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

Welcome to CSU Digital's Conference Call to discuss the Fourth Quarter and Full Year 2024 Results. This call is being recorded, and a replay will be available on the company's website, ri.csu.com.br. The presentation is also available for download. [Operator Instructions] Please note that this presentation will be conducted in Portuguese with simultaneous translation into English. [Operator Instructions] Before we proceed, I would like to emphasize that forward-looking statements are based on CSU Digital's management beliefs and assumptions as well as information currently available to the company. These statements involve risks and uncertainties as they refer to future events that may or may not occur. Investors, analysts and journalists should be aware that macroeconomic conditions, industry-specific factors and other variables may cause actual results to differ materially from those in the forward-looking statements. Joining us today are Mr. Pedro Alvarenga, CFO and IRO; and Bruno Costa, CPO and the Investor Relations team. With that, I'll now hand it over to Mr. Pedro Alvarenga to begin the presentation. You may proceed.

Thank you. Good morning, everyone. It's a pleasure to be with you for another conference call to talk about the results both for the full year '24 and specifically of the fourth quarter '24. I'd like to start the presentation talking a bit about our execution, given the growth strategy that was divided since the incept of the company, how we organized ourselves and how we are preparing to create value to shareholders before talking about numbers. CSU is a company that has many ways to see growth. We basically work as a tech infrastructure company for financial services. That means that other companies that want to offer a myriad of products for their end users can count on our platforms and options and technology for such. So I think the first main challenge that CSU has on its day-to-day is how to attract more and more companies to operate through our portfolio. And here, we have been devoting time, energy and investments to create precisely a network of products that create synergy with the several items of our portfolio in such a way that each day, new companies join our platforms to precisely start operating within this financial ecosystem. So whenever a new company becomes a client of ours, it brings a relevant user base. And somehow we end up interfacing with these clients. They are not going to see our brand on the card, but behind, there is a huge list of technologies that CSU provides for the services to provide the best digital experience for each user. So naturally, our challenges from now on is to foster the space once in our platform becomes active, that is each user uses the multiple financial services available. So we have a very well-designed strategy, and we are going to explore the topic along our conference call today. Bruno is going to talk a bit about future challenges with regards to that, which is to bring the customer base and activate the base. And once they are using our services, we want them to use in multiple forms. That is more and more users, we want users to have the interest of using each day more services that the companies that are hiring at CSU are offering to them. So we have a very well-designed strategy to, again, encourage users to use more transactions every day. And for that, we have a relevant strategy in terms of technology, artificial intelligence, customization. We seek more efficiency on the day-to-day management of services. And efficiency is another chapter that is very important, an important pillar of our strategy because at the end of the day, it's no use to generate a high volume of businesses for CSU or for our clients. And then all the efforts that was made to have an additional volume is drained by very expensive structures, back office, risk analysis, fraud onboarding. So this is a very important chapter of our segment. So we have to generate the best experience at the front end. But at the back end, we have to have less waste of resources, more efficiency in execution of each one of these activities. So this tripod is what we propose to offer. This is how we want to operate, how we organize our company and how we see as the most ideal way of seeking value with profitability, cash generation and so forth for our business. Now our market in the last 10 years has gone through a relevant transformation. I think this is very important for each investor to keep in their [indiscernible] because of regulatory changes, tech changes or simply because changes in consumption trends. The industry gained new products, interfaces, technologies that obviously make us as a leading company in this segment seek always to be at the forefront of innovation. More and more, we want to strengthen the competencies I mentioned about efficiency, productivity, scalability, but also we have to have a list of products that is broader and broader to cover each of the functionalities and products that come up in financial operations. So in the last 5 years, the company invested a lot in really raising the bar to cover each of the market changes that took place to keep in tune with this business strategy, our strategic plans, we had to make important changes within the company, changes that started from the basics, from our tech architecture that becomes stronger, safer, more flexible, agnostic. This is a market that I mentioned that is multifaceted. You have payments with the Central Bank, the different flags. So somehow, we have to cover all this framework of services that are needed in the market. It has to be scalable. It has to be efficient in terms of costs. And it has to be very much in tune not only with the capacity of processing, but also generating better business inputs. This is a very important shift that happened in the industry, and that will carry on for the coming years. In the last 5 years, we are talking about investments that are beyond BRL 260 million, more than 800,000 hours of development to adapt the platform for this new business reality that is evolving each day. Another challenge is, if we are going to go through a relevant transformation process as we saw in the last 5 years, we have to do that efficiently, as I mentioned before, cheaper to be able to preserve profitability of the business in view of a scenario of relevant growth that we had in these years. Therefore, the company invested lots of time and intellectual capital to develop a relevant layer of services originally to -- inside the company to meet our business demands on the day-to-day in the management of internal processes and optimize our service structure. That is whenever you provide a service within a tech infrastructure environment, there are several activities that happen after the transaction. So I mentioned onboarding fraud analysis. So if we do not have the capacity to develop routines in a fast, efficient, error-free manner, then we have a burden on our results. So in addition to investing strongly in a new architecture that made new portfolio possible with a new platform, we invested time to enhance and digitalize our processes. In addition, as I mentioned, the market started to be multifaceted. We started to have a system where Pix in Brazil becomes a reality. We have an environment where cryptocurrency transactions start to pop up in the ecosystem. We have new companies that want to develop and enhance their financial ecosystems. And so those that operated before with financial services regardless of who they were, a retailer, a co-op, everyone took a further step in terms of the quality of services provided. And this is where we come in, expanding our offer substantially, not only covering digital payments, but the whole chain of embedded finance, loyalty incentive, automation, customer