Earnings 4Q

Release 23

Videoconference with simultaneous translation into English

March 07, 2024 - 10 a.m. (BRT)

Access:Click here

Highlights

Valid presents a 20% growth in Net Revenue and achieves a Net Profit of R$ 213 million for the year.

São Paulo, March 06, 2024 - Valid (B³: VLID3 - ON) presents today its results for the fourth quarter (4Q23) and full year of 2023.

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 2022.

Net Revenue

  • Net Revenue stood at R$633Mn in 4Q23, up by 32% over 4Q22 and by 13% over 3Q23;

▪ In 2023, Net Revenue reached R$2.26Bn, up by 20% over the R$1.88Bn reported in 2022. The YoY revenue growth exceeded 10% in all operating segments.

▪ EBITDA was R$147Mn in 4Q23, up by 9% over the R$135Mn

EBITDA

reported in 4Q22. The EBITDA margin stood at 23.2% in the

quarter;

▪ EBITDA closed the year at R$567Mn, a 19% YoY growth. This is

the 3rd consecutive year that Valid reports record EBITDA;

▪ The EBITDA margin stood at 25.1% in 2023, in line with the

25.4% reported in 2022.

▪ Net income attributable to controlling shareholders was

Net Income

R$36Mn in 4Q23, with a net margin of 5.7%, up by 44% over

4Q22;

  • In 2023, Net Income attributable to controlling shareholders stood at R$213Mn, with a margin of 9.5%. Compared to the Net Income of R$24Mn reported in 2022, growth came to 774%.

4Q23 Results |

1

Cash Conversion and Leverage

  • The EBITDA-to-Cash conversion rate stood at 109% in 4Q23. This rate was 95% in 2023;
  • The effort to optimize Working Capital strengthened in 2H23 and enabled another period of significant leverage reduction in 2023;
  • The ND/EBITDA ratio closed the year at 0.13x only, com with a Net Debt of R$73Mn, the lowest level ever reported since the
    Company's IPO.

Subsequent Events

  • In January, Valid concluded the sale process of its property in São Bernardo do Campo, as well as its stake in Serbet/Digital Parking.
  • Also in January, we prepaid the bilateral debt outstanding with Safra, of approximately R$16Mn, given that the cost of this transaction was above the amount being raised by Valid.
  • On February 19, we disclosed a Material Fact announcing some changes in Valid's Executive Board. After nearly three and a half years as the Chair of the Executive Board, having led and delivered important operational, financial, governance, and team results, Mr. Ivan Murias will leave this position to Mr. Ilson Bressan, who will take office on April 01. Bressan joined Valid in May 2020 and was responsible for the ID segment. Valid promoted Mr. Leandro Castro, who has been one of the leaders in this unit since June 2023, for the position previously held by Mr. Bressan.
  • On March 06, we disclosed a Material Fact announcing the conclusion of the sale of 67.5%, equivalent to 8,863,743 shares, for €32.175.387, that Valid Soluciones Tecnológicas ("Valid Spain") owned in the IOT Cubic Telecom. After this event, Valid will remain, through its subsidiary Valid Spain, with 7,261,873 shares of the investee company.
  • The Board of Directors is proposing, to be confirmed at the Ordinary General Meeting that will take place on April 17, the payment of additional dividends for the 2023 fiscal year in the amount of R$24,646,235.95, which represents R$0.307585 per share, considering the current shareholders

4Q23 Results |

2

basis, already excluding treasury shares. The Company's shareholders holding shares on 04/22/2024 will be entitled to the dividends. Payment will be made on 04/30/2024.

Note: In 2023, Valid recorded non-recurring accounting entries in its financial statements, totaling R$9Mn, due to the receipt of past amounts from a major client from the government segment.

4Q23 Results |

3

Comments from the Management

Dear sirs,

All Executive Board members are proud to present today the results for 2023.

Before breaking down the figures achieved, we would like to once again the work of each one of our employees. At the end of 2020, we started writing a new chapter in Valid's long history, and it was evident that we would need a significant cultural and organizational change.

Also in 2021, we conducted the first NPS survey with our employees and received a score of 53%. In January 2024, we conducted another version of the survey and achieved a score of 73%. The significant increase in the indicator shows us that everyone at Valid is building, quarter after quarter, a better environment to thrive. And undoubtfully dedicated human capital interested in the Company yields results.

Moving on to the figures, 2023 will be marked as the 3rd consecutive year in which Valid reports significant results both on the operational and financial fronts. The highlights are as follows:

  1. 20% growth in Net Revenue, reaching R$2.26Bn;
  2. Record EBITDA and Net Income in the period, of R$567Mn and R$213Mn, respectively;
  3. 4.8 p.p. increase in ROIC, reaching 22.5% at the end of 2023;
  4. Progress, especially in 2H, in Working Capital optimization efforts, which led to an EBITDA-to-Cash conversion rate of 95% in the year;
  5. Reduction of approximately R$250Mn in Net Debt in 2023, closing the period with only R$73Mn in Net Debt, representing a leverage of 0.1x;
  6. Resumption of the continuous process of distributing dividends to shareholders, with the payment of R$98Mn in 2023 alone;
  7. Significant increase in stock liquidity, moving up from R$2.9 million in 4Q22 to R$8.9 million in 4Q23. In 2023, Valid became part of the SMLL11 index, increasing its representation in the index throughout the year;
  8. On the strategic side, we announced, in the mid of the year, the acquisition of Flexdoc, and, in 4Q23, we executed an agreement for the sale of the minority stake that Valid Spain held in IOT, Cubic Telecom, whose closing and receipt of approximately €32 million is expected for 1Q24;
  9. Conclusion of the process of selling the São Bernardo do Campo property and the stake held by Valid in Serbet Digital Parking.

