Locaweb Serviços de Internet S.A. (LWSA3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to LWSA's Q2 2026 Earnings Conference. Joining us today are CEO, Mr. Rafael Chamas; and CFO and IRO, Mr. Andre Kubota. For the Q&A session, we will also be joined by members of the company's senior management team. This event is being streamed via Zoom webinar with simultaneous interpretation into English and will be available for replay at ri.lwsa.tech. The slide deck for today's presentation can be downloaded from the results center under the Financial Information tab on the same website. All figures are stated in Brazilian reais and have been calculated in accordance with Brazilian accounting standards as defined by the Brazilian Accounting Pronouncements Committee. Before we begin, please note that any statements made during this presentation regarding LWSA's business prospects, operational and financial forecasts or future growth estimates are projections and as such, are based solely on management's current outlook for the business. This outlook is highly dependent on market conditions, the performance of the Brazilian economy, the industry and international markets and therefore, are subject to change without prior notice. Unless otherwise stated, all variations in rounded figures presented here have been calculated in thousands of Brazilian reais. This business performance presentation includes both accounting and non-accounting data such as organic and pro forma operating and financial results as well as projections based on management's expectations. The non-accounting data have not been reviewed by independent auditors. [Operator Instructions] I will now turn the conference over to Mr. Rafael Chamas, who will begin the presentation, followed by Mr. Andre Kubota. Mr. Chamas, please, you may proceed.

