Grupo Casas Bahia S.A. ($BHIA3)

Welcome to the earnings call for the first quarter of 2026 at Grupo Casas Bahia. [Operator Instructions]. We would like to let you know that this earnings call is being provided on the company's IR website. [Operator Instructions]. The information in this presentation and possible statements that could be made during the earnings call about the business perspectives, projections and financial operational targets in the company represent assumptions 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 involve future events, and they involve risks that could occur or not. Investors must comprehend the general conditions in the market can affect the future performance of the company and lead to results that materially differ from those listed in such future statements. Today, we have the presence of the company's executives Renato Franklin; Elcio, our CFO and IRO; and Gabriel Succar, Investor Relations Director. Now I'm going to pass the floor on to Renato Franklin.

Guys, good afternoon, and welcome to our earnings call as we talk about the first quarter of 2026, a bit of the home appliance retail market, technology and furniture market and perspectives for the year of 2026. Moving on here before we talk about the highlights of the quarter, I want to reinforce the consistency of the execution of our entire Casas Bahia team, and we came about 2 years ago with a very different agenda prioritizing profitability, not buying growth at any cost, demonstrating discipline in credit granting and bringing incremental improvements, managing the company based on cash flow. I think the most important in this more challenging macro scenarios is to reach a sustainable cash flow that can overcome and as a company to start generating cash and then place a discussion of the current capacity of the company to generate profit value and a good spread on the cost of capital. So we were able to complete this at the end of the year, 31st of December, we reduced leverage a lot and the disclosure of this new balance sheet capital structure during the middle of March. And after this disclosure was when we started renegotiating the financial costs that still carry on the historical cost of the company. When we look at this, and we see that there are some levers that we need to apply and to fix the company and generate value. We need to use our competitive advantage differentials, logistical differentials. And gain scale and operational leverage and really be competitive. We've been doing this, and we've been able to once deliver again our top line with an important reflection in the cash flow of the company. And the second aspect is to improve the monetization of the platform. So without having to grow retail so much, how can we increase penetration with the retail media. And we've been also advancing in these initiatives that has allowed us, even in this mix difference, add incremental margin gains, and that can be reflected in the company's P&L. And the fourth pillar is financial expenses that we can -- as we renegotiate, right? So some of these lines have already been renegotiated. And we're going to give you some more color on this at the end of March, but then we start capturing new issuances with the new spread and until you actually switch the entire CDC line, it takes about 14 months. 90 days, 120 days. You can actually see the impact, so we're going to lever this incremental improvement, also reducing financial expenses. We're really confident about the company's business plan. And on the highlights, we want to have the free cash flow of the company. And then that's a reflect of the capital structure, BRL 162 million as improved working capital captured by this -- of course, there still are some advances in the working capital lines. But no doubt, the transformation was really big, allowing for us to have the best free cash flow in the company for the first quarter in the company's history, BRL 1.2 billion above last year. The GMV advances online as well, and we're going to discuss that 14.6% is not trivial in a market that doesn't grow we're gaining a lot of share in core categories, which is reflected in the 1.7 percentage points on the consolidated results. Then the consolidated EBITDA and the reduction of our net debt of BRL 2.7 billion due to the capital structure changes. And so we leave that phase where people were questioning our survival. And now people are asking when and how much will the company's profit be? When does this value creation possibility to take place? And we were able to grow our portfolio despite the macroeconomic indicators. So let's go over to the slide where can talk about the sales and markets. If you look at the physical stores, we were delivering very strong growth in physical stores levered by our credit solutions. And so throughout the last