Core Insights - Telefônica Brasil, also known as Vivo, is recognized as a strong dividend payer, which is central to the company's investment thesis [1]. Company Overview - The company operates under the ticker symbol VIV on the NYSE and is considered a cash cow in terms of dividend payments [1]. Research Background - The analysis is conducted by a researcher and operations manager at DM Martins Research, with previous contributions to TheStreet and current writings for platforms like TipRanks and GuruFocus [1].

Group 1 - Zacks Premium provides various tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1][2] - The Zacks Style Scores rate stocks based on value, growth, and momentum characteristics, helping investors identify securities with high potential for market outperformance [2][3] Group 2 - The Value Score focuses on identifying undervalued stocks using financial ratios such as P/E and Price/Sales, appealing to value investors [3] - The Growth Score emphasizes a company's financial health and future growth potential, analyzing projected and historical earnings and cash flow [4] - The Momentum Score assists traders in capitalizing on price trends, utilizing factors like recent price changes and earnings estimate shifts [5] Group 3 - The VGM Score combines the three Style Scores to identify stocks with attractive value, strong growth forecasts, and positive momentum, serving as a useful indicator alongside the Zacks Rank [6] - The Zacks Rank, a proprietary stock-rating model, uses earnings estimate revisions to simplify portfolio building for investors [7][10] Group 4 - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [8] - To optimize returns, investors should target stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B, while being cautious with 3 ranked stocks [9][10] Group 5 - Telefonica Brasil S.A., the largest telecom operator in Brazil, holds a Zacks Rank of 3 (Hold) and a VGM Score of A, indicating potential for value investors [11] - The company has seen an upward revision in earnings estimates for fiscal 2024, with the Zacks Consensus Estimate increasing by $0.02 to $0.63 per share, and an average earnings surprise of 10% [12]

Core Insights - Zacks Premium provides various tools for investors to enhance their stock market strategies and confidence [1][2] Zacks Style Scores - Zacks Style Scores are indicators that help investors select stocks likely to outperform the market in the next 30 days, rated from A to F based on value, growth, and momentum characteristics [3][4][5][6][7] Value Score - The Value Style Score focuses on identifying undervalued stocks using ratios like P/E, PEG, Price/Sales, and Price/Cash Flow [4] Growth Score - The Growth Style Score evaluates stocks based on projected and historical earnings, sales, and cash flow to identify those with sustainable growth potential [5] Momentum Score - The Momentum Style Score assesses stocks based on price trends and earnings outlook changes, indicating optimal times to invest in high-momentum stocks [6] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for selecting stocks with attractive value, growth forecasts, and promising momentum [7] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988, outperforming the S&P 500 [8][9] Stock Selection Strategy - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B, while also considering the direction of earnings estimate revisions [11][12][13] Company Spotlight: Telefonica Brasil - Telefonica Brasil S.A., the largest telecom operator in Brazil by revenue, holds a Zacks Rank of 3 (Hold) and a VGM Score of A, with a Value Style Score of A due to a forward P/E ratio of 12.83 [14][15] - Recent upward revisions in earnings estimates for fiscal 2024 indicate a consensus estimate increase of $0.02 to $0.63 per share, with an average earnings surprise of 10% [15][16]

