Earnings 1Q

Release 24

Videoconference with simultaneous translation into English

May 09, 2024 - 10 a.m. (BRT)

Access:Click here

Valid closes the quarter with a Net Income of R$148Mn and reaches the Net Cash

level for the first time since its IPO.

São Paulo, May 08, 2024 - Valid (B³: VLID3 - ON) presents today its results for the first quarter of 2024 (1Q24).

The following financial and operating information is presented on a consolidated basis, in Brazilian reais, under International Financial Reporting Standards (IFRS). Comparisons refer to the same periods in 2023.

Net Revenue reached R$484Mn in 1Q24, down by 8% from

1Q23.

Net Revenue

As anticipated back in 2023, the greatest volume and price

pressures would come from the Mobile segment, which was

the main responsible for the revenue loss in the YoY

comparison.

EBITDA totaled R$116Mn in 1Q24, down by 19% from 1Q23, with

EBITDA

a margin of 24% compared to 27.1% in 1Q23;

Similarly to sales, the largest contributor to the decline in

terms of EBITDA was also the Mobile segment.

Net Income attributable to controlling shareholders was

Net Income

R$147Mn in 1Q24, with a net margin of 30%, up by 146% over

1Q23;

The result for the period was mainly positively influenced by

the sale of the minority stake held by Valid in the IOT

company Cubic Telecom.

1Q24 Results |

1

Net Cash and Leverage

  • Despite the cash utilization in operational activities, the sale of Cubic allowed Valid to end the first quarter with a Net Cash position of R$70Mn, a level never reached since its IPO.
  • Immediately after the closure of 1Q24, Valid concluded the process of the 10th debenture issue. The issue had the participation of almost all creditors from the 9th issue, and will allow Valid to extend its average debt maturity by around 7 months, from 19 to 26 months, and reduce its debt cost by around 50 bps, reaching an average cost of CDI + 1.79% p.a. in Brazil.

Subsequent Events

  • As mentioned in the previous section, in May, Valid carried out the 10th issuance of Debentures, where 97.26% of debenture holders adhered to the Exchange Offer, representing a volume of BRL 243,141,000, migrating from the 9th issuance to the 10th issuance. The rate for the new issuance is CDI+1.95% with a maturity of 5 years.
  • Valid extended a bilateral debt with Banco do Brasil, reducing the cost of this operation from CDI + 2.17% p.a. to CDI + 1.70% p.a.
  • At the ASM held on April 17, 2024, shareholders approved the payment of an extraordinary dividend of R$0.3074 per share. The payment was made on April 30, 2024.

1Q24 Results |

2

Dear sirs,

All Executive Board members are proud to present today Valid's results for the first quarter of 2024.

Valid, a company renowned for its solid and diversified presence in the identification systems, secure payments, and connectivity solutions market, maintained its trajectory of financial strength in 1Q24.

In a period marked by global economic challenges, the Company not only sustained its stable financial performance but also achieved a significant milestone: net cash position.

Furthermore, Valid continues to show its commitment to shareholders by maintaining its consistent remuneration policy. In early 2024, Valid paid extraordinary dividends for 2023, reinforcing its track record of distributing attractive returns. This remuneration policy reflects the Company's resilient business model and Management's confidence in its ability to create sustainable long-term value.

Valid's Management reaffirms its commitment to executing its business strategy focused on innovation and sustainable growth, without neglecting the operational gains achieved over the last few quarters.

To strengthen its transformation process, Valid has been boosting its teams of employees. In the first months of 2024, we welcomed recognized professionals from the market in engineering, data, customer success, sales, and marketing to increasingly focus on the customer journey and new revenue growth opportunities.

Moving on to financial highlights, 2024 started featuring the following items:

  1. Net Revenue of R$484Mn, EBITDA of R$116Mn, and Net Income of R$147Mn;
  2. LTM ROIC of 21.0%, maintaining the indicator above 20%;
  3. Net Cash of R$70Mn, with Valid achieving significant progress with creditors in extending and reducing the cost of its debts;
  4. Maintenance of shareholder remuneration dynamics through the extraordinary dividend for 2023 approved at the ASM held on April 17, 2024
  5. Valid's presence in events and rounds with Brazilian and international investors, reinforcing their interest in the transformation the Company is currently undergoing;
  6. VLID3 liquidity closed 1Q24 at R$8.8Mn in daily volume, in line with the R$9Mn recorded at the end of 2023, up by 238% over 1Q23.

The highlights by business unit are as follows:

Valid ID:

1Q24 Results |

3

  1. 7.2 million documents were issued in 1Q24, in line with the 7.3 million documents issued in 1Q23. The volume highlight has been the issue of the New ID Card, whose volume has increased since the official introduction of the new document in January 2024.
  2. Revenue from the segment reached R$194Mn in the quarter, up by 12%. EBITDA came to R$60.8Mn in the quarter, 6% increase from 1Q23, with a margin of 31.3%.
  3. Starting this quarter, we will provide more detailed figures for other divisions that make up our ID segment, such as the Digital Government segment, which accounted for approximately 6% of revenue in this segment. In the period analyzed, Digital Government solutions generated revenue of R$11.8Mn and an EBITDA of R$4.7Mn, with a margin of 39.7%. In the ID section, we will provide more details about the services considered in this segment.