Good morning, everyone. Welcome to our Q2 2026 earnings conference. In the first slide, we have the executive summary, which I would say is one that shows the consistency of our earnings. As we've said, this is a company that has been growing at double digits. So we ended this quarter with 12.4% at BRL 276 million. And it's important to mention that our growth has been very much driven by the growth in subscriptions growing at 14% and also the customer base for several consecutive quarters. We have had an increase by close to 5,000 customers per quarter. So both subscriptions and the segment have grown and with also great cash increase over the quarter, which has been true for several quarters consecutively. And I think that we have very impressive figures to show this quarter. We have an adjusted margin of 27%, 6.4 percentage points versus the same quarter of last year. This is the widest margin and the highest EBITDA in the last few quarters. So 35% increase in our adjusted EBITDA quarter-over-quarter. We also ended the quarter with close to 28% commerce margin, an increase by 6.4 percentage points year-over-year and BRL 76 million in EBITDA, the highest in the last 24 quarters. And it's important to say that our EBITDA has been translated into cash. So this is another quarter where our cash generation has been very high, BRL 137 million in cash generated in the first half of the year, which versus the same half of last year represents an increase by 51% with a free cash flow margin of 18% in this half of the year. The operation in the last 12 months came to BRL 271 million with a yield of 15%, which is to say we've been able to make our growth to translate into a bottom line. Also very interestingly, our profit for the period was very interesting, 65.7 million in the quarter, which represents growth by nearly 50% year-over-year. And when we look at the first half of the year, we have an adjusted net income of BRL 119.7 million. So an increase year-over-year by 51%. So a lot of what we've been saying in several quarters is shown here, consistent growth by adding subscribers, efficiency and cash generation. So I think this is very consistent with what we've been saying every quarter. Moving over to the next slide, more details about our operations. Drivers in terms of our growth dynamics. So the ecosystem GMV BRL 20.3 billion, representing 15.2%. TPV, which is very important for our operation, went up 13%. So we ended the quarter with BRL 2.3 billion in operations. Our net operating value -- net operating revenue of BRL 375 million, up 8.2%. So as I mentioned, our commerce revenue at BRL 276 million, up 12.4%. Our subscription revenue up 14% at BRL 148.6 million and our platform subscribers, which is an indication of the health of our operations. And all of this shows that there's been no slowdown when it comes to our solutions. We ended the period with 215 -- close to 216,000 active subscribers in our operation, an increase by close to 9% year-over-year and a net addition of close to 5,000 customers. So it is a record-breaking quarter for us in terms of clients. And I talked about the margins with adjusted EBITDA up 35% and BRL 137.2 million in free cash flow after CapEx. And Andre Kubota will give you further details, but I'd like to spend the next slides talking a little bit more about our operations and most importantly, about AI. So moving forward to the next slide. In the last few quarters, we've talked a lot about how AI is no longer an isolated resource or functionality, but rather having become a layer of efficiency to our customers. And agent orchestration is something I would like to talk about in a more schematic way with regards to our outlook. We wanted to develop our operation knowing that we would have a very good asset, which means we had the data from our customers and multiple workflows with which we would be able to build an orchestration layer that would add a lot of efficiency to our customers via these agents. And that's what we're now starting to deliver in a structural way within our operations. This agent orchestrator is launched first in our operations for our larger commerce customers, which is Wake, but with a unique architecture, which is now being replicated to the entire group. This orchestrator coordinates a suite of specialized agents, each of them tackling a specific issue. And I'll be detailing each one of them in the next few slides. So moving over to the next page, I'll start with the catalog enrichment agent. This is a very important agent when we think about our customer sales because it operates from an SEO standpoint. And it improves both traditional search engines and LLMs, which are increasingly mediating purchase decisions for our end customers. So it connects product bases and enriches their catalogs adapting the profile for each merchant. And obviously, they have optimized communication for their end customers. So it's a way to drive sales for our customers and very significant working as an autonomous agent across our entire customer base. Moving over to the next slide, also about sales, but from a different perspective, which is communication in terms of segmentation and promotional strategy. So this is an agent that promotes a smart segmentation of the audience for all our customers. So we have a fully automated and integrated native operation, consolidating the history data, behavior data for users in the client's website. And the customers ultimately have a history that feeds into the audience segmentation, identifying audiences and opportunities, ultimately becoming a full-fledged orchestrator for the customer CRM, obviously, with actionable ways to -- providing opportunity. So we can fully optimize the way our merchants, our customers seek to increase their sales, speaking to their end clients in a very sophisticated way, leveraging AI to tackle this wide database that we have for them. Now moving forward, we show how we help our customers in a critical operational way. This is something we have been calling the health and operation agents, which manages orders. And ultimately, this is how it works because we have very important omnichannel operations, it's very common for a product to sell off in a brick-and-mortar store or in the commerce store or both at the same time, which ultimately creates a disruption and creates an issue in terms of the customer experience and ultimately affects the result because it can disrupt the sale itself. So this agent identifies bottlenecks and proposes automated decisions in terms of inventory counting. So it points out any divergence and provides a little bit wiggle room for the team, for the operating team to adjust their order processing. So it improves the customer experience, improves sales conversion capacity and helps you to monitor the operation at large. So this is an agent that works in several different contexts within the operation, especially taking into account the omnichannel experience of the customer. This is the last agent, which is also very interesting because it's specifically about money. So it deals with the logistics intelligence validation. And the last example, which is a very smart and interesting agent because, again, it injects money right into the veins of our customer. And this is a logistics intelligence and validation agent. And what this is about is the decision to deliver a product should not be made considering only distance, but rather looking into more efficient ways of thinking across distance and inventory and cost and freight profile and coverage and inventory. So sales should take into account not only one variable, which is distance, but rather working in a smarter way. And what this agent does is it thinks about which store or which distribution center should send the product to the end customer. So this provides better experience to the end customer, but also optimizes inventory management and logistics costs for our clients. And again, this is only possible because we have a very wide operations and data layer from our customers for them to make these decisions, which are not necessarily binary. It's not about what's closest or cheapest in terms of allocation. These are just a few examples that are already operating in practice for our customers, but it shows the power that LWSA has in leveraging the structured data from our customers in multiple critical ways, all of that connected by a single platform and shows the potential of what we can bring to our customers by leveraging AI. And still on the issue of our potential ways to serve our customers, I'd like to show a few concrete data with regards to the use of AI, especially when it comes to IPMS. I've shown a few of these data points before, but this shows how much AI has improved substantially our SME customers that shows the experience and their capacity to sell. So these are direct data points. So year-over-year, the average time to launch a store has dropped by 72%. So all of the capacities that we provide for our customers through our automation stores and the way they create the store and include their inventory has helped to reduce the time for them to make the store go live in 72%. And this shows how effective this has been. And not only have them been able to have a much more expedited e-commerce operation, but also helps them to sell faster. And year-over-year, the figure has increased 22% when it comes to the first sale -- starts with the first sale within 60 days. So the provision of tools with native integrated AI in the context of using our product has shown how successful and useful this has been ultimately for our customers. And ultimately, before turning over to our CFO, Andre Kubota, a very significant strategic move, which consolidates our ecosystem thesis, which is the strategic repositioning of Bling. Last week, we launched our Bling rebranding communication, which solidifies what we've been saying about our go-to-market and product strategy, which is to unify within a single journey, every component we deem significant and critical in the successful journey of an SME. So integrating via Bling, we provide the capacity for our customers to manage and sell through several different channels via their own virtual store within Bling. So we already have the context for the customer, their inventory. They already have a virtual store via a single click, so they're ready to sell. And not only that, but we also have all financial services fully integrated in the store. So it's a virtuous circle, financial management, sales and logistics management, including all of that capacity within that portfolio with solutions that we're offering in an integrated way to our SMEs through a single journey in a single product with a single purpose, which is much broader, which is a full-fledged business platform for our customers. And I'm confident that this is a very significant strategic movement because it enables our customer and sets them up for success because LTV propensity to marginal use and solutions reduces barriers and makes the experience a lot more seamless and successful. And I've talked about the importance of critical workflows and integrated data points. And this shows how we create a strategic moat that's very significant with multiple business layers fully integrated and orchestrated definitely providing a much better experience to customers. And not only that, but by repositioning Bling that way, we also enable Bling to expand its addressable market. So we now have product, operation and service dynamics to bigger clients than we used to serve before. So we're now tackling a different customer profile, which will substantially benefit within the context of e-commerce retail with a solution such as this one, consolidating our operations. And I always like to remind people that ultimately, for SME customers, these are things that cannot be separated, selling more and selling better and managing better. So they can better manage their own business and their multiple channels, their marketplaces, their social commerce, they can set up their own store, manage logistics, provide a fully integrated financial service and do all of that in a horizontal way, paying their taxes and issuing invoices, obviously, monetizing the entire flywheel. So this is it. Thank you very much. And I will now turn it over to our CFO, Andre Kubota.