experience, that is we indeed bring a business view that is robust, that is we work end-to-end in the journey of a financial transaction. And I think this is one of the main highlights of CSU compared to the competition. From the start, this is how we position ourselves, and we took substantial steps towards this end. And then I always like to support each one of these steps, because it's always very important to align if the strategy is being executed, how it's being executed and if it's really generating the results expected, both operationally speaking, but also financially speaking. And here, bringing as a reference the pillars of our strategy that I mentioned at the beginning of the presentation, I think each of the numbers really materialize this outstanding performance for the year of 2024, which in practice is the continuity of an evolution that started 5 years ago. What I always like to strengthen is that it was not only 2024 that we had important results. For 5, 6 years, we are breaking our records compared to previous years. So when we talk about expanding the active user base, in 2024 alone, we had 6 new clients, some still under deployment that is partially contributing to results, very relevant clients, expressive industries, industries with a high level of recurrence results with high growth rates, industries generally connected to essential services. So we are talking about financial company, insurance companies, telecom, hi-techs, so companies that really bring growth with them. And obviously, we have excellent expectations with them -- for them -- with them -- with us. We worked very strongly on the activation of this customer base. As I said, it's no use bringing new clients if they don't use the services. So today, we have an outstanding performance. Today, 61% of the 36.7 million users are active. That means 22.4 million users using at least one of our services, a number that is 10% higher than last year. In addition, we had great efforts to attract clients. As I mentioned, when we have a client with us, the objective is for this user to use the platform. So we always seek to increase the number of points of contact that we have with the client base. This year alone, we signed 8 amendments with existing clients for new products. So if a company just worked with cards, they started working with Pix or loyalty. So we grew with cross-selling and upselling of new products. And in addition, we used all the tools that we had to really encourage users to actually use our services. And the result is that just along the last 4 years, we went from 30 transactions per user on average to an average of 53 transactions per user per year. And the consequence of these numbers is that we grow at an accelerated pace. We went past the 1.2 billion transactions for the year, more than 10% above that of 2023. And when we think of the operational efficiency pillar, we worked a lot, as I mentioned, to enhance our margins and results. We are a company that has a strong financial discipline. We want to make investments organically. And for this to happen, as I mentioned, we had to generate more results. So we focus very much on the digitalization of our services with the components I mentioned, process automization, AI. And today, the 2 business units are very much digitalized. So CSU Pays more than 95% of revenue comes from digitalization and DX, more than 71% of the interactions that take place within the digital environment. Our margin grew more than 12 percentage points in a short period of time. So we are talking today about gross margin of 42% consolidated numbers. And the consequence of the end result that was our main objective is that the company starts to go through a strong pace of value creation with double gross profit and net income in a short period of time. Just to deep dive some lines of our results very briefly. This growth that I mentioned in terms of value creation unfolds in basically to all our lines. So revenue, we have a company that is repeatedly growing 6%, 7%, 7.5% a year year-after-year, this is the pace of growth, but with very different dynamics considering our business units, CSU Pays, which is our main business. This is how the company is started, grows repeatedly at 2 digits mark. So we have a CAGR of about 13%. This year with the pace of growth, it was 10%, very much fostered again by our clients, our traditional clients, the existing base, but also starting to show results, both of the amendments for the existing customers and the new clients that were gained in 2024. We are going to talk a lot later on about how we believe in the pace of relevant growth for this company, very much based on intensive AI use to drive transactions and using this network of context and points of interaction that were created as of the expanded portfolio, again, digital payments, automation, loyalty and et cetera. DX. This is a business community that had perhaps one of the most acute transformation of the business. We always operated within this environment to anchor and support our business units and our CSU Pays, but we turned this business into a digital business from analog to digital. The cycle at first sacrifices revenues to create more profitability, and I'm going to show that on the next slide. But for us, it brings a very large value creation, not only in terms of results, but also perception of value to our clients. So it was an extremely necessary movement for our business. And now we are starting a new cycle. As I mentioned, CSU DX has new components through automation that started within CSU to provide services to our operations, but it became a product in its own. So today, we have a relevant offer onboarding, quality monitoring, credit analysis, fraud. So we offer this to multiple segments. And this year, it's a very recent product, it was launched in the end of '23. And since the second -- the end of the second quarter of '24, we started again to reap the first benefits. So this year, 10 new contracts for the business units, 7 connected to HAS, that is process automation. And the consequence of this beginning of capture of new business is that this is a unit that even still going through stabilization is growing. And we have an expressive expectation for growth in this vertical anchored on this new product that was recently launched. And when we talk about bottom line results per se, all the transformation I mentioned before is a key factor for us to continue to increase our financial performance. If on the one hand, we grow 6%, 7%, 8% on revenues, we have been growing. Obviously, we are working for this level to continue to grow in the coming years and quarters. But on the other hand, when we look at financial performance, we leverage this growth proportionally. So the beauty of digitalization is that for each real generate of income, I generate more reals in terms of gross profit when you think of again, gross profit and EBITDA and net income of the company. So in a short period of time, again, I'm talking about 5 years, we increased profitability in both business verticals. And that, to me, is a very strong takeaway message because it reinforces how the transformation was important to precisely finance the cycle of investment in transportation that we experienced and will continue to experience. So in a nutshell, we are growing 15% in gross profit compared to last year. We closed the year at 42%, 43% margin. And thinking of the different business units, the same effect, CSU Pays, we grow more than revenues, increasing margin proportionately and DX, the same thing, more than 18% in the last quarter again and already getting close to a margin of 18% to 20%. Now I'm going to turn to Bruno. We are going to talk a bit about the future and how all this transformation performed generates an important flow for the future in terms of initiatives, projects and opportunities.

