Valid Soluções S.A. (VLID3) Earnings Call Transcript & Summary

[Audio Gap] Thought about this, thinking of you. Before we go on to the material that we have prepared to, I would like to repeat some of the messages that we had in previous Investor Days. In 2021, we had 5 goals. These goals were first all to maximize the results of our core activities. Secondly, to gain scale in the digital world; three, to come digital in the mobile business; number four, to simplify the company more lean and number five, to transform the organizational culture. We will add details in each of these sections as we have made significant strides. We have had advances in our main business lines, the maintenance of contracts and of course, the enhancement of what we do. And we also intensified the work with customers. Now the financial balance of the company that we have mined in the last few years and the creation of new teams to improve the operational part. Now the changes are clear when we observe our main indicators. We have increased our EBITDA threefold, an expressive increase in margin in all of the areas. We went from losses to the best annual result of the company in its history. Presently, we have a company with balanced liabilities and with very low leverage. Now these results are only possible thanks to the more than 3,000 associates that we have. It is with them the through them that we have enabled Valid to become a strong organization focused on how we manage our results. Now we hold periodic rounds for NPS leadership along with our associates. And this has held us increase engagement. Number two, the creation and development of the ESG part, bringing into Valid the best practices in the segment; number three, strengthening the communication process among all of the associates. We presently have a company with 45% of associates that are women, and we would like to balance this further. Now we have presented expressive results and historical records. But we're still very attentive to the short and medium-term challenges that we will mention after three years of our recovery and the volume of SIM cards, we do think there will be an improvement in the volumes. We have operations disseminated in the main continents, and we're working very close to the main operators in the world. Along with this, we are establishing important partnerships in the market. We have 50 agreements side with different MNOs throughout the world. In the PACE segment, after a period of almost 2 years with low volumes, we began the expansion of credit because of the low Selic rate, we have seen an increase in volume and an appetite with the broader emissions in Brazil. Now the decrease in interest rates has created a better situation in Brazil for the medium term. When we look at our Argentina during some months, we have observed a scenario that is not very normal, but that has been very promising until the end of the year. The country will be undergoing elections, which could bring about volatility. And we will be able to specify which will be the final results and the impact in our business. We're following up very closely on what happens in Argentina because of the changes in regulation in the last few years, in 2026, we will have changes in the driver's license in Brazil. This will enable us to enter some states and perhaps enhance the services we have in some states. Certification has increased. And recent changes has led to a new driver's license that will be called CIS. And of course, this will demand important changes for which several states were not prepared, especially those that are rendering these services in a very primary way. Valid is also ready to be able to issue these stops. All of these improvements, operational finance or others, obviously have increased the price of our shares. Now when we look at our shares in the last [indiscernible] significant value of our shares [indiscernible] the price of the share was approximately [ BRL 8 ]. In the last few months, the share cost approximately BRL 15. Based on September [indiscernible] of our shares is of BRL 20. Now a valuation of 100% will put us still below the main indices. Now the valuation of Valid is that our ID vertical and the main verticals of the company that are mostly in the company represents 7x the EBITDA, but the others represent 0. And this will lead us to reflect on the evolution of our business, and we do believe there is an valuation of the company with the achievements that we have achieved, this have may decreased. And of course, it is our responsibility to show to the market how we are operating and how we insert these evolutions in the solutions that Valid renders to the market. We're looking forward with confidence. And as of this moment, we would like to offer you our future legacy. In the last 3 years, we have been preparing in 2 different directions, changes from the outside in the impact on our clients and the changes from the inside out that we would like to give way to. Many of these trends are leading to relevant solutions. Now physical presence has become less relevant when we work with different businesses showing that I am myself, that my device is secure. And this can help us to materialize some experiences in the life of our customers. All of this has never been so valuable and going forward, we will be adding more value. We speak about centralization. If we no longer have this centralization, who is going to orchestrate everything and integrate the different solutions? We have cybersecurity, we have the law of data protection. How can we allow everybody to convert among themselves and enhance the user's journey? Now we have to think about customers and citizens. This is a part of all of our business, and we are prepared to work with our private and public customers and speak about the digital journey of each of them. What is important is what the deintermediation has brought about, the availability, the NPS of services, the management of data and the transparency that society demands. And all companies are dealing with this as the core of our business and Valid. The more this happens, the greater the opportunities we have, the more digital society becomes more will society need our solutions. And for this, I would like to give the floor to Chris to have -- to Salvador to enhance this vision we have of society.

