Alpargatas S.A. (ALPA4) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the Alpargatas First Quarter 2024 Earnings Release video conference. Today, we have with us Liel Miranda, our CEO; and Andre Natal, our CFO. This video conference is being recorded and translated simultaneously into English. [Operator Instructions] Before moving on, I clarify that any statements that may be made during this video conference regarding the company's business prospects, projections and operational and financial goals constitute the management's beliefs and assumptions based on information that is currently available. I would like now to give the floor to Liel, our CEO, who will start this video conference. Liel, you can please proceed.

Good morning, everyone. It's a pleasure to be with you. I thank you all for being here. Our results for the first quarter 2024, I think it's good to start out by saying that this is one more step in that turnaround process that started out last year, and we start to see positive results in several dimensions, both financial and operational. Another important thing to mention is that we demonstrated that the strategy adopted to have a focus on the portfolio, focus on the channels and focus in the markets we operate in, combined with discipline and allocation of this -- of resources and allocation of resources and execution has been working, has been yielding the results we have been -- we had expected. When we look at what we proposed to do in 2023 and that we continue to do in terms of cash generation. This month, we had positive results of BRL 260 million. We are going to detail that later on which was the focus of this first [indiscernible] in this turnaround process. As for the competitiveness in Brazil, we see some positive results. The first result -- the first positive result is that we continue the optimization of our portfolio, focusing even more in the products -- on the products, we have more competitiveness. And in addition to that, we start to see an improvement in our market share very recently. We see that our competitiveness in Brazil has been growing. And as a result, we improved the operational leveraging of the business in all directions. As for the growth -- sustainable growth of the company. We also see some signs of improvement in the international business units. For example, we had a redefinition of responsibilities where the responsibilities of the Brazilian -- the teams in Brazil as for the Brazilian market and as for the European teams which is the responsibility of the European market, which is the responsibility of the European teams and the new -- a new business unit that is now responsible for all the distribution markets. Havaianas is presenting several countries in the world, but there are about 15 markets where we have to focus on because then we will be able to accelerate our growth. I think that this first quarter of 2024 is one important step, and we are going to keep on with this strategy that has been defined and which is yielding results as we speak. And now I would like to give the floor to Andre, who is going to give you the details of the financial results for the first quarter.

It's a pleasure to be with you, all of you. Good morning, everyone. We are in a sequence that as Liel mentioned on the -- showing the first slide that this is a journey. And this journey continues. And I think this slide on the screen, maybe is a great demonstration that the first phases of the journey did not -- we're not to discontinue. They are a permanent effort. They were a first step that was not abandoned due to other things that would like to focus. We will keep up with the discipline in the company about the allocation of resources, the CapEx and the good management of resources in the company. On this slide, we can emphasize on the first graph on the left upper side, one more quarter of cash release -- working capital cash release. We know that it was a pain point for the company in the past so we are -- we have already seen 4 consecutive quarters of working capital cash release. And in this quarter, it was BRL 112 million. So the accumulated for the last 12 months is of BRL 530 million. It was very important, you already know the story. You have been following this story along the quarters. Part of this came from the reduction of inventories, both for raw materials and finished goods, but also for the reduction of other accounts such as in working capital like accounts receivables, [ EG ] accounts receivable and accounts payables. This has been key to our efforts so far to stop the leveraging that was increasing. When we look at the graph on -- in blue on the right side of the slide, we see the same levels of CapEx when we compare it to the previous year. We started the first quarter investing BRL 114 million. And now our investments was significantly lower, about BRL 100 million smaller. This was very important process that in which we had to be very agile in 2023 by prioritizing what was really essential for the company and what we could really phase out or bring it to a halt at the moment. So we didn't burn our cash so fast. When we compare it to the budget this level of BRL 15 million, I already anticipate that this is not -- that we understand it to be recurring. We just approved it in the last Board meeting, a budget that suggests a return to part of the investments that we put on hold. I think it is more a phasing -- a matter of phasing, but it was important for the moment to break -- to put a brake in