El Puerto de Liverpool, S.A.B. de C.V. (LIVEPOLC1) Earnings Call Transcript & Summary

Good morning. My name is Daniela, and I will be your conference operator. [Operator Instructions] This is Liverpool's Fourth Quarter 2021 Conference Call. There will be a question-and-answer session after the speakers' opening remarks, and instructions will be given at that time. Today, we have with us Mr. Enrique Guijosa, Chief Financial Officer, El Puerto de Liverpool; Mr. Jose Antonio Diego, Treasury and Investor Relations Director; and Mr. Enrique Grinan, Investor Relations Officer. They will be discussing the company's performance as per the earnings release for the fourth quarter 2021 issued this week. If you did not receive the report, please contact Liverpool's IR department, and they will e-mail it to you. Please note that this call is for investors and analysts only, and questions from the media will not be taken nor should the call be reported on. Any forward-looking statements made during this conference call are based on information that is currently available. They are subject to risks and uncertainties that could cause the actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer in the earnings release for guidance on this matter. I will now turn the call over to Mr. Enrique Guijosa.

Thank you very much. Good morning to everyone, and thanks for joining us, and welcome to Liverpool's Q4 2021 Conference Call. Once again, I sincerely hope that you and your loved ones are healthy and doing well. I will be providing some perspective on the overall company results initially regarding our Q4 and then quickly covering the full year. Afterwards, and as usual, we will open the session for Q&A. Overall, 2021 was a year of continued transformation for Liverpool, and we are in great financial shape. Our accomplishments in the fourth quarter span across key variables such as revenue, margins and cash generation. We also delivered solid results in the digital channel and in logistics. It is worth noting that in many fronts, we are already at or above our prepandemic levels. Importantly, throughout the fourth quarter, all our stores and shopping centers were open and operating with few nonmaterial restrictions. Conversely, the base period was strongly affected by the closure of our stores and shopping centers in the central part of the country, including Mexico City, just a week before Christmas. As mentioned, during this quarter, we obtained solid results and moved ahead on all our strategic initiatives. Retail revenue increased 20.3% when compared to Q4 2020, and we remain encouraged by the indication of a positive impact for our business as customers return to some degree of normality. Same-store sales for Liverpool posted a 17.5% increase, while Suburbia reached 35.1%. We're very excited about our same-store results as we continue to strengthen against competition. For reference, the permanent stores in ANTAD reported an average of 16.1% increase, well below both the Liverpool and the Suburbia numbers. Due to the efforts of our commercial group, our fourth quarter also reflects a solid inventory management, which allow us to reduce rebates and discounts and, at the same time, a significant increase in the soft lines share. As a result, retail margin was 32.7%, a sound 510 basis points compared to a year ago. For perspective, commercial margin was 10 basis points above 2019. Revenues in our shopping center business increased 22.4%, and it looks like we reached the bottom of our occupancy rate in the third quarter as we closed the year at 91.1%, 30 basis points above a year ago. Our credit business also reflects positive performance with a 1.3% revenue increase. Credit accounts grew 6.3% to reach almost 6.1 million at the end of the year. The measures that we put in place to control risk continue delivering excellent results as the delinquency rate was a record low 2.2%. We have not seen such a low number since all the way back to 2004. As we had anticipated, the provision for bad deb during the quarter reached an inflection point, posting a total of MXN 1.3 billion, almost 2x above a year ago. Importantly, we closed the year with conservative coverage ratios as the impact of the new COVID variant on collections was difficult to determine. Our bad debt reserve coverage at the end of the quarter was 11.3% of our gross portfolio and 5.7x our 90-plus days overdue balance. Operating expenses for the fourth quarter, excluding bad debt provision and depreciation, were 20% above a year ago. The fourth quarter includes the effect of one-off expenses related to the provision for the closure of our Huehuetoca distribution center for MXN 210 million as well as noncomparable effects in personnel expenses related to the executive compensation, specifically our performance bonus and the employee statutory profit sharing. The combined effect of all these effects [ explained by ] more than 60% of the increase that we observed in our OpEx. Our EBITDA for the quarter was MXN 10.3 billion. This is 42% over a year ago. And our EBITDA margin was 18.4%, a 100 basis points increase versus year ago. Should we exclude the above-mentioned one-off and noncomparable effects, our EBITDA margin would have reached 20.3%, 480 basis points above 2020 and just 120 basis points below 2019. Cash flow from operations in the fourth quarter was very strong at MXN 16.8 billion, more than 40% above both 2020 and 2019. This reflects the strong operating performance, sound inventory control, the normalization of our accounts payable to suppliers and lower advanced payments of income tax. Our cash balance as of December 31 was MXN 32.5 billion, and given that our gross debt closed the year at MXN 30.5 billion, we posted a negative net debt-to-EBITDA ratio of 0.08. Turning to our omnichannel experience. Our digital channel delivered strong results amid a strong comparison basis in Q4 2020. Although GMV for the quarter was basically flat versus a year ago, it was 2.4x above 2019. Our digital share was 21.3%, 2x above 2019. As you all know, marketplace is one of our key growth initiatives, and we grew 36% during the quarter and more than 7x compared to 2019. Our sellers and SKUs basically doubled