Grupo Casas Bahia S.A. (BHIA3) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for waiting. Welcome to the Earnings Call for the Third Quarter of 2025 of the Grupo Casas Bahia. If you need simultaneous translation, we have this tool available on our platform. [Operator Instructions] We'd also like to let you know that this earnings call is going to be provided on our IR website and the company at the ri.grupocasasbahia.com.br, where you have the full material for our earnings release. You can also download our presentation on the chat icon in English. [Operator Instructions] We'd like to let you know that information present in this presentation and possible statements that could be made during the earnings call related to business perspectives, forecasts and operational and financial goals represent assumptions and beliefs of the company's management as well as information that is currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events that could not occur through different circumstances. Investors must comprehend the general economic conditions, market conditions and other operational factors can affect future performance in the company and lead to results that differ materially from those in such future statements. So today, we also have the presence of our earning -- our executives at the company, Renato Franklin; Elcio, our CFO and IRO; and Gabriel Succar, the Investor Relations Director. Now I will pass the floor to Mr. Renato Franklin.

Hi, guys. Good afternoon. Welcome to our call, and we're going to talk about the third quarter of 2025. Before we begin with the numbers, I want to quickly have a broader message shared about the company's journey so far. The third quarter really reinforces this in a very clear way, something that's essential. We've been evolving in a consistent manner for the past 8 quarters in a structured and predictable way. Our deliveries from an operational perspective go through all company channels. We're delivering growth in all channels, an improvement in margins and an advance in productivity. And at the same time, we've been optimizing costs, reducing the company's SG&A. From a financial and capital structure perspective, we've been executing everything we've planned ever since August 2023. So we're improving our operational cash generation, we're rationalizing our expenses, and we've had concrete advances in our capital structure. Every quarter that goes by, we've been bringing receivable deliverables in the short term in our operational numbers in the company. But at the same time, we also bring in structured levers that will bring in contributions in the midterm. In the short term from the next quarter on, but will also impact the mid- and long term of the company. And I want to highlight 3 of these this quarter. The first one is we provided disclosure during the earnings release. But this effect actually occurred in the beginning of the third quarter, which is when we speak about the conversion of BRL 1.6 billion of Series 2. This all starts to bring benefits to the company throughout this period, reducing the spreads and bringing in new capital sources and helping us reduce financial expenses slowly but surely. The second, which is coming from this conversion is the issuance of another FIDC now for funding suppliers and substituting some for facilities with a smaller spread, which will help us also reduce the funding and working capital in the company. And then the third that's very transformational, which is the alliance with Mercado Livre. We mentioned that, that had a major repercussion and the fact that we're here for in 11 days of operation and the earnings will definitely be a lot better than what we expected. We started off very well. And I'm not only talking about the GMV. I think that's an additional part that helps us with the operational leverage and reduces a bit of pressure so we can have more set of pricing with more vigor, prioritizing margins and the channels with the best margins because you start working with another channel that has additional demand and new public and a different assortment. But it also brings operational efficiency gains with the synergies that this alliance allows us to capture and the lessons learned that can be applied also to our internal channel for 1P, 3P, and there really is this ecosystem of tools and information that allows us to be even more efficient from this side. I think all of these movements help and strengthen the company, not only for the next quarter, but also our competitive advantages. As the leader and the biggest provider of home utilities appliances and are really using our logistical structure and reinforce our own private label what we've seen in the first 11 days is that growth has been helping also in our own channel on this side because of the brand awareness. And I think that once we talked about this, I think I want to add on to this. Maybe this is one of the most important points, right? And I want to mention the transparency aspect. We are completely aware of the macroeconomic scenario we're experiencing and the capital structure that the company has at the moment. But of course, obviously, the main channel of the company, which is the physical stores is the channel that as the base of the pyramid uses to buy. So this is the most impacted channel from the macroeconomic environment. Why am I saying this? Well, this product is more sensitive to income, inflation and credit. And when we have an improvement in the macro scenario, then once we fix things up and we have everything working well, that will allow us to really capture this improvement in the macro environment and this demand, contributing to operational leverage with more elasticity in our product and our core product, which is a Buy Now, Pay Later that brings this opportunity also to reach a return rate that is sustainable in the long term. And about the capital structure, we know we have a lot to evolve with, but there's -- it's worth mentioning that all deliverables that were made so far really make it evident how we have the capacity to execute and really work on the turnaround of the company. The plan is working. Things are taking place till now. And we know about the levers we must deliver to continue to improve our capital structure. And that's why we're super confident. And every quarter with each of these levers, we increase our trust and our confidence that we'll even have some positive coincidences. We'll be able to improve the company most probably when we are ready to enter in this new growth cycle is really going to be when we're going to start seeing macro get better, and that will allow us to have a very positive cycle. in this company, bringing operational leverage and efficiency, the net income and profitability. So this is a bit of the journey that we've been experiencing in the last 2.5 years and that we hope to experience in the next quarters. Now