Good morning, everyone. So I'm going to talk about how we are perceiving financial challenges and strategies. Basically, we see a future that will necessarily go through AI and the use of new technologies in our business in Pays and DX. So the first thing that we think is AI in hyperautomation that is using AI in DX. We started that with HAS, and it is developing with new AI modules for Pays, we are talking about evolution with the use of AI in financial services, basically fostering customization, activation of customers and enabling our customers to gain leadership in their role. And we have an important front that goes through new geographies and global product offerings. These 3 strategies want to expand our operations, always bringing state-of-the-art technology, innovation for financial services and at the same time, seeking to bring more profitability to our solutions, be it from the perspective of the results of CSU, but also to generate a more attractive profitability to our clients. And again, expanding our portfolio and going into different addressable markets through cross-selling and upselling. Now how we are providing this evolution within pace. I think it's very important for us to understand the market background. When you think of [ means ] of payments, and this is an image just to represent the challenge for issuers to be a top of wallet in their customer wallets. So again, this is a key point for all issuers because the market has fierce competition, many cards being issued by different players. And again, it's very important to keep those cards active. The level of market activation in last years has gone down to close to 40%. Now when you take a look at our clients, our activation base is around 61%. So a level that is much higher than the market average. And what we want is to continue this leadership position, having AI to enable a more individualized customized relationship and that end users show preference to the cards of our clients that go through CSU platform. And how do we do that? Well, basically, we bring AI to foster personalization, generate more engagement and again, basically the customer core value. And we separate that into 3 parts. First, relationship, how end users perceive that they have a more customized, individualized relationship with their financial services. We use AI, Pedro mentioned 1.2 billion transactions every 12 months at CSU, more than 36 million of cards that we manage, and that brings a huge capacity to understand users and to understand their preferences, interests, the time of life that they are in. And with that, we can have actions that are much more customized and contextualized in terms of benefits, product offerings, tips for them to use their cards. So that has all to do with customer relationship with our AI adviser that really enhances the credit card experience to the end user and also AI activation that wants to bring new activation strategies based on profiles and behavior of each user to enable them to either use the cards again or that use their cards more frequently. The second part talks about limit management and authorizations. And here, we bring AI technology to have an integrated and flexible management of limits even between cards of different flags and also to enable the approval of specific transactions based on the profile of each customer. So we look at the profile of each individual customer and transaction for us to have a much more efficient authorization performance. So at a critical moment of the customer's journey when they are going to use the card, they can count as much as possible with the approval of that transaction. But security is a very important aspect. And then we bring the application of AI to our fraud prevention tool, ensuring more efficiency whenever our users are using their cards or making a Pix transaction for us to ensure the protection of these transactions at any point. Now talking about DX, then -- we already have HAS in the market with customers and with very substantial results. And basically, what we have at DX is an evolution of HAS to expand our capacity of operation. HAS originally started considering the central portion of processes. So remember, HAS brings an efficiency in terms of processes, ensuring not only operational efficiency, but less errors because you have less manual interventions in the system. So you have more quality and also you have resolutions that are much faster to users that have a demand. And again, we have fraud prevention, onboarding, credit, a series of critical processes in the relationship with customers. We started HAS, again, working in the central part in the handling of these demands. And more recently, we have been expanding HAS operations, especially with AI and generative AI to work at the start and end of this process to make it more efficiency and more quality processes. So again, this open new markets of operation and a potential for gains in terms of quality and financial experience as a whole, both AI for Pays or DX in the end of the day, what we are generating, what we are delivering is value to our end users and institutions that work with us, partners. On the side of end users, we bring a different experience in terms of limits, relationship, benefits, campaigns that they receive -- users receive real-time campaigns, the AI adviser for financial consulting. And with that, we have satisfaction, loyalty and quicker handling of demands. With institutions, we have higher revenue and profit through a strategy of cross-selling cost reductions. We have gains with process automation, reducing again, costs and improving resolution times of demand at the same time that we reduce operational errors to almost 0. We have 95% reduction in operational errors. We ensure effective risk prevention with more than 10 percentage points of improvement in terms of fraud reduction and better approval rates. And we work with lines as onboarding, credit analysis, making these processes more efficiency in addition to quality monitoring in the operations that we have. All that enables us to make our commercial pipeline a lot stronger. So the use of AI at Pays and DX expands the capacities that we already have. In Pays, we have all the solutions in terms of processing cards. We have some examples here, the embedded finance, sponsors, digital accounts, marketplace acquirers and also solutions in terms of engagement and operations in which we have loyalty with incentive programs, score programs, loyalty programs, BPO and HAS. So with that, we expand our commercial pipeline, not only working with financial institutions, banks and retailers, but also insurance companies, acquirers, telecom companies, utilities, increasing the potential to generate new businesses. This is not restricted only to the Brazilian market. An important avenue of growth that we established is to go global. We are constantly investing in new tech solutions, now not only looking into the domestic market, but how we can do that in such a way that we have a design in a context that is geographic, that is that we can offer solutions not only to the Brazilian market, but to other global markets. We are initially focusing on the American market with a strategy that wants to foster businesses that we have in Brazil, but also extract value from this new market. This is a global opportunity. When we look into the context, it's very favorable for CSU. We already operate in the Brazilian market. We know very well how to handle with high inflation rates, high interest rates, a high level of fraud attempts, and this is precisely the context that we see in the American context, a pressure on inflation, interest rates and an increasing number of frauds, 38% in the last 4 years. At the same time, in the Brazilian market, we have a growing demand for international financial products, what we call the global products. Brazilians are spending a lot more in external markets. So these products aim at meet this demand. In terms of technology, this is a market that wants new technologies. cloud-based instantaneous cross-border payments, digital wallets, seamless customer experience, open finance, fraud and securities and also AI. So these are all avenues and developments that we are already putting into practice in Brazil, and we have huge capacity to adapt to this new market and a market with huge potential. When we think of quantity of financial institution and payment providers, this is a market 9x higher than the Brazilian market. And in volume of credit card payment, it is 15x bigger. So very appealing, very attractive to take part in this market. And basically, when you think of the steps and last call, we did mentioned a bit of the stages that are important for our geographic expansion. The first stage has been completed, analysis of potential and competitive market and CSU readiness to operate in the market. We are substantially advancing in the definition of new business partners, all strategic partnerships and local suppliers that are necessary for us to operate in this new market, be it directly in the North American market or serving the Brazilian market that is global products for Brazilian residents. And we are in due diligence now to validate the selected partners. As of then, we are going to start integrating and implementing the operation we have later phase of certifications that is necessary when you talk about all the certifications that are needed with the flags to enable us to operate in this market. And finally, we are going to get to the launch and production. So the expectation is to be able to do this still within the year of '25 to have this global product already in production.