Good morning, everybody. Thank you, Ivan. My name is Salvador Cabrera. As you can see, I am Mexican. I am responsible for Valid, then I am very happy to be here with you I'm going to speak about our unit and I'm going to speak about the SIM cards. The total market for SIM cards has been reduced in the market as a whole with a drop for BRL 5.0 billion in 2018 to BRL 4.4 billion. And in 2023, we should end with BRL 4.3 billion. Now the volumes have been strongly impacted, of course, by COVID and other reasons in the market. During this period, we were able to acquire higher added value products, improving our mix. And beginning in the fourth quarter, this will no longer operate. The market will no longer be geared by supply and said it will be cured by demand. There will be some minor adjustments in the coming months. And we do believe we will be able to return to the pre-COVID levels. We have increased our market share from 8% to 10%, 11%, maximizing our efficiency and minimizing the impact of price erosion. In the future, we can see that there was a migration of towards eSIM technology. And then we have 2 market segments which are different. And I would like to explain a little bit before we look into the future. We have the OEM sector focused on meeting IoT segment that makes devices to different verticals, telemetry, automotive industry and all the segments need to have an operating system in -- inside the eSIM so that later we can download the subscription and activate those in the final device. The second segment is a segment that we already know very well, which are the operators of cell phones, and they require remote managing platforms to manage by means of customized activating, deactivating and in the subscription in these devices, which are enabled by eSIM technology. And we are going to see how those segments operate so that we can understand the current situation and see the opportunities and the future opportunities. And now talking about manufacturers of OEM, as you can see on the graph, the SIM market grew a lot from 2019 and 2020. However, because of the shortage of chips, it was impacted at the end of 2021 up to 2023. This market was dominated by Apple and that used this in all devices. And after iPhone 14, there was a new model with eSIM exclusive for the American market. Today that is traditional, has this performance. And then Samsung delivered telephones with high level. As we can observe the future growth for the next years will continue to be driven especially by the manufacturers of telecom. Samsung that is likely to implement the technology of lower-level devices and other manufacturers, especially the Chinese manufacturers Oppo, Xiaomi, and they are likely to implement the technology in their devices. As cell phones, there's a lot to happen. Future seems to be very promising. Analyzing the data of GMS association, we can observe that today there are 5.4 billion of subscribers that are served by 3,000 operators at the global level and only 10% of which are prepared to offer eSIM services. And these places where the implementation of eSIMs happen, only 30% of the clients are aware of the eSIM technology. It's expected that up to 2030, there are 6.7 billion connections via eSIM, out of which 76% will be done by needs of a smartphone. And up to 2025, it's estimated that there will be 850 million users. We can observe that up to 2030, the number of connections of eSIM will grow in a very significant manner, and we at Valid believe that we can take advantage of this potential. We are going to provide more details of the OEM segment, as mentioned before. In this segment, we have 2 verticals: the vertical focus on final consumer and the other one, focus on IoT. We'll start talking about the final consumer segment. The growth in this segment will be driven especially by the smartphones. Followed by the wearables such as watches and then the laptops and tablets. As mentioned before, we know that Apple leads and will continue participating in the segment, but the future growth will come from other brands, especially Chinese manufacturers. ABI projections indicate that the market will resume its growth as of 2024, when Apple probably will launch new models in other regions and the exclusive eSIM where the normal SIM is not supported in [ Tensa], implementing more types, and the Chinese will come into the market, implementing it in different segments. Our vision is that this market is going to become mature up to 2025 with the democratization of all brands of eSIM technology has different types of smartphones and for IoT, we have different technologies that serve this market with eSIM technology, and we also integrated eSIM. We are going to start talking about eSIM technology. Expectations for the future is that the growth will be beared, especially by the automotive sector followed by the telemetry, track of assets in the point of sales, applications in the sector, health and also smart cities. Even though the growth from 2022 and 2023 was limited because of the shortage, the expectation is that the growth after the shortage will take place together with the implementation of simplify this factor that will be defined by the GSM Association that promises to accelerate the adoption of eSIM technology. The other technology is iSIM or integrated SIM which is nothing but the evolution of the operating system developed for one ESIM and that is integrated in another system. This technology allows that one device should integrate different functionalities in a single semiconductor. The advantage of this technology is that it uses less physical space, consumes less energy, it's safer, more secure and maintains the characteristics of remote management of the conversion eSIM, using the provisioning platform of IoT. This technology will be used in IoT with application of low power wide area, which are applications with low energy for broad areas of connectivity that will involve smart tags and this is a technology that is likely to be implemented in the smartphones, and -- but it will only happen after eSIM technology becomes a reality in most part of smartphones. In between, it will complement the iSIM technology, and then we can observe solutions that we will use both at the same time in the long term, probably after 2030. This technology is likely to be the most used technology. Considering all the segments of eSIM technology and integrated SIM, the volumes projected for 2022 and 2023, we will reach a volume of 435 million units, showing an annual growth of 5% limited by the shortage of chips and also the reduction of volumes of sales of smartphones at the global level that reached a minimum level of 1.2 billion of units sold in 2022, and we'll resume the sales levels before 2021 in 2024 with volumes estimated at 1.3 billion units a year. Expectations for the future are very positive. According to Counterpoint research, more than 6 billion embedded devices will use eSIM and integrated SIM technologies. And 70% of all devices will be connected in a cell network using eSIM technology. At Valid, we take an active role, serving our direct or indirect client via technological partners, and we have lots of achievements to celebrate. We developed a complete portfolio of products and with all [indiscernible] technology means. Our operating system was certified this year by our partner from China. We have a project of a Tier 1 manufacturer of devices at China. It is in the process of final certification in operating system in a model that is likely to be launched soon. We expect the first volumes to happen in 2024. We'll have a launch in the next few months of a new product in the North American market using our eSIM technology. For the integrated technology, we are already working with the Chinese partner. Manufacturer of SIM conductors who is integrating our technology in one of the systems of chip models. In 2024, we started the first deliveries of our eSIM to Volkswagen in China as the models of electric cars. We are on the right track towards the success in the market. And our purpose is to achieve a market share of 10% in the next 4 years. Now we are going to review some interesting numbers that will allow us to see the sizable opportunities we have ahead of us. According to Counterpoint research, it's expected that up to 2030, 12 billion of devices be embedded in the market, a growth of 21%. And the penetration of the technology up to 2030 will be around 70%. In addition, 55% of those devices will be from the consumer sector and 45% from the IoT segment. In other words, we have big opportunities ahead of us to meet this demand of remote management. Our achievements show the capacity to grow in this market. We gained 42 platforms in 2022. In 2023, we have already gained up to the moment 22 additional platforms. We are working with operators Tier 1 in an outsourcing strategy for contingencies that open up rate opportunities in the short term from 2024 and 2025. We are going to continue delivering our platforms to our clients such as infrastructure, generating revenues of professional services, installation, support and maintenance. But even with a number of transactions, which is limited due to the market conditions in the midterm, after 2026 the number of eSIM devices, as we have mentioned, is likely to grow, and the number of transactions will follow suit increasing exponentially our transactional revenues. And we are going to continue implementing our traditional platforms over the year in several geographies in the world to manage the traditional SIMs and then the content of eSIMs and the smartphones. In addition, we are still proud to sell that market analysts such as Counterpoint Research, which qualify different markets in this area and using different evaluation criteria, such as interoperability security, global presence, marketing, analytics, et cetera. We are -- they ranked us as 7 among more than 25 companies evaluated last year. We assure that in 2023, with achievements that we made and considering all the differentiating factors that we offer, such as our platform for orchestration that help us simplify the eSIM journey for the client, our partnership with entitlement service of interoperability as a service that allows us to offer an interoperable services among different players and with our flexible business and adaptable to the need of a client, we are going to go up the position, making it clear that Valid is one of the main companies that are part of the digital transformation in this eSIM industry. As we can observe during the presentation, the migration to eSIM is going to take a while, but certainly, it will take place. Generating new opportunities of business for Valid -- in fact, the speed of migration of eSIM may vary. But considering the formation of the market and in order to make -- to show the prospect of the future of Valid, I would like to show the table where we had the -- in the columns -- we have the time I mentioned, showing the pre-COVID period, current period, medium term, that will be 1 or 2 years ahead of us and 3 of 5 years for the long term. And in the horizontal line, we are going to analyze the unit margin of eSIM to unit margin of activation transactions and the operating system and the volumes associated to both. My intention is to show how important it is to compare the periods. We have a very limited unit margin. We had no digital business, but we have very, very representative volumes at the time, such as the sum of the margin and the volumes. We have a lower volume when compared to the time pre-COVID cards, but with a larger margin, but we have good margins in the operating system of eSIM and activations of eSIM. However, in a very low volume. So the product of those 2 margins with the volume that we currently have, we can say that we have a very, very good margin for this year 2023. And for the next 3 years, we expect that unit margins of SIM -- the physical SIM be reduced, but probably it will not reach the same levels as we had before the COVID pandemic. The margins of the operating systems and activations are likely to be maintained because we do not expect that the volumes will increase in 2 years. We do not have big devices. And that's why the volume and activation and operating system will be relevant. But the level of margin will be lower in the next 2 years. As we mentioned, the physical prices will have some impact without reaching the pre-COVID levels, but we'll be close to them. In the same period, the price of digital service are likely to be maintained at constant levels since the volume total [indiscernible] were going to increase. We have a combined margin, which is lower than the current and larger than the pre-COVID margins. Finally, when the migration of eSIM accelerates in 3 or 5 years, the fiscal margins are likely to reach the minimum levels and the equivalent levels will be similar to what we have today. The operating systems for iSIM and eSIM and the digital transactions will have a natural reduction as a result of the exponential increase of volumes. The combination of both businesses are likely to generate margins which are much better than the current one. And then I turn the floor to Cristina Bonava]. Over to you Chris.

