Unifique Telecomunicações S.A. (FIQE3) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for waiting. Welcome to the earnings call for the third quarter of 2025 at Unifique Telecomunicações S.A. I want to highlight that should you need simultaneous translation, this tool is available on the platform. To access please select the interpretation button, located at the bottom part of the globe at the bottom part of the screen and choose your language of reference, Portuguese or English. For those listening to the earnings call in English, you have [indiscernible] the original audio option [indiscernible]. We would also like to let you know that this earnings call is being recorded and will be provided on the company's IR website, ir.unifique.com.br, where you can also find the full material of our earnings release. We can also download the presentation on the chat icon in English. [Operator Instructions] We also want to highlight the information in this presentation and possible statements during the earnings call related to business perspectives, projections and operational and financial targets at Unifique Telecomunicações S.A. represent beliefs and assumptions of the company's management as well as information that is currently available. Future statements do not guarantee performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, rely on circumstances that could or not occur. Investors must comprehend that general economic conditions, market conditions and other factors could affect the performance in the future at Unifique Telecomunicações S.A. and lead to results that differ materially from those listed in such considerations or future statements. Today, we have the presence of the company's executives, Fabiano Busnardo, the CEO; and Luiz Bogo Junior and Investor Relations Officer. I'll pass on the word to Mr. Luiz Bogo Junior.

Hi. Good afternoon, everyone. We are here once again gathered together for this earnings call for the third quarter of the company. And I want to thank you all for your presence during this event. And I also want to thank the shareholders for accompanying us. And today, we want to present the excellent results we've been disclosing yesterday. So today, we're going to cover the first slide. And I want to show you a bit of the highlights of the third quarter where -- we want to start off with profitability, talking about the adjusted EBITDA, which added up to over BRL 160 million and the growth of over 32% in regards to the same quarter last year. The EBITDA adjusted margin, as you can all see, reached 52.5%, leading to a growth of 2.3 percentage points compared to the previous quarter. And this reflects the ongoing operational efficiency gains and the strong discipline in cost management that we've been having here in the company. It's the second highlight we want to bring out to you about mobile phone, where we already registered over 211,000 accesses with an increase of almost 41,000 accesses in the quarter. And this movement with the increase in the base is really in line with our strategy where we want to increase our coverage and relevance of our brand in States where we operate. And the third point is we want to talk about leverage, financial leverage that we reached 0.61x. And that guarantees flexibility and security because we have a lot of investments to be made during the year, and that gives us the necessary comfort to see a horizon that's a little more clear even if we know that there's a real challenging environment from the moment where -- from the beginning of next year. So then we're going to talk about our churn. We were already having a pretty good rate in the last quarter when we disclosed that it was about 1.50%. Now we reached 1.42%. So this reduction of 0.08 percentage points in regards to the last quarter. And that reinforces that we have a really good control over our base where they demonstrate satisfaction and loyalty of these new customers. Now I'll move to the next slide, where we talk about operational performance of broadband. We ended this last quarter with over 3.7 million homes passed and over 824,000 homes connected. If you take a look at this ever since the third quarter of 2021, as you can see on the slide, there is growth of over 94% of the expansion of homes connected, considering both states, Rio Grande do Sul and Santa Catarina. And when we talk about the net organic growth, we had a growth of 7,219 accesses. And this result is really in line with our strategy that we have in the company. Yesterday, for example, in Rio Grande do Sul, we focused a lot more on qualification of the channels and for our customers and also in the reduction of delinquency and even more on the mitigation of the churn. But just to show you a little bit about this issue with the churn with the objective of keeping the standard of a low churn in the states we operate in, we implemented a team that's dedicated to managing this indicator with a focus on identifying causes and applying the corrective measures. Then the results are there. The average churn in the third quarter dropped to 1.42%, and it's the lowest rate we've ever had registered, and it's consolidated as the lowest churn in the telecom sector, not only for ISPs, but also considering our entire telecom sector. So now we're going