CSU Digital S.A. (CSUD3) Earnings Call Transcript
August 12, 2026
Earnings Call Speaker Segments
Good afternoon, ladies and gentlemen, and welcome to the CSU Digital Earnings Call for the second quarter 2026. This video conference is being recorded, and the replay can be accessed at the company's website, [ http ].csu.com.br. The presentation will be in Portuguese with simultaneous translation into English. For those listening to English click on the Interpretation on the bottom right corner. Before proceeding, we reinforce that the forward-looking statements are based on the beliefs and assumptions of CSU management and on information currently available. These statements involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not occur. Joining us at this video conference are Leonardo De Cara, the IRO and M&A Officer; Mr. Andre Lapola, CFO; and Superintendent of IR, Bruna Gamboa. I would like to turn the floor over to Bruna Gamboa, who will begin the presentation.
Good afternoon to all of you, and thank you for joining CSU Digital Second Quarter 2026 Earnings Call. My name is Bruna Gamboa and I am the company's Head of Investor Relations. It is a pleasure to be with you, again, to share our results and main highlights for the quarter. Before we discuss the results in more detail, I would like to take the opportunity to formally introduce Leonardo De Cara, who has joined CSU as Executive Director of IR and M&A. Leonardo's arrival is an important addition to our team. He will strengthen our communication with the capital market, our M&A activities and the development of new strategic opportunities. Leonardo's experience will help us further strengthen our relationship with investors and support CSU growth strategy. With that, I will hand over to Leonardo.
Thank you, Bruna. It is a pleasure to be with you for the first time. I am very excited to begin this new chapter at CSU Digital. I spent the last several years of my career in investment banking. And one of the parts of my job that I enjoyed the most was telling the story of companies like CSU to the global investment community. I hope to bring that experience for both organic and inorganic growth. First of all, I would like to share with you my overview of CSU. As CSU operates like an independent infrastructure for financial products of institutions of different sizes, it works whether B2B2C models so that banks and others can launch products with their own brands supported on our platform. Therefore, CSU delivers the full customer journey payments, loyalty, digital experience and much more. The operation is structured on 2 pillars, CSU, the payment means and CSU DX automation, all integrated in the same ecosystem. AI is incorporated throughout the company and the product and in the operation. I see a potential for growth on several fronts. We see [indiscernible] benefits of [indiscernible] payroll and verticals in -- that will grow such as loyalty and others, all of this based on a company that has a size [indiscernible] solidity, and that consists and track record. Our contract base is always higher than 13 years, sustaining them [indiscernible] forecastability of our revenues. We generated BRL 662 million in the last 12 months. A consistant growth with very high forecast, more than 42% of our revenues have been contracted for the coming years. We also deliver profitability. Net revenue of about BRL 100 million and a return on equity of 20%. Leverage is comfortable at about 4.4x. We have contributed BRL 370 million since its foundation with an average payout higher than 50%. In terms of operational scale, we have [ BRL 8 trillion ] and more than 1.4 million (sic) [ 1.4 billion ] transactions and DX had 18 million managing interactions. With this, let us go to the figures of the second quarter. Before we move into the quarterly results, I would briefly like to review the main highlights from the last 12 months showing scale, strength and a consistent track record. As mentioned, over the last 12 months, the company reached record net revenue of BRL 662 million, an increase of 6.1% vis-a-vis 2025. Gross profit totaled BRL 278 million, up 7.9%, with a gross margin of 42.1%. EBITDA reached BRL 172 million with a 26% margin with net income totaling BRL 98 million with a net margin of 14.8%. Both indicators reflect the investments we are making in our main strategic initiatives without hampering our [indiscernible] solidity profitability with an ROE of about 20%. We do this by distributing paying out to our shareholders more than BRL 104 million distributed in the last months. At the bottom of the slide, you can see the contribution of each of the company's business units, CSU Pays generated 60% of our revenue at BRL 399 million with gross profit of BRL 223 million, representing 80% of total gross profit. CSU DX generated BRL 262 million in net revenue, 40% of our total revenue and BRL 56 million represents 20% of total gross profit. Now we ended the quarter with 40 active clients across banking, financial services and benefits, retail and general services. This is a diversified client base that includes leading companies in each segment. During the quarter, we signed a new contract at CSU DX, reinforcing the attractiveness of our solutions and the company's ability to continue expanding. We