year, we saw delinquency deteriorating in some clusters of customers and then we became more conservative. I think the macro results this year, in our view, still have a lot of volatility in a volatile geopolitical scenario. And there's a lot of inflation impact that could really delay the drop in interest rate. So in this sense, we feel that the equity is at risk and are being very rigorous in credit granting. So the closing and requirements of a smaller entrant, we don't have a commitment to growth, and that led to the minus 1.6%. And if you look at the CAGR for 2 years, it's really strong growth and our view in 2020 is that the physical stores will still be a channel. And it depends on the macro scenarios where the rating of population is and it really depends on credit if there's demand, and we're going to be very assertive with this, right? So we've been improving our models with more granularity to be able to offset part of this worsening in the macro environment, but we're not going to take on these risks to see this conservative approach. And then on the digital -- we've been growing 27% and we also have an omnichannel approach, customers and prefer to buy 1P instead of physical stores. It's a very profitable channel that we were able to fix the contribution margin for and now it's working pretty well. And the 1P online channels -- all of the channels grew, right? Our own channels grew with significant growth, almost half of this growth. And then the marketplace channel is already brought in contributions, and we have new partnerships coming in from the second quarter that are going to bring in additional contributions up ahead. So important to highlight the market share, the market's at a stage, but our market share is pretty high and now it's really at 14%, 15%. It's going to grow a lot. We're going to grow along, and we noticed we'd also participate in part of the market. That we thought we wouldn't participate in. So that's why we're going to see online growth. What's interesting is that we're going to also improve margin as this growth comes in because our biggest commitment with profitability and not to grow. So we increased the take rate of this amount that impacts GMV, but less of the net revenue, we were able to deliver revenue improving profitability and our challenge has been how we could bring sustainable growth improving profitability. So the operational cash flow can be more robust, reducing financial expenses and that we can reach this level after positive interest. So we've been evolving a lot in line with the execution, et cetera. So let's talk about credit. This business is very relevant for us, and for explaining a little bit of this dynamic. So when we look at the active portfolio of BRL 6.3 billion at seasonality every first quarter is a little bit smaller in the fourth quarter. But you can see that we had this a little bit broader. We were able to control credit granting especially in physical stores, and this was partially offset by the growth in digital. In digital, we grow buy now, pay later. And so what's interesting is that in physical stores, we have like 500 cities of an addressable market and online, we have 5,000. So we already have a contract in basically all of the municipalities in Brazil. We are growing, and we delivered another all-time high penetration, and we're going to deliver another increment. So every quarter, you're going to see an increment going up 1 percentage point, 1.5%, and that's one way and finishes the next quarter in a different way. And so it starts to extend a little bit higher, but that's going to bring in consistent growth in our credit portfolio, increasing the profitability of the company as a whole. And so we were able to stabilize this being below 1. The net loss was below 5%. And our production, as you can see, comparing to the first quarter '25 shows our conservative approach. Here you can see our resilience, and here, we're talking about keeping it below 9%, 8.8% and even with the worsening in the fourth quarter, the cycle is pretty short, 14 months, but our set ones in forcing delinquencies really high. And we're able to adjust these parameters that every quarter, we can deliver within the guidance keeping below this at the growing business is profitable, but above all, without taking on necessary risks, right? So let's talk about the market. Here, we can show how our delinquency is stable. If we get it from the first quarter '24 to the first quarter '26, it's pretty stable. And comparing with the market where overdraft credit from 12% to 18%. And credit cards paid through installments and you can see most of the finance transitions and maturity deterioration, and that has been demonstrating our services in credit construction here at our group. We will now invite Elcio, so he can share the main messages. Elcio, please.