we're going to get into the numbers a bit and show you what makes us confident about all this. Can we move on? Well, here, you see the top line of the company, as I mentioned, the company grew in all channels. And you can remember, we're not in the growth phase. We're in a phase of profitability of efficiency. We have a lot of discipline in credit granting that can promote growth. And even so with the strength of the brand, as you organize the company's stocks and engage the team, the team becomes more confident and more excited and the awareness of the brand grows, and we have share in all channels. So same-store sales grew 7.8%, the online GMV has been growing 9%. Our 3P that's core in home appliances is not the additional 3P. And here, you can see our discipline of buying items that really have a good turnover, and we can work with the assortments that customers want. This is the DNA of a specialist player. If I want to be an omnichannel specialist, customers that come in, if they want to find any model of televisions, they have to have that. Most part will be 1P. But of course, we really need to service the whole scope of assortment, and that's something we can add on to with 3P. So customers can find the televisions they're looking for in attractive conditions, and they can still use the credit tools where the Buy Now, Pay Later has really advanced and made it possible to have this growth. So with this, we've been able to improve our take rate and market share as well in core categories. I want to highlight the white line and other categories as well with incremental gains even with the market moving sideways. So we can move on now. And as we talk about that structuring step, which is transformational for the company, the Casas Bahia and Mercado Livre's alliance, we disclosed this recently in the end of October, and we saw that we're going to start operating on the 3rd of November. We were able to start a pilot 3 days before, and this was an important case. And it really demonstrates our technological platform prepared to have this team with the strong execution. We're still learning. We have major potential. And yes, we're doing a little better than what we expected, and this makes us excited. But when we come in and see the level of the opportunity and especially the complementarity of the public, and here, I have positive reinforcements here. And maybe that's the most strategic challenge to guarantee we don't have cannibalization is this complementary public. So we're able to deliver additional growth in the Mercado Livre platform, and we brought in more growth. And so because of the awareness reinforcement and public complementarity, and this is going to help us. The sales curve that this additional channel can bring to the company. But no doubt, we already have a material contribution in the fourth quarter, and we're going to continue quarter-over-quarter adding on and bringing in improvements to the company. So from a strategic perspective, this is very relevant with synergies and opportunities that we have, but reinforcing a bit of what our rationale was, right? In Casas Bahia, we lead the market with physical stores, which is a bit less than half of home appliances, technology and furniture in Brazil. In our own e-commerce, we've been growing, but we still have a smaller share, about 17% market share. And in this generalist e-commerce, where we have a lot more of an impulse purchase, there's always like different items with conditions that suppliers provide 1 day with some volume or some depth, then you can have a more impulse-guided purchase and this is a market that's super relevant, over BRL 30 billion here. So yes, we do have an expectation to bring in a material volume of sales with incremental margins. And this has been -- we've had a lot of rationality. We're not going to perform irrational investments. And another thing that really brought us here is about the competitive environment. So that's always a topic we need to discuss a bit more. The competitive environment, you can see there's some big players that are rational and very aware of the macroeconomic environment. But -- and we can see this demand as well that explains a bit of this from the Mercado Livre as well. So with this assortment that's really broad in a lot of depth, so we've seen each item representing 1% or 2%. And it's really interesting to see that we are selling over 1,000 SKUs per day. And so this allows us to have some different initiatives to improve our stock management. And this is an additional channel that gives us a lot more flexibility in management. And on that side, we also have different opportunities, of course, items that maybe weren't so rational as a big tower of sound systems or sort of like even cases where logistics provide more capacity for deliveries, and we're going to lever this and also allow for this in Mercado Livre. So now we can talk about the core product and a bit of the Buy Now, Pay Later in our approach. And we're going to keep this rigor in the credit granting. This number shows we could be selling more. I see there is a demand that exists. If we want to have BRL 100 million more as production per month, it would be reasonably okay, and I don't think that would impact too much. But we prefer to keep this conservative approach to avoid any issues. So we've been keeping our delinquency really controlled, NPLs also controlled, the net losses are controlled and production is a little more than last year with about 5% more with BRL 2.5 billion now in the third quarter. Now we have the fourth quarter with better seasonality, where we can also have productions a little stronger and gradually grow our portfolio. But we're going to wait to have a better macro environment and so that we can then accelerate this business that brings such strong contributions to the company. We can move on to talk about delinquency and the credit market in Brazil and how we have this approach. We brought in this slide last quarter, and you can see the updates. When you see the blue line, our delinquency is measured by the rate or the lowest sale. So we went from 9% in the first quarter of '24 to 8.4% in the third quarter of '25. And you can see the market indicators. This is from the Central Bank. If you look at the red line, it's the overdraft credit, and that's almost 300 bps. If you look at the cards on installments, it goes from 10 to 3.2. And so you can really see our rigor in credit granting. And you can see the efficiency of our credit engine and technology database and all the differentials that really have this business and a lot of resilience with a lot of discipline and excellent returns which is why we're really betting on this lever to optimize and improve returns in the company in the midterm. We can go over a slide, please. Here, we can talk about the financial highlights. I'm going to pass this on to Elcio to provide more details, please.