ended the period with more than 90% of our revenue contracted for the next 3 years. This reflects our recurring business model, long-term contracts and high degree of integration of our clients' operations. The average term of our contracts is more than 13 years, and we have low churn of our client base. All of this translates into predictability and resilience of our results. On Slide 7, we see the details of CSU Pays. We reached record net revenue of BRL 104.1 million in the second quarter, up 6% compared with the second quarter '25. This performance was supported by the organic growth of our client base, consistent performance of loyalty and incentives and the expansion of our new solution, driving greater activation of the client base. Gross profit reached BRL 62.6 million, up 19% vis-a-vis the second quarter '25 with gross margin of 60.1%, an expansion of 6.5 percentage points year-on-year. Excluding nonrecurring effects, adjusted gross profit reached BRL 58.6 million, a margin of 56.2%, an expansion of 2.6 percentage points, showing the underlying operational strength of this business unit. On the operating side, we ended the quarter with 22.7 million build units, an activation rate of 61%, process transactions totaled BRL 385 million, up 27.3% vis-a-vis the second quarter '25, showing the continued expansion of transaction volumes across our platform. On Slide 8, we show you the results of CSU DX that delivered another quarter of record net revenue, reaching BRL 71.9 million, up 27.7% compared with the second quarter '25. This performance was driven by the ramp-up of HAS contracts signed over the last few quarters and the increase in managed interactions. It is worth highlighting that we signed a new DX contract during the quarter, implemented 3 contracts signed in the first quarter of '26. They are already contributing to revenue and provide greater visibility for growth. Gross profit totaled BRL 15.2 million, up 30.9% with a gross margin of 21.1%, an expansion of 0.5 percentage points compared with the second quarter '25. This reflects a greater scale, the continued maturation of the platform and efficiency gains from hyperautomation. On the operating side, we manage more than 5.2 million interactions, an increase of 39.1% vis-a-vis the second quarter '25. Now the digital interactions accounted for 77% of total interactions over the last 12 months, demonstrating the continuous progress of our hyper automation journey. Going on to Slide 9, we show you our consolidated results, delivering a record net revenue of BRL 176 million for the quarter, up 13.8% vis-a-vis the second quarter '25 driven by the consistent performance of both business verticals that have reported their quarters. Gross profit totaled BRL 77.8 million, up 20.9% with a gross margin of 44.2%, an expansion of 2.6 percentage points compared with the second quarter of '25, excluding nonrecurring effects, adjusted gross profit reached approximately BRL 74 million, a margin of 41.9%. Also reflecting greater operating efficiency and the strong robustness of our business model. EBITDA totaled BRL 49.2 million, up 3.6% with a 28% margin. More importantly, as you can observe in the chart on the lower left is the nonrecurring effects on EBITDA that have been gradually declining. They refer to strategic investments for the company. To the right, net income totaled BRL 20.1 million with a net margin of 11.4%. In addition to the already mentioned, the result was impacted by a higher effective tax rate, especially due to recognition of expenses incurred in the CSU U.S., which do not benefit from tax incentives of Brazilian operations. The predictability of our revenue, combined with the profitability of our operations allows us to organically invest in the company's new growth avenues. Artificial intelligence, hyperautomation, international expansion and technological capabilities are our focus. Let's go on to Slide 10. I highlight our solid capital structure appropriate for the company's current stage of development. It allows us to continue investing consistently maintaining a healthy shareholder remuneration policy and preserve flexibility for potential strategic opportunities. Operating cash flow reached BRL 14.5 million in the quarter, BRL 128.3 million over the last 12 months. The quarterly result reflects a temporary change in working capital related to a cash conversion cycle of certain contracts, the expansion of ongoing projects and a concentration of payments to suppliers during the second quarter '26. CapEx totals BRL 36.8 million in the quarter and BRL 106.7 million over the last 12 months. The increase in the second quarter was mainly driven to 2 factors within CSU Pays one-off investments in [indiscernible] main spread modernization to the technological infrastructure supporting our payment operations and the revision of the criteria used to capitalize development team hours. We ended the quarter with a cash position of BRL 72.1 million interest-bearing debt totaling BRL 77.8 million and a net debt of BRL 67.9 million, and net debt-to-EBITDA ratio was 0.39x, a very comfortable level under the company's financial criteria preserving our financial flexibility to continue executing our strategic growth agenda. I will now hand it back to Bruna to discuss CSU's growth avenue.