the CapEx expenditures and make a reprioritization to implement our capital, allocate our capital where we needed to actually deliver what we intended. This was a very important character in the story so far. When we look at the green graph on the left-hand side, of this slide, we see that we also maintained our discipline in the expenditures. We also stopped in the second and third quarter of last year. We had a first brake, but it was still granular when looking -- picking up the low-hanging fruit and also understanding that some of this stuff were not recurring. We emphasized that fact that this was not going to be recurring. So part of that was by freezing some of the expenditures that wouldn't necessarily would get back. But over the last -- the end of the last year and the beginning of this year, we would go deeper into the opportunities that we had so we could be able to return with the expenditures that were not recurring, that were not being frozen forever. So we returned it with some of the expenditures, but we maintained a level of reduction in our expenditures in a more precise way, in a more accurate way. So it's more now recurring what you were looking at. When we look at the graph on the right-hand side of the slide, in yellow, it is the summary of what everything I have said so far. It's a reduction in the leveraging of the company. This was actually worrying for us because it was reading -- reaching our covenant clauses. So it was important to make the 3 previous adjustments I showed. So we could reach the results that you'll see here, which is a meaningful result, relevant result and brings the company to leverage levels, which are absolutely healthy and comfortable compared to any other companies. So it's important to notice as well that in the yellow line, we have the EBITDA contaminated by the write-offs of the raw materials and finished goods that happened last year, which are not necessarily connected to the capacity of the company to generate cash. So these are accounting effects that arose from older decisions of collections and that's part of that became inventory that was transformed into a write-off along last year in this quarter. So when we remove that, we look at the blue line, which gives us an even healthier leverage level for the company of about 0.7x the EBITDA of the company. So this shows that the first wave mentioned by Liel, not only did not stop, but also got stronger and more solid in this quarter. And this is something that we will keep up from now on with the discipline in the usage of capital. On the next slide, we see the impact of that in the cash -- net cash generation. Here, we have the -- remember what I have been telling you to have the perspective of a movie, understanding what was happened in the past -- what's happening in the past when there was this rapid accumulation of leveraging of the company. And starting last year, we have been generating cash consistently. So 260 plus positive now. So the accumulated over the last 12 months was of BRL 765 million and creates now for us the possibility of -- moving on with other agendas and finance the growth of the company and the recovery, the turnaround of -- in the scaling of production of the company. So on this slide, I'd like to recap the sequence of our business cycle. We have been showing this to you, and this somehow is an easy way to explain the overall. So in a year-over-year comparison, we see first the resumption of our sellout which is a very important process to resume our scale versus last year, we still don't have -- we still have a smaller scale; however, in Brazil, we managed to grow our sell-out at a rate of 1% and this obviously has generated when we look at the sell-in, which was 12% higher. I think it's very important to emphasize that this higher growth of the sell-in compared to the sellouts is not necessarily related to we pushing inventory into our sales chain. These numbers being different, it's much more compared related to the comparison of the basis for last year than the absolute levels of sell-in and sellout of the current period. So in order to -- there is a reconnection between selling and sell out, it was expected, of course, that the sell-in grew more than the sell out so now they would be a little bit more leveled out. I'm going to show that to you on the next slide. But it's important to notice that the sell-in and sellout are much more connected right now. And that's what takes that green curve, this green line curve below to be more balanced. There was a destocking in our chains, and this is going towards normality right now, normalization right now. So there will be a slight disconnection between selling and sell out, especially because the sell-out is not precise. We do not have a reading of 100% of our demand in the market. But inside the estimates we have, these numbers seem to be much more connected. Today as a business principle, we make sure that we don't have any kind of disconnection between those 2 variables sell-in and sell out. Looking at the blue part of the slide now we have production levels, which is 7% smaller compared to last year. It's important to say that last year, we were about 30% lower -- had a 30% lower production, which means that we are resuming our production levels to levels which are different from last year. It's still slightly higher than last year, but they allow us -- since we have drained part of our finished goods inventory, we can also have a better connection between those 2 parts as