Thank you, Rafa, and thank you to everyone who joined us for our Q2 earnings conference. So moving forward, talking about our net operating value, we see growth by 8% year-over-year to BRL 375.2 million with the commerce business contributing with an increase by 12.4% of BRL 276 million with a highlight to our subscription revenue, which has increased by 14%. Our BeOnline business is still slightly declining, a result of the optimization of our portfolio and capital allocation of products and services with greater profitability, which will become clear in the next slide. So moving forward, when we look at the adjusted EBITDA, we see substantial increase by 35.1% year-over-year, a record quarterly EBITDA and record margins as well at 27.3%, highlighting the commerce business, which grew by 46.5% with an EBITDA margin of 27.7%. The BeOnline business, as I said earlier, despite a slight decrease in revenue showed an increase by 10% year-over-year, reaching a 26.4% EBITDA margin. So we're working a lot in optimizing our portfolio, recycling our portfolio and allocating capital to more profitable and scalable products within the company. Moving over to the next page. Looking from a slightly longer time horizon perspective, in the last 12 months, we show the record-breaking figure, both in nominal terms and in terms of margin, we reached BRL 377 million in the last 12 months. It's also important to note that this is the highest nominal EBITDA -- adjusted EBITDA in the last 12 months that we've had in a very long time. In the last 12 months, our cash generation reached BRL 271 million, and that's after the investments we've made within the company. We're reinvesting in the company's growth and the margin versus our net revenue came to 18.3%, up 8 percentage points versus the margin we reported last year, which was 10%. From this cash generation, we distributed over nearly BRL 200 million in shareholder return in the last 12 months. This concludes our financial details, and we'll now move on to questions and answers.

[Operator Instructions] Our first question comes from Mr. Luis Chagas with XP.