Thank you, Leo. We move on to Slide 12, and we continue to advance in a new phase of its growth journey, our strategy for coming years is structured around 3 complementary fronts, combining revenue growth, efficiency gains and expansion of our client base. At CSU Pays, we continue to develop new products aligned with market trends using AI to hyper-personalize projects and customer [indiscernible], strengthen our loyalty and incentives vertical and enhance our commercial approach increase in cross-selling and new client acquisition. At CSU DX, artificial intelligences and hyper-automation remain important drivers of efficiency and differentiation. We continue to expand the capabilities of our HAS platform incorporating generative AI and strengthening our proprietary technology as a competitive edge and an important driver for expansion. On the next slide, you will see more details of our international strategy. This is more than a geographic expansion. We're building a new avenue of growth for the company, addressing a market that is 15x larger with a greater scale and diversification of our client base. On Slide 13, I would like to update you on our international operations to the left of the slide, in the last quarter, the company advanced in important stages. We have concluded the approval as one of the main banners in the market. We also strengthened our commercial team with very experienced professionals coming from important players in the American market. Commercially, nothing changes. We're looking here at 3 fronts basically. The first customers at the base. The idea is to offer a global card to clients that still do not operate in the U.S.A. We will then offer our product to Brazilian banks that are not clients of CSU that operate or had the intention of operating in the U.S.A. And the third path for the midterm is to enter the American market offering our solutions to financial institutions, local fintechs and then truly penetrate the American market. The 3 strategies are already being executed with dedicated commercial teams working in parallel both in Brazil and the United States. And we continue with advanced negotiations with potential clients. Now this reinforces our vision that CSU is building new avenues of growth, combining revenues, efficiency gains and the expansion of our client base. We will now move on to the question-and-answer session, and the Leonardo will return for closing remarks.
[Operator Instructions]
Alex Andre, I will read his question. With the arrival of Leonardo De Cara, who is also leading the M&A front, which is a viewpoint of the company of the M&A front as part of their growth. Are there special geographies or abilities that you deem to be a priority for possible growth. And how should we look upon these opportunities.
Thank you for the question, Alex, my arrival at the company is an important step in terms of discipline and consistency to analyze the M&A opportunities. The company has always been very disciplined in terms of capital allocation, developing technologies and exploring the verticals in-house, all of these segments we are active and have undergone significant changes in the last few years and they should increase the pace in the coming years. This means we have to be ever more disciplined, monitor the market and take part in those conversations as part of everything that is being debated, especially artificial intelligence. More specifically to your question, sentence, geographies according to CSU Pays. We have a vertical loyalty that has been growing significantly. We have seen the value delivered by this platform and I believe that we could have interesting opportunities there. When we look at DX, the agenda for hyperautomation, artificial intelligence, there are several capabilities that we can look for in the market. This is probably where we will be spending our time with an M&A hat. When we look at our internationalization strategy, the company decided to make that investment in an organic and a disciplined way, and we're harvesting a great deal from the strategy because of the different and multiple prices in the American market. And it is with this discipline that we will continue to look at opportunities. And this based on our leverage, which is a reason of pride and should not change. We should keep in mind when we assess opportunities, of course.
Let's go on to the next question of Lucas [indiscernible] from Brazil [indiscernible], the SG&A grew about 42% above the of revenue, which a part of that volume is recurring, which part is onetime investment. When will there be a reduction of these expenses and a gain in operating profit.
Very well. I will -- thank you for the question, Lucas. The last quarter, Specifically, in the second quarter '25, we got to a level that is not comfortable when it comes to the increases we see still foresee a certain pressure from the investments that are being made perhaps in the coming 2 quarters. And going forward, we should capture that scale-up gain and a faster moving revenue increase. Now we have been growing our revenue, our profitability as well as heavily investing in our technological teams with the discipline, of course, that the entire market can observe. Yes, in the coming quarters, we will have a steady improvement in that line item.
[Operator Instructions]
Good afternoon. If you could give us more details on the change of your Executive Board and how this changes your strategy?
I will begin here. Thank you for the question, Andrea, and then my colleagues will complement this. CSU, very recently, went through a change in its board. We have brought in new people, people from the market, of course, very seasoned players from different verticals. I already mentioned the new Director, we have in Loyalty and Incentives. Last quarter, you met our Product Director. And in SG&A, we did bring down some new directors for the technology area to capture the investments we have made in artificial investment and greater capabilities in our products. So the message to the market is that we're not going to limit these efforts. We are at a crucial point of capturing our next growth cycle at CSU here and also internationally as well. I don't know if this answers your question, Andrea.
Another question from [indiscernible] Lucas Mello from Brazil horizonte. The company [indiscernible] its leverage at the end of 2025 helping to fund the debt of extraordinary items, a higher financial cost and this debt. Will this change the ability of the company to maintain a similar level of payouts and dividends.
Let me answer this once again. If you allow me, Lukas. No, absolutely not, the company has an extremely comfortable leverage of 0.4x net debt over EBITDA. And if we look at the capital structure, I think we are below what is optimal, but this is another discussion. We have always included in the opening that the company has paid out more than BRL 370 million payout since its foundation, an average payout of 50%. Certainly, this will continue as part of our policy to remunerate shareholders and our leverage will allow us to keep up with this policy. Now leverage is very serious for us and the company will always have that strategic mission of maintaining it in that strategic level of 0.4 or something similar.