well, what we expect to sell and what we expect to produce and buy in terms of raw material. The project that we designed that we call rewired so we could through better planning and better streamlining of all of those 4 parts to make those variables to be more even and avoid draining our inventory to sudden -- to suddenly or to accumulate inventory. When we look at the graphs, you can see that we have destocked our inventories, and this inventory levels are much more well behaved, so as to say right now. Of course, there is seasonal points here because there are some seasonal demand, which means that we're not going to have an absolute number of inventory that's going to be always still, but we shouldn't have an unjustified accumulation of inventory anymore. The same when we look at the yellow graph, we are going to purchase -- you can say that we purchased less material than a year ago. But when we look at the destocking of the inventory levels compared to last year, you can see that we got very close to being almost pretty much adjusted. From our understanding, it is adjusted. So it's worth noticing in the yellow graph. It took us a year to destock our raw materials inventory levels. And we understand now that this graph is inside -- the raw material right now is inside, we understand as what is to be pursued as an inventory level purchase. So we should remain within this band's overall material inventory. Of course, we have a variation of prices in the market. But in terms of volume, we feel comfortable with what we have right now in inventory levels for raw materials. On this slide, we rewinded a little bit of the story. Just to remind you of what we had been through before that generated the destocking in the chain. When we look at the sell-in in yellow and sellout in blue. We see that in 2021, in the second half, we had a much higher sell-in than the sell-out at the time, and this generated a very large amount of inventory in the chain. So the second quarter of 2022 was a little bit more balanced out. And in this -- the first in the accumulation of this 1.5 years, we accumulated the sell-in in the chain inventory that obviously was going to have a price that we will have to pay and we pay this price in 2022, 2023 overall. So you remember that in the first 2 quarters of -- went through a very strong destocking. So you can see the inverted yellow bar, smaller than the blue bar. And from the second half, of the year on 2023, we saw this a little bit more connected. And now in the first quarter, also the bars are going to be closer. Of course, there is some fluctuation, and we are going to be extremely careful to have greater disconnection between those 2 bars of sell-in and sell out. When we look at the basis effect on this graph on the right-hand side, we can see why the sell-in grows more because the basis of last year is low because this is when we were providing -- making a destocking of the chain so they are pretty much reconnected the levels of sell-in and sell-out are pretty much reconnected now. And this is very important to keep the chain with a healthy inventory so that we don't lose our leverages. When we accumulate inventory, we lose part of the levers that we have. Now moving to the gross margin, EBITDA margin evolution in Brazil and internationally. As we had already seen it before, now in the first quarter of 2024, this is very strong. We have important gross margin expansion compared to the first quarter of 2023 and 2022. And we are -- we get closer to the first quarter now of 2021 in the lower part in the yellow graph, we see these numbers adjusted by write-offs, and we adjusted the whole historical series. So it's important to notice that we are at a 43% level when adjusted by write-offs. And in this quarter, we adjusted only the write-offs, but it's important to remember as well that we have important provisions related to labor contingencies due to all the reduction in personnel we had to proceed with last year. And if we exclude it and we normalize it -- that today, 43% would become -- would turn into 45% of gross margin and EBITDA in terms of gross margin. Just to give you an idea of the nonrecurring effects that we expect to see improvements over the next quarters. So this is just to say that we are at a level that is equivalent to or close to the level of the gross margin -- the first quarter 2021. And compared to that period, do we still have our selling 3 million pairs less than at the period. So even with a smaller operational scale right now, we already see a margin expansion that's quite interesting, so let's just say, and more compared to our historical levels. If we go even further back, we were at regular levels in 2019. So we can say that we are at a very competitive level right now compared to our historical records. Again, we are going to keep pursuing productivity gains. So we can see right now rate recovery in those variables. The same happens in the EBITDA margins, we see an important expansion and a sequential expansion. And again, back to 2022, this is contaminated by the same problems of the labor contingencies. So this 16 would be closer to 18 compared to the first quarter of 2022. On the next slide, we then bring the international business of Havaianas, which is coherent with the narrative that we brought to you in the last quarter of last year. What we tried to show at that time was that 2 important points. One, that's the recovery of the international market has a kind of a delay, a longer delay than the one we