Locaweb Serviços de Internet (LWSA3) Q2 2024 earnings summary

Executive summary

• Ecosystem GMV grew 22.5% year-over-year to nearly BRL 17 million, with Own Store GMV up 17.8% and TPV up 12.8%, representing close to 20% of Brazilian e-commerce.

• Subscriber base reached nearly 190 million, up 8% year-over-year, driving 21.7% growth in Platform Subscription Net Revenue.

• Platform subscription revenue grew by 22%, and consolidated net revenue rose 7.1% year-over-year, with net revenue excluding Squid up 11.2%.

• Adjusted EBITDA increased 22% year-over-year to BRL 65.4 million, with margin expanding to 19.5%.

• Net income turned positive at BRL 18.3 million (net margin 5.5%), reversing a loss in 2Q23.

Financial highlights

• Gross margin reached 47.6%, up 1.5 percentage points year-over-year.

• Free cash flow after CapEx improved to BRL 28.7 million in Q2 2024, compared to near zero in Q2 2023.

• CapEx as a percentage of net revenue reduced to 7% from 8.3% year-over-year.

• Net cash position at quarter-end was BRL 565 million, with no debt.

• Financial expenses from advance of receivables reduced to 0.54% of TPV from 0.75% in 2Q23.

Outlook and guidance

• Focus remains on sustainable growth, prioritizing EBITDA and cash generation over revenue growth.

• Financial services and embedded finance expected to accelerate in 2025, with new digital account and credit products launching later in 2024.

• Strategic moves in logistics, omnichannel integration, and product launches expected to drive further revenue and margin improvements.

• Restructuring of Squid is ongoing, with focus on profitability and cost reduction; revenue expansion expected in a more sustainable manner.

• Approval to operate as a Payment Institution is expected to enhance financial services and ecosystem engagement.