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

Good morning. Welcome to Time For Fun's Third Quarter 2023 Earnings Call. The Investor Relations team will be available to answer questions about the results reported here during the presentation for the set 2 of this video conference.

Good morning, everyone, and welcome to the Time For Fun presentation of results of third quarter of 2023. In this quarter, we premiered the Musical The Lion King in partnership with Disney, the longest running Broadway Musical that has been Supreme over 25 years, garnering critical and acclaimed by loyal audience during its new run in Brazil after a decade. We are wrapping up the final preparation for the delivery of the Brazilian addition of Primavera Sound, the largest festival in Europe, reinforcing our strategy to expand our festival portfolio with relevant brands, emphasizing sustainability and inclusion and deliver an excellent experience. This year's addition features The Cure, The Killers, Pet Shop Boys, Beck and others such as Hives, Carly Rae Jepsen and Marisa Monte. With this impressive lineup, the outcome couldn't be different. We have had excellent support from big audience and partners. Additionally, we have announced the expansion on our beloved Turá Festival, which will be held for the first time in Porto Alegre on November 18 and 19, featuring Caetano Veloso, Emicida and some other attractions. Lastly, we have successfully concluded the sales absolutely sold out of the 6 shows from Taylor Swift, The Eras Tour. A worldwide success, the singer will perform 3 shows in Sao Paulo and 3 shows in Rio de Janeiro in November. With that, we concluded third quarter of 2023 with an EBITDA of BRL 14.5 million, with 24% margin, making 8 points better than the previous year. Regarding the company's cash position, we closed the quarter with a gross cash balance of BRL 172 million after fully prepaid the BRL 63 million of our debenture and short-term debts. After the Diego's explanation, our Director of Investor Relations, regarding the financial and operational results of the period, I will return to discuss the upcoming events.