Financial Data and Key Metrics Changes - Total revenues increased by 7.1% year-over-year, primarily driven by mobile service revenues which grew by 8.8% [7][8] - EBITDA grew by 7.4% year-over-year, with an EBITDA margin of 42.4% [20][22] - Year-to-date net income reached a 10.4% year-over-year increase, totaling BRL6.8 billion [22][23] - Free cash flow generation reached BRL7.1 billion, resulting in a free cash flow yield of 8.4% over the last 12 months [22][23] Business Line Data and Key Metrics Changes - Postpaid customer base increased by 7.6%, with postpaid revenues growing by 10.4% [7][9] - Fiber homes connected with FTTH grew by 12.5%, reaching 6.7 million users [11][12] - B2C segment represented 77% of total revenues, growing by 7.5% year-over-year, while B2B segment grew by 6.5% [13][15] Market Data and Key Metrics Changes - Vivo's market share in 5G access increased to nearly 40%, with 13.8 million 5G users [10] - The company reached 28.3 million homes passed with FTTH, achieving 98% of its goal for the year [11] - The average monthly revenue per B2C customer was BRL61.5, reflecting a strong customer-centric approach [14] Company Strategy and Development Direction - The company aims to maintain its leadership position through a diversified portfolio of services and a focus on digital transformation [6][8] - Vivo Total, a convergent offer, is expected to reduce churn and enhance customer loyalty [12] - The company is committed to optimizing CapEx while continuing to grow revenues, particularly in digital services which now represent 10% of total revenues [21][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining revenue growth above inflation, driven by upselling and migration strategies [30][53] - The competitive landscape is acknowledged, with new entrants being viewed as additional competition rather than a threat [26] - Future CapEx will focus on increasing penetration in new areas while maintaining a strong cash position [40][41] Other Important Information - The company has engaged 87% of its suppliers in climate-related activities as part of its ESG initiatives [16] - Vivo was recognized as one of the top three best companies to work for in Brazil, highlighting its commitment to employee engagement and diversity [17] Q&A Session Summary Question: Competitive environment and pricing strategies - Management acknowledged the entry of new competitors but emphasized their strong market position and ability to offer differentiated services [26] Question: Lease expenses growth - Management explained that lease expenses showed volatility due to negotiations with tower companies, but overall cash flow remains strong [27] Question: Sustainability of mobile service revenue growth - Management confirmed that the growth in mobile service revenue is sustainable, driven by successful migration strategies and upselling [30] Question: CapEx outlook and EBITDA margin sustainability - Management indicated a focus on reducing capital intensity while maintaining strong EBITDA margins through operational efficiencies [33][34] Question: Migration from concession to authorization - Management provided an update on regulatory approvals and expressed confidence in optimizing costs post-migration [37] Question: B2B growth ambitions - Management highlighted significant growth potential in B2B digital services, with only 15% of B2B customers currently utilizing these services [44] Question: Prepaid segment dynamics - Management noted rational strategies in the prepaid segment, focusing on upselling and value-added services to enhance revenue [50]

Telefónica ***Este documento está clasificado como PUBLICO por TELEFÓNICA. ***This document is classified as PUBLIC by TELEFÓNICA. RESULTS 3Q24 November 5 th, 2024 Telefônica Brasil S.A. Investor Relations VI > DISIN SE VIVT B3 LISTED ISEB3 ICO2B3 | --- | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Core Insights - Telefônica Brasil reported strong operating performance in 3Q24, with growth in revenues, EBITDA, and net income, alongside reduced Capex intensity [1] Financial Performance - Net Operating Revenue reached R$14,039 million, a 7.1% increase YoY, driven by Mobile Services revenue growth of 8.8% YoY [2][3] - EBITDA totaled R$5,950 million, reflecting a 7.4% YoY increase, with an EBITDA margin of 42.4% [2][3] - Net Income attributed to Telefônica Brasil was R$1,667 million, marking a 13.3% YoY increase [5] Revenue Breakdown - Mobile Services revenue was R$9,212 million, up 8.8% YoY, supported by a 10.4% increase in postpaid revenue [2] - FTTH revenue grew by 14.0% YoY to R$1,790 million, with the network present in 444 cities and 6.7 million homes connected [3] - Fixed revenue increased by 3.6% YoY, driven by FTTH and Corporate Data, ICT, and Digital Services [3] Cost and Cash Flow - Total Costs increased by 6.8% YoY to R$8,089 million, while Operating Cash Flow reached R$9,972 million, a 12.0% YoY increase [2][4] - Free Cash Flow was R$1,671 million, down 12.9% YoY [2] Capital Expenditure - Capex ex-IFRS 16 was R$2,495 million, a decrease of 5.0% YoY, representing 17.8% of revenues [4] - Investments focused on enhancing mobile network capabilities, particularly 5G coverage, which is now available in 394 cities [4] Shareholder Remuneration - Shareholder remuneration for 2024 was R$4,790 million, with commitments to distribute at least 100% of net income for each fiscal year from 2024 to 2026 [5]

