Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Locaweb Servicos de Internet SA (BSP:LWSA3, Financial) reported a significant increase in margins, with a 4.7% point rise since last year, attributed to strong cost control and operational leverage.
- The company achieved a 16% growth in ecosystem GMV, highlighting its importance in the Brazilian e-commerce chain.
- Locaweb's consolidated net revenue increased by 5.4%, with commerce operations growing by 18% excluding the impact of restructuring.
- The company launched three important products this quarter, including a successful POS system via Trey, enhancing its omni-channel strategy.
- Locaweb returned over 192 million to shareholders through stock buybacks and dividend payments, demonstrating strong shareholder returns.
Negative Points
- The restructuring of the subsidiary Squid has been a drag on the company's bottom line, affecting annual comparisons.
- There was a reported decrease in the acquisition of new subscribers, particularly among customers with less than 15,000 in GMV.
- Despite improvements, Squid's operation still reported a negative profit, although it is nearing break-even.
- The company's growth in online and SaaS segments was modest at 0.3% year-over-year.
- Locaweb's capital allocation strategy, including buybacks and dividends, raised questions about potential changes in capital structure or increased debt.
Q & A Highlights
Q: There was a decrease in revenue for one of your subsidiaries, Tradelink, and an increase in prices last year. Is there a connection, and what are your expectations for these subsidiaries moving forward? Also, regarding capital allocation, do you plan to change your capital structure?
A: The decrease in revenue is due to the accounting state of our subsidiaries, as Trey and Bling have been incorporated into LWSA. They continue to grow, with GMV and TPV increasing. Regarding capital allocation, we have historically generated a lot of cash and plan to leverage existing assets for better returns, maintaining our current capital allocation strategy.
Q: What are the main drivers behind the improvement in EBITA margins, and how do you see these margins moving forward? Also, any updates on the changes in Squid?
A: The margin improvement is due to operational leverage, cost control, and merging operations. We've reduced staff and streamlined operations, contributing to margin growth. Regarding Squid, we've improved processes and optimized the team, nearing break-even, which should positively impact future results.
Q: There was a decrease in new subscriber acquisition in Q3, especially for customers with less than 15,000 in GMV. What are the drivers behind this, and how does Mercado Libre's new product affect you?
A: The decrease is due to a strategic shift to attract more successful clients, focusing on those who will consume more of our ecosystem products. We don't see competition affecting us significantly. Regarding Mercado Libre, we maintain a marketplace-agnostic strategy, integrating with multiple platforms, which differentiates us from their vertical approach.
Q: Can you elaborate on the integration and operational changes within the company and their impact on margins?
A: We've focused on integrating acquired companies, reducing the number of brands, and streamlining operations, which has led to significant cost reductions and improved margins. This includes merging operations like Tray with S Club and optimizing our payment operations.
Q: How is the company leveraging its assets for future growth and cash generation?
A: We are focusing on leveraging existing assets by integrating products for better customer value and cross-selling opportunities. This strategy will help us continue generating cash and support our capital allocation strategy, benefiting our investors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