saw in Brazil. First, we saw Brazil first as having priority in the recovery, especially because of the size of our business, but also because of our capacity because we sell all year round in Brazil, we don't have such a strong seasonality in Brazil as it is in the rest of the world. We don't have a season that ends in the middle of the year, et cetera, et cetera. So we managed to deploy initiatives and see the effects of these initiatives throughout the year. And on the other hand, in the international markets, we are there through preorders. And there is a series of effects that whatever we do throughout the whole year, in the short term, we are not going to see those effects -- are not going to be the effects that we expect to see in the future. So it's a longer journey to see the results, but it's absolutely possible, given the power of the brand and the -- how well we are -- how well known we are abroad. And another message that we brought to you was that, that quarter, last quarter last year was not a good reference for profitability of the business. We had in sequence 2 quarters which were quite different when we look at the EBITDA graph, we arrived at minus BRL 51 million and minus BRL 100 million in the third and fourth quarter of 2023. So this brought kind of a perception of risk that was bigger. So at that time, we try to make a point to the market that we didn't see that as a recurring level of our business. Obviously, I would like to say that we won't get where we want quickly, but we also understand that we are not at that level that seems so bad in that fourth quarter of 2024. So once again, we have lots of homework to do here. lots of opportunities. We are having a very deep study in each one of the regions and we have plans inside the company, but they will take their time to be executed. So this graph on the right-hand side, we only make this comparison in the volume in millions of pairs and in the other x -- the -- [indiscernible] thousands of Brazilian real. So this comparison shows that the 2 dots are the third and fourth quarter of last year. So we seem to be at a very more difficult position than we actually were. We are now a little bit compared to -- a little bit worse compared to the first quarter of last year but we see important perspective that over time, we were going to be recovering levels that we are going -- had already had in the past, which are going to be better. Now I'm going to go -- I give the floor to Rafael Estides who will continue with more details in each one of the regions.

Thank you, Andre. I'm going to start out talking about the volume and revenue and net sales. We had a 12% growth in volume 14% growth in net sales -- in the net sales per pair. It's important to emphasize the stabilization of our sell-out. When we look at the sellout breakdown by channel, we had a more positive sell-out in our food retail and our D2C, the food retail grew 3% to 6% year-over-year. So this is the most important and relevant channel for us. So it was a very meaningful recovery. Moving on to the international markets, we bring to you the broke down by regions. So in the consolidated for the international, we saw a 10% decrease in volume, 14% in net sales. This was driven mainly by the U.S.A. and EMEA and also distributors which saw volume decreasing of minus 4%. It's important, our most important operation in Europe, we already have a more adjusted logistic structure. That was a very important and recurring topic last year, which resulted in loss in volume and distribution costs, which were elevated last year. So this year, we have the structure working in a much better shape. So we started out at the beginning of the high season delivering the volumes that we expected to deliver to our clients. And as we manage to replenish the shelves of our clients from the very beginning of the high season, we have these good prospects to advance in the sell-out and sell-in in this very important region, which is Europe. In the distributors market, we're still in this process of normalization of the inventory levels of our distributors, but already at a very advanced stage. You remember last quarter, there was a very steep [indiscernible] decrease because of this normalization of inventory levels. And at the beginning of this quarter, we have advanced well through this process. In the United States, we saw a volume decrease mainly in our B2B and mainly in the off-price channels. We started out the year with smaller inventory levels as well. So we gave less discounts, smaller discounts, and this affected both volume and revenue, net sales. Going to our gross profit, we saw an increase of 11% in the consolidated, growing 31% in Brazil and decreasing 13% in the international operations. It's important to emphasize, as Andre mentioned before. We adjusted 5% our year-over-year cost per pair reduction and if we use the write-offs and the labor contingencies, we would be actually adding 4 percentage points in this gross profit in Brazil. In the international operations, it was pretty much stable, a little bit of an advance that comes especially from the cost reduction in Europe. As I said, our logistics operations, there are much better and also distribute markets cost reduction that are much more aligned to our cost reduction in Brazil. Since these are markets that we serve through exports -- exportation via our distributors. It's important to reinforce that this cost per pair reduction. We had a very important reduction in labor. And there was also