The highlights by business unit are as follows:

4Q23 Results |

4

Valid ID:

  1. Strong document issue volume in all quarters of 2023, which was no different in 4Q23. We issued 7.1 million documents in 4Q23, and closed the year with 28.9 million documents issued. The segment revenue reached R$210Mn in the quarter and R$747Mn in the year, growths of 23% and 17% over the same periods in 2022.
  2. EBITDA stood at R$67Mn in the quarter, with a margin of 31.9%, and R$252Mn in the year, with a margin of 33.7%. The margin achieved was slightly below the 34.4% reported in 2022.
  3. The year 2023, especially in 1H, benefited from the extended deadlines for the expiration of driver's licenses that would initially expire during the pandemic, which will not occur in 2024.

Valid Pay:

  1. Growths of 44% in sales, reaching R$268Mn, and 56% in EBITDA, reaching R$56Mn, compared to 4Q22. In 2023, sales reached R$892Mn (+30%) and EBITDA came to R$191Mn (+62%).
  2. The operating margins came to 21.0% in the quarter and 21.4% in 2023, showing an improvement compared to the levels achieved in 2022.
  3. The result obtained in this vertical throughout the year, more especially in the 4th quarter, was influenced by the favorable scenario for Valid in Argentina. As it is currently a hyperinflationary country, local numbers need to undergo corrections in accordance with IAS 29 / CPC 42. Such adjustments benefited the EBITDA of this vertical in the period.
  4. In the last quarter, the country also experienced a significant devaluation of the local exchange rate, which led to a launch of foreign exchange expenses affecting the profit of the 4th quarter.

Valid Mobile:

  1. In the Mobile segment, we closed the year with an 11% increase in Revenue, reaching R$617Mn, and a 12% drop in EBITDA, to R$124Mn. These results represent an EBITDA margin of 20.1% in the year, down by 5.2 p.p. from the margin reported in 2022.
  2. During the 2023 reports, we mentioned that this business unit would undergo a stronger adjustment in prices and margins as the volume of SIM cards increased. In the 1st half of the year we managed to sustain prices and margins, however in the 2nd half we saw the deterioration we were talking about affecting the results.
  3. In some locations, especially in those regions where SIM Cards used are of lower added value, price competition has been more intense. We will continue to observe these

4Q23 Results |

5

dynamics to preserve our market share without excessively compromising the unit's

profitability.

Thank you very much, and let's move forward!

4Q23 Results |

6

Consolidated Result

Consolidated Result (R$ Million)

4Q22

4Q23

Var. %

2022

2023

Var. %

Net Operating Income

478.8

633.5

32.3%

1,879.4

2,255.5

20.0%

Costs

-309,7

-406.9

31.4%

-1,209.8

-1,432.7

18.4%

Gross result

169.1

226.6

34.0%

669.6

822.8

22.9%

Gross Margin

35.3%

35.8%

35.6%

36.5%

Operating income (expenses)

Selling expenses

-41.9

-66.3

58.2%

-176.1

-194.1

10.2%

General and administrative expenses

-21.2

-42.3

99.5%

-115.7

-165.7

43.2%

Other non-operating income (expenses)*

-44.7

-43.8

-2.0%

-71.7

-71.0

-1.0%

Equity pick-up

-1.5

0.6

n.a.

-3.4

-0.2

-94.1%

Operating Income

59.8

74.8

25.1%

302.7

391.8

29.4%

Operating Margin

12.5%

11.8%

16.1%

17.4%

Financial Result

Financial income

60.0

117.5

95.8%

220.3

277.1

25.8%

Financial expenses

-94.1

-160.2

70.2%

-407

-396

-2.7%

Profit (loss) for the period before Income Tax and

Social Contribution

25.7

32.1

24.9%

116.2

273.2

135.1%

Income and social contribution taxes

-0.3

2.7

n.a.

-18.8

-62.6

233.0%

Profit (loss) after Taxes

25.4

34.8

37.0%

97.4

210.6

116.2%

Net profit from discontinued operations

-10.6

0.0

n.a.