year-on-year, and Suburbia line sales grew almost 3.6x compared to 2019. The Liverpool Pocket user base increased almost 1% in the quarter, and just during the month of December, new digital customers increased 28%. Another one of our strategic initiatives is faster deliveries. During the quarter, we released new online product offerings on the back of our real-time inventory availability at our [ store ]. Our flash option allows our customers to see the inventory that is available at the store they choose and collect the merchandise within 2 hours on the Click & Collect modules, or have it delivered to their homes within 24 hours. Same-day and next-day delivery increased 85% versus 2020. Furthermore, we continue to leverage one of our key competitive advantages, this is our store network, and the share of our direct deliveries from stores increased 2.6x during the year. Our average delivery time in December was 40% below a year ago. Importantly, we've seen a gradual but sustained recovery in Click & Collect, reflecting the return of customers to our stores. We ended the quarter at 38% with an average fulfillment rate of just 2 hours. Our delivery commitments for the year was achieved on 94% of all orders, a 4 percentage point improvement over the previous year. Another exciting news on the technology front, the first phase of our new transportation management system, which we call TMS, was put into operation, and we started the modernization of our critical backbone order management system, or OMS. Also, a new version of the warehouse and store procurement platform for the picking, packing and shipping processes was put in production. We opened a new Suburbia store at Mundo E in the metro area of Mexico City and moved the Suburbia Plaza del Sol to the space which was formerly occupied by Liverpool at this same shopping center, which is owned by the company. I will now briefly talk about 2021 full year results. Although revenue increased almost 30.8% compared to 2020 and 4.7% compared to 2019, retail revenue shows an increase of 30.5% and 7.4% when compared to 2020 and 2019, respectively. Retail margin improved 420 basis points to reach 31.3%, albeit still 50 basis points below 2019. EBITDA for the year was MXN 23.9 billion, in line with 2019 and 2.7x higher than 2020. EBITDA margin was 15.8%, 70 basis points below 2019. Excluding the above-mentioned onetime and comparable effects, [indiscernible] have been 16.5% which is basically at the prepandemic levels of 2019. Moving to capital expenditures. We invested almost MXN 6 billion. Of this amount, 36% corresponds to expansion, 14% to remodeling projects and 50% to logistics and information technology. The development of PLAN, which, as you know, is our Arco Norte logistics platform, continues right on schedule and is set to start operations for big-ticket processes in the first half of 2022. In fact, I'm happy to report that we started to move merchandise to this new facility on February 14. Investment in PLAN during 2021 was MXN 1.8 billion, and this brings our cumulative CapEx in this important project to MXN 4.4 billion. The dividend of MXN 1.50 per share or a little bit more than MXN 2 billion, which was approved in last year's shareholders' meeting, was paid in 2 installments of equal amounts, the first one back on October 29 and the second one just a few days ago on January 28. Well, that's it in terms of our performance over 2021. Let me share with you now what I see as the key challenges that we are expecting in 2022. The first one has to do with the economic growth for the country, which, as you know, is now expected at only 2.1% and, unfortunately, has been going down every time it has been updated. The second one has to do with inflation. As you know, inflation in Mexico was 7.4% in 2021, and we will probably close this year at 4.5%. This will certainly erode the purchasing power of our customers while, at the same time, exerting pressure on our cost of goods sold and our operating expenses. The next one has to do with potential supply chain disruptions. We have already seen some stock-outs in several categories, the exporting shoes and sports apparel, although they have been nonmaterial. We are confident that we will be able to navigate this environment during the year, but this is certainly something to follow up closely. Next one, we need to recover the productivity of our credit portfolio. A conservative approach to risk management was the right thing to do throughout the pandemic, and as I said above, we closed 2021 at a record low level. We now need to strike the right balance between risk management and interest income. Finally, let me share with you our 2022 guidance for our most important KPIs. Regarding same-store sales, it is important to recall that the first 45 days of 2021 were significantly affected by store closures in the central part of Mexico, so the base period for the first quarter will be relatively easy. We expect same-store sales for the first quarter of 25% for Liverpool and 33% for Suburbia. For the balance of the year, that is for -- from April to December, we expect same-store sales for Liverpool in the 5% to 5.5% range and, in the case of Suburbia, in the 8% to 8.5% range. In our credit business, we expect to close the year with an NPL of 3.0% and a full year bad debt provision in our P&L of MXN 1.45 billion. This will be 22% below a year ago. In spite of the challenging environment that we will face in terms of retail margin and operating expenses due to inflation pressures, we expect to keep our EBITDA margin basically flat at 15.8%. CapEx is expected to be at MXN 10 billion, and once again, logistics and technology will account for close to 50% of the total investment. Finally, in terms of store openings, we're planning to open 2 new Liverpool stores. One of them is our first store in Tijuana, which is the last big metro area in Mexico where we don't have any presence; and another one in the metro area of Mexico City. In the case of Suburbia, we expect to open 15 new stores. Thank you once again for your trust in our company as we continue to serve our customers everywhere, every day and life long. Let me now move to your questions. Thank you very much.

