• Net Revenue: BRL518 million in Q2 2024, a 3% decrease year-over-year but a 7% increase from the previous quarter.
• Net Revenue Growth: 40% increase compared to the previous year.
• EBITDA: BRL129 million in Q2 2024, a 4% decrease year-over-year but an 11% increase from Q1 2024.
• EBITDA Margin: 25% in Q2 2024, up 1 percentage point from the previous quarter.
• Net Income: BRL8 million in Q2 2024, with a margin of 15%.
• Net Cash Flow: BRL136 million.
• ROIC: 22.5% over the past 12 months.
• Dividends Paid: BRL51 million in 2024, with an additional BRL35 million announced.
• ID and Digital Government Revenue: BRL202 million in Q2 2024, a 19% increase year-over-year.
• Payments Vertical Volume: 17.5 million cards issued in Brazil and Argentina.
• Mobile Segment Revenue: BRL111 million in Q2 2024, with an EBITDA margin of 18.5%.
• Operating Cash Flow: BRL173 million in the semester, 134% of EBITDA.
• Gross Debt Reduction: Significant reduction in Q2 2024.

• Warning! GuruFocus has detected 7 Warning Signs with PFLT.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Valid Solucoes eServicos de Seguranca em Meios de Pagamento e Identificacao (BSP:VLID3) achieved a record net revenue of BRL518 million in the second quarter.
• The company reported a 40% growth in net revenue compared to the previous year, reaching BRL80 million in the quarter.
• Valid Solucoes has consistently paid dividends for eight consecutive quarters, with BRL51 million already paid in 2024.
• The company achieved a ROIC of 22.5% over the past 12 months, indicating strong returns on invested capital.
• New business initiatives, including digital government and onboarding solutions, contributed 12% to the company's EBITDA in the second quarter.

Negative Points

• Net revenue for the second quarter was 3% lower compared to the previous year.
• The company's EBITDA margin dropped by 4% compared to the second quarter of the previous year.
• The mobile segment experienced a decline in sales and EBITDA year-over-year.
• There was a negative financial result of BRL16 million in the quarter, although it was an improvement from previous quarters.
• The company faces challenges in ramping up the issuance of new identity cards in Sao Paolo, affecting growth in the ID segment.

Q & A Highlights

Q: How is the rollout of the new national ID card progressing, and what are the plans for polycarbonate cards? A: Ilson Bressan, Sales and Marketing Director, explained that over 10 million SIMs have been issued in Brazil, with Valid responsible for 5.5 million. The rollout in Sao Paolo has been slower than expected, but growth is anticipated in the coming years. Polycarbonate cards are not yet widespread due to old contracts and cost considerations, but they are expected to ramp up by 2025.

Q: What is the scope of the new contracts in Bahia, Moreno, and the Federal District? A: Bressan stated that the contracts include both traditional and digital government services. In Bahia, the contract is three times larger than before, including national ID card issuance and digital government services. The Federal District contract will double CNH issuance and include digital government platforms.

Q: How does Valid view its operations in Argentina? A: Bressan noted that Argentina has been a strong contributor to the Pay segment despite economic challenges. The company remains cautious about long-term results but intends to maintain its market presence.

Q: What is the strategy for digital onboarding? A: Bressan highlighted the acquisition of Flexdoc and the focus on enhancing digital onboarding services. The company aims to expand its presence in government and financial sectors, leveraging AI and hyper-automation to improve offerings.

Q: What are the expectations for the second half of 2024? A: Bressan expressed optimism, expecting recovery in the mobile segment and continued growth in ID and digital government services. Stability is anticipated in the Pay segment, with potential surprises from Argentina.

Q: How does Valid plan to manage cash flow and future M&A activities? A: Olavo Vaz, RI Director, emphasized the company's strong cash flow and commitment to shareholder remuneration through JCP. Valid is actively seeking M&A opportunities to enhance its portfolio, with a focus on strategic fits.

Q: Does Valid plan to enter new business areas to mitigate obsolescence risks? A: Bressan stated that Valid aims to be a trusted provider of safe identities in Brazil, expanding its portfolio to include digital government and onboarding services. The company is also exploring cloud services and cybersecurity.

Q: What is the contribution of Valid Argentina to the Pay business? A: Bressan mentioned that Argentina accounts for 40% of revenue in the Pay segment, with favorable local conditions boosting EBITDA contributions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.