the point of view economic scenario, interest rates. We'll have some unique characteristics, such as payroll loans and payment installments and credit card installments. So we are very familiar with all of that. However, in the U.S. market, this is all very new. So we've acquired expertise here with the developed platforms to be able to support us in the circumstances here in Brazil. And in the U.S. market, we see that they are moving into all of these things that we already know -- we are very familiar. It's a huge market in the U.S. It's very concentrated as well. But we see many opportunities in the U.S. And the players there are our competitors here in Brazil. So we already compete with those major corporations. Of course, in the U.S. market, we don't have the reputation we have in Brazil. So this is something that we will need to build over time. On the other hand, our major competitors there, they operate mostly with large accounts when you look at midsized customers -- midsized companies in the U.S., which would be huge customers when compared to our Brazilian customers. And they are not very well served there. So we think that this can be a very beneficial initiative for the U.S. market, and we would be able to offer our solutions and expertise there when it comes to all of these products. Some days ago, we saw an ad of a bank, a regional U.S. bank, and the ad was offering multiple card as something that would be such a great novelty with one plastic only for credit and debit. We've been doing that in Brazil for 20 years or more, having one plastic for credit and debit. So this is just one example to illustrate. So, in a scenario of high interest rates, a high default rate and the growing fraud problems, which is what we see in the U.S., but in Brazil, we've had these circumstances for such a long time. So we see a very attractive window of opportunity when we look at all of that.

Yes, indeed, it's a window of opportunity that opened up because the market has changed and players there do not have the same level of understanding that -- about all of this as we do in Brazil. And it is a huge market, of course, and also a major challenge. The challenge is proportionate to the size of the opportunity. The market there is 15x bigger than Brazil's market. So we see that there is a penetration opportunity even if with some niche players, some specific market niches where competition is not necessarily as fierce. And still, this is expected to give us great revenue. In addition to that, we would be having revenues in USD and we can be more aggressive in prices and have good margins or the opposite. We can absorb that margin in case we don't need to be more aggressive in prices. So this is actually one of the things we see as important going forward. This is still just a seed being planted, okay? It's important to manage your short-term expectations. But initially, we will have to have some expenses. We already have some expenses related to that, to set up a headquarter, to do some brand building, setting up the structures. And if all goes well, which we believe is what is going to happen, is -- this might be an important source of revenue for the company.

Yes. Who would expect people to be able to buy TV set at Walmart installments, right, buy now pay later? Who would have expected that? And is there already?

So our next question is by [ Pedro Madaloso, Nexus ]. What is the commercial strategy for your U.S. market operation? Are you going to be working with local partners or the new deal origination is going to be made by your own sales force?

The strategy now is to enter into partnerships, be it because of regulatory matters because that's a highly regulated market when we don't have all of the license. And because of that, we need to enter into partnerships so as to be able to start processing transactions there as we do in Brazil. From the operational point of view and also from the point of view of relationship channel, we have to create channels with the market, and it is just natural for us to start with partnerships because we can be more successful in the short run with fewer investments. So that's the idea. At the same time, we can also generate deals, especially Brazilian companies that already operate in the United States and are faced with the challenges that we see in Brazil, inflation, interest rates, and fraud. And so Brazilian companies that -- are aware that there are solutions for those problems in Brazil, and they're looking for those solutions or, of course, local players as well who also share the same need because time is of the essence here now. So they need new solutions now. So it's not by chance that every day, we hear others there's a bank mentioning that now they are offering global accounts or global cards or companies, not necessarily banks, that are now operating the U.S. to make it easier for you to transfer funds from the U.S. to Brazil and vice versa. So there are many companies in Brazil doing that, and we want to benefit from that of course.

Next question, [ Pedro Madelozo, Nexus] as well. When we compare CapEx of your last year with history data, we see that there is a significant moment, but it doesn't look like that your revenues have grown at the same pace. Where did you invest your CapEx? Growing revenue, reducing costs or something else?

Thank you, Pedro, once again. We've been investing in these platforms that I mentioned here, improving profitability, which is taking our own medicine. We are not generating technology just for customers to use, and we are not using spreadsheets in-house. No, we are automating our own processes as well. Based on that, we design new products, such as HAS, for instance, all of the development of what we worked here and more recently in the use of AI, we've been training our team being -- working with global suppliers for that as well. So that also required some investment. There's also some customization -- customer customization processes. Some customers have been demanding important customization sets, which require development. And the regulatory agencies also been more -- has been more active in this market and has been requiring changes and improvements in the relationship with customers and also we've needed to make investments so as to be able to comply with these requirements. So these are the main points. So first, optimizing our use of resources, such as labor, computational resources. We've been updating some environments. Second, the regulatory requirements that we need to comply with and customer customization required by customers that require investments on our part. So these are the 3 main points.

But just adding to that, speaking about the financial aspect. In practice, Pedro, we've been investing at higher levels than historically. But looking at our recent history, you see that we invest 12% of revenue on average, and in the past 5 years, that's been roughly the level we've been on. So it used to be 8% to 10%, but in the past few years, it's been closer to 12%. This is something we need to do. But we are very disciplined from the financial point of view. So we've been investing roughly 12%, and we've been pursuing this level in the past few years in tune with the company's cash generation. We see other companies in the industry, who have this start-up spirit and they wanted to burn cash endlessly. And then every quarter, they need to pass the hat for the shareholders. We don't do that. We focus on generating cash, results and self-finance our operations. So we think that this is very healthy even if we've been investing much more than we used to 6 or 7 years ago, still we've been able to generate enough cash to do CapEx and pay debt and to pay out 50% of our profit as dividends. So this is all very aligned.