[Operator Instructions] Our first question comes from Vanessa Quiroga.

Congrats on the results. I have a few questions. The first one would be about the update on the logistics strategy. What percentage of total CapEx have you already disbursed in the development of the new distribution center backbone that you are developing? And then also, if you could provide an expectation of when Liverpool will be able to provide a specific arrival date, delivery date for each product sold online. And I guess your expectation for Click & Collect going forward as you continue building on your logistics strategy.

Yes. Thank you, Vanessa. Well, in terms of our Arco Norte project, we invested MXN 1.8 billion during 2021, and this brings the cumulative total spending in this strategic project to a total of MXN 4.4 billion. For 2022, we expect that more or less MXN 3 billion of the total investments of MXN 10 billion that I just mentioned in our prepared remarks will be allocated to these projects. So this will then bring the total cumulative investment to basically close to MXN 7.5 billion by the end of 2022. As I said, we start to -- we have already started to move merchandise basically for the Williams-Sonoma brands to Arco Norte. Things have been going smoothly, and we will move in the next phase of the project to complete the full movement from the Huehuetoca to Arco Norte by the end of the first semester. In terms of your second question and when we will be able to offer a specific date of arrival, I think that this will still take some time. I think that we will continue to play with -- to offer our customers ranges, but we have been working very hard to reduce the range. It used to be that we have a range which was very open. Basically between the minimum and the maximum, we could have all the way up to 10 days, and we have been trying to shorten that lead time in order to be more assertive in terms of our arrival dates. And finally, on your Click & Collect question. As I said, we are very encouraged by the fact that with the return of our customers to our stores, the Click & Collect has been gaining ground. In December, specifically, it was at 38%. So hopefully, we are assuming that as things go back to normality, hopefully, we don't face any new store closures, then we will see high 30s or even a low 40s in terms of the Click & Collect.

That's great. No, that's great, Enrique. And I guess on your e-commerce numbers, you have been at around 20% penetration for the last 3 quarters, and your target is 35%, if I remember correctly. Do you expect 2022 to see an acceleration and getting closer to the medium-term target?