to talk about the combo sales for mobile phones and broadband and contributing very relevantly to the reduction of the churn. In the end of the third quarter, 18.2% of the base of the company's broadband already had customers that also had mobile phone, and that reinforces our success and our strategy for convergence and loyalty among customers. Then another point on the market share. We can say we're really strengthening our leadership position in Santa Catarina. And with this percentage of share, this data is from Anatel. And so we have this number certified, and it's a number that's public in the -- on the website of Anatel. And I want to tell you these results are due to the work done to really expand our presence and our brand among our customers. So I can say Rio Grande do Sul is also really directing some significant efforts for growth. We have a 4.6% market share in that state. And we've been careful to work on this in a structured manner to expand this share and consolidate Unifique in the state of Rio Grande do Sul so that we can feel the quality and reliability of our services more and more as we've structured here in Santa Catarina. Can we move on to the next slide now? Great. So we're going to talk about 5G. And then after Fabiano will talk about this a little more. But I wanted to say that in our mobile segment, we ended with 211,000 accesses and this increase of 41,183 new customers in the quarter really make the revenue of the operation grow exponentially. And so these are all results that prove our assertiveness and our precision and expansion of our infrastructure. Of course, this also helps the customer base become greater and greater. So for comparison purposes, in December 2024 and our own coverage of the mobile operation was present in 11 cities. Now here, you can see in the end of the third quarter of 2025, the number already had gone up to 91 cities with 16 Santa Catarina and 31 in cities in Rio Grande do Sul. I'm going to say that this is a really relevant expansion considering the short period we've been operating, and that helps us reach a population of approximately 3 million people with our own network. So for purposes of information from the 91 cities with mobile coverage, 66 are part of the 5G auction obligation. So we anticipated these obligations will start off in 2026. And until the end of 2026, we would have this movement of about 30% of the total coverage. And so we've already anticipated this 66 units, but 25 cities of these already have over 30,000 inhabitants. So that means that we would have to reinforce our commitment as a company, expanding our performance in areas with greater population density because then at the same time, we can have more returns on investments that we're applying through 5G. And so I'd tell you here that on this slide that one important highlight is that from the 211,000 mobile accesses that we registered in the quarter, 53.8% are from lines that come from other operators. And this is really important data because it provides evidence on the trust customers have towards the quality of our service that we already provide with fixed broadband. And we know that this market, fixed and mobile is really competitive, right? But that brings a lot of tranquility knowing that our quality is really seen by our customers when they think about this mobile product. So another relevant point I want to mention also is that in line with what we've already seen is 81% of mobile sales have been performed in a combo with broadband. So that means that our portfolio when it's integrated, provides more efficiency to our commercial strategy. Then on the next slide, we're going to talk about our services a bit. And we'll be presenting the gross revenue graph. And what I want to highlight here is the advance in mobile phone in the composition of this pizza. In this quarter, we reached 5.2%. And if we were to compare with the previous quarter, it was at 4.1%. So just to show you, mobile fixed phone services were up 4.3% and now they're at 4%. So that means that mobile phones have already gone over fixed phone services in revenue in the composition of the company's -- the company's revenue. Besides the traditional telecom services, we also continue to expand our portfolio with some solutions that go beyond connectivity. And one of them is Unifique Energia, as you've already mentioned at the other event. So then other services that we have, I'll talk about new business, new tickets, et cetera, and they represent 2.4% of the revenue, providing more evidence to our strategy of diversifying our products. And then to be able to highlight this here, I want to show you that actually all of these services have our main deliverable as a basis, right, which is quality [indiscernible] and through fiber or even mobile 5G. Let's move on to financial performance now. Over here, you can see a bit of our third quarter in '25. We disclosed that yesterday. So our gross profit reached over BRL 367 million, and that represents a growth of approximately 4.4% in regards to the previous quarter. This performance, I can say, it was especially levered by the sale of these products with mobile phone plus broadband, and these were the ones that were most acquired by customers. Then we can also say that there was a significant