Good morning, everyone. It's so good to be here with you to share the vision of the future for Valid. When we look at the whole business, the result comes from cards basically. And when we see the speed and the acquisition of means of payment happen. The question that is asked is the following. How long will cards last? To answer the question, we can go back and look at the history of -- history of services and products, whose journey was very similar to what we see today. We chose the start of another means of payment, which was the cheque. In the half of '90, about 30 years ago, in other words, the first Internet banking platforms were starting to come up. And without any doubt, this was a big challenge to the paper cheque, which was a means of payment, which was absolutely analog with a bad journey and with the risk of not receiving the amount. In 11 years went by, so that the volumes would drop of -- cleared would drop by half. In Brazil, last year, BRL 600 million cheques were cleared. At Valid, our cheque operation delivered BRL 109 million in revenue in the past 5 years. Of course, the rhythm of the world today is different. Technology brings in advances in a much more accelerated way, and we are leaving a real revolution in the means of payments. All this makes this the materialization of the card becomes a fact. But this future is going to take a while to be materialized. And then when we look at the card, we noticed some characteristics and data that will help us understand this thesis. The first one is that the card is what materializes the experience of the banking brands. Digital Bank is the only tangible instrument that the client has. And in human banks, issues continued and we noticed a movement that they want to offer a proposal -- proposition of value, which is more robust, such as metal card would be an example. And big taxes as Apple and Amazon launched their own card. Amazon launched its card in Brazil. In addition, there is data from the Central Bank of Brazil, showing that the carding credit, debit and prepaid services is still the means of payment, which you mostly use in Brazil. And the question is, what about digital wallet payments, cellphones, watches, smartwatches? Of course, the payment by proximity increased a lot in 5% in the first quarter of 2023 versus the first quarter of 2022. [ Back ] had a research for July this year, and it verified that 64% of consumers use the payment using the contactless technology. Without a doubt, it's very comfortable. It's very quick. And out of those interviewed, 78% use the card for the payment in contactless instead of using the cell phone or the watch. And then we consider 2 scenarios, short and medium term. How can we extract the value for our operation? How can we build our future, considering that we're going to have this materialization process? In the short term, when the card is still very relevant, we continue searching for efficiency in our operation at the plant. And this is part of our answers. This year, we had savings higher than BRL 3 billion, and we continue devoted the topic. And there are 2 fronts that we'd like to mention. The first one is related to the in-sourcing fabrication of an important component of the card. We have already started the operation, and this will start in 2024. [Foreign Language] We are a very relevant player in terms of identification in Brazil. 60% or 70% of Brazilian documentation is in the hands of Valid. We also have an important role in ID in the private world. In this environment, we already began with a very relevant case where we held the onboard events of Caixa Federal that contemplated 50 million Brazilians. We know that banks are mature assets. They're highly sophisticated. And they have anticipated the hiring of this service. Now the universe of the identification of people with high levels of security against fraud is highly dynamic due to 2 variables. The technology available. When we speak about the network of smartphones we have in Brazil and the behavior of individuals, the customer that is doing the onboarding and the person trying to commit fraud. Although the market is very mature, there are opportunities we would like to address. There is an additional factor that I would like to mention the possibility of authentication through your finger or voice and Valid has important expertise in this field. We know there are journeys and transactions that are fundamental in medical assistance, telco, the financial companies and the health area. I would like to share a video with you to understand this, the physical presence is less necessary for most businesses. And in that context to verify precisely the identity of a person has more value and the Valid solution simplifies this process. Here, we see a person who was opening an account. Based on the initial registry are onboarding process will begin the face match with the document besides a proof of life. And here, the important differential for the Valid solution. This is a tool that has been adapted for the cellphones in Brazil, not only the smartphones, we use 50% more documents when compared to the competition. In other words, this helps us increase the success rate of the marketing campaigns of our customers. Artificial intelligence will extract data, will carry out several consultations throughout other databases to guarantee the security and prevention against fraud. And we would like to work with the highest conversion not only for Gabriel, but also for others. To increase the efficiency and onboarding. We have a digital back office that analyzes, corrects, validates the rules and personalizes the workflow. This is another competitive edge that we have in our solution. Any convergence found in Gabriel's registry will be recorded on the platform through data analysis. And finally, we have the analysis of documents that will analyze the documents extracted through different base -- databases. Very well. Now Gabriel can count on 54 million processes already carried out by Valid, a more secure and more fluid experience. Our third front creates a connection between the public and private world. It is a journey for the concession of benefits by the government. Nowadays, the process to grant benefits has a decentralized management. For each benefit, there is a different means of payment and a very specific journey and in this model, it is necessary to manage several suppliers to manage a series of costs and a very high degree of vulnerability to fraud. Besides the fact that there is no knowledge on the use of this benefit is a highly complex environment that is not very efficient. By identifying the citizen we can create journeys in these transactions. We can work with a city hall or state through a single card that will concentrate all of the benefits and simplify the process and the management and add a level of intelligence to the entire process. We can also make feasible the management of the balance through an app. Now to work on this experience, we have prepared a video that we would like to share. [Presentation]

Now having this, we can state that it would be the rupture of a perception where the government materializes for the citizen in a very negative way. We can change the way city halls work, increase the digitization of a marginalized population and increase the NPS of the public power. Besides minimizing fraud, abuse and waste. Now all of this can be done through CND card. Nowadays, 15% of the Brazilian population receives some sort of benefit in Brazil. We're referring to a market that represents more than BRL 1 billion. We have a pilot with 100,000 inhabitants. And we have the opportunity of carrying out an upsell where Valid is already present in the municipality. We bring Valid pay closer to the public governments where we make transactions feasible. I would like to give the floor to my colleague, Bressan, the Head of this section.