Okay. Thank you, Renato. Good afternoon, everyone. Thank you for your presence. The first quarter really reinforces the consistency and discipline and execution in every aspect of the business, let's focus on profitability and cash, as we've always mentioned, from the beginning of the plan launch. And the macro scenario that everyone knows has been quite challenging. I would just want to highlight how we always talk about the binary later better central pillar, key pillar for our strategic planning. And here, we had a lot of discipline in a conservative approach in granting, although this may be cost a bit of sales. But let's move on. On the next slide, we're going to start off with the evolution of the results. Ever since the launch of this plan. On the top graph to the left side, you can see the net revenue reaching BRL 7.4 billion, a growth of 6.1% in regards to last year and 16.8% in regards to 2024. So that was a significant evolution of the strategic commercial measures with a focus on core categories in the company on the top ground, a gross profit of BRL 2.2 million, gross margin of 30.3% and an improvement of 0.1 percentage points in regards to last year. And here, you can also see resilience just what may seem like not much. We have resilience and greater share from the online market that has a bit of a tighter margin rate. So here, you can see that from our mix and our strategy as a whole, we will be delivering this consistency and this resilience in the gross margins. And when compared to 2024, there's an improvement of 0.3 percentage points. So on the left bottom graph, SG&A as a percentage of the revenue had a reduction of 0.1 percentage points. Once again, you have the continuity of the discipline for expenses and gradual capturing this. And so we have this gain of 1.8 percentage points. So that's consistency of our operational leverage and strategy and a lot of discipline and control. Then finally, on the right side, as a result of the strategy, the EBITDA added up to BRL 597 million. So this is a growth of 4.7% in regards to the previous year and a margin of 8.1%. And so that's where you have a significant growth of 54%. And then we continue to operate at a very consistent operational profitability level, reflecting the structural advances in each of these processes. So there's no like silver bullet that will increase the profitability of the company for one day to next. But there are different consistent measures and gradual measures that will help. And the objective here is to expand the nominal value of the EBITDA, really focusing on growth and nominal values here in the company. That is what's going to really help pay the financial costs and fixed costs. So -- and here, we've already talked about most of the operational lines, and I want to highlight the financial expenses that add up to BRL 1.2 billion in the quarter. And it's worth mentioning, as Renato mentioned, we disclosed the transformation in March this year, and these initiatives to renegotiate the spread. We'll have their benefits captured throughout 2026. So we already have hired as mentioned in the Investor Day, one of the biggest lines in the company to fund the CDI and the buy now, pay later. We have probably been operating about 3.5 percentage points lower than what we had before, but this is a gradual effect. And we're going to be capturing this as we renew the portfolio monthly. So we have BRL 800 million, BRL 100 million you're going to expire and then we renew this portfolio with smaller costs as we have 14 months of an average term. So throughout this period, we're going to have this effect that's going to be the full benefit of these spreads next year, right? So regardless of SELIC, and so another important point, if you compare financial results, including only the modification, you can see a sequential reduction in regards to the fourth quarter of BRL 116 million. So when you consider this versus last year, then you have an increase of almost 