growth where we reached a bit more than BRL 160 million with an advance of BRL 11.4 million in regards to the second quarter. Now here, it's an important point to show you, which is this result reflects a bit of the work that was done in the last call, as I mentioned, in some events also with the shareholders that highlights that efficiency and control for operational costs. And we had -- we're actually in the middle of this function here to reduce costs and expenses in the company. And we already had that under control, but we started to look at that carefully. And this is being translated into numbers month after month in the company here. But of course, there's a tax issue that helped a bit with this growth as well. Now about the EBITDA, we're going to talk about the pure EBITDA, not the adjusted EBITDA. And as we mentioned, this was almost BRL 156 million with an increase of 8.5% in regards to the second quarter of '25 and the EBITDA margin was almost 51%. And that demonstrates that we were able to keep the profitability even with the advances in some operations that are relevant in the company for our mobile operation today. And so I go back to mentioning that this margin level here is only possible, thanks to the rigorous expense control that we've been working on here in the company. And we've also been working strongly on controlling our budget. So all of the management teams have been really controlling this budget. And we've been redirecting these resources to prior projects, as we mentioned previously, as the expansion of the mobile network. So if you were to see ever since we went to market in the third quarter, we had an EBITDA margin that was kept with a very good consistent stability. And so when we look at the net income in the quarter, it was almost BRL 65 million, and we have been very careful to guarantee consistent value creation for all shareholders. Of course, this increase of 43.4% that's on the screen is also considering the JCP payment that we performed. But now let's move on to the next slide here, where we talk about our debt level. In line with what we've already disclosed yesterday, we have a net income -- net debt of BRL 241 million, and we also have a leverage of 0.61x the EBITDA and in this quarter, right? So that already reduced a bit in regards to the previous position. And this continues to demonstrate to the market our financial health and our capacity to invest in the expansion and improvement of our services. So one point here that we just need to mention is that 88% of our debt is -- IPCA, which helps us mitigate some of these variations and also preserves the solidity of our capital structure. As I mentioned a little bit before, we performed the payment of dividends and interest on equity, and then we had [indiscernible] split between JCP and dividends. So this is also important to demonstrate our commitment towards the construction of the creation of value to shareholders. Now I want to quickly cover the acquisitions in the next slide because now in the end of the last week, we announced the acquisition of 2 customer portfolios and the complete purchase of a company, and we had a good while without interventions and acquisitions. But now we understood that there was a good moment, a window where we should have this opportunity, and we opened up the -- so we started an acquisition with a local customer portfolio that helped us increase our share locally to about 86% in our region. SerraNet is a provider. We acquired a portfolio from in Rio Grande do Sul. That was a location where we didn't have fiber. And now we're going to really follow the strategy line, knowing that we will have to fulfill some obligations due to the 5G action, right? And then finally, we acquired a total stake in CCS Telecom, which is in the -- they operate a lot in Balneário Camboriú, and there is intense populational density, a lot of tourists as well. And that's where the square meters are probably the most expensive in the country. And that also helps us to expand our market share in this region, which should be around 31%. Then we -- just to add on, -- all 3 acquisitions are thought -- of considering all of the efforts required to really consider the coverage or guarantee the coverage of 5G. So guys, I'm going to just give you a final message here saying that we intend to have a mobile operation soon in over 100 cities in Santa Catarina and Rio Grande do Sul. But we intend to be one of the most desirable companies in Brazil when it comes to telecom, which is why we're trying to have sustainable organic growth and not at any cost within broadband, and we've been searching for, as I mentioned, ways to keep a healthy cash flow. And we also try to retain or really be careful with customer retention with very proactive initiatives against churn, which really lead to a lot of positive results. And then finally and not least important, we want to keep our commitment with compensation to shareholders and with the expectation of consistent payments and dividends in line with being 100% sustainable. So to summarize, that would be it. And now I want to wrap up here and open up to any questions you may have, but I'll let Fabiano talk about this a little bit before. So he can also maybe anticipate some answers you may have.

