Desktop S.A. ($DESK3)

Ladies and gentlemen, welcome to Desktop's conference for discussing the earnings of the first quarter of 2026. This conference is being recorded, and you can replay on the company's website, ir.com.br. The presentation is also available for download. [Operator Instructions] I would also like to say that any of the information or predictions are based on the positions and the macro information available to Desktop today. These declarations can change, could involve risks and uncertainties, and are dependent on future scenarios that may change and circumstances which may or may not occur. Analysts should also understand that the issues relating to the macroeconomic scenario may cause other -- may cause the results to be very different from those that are expressed in predictions. We have with us here today, Mr. Denio Alves Lindo, CEO at Desktop; Mr. Bruno Leao, CFO of the company; and Mr. André Falcão, CRO of the company. I would like to pass the word to Mr. Denio, who will begin the presentation.

Welcome to the Desktop teleconference -- the Desktop 2026 Earnings Call. Today, I have the presence of Bruno, our Chief Financial, M&A and Investor Relations Officer; as well as André Falcão, our Chief Revenue Officer. I would like to start with the highlights for the quarter, both operational and financial and then pass the word to André and Bruno for the details of the results. As we have been reinforcing over the past few quarters, we continue to be focused on improving cash generation and operational efficiency. The results in the first quarter show how much the company has evolved on this front, even in a quarter marked by a slower pace of operational growth as a result of the strategic decision the company made, we continue to deliver consistent revenue evolution, profitability expansion and strong cash generation. Throughout the quarter, we maintained a more selective stance in the way we chose new clients and receive them, prioritize higher quality commercial channels and customers with the best better profiles and with higher return on invested capital. Today, we have a mature operational commercial platform, which allows us to modulate the pace of growth strategically, preserving efficiency and value creation. The company's net revenue reached BRL 322 million in the first quarter of 2026, growth of 9% when compared to the first quarter of the previous year. Adjusted EBITDA totaled BRL 174 million, up 14% year-on-year with a margin of 54%, reflecting continued gain, operational efficiency and better discipline in managing costs and expenses. Adjusted net income was BRL 29 million for this quarter, mainly impacted by the higher level of financial expenses and the increase in depreciation and amortization expenses resulting from the investment cycle carried out in recent years. From an operational point of view, we ended the quarter with 1,206,000 active accesses and 4,844,000 homes passed. As planned, we reported stability in our subscriber base, a slightly negative net income, which reflects our decision to bring in a smaller volume than what we did in previous quarters in terms of client base. Once again, it is important to underscore that this dynamic is not related to any competitive or market depreciation, but rather to a conscious decision the company made to prioritize cash generation. The financial results prove the assertiveness of this strategy. FCO as well as adjusted CapEx reached BRL 54 million in the quarter, which represents an improvement of BRL 52 million when compared to the first quarter of 2025. We also continue to make significant progress in making the most of our customer base through the expansion of additional products and services, greater digitalization of sales and acceleration of convergence and B2B. Overall, the quarter's results reinforce Desktop's ability to balance growth, operational efficiency and cash generation, preserving profitability and financial sustainability in the long term. I now give the floor to André, who will detail our commercial performance for this quarter.

Thank you, Denio. Good morning. We continue to consolidate our geographic presence in the state of Sao Paulo with 58,000 kilometers of network, 4.8 million households served or homes passed and a presence in 200 cities. We ended the quarter with 1,206,000 active accesses. In terms of net additions, we reported approximately 2,000 in the quarter and -- 2,000 net disconnections in the quarter. As already mentioned, this dynamic reflects a strategic decision by the company to more selectively calibrate the pace of new activations prioritizing greater cash generation, commercial efficiency and better return on capital without giving up the quality of the operation. The integrity of the base and our future growth capacity. Desktop today has a resilient commercial platform that is fully capable of accelerating sales whenever we deem it appropriate. At this time, we continue to prioritize customers with a better profile, more efficient commercial channels and higher quality sales. As a result of this strategy, we had another relevant advance in digital sales, which reached 70% of total sales in the quarter, an increase of 16 percentage points compared to the first quarter of 2025. In addition to the evolution of digital channels, we continue to advance in important avenues of revenue generation, monetization and profitability in the base. We have consistently improved our sell-on and cross-selling of services based on our customer base, including streaming, premium broadband packages and products related to mobile convergence via MVNO. At the same time, we have accelerated our operations in B2B, which continues to present excellent levels of return for the company. Even in the quarter with greater stability in the customer base, we continue to evolve the average ticket of the operation, reflecting the progress of these monetization initiatives, greater commercial sophistication and value captured on the infrastructure we have built. We have also continued to observe that gradual improvement in the quality of our customers and healthier delinquency or default indicators and greater efficiency and acquisition. In general, the operating indicators reflect the maturity of our operation and the company's ability to plan and execute with balancing cash generation, operational efficiency and profitability. Now I'll pass the word to Bruno Leao, who will detail the company's financial results.