Good morning, everybody. I am Ilson Bressan, the Manager of Valid ID. We're going to speak about the future of this vertical and of course, do interrupt me at any point or should you have a question. We're going to speak about the challenges of this vertical and the vision that we have built based on the evolution of cities throughout the world. If we look at what has brought us here throughout the years, we have gained 80% of market share in the issuance of cards in Brazil and 60% in the issuance of our Brazilian ID and we are the great preference of clients when it comes to carrying out these services. What allows Valid to achieve this position is the expertise in terms of the volume. And the way we have always been very careful with data that is sensitive for the population. We are present in the way in which each of the citizens identified themselves day after day. Now to become ever more relevant, we need to broaden our tools and our product portfolio and that is why we went to see the evolution of societies worldwide seeking for inspiration and see how a strong and secure ID system has been anchored in those companies. In the Nordic countries like Denmark and Finland, we visited Estonia. We also visited Singapore where there is a great preference of society, the U.K., Australia and other countries that have evolved significantly in the last few years. We have also looked at surveys with -- we see the potential impact of the generation of wealth. According to Mckenzie, a strong and digital world can give thrust to the GDP of Brazil very strongly. And in 2021, we look at the cost of Brazil, it goes from BRL 104 million to BRL 154 billion every year to prove that you are you. This represents 2% of the Brazilian GDP. Estonia was able to save its GDP when it created an ID system that is a great pillar of the digital functioning of that society. And now the time has come after a great deal of preparation. We are an official issuer, and we can now work in the government environment and we can become the great ID provider in Brazil. We're referring to a secure platform where people, their identities and their journey will be guaranteed both in the public and private sector, not only identifying, but also authenticating and authorizing, becoming a hub between citizens, both public and private. A secure digital world will not be possible without a secure ID in each of our lives. If we look at the digital world in Brazil, there is enormous opportunity for Valid in this environment. People spend a great deal of time in front of screens. We are the second country in the world when it comes to the time that we spend in front of screens, both of smartphones and computers. We do this for banking services, mobility, delivery, commerce and much more. We know that it is good to save time and money in our private lives. It's time to also expect this from public services. And Valid is aware of the fraud and abuse that happens, and we have special products, both for governments and companies. Now we need an eco-system in the Brazilian society that will guarantee our transactions in a world that will be ever more digital. And this is a space that we would like to occupy. We believe that we are the player that is more prepared to work in this because we already know the people, their journeys and their transactions. People need to have a strong and safe ID. Journeys require interoperability to empower each individual to become the owner of their own identity. And of course, we have to have services with secure authentication to increase the confidence in these services. And we see that there are different stages in different areas. What differentiates these is how managers use technology, data and evidence when they make decisions and to create the most adequate public policy. And of course, this inaugurates several opportunities for Valid. We can differentiate clients, different solutions using artificial intelligence, machine learning and automation, enhancing the level of quality of the services rendering and of course, reducing the gap with what happens in private lives. So we go from a reactive model. We go to something that is more responsive, where we work with authentication with authorization and go to a predictive model where we will have a relationship platform and integration of what is public and private. We will go through different tiers through better integrated structures to offer better services to the citizen. When we finally get to an area where data is shared and will be under the control of citizens. We have websites with basic services offered to citizens evolving to portals of integrated services, local platforms and that will be able to service the needs of the population through predictions, something that will be adequate for each member in the population. Now some of these are ready. Others are being prepared. We already have the digital app implemented in 12 states. Also implemented in the medical councils, in the federal police and the registration of foreigners. We have a digital ID and [ PRV ] where we have been authenticating all of the citizens of [ PRV ] when they access the integrated services. Going forward, we have a platform called Viva that has more than 12,000 subscriptions working with cryptography leading to a fully integrated future. And we want to work this ID platform for the full integration of both public and private services. Let's now see the case in the state of [ PRV ] with the platform showing how this is going about in the official platform at this stage. We made forward into interoperability, and we have been providing the unification of the data bank in different sectors in different cities. Another example is the national election that was carried out in August 2023, more than 600 physicians -- 600,000 physicians voted using Valid structure. This is equivalent to say that we are ready to have hold elections based on the authentication for each city with more -- with up to 600 voters. And this can be done remotely. After this -- the slide, we can see that we have platform that has monetization of data connected with a safe secure ID with transparency that can control everything that happens to the person's data in whichever environment. And this can eliminate the inefficiencies when you need to prove that the person is alive in sharing an environment that is secure, showing that you or who you are and showing that transactions that you can make are safe in the digital environment. And lastly, the presence in those government environment show that we can issue documents and we increase the scope of the service digitizing resources that provide savings. To this date, we eliminated fraud possibilities providing better perception from the population and to the service that was provided. Some examples, [Foreign Language] with biometric authentication for the students who need to do a driving test. Another example is the creation of a digital counter in [ Seara ] that offers digital services for the documents, proof of life that allow the electric transfer of vehicles. And we would like to show another case that started in 2023 that the automation of the role being called in -- at schools. This was developed by Valid in a partnership with [ Calabar]. Let's see the video. [Presentation]

And having said that, when we look at the size of market for documents to be issued, we see that TAM is not bigger than BRL 1 million, and we can reach BRL 700 million, and we generated BRL 500 million in net revenue. When we expand this horizon and we've maintained the position of issuers of documents and considering everything that we showed as opportunities in the digital world. This market can multiply by tenfold, and we can operate in the market is 7x bigger with the potential of very big increases provided we do the right investments in organic and inorganic growth. With this vision based on the core competencies of Valid, we understand the 3 pillars, [ ID ] strong and secure interoperability and digital services. It's the first -- not -- digital only because we have interoperability with integration in the proof of identity and the authentication of transactions of every journey. And we invest even more in digital services. We're using cases of use that get closer to the experience of the private that it relates to saving time and money. And then we can create there super identity providing services in different fronts. Security, health, automation at the trends, education, mobility, companies and commercial chambers. So this is also related to the private world, because we have the competencies for these journeys, be them background onboarding payment and identification every day in the real estate for travels for purchases and the number of other journeys. This vision allows us to sustain what brought us this far and build the bridges to the future. We preserve the revenues that are currently made and will also lead us to bigger revenues as third parties, which are trusted by the Brazilian. It's the core and the adjacencies and this is going to likely to happen inorganically and organically. And related to this last format of inorganic growth, I would like to invite Rafael [indiscernible] who is going to talk about the news business. Thank you very much, and over to you, Rafael.

