Companhia Brasileira De Distribuicao ($PCAR3)

[Audio Gap] [Operator Instructions] Please note that this video conference is being recorded and will be made available on the company's Investor Relations website where the full earnings release materials are also available. [Operator Instructions] We would like to remind you that the information contained in this presentation as well as the statements that may be made during this video conference regarding GPA's business outlook, projections and operational and financial targets constitute the beliefs and assumptions of the company's management and information currently available to the company. Forward-looking statements are no guarantees of performance. They involve risks, uncertainties and assumptions as they relate to future events and depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect GPA's future performance and could cause results to differ materially. Today, we have the CEO, Alexandre Santoro; and the CFO and IRO, Pedro Albuquerque. I will now turn the floor over to Alexandre Santoro to begin the presentation.

Thank you, Alini. A good day to all of you. Before we begin, I would like to thank our employees, suppliers, partners and shareholders and especially our customers for their support and trust throughout the important period of our history. I would also like to thank all of you for joining us in the company's first quarter '26 earnings release. To begin, I would like to give you an update on the out-of-court restructuring process and the company's main developments during the quarter. As we communicated to the market on March 10, we filed for an out-of-court restructuring process with the objective of renegotiating the company's unsecured nonoperational debt, which totaled approximately BRL 4.6 billion and carries significant short-term cash obligations, including BRL 2.3 billion falling due in 2026. In less than 2 months following intense negotiations with creditors, we secured the support of more than 57% of the eligible creditor base, exceeding the legal required minimum for court approval of the plan. This agreement represents an important step in the company's financial reorganization. The proposal structurally improves the debt profile, reduces financial cost and extends maturities, significantly easing cash flow pressure over the coming years. It is important to note that the process still depends on court approval for its final conclusion, but we believe we have made meaningful progress towards building a more balanced and sustainable financial structure for GPA. Since the beginning of this new cycle, we have created the strengthening of GPA's financial structure as a priority alongside our operational efficiency and cash generation agenda. More importantly, we have conducted this process while preserving operations. The experience of the more than 20 million customers who visit our stores every month, the day-to-day of our employees and our relationship with suppliers and partners, priorities we have always considered as nonnegotiable. Now the chart on Slide 4 illustrates what the negotiation would represent for the company using the first quarter '26 figures as a reference. As you can see, this agreement would enable a substantial reduction of up to 75% of our pro forma net debt. Now turning now to Slide 5. I will address our operational performance for the first quarter. We delivered same-store sales growth across all banners and formats, mainly driven by the performance of perishables, a category that has historically been highly relevant to our banners and one of the main pillars of our value proposition. The highlight was Extra Mercado with a growth of 1.2% for same-store sales. In total sales, we recorded a 5.2% decline mainly reflecting the discontinuation of the Aliados, as we call that, as well as the prioritization of more profitable channel sales that will bring better returns for the company. We stopped making sales that were nonperforming. In this context, we continue to make progress in rebalancing digital sales, including the review of certain partnerships and a greater focus on strengthening our proprietary e-commerce platform, seeking to improve profitability and service levels in this important channel. We continue to operate in a challenging consumer environment pressured by deflation in some relevant categories such as basic grocery. And additionally to that, we observed significant changes in the behavior of consumers. Customers are ever more focused on healthability, convenience and quality, trends that reinform the relevance of our value proposition and the quality of execution in our stores. We had a positive Easter with a growth in same-store sales in the seasonal categories above the consolidated figures of the company, reaffirming the competitiveness. When we look and operational efficiency, we continue to advance with financial discipline, simplification and a consistent reduction in cost and operating expenses. Only in the first quarter, we reduced CapEx by 55% and captured BRL 99 million in efficiencies, keeping the company aligned with the main operational and financial priorities set forth for the year. Now going on to Slide 6. I would like to highlight another relevant development. At the beginning of the cycle, we strengthened our leadership structure, an important moment in the transformation process, with a more integrated and complementary executive team made up of experienced professionals prepared to elevate execution standards and accelerate GPA's transformation agenda. We have an experienced and committed team that is fully aware of the significant challenges still ahead. And together with this team, with the support of our Board of Directors and the more than 35,000 employees who make GPA's day-to-day operation happen, we will work to raise execution standards, improve the customer experience and consistently expand operational cash generation. In an environment where consumers are ever more selective and increasingly attentive to the relationship between value, quality and experience, operational execution becomes ever more critical. In our business, results are a consequence of execution. It is in the store that the customer decides to come back. It is in the store that trust is built. And it is in the store that GPA will continue to evolve every single day. I will now turn the floor to Pedro Albuquerque, my partner and the company's CFO, to detail the quarter's financial performance.