Thank you, Falcão. I'm Bruno. Good morning. And in the following slides, we will go over some of our financial results. On Slide 7, you'll see the main lines of financial results, net revenue, adjusted EBITDA and the adjusted net income. Starting with the net revenue, we ended the first quarter with BRL 322 million, a growth of 9% when compared to the first quarter of '25. This performance reflects not only the growth of the base over the last few quarters, also the evolution of the company's average ticket, driven by the initiatives to monetize and B2B. Regarding adjusted EBITDA, we recorded BRL 174 million in the quarter, a growth of 14% when compared to the first quarter of 2025 with an EBITDA margin of 54%, reflecting the continuity of operational efficiency initiatives and greater discipline in the way we manage costs and expenses. Throughout the quarter, we had a significant reduction in expense of third-party services in addition to the optimization in the personnel structure. In addition, we recorded lower expenses of advertising and marketing in the absolute terms in the annual comparison in addition to gains, operating leverage and dilution of expenses. With regard to the adjusted net income, we recorded BRL 29 million for the quarter. The reduction compared to the first quarter of 2025 is mainly related to the high levels of interest and depreciation as well as amortization resulting from the investment cycle carried out in recent years. Slide 8, we present the evolution of the company's cash generation. Adjusted FCO, which excludes financial results and CapEx suppliers reached BRL 140 million in the first quarter, an increase of 13% when compared to the same period in the previous year. Moving to the adjusted CapEx. We recorded BRL 87 million in the quarter, equivalent to 27% of net revenue. This level represents a reduction of 29% when compared to the first quarter of 2025 and a decrease of 15 percentage points as a percentage of net revenue, reinforcing greater discipline in capital allocation. This evolution is a direct consequence of the slower pace of new activations, the greater reuse of equipment and more efficient management of investments. As a result, when we look at the chart on the right, which represents the FCO plus adjusted CapEx, we recorded BRL 54 million of cash generation in the first quarter. The result represents an improvement of BRL 52 million when compared to the first quarter of 2025 when the company had practically recorded breakeven in this metric. Slide 9, we present the company's consolidated cash flow in the first quarter of '26, starting with the adjusted EBITDA of BRL 174 million. We recorded BRL 140 million of adjusted operating cash flow, which represents a conversion of 81% of adjusted EBITDA. In the CapEx block, we had investments of BRL 87 million in the quarter. Main allocation remains customer equipment and services with BRL 53 million equivalent to 62% of total CapEx. We also had BRL 21 million related to M&A payments and installments of acquisitions made in previous period. In the financing block, there was a cash consumption of BRL 44 million, mainly impacted by debt and interest variation, dividends paid and other financial transactions. As a result, we ended the first quarter with BRL 457 million in liquidity, maintaining a robust cash position adequate to the company's financial strategy. In closing, we present Slide 10 with the company's capital structure. As gross debt considering banks and M&A obligations ended the quarter at BRL 2.009 billion with a cash and equivalent position of BRL 457 million, net debt totaled BRL 1.5 billion. In terms of leverage, we ended the quarter with 2.22x, net debt on annualized pro forma EBITDA, representing a reduction compared to the first quarter of '25 and this indicator was 2.4x. Regarding the composition of [indiscernible] 83% is related to financial debt and 17% to the M&A obligations. [indiscernible] In the amortization schedule, we continue with a balanced profile with a higher cost efficiency and maturity between 2031 and 2032 providing predictability for a long-term financial planning. Another important point is the average spread. Our financial debt remained at CDI +0.4% in the quarter, which is significant below the level of the CDI +1.3% in the first quarter '25. This evolution reflects the effect of the liability management initiatives which were carried over the last quarters, allowing the company to lengthen it's debt profile, reduce the average cost and strengthen the company's capital structure. As a result, we ended the quarter maintaining a solid financial position with adequate liquidity, lower leverage and efficient capital structure. I now give the floor back to Denio.

