Positivo Tecnologia S A : 1Q21 Results Presentation Transcript05/20/2021

Conference Call Transcript

1Q21 Results

Positivo Tecnologia (POSI3 BZ)

May 13, 2021

Hélio Rotenberg:

Good morning, everyone. We are here to talk to you about the results we had for the 1Q.

We are very happy with the results. It is actually a unique moment for the Company where all of our businesses have become quite significant. Despite all of the problems that we are facing today in the area of parts and supplies, especially of integrated circuits, the results are very good. They crown the efforts of the past few years.

You can see our numbers and the highlights. Our revenue was quite high, 85% higher than the 1Q20, R$809 million. Our EBITDA was R$61 million, with a margin of 9.1%. The net income was R$55 million in the 1Q and exceeds the 1Q20 by 1.175%.

At the end of March last year, we were affected by the pandemic and had very good performance. We are very happy to say that we have concluded our portfolio of computers. Positivo, had a very strong computer portfolio for the end consumer.

Positivo is very strong, with a significant share, demanded by the Brazilian middle class. We had Vaio. It was increasing in mid-high. We are talking of prices of up to R$2,500. R$3,500 to R$3,800 today.

But there was an area where we did not have a significant share, it was low, below 6%. We had been negotiating with HP for a while and now we come in with the Compaq brand. With that, we have concluded our computer portfolio. We are more and more a portfolio based company.

We did the same with smartphones. We have one additional brand, and we are doing quite well with this strategy, just as we are doing well with our strategy in different avenues of growth.

Our growth is centered on consumption, but other areas have also grown, 162% is what we have had of increase in direct sales. We also had an increase in public institutions. This market has grown a lot. We had an increase of 162%. Companies are reacting to the pandemic, they are buying again, and we have had an increase of almost 13% in the corporate market. HaaS has also done quite well.

Digital transformation. It is doing really well. We have online channel sales, both for our own and third-party online channels. They have maintained their expansion trajectory, and by means of our retailers, marketplace, we are doing really well.

We have reacted, modernized all of our platforms, have reinforced our channels. Right now, we only have online sales, or mostly online sales. 70% used to be on site and 30% digital, and this has been inverted.

I have already talked about the brand portfolio with the addition of Compaq, Vaio is doing really well, an increase of 92% and has become a very important brand. Sales have exceeded our expectations of growth. It is strong and a demanded brand for the A and B classes in Brazil.

In terms of our mix, we have an improved product mix. And despite the prices of pieces going up so significantly, we have a gross margin of 23.2%, which is greater than what we had in the 1Q20.

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Conference Call Transcript

1Q21 Results

Positivo Tecnologia (POSI3 BZ)

May 13, 2021

The demand is still high. If we look at the demand, we see that it is a very high hybrid work. It is here to stay. I have no doubts about this. Everybody can see this. We are no longer going to live the same kind of lifestyle, and the demand is going to continue high.

The market is very heated. The perspective is that we will have 360 million computers per year, according to the IDC, and it might be even higher than that. We are going back to the peak of computer sales we had in 2011, and this combined to the demand of other sectors which fight for the same integrated systems, smartphones, tablets, televisions, they are all competing for the same integrated circuits. There are unbalances throughout the world.

With the prohibition of some Chinese companies to operate with American technology, and therefore they have anticipated their first purchases, we have had some events of plants burning products. With that, we are lacking integrated circuits.

The difficulty to buy a computer board is very high, and integrated circuits for LCD, because LCD is something demanded by the whole chain, all of the electronics, and that makes everything very expensive and it is very difficult to buy.

We could be selling a lot more than we are if it weren't for the restrictions of supply. We have been able to deliver the minimum that we would like to deliver, and you can see very good sales numbers. For the 1Q, we have been able to deliver the minimum required so that we can grow well this year in all of our channels.

Next slide. I would like to repeat the graph here, just to consolidate this moment. We start explaining what happens with our three large divisions. We have vice-presidency for the different areas. We have corporate, public institutions, we are pursuing all of the opportunities coming from the market. Computers is something that we sell for all of them, tablets for all of them, peripherals as well. We have the electronic ballots, which is something that we are discussing publicly. We have the service, which do really well with corporate and public institutions.