200 points in this average SELIC in regards to the previous year. And so in regards to the income tax line, we had this provision. And considering this scenario of uncertainty that we have in Brazil and around the world. We kept this conservative approach and do not include the income tax in this quarter. So the company continues to have this benefit, but we just haven't been registering this in our accounting. So now moving on to the next slide. I think that's one of the highlights here in the company, our cash generation and addition of BRL 851 million free cash flow in the company. This is pretty atypical. And this improvement is mainly due to more efficient management in our working capital. due to the transformation of our balance sheet and here you can see evolution from this. We have operational evolution and in the financial results as well and there are many movements in this sense, right? So the first we had from this moment was this extension of terms and an improvement in our cash cycle from a structural perspective. If you remember in the Investor Day, we demonstrated this mismatch, considering the original terms. And so there's the stock payments and also considering the fact that we sell high added value products and consumers and the capacity for consumption, we have to offer credit and payments that are a little more extended. And that's what we've been trying to adjust structurally in our potential cycle when it comes to suppliers, as stock management, searching for efficiency as well, which is what we should be observing in the next quarters. Another important point is the reduction of the interest payments. As you see when you look at the cash situation and interest, as you can see and we had this level of BRL 662 million, it's still pretty high, but there's a sequential reduction of BRL 134 million. Of course, there's a bit of a volume effect here, but you can already see that the interest already start off in a very gradual manner. And then it grows over time and so the graph on the right side shows this combined dynamic, June 4 and first quarter. So you can see this positive seasonality, where most of the cash of Black Friday get into the fourth quarter and a part of this -- the payments are the same products we sell happen -- and then of this combined view over the last 6 months, demonstrating the structural reality of the company's cash generation. And then on this, we generate BRL 2.7 billion cash the last 6 months, the biggest level in the last 5 years. And on the next page, so we can open up, we can see the capital structure. So we -- as you all know, we had the big transformation in our balance sheet, and we continue with the net debt pretty stable, after this transformation in the fourth quarter, we ended at BRL 1.2 billion, the financial leverage and 0.5x net to EBITDA and refers to the previous year. We had a significant reduction because, of course, there wasn't a transformation happening in the end of the year. with a reduction of BRL 2.7 billion or 68% of the reduction of the net debt versus the previous year. And then the other advance -- when you don't notice this, there's a robustness in the company's balance sheet from the transformation where we were to also advance of the profile of the debt remaining. So now 65% of the remaining debt is long term versus 41% that we had in the fourth quarter last year. This liability management process is fundamental to be able to continue to improve balance sheet and substantially reduce the risk for refinancing in the short term, and that will automatically impact the credit risks and reducing this even more pressure to reduce the spreads up ahead. So we continue with a capital structure that is a lower balance than what we had previously. We continue to advance in our objectives of gradually reducing the cost of debt and improving the profile of the remaining debt as we perform the renewals and structure new operations. So Renato back to you. Thank you.

