T4F Entretenimento S.A. (SHOW3) Earnings Call Transcript & Summary

Good morning. Welcome to the Second Quarter 2023 Results Presentation of Time For Fun. The Investor Relations team will be available to answer questions about the reported results during the presentation for the set 2 of this video conference.

Good morning, everyone. Welcome to the results presentation of the second quarter 2023 of Time For Fun. This is a very significant period in our history as we begin the succession process of our founder, Fernando Alterio, who is one of the greatest symbols of Brazil live entertainment industry. For years, Fernando has been the heart and soul of Time For Fun. Fernando was a pioneer in promoting shows of top artists, festivals and Broadway musicals and he modernized the sector turning Time For Fun into the synonymous of expertise, quality and success. The succession process has been planned since the pandemic period, of which the Alterio family remains actively involved. Francesca, who has been with the company over 6 years now will become the Director of Strategy and Innovation, while Fernando will continue to contribute as the Chairman of the Board. In addition, we had significant announcements during this period, including the successful tour of Taylor Swift in Brazil, as well as taking the promotion of the Brazilian addition of Primavera Sound, the largest festival in Europe. This reinforced the company's strategy of expanding its portfolio with relevant festival brands focused on sustainability and inclusion, and delivering excellent experience. With all these news, we conclude the quarter with BRL 22 million EBITDA, a growth of 134% compared to the second quarter last year. Net profit also increased 89%, reaching BRL 16.3 million. During the quarter, we hosted the second edition of Turá Festival in São Paulo. And also, we performed the concert by the French singer, ZAZ, in April. In the Family and Theater category, we conclude the Anastasia musical season and start to sell The Lion King musical. This is the second season of the musical in Brazil, a decade after the first edition also produced by Time For Fun. It remains the most successful musical in the history, have never gone off stage. Additionally, in May, we launched the immersive experience of Marvel Avengers S.T.A.T.I.O.N., an official exhibition where the audience can learn more about the secrets behind the franchise film. After Diego, our Director of Investor Relations, explain about the financial and operational results for the second quarter, I will come back and provide more information about the upcoming events.