Small retail, our sales in the 1Q20 were to 160 retailers this year, we had over 700. So this project where we permeate the whole Brazilian retail has worked out really well. Smart house continues growing significantly. The demand for residential automation products remains high.

We are also exploring the corporate market with that, with intelligent offices. And also, sales for construction companies. Educational technology is not doing so well, the schools are still closed. The priorities are others. Digitalization of education has become necessary, and we believe that this area will grow a lot.

Rental continues growing, this is true for corporate and public institutions. And payment solutions, where we are selling to other clients.

And just to talk to you about our revenue and how they were broken down, you can see 55% for consumer, 15% for corporate, 21% for public institutions. When we break down according to the different products, our main products, our computers and then mobiles, tablets almost 14%, mobiles 24%, servers 3%, services 4%, and other 9%.

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Conference Call Transcript

1Q21 Results

Positivo Tecnologia (POSI3 BZ)

May 13, 2021

We continue investing in startups, we have just closed a deal with Eunerd for maintenance and services. We already used Eunerd services in the past. It is a very interesting company. We have made an investment in this company, and now we have 11 startups in our portfolio.

Next slide, please. And now talking more specifically about the consumer market. I have already talked to you about the computer market. We have 357 million units in 2021. A computer has become personal and essential in our lives. We can all see that. Historic levels at retailers are still low, even lower than in 2020, demonstrating that we still have a lot of opportunity to grow. We have sales opportunities. This market will balance out eventually, but we have the supply issues as well.

Brazil has had 20% more sales than in 2020, and this was limited by supply, otherwise it would have been much higher. And our gross revenue reaches R$500 million, indicating a growth of 152% when compared to the previous year to 2020.

We have merged with Compaq. Our purpose is to provide technology to leverage lives in Brazilian families, Brazilian lives, and Compaq completes our product portfolio.

In corporate, we are happy with the growth. When compared to the 1Q, almost before the pandemic, the market was almost normal in the beginning of last year. Even so, we have grown. Companies are buying again after a very weaker last year with the pandemic, when companies closed their doors, reduced investments. Companies already showed their budget, they are ready. Employees need to have computers, and companies are providing infrastructure to their employees.

Notebooks are the major trend because of the mobility required by hybrid work. Everything is done by notebooks, and not desktops. And we were ready to grow with this portfolio for the corporate market.

Public institutions. We have already shared this graph, our backlog for the delivery of computers used to be 609, and it is now 932, with a significant growth. We grew 43% in the 1Q. This market is very seasonal. We have a lot of requests, and basically this is true for the whole year, indicating a stronger growth when compared to last year in the public institutions market.

And just to review the results of the 1Q, we had some large bids in the Ministry of Finance. We had large tablet tender processes, and that really leveraged the public market. And we are still observing the same strong growth. Right now, we have a very high delivery backlog, because of our supply bottleneck.

We also have the electronic ballots. It is not included in this figure of 932. We have already been hired for 225,000 urns, sales of approximately R$925 million. This is what we imagined, but we have some supply limitations. The project is doing really well, and most of deliveries will take place next year, for the 2022 elections.

Next slide. Financial highlights. I turn over to Caio, our CFO. He will talk a little bit about this.

Caio Moraes:

Thank you very much, Hélio. Financial highlights for the 1Q. Gross revenue, as Hélio mentioned, we have had robust growth of 85%. We have really gone to a different

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Conference Call Transcript

1Q21 Results

Positivo Tecnologia (POSI3 BZ)

May 13, 2021

level. In the 4Q, we had a gross revenue that has led us to a differentiated level when compared to the past. When we analyze the gross revenue for the business, we can see growth in the consumer segment, mainly, but public institution has reacted. In the 4Q20 it was 21% and it is now 23%. Corporate has also reacted, but it is still lower than what it was last year.

When we analyzed gross revenue per product, we can see notebooks growing a lot because of the mobility, and desktops are going down. We have an interesting mix here, and we have had an increase when we look at tablets and mobile. Servers was a little lower.

We also had an increase in HaaS because our revenue volume has grown a lot. We had. An increase of 26% in our gross revenue, even though the percentage results are similar.