Financial Data and Key Metrics - Total revenues increased by 7.4%, driven by mobile service revenues which grew by 8.8% [21] - EBITDA expanded by 7.3% year-over-year, with operating cash flow reaching R$6.5 billion and free cash flow at R$5.5 billion, representing over 20% of total revenues [21] - Net income grew by 8.2% year-over-year, reaching over R$2 billion in the first semester [30] - Mobile ARPU increased by 6.3% year-over-year, reaching its highest level since 2019 [22] - FTTH ARPU grew by 4% year-over-year, reaching 90.9 [44] Business Line Data and Key Metrics - Mobile access reached 100.9 million, with postpaid access growing by 7.2% year-over-year [154] - FTTH homes connected grew by 12.7%, adding 199,000 new accesses in Q2 2024 [44] - B2B digital services revenues grew by 19% year-over-year, representing 32% of B2B business and 7% of total revenues [45] - Vivo Total convergent plan reached 1.8 million fiber customers, more than doubling year-over-year [73] - Health and wellness revenues amounted to R$37 million over the last 12 months, with 321,000 subscriptions [23] Market Data and Key Metrics - The company reached 27.3 million homes passed with FTTH, up 10.7% year-over-year, aiming for 29 million by year-end [69] - The prepaid to postpaid migration strategy is driving growth, with prepaid access decreasing from 38.1% to 37% [6] - The company's churn rate in postpaid remains under 1%, with Vivo Total customers experiencing a 1 percentage point lower churn compared to stand-alone fiber customers [151] Company Strategy and Industry Competition - The company is focusing on convergence, offering combined fiber and mobile plans, which has led to a significant increase in Vivo Total customers [74] - The company is actively pursuing M&A opportunities in broadband, looking for the right pricing, footprint, and technical quality [5] - The company is expanding its digital services portfolio, including financial services, insurance, and health and wellness offerings [16][23] - The company is accelerating its ESG agenda, aiming for net-zero emissions by 2035 and increasing diversity in leadership roles [84][85] Management Commentary on Operating Environment and Future Outlook - The company is optimistic about the ability to grow and bring more value to customers through a combination of services and digitalization [34] - The company expects to continue improving margins and operating cash flow, driven by new businesses that require no CapEx [130] - The company is confident in its ability to maintain a high shareholder remuneration, with a payout of at least 100% of net income [149] Other Important Information - The company acquired IPNET, a cloud transformation company, which generated R$218 million in revenues last year, up 35% year-over-year [24] - The company is increasing its focus on financial services, with revenues from these services growing by 27% year-over-year to R$450 million [15] - The company is also expanding its insurance offerings, including life, bike, and pet insurance, with 450,000 customers already insured for smartphones [16] Q&A Session Summary Question: What are the main drivers for the strong net adds in mobile? - The market is seeing more opportunities for migration from prepaid to postpaid, with the company's prepaid access decreasing from 38.1% to 37% [6] Question: How robust is the guidance, and does it consider the concession to authorization migration? - The guidance remains unchanged, with a payout of at least 100% of net income, and the migration does not pose a risk to the guidance [145] Question: What are the trends in prepaid ARPU and recharges? - The prepaid market is performing well, with the company increasing its offer to BRL 70 and seeing a revenue increase of BRL 4.9 million [125] Question: What is the company's exposure to FX depreciation? - The company has some exposure to FX, mainly from handset costs, but it has protections in place and will pass any price increases to consumers [131] Question: What are the economic benefits of the migration from concession to authorization? - The migration will allow the company to dedicate investments to digitalization and bring more efficiency to operations, with potential benefits in OpEx and CapEx [121] Question: What are the trends in broadband and FTTH ARPU? - The company is seeing increased broadband growth, driven by higher gross adds and lower churn, with FTTH ARPU growing due to better customer experience and higher speeds [96][106]