Yes. Absolutely. I mean we have very aggressive targets for our GMV -- digital GMV in 2022. We have, as you know, an internal objective of growing it close to 40%. And this, as you know, depending on what you assume for the physical stores, but this should get our digital share close to the 28.5%, 29% share, so that we're close on our way to the 35% that we shared with you in the Investor Day. So yes, we are assuming that we would move the needle significantly in terms of the digital share in 2022.

Our next question comes from Andrew Ruben.

Andrew Ruben from Morgan Stanley. I thought the guidance was extremely helpful. Just to dig in a bit on margin. You mentioned some of the headwinds that you expect. Can you talk about some of the offsetting factors that give you conviction in the flat guidance?

Yes. Well, I think that, Andrew, the first one obviously has to do with delivery -- delivering our top line objectives. You see how the same-store sales targets I just shared with you, they translate to retail revenue growth, total growth of around 11%. So that will give us an important, let's say, shield in order to accommodate the pressures that we're seeing at the gross margin and the operating expense front. So again, that would be critical in order to gain the leverage that we need to offset the headwinds that we said. At the same time, as I said in the prepared remarks, we have, especially in terms of personnel expenses in 2021, we exceeded our initial objectives. We, as you know, had agreed with our Board by a lot significantly. So the performance bonus that we will pay in 2021 will be on the high side. Usually, we paid like 1.3 months on average of performance bonus. But this year, because basically, all our business units exceeded significantly their objectives, we're going to pay close to 3.3 months. So that's very good news for our executives. But for next year, we are already setting with -- like [ they disagree ] that we have more aggressive objective for 2022, and this, I think, will allow us to bring the performance bonus back to the normal levels of 1.3 months. It will also give us some relief to offset some of the cost pressures that we're expecting. And I guess that the only thing I would add is that as we like are negotiating store supplies and packaging costs, and we are doing our best in order to try to offset the inflation or cost increase pressures by challenging our specifications and see we can gain also some ground on -- to offset the inflation.

Our next question comes from Luis Willard.

Hope you're all right. Just a quick one on capital allocation. I mean the cash flow has been outstanding this year and last, so basically left you with some resources ahead to deploy. So how do you -- what do you describe as your capital allocation priorities in the next 3 years? And if any -- if your perspective has changed in this regard. That will be the first, and I have a little follow-up after.

Yes, Luis. Thank you. Well, not really. I mean the [ percentage ] we have in terms of deploying our capital is to continue investing in our CapEx in the MXN 10 billion to MXN 11 billion range for this year and probably the next 2. And again, the lion's share of this total investment, close to 50%, will be devoted to strengthening our logistics network and our technology projects. So you should expect again to see that same trend that we have seen basically in the past 12 to 18 months. So that should, again, probably take like MXN 30 billion the next -- this year and the next 2 in terms of capital investments. In terms of dividends, we still don't have a specific amount. We will have the shareholders' meeting in March 10. But it will probably be around MXN 2.3 billion. That's what we are expecting, but again, it has to be still voted in the shareholders' meeting. So that should give also some flavor of what we are expecting in terms of paying dividends. Other than that, we -- in terms of working capital, inventory and trade payables should continue to basically offset each other, but hopefully, our credit card portfolio will grow very close to our retail revenue target. So that will require probably around MXN 4 billion to MXN 5 billion year-on-year, which, again, will take some cash. So that's basically -- as you can see, it's basically the same thing that we have announced. We don't expect any major revision. We don't have any M&A plans, although we, as usual, are open to any options that may appear, but we are not pursuing anything specifically at this point in time.

Correct, Enrique. And if I may have a follow-up on the Q&A -- on the e-commerce side. I mean you've talked about this to the -- your remarks in the Q&A. But especially about the 24-hour delivery promise, if I'm not mistaken, you said it grew 85% versus 2020. So I wanted to ask, first, if you had any idea that you could share with us of what kind of penetration does this option have within your overall delivery, excluding Click & Collect? And the second is, how are you preparing, I mean, Liverpool and your capabilities of distribution if this option continues to increase in demand from your consumers or trends?