Thank you, Renato. Good afternoon, everyone. Well, just to give you about 10 minutes of reflection, I think the quarter really reinforces the company's capacity to keep its focus, consistency and discipline on the transformation plan. So when we see the execution of the plan 2.5 years after, we're still working with the same initiatives and the same consistency. Even in a scenario that we've seen today, we're able to deliver an important combination that is not that simple, right, with the increase of profitability, as we were mentioning and the increase in margins, at 0.8 percentage points alongside the growth of our revenue. So normally, these are not items that are in walking hand in hand. There's always some sort of trade-offs, but we've been growing the revenue by 7.3%. So that's why the maintenance of the delinquency rates and indicators that Renato just mentioned. The second pillar with a positive cash flow, but of course, still recognizing that it's not sufficient yet considering the way and challenge with the capital structure, but more of the operational aspects and the healthiness of the business, working with topics that are like labor, monetization of tax issues that we've been advancing with in a very consistent manner. So here, we have high seasonality, and we're really well prepared for this. High-quality stocks that are really healthy as well. And we have quality depth and a reduction of those stocks that were a little older and that have excellent security and flexibility also for us to perform in the fourth quarter. So we're very cautious about this and considering the macro scenario, right? But we've been taking care of all of this plan and working on the seasonality in the best way possible. And as we mentioned, the capital structure, as I mentioned, we performed the second series, as Renato mentioned, with an impact that took place in August and the impact of the financial expense is still partial. But that just reinforces that we have a path to follow in our capital structure as we continue with other initiatives. Another important theme that Renato mentioned is our FIDC for overdraft for freight, and we had the BRL 525 million, but the minimum wage offering was BRL 138 million. So I think there was really good reception from the market, and we were able to close that BRL 555 million. And this evolution, along with the advances in the capital structure have allowed us to reduce spreads and this had an important impact and it's going to happen slowly but surely, especially in '26, because now we get into the fourth quarter with high seasonality. So despite the spreads being a little smaller marginally we have a higher fall in. It's been advancing now due to seasonality. But structurally, we should see an improvement throughout '26.I think we can move on to the next slide now. Here we can always see the advances of the transformation plan. In large numbers, revenue grew about 7.3%. In regards to last year the physical store had a growth of 7.8% in the same-store sales and reinforcing our strategy initially of strengthening our channel, which is the most profitable in the company. The gross profit had BRL 2.1 billion and a margin of 30%. Here we had an increase nominally of almost 2%, but there was also a reduction of 1.6 percentage points in the margin compared to the previous year. So that's an explanation of the categories and channels. You have more significance in the growth that we've noticed. And this is actually an important topic. We even had some concerns about our online growth with those categories you mentioned, and we decided to focus on core. So it's been growing, but there's a margin that's slightly smaller. And so the weight of the online channel with greater penetration in the cell phone category with margins that are lower than the average of the company brought in pressure for a gross margin reduction. And so we recover this efficiency in our operational expenses that dropped nominally by 3.2% compared to last year, even with the adjustment of the revenue 7.3% and an inflation of 5.2% in the period. So when we grow the top line, we have a gross margin that's healthy, and we are able to have the dilution in our discipline for cost and expenses, and we're able to have the reduction in operational leverage that is translated here to 8.5%. So I think that's a point of the plan that's been going on for a few quarters, and we can continue to see the levers for the next quarters. The growth of the top line with commercial execution and operational execution is very healthy, managing the categories and channels and prioritizing profitability at the end of the day. As Renato mentioned, we're going to be focused on the expansion of online with Mercado Livre, et cetera, but also a close focus on the profitability with the goal of expanding our top line alongside profitability for the company. Now we'll head to the next slide, and this is where we can see the consolidation of the 9 months in the year. And it's important to also look at the other indicators. But in the revenue, you have a very similar message here. So growth of revenue of 7.8%. The EBITDA was an expansion of 30%, about 4 percentage points of advances in the margins, very substantial. And we always mentioned the EBIT, which went from 1.3% to 4.1% in the first 9 months, and that's a growth that's very significant, 242%. And on the other side, you also have the capital structure with an increase in financial expenses leading to greater losses in the period. So I think that's a bit of our journey and what we've been presenting with our challenges and advances and a bit of the trajectory and the same story. So we can move on to the next one. And we generated BRL 488 million in the quarter, BRL 1.6 billion in the last 12 months, and we see this trajectory