Okay. Just for us to close our results, just overall numbers of the company. What I think is important to give you as a takeaway message is the following. The company has been working step-by-step with new business fronts, evolving its operation model, bringing new technologies and nothing would be possible if we did not generate results. I think the main objective of each -- any company is to generate profit and cash. And we have this objective and the commitment to evolve in our strategy without giving away sustainable growth. So I think the takeaway message of the slide is that we work very hard in the last 5 years, as I mentioned before, to increase our gross profit. The amount that is indeed generated by our day-to-day operation. It did have to grow substantially for us more and more to have capacity of investments in our business. In parallel to that, we have been expanding investments, respecting this larger volume of the cash creation, and we are improving results. So when you look at EBITDA, net income, this is a company that is growing at the 2-digits mark every year, even making very relevant investments. So here, the message to the market is that we are going to structure each one of these new fronts. After this phase, we are starting a new cycle to leverage the use of new businesses and our geographic expansion, but we are going to continue with our discipline quarter-after-quarter to keep profitability of our businesses so that a long time, as initiatives mature, they will obviously self-finance themselves and the results of the company will continue to evolve. So as a whole, we closed the year with EBITDA at BRL 192 million. This is the highest number historically, a margin of about 34%, net income above BRL 90 million, a margin again above 16%. But I'd like to draw your attention to current businesses growing and increasing profitability. So if you take a look at the breakdown of the results, apart from the initiatives that Bruno mentioned, if we were not investing in new initiatives, we would have results way above EBITDA above BRL 207 million, net income above BRL 105 million. That is we are creating a company for the short, mid and long-term. And this is where we are employing our efforts. We are investing in internal resources. Today, we have a management Board that is very special. We have data. We have people more and more dedicated to compliance, governance because dealing with financial services is critical. We have to be very strict in controls. And at the same time, you have to have internal technical capacity, commercial teams, tech teams, product teams in place to really lead all the services and technologies that we have. And this is where we are going to continue going to, again, balancing our capacity of investment. We are a company that we do not have a mismatch between investments and cash. We continue to have high cash generation for '24, a conversion of 82% of EBITDA. So we continue to have breadth to be able to carry on with our plan and cycle that we defined for the coming years. Today, we have no financial leverage. So our net debt-to-EBITDA ratio is ratio, it's negative. This is a company that has free cash, and obviously, as I mentioned, this enable us to have a high level of investments, accumulate cash. And still, we are also keeping an earnings payout that is very high to each shareholders. So CSU shareholders do not need to wait for a new cycle of expansion or valuation of shares. Every quarter, every year, they are going to have a high payout of our profits that are growing. So just to reinforce today, this year, BRL 27 million distributed on interest on capital. We are going to submit it to the general meeting already approved by the Board and BRL 22 million in dividends, increasing our payout to the 50% that we have had in the last years. Very briefly, with regards to capital markets, in addition to the dividend payout, we have been working very much to get closer to the capital market to tell our story, to bring visibility, not only of recurrent results, but also potential businesses that come up with new initiatives and somehow the market is starting to appreciate these actions. So our total share return as a reference, the beginning of '23 is already close to 80%. More and more, we have companies covering and talking about the company, and we have been very successful to attract institutional investors to our shareholders base. So people are following our case, analyzing our investments. And I believe in the future, we are going to have a high rate of return as we have been presenting. Despite the valuation of shares, we also like to say that the market still has to analyze our company in depth. We continue to deliver results. We are a company with a return on invested capital, return on equity, whatever indicator you want to use above the 20%. This is a company that really stands out in the tech segment and financial services. In terms of dividend yield, we are talking about almost 7% of return to shareholders immediately. And obviously, the more you can improve, we have more symmetry of multiples, even with all the appreciation that we have in our shares, this is starting to be diluted. So just to close, I think the main takeaway messages are the following. The company continues to deliver strong results, 5, 6 years now in a row of record results compared to the previous year. So this is a company that is committed to the day-to-day in terms of results. This is a company that is always seeking innovation. It wants to be in the forefront of its segment. We continue to launch new products, features, technologies, and we are more and more investing to carry on with expanding our potential market through new initiatives in AI, but also seeking global opportunities, as we mentioned before. We have a very strong balance sheet in terms of capital structure and cash generation, which gives us the trust that the plan is going to carry on and also gives us the confidence that we may anticipate growing results to our investors, either through interest on own capital or dividends. Please take a look at our numbers, take a deep dive in our releases, and we are here to answer any questions you might have.