Yes. Well, we have seen, I mean, a very receptive customer to this option. That's obviously very important, and we've seen that the customer is getting familiarized with this. Flash, you have to choose the flash option in order to make sure that the SKUs you see displayed to you are the ones that are available at the store that you chose when you decide to go for the flash option. So again, I say that the acceptance from our customers has been high. I think that overall, the penetration of this 24 is still low, I would say it's probably around 10%, but well what we have before. And I'm sure that we will share more perspective on this front when we have our Investor Day in early May.

Our next question comes from Rodrigo Echagaray.

Rodrigo here from Scotiabank. Congrats on the results. Just maybe if you can please share some color on your online sales. How important is 3P within the GMV? Where do you think that will be in, perhaps, a couple of years? And maybe perhaps shed some color on what kind of sellers or categories have you been mostly focused on the marketplace. That's my first question.

I believe you are on mute.

Sorry. Thank you. Yes. Thanks, Rodrigo. Regarding your question on 3P, which generally we call the marketplace, as I said in the prepared remarks, we observed in Q4 a year-over-year growth of 36%. And if you compare it on a 2-year stack, basically, it was 7x above what we had in 2019. So we continue to see a very significant growth of that option. If you see for the full year, we ended 3P with a growth of 52%. It basically accounted for almost 14% of what we sell in our e-com channels, and so it's gaining a lot of ground. For this year, we have a very challenging objective of basically doubling the GMV that we achieved in 2021. So that's same strategy. It's a very important growth strategy and explains a big part of the 40% target that we have for 2022 for GMV growth. We expect to continue growing our sellers this year. We also are placing very tall objectives, growing our sellers by 71% this year, growing our SKUs by 89%. So all in all, this will continue to be a key focus area for the company, no doubt about it.

Got it. And if I understand correctly, the way you calculate the penetration of online sales is by including the commissions of those 3P sales, and then you divide that by the entire GMV, correct?

Yes. That's correct. The way we calculate the digital share is basically we take the sales that we do with 1P, both on the digital channel. And also, we also consider our digital sales, the sales at our ordinary stores. Through the app, obviously, used are not available in the sales figure. So that's what we call extended catalog. So the fact that we can offer those SKUs, again, that are not present in the sales to our customers and sell them in the stores is because we have the extended catalog in the iPads in the hands of our sales associates. So that's also part of the -- what we call digital sales. And then you're right, we also take into account the take rate for the marketplace business. And the denominator is basically the 1P sales of the total company and the addition of all the commissions that we get paid.

Our next question comes from [ Camila Acevedo ] from UBS.

This is [ Camila Acevedo ] from UBS. My question is regarding your logistics network and last mile. So what percentage of your orders are shipped directly from your stores? And what is your target for 2022?

Yes. Thank you, Camila. Well, the share that we have of the orders that are shipped directly from the stores, in Q4, it was around 15%, well above the 5%, 6%, 7% of where we started to use this option. We -- as you can imagine, this is one of our key competitive advantages, to leverage store network. We are planning for this year to be in the 20% to 25% range. That again is very, very aggressive, but we think that we can get there.

Our next question comes from Rahi Parikh from Barclays.

This is Rahi Parikh filling in for Ben Theurer from Barclays. Just one quick question. In terms of your transportation management system and OMS, should we expect a ramp-up for some months? Or are these already fully operational?

Yes. Thank you. Well, TMS, basically, we have a couple of phases. We already launched the first one. The first phase has to do with the transportation that we do from our distribution centers to the store network. So that's what we call the first leg of our supply network. So that's already up and running. And the second phase, which has to do with moving the merchandise from the stores to our home deliveries or transfers that will be operational by Q3 this year. In terms of the order management, that we have several phases. We started with Suburbia, which really didn't have any OMS in the past. So that went live by the end of 2021. The next phase will be in Q2, and we have another couple of phases throughout the year. So it will be a phase-by-phase approach.

Our next question comes from Joaquin Ley from Itau.