that's growing and that's where we really have our EBITDA margin and free cash flow. And of course, considering our capital structure weight, we still need to continue to move along with the operational evolution of the margins and operational cash generation in our capital structure. And so we're finishing the quarter with BRL 3 billion in liquidity. And now we're going to head to the fourth quarter in seasonality that's very positive for our cash flow. We can move on to the next slide. And now we're going to get into the main messages. So we have more seasonality. Last year, we had the Live Black. So we have a lot of marketing to measure what customers are searching for and allocate discounts according to what customers are searching for. And with that, you become more efficient. This year, we're working on more integrated initiatives of physical stores, a lot of lives through directly from the store, calling customers to the store, spread around all of Brazil, along with the Black Central online channel that works in the Marginal Tietê unit. And an important highlight is the company's stock. When you see the company's stock, obviously, at the end of September, it's not much better than last year. But when you look at the stock in stores, we have 27% more than last year. So it's a store that's very well supplied. So we're not working on 1 quarter. We made the best decisions for the business to have better -- and this allowed us to be more organized and also have a level that will help us take advantage of the efficiency here in our physical store and our brand strength. And so that allows us to have strong sales. You can see this makes us very excited not only with sales but margins and profitability, which is our main commitment. So we can move on to the next slide now. We're very competitive. We have a lot to sell. And I want to invite you all to also look into the offerings we have even before the Black Friday, November 11 was also very important for us, and we're going to be launching some new offerings. And this is why we've been able to have very strong days and growth day after day preparing for Black Friday that used to be only 2 or 3 days, and now it's the full month. So now moving on, we can see the main messages of the company. And first, we can see the consistency, 8 quarters that are improving the GMV and optimization of the expenses, as Elcio mentioned, improving the penetration of our services that are profitable, such as the Buy Now, Pay Later. Our retail media as well, growing take rate with 3P and the insurance services and cards that also contribute to profitability. So this also reflects on this improvement. We're on this ramp-up and transition with levers that also optimize the capital structure. We're going to optimize this capital structure, which helps us to reap benefits in the next quarters. Of course, we're aware we have to continue to address our capital structure. But we're confident and we're excited with what we've done so far and with the plan we have ahead. Moving on, we can talk about our future a bit what do we expect from now on? We have fourth quarters, we're going to have strong seasonality, and we're going to continue to gain market share. And here, we can see our main focus, which is gradual growth of the physical stores. As I mentioned, the macro environment is more challenging, families' debt level is also getting the way a bit. So it's limited growth in line with what we've been delivering here. And no doubt, we're preparing to capture this in a stronger manner. Now on the second point, digital is more profitable. And here, I want to highlight that the penetration of the Buy Now, Pay Later new levers, Mercado Livre also helps reduce pressure from some less profitable channels. And the third item, which is related to this how -- when they ask you how does your e-commerce grow like this? Well, we started talking about IA for pricing, and we implemented 100% of this in the online channel in the second quarter. We're reaping the fits in the third quarter. This also impacted a bit of the second quarter. And this is going to help us a lot to have results in the fourth quarter. So the pricing system is a lot more dynamic, more rational, and it allows us to improve our margins and also makes us a lot more competitive without exaggerating on the competitiveness, but we're going to start rolling out to physical stores as well, our brick-and-mortars that are going to help us gain share as well with pricing that is more efficient. So our main focus is the strategic expansion of the Buy Now, Pay Later. We're expanding this year, but we have a lot of rigor in credit granting and a lot of discipline, and we're preparing so that as soon as possible, we can advance our Buy Now, Pay Later into other channels and segments. There's a lot to be done here. And I think keeping up this cost base with a bit of efficiency, of course, mitigating the inflation. And the last line is what we've been talking about and bringing as constant improvements for the working capital and capital structure that will allow us to solve the operational aspects, reaching the point we want to reach, but also considering that we need to have very robust EBITDA to be able to have a profitable company and an interest rate of double digits that we're going to have in Brazil after the improvements, but also having a company with low leverage without debt that will allow us to serve through positive results in any macro environment here in Brazil. When we have more positive environments, we have more growth when there's a challenging environment with a structure that's light and deleveraged, we can also capture spreads using our products to fund consumers and suppliers. And I want to pass this on to Gabriel so we can open up for Q&A. Gabriel?