[Operator Instructions] The first question comes from Matheus Guimaraes from XP.

I have a problem with my mic, but I would like to ask a question. First, I would like to congratulate you on your results. And I would like you to give a bit more color on the differences of CSU in the use of AI for payments.

Okay. Pedro, I'll answer this question. This is a very good question. As we did in DX with the HAS product and hyperautomation with AI, remembering HAS, we put together something that we do not see in the market. We have an operation model in which we not only apply AI for automation, but we also generate and manage the process to our -- for our clients. So today, companies seek for tools in the market. They don't have anyone that actually operates for them. So the same difference is also observed on the side of Pays, the solution for the means of payment with AI. The challenge that issuers have today of having a hyper-customized relationship with their customers is something that we do not have in the market. When we take a look at the competition and we see the solutions that are available. You do not find an application that is actually based on generating results, which is not only having the technology available for the client to try and generate results. And at the same time, because we have a customer base that enables us to manage 36 million accounts and cards, more than 1 billion transactions every year, all that generates a database that is unique and that also places us in a very advantageous position in terms of being knowledgeable and know-how, which is very important for the application of artificial intelligence. That is, you have the know-how and therefore, you generate expected results. So I think the major difference is that we are a solution that is innovative in terms that is not like the ones that you have in the market. And that has a potential to generate results for the customers because we have a relevant database and data is very important for us to use artificial intelligence.