Thank you, Santoro, and a good morning. On Slide 8, we highlight the evolution of gross profit and adjusted EBITDA. In the quarter, we had significant expansion in gross margin, which reached 30.4%, representing the strategy of prioritizing profitability and our sales mix for e-commerce contributing with 1.2 percentage points. The effect of excluding certain products from the ICMS tax regime and the impact of nonrecurring recognition tax credits of 0.7 percentage points. We had a reduction of BRL 33 million in SG&A because of the cost reduction of our efficiency plan 2026, we have CapEx initiatives, expenses and costs. We invested BRL 7 million (sic) [ BRL 87 million ] in the quarter, a reduction of 55% vis-a-vis the previous quarter. We would like to end the year at BRL 300 million, BRL 350 million. In terms of expenses, we captured BRL 99 million. Now these results reflect the reduction of headcount, the reduction of relevant contracts, a significant reduction in rates, a reduction in utilities and of course, a reduction in expenses. The EBITDA margin grew to 10.5%, an expansion of 192 basis points vis-a-vis last year. In Slide #9, we show you the loss of BRL 1.3 million (sic) [ BRL 1.347 billion ] of discontinued activities. This relates to a nonrecurring event without a cash impact totaling approximately BRL 1 billion, a write-off of credit assets of BRL 435 million and BRL 9 or 10 million relating to other effects. If we disconsider these nonrecurring effects, the net income would be BRL 333 million. On Slide 10, we presented cash flow view from a management perspective, looking at the last 12 months. We generated BRL 522 million in operating free cash flow after CapEx, a growth of to 65.2% compared to the prior period. This performance reflects a combination of 3 factors: improvement of the pre-IFRS 16 adjusted EBITDA reaching BRL 899 million, operating assets and liabilities and the reduction of CapEx. Part of this improvement was offset by a higher cash allocation to suppliers and worsening the supplier payment turns by 7 days with the objective of preserving operational normality. In the CapEx line, we invested BRL 507 million in the last 12 months, reflecting a turning point with a reduction of BRL 202 million. This movement began in the fourth quarter '25 with the company revision and is expected to intensify throughout 2026. In other operating expenses, we continue to see a reduction compared to the previous year. The line totaled BRL 527 million in the period due to one-off positive effects in the fourth quarter '25. Finally, net financial expense totaled BRL 967 million, an increase of BRL 337 million compared to the same period in the prior year. Now over the last 12 years, we have the renewal of surety bonds, new issuances and a reduction of average [ cash ] during the period. On Slide 11, I would like to reinforce the impacts we expect following the conclusion of our out-of-course restructuring plan and the projected cash requirements for the coming year. When Santoro and I joined the company, we projected cash outflows of approximately BRL 5.2 billion over the next 2 years. BRL 300 million are being addressed with proceeds from the sale of the FIC, under the terms of the restructuring plan. The average debt maturity is expected to increase from 2.1 years to n6.4 years, and we estimate a reduction in the average cost of debt to CDI plus 0.5% per year. The company's net financial debt, as anticipated by Santoro, could be reduced to BRL 822 million, a decline of 74.3% considering the first quarter '26 pro forma position. This new debt structure and payment profile will enable the continuity of the turnaround already underway, allowing the company to address its remaining liabilities. I would like to thank our creditors, suppliers and the entire team that supported operations throughout the restructuring process.

Thank you, Pedro. Thank you. Before we open the floor for questions. I'd like to reinforce some of the important progress we've made during these first months leading the company as well as the priorities we'll continue to pursue. Over the past close to 4 months, we've carried out an intense effort focusing on reorganizing, on stabilizing and establishing clear priorities. Our focus has always been to strengthen GPA's ability to execute and deliver results. We're talking about one of the most traditional and relevant companies in Brazilian retail with strong brands, tens of thousands of employees and a long-standing relationships with millions of customers across the country. And obviously, that carries tremendous responsibility for all of us. The out-of-court restructuring process has been undoubtedly one of the most important milestones during this period. We've been able to move, I would say, very quickly through a complex negotiation while preserving operations, maintaining relationships with suppliers and protecting the customer experience. There are still major stock steps ahead, including, of course, court approval, but we believe we have taken a meaningful step toward the company's financial reorganization. In the most challenging moment such as this one, the role of leadership is to provide stability, clarity of priorities and direction and that is exactly what we sought to build throughout these first months. Change such as this occurs when there's great alignment across management, the Executive Board, the Board of Directions (sic) [ Directors ] and the operation. From an operational standpoint, we've launched a highly disciplined agenda focused on efficiency, simplification and cost control. We've reduced CapEx, captured efficiencies and continue to deepen the review of processes, organizational structure and capital allocation, always focused on productivity, profitability and operating cash generation. We remain committed to keeping the customer at the center of our decisions, continuously improving shopping experience, assortment, service level and the competitiveness of our commercial offering for each one of our brands. We'll also continue to make gradual progress in addressing the company's remaining liabilities and other strategic priorities. I believe that very few companies in Brazil retail have the relevance, heritage, scale and customer connection that GPA has built over the past decades. There are still major challenges ahead of us, and we are fully aware of that. But we also believe the company has the necessary attributes to return to a path of consistent long-term evolution. We're building stronger foundations for GPA's future with greater financial discipline, more operational simplicity, stronger customer focus and a culture increasingly driven by execution. Our motto is to do the basics in the very best way. And personally, I feel honored to contribute to this important moment in the company's history. Thank you so much. We will now open for questions.