-81.9

0.0

n.a

Income (loss) for the period

14.8

34.8

135.1%

15.5

210.6

1258.7%

profit attributable to:

Controlling shareholders

24.7

35.6

44.1%

24.4

213.3

774.2%

Non-controlling shareholders

-9.9

-0.8

-91.9%

-8.9

-2.7

-69.7%

EBITDA Reconciliation (R$ million)

4Q22

4Q23

Var. %

2022

2023

Var. %

Net income for the period

24.7

35.6

44.1%

24.4

213.3

774.2%

(+) Non-Controlling Interest

-9.9

-0.8

-91.9%

-9.0

-2.6

-71.1%

(+) Income tax and social

0.3

-2.7

n.a.

19.0

62.5

228.9%

contribution

(+) Financial expenses/(income)

34.1

42.7

25.2%

186.5

118.5

-36.5%

(+) Depreciation and amortization

29.1

29.4

0.8%

100.4

104.0

3.6%

(+) Other non-operating income

44.7

43.7

-2.2%

71.7

71.0

-1.0%

(expenses)

(+/-) Equity pick-up

1.5

-0.6

n.a.

3.3

0.3

-90.9%

(+/-) Results from discontinued

10.6

0.0

-100.0%

81.9

0.0

-100.0%

operations

EBITDA

135.1

147.3

9.0%

478.2

567.0

18.8%

EBITDA Margin

28.2%

23.2%

25.4%

25.1%

*Breakdown of Other Non-Operating Income/Expenses

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

4Q22

4Q23

Var. %

2022

2023

Var. %

Brazil

-37.6

-37.6

0.0%

-44.0

51.0

15.8%

Foreign

-7.1

-6.2

-12.6%

-27.7

20.1

-27.6%

Total

-44.7

-43.8

-2.0%

-71.7

71.0

-1.0%

Net Revenue

4Q23 Results |

7

Valid's total Net Revenue reached R$2,26Bn in 2023 (+20% YoY) and R$633Mn in 4Q23, up by 32% over 4Q22. All Valid's operational segments grew by more than 10% YoY. In the last 2 years, Valid has achieved annual growth of 40%.

Net Revenue (R$ Million)

+45%

633

+40%

437

479

210

2,256

1,879

171

1,167

747

137

268

637

511

165

186

892

594

684

156

135

121

512

558

617

4Q21

4Q22

4Q23

2021

2022

2023

ID

Pay

Mobile

ID

Pay

Mobile

OPEX and EBITDA

Valid's Consolidated OPEX totaled R$486M in the quarter, up by 41.5% YOY. As a result, EBITDA was R$147Mn in the quarter (+9% YOY). The EBITDA Margin reached 23.2%. EBITDA totaled R$567Mn in the year, an increase of 18.6%, which marks the 3rd consecutive year of record results, while the margin came to 25.1% (-0.3 p.p. YoY).

EBITDA (R$ Million)

+9%

+19%

135

147

478

567

4Q22

4Q23

2022

2023

EBITDA Margin

28.2%

23.2%

25.4%

25.1%

4Q23 Results |

8

Consolidated Result

Below is the quarterly evolution of the cash conversion throughout 2023. The indicator has significantly grown due to the dedicated work on improving Working Capital management, with a special focus on the Accounts Receivable and Inventory lines. This improvement in the indicator has enabled a continued reduction in leverage. In the year, YTD OCF/EBITDA exceeded 95%.

Operating Cash Flow (R$Mn)

OFC/ EBITDA

176%

223

109%

160

73%

98

39%

58

1Q23

2Q23

3Q23

4Q23

1Q23

2Q23

3Q23

4Q23

Net Income

The Company reported an all-time high Net Income of R$213Mn in 2023, compared to the R$24Mn recorded in 2022 (774% YoY). This result represents an earnings per share of nearly R$2.70. Compared to the previous year's result, the increase came from i) the EBITDA growth; ii) the fact that 2023 was not impacted by the USA operation; and iii) the reduction in currency variations linked to loans and the significant decrease of the Company's debt, which led to a decrease in demand for interest payments. The quarterly profit was mainly affected by the significant devaluation of the Argentine currency in December, which impacted the financial result.

Net income for the period (R$ Million)

4Q22

4Q23

Var. %

2022

2023 Var. %

EBITDA

135.1

147.3

9.0%

478.2

567.0

18.6%

EBITDA Margin

28.2%

23.2%

25.4%

25.1%

(+) Other non-operating Income/Expenses

-44.7

-43.8

-2.2%

-71.7

-71.1

-1.0%

(+/-) Equity pick-up

-1.6

0.7

n.a.

-3.3

-0.3

-90.9%

(+) Non-Controlling Interest

10.0

0.8

-91.9%

9.0

2.7

-71.1%

(+) Income tax and social contribution

-0.3

2.7

n.a.

-18.7

-62.5

228.9%

(+) Financial Expenses/Revenues

-34.1

-42.8

25.2%

-186.6

-118.6

-36.5%

(+) Depreciation and amortization

-29.1

-29.4

0.8%

-100.4

-103.9

3.6%

(+) Results from discontinued operations

-10.6

0.0

n.a.

-81.9

0.0

-100.0%

Net Income (Loss)

24.7

35.6

44.1%

24.4

213.3

774.2%

4Q23 Results |

9

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Disclaimer

Valid Soluções SA published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 March 2024 22:23:28 UTC.