[Operator Instructions]
A question from [indiscernible] pickers. How does AI impact competition in terms of products and services. Theodoro, thank you for the question. Very generally, what we have market by impacted by AI, it's the [indiscernible] all of the moment we look at the Brazilian market. And of course, there is the American market but CSU has been able to position itself in a very assertive fashion. When we look at AI, but not only in the service operation in past 2 years ago, we had already increased profitability considerably. The gross margin of CSU DX went to 20%. And we're speaking of the beginning of a very important movement for the company. Additionally, when we look at CSU Pays, we have launched several new solution, AI for activation, the part of concierge, 100% AI pushes to increase engagement on our platform. So all of this has allowed CSU to take a stand ahead of the competition. Of course, competition will always exist our competitors are just beginning to look at that market, especially when we look at BPO, we are huge steps ahead. We are now looking at AI solutions, and we're speaking of AI -- of an operator that is 100% artificial intelligence. So we have been able to serve that way. We are ahead of the competition, which is not an easy job. So every quarter in the company, we enhance our investments with a focus ever more on technology to avoid lagging behind and losing this competitiveness in the market.
[Operator Instructions]
A question from [indiscernible]. Is there a deadline for the breakeven of the operation in the U.S.A. Should this not happen, will you turn back or try another geography.
Thank you for the question, [indiscernible], and I will begin by the end. I think that thesis is very clear because of the opportunities we see in the American market. We have all the tailwinds pointing that we are in the right direction. Our entry into the market has been by the clients that are demanding this movement, this support. They're knocking on the door of the American and they don't have the right support from the players there. And now I'll go to the beginning of your question, all of this to say to you, [indiscernible], that the market that we want to play in is the American market. It is 15x the size of our addressable market in Brazil. We're quite confident that we can penetrate that market. We're going to go beyond our base in Brazil, service other Brazilian clients that know about CSU's track record and will be our partners in this international move to finally get to the last bucket of the strategy, which is to penetrate the American market, community banks, other banks, a gigantic market with very poor service. To speak about breakeven. The same response that I gave for M&A is also valid for investors under that hat. We're going to be very disciplined in our moat to protect our profitability, which is one of the pillars and the robustness of our balance of our capital. The last question refers to our leverage. So we're highly confident that this investment is on track. It is within what was set forth as a strategy and very soon, will represent the engine of growth for the company. I think this responds to your question that we're very focused to bring the upside of growth on the part of revenue.
Next question from Joan [indiscernible], which has been the evolution of the AI activation and which are the results that CSU has been able to observe because of this solution. Joao, thank you for the question. We mentioned in the last earnings call, that this is a solution that has already been contracted by 2 of the clients in our base. But those who don't know what AI activation is, it is a solution fully linked to artificial intelligence awake and in dormant basis. We have a rich database. We understand the behavior, the consumption habits of the users and with the activation, we can use the cards that are no longer activated and with pushes and promotions reactivate that base. This is a product that has been very successful. We have been able to reactivate 10% of our dormant base is a high number for the industry. And we're going to continue to offer this type of solution as well as other innovative solutions. Now this product is linked directly to revenue. We get revenue from active accounts, nonactive accounts don't give us revenue. So all of this will bring us greater revenue and better cash.
The question-and-answer session ends here, we would like to return the floor to Mr. Leonardo De Cara for the company's closing remarks.
Thank you once again for joining us, and I would like to reinforce my thanks to the Board of management and the directors for the reception I received in the company. Here, I would like to reinforce the central message of our presentation. Over more than 3 decades of operation, CSU has focused on value for the shareholders based on 3 pillars: First, revenues. Revenues grow consistently, but more importantly, grow with predictability, a long base for contracts and long terms of contracts allowing us great predictability of what is ahead of us and what has been contracted. A second very important pillar is operational profitability. We look at the gross margin of the last 12 months, 40.9%. This shows the discipline that we have and the importance of the chain and the payments, the DX that we operate, and we can operate with a highly robust margin without losing focus of our shareholder or return on equity is comfortably above 20%. And in our bottomline, we are working the rules of the company, which is profitability -- robust profitability. And finally, the topic of the presentation and Q&A, our balance and low leverage. For more than 3 decades, the company has had a great deal of discipline in allocating capital. We have always generated sound cash, and we continue to have a debt level of 0.4x. This calmly allows us to maintain our investments invest in the different verticals we mentioned during the presentation, hiring teams, investing in technology, taking flights of internationalization without compromising the company's solidity without going beyond our leverage and always supported on the pillars of company not hampering adequate levels of leverage in the company, these are the points we would like to highlight. Once again, thank you very much for your attendance. Andre, Bruna. Thank you very much for your participation, and we hope to see you in the earnings call for the third quarter, the CSU Digital Earnings Call. And here, we would like to thank all of you for your attendance, have an excellent afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
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