Thank you very much, Serafim. In this quarter, we promoted 91 events for which we sold 154,000 tickets compared to 103,000 tickets sold for 105 events in the third quarter of 2022 as can be seen in Slide 5. This means a 49% increase in the number of tickets sold even with a 13% less events being promoted. These 91 events consisted of the Marvel Avengers S.T.A.T.I.O.N and of the musical The Lion King, which premiered in July. In the same period of 2022, the 105 promoted events, including of the Warner Bros [indiscernible] exhibition and 53 sessions of the musical, The Addams Family, in addition to 5 indoor shows and 2 days of the Turá Festival. The accumulated 9 months of this year, we promoted 24% more events than the same period of 2022, 268 against 216. This increase also means a 21% increase in the total number of tickets sold between the 2 years. Net revenue for the third quarter of 2023 was 12% higher than that recorded in the third quarter of 2022. This increase is concentrated in the event promotion line with a 78% year-over-year increase highlighting revenue in Family and Theater Events with The Lion King. This increase was offset by a slight 6% decrease in ticketing, food and beverage and venues operation as well as a 27% decrease in sponsorships. This drop in sponsorships is due to the calendar difference in the promotion of the Turá Festival in Sao Paulo, which in 2022 occurred in July being recognized in the third quarter, and this year, we hold it in June, still in the last quarter. In the 9-month accumulated view, we see a 28% growth in net revenue distributed across all segments. Event promotion grew 9%, while ticketing, food and beverage and venues operations grew 32% and sponsorships 78%. Moving on to Slide 6. We see a gross profit of BRL 28.7 million in this quarter with a gross margin of 48%, which means a 31% increase compared to the same period of 2022 with BRL 21.9 million and a gross margin of 41%. This expansion of 7 percentage points in gross margin is due to the revenue mix with greater volume of family and theater events, which historically present better margins than the live music ones. Also in this slide, we see a 24% increase in SG&A in the third quarter of 2023. The total SG&A was BRL 11.9 million versus BRL 9.6 million in the same period of 2022 year-to-date. However, we see a 3% reduction in normal terms under absorbing inflation, driven by the company's continuous focus on cost control, as we have highlighted in previous periods. In other revenues and expenses, we recorded about BRL 1.5 million negative in the third quarter of 2023 against about BRL 4.9 million negative in the same quarter of 2022. The increase this quarter is due to the recognition in the line of other results of investments of BRL 4.2 million related to the variable portion in the acquisition of the ticketing company, which reflects the results of this business unit above the projected at the same -- at the time of its acquisition in 2020. Now going to Slide 7, we see that the EBITDA for the third quarter of 2023 was BRL 14.5 million, a growth of 62% compared to the EBITDA of BRL 9 million in the same period last year. The recurring EBITDA of BRL 15.8 million in the third quarter of 2023 compared to the same period of 2022, which totaled BRL 13.1 million. In both periods, we have adjustments related to agreements, legal decisions and provisions for contingencies recognized in other operational expenses. Additionally, in this quarter, we adjusted the aforementioned BRL 4.2 million related to the INTI acquisition. This quarterly growth reflected in the accumulated without the first 9 months of the year, the results topped that of the same period of 2022 by 70%, being BRL 63.7 million against BRL 37.6 million. In the recurring EBITDA, the exclusions are essentially the same as the quarterly view. Thus, the increase from the third quarter of this year against the same period last year is 34%, going from BRL 51.6 million to EUR 69.3 million. On Slide 8, we demonstrate the financial results, negative at BRL 9.2 million in the third quarter of this year, which is 23% better than the BRL 12 million, also negative, recorded in the same period of 2022. Of this result, approximately BRL 600,000 negative refers to the difference between financial revenues and expenses, mainly composed of the difference between interest on financial investments and the payment of interest on loans in the same period of 2022. This relationship was slightly positive at BRL 0.5 million. Its variation is due to the fact that in the third quarter of 2023, we had 3 lines of [ Fluence ] contracted the debentures and 2 short-term lines all settled within the period. Additionally, we have effects that do not directly affect cash in the lines of exchange monetary and hyperinflationary variation. The exchange variation recorded in the period was positive at BRL 1.7 million, with appreciation of the dollar in the period by 4%, reflecting in the value of the foreign currency holdings maintained for payments of international artists as well as the financing of operations abroad. Furthermore, the monetary and hyperinflationary variations added together were negative at BRL 10.3 million against BRL 13 million, also negative, in the same period of 2020, a result of the constant inflationary process in Argentina. Moving on to Slide 9, we have the net result. In the third quarter of 2023, we recorded a net profit of about BRL 3.7 million, compared to a net loss of BRL 8.8 million in the same period last year. This improvement is due to the accumulation of the factors described earlier, mainly the higher margin generated by the contents promoted in the period, combined with the company's focus on containing costs and expenses. In the year-to-date, we reported a net profit of BRL 33.9 million, an improvement of more than 400% compared to the BRL 6.5 million recorded last year. As for the cash balance shown on Slide 10 of the presentation, we ended the quarter with gross cash balance of BRL 172.5 million and net cash balance of BRL 156 million. The difference between these 2 indicators is made up solely by lease liabilities since we closed this quarter with OpEx as we settled our debentures in August as well as the other loans lines during the month of September. In the same period of 2022, we had a gross cash balance of BRL 232.6 million while net cash balance recorded was BRL 115.5 million. On Slide 11, we detailed the cash flow. This quarter, we generated BRL 42.5 million, while the third quarter of 2022, the generation was BRL 15.5 million. The effects were in operating cash flow generation of BRL 170.7 million this quarter with the receipt of amounts relating to tickets sold for Taylor Swift's concerts and the musical The Lion King. Cash flow from investments is mainly of management software and evolution of the INTI ticket platform plus investments in modernizing Renault Theater and improving its surroundings for the musical The Lion King. The total, however, was positive due to an adjustment of around BRL 4 million between the operational and investment cash flows. As a result of paying off the short- and long-term financing lines we held, we increased the consumption in financing cash flow from BRL 1 million in the third quarter of last year to BRL 133.9 million this quarter. Finally, there was a positive exchange rate variation of BRL 0.3 million. Thank you all for your attention. Now Serafim will conclude with the presentation of our pipeline.

Thank you, Diego. As I mentioned earlier, we will continue to expand our festival platform, both with licensed brands like Primavera Sound and proprietary brands. In that regard, we are thrilled to kick off our first edition of Turá Festival in Porto Alegre. The first already well established in Sao Paulo is now beginning its geography expansion in the capital of [indiscernible] , bringing Taylor Swift The Eras Tour to Brazil, where more than 300,000 people will be able to experience it in November, fuel us a pride and demonstrate how committed we are to our purpose of bringing people together through exciting experience to celebrate life. Due to immense success in terms of both audience and critical acclaim, The Lion King musical will continue to run at the Tier 2 [indiscernible] for the new season, reaching an even larger audience than during the first time in Brazil. Reaffirming our commitment to inclusion and sustainability. In this quarter alone, we donate over 1,700 tickets to The Lion King musical to NGOs and ensured that all shows include sign language interpretation and [indiscernible] description. Our festivals achieved 100% carbon neutrality with a human approach, which is strongly in force with our partners and suppliers. This year, we recycled over 53 tons of waste and obtained zero waste certification at the last Turá Festival held in July in Sao Paulo. Lastly, we continue to invest in our company digital transformation by innovating tickets acquisition and event execution. We are also implementing efficient management tools to further enhance the experience of our audience and business partners. Thank you very much for your attention. I wish you all a great Tuesday.

Announcement of results complete. Thank you for your participation. The Investor Relations team remain available to enter any questions regarding this presentation, the videoconference had or later via e-mail. You can now disconnect your lines. Thank you very much.