Congratulations on your earnings. It's very interesting to see the company's great execution and evolution over time. I have 2 questions. The first, your EBITDA margin is still a major highlight. So I wanted to understand how you think of your trade-off between reinvesting and accelerating growth versus continuing to expand your margin in the next 6 months? And how do you see that path of growth in the next 12 months considering your level of growth? My second question, I found very interesting the way you mentioned the catalog agent because it seems to add a lot of value for customers as it provides better context. So how do you expect to increase sales conversions by using your catalog in general and in terms of the agents, how would you charge for them? And how would that affect your expected gross margin?

Luis, this is Andre Kubota speaking. Thank you for your questions. I will take your first question and then turn over to my colleagues to take your second part. Well, we agree with you about our margins. I think this has been a very significant highlight when we think about what the company has delivered. We have great reason for that margin growth. We've been working very hard and recurrently in improving cost efficiency without failing to invest in different business fronts that will provide gains for the future. So we are seeing productivity gains in using artificial intelligence, automation within our internal processes. This has been very strong when it comes to support, customer support. And also, we're seeing some outstanding synergy from our mergers and acquisitions. And maybe a third point that's becoming more and more significant is our strategy when it comes to capital allocation and focusing more on scalable products, which are more profitable for the company. So not only have we made structural moves when it comes to selling companies last year. But even within the company's portfolio, we might have one or other products that's more of a legacy product that provides different profitability. And we might either be discontinuing or reducing the share of those products. And our revenue in a few businesses has seen lower profitability. But looking forward, we are looking at very interesting margins. We operate in a market that's growing significantly still, and we're often talking about or looking at these trade-offs between investing in growth, but we're always trying to reinvest to continue to grow. So this is a little bit of what we -- what I would have to say to your first point, and then I'll turn it over to my colleagues to answer your second.

Luis, this is Ale speaking from Wake. And it's interesting to have a very solid perspective in the use of AI, especially within Wake. And I think Willians can talk a little bit about that later because the application on his side might be a bit different. When it comes to the agent orchestrator, we're using it in a very strategic way. First of all, because in addition to having an optimized catalog, we have several other agents, which will not only improve conversion, but also make our customers' operations easier on their everyday lives. We have an agent for auditing. We have an agent that can create promotional sales in a more effective way. We also launched something called Audiences, which is an integrated CDP within the platform, which could move or customize the website via AI agents. And this army of agents is coordinated by this orchestrator, which we've just launched. So our perspective is this is a very important thing because it will not only provide or allow these multiple agents that the team is developing to be used by merchants, but also allow them to create their own agents. And this ecosystem will also be able to create agents so that this orchestrator can manage both the external and internal agents for the customer. This creates a universe of new possibilities for customers. And the way to monetize that is obviously by providing token packets or suites of tokens. So we will be talking about the best -- the better he can execute the task, the more we'll be able to monetize the use of these agents. In parallel to that, when an external agent from the ecosystem or by the client can operate within the platform, the use of the platform's computing power will also be charged for. So by providing these very mature and complex operation use, we also can make the platform even more reliable and even better.

Our next question comes from Mr. Lucca Brendim with Bank of America.

I have two. First of all, I wanted to follow up on the issue of margins, which has really been the highlight in the last few quarters. I wanted to understand whether the level that you've reached in the last quarter might be seen as the basis for the future or if there's been anything that was one-off that moved the level up? And thinking long term, how much room do you see for your margins to grow? Or how far could it be thinking of a longer horizon? Do you think of a cap? Or what would your target be for the future? And my second question is about BeOnline. You guys have made several adjustments to your portfolio. You're trying to remove these less profitable products. But when we think about the optimized portfolio, how is the business growing with the optimized portfolio? And how would you see BeOnline growing with this new streamlined portfolio?

Lucca, this is Andre Kubota again. I'll talk a little bit about our margin, and then I'll turn it over to my colleagues to address your second question. With regards to our margins, we have no formal guidance as to a figure we're looking for in the future. But for some time, we've been sharing with you that historically, our margin has been close to 27%, including in the commerce business. And we believe it might take some time longer for us to reach that. But with everything that's going on and all the efficiency gains we've had with automation and also scalability with the business as well as improvements in our support business, I think we might reach that level even faster than we thought. Also, the portfolio optimization is taking place at a very fast speed. But looking forward, we also believe that we have potential growth with a secular tendency for digitalization and great potential. So we'll continue to reinvest in the company. We do not foresee any additional growth vis-a-vis the current level. And I think this is sort of how we see this margin trade-off looking ahead. And I'll now turn over to Higor, who will talk a little bit about BeOnline and take your second question.