a sequence reduction in the raw material cost reduction. Moving on to the expenses. The SG&A expenses consolidated were nearly flat year-over-year with relevant benefits such as OBZ packages with a 13% decrease compared to the first quarter last year and also distribution expenses minus 9% versus first quarter 2023. If we make this math prepared, given the volume we gave, we reduced our expenses, our costs for distribution of pair in minus 15%. Of course, here, emphasizing the optimization, our logistics and distribution operations. On the other hand, we have negative impacts of bonus provision. We are provisioning the bonus, which is related to this current year. And we also have the right expenses related to volume increase like in royalties, collections, et cetera, which are aligned to the volume growth that we saw in Brazil. We also had a market expenses reduction of minus 8% year-over-year. But these marketing expenses were still 21% higher and 20% higher than the first quarter of 2022 and '21, respectively. And again, we remind you that the plan of our company in the long term is to go back to resume these investments in markets to invest more in our brand, especially in the priority markets and part of the savings that we have managed to generate so far with the reduction of the OBZ packages should be reinvested in the brand and that's what we will be seeing in the mid-to-long terms. So starting at BRL 107 million for the normalized EBITDA for Havaianas, we had an addition of BRL 3 million from other operations, reaching BRL 110 million, normalizing EBITDA. We had extraordinary items, especially in this quarter related to the simplification in the operations we have been executing and the cost is associated with it of BRL 10 million, reaching a statutory EBITDA, EBITDA of BRL 100 million. Going to the net financial position and operational flow, we had a very important release of working capital, once again as for the inventories, we had a reduction of BRL 30 million compared to the fourth quarter '23 and especially compared to the first quarter '23, 34 days of products in inventory compared to the first quarter of '23. In this quarter and that's a novelty. The biggest contributor for this working capital release was the receivables with a release of BRL 120 million in receivables, which means a reduction of 8 days of net sales. This all reflects a much higher discipline in our management of our receivables and an improvement in our processes for approval of receivables deadlines with our clients. Of course, we don't expect this to be recurrent, but the average level that we got is already much more aligned with the historical records of the company, and we do expect to maintain this at this level right now. From the supplier standpoint of view, we had a reduction of BRL 38 million, a decrease of BRL 38 million in suppliers. This is still reflected by the reduction in the raw material purchase. As Andre mentioned, we decreased 13% and 28% the value reflecting the cost reduction of the raw materials in the market. And as we normalize our production and the purchase of raw materials, we expect our suppliers to go back to more normalized levels according to the historical records of the company. Moving into our net debt, we saw a variation of BRL 260 million, BRL 280 million referred to the operational flow in CapEx. BRL 280 million of -- BRL 185 million of working capital and other and BRL 15 million in CapEx and BRL 21 million related to no operational flow. Moving to Rothy's results. We had a quarter that was aligned to what was expected with a BRL 34 million, 10% growth in the revenue. Negative EBITDA, but getting very close to the breakeven point. It's important to remember that this first quarter is the least relevant considering the top line for Rothy's in the United States because of the seasonality. And that means the breakeven -- being closer to the breakeven point, it gives us a positive perspective for the rest of the year in a perspective of bottom line and EBITDA numbers. The company is still seeing important advancements in the gross margin, seen less cost in the shipping costs for the last mile and also important optimization of expenses. In the reduction, in lower customer acquisition costs and expenses optimization. It's also important to see that we had same-store sales growing 12% year-over-year and launch of a product that performed extremely well at the beginning of this year in this first quarter, which brings us a very positive perspective for the rest of 2024. I'm going to move now into our Q&A. We are going to follow the order of the people who raise their hands.

The first question is from Diego Guilherme Vilela, JPMorgan.

I would like to understand a little bit more this margin in Brazil of 43%. When you remove the write-offs for labor provisions and compared to last year, which was a 41%. Can we understand that this margin is to go for the company, consider that we have less volume and excluding eventual cost pressure that this is going to be a recurring number. My second question about the international operations is I like you to give us a little bit of visibility in the preorder process that you mentioned making the deliveries in spring and how this is happening, this delivery is being -- the shipping has been happening and also about international, if you could give us some idea of the profitability for each one of the regions, isolated, and how this was dialogue with an eventual revision of the footprint from now on.