Our next question comes from Marco Saravalle with MSX.

Congratulations on the results. More than the results, the consistency of deliveries that you have been telling us. And congratulations on the transparency and access to all executives. I would like to talk a bit about CapEx. Pedro in the beginning, did mentioned that you invested record volumes. So I would like to understand your expectations for CapEx in terms of trend. And of course, when we talk about AI technology, it's always important to be at the forefront to keep the company ahead of technology. But how much this not only production of CapEx, how much this can translate into potential revenues and/or margin gains along time because Pedro also mentioned that we do have some new good clients. So as the investments made in '24, '25 are going to mature and translate into revenues and productivity and profitability for the company. So volumes and potential results.

Marco, thanks for your kind words. Well, objectively answering your question, our market in its essence is going through a unique moment in history with a high confluence of new initiatives that starts from the base, from the platform, the technology that supports all systems to the product security and the efforts that we have in terms of operating in multi-geographies for us and for all the companies that operate the market. So naturally, we are going to be a company that will continue to invest high amounts every year. What perhaps is happening differently from other cycles because the curve of innovation is much cheaper than before, proportionally in revenues, the amount is slightly above what we were used to in previous years. CSU was a company that would invest 8%, 9% of revenues, and we are now at 12% to 13%. I would say that we are going to continue to invest at a substantial level. I would say more or less these numbers for another 2 to 3 years. It's natural that we have to accelerate some actions. So artificial intelligence is a subject that gained relevance in recent years and not because it did not exist before, but the computational capacity has changed. The capacity to interpret data has changed. And naturally, you have to accelerate investments in the beginning. And then you go more into a maintenance phase. But starting an operation from scratch in a different country, which is what we decided to do about 1.5 years ago, is also something that demands starting from scratch, setting up an office, hiring a team, bringing the platform, adapting the platform for the new market. So again, this is an investment that will necessarily be higher for a certain period of time. What changes is perhaps what is related to operational investments. When we invest, it's not only CapEx. We invest in other kinds of expenses in the end of the day. So today, we have a relevant team, for instance, for data engineers, a relevant number of people that are studying the best way to work with artificial intelligence. We have a team that is seeking innovation in our products all the time. So then in '24, we had to raise this bar again. But I would say that as of '25, we are gradually going to see a dilution of investments. And when I say gradually, it's gradually. As revenues go up from these new initiatives in terms of OpEx, the amount starts to dilute. And a good proxy, I think, for a recurrent level is perhaps the dotted blue line. Today, the difference is basically just expenses. When you have revenues, you start to offset that. So it's going to be gradual, especially because of the investments in the U.S. that will take a bit longer to mature. But in 2025, we'll start to dilute a large portion of these additional expenses that we had for '24 that we don't see expenses, we see as investments to precisely foster the potential of revenues. It's important to remind you that CSU Pays had an accelerated ramp up in terms of margin in '23. In '24, it started to go through a more natural curve. DX still has gross margin to grow as has matures. So a lot to happen, and it's natural that investments, especially operationally will be diluted.

Our next question comes from Rodrigo Schmidt Prado from [ CX Invest. ]

Congratulations on your excellent results. With regards to customers that have a significant allocation of capital in a single product, is it a higher risk than in the past?

Okay. Rodrigo, I'll take your question. Our business naturally has an exposure to clients that are very relevant. These are operations that I said that have high volumes, high recurrent levels and that have a base of users that is relevant. Most of our strategy of growth of diversification and revenues address a much larger potential of growth for our company, but also addresses part of your question. If you depend on a single product, a single client, a single sector, not necessarily an isolated customer, but just a high exposure to a single sector, obviously, you have more risk to the business. So we are a company that was born to provide services to banks. So we did have our revenues 100% exposed to banks. And as time went by, we diversified our portfolios. Banks today account for 25% of revenues. Other financial services, another 25%. So we have a very diversified portfolio, and so the risk dilutes along time. And also, when you talk about a specific customer, we are a company that in the past, we did have exposure to a single customer that had more 30% of our revenues. Today, our largest clients are at 15% to 17%. So every day, this is a risk that is more controlled, and it is our objective in terms of commercial strategy to continue diluting the concentration of specific customers or segments. I want all customers to grow. But at the same time, I want to have new clients, new customers to dilute each of their share and the risk in terms of generation of results. So portfolio diversification have more than a vertical active prospecting customers from multiple segments. This is all part of our strategy in terms of managing risks and growing the company.

Our next question comes from Pedro Madalozo from Nexus.

Some calls before, CSU mentioned it created new simpler products for HAS and make it easier for sale and deployment. For the new clients of HAS of '24, what is the deployment time for these customers to start generating revenues for the company?

