Infracommerce CXaaS S.A. (IFCM3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the presentation of Infracommerce's financial results for the fourth quarter of 2024. Good morning. We would like to welcome everyone. [Operator Instructions]. My name is Bruno Vasques, CFO and IRO. I will lead this earnings release conference call together with the Global CEO, Mariano Oriozabala. Before we move on, I would like to point out that both this material, which will guide our conversation as well as the audited financial statements are already available in our Investor Relations website. Both this presentation and the management statements may contain forward-looking information based on reasonable and current assumptions. However, it is important to note that such statements are not guarantee of future events. Many factors such as risks and uncertainties could cause the forward-looking circumstances and events discussed herein not to occur. And as a result, the company's future could materially differ from those expressed or suggested in these forward-looking statements. Finally, we recommend that the indicators explored here should not be analyzed in isolation. To do so, please consult the full financial statements stored in our Investor Relations website. Today's agenda includes the presentation of consolidated operating results and broken down by macro region. The equalization of the capital structure and net debt and the restructuring plan recently amended and disclosed to the market. At the end, Mariano will share with us his vision for our business model and strategic priorities for the year of 2025. We start by covering the consolidated financial results. In line with previous disclosures, we measured this in this presentation, the operating performance by the following method: accounting EBITDA deducted from rental expenses, CapEx, both technological and structure CapEx and adding expenses with anticipation of receivables booked as financial expenses, thus neutralizing in this indicator revenues from anticipations originally recorded as revenues. Finally, we exclude the effects of impairment write-off without cash effect. We believe that in this way, the accounting EBITDA with these reflections in our understanding demonstrates more accurately and transparently the way the operating profitability already reinvested. So all calculations are detailed and can be directly reconciled with the financial statements. That said, we highlight the positive operating result in Q4, which in addition to representing an important milestone demonstrates focus and excellence in the execution of this restructuring plan, resizing organization and logistic structure, optimizing systems, processes and capturing efficiency gains and synergies between operations and geographic areas. Equally important, we grew 45% in revenue, excluding anticipations in the quarter, still reflected in the process of reviewing our customer base in Brazil. We executed Black Friday with excellence, strengthening the relationship with recurring customer base, paving the way for building more -- even more ambitious business plans for 2025. When we look at the operation in Brazil, we emphasize the improvement in the operational financial performance in the last quarter, capturing albeit as at an early stage, the economic gains from the ongoing optimizations. We highlight that the operating result of BRL 21 million includes provisions for the demobilization expenses amounting to BRL 13 million. Equally important, it's worth noting that we reduced 54% of our leased area for storage and no savings derived from this action are reflected in the numbers of Q4 due to contract delivery deadlines after notification. The remaining area is sufficient to meet the needs of our current customers, allow their growth and enable the capture of new customers in future periods. In operations in other countries in Latin America, we report significant annual growth of 82%, driven by Ecomsur M&A concluded in the second quarter, impacts of inflation, exchange rate variation and organic growth. So we grew 20% year-on-year. Thinking in terms of profitability, the year was marked by the challenge of integrating the acquisition. Management has implemented an agenda to optimize expenses and structures in Q3 and the benefits of integrated operations now more efficient are already materialized in the results of Q4. The consolidated net income for the year is impacted by the impairment expenses booked and already disclosed in Q2. The variation in financial expenses resulting from lower expenses with anticipation of BRL 81 million that are booked in this item. The significant reduction in CapEx shows the management's vision of strictly necessary and profitable investments in line with the transformation agenda. The new amount of investments is consistent with our positioning of providing innovative digital solutions with value recognized by customers and brands. In the cash flow analysis in Q4, it is clear that the deepening of the transformation agenda with a focus on providing full commerce solutions in a sustainable and profitable way already demonstrates positive initial operating results that will be enhanced as this agenda advances. Liquidity analysis is basically linked to the ongoing liability structuring plan. Net debt plus M&A payables totaled at the end of the period, BRL 667 million. Excluding the cash balance of BRL 128 million, we get to the gross debt of BRL 795 million. It's important to emphasize that of this total, BRL 720 million or 91% is object of the restructuring plan contemplating the later capitalization of the balances. Upon completion of this important step, the company will address in a significant and long-lasting way its capital structure. Now we are dealing with the update of the debt restructuring plan. According to a financial material fact disclosed on March 28, the company and its main creditors signed an amendment to the binding agreement disclosed in the material fact on October 7, 2024, unlike previously provided for in the segregation of operations with the payment of New Retail quota's LatAm operation. As part of the partial payment of debt, now the new agreement signed provides for the maintenance of the combined operations below the holding company, Infracommerce CXaaS direct and indirectly. Over the past few months, creditors have followed the success in executing the transformation agenda of the operation in Brazil. After understandings and conversations, we decided that the ongoing transformation plan once completed, will result in profitable and cash-generating operation in a sustainable way. Additionally, it became evident that the combined operations, Brazil and other countries in addition to bringing synergies and scalability positions Infracommerce as the main player capable of providing integrated digital solution for major brands in our region. In this manner, the new agreement provides for the issuance of mandatorily convertible debentures issued in 2 series; the first series estimated at BRL 740 million based on the calculation of the net debt on the date of its payment will be subscribed by Newco with Banks' credits; the second series estimated at BRL 105 million will be paid by the minority shareholders of New Retail who hold 16.4% of the company's shares. As a result, Infracommerce will have reduced by 91% of its liabilities and will hold 100% of New Retail shares. It's important to note that the company's management has made every effort to renegotiate and restructure its main debts continuously and diligently analyzing the most appropriate structure for the reorganization of its financial standing in the best interest of the company. Now I would like to give the floor to our CEO, who's going to share with us his strategic vision for 2024.