Thank you, Chris, Salvador, Bressan. I'm so glad to see all those opportunities. I hope you feel the same. New clients, new markets, new products and the adjacencies of our new businesses. They offer opportunities, those markets also present us with challenges, be them access to new clients or creating new products in order to face those challenges, we are going to go after and companies that will help us complete our long-term strategy. And this is the reason why we have an M&A team and corporate venture capital that is attentive on the lookout for opportunities to change -- to face those challenges in addition to accelerating our plan by means of acquisitions. And the sectors we are looking at do not change the same of the future related strategy mentioned previously, digital government identity onboarding and identification -- authentication. And since it's a one-way process in order to accelerate the business and get into those markets, we want to reach those new companies, new channels and new people so that they can [indiscernible] our technology for higher scales in order to grow their own business. As an example of this search, which represents how we are looking to the future, I would like to mention the rationale of the last 2 investments we made, Vsoft and Flexdoc. Vsoft is a technology company based in Paraiba that help us grow new businesses in the digital government, especially related to schools and [indiscernible], and it brings another expertise related to digital technologies and biometrics, bringing in more quality to valid product. And Flexdoc, it's an effort that we were integrated in an important way in another sector, and I would like to give more information about this. We believe in our business. We believe the onboarding digital. Considering that this is close to our core business, and it has a very good size in the market, it's a solution and because it provides secure identification the same as we use for IDs. And we are close to clients above all government and banks. So we are going to get into the market in a more integrated way. So we invested in a company that has the capacity already proven related to solutions and clients. Then we get closer at a lower and lower risk and lower cost. When you look at different companies in the market, and we found at Flex and make those important competencies that I would like to share with you. From the viewpoint of corporate structure, we're bringing [indiscernible] and a team that has experience of more than 15 years in the banking and technology sectors. And as to technology, they are able to work with the diversity that we have in Brazil. The diversity of smartphones of devices in the hands of Brazil, more or less technological the way that the documents are going to be analyzed, connections in different places in Brazil, diversity in the larger and lower levels of understanding the technology by the users. All this put together allows Flexdoc 60% more clients than the competitor, and this brings the quality solution to our clients. From the viewpoint of cases, we have more than 50 million of onboarding events in different institutions and in one of the major banks in Brazil, providing access to Brazil with digital services. Flexdoc allows us to go into the digital onboarding with scale and Valid brings instruments by means of major channels and clients. And also, we also offer the technology of biometrics. And this visibility of new markets onboarding and digital government involving our B2B, B2G clients shows that we have a long way to go from the core when we identify in a secure and strong way. And talking about the funds where the funds came from, I would like to invite Ivan once again to take the floor. Ivan, welcome again.

So we are getting closer to the end of the presentation, and I would like to end our event with messages. Today, we can say that the turnaround period is behind us. And the numbers we showed previously made it all very clear. The next snapshot we see on screen shows that in the past 30 months, the period that we say that we were housekeeping. And considering all the funds that we had from the cash operation management, they amount to BRL 1 billion. The biggest share, 70% of this amount was allocated to balance the liability structure of the company. And this amount to pay of the shareholders with dividends or share buyback. And since we have a less lower level of demand for the liabilities, we have more cash to invest in everything that we mentioned during the presentation, but also to pay our shareholders. And this success is not only in the financial dimension. Valid has undergone to change when time has came. We are prepared these changes come from abroad and we are ready when the change is made by us. And talking about evolution, I would like to show the new position that we are going to adopt as of now. In order to materialize the way we approach the market. I would like to share a video with you that we translate the new positioning of Valid. [Presentation]

Now we are going to start the Q&A session. The first part is going to conducted by Daniela Belisario, our Manager of People and Culture. And then we are going to answer your questions. We really hope that this content was relevant to you, and we would like you for being with us one more time. Daniela, over to you.

Hello, evening. 66 years of history, Valid has undergone different changes in the market, the internal changes and many others that are about to come. How do you see this movement of different cultural transformation of the company?

We went public in 2006. We had a number of years, which were very successful, very good from 2006 up to 2015, nearly 10 years of growing profits and everything. And of course, the company started to look at itself. It was feeling as itself as a strong company, and we no longer heard where the clients had to say. And there was a time when it was necessary to have a complete and profound transformation. And then we changed the officers, also the shareholders changed. There was an important change in the management of the company. We replaced 7 of the 8 officers and this is when we started the cultural transformation at the company that lasted nearly 3 years. So I believe that this cultural transformation was very successful. Data show that. And this, we would say that the initial phase has been completed. So that has been a corporation for a while. And government has to look at this very carefully.

How has the Board seen this way of operating in the past 3 years?

I think the role of the Chairman of the Board, who's -- who do not have shareholders, anchor shareholders is very difficult. This is not our case. 3 or 4 shareholders would account for 40% of the shares. And this -- with this 3 or 4 shareholders are all -- are able to -- we are able to talk to them in the past. We discussed with them. We wouldn't have been able to make the decision of transformation without this shareholder base. They were the ones that allowed to undergo this transformation. I hope I can comment them in the future. So we are a corporation. We've been in corporation for some years, but we always give a special attention to one group of large shareholders, which are very committed to the company. And at present, there is one different group. We are very lucky, by the way. And they provide us with a guarantee that in the future, we are not going to make decisions without listening to those shareholders. These are very experienced people, seasoned professionals who have been in the business for a long time. And I intend to be listening to them whenever we have to make essential decisions. So this is a guarantee that we have to the other base of shareholders. We have a very good group, experienced group, and they are very attentive to whatever is happening.

And how did the company managed to even taking part in some changes in the market that have been discontinued? How could the company reinvent itself? How has it been to take part in this process?

The company is there to serve society, a company that does not serve society will not survive. And that's what we do. This is the reason why we exist. We are here to meet the demand of society. We listen to what they have to say. We listen to clients. We listen to the people around us. We observe the behavior and how the behaviors change. We manage some curves, some demand curves that move up, demand curves that go downward, and we do know exactly what would be the speed of those curves. We know that the curves are there. And every day, we have to be on the lookout of those movements and see how those curves are behaving. And the company has to respond to that. It's our role to listen to it to be alert and to pay attention. So this is the role of the company. And this is the reason why we're here. We are here to listen to what's happening. We have to beyond the count to whatever is happening and respond to it. So this is a way of continuing alive. And this is why we're here.

And when we say that we are looking to the future, in a practical way, how is the company preparing for that?

We have a governance okay? We have the shareholders, we have the Board the Board gets together on a monthly basis. We have different committees, new business committee. We have people from the Board, the people from outside. We also have the Executive Board. We have almost a tool that maps the society. And this is how we measure on a periodic basis, where we are going to place our bets. Of course, these are the secret to make bets that are successful. We cannot make a lot of mistakes. Another important point is the quality of the leadership. The role of the Board is to ensure that the senior management is prepared. There is a succession plan. It's renewed whenever it does not work. So our role is to be attentive. To be -- to watch how the leaders are behaving by means of a permanent conversation with these leaders. And this is something that we have lived intensively to prepare -- the preparation of the company is related to the quality of the leaders. And we are well served and results show this.