[Operator Instructions] Let's hear our first question, it comes from Danni Eiger with XP.

We have 2 here. First, I know you are very focused on your restructuring plan and your adjustments, but from an operations perspective, which you also mentioned will be very significant, there's also been major changes both in generational consumption shifts with the increase in GLP-1 sales and also from a more macro perspective, the changes in income levels. So I'd like to hear from you the first impressions or initiatives that are already clear for you in terms of really improving your sales levels, whether via price changes or changes in the mix? I think it would be interesting to understand your mindset. And also, what's been your diagnosis with regards to consumer behavior, with regards to the Staples basket and things of that nature? And my second question would be, I'd like to hear more with regards to your material fact, the removal of the OPA clause and also your capital raising and the amount that's been approved. I just wanted to understand whether that's part of the steps you're taking in terms of the capital restructure?

Thank you, Danni. I'll start by answering the first part of your question. There's a very clear challenge here, Danni, as I said in the beginning of my presentation. There are shifts in consumer spending. And also another challenge we've been seeing, which is the discretionary income, which has improved, but we know there are other factors, which have been shaping part of how they spend their money, which is not with our business. So we believe this is a scenario that has an impact in the entire industry. During these very -- this very short time that we've been here, what we see is there's still a huge need to better position these 2 major brands that we have, both Pão de Açúcar and Extra. I think that we have a very interesting business in our hands, which addresses, in different ways, the opportunities this market offers. From the Pão de Açúcar perspective, as we mentioned before, I think we're very well positioned in terms of the value proposition where a large share of our sales is made up of perishables, and we offer a distinguished service. And that's the path we'll continue to be on, always seeking an increasingly better proposition for our customers in terms of convenience, service and -- service level and quality. At the same time, what I've understood during this time I've been here is a huge need for development on the Extra side of the business. And we have been having great discussions with regards to price positioning and a number of other initiatives that we are looking into adopting. Also, when we look at the Proximity business, there's also initiatives in terms of the mix and also the logistics, which is a huge challenge on that side of the business. So there are a number of initiatives underway. But I think when it comes to the company's positioning and its brands and different consumption opportunities on the opportunity side, we are seeing a path to improve things and to become more efficient, and as a result, to see more progress on our -- more progress in our sales really. So that's what I can say to you, of course, keeping in mind the 4 months that we've had and also the agenda that we've addressed so far. Part of our agenda is to redesign the company's strategic plan for the next few years, Danni? Anything you'd like to add?

Well, I'd like to address the material effect. I think there are 2 points or 2 propositions really. One is to use the capital increase that's been approved. When you look within that, we are looking at the convertible. And once we address that issue, we'll have to have a preference hearing if you have other stakeholders who want to adopt the reversible. And if you look at the trend, that debenture might not be converted with every window, so it will extend in its maturity until the end of the period. So there's even the issue of interest if we were thinking about the maturity of this debenture at the last window, which I believe would be -- or last [ tranche ], which would be 2031. So even within the -- that perspective, I think it would be important to address that even considering that there will be an opportunity for conversion. I think that, that's another issue shareholders would like to hear about.

Our next question comes from Alexandre Namioka with Morgan Stanley.

Our first question, from a gross margin perspective, which I think was a very positive highlight for this quarter, if you could please break down this 2.9 percentage point increase in different factors that you've mentioned such as the continued profitability and the allies, if you could please quantify each 1 of these elements that would be great. And my other question pertains to the line of suppliers in your working capital. You mentioned that you see a onetime impact in Q1. So I just wanted to make sure that this effect has already been corrected starting in the second half -- the second quarter of the year?