Okay. Here, I can say a bit and Pedro can add to that. This was a turnaround that we had compared to the previous year. And that was basically to have a [ last store ] opening in a way of how we took HAS to the market. What do I mean by that HAS in terms of capacity? It can be applied to any process with high volumes and high complexity that the company has. But that made the commercial process a lot longer because every new interaction with the client, we had to have an assessment to try and understand the process and the needs of the customer. And then as we narrowed that and defined the main processes in which we wanted to use HAS, we had a bit of a more predefined solution to use in each of the customers. So what we are saying as priority processes are the following: fraud prevention, challenging expenses, chargeback, onboarding, credit and quality monitoring. So that enabled us to have a better commercial focus and enjoy more everything that was done for one particular customer to the other. And so in the last months, we were able to accelerate in terms of commercial success and negotiation and employment of our customers.

Yes. And I think just to add to what you said, it's not by chance that when we saw this change, we started to announce new contracts. So we changed the strategy to have more off-the-shelf products, so to speak, as an entrance door for our customer base. So 7 new contracts, just to remember you, that happened basically in the second half of this year of '24. Part is still not fully deployed and that will generate added value for '25. So an important shift in terms of relationship. That does not mean that we gave up the original strategy to see all possible processes of companies that work with us. But we are using this more as a gateway. And as the relationship deepens, we understand more the customer base, the way that the company manages its processes, and then we can open new opportunities along time. That's the pathway to follow right now.

Our next company comes from [ Carlos Tozzi from Sonas Investment. ]

Congratulations on results. About the expansion to the U.S., any forecast to complete the current phase of defining partners and launch?

Carlos, thanks for your question. We are very close to completing those 2 stages that I mentioned, which is assessment of partners and definition of the first ecosystem that we are going to put together. And it's important that you understand that this is live. This is a phase that to another end will continue evolving in our ecosystem. As we do in Brazil, we are going to do the same in the U.S. So constantly, we are going to integrate new partners not only in terms of banks, but partners overall that enable us to have a full service solution as we have in Brazil. But for this initial staff, whose objective is for the fourth quarter of '25 to be live, we are at the final phase of closing this partner. So our expectation is in the next months, March or April, we are going to complete this phase and then indeed go into deployment and then certification processes for us to be live until the end of the year.

Our next question comes from Carlos Herrera from Condor Insider.

Could you talk about the prospects for '25? What are the main triggers and challenges we should watch out for? How do you see possibilities of M&A for '25? Or are you focusing more on organic growth?

Thanks, Carlos. I'm going to try to answer your questions. But overall, in '25, we picture different fronts that converge. What do I mean? CSU pace is a business unit, as I mentioned, that is growing repeatedly and substantially. And that has to do with the business engine. Whenever we sign a new contract with the customer, you have an initial step for designing the project, then you have the setup. The customer, when they start, they don't -- the client does not put the whole customer base, they want to test adherence. So it goes on. So much of what we had in terms of growth for '24 was planted in previous years. So what brings us a difference in pace for '25 is that, both in the end of '23 and '24 we experienced a scenario of a full portfolio, and that expands our capacity to sell more, not only for existing customers, but also new ones that we are prospecting. So we are very optimistic about the pace of growth that we have been presenting in pace for a long time. And at DX, we want -- we expect to accelerate growth compared to previous year. HAS indeed brought a sea of opportunities for us to approach different customers. The demand for this type of service is high because we are not creating only a new business. We are solving a real problem. Sometimes these companies have deficiencies that have nothing to do with financial services. You get a case like...

I'm sorry, Pedro, your answer was cut off for a second, if you could say it again.

Yes, I was saying in the case of DX, HAS is highly adherent to the reality of several companies and sectors, not necessarily the financial sector. So when you talk about documents of monitoring, for instance, telecom has a series of data that they handle in RP, CRM, call center that have to be added for you to actually have an action compared to that demand. So we see that the product is very much in tune with business reality, especially in the year of '25 with the concerns in terms of interest rates and inflation in Brazil. So helping companies reduce their costs, offering this type of product fits perfectly a time like this. So our expectation is that DX is already showing this in the end of last year, but I think it's going to accelerate for this year. In terms of challenges, the greatest challenge will be the operation in the U.S., completely new operation for the company, although we understand that technologically speaking, and in terms of product, we are very much well positioned compared to the competition, but it is a new market. So that's why we are watching out for the topic and making investments gradually to test the best directions for us to follow. So I think this is a topic that we are going to give you lots of visibility along the year. We are really convinced that this can be a very relevant market for us for the size of the industry, the technological advances that Brazil has compared to the U.S., but still, we have really to monitor how things evolve. And the last part of the question was M&A. Well, M&A is something that is always active in the company in terms of looking into market options. We are a company that traditionally focuses on organic growth more than acquisitions. but we do have an active agenda in monitoring opportunities. What are the assets and technology that can complement CSU well in terms of plans. So transformational M&A, this is not really what we look into. We think more about complementing our current capacities. This is what interests us most. Now the real possibility of happening, that's very hard to say. It is -- M&A is binary. Sometimes it happens, sometimes it doesn't happen. You have happen M&A. So it's very hard to predict. We continue to prioritize organic growth. This is, I think, the main message, but we are always actively seeking possibilities, especially in the American market, which may be a shortcut to accelerate growth. But again, it has to be addressed very carefully when projecting results for the future.