What's the expectation of capital investment for the next cycles?

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[Foreign Language] your participation, and I would like to ask the audience to please hold just a few seconds while we reorganize for the other questions. Thank you very much. [Break]

Well, thank you for having waited. We have already reorganized and we're going to begin what is the most important part, which are the questions and answers. [Operator Instructions] I am here with most of the Executive Board here at the studio, Dani, Ivan, Chris, Rafa, others and Sydney and Salvador are connected there, of course, busy with other commitments, but should there be a question addressed to them, we will include it on the screen. Very well. The first 2 questions we have received come from Fabio and they are the following. It's true that Valid has done an excellent work in reducing its debt and leverage in the last quarters. You're going to maintain that indicator in the coming quarters? Or will it increase because of an M&A or other factors. I will respond to the question when we began putting the house in order, we had a very high leverage 3.5x at the end of 2020. And we have gone through a reduction thanks to the efforts carried out, we now stand at 0.5x at the second quarter. Of course, if we look at the cost of capital, we could have a bit more debt to balance out things but we're speaking about a country where the Selic rate tends to be very high. It's not because we want to include that in the balance that we're going to do this. Sometime ago, we saw that there was a crunch in private credit. So we keep talking with our partners and opportunities are popping up that we can look up. Something that we look at is how our debenture trades in the secondary market. This gives us a reference of the rates and it's good to know that we have this channel should we need it. Now to connect this to what you said regarding M&As. Nowadays, in-house, we have nothing that would justify raising funds for that. The M&As that we have worked with our minor M&As. We can handle them with the cash generation of the company itself. Now if an opportunity arises in the pipeline, it's good to know that we have this channel. But nowadays, the Board and the directors are quite common, having a very well balanced -- balance. And the next question also comes from Fabio. Without giving guidance, your expectation for the fourth quarter and the rest of '23 is for EBITDA and margins to remain at the levels that they are? Is there anything that could impact your production cost and increase in dollars? An increase in the cost of raw materials or anything else? Very well. I will take this question myself. In the initial presentation made by Ivan, he spoke about the challenges we have in the medium and short term. We have challenges in the mobile part, perhaps a pressure in prices and not in cost because of the resumption in the production of chips. And with inflation that is not controlled, we could have an increase in prices. But there's nothing that would justify significant changes in margins because of cost there are market dynamics that we also mentioned we could have a reduction in volumes in terms of drivers licenses or more competition in terms of cards. But presently, we're quite comfortable with the margins that we have in-house. [Operator Instructions] I will stop speaking a bit and give the floor to Rafa. Rafa, if you could?

And I'm the one that included this question. Yesterday, I participated in an event, and they said, "Oh, you're holding your Investor Day tomorrow. There is a question I would like to pose." So I brought the question because I think it's important for people to understand our dynamic. The question basically is, if we could speak about the approach of the Valid M&A team, which is the funnel that we work with this, and you can explain this better than myself.

Well, thank you for the question. Yes, there is a change in the M&A dynamic. During the last 2 years, there were 2 factors an inside and outside factor that made us less active in the M&A proposals. We were working with cash management because of our debt. Now in-house, we had a scenario of very high interest rates and the price of assets we were not able to find good references that would merit investments. Now this will change as of this moment. We can see better assets and we are now adopting a more proactive approach vis-a-vis the past. Now when we look at the coming months and years, we will become more proactive. We will -- when it comes to seeking the growth of the company in the 2 sectors that we mentioned. We have a great deal of expertise in government and digital governments, and we carried out our initial investment in Flexdoc for the onboarding market. Now the size of the tickets will be very similar to what we have done so far, but we do believe there will be better opportunities looking forward.

Now to continue on. The next question comes from Eduardo and I will send it to Chris. Chris, you spoke about the potential integration between ID, Pay and you did mention the benefit card. If you could speak more at length about how this product works.

Thank you for the question, Eduardo. Yes, that products, that card comes from a company in which we invested. We already operate with it municipalities like [ Vine ] and [ Santana ], where we have operations. And I think this product has 2 positive points. One, referring to Valid itself. It creates a bridge between ID and pay. Why? When identifying a citizen, we use all of the in-house expertise to issue driver's license to carry out the identification. And we bring in the pay world, adding that possibility of transforming all of this into a means of payment. Now the second factor refers to service in general. Nowadays, the government of municipality of the state will look upon the different benefit that grants us if they were independent verticals with the difficulty of management and with a very high-level view. Now this product will consolidate this vision and the government will look upon the citizen as an individual and for the individual, for the citizen, they can materialize the government in a completely different way. In terms of governability that this could bring about. This is very successful and there is a significant added value in how all of this will materialize for the citizens. And this is what we will be delivering to the market as from now.

[Operator Instructions] We go on to the next question. coming from Renata. If we think about the digital government topic, which is the path for Valid to continue in the leadership in the Brazilian market. And if you're considering entering markets outside of the country?

Thank you for the question, Renata. Well, to continue our leadership. We're going to work in areas that are very similar when it comes to issuance of documents. We're certainly not lacking clients in the public or private market. As we occupy this space with the digitization of processes, we have platforms that can prove identity. Now we have the digital ID and we offer access for other journeys of the citizen, including benefits. This is the way to continue off occupying the space to become relevant for the Brazilian country as a whole. As I mentioned, there are several initiatives that we're undertaking and they begin by being present in each of these journeys. For example, we work with driver's licenses in the department of motor vehicles and other institutes. We offer greater ease to the citizen to have access to these services. And we also allow for savings in this entire process. This is how we will remain relevant. Now when it comes to becoming international with the services, we're not thinking about this presently. We're getting ready for that outside of Brazil. But in the last 3 years, we had intense activities in-house, the turnaround was concluded at the end of 2022. We also had several initiatives in terms of unifying products and others for each state that we have a contract with. We had a different system. Presently, we already have a national legislation, and we can implement the regulations in a more unified way. And this will allow us to have a single platform for IDs that can be scaled up in different places. Now there's a great deal that we can still take advantage of in the Brazilian market and the identification of these citizen, whether it is in the public or private market. And what we have, of course, will enable us to think about an expansion in the near future.

Our next question comes from -- Okay. I'm going to direct to Salvador, let's see if everything works. It came from Juan. Congratulations on the presentation. As to mobile with the migration for eSIM when the business model is based on the activation system. How do you see the competition in this scenario? Salvador, are you there? Yes. Can you hear me?