Thank you, Bruno. Thank you, André. Before closing, I would like to say that the results of the first quarter demonstrate the consistency of our strategy. We are focused on improving cash generation and operational efficiency while continuing to progress in delivering the best services and products to our customers. Desktop starts in 2026 at a new level, more profitable, more disciplined and with a greater capacity to transform operating results into cash. Once again, I thank all of our employees, our collaborators, customers, partners, clients, shareholders for their commitment. We will now open for questions and answers. Thank you so much.

[Operator Instructions] Our first question comes from Luis Chagas from XP.

First of all, we have 2 questions. So we look at the average ticket improvement margins. I would ask if you could give us a little bit more information on how you made your client base more profitable. And also if you see any room for increasing front book pricing throughout this year and also a little bit of your program for back book pricing. And the second question is that we see an improvement of operational cash flow and CapEx. And I would like to know what level of CapEx you see for the next quarters and from this CapEx. It looks like it -- this became more stable after the first quarter. I would like to know if we could -- what we can consider moving forward.

Thank you for the question, Luis. I'll talk about average ticket, and then I'll pass it to Bruno to talk about some of the financial terms. So we continue to advance very consistently in different situations of generating ticket and monetizing our client base. We consider our current base of clients. We structured the ecosystem in a more robust way throughout 2025 in terms of profitability with 10 different contact points, contact with the client. This has allowed us to significantly improve our streaming [indiscernible] and MVNO products, always thinking about convergence and increasing or adding value for clients. We talk about acquiring new clients. We also consolidated a very mature portfolio with a mix between high-level subscription. So I don't necessarily need to put the price up to improve my ticket. I can improve the mix over time and I don't have to off price. That would be a more strategic way of increasing margins about the basis that I already mentioned, we continue to -- how we can grow the ticket as well as how we can grow our clients. In terms of B2B, we continue to expand and make our portfolio more sophisticated as well as improving our governance and our commercial execution. When we think about the fact that our commercial operation already operates within the curve, we expect curve, and we continue with great expectations for the next quarters. We delivered a year-by-year 3.6 and we are very confident that this evolution will continue. We have all of our avenues very well mapped out. And if we look at the base as well as new clients as well as B2B, we see that there is room to keep moving forward. I don't necessarily need to increase prices. So we do have a strategy that we have traced and continue to follow here and which helps us to avoid extractions or doing wild dances throughout the year. We have a well-traced plan, which I will continue to follow. And I would actually say it's even doing better than we expected. So we'll continue following that road map. Bruno, the word is with you.

Thank you, Falcão. To add on to this answer about CapEx. In the first quarter, normally, there are more payments. That's why I look at CapEx and cash gains, those will become more obvious during the next quarters where there is less churn and better improvement of equipment, better use of the equipment.

[Operator Instructions] The question-and-answer session is closed. With that, we can pass the word to the CEO of the company, Mr. Denio Alves, so that he can make the final considerations to close.

Thank you. I would like to highlight that we continue to grow sustainably in a controlled manner and more and more efficiently. This current high interest rate scenario, we understand is the best strategy for the company and its shareholders is to strengthen the cash flow. That is what we're delivering, and that's what we will continue to deliver in the near future. More and more, we're occupying our network, adding more products to the clients of the base and opening new fronts of convergence in B2B. So we are improving our revenue while we decrease CapEx. We continue to invest in technology to evolve technology and the efficient use of tools with AI as well as a permanent focus on client experience. I want to thank everyone for your participation and warm embraces.

The Desktop earnings call is closed. Thank you for participating, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]