Core Viewpoint - Telefônica Brasil reported strong operating performance in 2Q24, achieving above-inflation growth in revenues, EBITDA, and net income [3]. Financial Performance - Net Operating Revenue reached R$13,679 million, a 7.4% increase year-over-year (YoY) [4]. - EBITDA totaled R$5,455 million, reflecting a 7.3% YoY growth, with an EBITDA margin of 39.9% [4][6]. - Net Income attributed to Telefônica Brasil was R$1,222 million, an 8.9% increase YoY [8]. Revenue Breakdown - Mobile Services revenue grew by 8.8% YoY, driven by a 9.7% increase in Postpaid Revenue and a 7.2% increase in customer base [5]. - Fixed revenue increased by 3.9% YoY, primarily due to a 17.1% growth in FTTH Revenue [6]. Operational Metrics - Operating Cash Flow reached R$3,114 million, up 14.0% YoY, with a margin of 22.8% [7]. - Total Subscribers increased to 114,683 thousand, a 2.5% growth YoY [4]. Capital Expenditure - CAPEX ex-IFRS 16 was R$2,341 million, a slight decrease of 0.5% YoY, representing 17.1% of revenues [7]. Shareholder Remuneration - Shareholder remuneration paid in 2024 reached R$4,137 million, with commitments to distribute at least 100% of net income for each fiscal year from 2024 to 2026 [8].

Financial Data and Key Metrics Changes - In Q1 2024, total revenues increased by 6.5%, driven by a 9.3% growth in mobile service revenues [8] - EBITDA grew by 6.8% year-over-year, while net income expanded by 7.3% [8] - Operating cash flow reached R$3.4 billion, with free cash flow generation at R$2.4 billion [19] Business Line Data and Key Metrics Changes - Postpaid access increased by 6.6%, and homes connected to FTTH grew by 12.3% [8] - Mobile service revenues accounted for 64% of total revenue, with a significant contribution from postpaid revenues [9] - B2B digital services reached R$3.5 billion, up 20% year-over-year, representing 31% of B2B business [13] Market Data and Key Metrics Changes - Vivo's FTTH footprint is available to 26.8 million homes, with 6.3 million homes connected [11] - The average FTTH speed sold increased from around 260 megabits to over 310 megabits [11] - The company reported a postpaid churn rate of 0.97% per month, the lowest historical level [10] Company Strategy and Development Direction - Vivo aims to enhance its value proposition by combining connectivity with a broad portfolio of services [9] - The company is focused on increasing its FTTH take-up rate and leveraging its unique capability to offer combined fiber and mobile plans [11] - Vivo's ESG initiatives have been recognized, positioning the company as a leader in sustainability within the telecommunications sector [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth and profitability despite macroeconomic uncertainties [2] - The company is optimistic about its ability to continue migrating customers from prepaid to hybrid and from hybrid to postpaid [25] - Management highlighted the importance of digital services in driving revenue growth and customer loyalty [38] Other Important Information - CapEx totaled R$1.9 billion in Q1 2024, with a CapEx to sales ratio of 13.8% [18] - The company announced a share buyback program, planning to invest up to R$1 billion until March 2025 [20] - Vivo's cash position surpassed financial debt by R$1.9 billion at the end of March [19] Q&A Session Summary Question: Net adds dynamics and prepaid pricing - Management noted a positive trend in net adds and emphasized the migration from prepaid to hybrid plans, which is driving ARPU growth [22][23][26] Question: Fiber ARPU dynamics and CapEx outlook - Management discussed factors influencing fiber ARPU growth and indicated a reduction in CapEx intensity for 2024 [27][32] Question: Competition in fiber business and prepaid migration ceiling - Management expressed confidence in the ability to migrate customers and highlighted Vivo's competitive advantages in the fiber market [43][47] Question: Effective tax rate and lease size - Management explained the impact of interest on capital distributions on the effective tax rate and provided insights on lease liabilities and efficiency initiatives [49][51][52]

Telefónica RESULTS 1Q24 May 7th, 2024 Telefônica Brasil S.A. Investor Relations VIV NYSE VIVT B3 LISTED ISEB3 ICO2B3 | --- | --- | --- | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-- ...