Next question from Pedro Fagundes, Newfoundland Capital.

Could you tell us more about the company churn rates today or net revenue retention? And of the 10 top customers of the company, does anyone -- is anyone going to renew their contracts with you still this year?

Good morning, Pedro. Nice to talk to you again. So Pedro, as to customer retention, this is an agenda that is, I would say, is -- can be addressed from different angles. Basically, there were 2 important churn events of important accounts, one in 2013 and the second one in 2018. So there are very rare events. The company has been around for 32 years and only 2 major accounts have left us. So the industry dynamics is such that there is an important barrier to entry and to exit, which is important because of the complexity of the system. It's not trivial to set up all of these systems. And systems are highly customized and have a connectivity between platforms. So it is very painful for our customers to exit in case they want to. So the rare cases -- and not only for our customers, very rarely do we see churn events in the market. And when that happens, usually it's a bank that has internalized the system. So there are exceptions to the rule. So since 2018, we've had no problems like that in churn, and the probability is increasingly smaller. So when you only process cards, the likelihood would be such. But then the customer who have a card, marketplace, loyalty, Pix, digital account and so on and forth, it becomes increasingly difficult for customers to leave. So our revenue diversification strategy is also related to this agenda. So this is something we addressed through products. Also another formula for us to address that is also helping customers and generating new businesses. So we no longer see ourselves just as a platform. Of course, so in addition to that, we help customers monetize and engage their users. So this is an important difference in terms of performance between the different choices in the market when compared to us. And this is what this enabled us to be and remain market leaders. And our sales efforts focus not only on banks. We used to be a company delivering services to banks alone. Today, 25% of our revenues come from banks and the remaining from other industries. But you can say, well -- our banks [indiscernible] Achilles' heels, no, if you know how to work with banks, there are great opportunities there. The point is when we look at the other customers, the initiative on internalizing systems is nearly impossible because that's not the core business of customers in other industries. They are not familiar with regulations and laws and potential bank requirements. And there, we can create more value. So customer diversification and product diversification help us address that agenda. And you also asked about contract renewal. Since the beginning -- at the end of 2022, we've been telling the market that we voluntarily would renew contracts. We've reached out to customers, irrespective of expiration date. There are some contracts that would expire in 2 or 3 years down the road. So we reached out to customers and so we've come up with many growth avenues. There's many opportunities for us to do new businesses. So let's make the most out of this very positive moment to review our contracts. If you look at the 2023 result, mostly in the first half of the year, we had a very active agenda of renewals. In the first half of last year, we had renewed nearly 90% of our contracts. And today, nearly all of the contracts have been renewed for a long cycle, so 4, 5-year terms. So that's being very well managed so that we can give continuity to this growth cycle that we've been experiencing.

Next question, Carlos [indiscernible].

Congratulations on your performance. What are your prospects regarding the impact of new products on your performance?

Thank you, Carlos. Great to talk to you again. So we already see that actually. When we look at the financial performance as a whole, new initiatives have helped us grow operationally in the range of 15%, 20%, depending on the metric or the period. So on average, we've grown operationally significantly. New products can be just a transformation of something we used to do, but with a new -- so for instance, cards that can be turned into virtual cards. And for some quarters, we've already been disclosing the other metrics of Pix, for instance, have been growing markedly. We have entered in 2 major embedded finance contracts this year. So we already have -- we see that impact on our performance, and that's what being supporting the continued growth, especially at CSU Pays. At CSU DX, we are still expecting the results in the coming quarters because the contracts are very recent and the contribution so far has been virtually 0. And we expect a bit of this impact on Q3 and then more on Q4. And next year, we will be able to capture more benefits from HAS. It's slightly different. But in terms of margin, HAS has more than doubled my gross margin at DX because HAS again started in-house -- being used in-house.

Next question, [ Rafael Canute ].

Regarding operations in the U.S., do you think that you'll be able to have a new American customer by the end of second half of 2025? And about payout, do you intend on keeping that at 50% even with the investments required to operate in the U.S.?

Do you want to answer that?

I like to be optimistic. If you ask me if we're going to have one customer by the end of next year, well, we need to be able to do at least that. We won't be able to be here, but otherwise. But jokes aside, this year, we are entering into partnerships. We're adjusting the platform where necessary. We are also building regulatory inroads so that next year, we will have at least a handful of customers operating with us. That's our ambition. That's a long way ahead of us, I know, but that's the ambition. So that's the first part of your question. I'll turn it over to Pedro for the second part of the question.

So you asked about the payout. So yes, the trend is that we will keep it at 50% because, again, if you look at cash generation in the company is going up, results are better, and my cash generation ability is larger. So it is indeed possible to keep this payout base even considering investments that are required in the United States. What could maybe change that? If there is an interesting asset that we find for acquisition along the way because we enter into partnerships, and then we might realize that their interests in -- that we do something else. Just when we look at hyperautomation, for instance, we've seen some companies -- there are companies that have been working with us that might see interesting synergies with our business. So the only variable I see today that could change this payout dynamics would be an occasional acquisition. But then, of course, we would have to retain dividends to be able to do that.

[Operator Instructions] Are there any further questions? So if there are no additional questions, I'd like to turn it back over to Mr. Pedro Alvarenga for closing remarks. So go ahead, Pedro.

Once again, thank you. Thank you for your time. Your presence here is very important for us so that we can review our performance and also discuss our future, which is what Fabiano has done today. So again, the company has been executing its plan consistently and the results reflect that. So that's what we expect will go on happening in the future. And my team and I are available in case you have any additional questions. Have a great day.

Thank you, everyone. Have a great day.

So the CSU Digital webcast is now concluded. Thank you all for joining us, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]