Thank you, Elcio. We can pass on the slide here. It's a very clear message. If you look at this, and we have this reflection on the last 2.5 years in the company. We've been delivering in a consistent manner growth in core categories and what we know how to do and profitability bring improvements in operational efficiency and sequential all-time highs in the company's indicators, including the free cash flow, which is super relevant. So looking up ahead, we will be identifying where the new improvements come from. So there's operational leverage, and we started this with another 2 partnerships. We announced a partnership with Amazon on the Investor Day. And then we already had a partnership with Shopee. They only sell low ticket items, and then they also started accelerating the home appliances and technology categories, accelerating significant growth, and that's going to bring in important growth. We're not going to buy growth like this. We're not going to do anything that will demonstrate a more positive quarter that will hinder the long term of the company, right? So it's going to be gradual, consistent. And we want to have initiatives that can bring in more granularity and allow us to gain share, right? So there's a lot of expense reductions, artificial intelligence and transforming productivity. And I think productivity in all companies will significantly grow because all of these activities and different functions will be able to be automated and expanded through AI. So we have a lot of cases here. They're moving a lot quicker than what we imagined. And results also appearing. So then on the credit side, it's like what we mentioned, short-term credit is going to be growing. When we look at the second quarter, it's a similar reality, a lot of demand at the store, but families debt levels are really high. We've been really conservative in credit granting. There's a rating that's a little bit better in e-commerce. We're working through CRM to bring these customers that have a bit of a better rating also in the physical stores and control delinquency. And with this, we're going to grow a little more digital than the physical stores for the next quarters. But in the midterm, we've been expanding credit share in the company. And since May, we changed all of the visual merchandising, all of the commercial strategy at the buy now pay, later product at Casas Bahia. So initially, we're really focused on cost reduction unleash funding. Now we have no blocks for funding. We have a lot of appetite. And now we're going to focus all of our strategic plan in the company and all the tactics focused on advancing the sale of buy now, pay laters, which will change this reality also the multiples, if you see this mix, you'll understand that there's a lot of different profitability in credit. So I want to talk about what's coming up ahead. In the bottom part of the balance sheet, we see the cash flow is a little better, and that's going to bring in an incremental capital structure got better, but we still need to take advantage and capture the benefits of this new structure. So I think it's very clear to everyone the capacity of execution that the financial team has in this company and the evolution of the balance sheet and the capital structure over time. But the movements we had from August 2025 with the conversion, the FIDC and the total transformation in December, this is very strong, right? And so as you mentioned some initial gains in the structure in like 15 days in March. So we went basically around the second quarter after the announcement of this capital structure. So what's coming ahead? Well, a lot of this is already hired and the reduction of the spreads we start switching the facilities, credit and the funding facilities. But you can imagine we have BRL 800 million per month and then this switch BRL 6.2 billion is going to be 14 months, right? So this is all moving slowly. And then we adjust and adapt. And with this at every quarter, you can switch to 20% or so. So you'll see this full impact of the new capital structure in '27. But of course, in the second half of the year, you're already going to have a big impact, and we'll show that and that's going to impact the P&L, the cash flow. And we're really confident about what's coming up ahead. So then you have other levers as well. We have an increase in working capital. We've already captured a part. We have a bit to capture as well. And we have a lot of optimization in the stock turnovers and some work also with suppliers to optimize this company -- we have the biggest showrooms for home appliances and electronics. And there's a bunch of things we're monetizing through retail media and also optimizing this because today with AI and all the tools, we can perform the sale to customers, and we already have a lot of omnichannel sales at the store, and we can optimize this and keep the sales conversion, improving profitability. Besides this, you can remember that the stock of e-commerce is the same where we have the partnerships. That's why it's really important to have the stock turnover, and that will also improve the margin on our returns. And so we're super confident with what comes ahead. We can move on to the next slide now to talk about what we consider as the path to profitability. When does profit come wrong and how does it arrival? To summarize, our main message here is we have a defined strategy. We're conscious of the macroeconomic scenario. If this improvement comes, it's going to be an upside, but we have a clear plan to address the macro scenario that is challenging and transform the company into a profitable company that can generate value that considers a reduction of financial expenses, improvements in operational efficiency, operational leverage with cash margins coming in growth in the short term with e-commerce and physical stores and a lot more credit, more services, more take rate for 3P and more retail media. We have more suppliers coming and we opened just this week on Wednesday, the first store in store, the biggest worldwide manufacturer arriving in Brazil with a long-term agreement with a lot of retail media investments. We already see some other stores this week as well. And these are players that increase competitiveness and also the investments in the incumbents. And so the big supplier was going to be present, and we can monetize the platform and bring in additional profitability. So we're still very conscious. And so we have a structured plan, the CMO and a lot of discipline as well with levers, rigorousness in the deliveries and so that everyone can perform what wants to be done and a team that is really aligned with a strong culture that can help us be very efficient in delivering these levers. And so Gabriel, if you can conduct this, we're going to share a bit of the questions and answers here.