Our next question comes from Carlos Herrera once again. I'm sorry. The question was answered already. Our next question comes from Malek Zein.

Congratulations on results. Could you give us some more color on the pipeline of HAS contracts? The 7 new contracts should generate how much revenues for '25? And what do you expect to close in '25 to start invoicing in '26?

I'll try and answer your question. But again, we do not have an official guidance. So I'm not going to be able to give you a precise number. But thank you, Malek. It's a pleasure to have you here. When we talk about deployment of current contracts, Today, we have 3 contracts deployed and other 4 that were either deployed in the end of the year, so 0 contribution to '24 or that were deployed in '25. So we have the growth of DX continuously. We expect an increase in revenues despite the seasonality. Remember that the first quarter is seasonally worse for us. The fourth quarter tends to be better. But still, we expect a continuous growth for this company because lots of contracts are being deployed. Commercially speaking, I'm not going to give you a [ fine ] answer, but when you think of the funnel of segments that Bruno showed gives us a good color on where we are focusing our efforts. What I think the main message with regards to pipeline is the following. We'll always prioritize companies with high volume in terms of transactions. HAS is really boosted when you have a large amount of transactions and data to explore. We start generating learning -- machine learning for it to enhance processes. But the more volume, the more precise and the more efficient. So all industries that have a high customer base and a high volume of transactions are our target. So basically, and roughly speaking, of course, there are others, but roughly speaking, we are talking about telecoms, utilities, retail, insurance, finance, and we prioritize these segments. Is it okay? So this is where we are going to prioritize our efforts. HAS in general, brings with it a drop in volume. So this is important to say you're not starting a new operation. It gets the volume of operation and brings to us. So it has a huge potential of bringing important compound growth for the future. So I would say DX may grow as much as pace along time from now on.

Our next question comes from Carlos Herrera.

Any possibility to review your payout and make it higher? Today, our payout is about 50% of profit and it is a difficult question to answer as M&A. [Technical Difficulty]

Ladies and gentlemen, please wait while we reconnect our speakers. Ladies and gentlemen, please wait while we reconnect our speakers. Once again, please wait a minute. We are just reconnecting our speaker. You may go on now. We cannot hear. Your mic is on mute.

Can you hear me now?

Yes, we can hear you loud and clear.

Okay. So I'm sorry, can you repeat the question because I got lost here. I'm sorry.

Any possibility of increasing the payout? This is a question from Carlos Herrera from Condor Insider.

Well, payout is very similar to the M&A question. The definition of how the capital structure is established depends on the growth of the company and even in terms of profitability, cash generation, how growth is composed. And obviously, if I have an M&A, for instance, I eventually have to hold a payout. If we do not have a very relevant investment. As the results continue, we may increase the payout. But that depends so much on the pace of growth that -- or the pace of investments, I'm sorry, that we expect to have in the coming years.

[Operator Instructions] Our next question comes from [ Suzak Vento, ] an individual investor.

Given the size of the American market, what are your prospects of growth after launch?

Well, the American market, as I mentioned, has a different breakdown compared to the Brazilian market. And why is that? Basically, you're talking about 12,000 institutions that are our target for our solutions. Think of banks, unions, our solutions with pace. And it is also a concentrated market. But because it is 15x greater than the Brazilian market, when you look at the long tail of this market and you think of 25% of this market broken down in hundreds of tens of thousands of institutions. And this 20% is already 3x bigger than the Brazilian market. So our focus is to work with companies that are midsized, too smaller thinking of the American market. But these companies midsized down, when you think of Brazilian levels, these are companies that have a relevant size and results to our base. So again, we are not going to give you any guidance about how we are going to have the penetration of our base. But directionally speaking, I think it's important to give you this clarity. We are going to work at this segment and market share.

[Operator Instructions] Since there are no further questions, I'm going to turn the call back to Mr. Pedro Alvarenga for his closing remarks.

Well, everyone, I'd like to thank you very much for joining us. Having this possibility of sharing our results, our strategy is always very much important. And once again, we are very much committed in carrying on our investment plan, and we expect to bring good results to all of those that do invest in the company or intend to invest in the company. Have a good afternoon.

CSU's digital conference call is now closed. We thank you very much for joining us and wish you an excellent day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]