I have 2 questions and then a clarification, if I may. First, in addition to the Arco Norte project, if I understood correctly, you have also the project of developing, if I remember correctly, about 7 distribution centers, either building them or modernizing the ones you had. So if you could provide us, please, with an update on where are you in that project, okay? And the second, it's regarding the -- your loan book. I'm trying to reconcile the idea of 17% growth in the loan book with a 1% increase in revenue. I know there's always a lag between you building the loan book and then the revenues kicking in. But I'm curious to know what's -- how the proportion of noninterest-bearing loans has evolved, please.

Sure. Thank you, Joaquin. Well, regarding your first question, yes, you're completely right. Besides the Arco Norte project, another important strategic initiative in our logistics is the development of these fulfillment centers. We're still not sure about the total number of them and probably will be 5 to 7 nationwide. And you're right, the idea is basically not to build. It's really -- we lease these distribution centers. So idea basically probably to expand them and modernize them with automation equipment. Our plans are to start the first 2 this year in Q3, the first one in Guadalajara and the second one in Monterrey. As you know, those are big metro areas besides Mexico City. So this will be an important start of this very important leg in improving our supply network. And the second question regarding the loan book and the mismatch, as you're saying, between the growth of our loan book and our revenues. You're completely right. I mean we're seeing a big gap. I first would like to point out that the loan book review take a gross loan book and not the net. And the net, you're right, it grew 17% year-on-year, but if you see our gross, it grew only, and I would say "only," 10%. So I think that 10% is the figure that you have to take into account to see what's a real mismatch between the loan book growth and the revenues, but still, 10% and 1% is a big gap. 9 percentage points is a lot of money. And it is basically explained by the fact that we prioritize risk management, and we put a lot of tight controls in order to keep our NPLs at the lowest level possible, given the uncertainty. We, as you may imagine -- a lot of these borderline customers that were not very good payers, they were excellent in terms of revenue generation. So they paid a little bit late. They recently bought with interest. And so they were not good payers, but again, they were the key customers for the financial services business unit. As we started to tighten the notes in terms of risk management, a lot of these customers where we basically -- they're not customers anymore. They were write-off. So we're not giving additional loans to them. So basically, what has happened is that we ended up with a big chunk of very good customers in terms of what they pay on time, but they're not very good in terms of generating interest. So in fact, what we call [ totaleros ], which are people that know that pay the full balance that they -- when they have to, they don't take any rate, we have seen them all the way up to 40%, 45%, which is like 10, 15 percentage points what we normally saw before. So that's why I said the challenge that we have for this year is that we need to strike the right balance between being a little bit more open in terms of risk management, not being as cautious as we were. I think that we have, thank God, like better visibility and regain some of the lost ground in terms of productivity for our portfolio. We have already several initiatives in place. We are starting to open, for example, the option of taking cash out of the ATMs was very much closed for the pandemic. We are, little by little, reopening them for our good customers, and we're starting to rework our loan balances to be more aggressive in terms of increasing the lines and several initiatives as such.

Okay. That's great color, Enrique. And just a quick follow-up. When you mentioned that as of fourth quarter '21, 15% of the orders were being shipped from stores, it doesn't mean that the remaining 85% is being shipped from the distribution centers, but most of that from all of the stores, and then there's a transfer, right?

Yes. Absolutely. I mean you see more or less the tie for home deliveries, more or less 8% to 10% comes out of our central distribution, and the other, basically, 90%, 92%, comes out of the stores. The thing is that only 15% go from our store directly to the home, and the other one goes from the store to our consolidation center and then from there to the home.

We have a follow-up question from Vanessa Quiroga.

Yes. So you provided guidance of 5.5% growth in same-store sales for 2022, if I'm not mistaken. So my question is if that includes the increase in e-commerce that you are guiding. And then just a clarification, when you mentioned that you want to double GMV in 2022, you are referring to only 3P or to your total GMV?

Yes, Vanessa. The second question, when I mentioned that we're planning to double our GMV in 2022, I'm talking about 3P, our marketplace. Total GMV should grow 40%. So the second one. On your first question in terms of same-store sales, yes, the same-store sales guidance that I shared includes digital. So it's all in. And what I said is that Q1 is going to be like a very easy comparison. So we will see 25% for Liverpool and 33% for Suburbia, both things are going to get tougher in terms of comparing for the balance of the year. So we're expecting, from April to December, 5% to 5.5% in Liverpool and 8% to 8.5% in the case of Suburbia. So that's -- and again, the same-store figures include digital.