Yes, for sure, Renato. Well, our first question is from Pedro at XP.

We have 2 here. For Elcio, if you could share a little more color on the working capital. And so I think you talked about this a bit, but would you consider this? If you could give us some color on these movements. And what should we expect and then the sales dynamics. So the effects of the partnership with Mercado Libre, you already had another which is really moved by this partnership. And what are the lessons learned? We have a bit more than 6 months of sales. And so what are the lessons learned you already captured? And how can you use this to lever sales with other partners like Amazon, Shopee or even in your environment? I think these are the main points here.

Let me start off here, and then we'll share with Renato about the working capital. We as we have this transformation of the balance sheet again, and we can transform and eliminate excessive risks we had in regards to the capital structure of the company, then we start focusing a lot on how to adjust the company's cash flow with more intensity. So I think the first one is we showed this in the Investor Day, we have a negative cash cycle, mainly due to the original term for the sales of -- to the end customer. So what we've done is some ongoing work with different gains. We had to work on extending this with the suppliers. And it's not like a one-off event that comes and goes, that will be a little more structural. And with this, we'll be able to continue to search for optimization and also in the stock. So we can see this in the preparation of the seasonality of the Mother's Day and World Cup in sequence. And so I think we're really prepared from a stock perspective, also with a lot of conservative approach. There's no like bet to have a stock that is beyond what's necessary or the macro scenario with the adequate stock to reach this good seasonality, and we'll continue to optimize this stock turnover with this new channel we entered. So up until last year, we did not have this. And we use the same stocks online. And so what we would like to do is we would increase the revenue quarter-over-quarter. But I think this is our challenge, really searching for efficiency in the management of the stocks and a lot of intelligence and processes, distribution and understanding and predictability of the demand. We have over 1,000 stores. So this is a work that needs involve data understanding on the supply chain. We have a team working in this and also this additional channel we brought in, right? So I think once again, we'll be even when we consider this and we sell to these channels, cash position is even coming in before. So everything is really driven and focused on cash generation, and we want to continue to advance. We don't provide like any guidance or numbers, but I think we want to continue to advance with stock turnover. And the only thing we're not able to promise is -- well, we did this, but we have some sales elasticity that's really strong. So when you decide to reduce from 10x to 8x, then it's a little bit of the market and up until where the market can stand this because we won't be able to work on this on our own. But sometimes we try to search for this from a structural perspective in the company.

Well, to give you a little more color here on the lessons learned, I think you mentioned the business really well, but the lesson learned here is assortment management. We identified additional assortment that for us would be like a long tail product, we thought there wasn't that much scale, but that did gain scale more and more. So we're going to rebalance. And we're at this phase, we were prioritizing capital allocation as an important factor. So some items and some categories -- since they have lower margins, we're not capturing the potential growth we have. We saw -- we reduced stock quickly, but we've been conservative in this process of accelerating these levers that have maybe lower contribution margin. So where we have greater penetration and profitability guaranteed. And we also have a lesson learned on the additional assortment so that after some more advances in the company's cash flow, we can gradually accelerate. And another lesson learned for us was in a scenario of cannibalization, this seems to be lower than what was expected. And we haven't considered this traffic increment that was very material, and we can establish growth in our own channels and part of this comes from the increase in relevance of our brand, digital platforms, work on customer acquisition and there's some base complementarity. We're really strong with Class C, D, E. And of course, proprietary credit or our own credit, some people don't want to work with this and those that do have this have sometimes a lower average ticket or rating is a little better. But this also -- we also have some buy now, pay later leads that help us to monetize this. So it brings more operational leverage and all of this is with our fulfillment. And then here in logistics is an important lesson learned. The mini hub structure we work with today was very limited and very focused on what we saw as opportunities, customers that are paying to receive the same day. But now with the new channels and the potential is huge, and we've been expanding this concept. And we're going to really transform this into scale with a big box that we used to have for the lighter items with the same-day delivery, and that's been advancing a lot with some players, even the third-party assortments as well. So when we look at the logistical ecosystem, it's not a short-term journey. It's a pillar in the company that maybe has one of the biggest value unlock, but the numbers -- we're executing this and transforming the numbers. We already changed a lot. We have more than 100 external customers, but these agreements with big platforms really making a difference in volume is transformational. So we hope that in the next Investor Day, we can give you more color on this. It's going to be super relevant. And it's one of the biggest competitive differentials in the long term. It's really what helps us be searched for by the platforms and Gen AI platforms already understand this is also very important for e-commerce, and we know that the big flow of e-commerce goes through electronics and technology. And they want to have us as partners. So when you look at this from today to the end of the year, we'll have a whole another market with new channels. Omnichannel is going to be a lot more present and a trend that's very different than what I see as valuation and returns that this company could deliver.

Our next question is from Gustavo Fratini from Bank of America.

We have 2. First, I want to understand what pressured the selling expenses. It grew about 7%, a little bit higher than revenue. And then Renato's comment also about stronger growth, especially with the higher tickets. You guys already had this store for a while. Now that's back. But could you give us a little more color here on how much growth of 1P is coming in from each marketplace and the potential and how this Shopee move really makes -- if it makes sense for you?