Yes. Jon, thank you very much for the question as to eSIM. During the presentation, we saw some description. But as to activation of the operating system, we come from a model of licenses and the competitiveness has to do with the technical capacity. We -- there is a number of players will take part. And we'll see who is capable and the history and the global presence to offer a service. Related to infrastructure, eSIM in different devices that are going to be in the market. So it's a multiple licenses. So the players may be those that already developed technology of SIM card. Apart from those activations because in fact, it will -- it's likely to grow in the years to come. The best ones which are qualified are the ones that are already working with the operators and those who already have a global presence because it's a very sensitive service in the market. Sensitive to failures. It's a service that requires a highly reliable platform with offering redundancy and I believe that likewise, there will be new entrants in the market that I think that in the long run, I believe that those who are currently well positioned and provide services to the major players are the ones that are going to provide more the services to the market.

Thank you, Salvador. I think there will be another question for you to answer Salvador. [indiscernible] the next question is to you, it came from Ricardo. It has to do with government you described interesting solutions related to the government environment. He asked 3 questions. I'm going to ask them all. Who is the one that has the most focus of the team and presents the highest potential? How do you intend to face the challenge of the stability of solutions? We understand that in the past, it was something important in some of the business of Valid. And how do you intend to face the challenge in different entities of the government?

Thank you, Ricardo. The first topic is related to the focus of the team and what's the focus of the team to deliver the best solutions? Of course, we want to look at digital solutions and be closer to the client, especially those who are already with us with the contract. So we have to make advances in the ID digital as an authenticator of the journey, as we mentioned, when we said that [indiscernible] platform launch. And this model of authentication are used not only for the journeys in the government environment to use with the main journeys, but that service is provided to the right person and it's a proof of identity. Identity which is not physical for a certain environment. So this model of proving the identity in an environment which is digital. Without a doubt is one of the biggest focus of our team. But this also interacts with another platform that allows us to deliver solutions associated with some journeys that are going to be digitized in the future. We mentioned the case of [indiscernible], the case of digital counter of [indiscernible], the case of authentication in schools and also in the past for the trust. So this identity requirements is present in all the services provided, and it's one of the biggest focus of the team. First, because we need to satisfy the citizen's life and allow the citizen to have a better perception of the service that is being provided by the public entity. And then we have to elect what would be the priority throughout the journey that's going to be digital -- digitized and while what we are going to do in terms of the digitization of the journey. So we are going to see the one that provides the highest saving for that identity. So this is the focus that we're giving now. We want to advance in those solutions with proof of identity to provide savings to the state and also to increase the satisfaction of the user. These are our priorities at the moment. Yes, the topic, the second question has to do with our experience in relation to the different dimensions, especially with the previous experience. Regards other products and portfolios. Well, if we have a model which is different with from the model we have, we have something that connects all this, and this is related to how we identify the citizens so that the state can interpret who the person is so that the person can receive the benefit. And in this aspect, I can prove that this is the citizen we are talking about. And then I can provide enhanced services with better services and higher savings. So it's different from the model that we used in the past in smart cities because we have all this connection for him to access the services and also in the identification of the specific needs of that citizen or closer population so that policy can be provided appropriately. And if we can prove this identity, this can be used in other platforms, which are private, where the citizen or the clients have also the same need of proving who he is on their daily activities. How can we scale up this solution? There is something connected to what happens inside the company. In the period of turnaround, we've built platform that can be scalable related to architecture, products and business. This is head by the team of [ Rafael ], and we saw what would be the savings when we have implemented the viability. And this can also be used at the federal level and also at municipal local base level. We understand that Brazil made advances in some initiatives, especially as regards the digitization, especially after the pandemic. And the state is a legal responsible. So the legal responsibility for the issue of NITs done at the central level. So we have been working on this concept with the other states for them to understand that they will have more accessibility to this unique database that would enhance the insurance of secure identity -- identification. And if there is this physical platform for identification, if this can be provided to the city level and if we can prove that the identity can be approved, and this was something issued by the federal level. This is something that can even included in the public transportation. The person can prove their age and can have, for example, free tickets. And we are ready to implement this. But how can we scale up this? We had to look what is the consistency of what all this is connected when we are able to provided the identity possibilities in Brazil. And the same player and with the same relevance is going to play in the digital world.

Thank you, Bressan. Salvador, once again, over to you. A question was asked by Lorenzo and this is the question. Can you talk about the eSIM economics versus the traditional SIMs in terms of TAM margin and required investments?

Yes, perfect. Thank you for the question, Lorenzo. It's important to mention first that we are going to have a period where the both technologies will be used. We are not going to have a very abrupt migration. Both are going to exist at the same time. The traditional SIMs will have volumes decreasing slowly by little by little. And the TAM comparable at the unit level. When we talk about TAM at the digital level, we have to think about licenses and operating systems that will be included in the device in addition to the digital part, which are related to the activations, the onboarding of those clients in a smartphone network. In terms of licenses, we are going to have a lower TAM with higher margins and the level of activations, which much higher because probably what's going to happen is that in one smartphone, we are going to have 2 or 3 active subscription. So all the sum is going to total at a higher margin that we have posted this far.

Thank you, Salvador, once again. Ivan, there is a question related to your strategy coming from Eduardo. It's a long question. We can go back, if anything happens. Thank you very much on the presentation. Congratulations and you provided a broader view in relation to the company, especially in relation to the growth, which is an important element in this phase of the Valid. So we see some convergence of Valid Pay and Valid Mobile, even though it's the promise in terms of eSIM -- it's more independent. I would like to know more about Valid Mobile strategy in the long term. And if you want to go for the leadership at the global level, in terms of the stability, what would be something important to learn about Valid?

Thank you, Eduard, for the question. I believe that what we have in terms of mobile in the future, Salvador was able to describe in his presentation, there are some pathways which are well designed, not only in relation to eSIM but also to platform and the prescription management. And along this journey, the migration from the traditional SIM to eSIM is going to last a while. As Chris mentioned in her presentation, the future takes time. So the fiscal chip is going to continue to be very relevant in this chain. Because this is a global chain, it is distributed from -- than 8 layers out of which 4 or 5 are very relevant. I would not be ambitious enough to assume the global leadership of those platforms of subscription management because Telecoms also allocate their volumes of the traditional chips and they use the same strategy when we use platforms because nobody would like to be left behind the change. Nobody wants to assume all the risk, especially when we are operating at a global level. In summary, we are likely to be among the 4, 5 most relevant players in the market without a doubt. Together with Salvador and team, we want to ensure the fair share which we already have in the traditional business for the deploy in OEM. And along the time, those new businesses are likely to be replaced in terms of revenues that we propose to using the traditional chips. And there will be a replacement so that the margin will be a bit better because the platform business is more closer to technology business. And therefore, the unit margin is better than when we compare it to a product whose characteristic is more related to sourcing or more related to commodity, which is what we see in the traditional chips nowadays.