Thank you, Renato. We're going to start calling Daniela from XP.

Congrats on the results and for the evolution ever since you began the transformation plan in the company. We have 2 questions here on my side. One is a follow-up, and I know you guys have already talked about the partnership with Mercado Livre, but I wanted to discuss this a bit more because it's very transformational in this movement. And I want to understand a bit of why now. I don't know about the intensity of the competition as well and if this has made it a little more expensive to bring in nonqualified flow that you mentioned even in the release. But maybe the nonqualified have become a little more difficult with more intense competition. And I also want to understand a bit more about the economics. So at the end of the day, you guys have been, as Renato mentioned, you have a new public. And anyways, we're trying to understand how we should think about this in the comparison with 1P, not only the gross margins because there's other components below the gross margin that you probably don't have to cover like performance marketing, for example. But I know that in the news and even at the engines, you mentioned that things are doing well, but we had an event that maybe is -- has a different intent with the 11/11 right here in Brazil. And so just to understand how you saw this in Mercado Livre, but also in the overall market and everything you guys can bring just that would be great. But then the second one that's pretty quick. I think you extended myself a bit too much here on this point, and maybe my peers are going to bring in other points. But about store openings, you mentioned that the macro environment is challenging. There are short-term challenges, but we noticed you guys had recovery ever since the end of 2022, you -- then, of course, that you guys opened 2 stores, but I want to understand your mindset from this expansion perspective.

Thanks, Danni. Thanks for the questions. First, we're going to talk about the Mercado Livre here, our alliance and why now, right? Because -- well, ever since the beginning, when we saw the company's strategy of being a specialist player and that we were going to remove 50% of the categories, everyone had 2 aspects. One, was 2 warnings. You're going to lose recurrence because you're removing high recurrence items. And then you could give up on the 1win things on and that you're focusing on being a specialist player. Then we brought in the market thesis as a specialist with profoundness and a good journey, competitive advantages and how we can survive. But we've been performing with this thesis in a consistent manner that gives us really a lot of conviction that we have the right thesis. And we had a second question, which is, okay, you're going to perform, but eventually, the marketplace will start selling your category. Then what will this be like, right? So then we were saying, well, we think it's going to take a while because the items that most grow e-commerce penetration, which are very low -- they're small items, logistics are different. You need credit. And so there are a lot of levers that protect us from this big item, right? But the fact is after 2.5 years from that presentation, which was in August '23, we noticed not only Mercado Livre growing a lot, but strong growth in our categories during the last year. And so of course, it is grew with smaller items, portable devices and even small pieces of furniture, but that was a market that became very big, and we weren't participating. So the Casas Bahia Group has a strong point, which is a physical store. We are growing online. That improved with pricing to gain competitiveness and guarantee growth and -- but you lack investments to be able to grow more and more and reach the same levels as the physical stores. And this channel, we weren't participating in it. So there is a profitability issue that we weren't going to participate in if that didn't bring in marginal gains. And so I think you had both aspects, which is, one, we saw the market has already become relevant, and we also have this other opportunity that generates value from a margin perspective, right? So entering into the other part of your question here and by 1P, you can see a more strategic investment, and we're always improving consumer journeys, and this is something we're not going to give up on, and it's not even priced in this contribution margin. But you have the ad cost and you have a lot of things that impact this, right? And so we have commissioning and investments with this partnership, which is long term, and it addressed 2 things, better margins because here, you have a gross margin. But what was really important was using and taking advantage of this so that Mercado Livre can even use this for other sellers in 1P because I have idle capacity that was released when I removed other categories. So to optimize this cost, either I grow very quickly and I have no capital structure for this or I bring in other players so that they can use the structure. In the last 2 years, we brought in almost 100 external customers. But they're smaller