Well, let me start off. I think we had a small nominal increase in regards to revenue. You follow a positive trend, but it's also a little bit because of the different commissions we have with the increase in marketplace volumes. And overall, of course, when we look at the profitability in these channels versus some others that are paid, it's even better. So we manage this, and this is why it's a channel we didn't operate in before. And the entrance into the channel allows for more efficient management of the stock and profitability of the company. we're not in the mood here to grow at any cost, but we want to grow with the sustainability and profitability. So we're going to be really leveraging the volumes and growth between channels and online, if you have different channels and marketplace as well, and then we'll be able to manage this, right? But I think that's pretty much it, guys.

So just to add on another comment here. Back then, you had a lot of performance media when you're talking about e-commerce, right? And throughout last year, this changed a lot. You have the dates of Shopee and Mercado Libre also came in with the discount coupons, which is like a gross margin, right? But here, we've been investing -- we've been seeing that investments in marketplaces sometimes are very heavy duty. So sometimes you kind of pay a take rate here, but you have to see what's cheaper if you have 2, then the ad cost for some sales channels they go from 5% to 8% and then that went up a lot. So you have another coupon. And when you add up these, it's a lot more efficient to use like a third-party channel and pay the take rate, right? And so where this is going to come in is maybe a little less relevant and more important when it is last service in the last line. And getting into a little more details on the marketplace. The first quarter is still very strong with Mercado Libre dominating. And the plan is if we look at Brazil, Mercado Libre for these categories is the biggest, but the difference is going to -- then we have Shopee deciding to come into the game with this plan of being really relevant in a very short period. And there was this target there in December. And they're going to be above what was projected. So I think this is quite consistent, and it could become significant in these categories, right, with the dominance of the Mercado Libre. And for us, Amazon is still kind of new. We have this connection phase organizing. We're learning more about pricing and competition there as well, which is different. The panel and the portal for sellers is also different. And so you have some lessons learned, right? So they're in a long-term journey. They want to capture this market sustainably, and they have major ambitions also for Brazil. So it's like a competition between all 3 and the potential is that they all have big potential. But from these, that we have there, Mercado Libre is the biggest share. The others are coming along to challenge this, right? So we still can't really judge the future, but there's a lot of investments and we need to be present in the AI platform. So today, customer acquisition is probably through CRM, paid media, Google Shopping channel and influencers and affiliates. All of them use kind of the same tools, but we've been working with organic leads and from the different agents of artificial intelligence that is still not connected, and we're going to start being connected to all of the agents directly in our e-commerce and the platforms. And then we're going to see which attributes are going to be more valued by each AI because it's not like the commercial condition. Our expectation at the beginning is that there shouldn't be like a commercial condition, right? Some of these platforms want to have a plan to monetize media. Others believe that this could maybe distort credibility on the tool. And so initially, they're going to use the business without having paid media. So it's going to be like a new SEO organically structured with the capacity to have a description of their products and their site that can be the preference of the artificial intelligence tools. We've been working on different tests and what's interesting is that today, you can adapt using AI. So it's like despite having more things to do, it's quite quick. And so it's been very dynamic and fun. And when you look at Black Friday this year, it's going to be like a new Black Friday.

And now we have our next question from Lucas Esteves at Santander.

I have 2 questions here. First, a follow-up on the partnership with the marketplaces to understand how the profitability dynamics works because it's going to gain relevance in the overall top line. And how is this going to work when it comes to profitability considering instead of selling from your own marketplace. You're talking about maybe it makes sense to sell on theirs and on yours because of the cost of ads. But in the profitability gain levers could maybe this negatively impact at the moment? And I thought it was interesting because it also generates some leads, right, for the buy now, pay later, but I'd imagine that the penetration of the buy now, pay later and the total sales of the marketplace is maybe lower than in your own sales, right? So how do you think about adjusting this so you don't lose track of the financials of the business? And another dynamic you also talked about a lot, which is strategic to increase profitability is the reduction of financial expenses. And it makes like 14 months to generate some of these credit facilities. But excluding this, what you can see is some nonrecurring items related to tax issues. You can still see a pretty high level of some of these expenses. You keep the current interest levels. And what do you guys think would be like a normalized level, right, after this back in around 2027 when you have this turnover in all the portfolio?