Thank you very much, Seraphim. In this quarter, we organized 87 events for which we sold 82,000 tickets compared to 85 events held in the second quarter of 2022 with the sale of 92,000 tickets, as can be seen on Slide 5. Out of these 87 events, few were live music ones, including 2 days of the Turá Festival and 1 concert by ZAZ in São Paulo. These events sold a total of 20,000 tickets compared to 34,000 tickets sold in the same period last year, when we promoted the Brazilian tour of McFly. In Family and Theater segment, we had 34 sessions of the musical, Anastasia, and 50 sessions of the Marvel Avengers S.T.A.T.I.O.N. immersive experience. These events sold 22,000 and 40,000 tickets, respectively. This result led to 7% more tickets sold than the 58,000 tickets sold in the second quarter of 2022 for 76 performance of the musical, The Addams Family. In the accumulated total of the first 6 months of this year, we organized 59% more events than in the first half of 2022, totaling 177 events compared to 111. This increase also led to a 13% increase in the total number of tickets sold. The net revenue for the second quarter of 2023 was 15% higher when compared to the second quarter of 2022. In Box Office, Food & Beverage and Venues Operations, the increase was 40%, primarily due to the higher number of events and the service fee revenue from the ticket sales of Taylor Swift's shows. Additionally, sponsorship revenue increased by 319% compared to the second quarter of 2022. This increase was mainly driven by sponsorships for Turá Festival, which took place in June this year. While in 2022, the event was held in July, impacting third-party revenue. On the other hand, the Event Promotion segment decreased by 70% compared to the second quarter of 2022. As aforementioned, last year, we promoted 5 concerts of McFly's Brazilian tour in addition to other rescheduled [ live ] shows from before the pandemic. Looking at the year-to-date period, the growth in net revenue was 32%, distributed across all segments. Event Promotion grew by 2%, while Box Office, Food & Beverage and Venues Operations grew by 54% and sponsorships by 98%. This improved revenue is primarily a result of a strong first quarter in the Event Promotion segment, combined with positive results from the other revenue lines in the second quarter of this year. Moving on to Slide 6. We see a gross profit of BRL 32.3 million in the second quarter of 2023, a 45% increase compared to the same period of 2022, which was BRL 22.3 million. This increase is due to the revenue mix with a higher presentation of ticket sales, which have more favorable margins than Event Promotion. On this slide, we also observed a 34% reduction in SG&A in the second quarter of 2023. The total SG&A was BRL 7.6 million compared to BRL 11.4 million in the second quarter of 2022. For the year-to-date period, the reduction was 15% compared to the same period of the previous year. This reduction reflects the company's focus on cost control, as previously highlighted in early periods. In Other income and expenses, we recorded negative BRL 3.9 million in the second quarter of 2023 compared to negative BRL 3.1 million in the second quarter of 2022. In both cases, the majority of this value is primarily composed of provisions for contingencies. Moving to Slide 7. We see that the EBITDA for the second quarter of 2023 was BRL 22 million, a 134% increase compared to the EBITDA of BRL 9.4 million in the same period of previous year. The recurring EBITDA of BRL 26.1 million in the second quarter of 2023 represents a 116% growth compared to the second quarter of 2022, which totaled BRL 12.1 million. In both periods, the adjustments refer to agreements, current decisions and provisions for contingencies recognized under other operational expenses. This growth was reflected in the year-to-date EBITDA. The first half of 2023 grew by 72% compared to the EBITDA of the same period in 2022, totaling BRL 49.2 million and BRL 28.6 million, respectively. In terms of recurring EBITDA, the increase for the second quarter of this year compared to the same period of the previous one is 51%, rising from BRL 35.5 million to BRL 53.5 million. On Slide 8, we detailed the financial result, which was negative by BRL 5.5 million in the second quarter of 2023, reversing the positive result of BRL 1.3 million recorded in the same period of 2022. Out of this result, approximately negative BRL 2.7 million are related to the difference between financial income and expenses, mainly composed of interest on debentures as well as ex installments, partially offset by investment income. In the same period of 2022, this relationship was also negative at BRL 3.6 million, and its improvement is primarily a result of lower interest on debentures, neutral amortization of installments during the period. Additionally, there are noncash effects in the line of exchange monetary and hyperinflationary variation. The exchange rate variation recorded in the period was positive by BRL 3.2 million due to the appreciation of the Brazilian real against the American dollar at 5.1%, reflected in the value of updates to foreign [indiscernible] dominated loans with related parties, specifically that between our operations in Brazil and Chile. Previously, this variation was offset by the reverse effect on cash balances we held in dollar that were bigger than the current ones. Furthermore, the hyperinflationary variation was negative by BRL 4.4 million compared to negative BRL 3.6 million the same period of 2022 off our results of the Argentinian inflation, which increased from 20% to 29% between these quarters. Into Slide 9, we have the net profit. In the accounting view for the second quarter of 2023, we have BRL 16.3 million and BRL 16.7 million in the recurring view compared to BRL 8.6 million and BRL 30 million, respectively, after adjustments in the same period of 2022. The adjustments applied to net profits are due to the same reasons of those applied to EBITDA explained earlier. In the year-to-date view, net profit was BRL 30.2 million compared to BRL 15.3 million for the first 6 months of 2022, and BRL 31.8 million compared to BRL 22.4 million in the recurring view. Regarding the company's cash position, as shown on Slide 10 of the presentation, we ended the quarter for gross cash of BRL 137 million and net debt of BRL 18 million. In the same period of 2022, we had gross cash balance of BRL 100 million and BRL 85.4 million, and BRL 107 million and BRL 8.5 million the first quarter of 2023. This decrease from the first quarter of 2023 is mainly due to the payment of talent fees for Taylor Swift's performances. In June this year, we contracted loans under Law 4,131 [ from 1962 ] . These were short-term credit lines, mainly dedicated to the payment of Taylor Swift's talent fees, which temporarily increased our indebtedness, resulting in net debt in the period. However, we emphasize that as stated in the material fact, we redeemed all the debentures issued by the company on August 1, and we will also liquidate the other contracted financial lines within the third quarter of this year. Therefore, we will end the next quarter once again, with a net cash position, and we will seek financing lines according to the need for new projects. This way, we aim to operate in a quicker and more efficient financial structure, maximizing the relationship between revenue and financial expenses. When comparing with the same period of the previous year, when gross cash was BRL 217.1 million and net cash was BRL 103.6 million. The main reason for the variation was the amortization of 2 debenture installments in November 2022 and May 2023 totaling BRL 40 million in addition to Taylor Swift's talent fee payments, as explained earlier. On Slide 11, we provide details of the cash flow. In this quarter, we consumed BRL 45.8 million, while in first quarter of 2023 and second quarter of 2022, we consumed BRL 6.9 million and BRL 12 million, respectively. The effects were as follows: in the operating cash flow consumption of BRL 76.6 million in this quarter, mainly due to the payment of Taylor Swift's fees in addition to costs related to the events held during the period. The investment cash flow of BRL 4.6 million consists of negative BRL 3.5 million related to variable payments for the acquisition of INTI, combined with approximately BRL 400,000 related to management software and INTI's evolution in line with previous years. Reflecting the new short-term net lines, we reversed financial cash flow from consumption of BRL 28.5 million in the second quarter of 2022 to a generation of BRL 37.2 million in the second quarter of 2023. Finally, there was a negative exchange rate variation of BRL 1.8 million due to the depreciation of the Argentinian peso against the Brazilian real and the American dollar during the period, reflected in the company's foreign currency holdings and assets. Thank you all for your attention. Now Seraphim will conclude with the presentation of our pipeline.

Thank you, Diego. As I mentioned earlier, in November, we'll be hosting The Eras Tour concerts by Taylor Swift. As a global success, the singer initially planned for 3 shows: 2 in São Paulo, 1 in Rio. However, due to the overwhelming demand, she extended her stay in Brazil with additional 3 days, totaling 3 shows in São Paulo and 3 shows in Rio. In July, we opened the ticket sales and announced the lineups of the Primavera Sound São Paulo Edition, taking place December 2 and 3 at the Interlagos Autodrome. Headlines include The Cure, The Killers, Pet Shop Boys, Beck and some other heavyweight attractions like Grimes and Marisa Monte. We continue to expand our own festival platform, launching the first edition of Turá Festival in Porto Alegre. After establishing itself in São Paulo, the festival is expanding geographically on November 18 and 19 in the capital of Rio Grande do Sul. The Lion King premier on the 20th of last month and will continue the season until the end of next year. Due to strong public demand, the Marvel Avengers S.T.A.T.I.O.N. will continue at the Parque Villa-Lobos until the end of this year. I'm very excited about the moment that we are living in Time For Fun, and we remain committed to connecting fans to their idols through unique experience, delivering value to investors with high-quality content and operational efficiency. We also emphasize our pursuit of innovation, continuing the company's digital transformation to further enhance the audience experience. Thank you very much for your attention, and I wish you a wonderful Thursday.

The announcement of the results is concluded. Thank you for your participation. The Investor Relations team remains available to address any questions regarding this presentation in the chat of this videoconference, or later by e-mail. You may now disconnect your lines. Thank you very much.