And now we are going to talk a little bit about our operating expenses. We have had increases, but we have more expenses with marketing, freight. However, we can see that there has been a very good control. We went from 14.7% in 2020 to 12.9% in the 1Q21.

For G&A, we see a stability, demonstrating a very good control or the fixed costs of the Company, and the Company will keep doing so.

Next slide. I will talk a little bit about the financial result. Even though we had larger gains because of the changes in the currency rate, the USD rate went up and it closed at R$5.7 last year when compared to the BRL, but our financial operations are very well controlled. We are financing a higher operation, and even so, our results are quite aligned to the 1Q20.

And then in the next slide, I will talk a little bit about our profitability, net income. Here we can see the EBITDA. We went from losses of approximately R$3 million in 2020, and our results were positive this year, quite significantly, 61.4%. And we have had a strong management of fixed costs, trying to control the adjustments of the currency rate. We went from R$4 million to R$55.8 million in net income.

EBITDA and net income are quite aligned, demonstrating that in the 1Q, when we did not have recurring events, and they are comparable for this year and last year, we can see that the Company has had very good operating results. The EBIT was R$40 million. All of the operational figures are aligned at very high levels.

And then in the next slide, we are talking about cash and indebtedness. We have a very comfortable position. It is better than it was in the 1Q20. Also, our indebtedness is very comfortable and very well controlled. It changes a little bit. We went up to a higher level. We are financing a larger operation.

But when we compare our performance, we can see that it is very good. We went from 1.6x to 1.1x, which is a very comfortable number, demonstrating a very good control of our debt.

In addition to that, we are doing our homework in terms of the management of our liabilities and profile, and we can see that, in the end of the 1Q21, we can revert the proportion of short and long term debt. We go from 53% to 46% in the short term.

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Conference Call Transcript

1Q21 Results

Positivo Tecnologia (POSI3 BZ)

May 13, 2021

This is different from what we had in 2020, and we have a duration of 23 months, which was used to reprofile our liabilities. We exchanged short term debt to long term debt with a very interesting result, and we were also able to maintain a very well controlled cost of our debt.

Hélio Rotenberg:

And we are now going to try to give you a perspective of what is happening and what is going to happen. In the consumer segment, the pandemic will extend. Home office will expand, and we cannot think that, even after the pandemic, this will leave no traces. Home office, hybrid work in the future, all demonstrate that this segment will continue very high, the computer segment.

The high exchange rate we have this year, added to the high price of components, indicates that we will have an average ticket 15% to 20% higher than that or 2020. The demand remains high.

When we have high demand, this is good news for the Company. We have a lot of consumers, of course, but the costs incurred by the increase in the exchange rate, and also the increase in the part of components, has to be taken to the client.

Our average ticket will be 15% to 20%. We have a complete portfolio with three brands that are well positioned. The home automation category should continue to grow. The demand is very high for remote controls. We have just launched a light switch, and you change it and you control the whole room using your smartphone. If you change the light switch in one room, you can turn lights on and off or schedule them at any time. It is very nice and simple.

Also, electronic gates, locks, where doors are open by smartphones. We have a very complete portfolio and are very excited with it.

And this expansion of small retail. We have driven sales points since 1Q in a project that is doing really well throughout Brazil. We are spreading throughout Brazil. We used to be very strong within the largest 100 retailers, but we are now spreading to smaller ones, and working really well with a smaller retailers.

In corporate, the renovation of the park in the exchange for notebook's to obtain more mobility for hybrid work leads to more optimistic projections. Banks are still buying for their employees. They have this concern. Not every company provides computer to their employees, but they allow their employees to use their own computers.

But this combination of consumer and corporate is very large, even though the growth in corporate has been smaller, in the order of 12.5% year over year.

The trend of increase in 2021 average ticket is in the range of 15% to 20%. We have also had a switch from purchase to leasing. The demand for servers and storage also remains high, and therefore we have a very good performance here too.

Public institutions. We have a scenario of tender processes of large volumes of notebooks, tablets. So we have Ceará, Fortaleza with tender processes, they have required tablets in large amounts. In São Paulo, also, we have had some notebooks, and we still have a lot of other tenders coming our way. This will continue growing this year and in the upcoming years.

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