Lucca, thank you for your question. With regards to BeOnline, this is something that you've mentioned and something we've been saying for some time about our operation, which is taking place in a mature market. When we go back to strategy, BeOnline is located in this mature market. So we have Locaweb, which is an operation that dates back to 20 years ago. And obviously, several of our products carry this history and have carried some of this customer base, which is now being refreshed, as Kubota mentioned. And in some cases, when the product is showing indicators in terms of customer base and profitability below or falling short of what was expected, we are now being very careful to migrate this customer base and making it more profitable. This is ongoing, and there's still much of the process that we have to go through moving forward. But to your point, when we split the portfolio in two thinking about new products, which we have either launched more recently or we believe to be the future of BeOnline. And we split that from the older products, products marked by these more mature characteristics or which belong to a more mature market, these are products where we have made an effort to invest in them or this is where our strategy will work. These are growing significantly or in -- at a pace that we see as very consistent with our global peers. So we've been very fortunate with our new portfolio. But as you can see, there's still some work in terms of monetizing this operation that we will continue to perform moving forward. And this is work that has been bearing very great fruit. This is something we've been doing without hurting the company's ability to reinvest, meaning we are seeing profitability gains. And at the same time, we're making that happen. We are refreshing the portfolio. So our intention is to do that without hurting the company's indicators and without jeopardizing what we understand to be a healthy operation and a healthy customer base, and we price for quality and for serving these clients really well, especially when it comes to essential services and our digital footprint and cloud and infrastructure. So this is something that we have to do very carefully because everything we do has a huge impact on Brazil's Internet. So we're very aware of that, and we'll be executing our plan very carefully.

Our next question comes from Mr. Leonardo Cintra with Itaú BBA.

Congratulations on your very strong results. I wanted to understand the -- what you have in mind when it comes to enterprise, SMB and GMV in this quarter. We saw that SMBs have moved much of their sales inventory to marketplaces, and there was more traffic in enterprises. I wanted to understand how do you expect that to evolve moving forward? And also, I wanted to talk about the cloud business. Last quarter, you had just moved out of your soft launch. So if you could talk a little bit about how the strategy and your road map has moved forward, how it has scaled when it comes to client use, it will be very interesting to hear.

Thank you. Rafael. And it's interesting that your question addresses precisely our strategic positioning. When you think of SMBs, obviously, they struggle a lot more to sell with a lot more limitations. So having a product that adds multiple functionalities, allowing customers to sell via multiple channels, leveraging their options to survive is very interesting. So we have moved our ecosystem to evolve within this logic of a full-fledged platform, business platform. And we see that, that's very important for customers. It increases their probability for success and survival. There's also something implicit in your question, which is monetization is not exactly the same. In B2C, our ability to -- our ability for profitability gains obviously moves from transactional services to payments, but there are 2 things which are very important. This is independent of the client's success, but we're also creating monetization layers that will benefit from this dynamic that we have no control over. Obviously, you see channels sort of fighting amongst one another, which is something that eludes our control, but we are directly -- we directly benefit from the monetization of that. What I mean is our -- the pricing of our packets have variable dynamics embedded into them when it comes to sales performance. So regardless of where the sale takes place in the near term, we are gaining from that. And this also enables us to offer new types of products. We're talking about the evolution of financial services, and we're now testing a few credit products. And as this ecosystem moves forward, our potential to continue to offer services and to grow also increases. So for SMBs, regardless of that, we see that it's become more and more essential to work in highly complex environments. And this is where Wake's positioning becomes clear. This is an operation that we launched 3 years ago. And we're now seeing that indicators have been -- by indicators that have been very successful. We now have a widely recognized platform and very powerful, and we've been able to bring in clients that are improving their sales and conversion rates and also integrating their omnichannel strategy. These are customers that highly benefit from the fact that we are a solution with a full-fledged and fully integrated solution in a single system, a single product. So I will now turn it over to Higor.