Okay. Good. I just want to add on to some points. that I believe would be important. We have strong initiatives this year for operational efficiency. And we can see that this really reflects on improvements in our numbers. So we've been working on updating systems and improving CRM. We were able to reduce 35%. Just to give you an example here of the sales time and so we're able to produce more even with less labor costs, and we're at a final phase now with the deployment of a new platform to control operation. And so this is something we've been working on for almost 1.5 years. It's not easy to change a system like this, but we believe that from January on, we'll start reaping some more fruits and just to show you today, we have about some call center divisions to work on scheduling services and new sales with this new platform, it's all going to be done systematically, and we'll be able to really keep up with this improvement in our operational efficiency, and that is translated into less expenses and better returns so we can have investments in a more smooth manner, also promoting the growth without elevating our leverage too much. And so we would keep this really well controlled. And we believe that we're experiencing a period where the interest rates are very high. And so we need to be careful. And that's where we try to work on this growth, but creating value for our shareholders, right? We can't take steps that are too wide and place this company in a bad situation, which doesn't end up generating value. But of course, we are -- we have very low leverage. And if we have an opportunity, especially in the inorganic growth front, then we would be able to take advantage of these opportunities. And we've been looking into this market situation, we've been searching for more regulation in the sector. We have a lot of companies. And so it's not always adjusted accordingly. And of course, that could lead to competition that maybe is not that fair. And we really believe now that we could maybe be working on an environment that is a little more organized. And we would have this [indiscernible], right? But we must also not forget that the mobile operation issue has a economy because we're absolutely satisfied with the performance has brought. This 5G issue happened in the past and maybe until 2030, and we're really well positioned. So this has helped us a lot in our day-to-day to have more relevance in our business. And however, we cannot forget that we're planting, right? And so in this moment, although we're really happy by the fact that we're still in the beginning and we don't have the scale we need, that becomes a detractor of our margins. So even so the efforts we made to improve efficiency are translating into a better margin even if we have this issue that kind of hindered our results a bit. But this is not bad news. It's good news because, first of all, it's not offending our margin that much, considering the results it's bringing. And -- but as we are able to get more volume and we'll have this in the next period, then it won't generate this loss in results. And in a not very distant future, maybe it will even contribute significantly to an improvement, making us have a business that's advancing well. And we can take a look at the churn issue. Of course, that can't be controlled with 1 or 2 initiatives. But we really have been working on these initiatives, and they already have a pretty interesting savings with a reduction in the churn. We already see improvements in costs. But one of these factors is really the combo of mobile with fixed broadband, as mentioned already, and that becomes more relevant and more important in the company. And I think that was my contribution now here, and then we'll be available to answer any other questions.

[Operator Instructions] Now we'll go to our first question from Leonard. He's Itau BBA analyst.

We have two on our side. First, I want to ask about the net adds pace. The company's strategy is to select acquisition channels a little more and really if we should expect a better normalized net adds scenario for the next quarters. And the next one is a little bit about the comment you mentioned on consolidation of the sector. You announced 3 recent acquisitions, and I want to understand about these opportunities and if you've mapped anything out on the pipeline or what are the main metrics that you're seeing when you consider these occasional possible occurrences. And then when you take advantage of the second one, one thing we did become aware of is that another ISP that was listed is going to be possibly being acquired by an incumbent and they're speaking would it make sense for if Unifique also walked hand-in-hand with a big player. Is that something you're considering? Just to understand your mindset at this point in time.

Thanks, Leonard. Well, about the net adds, yes, we had to perform adjustments and that was following a pace that ended up leading to a reduction because we need to perform sustainable growth with efficiency. We can't bring in growth and then after have problems with the churn, et cetera. But yes, we expect that now in the next month, we will have an improvement in this rate compared to the third quarter. No doubt the fourth quarter, let's see after the first month already kind of indicates this, and now we'll see if we can have November, December in line. And in that case, we would already have significant improvements. So now about the acquisitions, yes, we do have some other conversations that are underway. And it is possible that in a nondistant future, we may be able to sign off another deal, but we have nothing certain in this sense, but it is a real possibility. And specifically, I believe that from half of next year, we would already maybe see these opportunities intensified because the situation is not easy and the guys are pretty -- have pretty high debt levels. And so then about your third question, everything is always a possibility in the world of business. But at the moment, we have not been in any conversations with like bigger players. I think we are really comfortable with this growth avenue we have in mobile and maybe some other improvements we'll have as well. So you'll see that in the beginning of next year, we'll have to deliver -- we'll be able to deliver even more than what we deliver now and the guys are going to be really excited. So that also ends up contributing to make sure we're on the right path and that we should really follow this path.

Our next question is from Bernardo Guttmann. He's an XP analyst.