Linx S.A.
Q1 2021 Earnings Call Transcript
Published:
- Operator:
- Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Linx's Conference Call to discuss the Results of the First Quarter of 2021. With us here today are Mr. Alberto Menache, Linx's CEO; Ramatis Rodrigues, CFO and IRO; and Carolina Pontes, Head of Investor Relations. We would like to inform you that this event is being recorded and simultaneously translated into English. This event is also being broadcast live via webcast and maybe access through Linx's website at ir.linx.com.br where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Before proceeding, let me mention that forward-looking statements about future events, operating or financial results are based on the beliefs and assumptions of Linx's management and also on information currently available to the company. Forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to the macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.
- Alberto Menache:
- Good morning. Thank you very much for your interest and trust in Linx. The first quarter of 2021 was a very difficult one for Brazil. New variants of the coronavirus were detected. The number of infection has skyrocketed across the country, the public health care system and several municipalities collapsed; and unfortunately, the death toll was higher than ever. With all of that, more restrictive measures had to be put in place throughout the nation at different moments, according to the severity of the situation in each municipality or region of the country. At the same time, the country started to vaccinate its population against COVID-19. With this backdrop, e-commerce remains the main alternative for retailers to operate safely and even grow their businesses. Linx continues to develop and improve its products and systems, while at the same time, strengthening partnerships to support retailers to navigate through this challenging period that has wasted over a year. Our portfolio consists of quick and efficient solutions with an excellent cost benefit ratio for all retailers in different industries and profiles. According to IBGE's monthly commerce survey, the volume of sales in retail trade grew 2.4% in March of 2021 when compared to the same period of 2020. However, the negative results posted in January and mainly February resulted in a 0.6% decline year-on-year. We still haven't posted any relevant impact on churn due to the differentiated profile of our customer base and also the fact that the monthly subscription fee had a lower representativeness on our customers' revenue. Also, I would like to take this opportunity to mention the excellent performance of our e-commerce-related products like Linx Commerce, and also our delivery products like the Delivery App and Mercadapp, both posting an impressive growth in the period as we will see further on. Our Opportunities Committee continues to monitor the impacts of COVID-19. In addition to the several measures to protect our cash that have been in place since the early days of the pandemic, a 100% of Linx employees are still working from home. And so far, there is no prediction of when they should return to our offices. Before proceeding, I would like to highlight the status of the business combination between Linx and Stone. As you are aware, on March 19, CADE's General Superintendence issued a technical opinion in favor of the approval with no restrictions of the business combination between Linx and Stone Co. On April 7 this year, we informed the market that the technical opinion from CADE's General Superintendence was appealed and now is being analyzed by CADE's administrative tribunal. Linx will keep its shareholders and the market informed as to the general developments of the referred proceeding and the final decision to be awarded by CADE's general until the final approval occurs, Linx and Stone will continue to operate independently.
- Ramatis Rodrigues:
- Thank you, Alberto, and good morning to you all. Looking at the presentation now on Slide 3. Linx Core total recurring revenue was up 12% year-on-year. And here, I would like to highlight a few points. When we look at the delivery performance in Q1 '21, we see that the recurring revenue was up 302% over Q1 of 2020, with a customer base 114.2% higher when compared to the same quarter of last year. Another highlight is Hiper recurring revenue that grew 36% year-on-year. Hiperadores' base was 27% higher vis-à-vis Q1 of 2020. Pharma's recurring revenue was up 6% over the first quarter of 2020, and customer activation was 39% higher when compared to Q1 of '20. And finally, Linx totaled 428 franchisees in December, accounting for 38% of new activations in the first quarter of 2021. Still on Slide 3. We see the main highlights of Linx Pay that posted 10% growth year-on-year of total recurring revenue. The main highlights are the electronic transfer funds, TF, which was 54% of Linx's space recurring revenue in the quarter and the volume traded was 20% higher when compared to the first quarter of '20. Another highlight was gateway with 4,700 customers in March. QR Code and Pix totaled more than 14,000 customers at the end of Q1 of 2021, increasing the customer base by 8% vis-à-vis December of 2020. Finally, Linx Space TPV grew 2.2 times in relation to the first quarter of 2020. Now moving to Slide 4. We show the highlights for Linx Digital, which total recurring revenue grew 56% in the quarter vis-à-vis last year. Since April of last year, we've been posting a Black Friday sales volume every month with a GMV from the e-commerce platform, 87% higher year-on-year. Linx Impulse recurring revenue grew 37% versus the first quarter of 2020, representing 60% of Linx Digital's recurring revenue. Moreover, there was an increase in Ads, and that increase was 188% higher in the volume of as when compared to the first quarter of last year. And at the end of the quarter, OMNI OMS had 25 clients and 6,300 rollout stores, therefore, recurring revenue was up 71% year-on-year. In the first quarter of '21, approximately 400 sellers published their inventories in marketplaces of Linx partners. And finally, I would like to mention that we reached 38 Linx Digital partners selling Linx Digital Solutions. Now before I turn the floor to Carol, I would like to refer to the allowance for loan losses which was 3.4% of the net revenue in the quarter, meaning BRL 7.8 million accumulated since March of this year. Request to negotiate the maturities of our clients' inventories have been analyzed on a case-by-case basis in the COVID-19 scenario. And by the end of March 2021, approximately 99 of the postponed invoices were paid on time.
- Carolina Pontes:
- Thank you, Ramatis, and good morning to you all. On Slide 5, we see that the recurring revenue was BRL 231 million, 11% higher than the gross revenue of the year before, representing 88% of the gross revenue this first quarter. Linx Core contributed with 72% of the total recurring revenue, whereas Linx Digital contributed with 15% and rate 13%. Now on Slide 6. We see that net revenue was up 11% year-on-year, partially attributed to the positive effects of the continuous acceleration of the digital transformation. But that led to an increase in the adoption of Linx end-to-end platform solutions despite a more challenging economic landscape. Moving now to Slide 7. Adjusted EBITDA was BRL 52 million in the quarter, with an EBITDA margin -- adjusted EBITDA margin of 22% in Q1, up 290 basis points vis-à-vis the previous year and 440 basis points when compared to the fourth quarter of 2020. And finally, on Slide 8, we show the nonrecurring expenses in the quarter that amounted BRL 5 million. This amount contemplates the stock option plan of the company. The impact from the prepayment and assignment of receivables offered by Linx Pay Hub, which have been allocated in the P&L, also legal and financial advisory expenses related to Stone's proposal for Linx and also the net earn-out reversal related to the 4 acquired companies. Thank you for your attention. And now we will proceed to the Q&A session proceed to the Q& about the results of the quarter.
- Operator:
- Alberto Menache:
- First of all, I would like to congratulate Linx's team for their excellence performance and results posted in this quarter, and thank you for their resilience. I think that the company was able to overcome these dire moments as by the pandemic. I would also like to congratulate our accounting team, the IR team. I would like to thank your support throughout this process with CADE related to Stone and Linx business combination. I would like to thank Linx's financial team. They've been doing an excellent work. I would like to thank all of our VPs and those who work with me. Thank you for this incredible partnership. And last but not least, I would like to thank Linx Board Members, we just elected a new independent member, Linx's founders. Now I would like to thank our entire team and thank Linx's shareholders for their trust in the company. We are at your disposal. I wish you all very good day. Thank you very much.
- Operator:
- Linx's conference call on the results of the first quarter of 2021 is now concluded. Thank you all for joining us. And have a very good day.