Thank you, Guilherme, for your question. When we look at the gross margin, as you mentioned, there are several moving impacts. There is an important part of the reduction that you see there of the cost reduction that you see, therefore, which results in margin expansion comes from the gain productivity of our workforce in the way of operating. And therefore, we managed to stay at the same levels of production and spending less in the production. So in this 43%, if you remove the labor contingencies that I mentioned, it was probably would be at 45% of margin. There is a part of this process that is obviously connected to the movementation of the raw material. So it's very hard to be precise about the recurrency because this depends on the commodities prices in the market. And we are not able to predict how the price of commodities will be. But when you look at the movements that we have seen so far, we saw obviously the price going down of the price of the main raw materials. The prices went down last year compared to the prices that what we saw we had in our inventories so in the market, we had much lower price than the price we had in our history of inventory. But we couldn't buy because of the huge inventory levels we had for raw materials. So only at the last of last year, we resumed this process of buying raw material. And in the beginning of this year, we did the same. So we saw part of these benefits of buying low raw materials at lower levels -- lower prices, the first important thing to notice that there is difference -- a delay between -- a lag -- a time gap between we buy more raw materials at a lower price and this reaches the inventory since we work from an accounting perspective in the average inventory. This will take some time to be reflected. Also, when we buy raw materials, it takes some time to be seen in the COGS of the company. So it takes about 2 months in order to see that. So in practice, not all of this process of reduction of the raw material prices that happened over last year was translated already, has already went through the cost of goods sold because we have to go through the inventory level prices and also through the COGS. On the other hand, it's important to understand that in the beginning of the year now in the market, there are some geopolitical changes and also questions matters related to the rubber industry. So this took the prices of the raw materials to increase again compared to the decrease we had seen last year. If on the one hand, not all the movement has been made for the COGS. On the other hand, the purchase of raw materials from now on by the company especially because we always start buying, we will resume the purchase of raw materials in the second half of this year, we will probably receive a higher price of the raw materials compared to what we saw in the past months. So it's difficult to precise exactly at which level 43%, 48%, 45%, where this is going to be stabilized because we have this moving impact. First, we're going to see this movementation of the benefits throughout the COGS. So we are very much well covered in the first half of this year in terms of pricing of raw materials. On the other hand, we will try to keep the recurrency of our purchase of raw materials. So this will take us, lead us to obviously buy sometimes the raw materials at a higher price than we see right now being practiced in the market. So the easy answer is we -- the part that comes from the raw material is very difficult to precise from now on. But we are comfortable that from now on, we will keep looking for newer suppliers or also to gain efficiency in our purchase processes as well as to better manage our daily manufacturing operations and our industrial operations. We are very comfortable with these levels, we are very well covered in the first half of the year. But after the first half of the year, we will have to rely on price that I will -- I cannot tell you how these prices will be in the second half of the year. And now I'm going to request Liel to talk about the second question and obviously, the profitability from market to market. We won't be able to give you the breakdown, obviously. But what I can tell you is that we have a very detailed understanding and our planning has been designed to try to correct the distortions that we have seen over time. So we won't to be able to give you a breakdown, okay, right now. But Liel can address a little bit the second question that you asked, okay? What we are doing in the international operations.

As Andre mentioned, when he talked about the slide on the international operations differently from Brazil, where we have continued sales processes throughout the year. In the north hemisphere, especially U.S. and Europe, as the main clients are large distributors, large accounts. Usually, this negotiation happens. For instance, at the end of 2023, for the December season of 2024 -- June 2024. So our capacity of reaction to seek additional volume to ensure that we have growth as we are seeing in Brazil, which is a little bit more dynamic. It's -- our capacity is limited. So that's why we say that the Brazilian market was much quicker in demonstrating the improvement of our competitiveness considering price execution and distribution. On the other hand, in the international market, this takes longer because we need to deliver this year of 2024 based on the orders that we -- a big part of that on the orders that we received in 2023, which of course, does not prevent us to keep working harder, to find more opportunities for growth inside this season -- summer season of 2024 through more distribution, better execution at the stores but the space for growth is kind of more limited than what we saw in the short term in Brazil compared to what we saw in the short-term Brazil, which means that we're going to see this improvement in competitiveness in the international scenario, maybe later than what we see in the first quarter in Brazil. As for the international markets, obviously, we cannot open -- break down our results market-by-market. But the most important thing as Andre mentioned, since we made an analysis of many of the markets where we are in, we are focusing now in the markets where we have the biggest scale which means that with a bigger scale, we are going to be able to accelerate volume and with better margins quickly or more quickly. So the point that I mentioned of having more focus on the right international markets will help us to have more positive results in the mid- to long term.

