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Edited Transcript of PARC3.SA earnings conference call or presentation 15-Aug-19 2:30pm GMT

Q2 2019 Wiz Solucoes e Corretagem de Seguros SA Earnings Call

BRASILIA Sep 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Wiz Solucoes e Corretagem de Seguros SA earnings conference call or presentation Thursday, August 15, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Heverton Pessoa de Melo Peixoto

Wiz Soluções e Corretagem de Seguros S.A. - CEO & Chairman of the Executive Board

* Marcus Marques Martino

Wiz Soluções e Corretagem de Seguros S.A. - Chief Financial & IR Officer and Member of The Executive Board

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Presentation

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Operator [1]

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Good morning, everyone, and thank you for waiting. Welcome to the Wiz Second Quarter of 2019 Results Conference Call. With us here today, we have Mr. Heverton Peixoto, CEO; Mr. Marcus Martino, Chief Financial and Investor Relations Officer; and Mr. Guilherme Aguiar, Market Relations and M&A Officer.

This event is being recorded. (Operator Instructions) This event is also being broadcast live via webcast and may be accessed through the Wiz website at www.wizsolucoes.com.br/ir, 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. Those following the presentation via the webcast may post their questions on our website. They will be answered by the IR team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Wiz management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Heverton Peixoto. Mr. Peixoto, you may begin your presentation.

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Heverton Pessoa de Melo Peixoto, Wiz Soluções e Corretagem de Seguros S.A. - CEO & Chairman of the Executive Board [2]

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Good morning, everyone. Welcome to our 2019 second quarter earnings release conference. After this opening, Mr. Martino will present to you the quarter results.

We ended another quarter with important developments at Wiz. In the company's historical scope, we have made significant progress in the last month in consolidating our position as the largest manager of business units in the distribution of insurance and financial products in the country with an increasing portfolio of business units in Wiz structure. We keep analyzing opportunities in sectors where we may boost results and generate value with all the know-how acquired and proven in the recent years.

I would like to mention the progress in our last partnership with Banco Inter, Inter Seguros, where we are working hard at the stage of mapping short-, medium- and long-term opportunities and strategic planning. We strongly believe in the outcome of these units, which will bring important value to all those involved in the transaction.

Regarding our controlled business units, we keep looking for continuous progress with the company 100% prepared and active in new commercial independents designed for each workflow. We have developed a management model and technology tools applicable to our current and future business units by supporting and boosting the execution of group's strategic and operation model in the search for better results.

In the second quarter, I highlight the launch of a platform developed by our Wiz corporate unit, which enables a quote and issue of surety bond insurance 100% online. In addition, the sales level in our Wiz Partners operation was an important news. With a renewed commercial model and record of production, Wiz reached more than BRL 970 million in sales of consortium letter in the quarter.

Lastly, we are still focused on expanding productivity and results of our main operation alongside with our partners, CAIXA Seguridade and CAIXA Seguradora.

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Marcus Marques Martino, Wiz Soluções e Corretagem de Seguros S.A. - Chief Financial & IR Officer and Member of The Executive Board [3]

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Thank you, Heverton. Good morning, everyone. I'd like to begin the financial presentation with Slide 3, events and quarter highlights.

In this quarter, we highlighted material performance of Wiz Parceiros, our business unit focused in consortium and insurance sales. Wiz Parceiros reached over BRL 970 million letters of consortiums sold, the highest amount sold by the unit so far. This performance reflects our efforts throughout the year in the revision of selling strategy, along with the expansion of our sales force.

I would also like to highlight the closing of the 40% stake acquisition of Inter Seguros approved by CADE, our state agency regulator. With the closing of the transaction, we performed the payment of the first installment in the amount of BRL 45 million and accounted the acquisition in our balance sheet. We will recognize the proportional equity income from June 2019 only in July 2019, therefore, normalizing the equity income flow at that time.

Lastly, we celebrate for the fourth year in a row the Great Place to Work award in the center west region. The sequence of awards show the consistency of our culture, which is based in people and in the investment made in the formation of high-performance personnel. We celebrate another accomplishment and remain committed to high performance and turning our company into a growth environment for our employees.

Moving to Slide 4, the earnings summary. We highlight our EBITDA that posted 10% growth versus second quarter '18 due to higher gross revenue in the quarter and drop in G&A expenses, reflection of our continuous work to maintain the company's operating efficiency. We also highlight our net income that posted growth of 11.2% in the quarter versus second quarter '18 and the net income after minority interest that totaled BRL 52.5 million, 10.6% growth year-on-year.

Moving to Slide 5. We present the effects for our adjusted vision. In this quarter, we did not have nonrecurring effects on EBITDA. It is stable. We present only the adjustments considered for deferred tax analysis.

In the second table on adjusted net income for the second quarter of this year, we had the effect of present value adjustment, AVP, of future installments of Finanseg acquisition. In addition, in amortization of Finanseg intangible assets line, we adjust the amortization expense on intangible assets recognized in this acquisition. We also adjust the AVP and the monetary restatement of future installments of the acquisition cost of Inter Seguros.