customers. They occupy one region. None of them have a national reach. But now we'll have a player that has national capacity that's going to reduce logistical costs and contribute a lot. And especially when I avoid, they have to invest in this infrastructure themselves, right? And that's where you have this interdependence, right? So it is good for both of them. And then they have a relationship that's a lot greater than this long-term contract that we have, right? We need it to be sustainable in the long term. And this is important for both companies. And so other opportunities, synergies, et cetera, that made the business really more interesting and that gave us the necessary confidence to be able to have the contract. So I think that's pretty much it. And then you have the economics of the deal, which I mentioned a bit, which we're not going to break down the commissioning details. But what I can say is that we've been able to have the idea is actually have 2 percentage points more in the contribution margin in our sales through Mercado Livre than on the average of our channels. When we look at our channels, we have a more profitable segment and other segments that are less profitable. So obviously, not everything we did in Mercado Livre will be growth. Considering my capital structure and our discipline, I'm going to prefer to reduce in a bit channels. I have more demand and increase prices and then I lose sales in some places. And on average, I'm gaining -- I'm growing the company at healthy levels, improving margins gradually, which is the main objective for the online channel. And then from on 11/11, this was very good. It was better than our site -- for our site than in there. But what happens is we have a lot to learn still, right? And it's a tool. When you plug that in, you already start selling that, and we plugged in other items with more assortment. We had changes as well. And basically, we must perform still in some periods where we can equalize this and have the necessary delivery terms. The routes are different. And we've been very conservative in this journey, although we have moved into a number that's quite material, but it's a very small share within what they sell. So marketplaces overall were very strong. They have less concentration of Black Friday. And so when you see the sales in 1 day upon the sales of the month of the year in a marketplace, it's less concentrated than a specialist player as ours. Our categories have less recurring purchases, right? So the seasonal dates have more strength. But 11/11, even for organic media partnerships helped us, and we're able to perform well in our own channels. So then we're not opening up stores, but we tested something and we just explained what this opening was. We have stores that are big and you have a store in Campinas, but there's some idle capacity, and we were able to look at this and we saw that with the same cost, we can open up a Pontofrio unit in the same property, right? So I -- my stock doesn't change, and that's a POS that never really legalizes -- normalize the sales in Casas Bahia, but it also brought in additional sales, and we see it's like a hub. You have one store next to the other. So there are opportunities that we tested here besides the Mega store in marginal together with our headquarters that we opened. So store openings are not in our radar. Even things that are very profitable and there may be some changes here and there, but this is maybe a shift in one spot or the other, very like one-off occasions, but we're only going to start opening up stores when the company gets back to profitability, and we have a positive cash flow.

Okay. Doug -- our next question, I'm going to ask Pedro from Bradesco to come along now.

We have 2 questions here. The first one is from -- well, I wanted to think about ever since you guys took over your roles. When you consider the evolution in your relationship with your suppliers, we had moments that were more restrictive in the beginning of '23 with Americanas. And sometimes the insurance companies were establishing some kind of a credit limit and now the company is already demonstrating a healthier level of growth. So I wanted to understand about the main suppliers and how this evolved and where we're at. And actually, if after the announcement of the partnerships with Mercado Livre, you guys have seen any more evolution in this sense, right? So that's the first question. The second question is kind of including a bit of the capital structure and the cash flow here and some questions we have on our side. The first is about -- for the first time, you guys broke down the FIDCs that are gaining more relevance in the capital structure section. But I want to understand more about the potential of this. What's the funding structure that can maybe consider this with the Buy Now, Pay Later? And how much can the structure achieve? And how can we think about this mix up ahead, a bit of the costs and differences we have. And I'm sure my last question here, I promise. Just an update about credit monetization versus the labor burden and how we're doing so far.