That's great. That's great. That helps a lot. And just an update on your digital financial solutions, everything that you plan to offer in terms of digital and e-wallet and all that evolution and increased offers for your clients. Can you provide an update, please?

Sure. Thank you. Well, in terms of the ecosystem for financial services, we're getting ready basically to launch our digital credit card. We have already launched, as you know, the option of applying for a credit card digitally, and in fact, it's now bigger in terms of our unit in credit than any of our stores, which is already the #1 channel for us, and this has been performing very well. But once we give you the green light in terms of authorizing a credit card, you do still have to go for the plastic credit card to the stores to start buying. So we are working very hard in order to be able to grant you the credit digitally and providing you the option of buying right away in our digital channels without having to go to the store to pick up your card. We think that, that will be an excellent option in terms of, originally, a bigger number of credit accounts, and that should be ready sometime in Q2. So we are just a few weeks from launching that. The other thing that we're working very hard as we speak, and I hope that by the Investor Day, we will give you more specific details, is that we're also working very hard on the next things that we wanted to launch, which is basically a vehicle to kind of a debit card. We're also working hard on that. While you don't have any specifics to announce at this point in time, but we are making progress. So again, I hope that in early May, in Investor Day, we will finally be able to give you specifics on that.

And a follow-up on that because I'm not sure about this. Do you provide free installments for -- as part of the services of the Liverpool credit card?

Free installments, you mean monthly promotions without interest?

Yes. Exactly.

Yes. I mean, usually, around 2/3 of what we invoice with our own credit cards are tied to months without interest promotions. That hasn't changed, really. I mean it has been pretty stable year in and year out.

Yes. But only for promotions. It's not a permanent service, correct?

No. You're right. I mean it's not permanent, only for promotional activities.

Yes. No, I was wondering, Enrique, because now with buy now, pay later offer that some fintechs are offering, I was wondering if you are planning to do something similar as the installments but on a more permanent basis. So just -- was just a question.

Yes. Well, that's -- buy now, pay later is a big question mark for us. I mean we -- I mean once we are interested, it's an important promotion for us. A lot of customers take that advantage. So for the customers, I really don't see any advantage on the buy now, pay later. Probably the only upside is on the debit cards. People that don't have a credit card can use the debit card for buy now, pay later. But as we speak, we are taking a look at that, but we don't have any specifics.

We have time for one more question today from Andres Ortiz.

It's Andres Ortiz from BTG Pactual. I would like to ask about the performance of the provisions that you had this quarter, particularly considering that NPLs were at the North side of [ 18 years ] low, right? So what proved that, particularly looking at growth in the loan book of 16.8%? It's -- I just want to understand if it's -- we'll continue to see these levels going forward or should be more indicative for the next year.

Yes. Thank you, Andres. No, I think we believe that we have already hit rock bottom in terms of NPLs. As I said, we want to be cautiously more open to take additional risk, and little by, it's going to be a gradual thing. And we expect that the NPL will finish 2022 at 3.0%. So we will see an increase of 80 basis points versus the 2.2% where we ended 2021. But we believe that being more relaxed in terms of our credit policies is required in order to strike, again, as I said before, a very balance with between the productivity of the portfolio and the NPLs. It used to be -- if you see our trends in the past several years, we were frankly comfortable at the NPLs at 4.4%. So 2% is certainly -- 2.2% is very, very low, and again, I think that, that was the right thing to do, given the certainty due to the pandemic. But now we -- given the very healthy position that we have, we have some room to be more aggressive on our approach.

That concludes our question-and-answer session. I would now like to hand the call back over to Enrique Guijosa for some closing remarks.

Well, that's it. Thank you. Thank you for your attention. Thank you for your questions, and we will send you the invitation for the next Investor Day in the next few weeks so you can block your agendas, and we are happy to give you a very broad update on our key strategies and our objectives. Thank you very much. Have a good day.

That concludes today's call. You may now disconnect.