Good morning, everyone. Thank you very much, Bruno. Now let's talk a little bit about 2025. Our focus will be on consolidating the business model in all areas of operation with a complete integration of the units and capture of operational synergies that we have already started. The company will intensify its presence and performance in strategic markets. In the core businesses, we will advance even more with high-value digital solutions, combining technology, AI, performance marketing and integrated logistics. As the leading independent e-commerce service provider in Latin America, we offer end-to-end solutions that collect the entire digital journey from marketing to delivery with performance, scalability and focus on value creation. We are implementing artificial intelligence to predict demand, optimize operations, customize journeys and increase the value perceived by customers and boosting efficiency and profitability and the brands. Infracommerce reaffirms its commitment to transparency, disciplined execution and delivery of consistent results. The turnaround is underway with impacts already visible. We will continue to be the strategic partner of choice for major brands that want to accelerate their digital presence in Latin America. Thank you.

Thank you very much, Mariano. Now we are going to open for questions and answers that will be answered here in the order we receive them.

We have a first question from [ Marcelo Jilasec ]. Congratulations on your results. Could you please talk about the combination of businesses and what about the financial expenses with creditor banks? Marcelo, thank you so much for your question. This is Bruno answering your question. And as we said in our presentation, the New Retail and Infracommerce Brazil operations will remain consolidated just as they are today because of the operational and strategic synergies. Financial expenses of the convertible debentures are part of our financial instruments, and they will be mandatorily convertible. So from now on, as it is in the release of the last quarter, approximately 90% to 95% of the financial expenses reported in our financials will have no cash effect and will be capitalized and will comprise the debt balance, which along with the principal will be immediately convertible.

Now combining some similar questions about the grouping, I would like to give the floor to Bruno to provide an update about the clustering of the company's shares.

Thank you again for the questions. As reported to the market, the company has been notified by B3 to go on with the combination. And so we should do that until June 30 and explained to B3 and made public this need is based on the completion of the debt restructuring plan. It is underway and documents are amended in the market. So we believe that the current deadline is sufficient for us to go over this step and to move on with the clustering as reported. We have a question from [ Daniel Marcato ]. Can you give us an idea of the total shares that are going to be issued as part of this plan? Well, Daniel, what we can say is what we have already reported to the market in terms of the value of convertible debentures into series totaling BRL 845 million and another public information related to your question according to the capital authorized in shareholders' meeting totaling BRL 1.3 billion. We have a question from [ Leandro Batista ]. Could you give us more details about the negotiations with the post office? Thank you so much, Leandro. The policy of the company is not to talk about the commercial relationships with no customer individually, except when the size of the contract is significant for interpretation of the company's numbers. So we don't know material facts that have been disclosed to the market is related to Correios, the Brazilian postal office. So the Brazilian post office hired us to develop its e-commerce platform, and this is for the Brazilian postal service is a transformational project to modernize the entity to us, it's an honor and a pleasure to be part of the project. And what we have already agreed and clarified to the market is that we will develop the technological solution that will support the development of the marketplace as the project moves on and if it is necessary, we are going to disclose new information to the public.

If there are no more questions, I give the floor back to Bruno for his closing remarks.

Thank you so much, everyone, for attending this conference call, for following us up. We reaffirm our commitment to full transparency and keeping the market well informed along the trajectory of transformation of Infracommerce. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]