Thank you, Alexandre. Let me take you through these 2 points from the financial side. If you look at the gross margin, I think the mechanics can be divided into 2 different effects. I think most of this effect, maybe 1.1 or 1.2 percentage points of these 290 basis points in improvement come from these decisions in terms of image improvement. There's been a significant improvement in profitability especially in 1P versus 3P, thanks to the decisions we've decided to make here at the company. There's another 1/3 of that, which would be on the more mechanical side, the ICMS stake where you remove that from revenues so the basis for comparison changes. So there's a 0.7 percentage point impact there. And there's also the impact from credit that's been recognized as a one-off during this period. So these are the 3 impacts that make up this 290 basis point increase. The second question with regards to suppliers, we saw a lot of our working capital being consumed versus last year. We're talking about a 7-day period. But even when you look at Q4 of last year, that was very clear. We have 20 days where we ate up a lot of our working capital. And there's also the seasonal period. At the end of the year, there are a few one-offs that we have to address. And what we noticed in discussions with customers that had to deal with a number of issues during this period of negotiations. Once things go back to normal, there's still a process for us to move forward, but we understand that this should progress over the course of the second half of the year? I don't know if you have anything to add?

No, I think that was very comprehensive.

Our question comes from Gustavo Fratini with Bank of America.

We have 2 as well. First, I just would like to know if there's been any update with regards to your tax issues? We saw there's been a decrease in Q4 of about 4%. We just wanted to get a sense of where that -- where you're at with that, and if there's any chance of that liability decreasing? And second, I just wanted to understand a little bit more about your selling expenses. I know you're trying to reduce that as much as possible, but it was still an aggressor. There's been a decrease in revenue. So I just wanted to understand what steps you're taking to reduce that in a more clear way?

All right. So first of all, to your point about the tax issue, now, Gustavo, the reduction is coming from our contingencies target, bearing in mind the São Paulo agreement, which we've been adhering to. So there's been a significant decrease in liabilities. And from the perspective of the overall discussion, we are moving forward with the steps that we've decided on. I don't think there's any significant update. I think it's more about the company's priorities, and we've been very focused and working hard on addressing that issue. Also, I think with regards to the reorg, we've also been trying to decompress our balance sheet, so there's a payment flow that we can adjust during this process, but it still something that's under discussion. And as soon as we have an update, you will be communicated.

Now with regards to our selling expenses, yes, of course. I can share with you a little bit of what we've been doing from that perspective. I could maybe break that down into different buckets, the first one being structure more specifically. We've redesigned our corporate headquarters. Our structure is about 25% smaller than it was at the beginning of the year. So a significant decrease has occurred, between 20% and 25%. Also to adjust to the company's new reality, I think that's an important piece of information. There are obviously a few fronts where we have not captured all of the gains even when it comes to the review of a few contracts we're executing. In IT, for example, our expenses are still disproportionate when you look at the company's -- or at the reality for the company. gpa is probably one of the few companies which still relies on mainframe, which obviously, as you know, is not the most effective thing in the world. It has -- it involves high costs and doesn't allow you the possibility of developing more modern apps. But we're still renegotiating and redefining the scope of changing that. So that's part of the scope of what we're looking at in terms of opportunities for change. We also had a number of properties where we were not operating anymore, but we were still incurring the costs with the lease and property tax and all the costs that you need to deal with, with properties that you're not operating. So most of our focus was in addressing that. And we also see opportunities, and of course, that's something we will be tackling over the next few months to improve our assortment and our logistics structure. There's a major front on the logistics side to streamline and improve our logistical efficiency. The company designed its logistics infrastructure to a reality that's no longer the one we see in reality. So when you look at the Northeast and the Central West of the country, our structure is a lot larger than the reality of the business requires considering that significant part of these stores that used to be in operations no longer is the case. So there are a number of initiatives in place which are ultimately focused on improving efficiency and streamlining the business. We also took an important step on the field to adjust -- to streamline the number of positions on the field, and we were very surgical at that. There were a few brands where we needed to reinforce our payroll or strengthen it. So we are still capturing part of the guidance that we provided in the past with regards to cost, but there's still a lot going on that has to be seized over the next few months, and we'll update you on that as we go along. But that's essentially it, Gustavo.

Yes, I think it's also important on sell-in, the major driver is still staff. There's also collective bargaining to consider. So you start off with a headwind, but I think on the initiatives that were mentioned, we're still working on bringing that down. But there's still a lot to come.

The question-and-answer session ends here. We would like to thank all of you for your attendance, and we would like to inform you that the video conference has ended. The IR department is at your entire disposal to respond to any questions that you may still have. Thank you for your attendance, and have a very good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]