Valid Pay:

  1. Revenue came to R$191Mn in 1Q24, down by 5% from 1Q23. The decrease was due to the discontinuation of some business lines throughout 2023, which are no longer accounted for in 2024. In the main revenue-generating units, such as Cards in Brazil and Argentina, we reported YoY revenue growth.
  2. EBITDA for the Pay unit stood at R$41Mn in 1Q24, down by 5% from 1Q23. The margin in the period was 21.4%, virtually flat from the 21.6% reported in the first months of 2023.
  3. In the Argentine scenario, after a significant devaluation of the official exchange rate of the local currency in 4Q23, the country had a less turbulent 1st quarter with the local government enabling financial operations for the payment of outstanding old amounts. Valid made some intra-group payments, releasing part of the cash that was retained in Argentina.

Valid Mobile:

  1. As it had been occurring in 2H23, the Mobile segment started 2024 with a significant volume decrease, leading to a 37% YoY reduction in revenue, reaching R$98.8Mn.
  2. The scenario with lower prices also led to a significant reduction in EBITDA, which ended the quarter at R$14.3Mn, down by 66% from 1Q23. This amount represents a margin of 15%, in line with those achieved in 3Q23 and 4Q23.
  3. Valid remains well-positioned among the leaders in this segment, cautious regarding price dynamics, although it believes that during the year 2024, the first quarter is expected to be the period with the weakest results

Let's move forward, always seeking innovation for Valid!

1Q24 Results |

4

1Q23

1Q24

Var. %

Net Operating Income

529.3

484.3

-8.5%

Costs

-321.8

-305.1

-5.2%

Gross result

207.5

179.2

-13.6%

Gross Margin

39.2%

37.0%

Operating income (expenses)

Selling expenses

-49.0

-47.6

-2.9%

General and administrative expenses

-39.7

-38.8

-2.3%

Other non-operating income (expenses)*

-16.4

109.1

n.a.

Equity pick-up

-1.0

-1.7

70.0%

101.4

200.2

97.4%

Financial Result

Financial income

46.5

47.4

1.9%

Financial expenses

-65.4

-77.5

18.5%

Profit (loss) for the period before Income Tax and Social

Contribution

82.5

170.1

106.2%

Income tax and social contribution

-22.9

-23.5

2.6%

Income (loss) for the period

59.6

146.6

146.0%

Net Margin

11.3%

30.3%

Profit attributable to:

Controlling shareholders

59.4

147.8

148.8%

Non-controlling shareholders

0.2

-1.2

n.a.

1Q23

1Q24

Var. %

Net income for the period

59.4

147.8

148.8%

(+) Non-controlling interest

0.2

-1.2

n.a.

(+) Income tax and social contribution

22.9

23.5

2.6%

(+) Financial expenses/(income)

18.9

30.1

59.3%

(+) Depreciation and amortization

24.8

23.5

-5.2%

(+) Other non-operating income (expenses)*

23.1

-109.1

n.a.

(+/-) Equity pick-up

1.0

1.7

70.0%

(+/-) Results from discontinued operations

0.0

0.0

n.a.

EBITDA

143.6

116.3

-19.0%

EBITDA Margin

27.1%

24.0%

*Breakdown of Other Non-Operating Income/Expenses

Other Non-Operating Income/Expenses (R$ million)

1Q23

1Q24

Var. %

Brazil

-9.3

-0.2

-98.1

Foreign1

-7

109.3

n.a.

Total

-16.4

109.1

n.a.

¹Other Non-Operating Income and Expenses include the sale of shares in Cubic and the recognition of impairment related to VCMC assets.

1Q24 Results |

5

Net Revenue (R$ Million)

448

529

484

156

156

99

191

159

200

132

173

194

1Q22

1Q23

1Q24

ID

Pay

Mobile

Valid's Total Net Revenue reached R$484Mn in 1Q24 (-8% YOY). We reported an increase in sales in the ID/Digital Government segment (+12%), a slight reduction in the Pay segment (-5%), due to the discontinuation of some business lines, and a decrease in sales in the Mobile/Connectivity unit (-37%).

OPEX and EBITDA

Valid's Consolidated OPEX totaled R$368Mn in the quarter, down by 4.6% YoY. As a result, EBITDA was R$116Mn in the quarter (-19% YoY). The EBITDA Margin reached 24.0%.

EBITDA was particularly impacted by the Mobile segment, which experienced a 66% decrease, in line with a previously mapped scenario of volume and average price reduction. In the other segments, the values achieved in the quarter were close to those reported in 1Q23.