Eduardo also asked another question to complement. To help in the projection, especially in the growth phase, would the company consider breakdown the volumes and other data? And we develop new products and new services. We tend to provide the best visibility to the community of investors. As Ivan mentioned in his presentation before, and this undervaluation that we have today is maybe related to the lack of understanding of what we are doing today. At the same time, considering that some are still in the inception. If we break down too much information, it may generate more complication. So along the time, we are likely to have spreadsheets with more information breaking down all the information as we have been doing with other metrics of the company. Two years ago, for example, we did a simple and pure analysis of one income statement or on the balance sheet. Now we are mentioning ROIC. We also mentioned cash generation over EBITDA. So we are including other indicators and other metrics. And we are going to continue to do so as we gain more relevance and importance in those services. [Operator Instructions] [indiscernible], Gabriel ask the question to you. Do you see any risk of the physical issuance of document? That could be no longer obligatory. How can you compare the physical monetization and the digital document issuance in the future? How will the digital document issuance be monetized? And what does it represent to the plan nowadays?

Gabriel. The first point I would like to mention is related to the topic considering the fiscal documents ending. So I would say that we would put in a horizon of 5 years. Of course, in 2050, the model will be different. But in the short run for us. We do not believe that in the short term, the fiscal document will end, but it needs to be modernized. We have 2 sources of identity. One is the ID document. And I see that it will increase in terms of volume in the next 10 years as established in the the creek, 10th, 9th and the 7th, enacted by the federal government that establishes the basis for the issuance of our ID. So there's a migration of the document. So in the next 10 years, all the adult resin population will need to issue a new document in order to be compliance with the biometric biographic standards of interoperability with a single key and tax identification will also have an ID. And I see that there's a growth because nowadays, the identity RG does not have a validity period. But after the implementation of this decrease, there will be different validity periods and the maximum period will be 10 years. So within 10 years, we will have to be issuing documents of identity for all the population. After these 10 year, there will be a transition from paper to polycarbonate. So there will be a modernization in the IDs. Another front in relation to ID issuance is our driver's license. What are the possibilities for this drivers license format is the following. We already have a major impact as we have seen in the past and even Ivan mentioned in the beginning of our call, when he mentioned the volumes of driver's license and also the expansion or the higher period of validity from 5 to 10 years. So we have already put this into numbers. So there will be a reduction in volume, and we're prepared for that. What can happen to the driver's license, we can have a movement with similar to the ID. We may have a connectivity of what proves my identity, and I have a physical option, and I will also have a digital solution. And then I'll talk about how the digital model can be monetized. When we look at documents which are issued, the final product that we can measure in terms of the physical documents, when we have the download in our smartphone. When it happens, we see a product which is very complex that ensures that the status had been made all the onboarding and needs to have the identity recognized, and this can be done at the physical level or at the digital level. Considering the contract that we have from the bidding processes. We have a model that is based in terms of pricing according to the issue. But there are some aggregate services. In the future years, we are likely to have the government demanding different specifications where little by little the digitization will be part of the contract, and we are going to have the same model of monetization by the units that you should -- it doesn't matter whether it's going to be digital or physical since they are likely to -- both are likely to have. Since we are -- we do one sort of monetization, we are going to use the same service charged the same way, and it has a bigger portfolio that evolves enrollment of the citizen hardware software. As we move ahead and considering the cases that we presented. And as we advance we wonder how can I prove my identity. So it's a model that we start to use, especially after 2023 in those cases that were presented. So when there is an identity authentication as a test -- driving test when there is a digital onboarding services that needs to prove that the person owns a certain vehicle and can sell that vehicle at the [indiscernible]. So that model is more related on the transactions, and it starts to be more relevant in our revenues. We see that 23% of the total revenues are revenues that come from the digital part. So the most obvious path in '23, '24 and '25 is to move forward to have more dedicated journeys that will prove the ID to be able to carry out transactions, integrating this with the other 2 fronts we have in our portfolio for some time. The issue with the smart cities that always includes citizens that will have to be authenticated to receive benefits and the digital signature of the Federal Medicine Council for example, that held elections in August in a digital way. I think I have been able to respond to all of the questions. [ Or level ] how this will impact the production plants? Well, the production plants have a very large capacity. They will be able to provide the volumes that we need for the next coming years. And we have the plant capacity as well as software capacity.

Allow me to add something, Bressan, the first part of the question. This is a question we hear a great deal about the physical document, when we are dealing with the B2G sale with the public powers, for example, the product that is being sold is covered by a regulation, of course. And as Bressan mentioned, that transaction has been set forth by legislation. If there will be changes, yes, of course, but change in legislation is more difficult to changing provisional measures and in that 10-year horizon, the documents will be both physical and digital. And this will give greater security to any transaction. A second important aspect is to see what is happening outside of Brazil even in the more advanced end markets, and we have led some missions with some government missions, especially in the Scandinavian countries and in Estonia that is well advanced in terms of the digitization of citizens. These citizens, all -- these countries also use the physical document because it is a point of authentication when you're accessing health or education, for example. So -- this has a great deal to do with what Chris and Bressan mentioned that link of the physical card and your exercise of citizenship. And these 2 aspects are of the utmost Important to see what legislation sets forth and of course, base ourselves on the best examples. And the best examples do not point towards the extinction of physical documents.

Thank you, Bressan and others. Now we're going towards our last questions. We have another question from Eduardo that says the following: an increase of TAM of 10x, and the document is relevant. When will this be reflected in the Valid revenues in 2024? And which is the most promising segment for this increase in TAM?

Thank you, Eduardo. Well, we don't have a very specific guidance for 2024. When it comes to the best figure of revenue that we could have as we penetrate other markets that represent a tenfold growth. What we are going to do is expand the percentage of digital revenues that we have, so that will be ever growing in the coming decade. We have another market that we can fight for that involves other fronts. France where we have gained the capacity to participate in the market. And this shows the potential that Valid has in terms of having a product portfolio that will deliver products to the citizens in their physical and digital journeys. We are gaining space in this market in 2024, specifically, we want to increase our share from 23% to 25% to 27%. The way to do this is very simple. We're getting prepared in-house with architecture, portfolio and technology to be able to further digitize their journeys, improving the reach of our contracts with the public powers. So that we can deliver an ever greater percentage of revenues as part of the work that Valid does in the IT part.

Thank you, Bressan. We have now come to our last question. And on behalf of everybody here, on behalf of Salvador and Sydney, who are not here, but who did help to make this event come true. We are at your entire disposal for further clarifications for one and one meetings or group meetings. Our IR channel is ir.valid.com. I hope you have enjoyed this, and we wish you all a very good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]