Pedro, thanks for the question. Just about the relationship with suppliers, as you mentioned, we reached a point where our relationship has always been quite strong. There's a high reliance. And there are some additional stakeholders, which are the credit insurance companies and the reaction of these stakeholders sometimes is not immediate. So they look at the LTM and things kind of happened as the quarter's update, right? So we have -- after Americanas and some strong points in the transformation, get own stock that kind of scared the market. But then we did have a reduction in credit limits and that restrained the company from an acquisition perspective and that made it difficult for us to capture operational leverage. But as we evolved, we were able to have great communication and that brought in an improvement in the sentiment with suppliers, and that was something we're able to capture occasionally with an incremental increase in the limits, BRL 150 million on the other month. And you come down on an elevated go up on stairs. And as we advanced and we're able to have the Series 2 conversion, that was an important milestone. And then we were able to bring in greater contribution with the goal of having an increase for next year, but we're able to have an increase in insurance companies and also get back to open risk with almost all of our suppliers actually working with a bit of the open risk. And why is it -- why isn't this reflected in the reduction of the [ for freight ] lines in the company? Well, because we looked at this together with seasonality in the second semester, and we were preparing the company for all the seasonality. And so there was growth. If you look at this from a consolidated perspective, it was quite relevant, and we had to prepare for it. So to be able to improve the company's exposure and reduce the volume of for freight, we had to continue to advance and have better limits with suppliers, expand our payment terms. And that's where we can recover this. There are some suppliers where we could have a term, but sometimes you have to pay in a shorter period than if I had a commercial agreement and that restraints working capital and kind of affects the for freight risk. With MELI, if you already and they sell another 10% or 15% for sellers with my scale, it's natural that we would gain a lot of share. So that increases and our negotiation became a lot stronger because we have visibility on how it's going to be. And with this strength, we can even gain a bit more of a fact-based negotiations looking at the market prices. And some people have a smaller SG&A as well. So how can we balance out the business to have a healthy market environment. So it's something that helps us. And I think we're going to see an expansion also. We've been negotiating with suppliers that are going to grow those that support us also more and we see this positively versus this relationship versus partnerships, right? But this is all incremental. I don't see any major changes from this level from one quarter to another. I think it's going to be gradual just as we worked on the operational transformation of the company. Now about the FIDCs, and I'll ask Elcio to complete this. But when you consider these 2 facilities, we have the [ structures ], the Buy Now, Pay Later, FIDC, which should move on to structures that are similar to the FIDC. It doesn't necessarily need to be the FIDC. But if I migrate to a fragmented credit you have less of a credit risk for the creditor than a corporate credit for Casas Bahia. So the spread is smaller, the cost of capital is lower and our gains become greater. So it's natural that we consider these structures that are maybe more similar to the FIDs have the receivables there and you have, et cetera. So what took a while was the preparation in the company. Now we're ready, and we've been expanding gradually as well. Now you have conversations with new creditors that we brought in with cheaper credit facilities, and we're going to substitute this gradually, but it's a step-by-step process. Some take a while to reach stability and they would give us a comfort if we have a worse situation, but that also kind of blocks in the spread and then it's going to drop gradually. It's going to take a little longer. But everything is structured. We have a plan to work on this management and to capture the funding efficiency. And the other line is the for freight FIDC as they start supporting the company. And in the future, this is going to maybe take a little longer because maybe the market got a little worse, but the macro environment, once it gets better, we'll be able to use this to anticipate this for suppliers and maybe gain more profitability. But maybe this takes a while. You have like a year of work to be able to optimize this gradually and start capturing. So oh, do you have the FIDC? Yes, but it's very little compared to the total amount. Now it's more of a liability than the financial revenue, it's going to become an asset up ahead, but you have other levers to deliver first to be able to migrate this line there. I'll pass the floor to Elcio, so he can talk about the monetization and labor issues as well.

So I think the first FIDC topic, if we get back to our transformation plan, we had a restriction in the funding to grow. This was always strategic. And this was the instrument that was the most important instrument. And we have to segregate this in a separate vehicle because the CDC that we've been working on has a component of a corporate risk. So we've been working on this, as Renato mentioned, to have a more -- a complete mitigation of these corporate risks and have this engine adjusted with all of the components and now it's ready and prepared to support the funding and the Buy Now, Pay Later. Through the [indiscernible] we also have these line, the FIDC and the Buy Now, Pay Later. We have no restrictions. Our initial objective is of not having funding restrictions is already a reality for quite a while. So we want to grow BRL 1 billion tomorrow it won't be due to lack of funding. And so then it is a strategic matter to be able to grow gradually due to the macro scenario, but we reached a point that we wanted to get to and obviously as you have more of an offering we can get into a spread compression process and you search for the most economic alternatives to grow your Buy Now, Pay Later, right? So there's materially processes until you bring in this track record into the FDICs. Slowly, but surely this becomes more predictable as well. But you have this process over time either through CDC or in the way that's most economic for the company. The FIDC in its concept and nature is normally within this segregated structure, right? So considering this marginal growth that we've had in the last quarters, this has been really captured within these structures. So this is a reality that we should keep on with. And maybe in the future, you want to -- once the market understands this, considering this profitability and who knows I can sell that leaving from an adequate pricing and then -- but that's the second step, and you're going to have to build this eventually. We'll have the conditions to get there, right? And forward pay, as you mentioned, we opened part of this in a more fragmented manner with a better footprint. Sometimes we're more limited to some cases. And with this, you have better access as well, considering the compression of the spreads, right? But this is the trend, I believe. And we're going to provide total transparency and clarity considering this vehicle that is so important for everyone. The second topic here, we've been keeping up a pace that is maybe now a little lower with the tax monetization. And we have sales to third parties, et cetera, which was a topic we had a shutdown that we believe was a little more temporary. We're going to be consuming part of these in a more internal way here, considering the efficiency of our stocks and how we can use the logistical routes. And I think that's where we have the monetization with third parties. It's a little more predictable at this moment. So this is a bit of the component there, things are working well, and I can consume it myself or once I'm able to perform these operations, they can accelerate again. And I think maybe it's going to be a more temporary issue. And labor has been improving sequentially. And once again, this is due to different management and the strategy we've been working on. We've been successful and I think this remains over time. But of course, it could be a little bit higher, a little bit lower. But what's most important is that in the last few years, ever since 2019, this has been accumulating. But the recent processes in the last 2 or 3 years, and so we're very confident that we don't have any big issues from now on, and we're going to have more normality in regards to our labor costs.