EBITDA (R$ Million)

-19%

144 116

1Q23 1Q24

EBITDA Margin

27.1%

24.0%

1Q24 Results |

6

The chart below shows Valid's cash conversion evolution over the last few quarters. After significant progress, mainly in 2H23, 1Q24 showed a cash allocation in the main operating lines. Although accounts such as Inventory and Accounts Receivable increased over the end of 2023, the level reached by the end of 1Q24 is better than that of March 2023. We emphasize that the pursuit of efficiency in managing Valid's operational assets remains one of the team's main guidelines.

Operating Cash Flow (R$ Million)

OCF/EBITDA

176%

223

159

109%

73%

98

39%

58

-11%

-13

1Q23

2Q23

3Q23

4Q23

1Q24

1Q23

2Q23

3Q23

4Q23

1Q24

Net Income

We closed the quarter with a Net Income of R$147.8Mn, compared to the R$59.4Mn reported in 1Q23 (+146% YoY), which represents earnings per share of R$1.83, the highest value ever delivered by the Company for a three-month period. The value achieved was due to:

  1. a positive impact arising from the completion of the transaction involving Cubic Telecom, contributing approximately R$137Mn to the result; and
  2. a negative impact arising from the impairment related to Valid's minority stake in VCMC of R$24.4Mn. Excluding these effects, the recurring Net Income would have been R$34.2Mn.

In addition to the aforementioned impacts, we had financial expenses of approximately R$7.5Mn in 1Q24, due to the release of funds from Argentina through BOPReal operations. These operations conducted in February and March allowed us to make payments primarily within the Valid group. In February, we were also negatively impacted by approximately R$8Mn in Valid Nigeria, due to the depreciation of the local currency.

1Q24 Results |

7

As mentioned in previous reports, we believe that throughout 2024, we will have a significant improvement in our Financial Result due to the Company's current Cash position. Analyzing only Financial Income accounts and interest expenses, we reported a negative R$1.1Mn in 1Q24. In the same period of 2023, this figure came to a negative R$15.3Mn.

1Q23

1Q24

Var. %

EBITDA

143.6

116.3

-19.0%

EBITDA Margin

27.1%

24.0%

(+) Other non-operating Income/ Expenses

-16.4

109.1

n.a.

(+/-) Equity pick-up

-1.0

-1.7

70.0%

(+) Non-controlling interest

-0.2

1.2

n.a.

(+) Income tax and social contribution

-22.9

-23.5

2.6%

(+) Financial Expenses/Revenues

-18.9

-30.1

59.3%

(+) Depreciation and amortization

-24.8

-23.5

-5.2%

(+) Results from discontinued operations

0.0

0.0

n.a.

Net Income (Loss)

59.4

147.8

148.9%

The EBITDA-to-Net bridge in 1Q24 is as follows:

  • R$7.5Mn in Expenses related to the release of funds from Argentina
  • R$14Mn in Exchange Losses (Nigeria and Argentina)

111 148

116

-30

(+149% YoY)

-24

-24

-3

EBITDA 1Q24

Financial Result

Depreciation and

Income tax and

Others

Cubic and VCMC

Net Income 1Q24

Amortization

social contribution

1Q24 Results |

8

R$ Million

1Q23

1Q24

Var.%

4Q23

Var.%

Revenue

173.1

194.1

12.1%

212.2

-7.7%

EBITDA

57.5

60.8

5.7%

66.8

-9.0%

EBITDA Margin

33.2%

31.3%

-1.9 p.p.

31.8%

-0.5 p.p.

OPEX

115.6

133.3

15.3%

143.4

-7.0%

Volume of Documents (million)

7.3

7.2

-2.0%

7.1

2.0%

Revenue from the ID and Digital Government segment totaled R$194Mn, up by 12% over 1Q23

In the quarter, the company issued 7.2 million documents, a small decrease over the 7.3 million issued in 1Q23. The volume decrease in the quarter is related to the calendar effect, whereby the first three months of 2024 had fewer business days than the previous year. We have also observed an increase in demand for ID issues since the early months of 2024, a trend that is expected to continue due to the National ID Card (CIN). ID card issues grew by 14% in 1Q24.

The ID segment is closely related to the physical and digital issues of documents. However, over the past few years, Valid has been diversifying its operations in this segment. In 1Q23, document issues accounted for 77% of the segment's revenue, whereas in 1Q24, these services accounted for 67% of revenue. Sales related to issues have remained virtually flat YoY, showing the growth potential of other products and services.

7,4

6,9

7,3

7,0

7,5

7,1

7,2

6,2

5,7

5,8

6,3

7,2

4,4

3,6

1Q21

2Q21

3Q21

4Q21

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

1Q24

Documents emission

Moving average 4 quarters

Starting this quarter, we will present the revenue of the Digital Government unit. This unit currently consists of solutions developed by Valid in four States (MG, PR, RS, and CE). Revenue came to R$11.8Mn in 1Q24, while EBITDA totaled R$4.7Mn, with a margin of 39.7%. In 2024, we intend to ramp up projects that have already been started, as well as expand Valid's presence in other regions.

In addition to the Digital Government segment, it is also worth highlighting the results obtained through our onboarding and document verification services, which became

1Q24 Results |

9

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Valid Soluções SA published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 21:43:49 UTC.