Moving to Slide 6, we detail gross revenue per business unit. In second quarter '19, we reached gross revenue of BRL 184.6 million, an increase of 12.6% when compared to second quarter '18. The results was mainly driven by the performance of our Wiz BPO business unit, which added BRL 18.8 million to gross revenue in the period.

In the bancassurance operation, we'd like to highlight the performance of our Credit Life product, which grew 10.9% in second quarter over second quarter '18, which we present an addition of BRL 4.1 million in gross revenue. That's the business excellent result.

The bancassurance operation decreased 1% when compared to second quarter '18 as a result of the drop in mortgage in the quarter due to changes in the product commission model.

Moving forward, our Wiz Parceiros unit, which sell CAIXA Seguradora consortium products at open fee, grew 7.2% in the quarter over the previous year driven by the increase in the sales of consortium letters in the quarter as well as performance of insurance products sold at the unit. In this quarter, the new compensation model of this operation come into force, as detailed in our earnings release.

Regarding the business unit share in the company's total gross revenue in the first half of the year, we observed a decrease of 7.9 percent points in bancassurance shares in the company's top line, offset by the significant increase in share by Wiz BPO.

Finally, our revenue stock accounted for 45% of the company's total revenue this quarter, a result 4.2 percent point lower than second quarter '18, influenced by significant revenue of the Wiz BPO unit, which revenues are fully new sales. In our bancassurance operation, we had a revenue stock of BRL 58.8 million in the quarter.

Continuing now on Slide 7. Let's talk about our costs. In second quarter '19, our costs increased 33.4% when compared to the same period of previous year. This result is mainly due to the consolidation of Wiz BPO, which is the result of new headcount focus at the unit's new activities, impacting the personnel line; two, increase the physical and technological infrastructure cost, which support our new organization structure of the operation; and three, impact of software license cost.

In this quarter, we also had an increase in the bancassurance operation cost due to the increase in costs related to sales commission and provision for profit sharing [year-over-year].

On Slide 8, let's talk about our expenses. General and administrative expenses decreased by BRL 1.2 million or 4.5% in second quarter '19 when compared to the same period of the previous year because of the company's focus on controlling the level of expense.

In personnel expenses, the BRL 1.9 million or 11.6% decrease in second quarter '19 when compared to the same period of previous year is mainly due to the 11.3% reduction in the administrative headcount in the period as a result of company's effort to optimize its administrative structure.

In occupancy cost, the decrease of BRL 0.7 million or 49% in second quarter '19 when compared to second quarter '18 results from the reduction in rent and condominium expenses, with a reduction in the physical space used at the company's headquarters in Brasília and moving our branch in São Paulo to a new location.

On Slide #9, we present the breakdown of net income. In MEP equity method, the negative amount of BRL 0.4 million refers to the company's interest in the result of GR1D Insurance. It is important to highlight that this quarter, we have not yet recognized the result of 40% interest in Inter Seguros acquired on May 8. The closing of the transaction occurred only after the approval of the acquisition by CADE on June 27, which postponed the recognition of the results of June 2019 to July '19.

In financial result, the BRL 2.1 million result vis-à-vis 2018 is mainly due to, one, higher financial income reflecting the higher cash balance in the period; and two, the reduction in expenses regarding the present value adjustment, the AVP, of the acquisition cost of Finanseg. These effects were partially offset by the recognition of AVP and interest on the earnout installments on Inter Seguros acquisition in second quarter '19.

Lastly, going to Slide 10, the main change that impact second quarter '19, cash flow work. The cash flow from investment activities resulting from the disbursement of BRL 3.4 million payment regarding the 30% stake of GR1D Insurance's share capital, BRL 45 million payment regarding the acquisition of 40% stake of Inter Seguros and BRL 1 million in the quarter as part of the acquisition value of SJK Corretora de Seguros Ltda. by Wiz Corporate, one of Wiz controlled companies. These disbursements were partially offset by the accounting of present value adjustment of the acquisition costs of Finanseg and Inter Seguros as well as the current interest of future installments to be paid regarding the acquisition of Inter Seguros.

In the quarter, BRL 56 million was paid in dividends as follows, BRL 53.3 million regarding the first installment of dividends from net income of 2018 as approved in the general meeting held on April 24, 2019, and BRL 2.6 million to minority shareholders of our consolidated companies.

With that, we now end the financial presentation, and I'd like to return the attention to Heverton, who will start the Q&A session. Thank you, everyone.

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Operator [4]

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(Operator Instructions) Showing no questions, this concludes our question-and-answer session. I would like to invite Mr. Heverton Peixoto to proceed with his closing remarks. Please go ahead, sir.

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Heverton Pessoa de Melo Peixoto, Wiz Soluções e Corretagem de Seguros S.A. - CEO & Chairman of the Executive Board [5]

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Hi, everyone. Thank you for attending our conference call for this quarter. We are very happy with our results, and we hope to continue delivering this type of numbers.

Hope to see you in next quarter. Thank you.

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Operator [6]

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This concludes the Wiz conference call for today. Thank you very much for your participation, and have a nice day. You may now disconnect.