I'm going to call our next question from Eric, Santander.

We're going to have 2 here. First, when we talk about the competitive environment, but especially for the physical stores with another quarter in the same-store sales has been evolving sequentially. And we want to understand a bit more how you guys have been gaining share and if there's like a specific region where you even have a stronger dynamic or maybe a weaker dynamic just to get a little more color on the environment and opportunities up ahead. And the other is about the capital structure you mentioned in the presentation with new opportunities for improving the capital structure, understanding a bit of what these potential opportunities would be and even the timing so that other things can also become material.

Thanks, Eric. Well, on the first one, the competitive environment in stores, we really see a reduction in the customer flows in the physical stores. So this flow is a little bit smaller, and we see rationality in prices, but we also see a very aggressive approach to payment terms. So when we see the Buy Now, Pay Later and how we are very rigorous in credit concessions, it continues to have a payment form that's very similar to what it was if you went back 6 months or a year with ratings and qualities of credit requirements that are a little higher because we understand the macro environment is worse. So what we see is even more aggressive special sales. So it increases a bit of the price. And so what we felt with other players, and we elasticity doesn't pay the bills, right? So when you reduce cost, you lose -- and so you destroy value, and we chose to not have a more aggressive conditions. So of course, it's very selective, and we have to be very careful, right, because we see that doesn't bring elasticity, right? But what has been bringing gains? I think it's more about the depth and the correct items. So we have really good engagement. We have integration that's very strong between planning and pricing and supply and also the store operation and commercial, along with the Buy Now, Pay Later and logistics working on this. So when you can see the dynamic per region, it's different, but the share is similar. So we're even able to gain share in all the regions, although the South maybe has a smaller market, and there was even an impact back there, right? But we suffer a little less than the average. So we also gained share in all regions. In some regions, they grow a little bit more. And so in the Northeast, Midwest, et cetera. But if you look at this month in Sao Paulo, we had pretty good growth. All of Brazil has been operating really well. Rio de Janeiro also has been gaining share. So we're able to -- I think in Rio, we suffered a little bit more. We're able to recover now. And there's this specific dynamic in each region, but it's really category based. But the issue here is prioritizing where we have margins, right? If we have categories in certain products where profitability is more aggressive. And that's where we had to -- we gained a bit of share now in the fourth quarter in this category, but that doesn't affect our margin as much. So the impact of the margin are not going to be pushing the margin downwards. We've been very selective. And once again, we don't have a commitment to growth here. We have a commitment to improving margins. And due to the strength of this brand, we've been able to grow. And when we consider the capital structure, what we've seen is we still have assets to be monetized. And each transaction and improvement, we have an improvement in the conditions to monetize assets. So there's assets we've been negotiating for over a year. And so all of them -- it's not things we wouldn't be able to monetize, but there are some things that were like BRL 140 million and then became BRL 170 million or BRL 200 million, and now we start assessing with greater depth. Then there's things that haven't evolved as much, and we're waiting when you add up these things that we mentioned a few times here, you have more than BRL 1 billion to be able to monetize. And so all of this is going to depend on the macro perspectives when people start seeing interest start dropping, you have the sales leaseback as well, the yield gets better. And these are things that really bring in some of these more strategic levers that we've been demonstrating. So basically, every quarter, we bring in strategic levers that generate contribution. So we have strategic levers we can't disclose -- provide disclosure on, but that can bring in an additional increment in the capital structure. So it's a bunch of different things that generate positive increments. Thank you, Eric. And so Gabriel you are on mute.

Next question, Gabriela, please.

I wanted to get into a bit more on the partnership with Mercado Livre and explore a little more about the funding dynamic. I imagine that the funding would be due to Mercado Livre. And I wanted to understand your perspective on this and how you're imaging the evolution of the Buy Now, Pay Later with this new partnership and the impact on the margins.