Next question from [indiscernible]

I have 2 questions. First one is a follow-up on profitability asked by Guilherme and reaching more the EBITDA side since you mentioned the productivity gains. What do you see as of the space? And what are the low-hanging fruits in terms of efficiency and simplification initiatives that you commented that started in the month of April. And my second question also about the international operations and thinking a little bit more in the American market is. If you could tell me a little bit more about this channel strategies that you have been working, where it is -- where you were at with it right now and where you intend to get to?

There is some problems for us to share our projections from now on. We cannot give you any kind of market guidance. And obviously, we have to be very careful here to be careful not to say anything that sounds or seems that it is a guidance where our margin should be converging to or what the potential of cuts in expenses that we see right now. First of all, I can tell you that we don't have no low-hanging fruit at the moment. The fruits are all high right now. So it's much more -- so it's much more complex right now. I think we did a very well-executed job in the end of last year. There was some external support. But the entire team was involved in mapping opportunities. And so we did, we map opportunities that make us comfortable to believe that there is something to be executed over time. What we decided to do, first of all, is that we can't do everything at the same time. So part of these opportunities are going to be carried out in a more phased way. Some of the things are more straightforward and some of the things they rely on automatization, preparations or processes that then enable us to capture on that gains, to benefit from those gains. So from everything we map it, we can't unfortunately tell you a number of a percentage or 1 million because we can't give you a guideline because of regulatory matters, but everything that we mapped here in terms of options for efficiency gain and simplification will be carried out over a period that includes part of this year. Part of this we have already done, part of this, we are carrying out right now and will be carried out throughout the year. And we'll still have in our parking lot, some interesting ideas to explore maybe throughout next year as well. Another thing that I can tell you is to anticipate for you is that part of these savings, obviously, we have the interest of reconnecting that by bringing these numbers back to our investments in marketing. That's why we're talking about the OBZ packages excluded marketing because this is exactly what do we want. We want to invert the spiral cycle that the company had been performing, which was an inspire of growing other expenses and not marketing, sacrificing marketing. So we are now reconnecting so what we call the good spiral to be efficient where we can be and we can. So we have the money to invest in the market boosted so we can see a growth in the top line of the company in the future. So not all of this money will translate into EBITDA gains because part of this will be reinvested in the business. So it -- we can go back to growing our top line because our volume growth will be also a very important component in the expansion of the EBITDA margin. So at a certain moment, we have to reinvest part of the savings, so we can keep growing the EBITDA margin in a sustainable way. Otherwise, we're going to be in a dynamic of only cutting but we also have to have -- to see an expansion of the top line of the volumes that we sell. So again, some of the effects of what we did last year, we had to revert, but we also managed to implement other initiatives at the end of last year and the beginning of this year. So we could have a counterpart to this nonrecurring event. So in March and April, we had some more adjustments. We had some headcount adjustments. We had some restructuring. Liel said in his very part of his speech about the redefinition of the global and the local teams. So in this discussion, we recentralized some functions that were local in each one of the markets. We brought them back and reconnected them to the global areas here in Brazil. So obviously, they generated some opportunities for headcount reduction and restructuring as a whole of leadership positions and so on. So these movements have been happening, but we can't anticipate these numbers, and we want to do that. So I'm going to ask Liel now to answer your question about the channels. In the international markets.

Thank you, Andre. Thank you, [ Larissa ], for your question. I think that the American market is very similar to what we mentioned for the international market as a whole. Obviously, what we have in the United States is the distribution based on 2 large channels. One channel, which is the department stores. Clients which are organized under large accounts and another part that is even more important in the U.S., which is the digital sales, the e-commerce. Those 2 channels for us make all sense personally because to be present in the department stores and in more premium department stores positions our brand as a brand that has added value to consumers, to the end users. And to have online distribution is must as well. So we have to be able to competitive and be able to execute online as well. So this is our strategy for channels in the U.S. We'll keep pursuing this strategy to make sure that this strategy is going to result in the scale that we want. Our challenge is that it's an expensive business to do -- expensive market to the business and to gain scale there is not so simple. So I hope I have answered your question, [ Larisa ].