I'm going to start off here and then Elcio, you can add on a little more. First about the partnerships and profitability, and I want to remind you here, part of this is organic and part of this is paid traffic. Then I have CRM. I want to grow a lot because of customers' mind, there's an LTV that's higher and the cost of acquisition CAC that is smaller. Then you have paid media. then you have this cost kind of doubling and you see major inflation, right, considering all of this competition between the generic platforms. And so when we look at the profitability of marketplaces, they kind of fit in between both. So it's above paid media and below the main channel, the organic channel. So as we grow, we diminish from other channels, and we've been able to grow and that also brings in organic traffic, and that's great. It increases brand relevance and that's been a very important contribution. And what you mentioned is you have a dynamic pricing that also helps concentrate sales in the best channel for me. Some negotiations are really good and all of them are long term. So we really have this stimulus to work in these marketplaces, considering our relevance and competition among them. So what we see as a trend in the midterm is not to have less platforms but more. So we think our decision-making power should continue for the company, right? But I think credit here is an important right? We do see a big potential, and we're under discussion to place this in the platform. Of course, for some of them, credit is not core. And so you have more chances of having a credit platform that can really be relevant within this ecosystem. And for others, it could be more limited kind of on a long tail of the credit because it's also in their DNA that credit will be a little more difficult for them to execute. But we do believe in the buy now as a service and as an accelerator for the growth of the platform as an important ally because we know how to provide credit to the same population to buy discretionary items above 200 -- and so here, we have good profitability with consistency as well. So it's all transformational and it's where we're working. When we talk about financial expenses and the normalized levels, we're not providing guidance. What we're saying is you went from BRL 150 operator at CDI. If you look at the spread and the cost of capital in the company, you'll see there's facilities with historical costs that I'm not even going to mention here because they are very expensive. But we did perform some funding that was necessary to get here. And now after this transformation of the capital structure, we must switch these facilities and we have some agreements, but the spread should drop significantly. And besides this, we have volume. We already have this reduction in the first quarter, but we still do a lot. The operational cash flow get better, and we're going to see more of an increment this year. We can drop this volume. And so we need to work on the spread and the volume and then asset monetization and stock turnovers and all this will help us reduce the volumes. So when look at '27, we'll have a better volume normalized will be like no overdraft credit and where the company performs this anticipation and then I have financial revenue, right? So in the long term, I think it's going to be a little bit longer than this, but we should already have a significant number demonstrating the profitability. And in the long term, I need to have my own funding as well, right? And considering BRL 2.5. So if this reaches BRL 3 billion, then of course, at some could be BRL 3, it be BRL 4 billion, but that's going to be bringing in this financial result, which is going to be significantly changing, especially when you consider some projections analysts have, right? So we're very convinced about the profitability potential of the company even in a macro diverse scenario, but that involves growing the credit business and consolidating this credit business to suppliers, and that will be a very profitable business, right?

Just to add on here, Lucas, there is actually a journey to get to this point Renato was mentioning and on Investor Day, we spoke about this a little bit. We see there are many different facilities. So we have a CDI. We really hope to have this reduction of 3 to 4 percentage points. It's already hired. And it's already in this -- it's going to take this while to convert into actual effective results. And even in overdraft credit, we're going to be reducing this perspective. And so -- and the rate and that's going to depend on the cash operations. We also consider a spread reduction as we structure different facilities. And also as we had -- you work on the transformation, you eliminate a lot of debt and then you're going to continue to improve the profile, right? So you throw this ahead and most of your remaining debt, right? So you throw that in the long term so that you can search for more of a reduction in the spread. And that's what we expect in CDC and for [ rate ]. And from then on, we can see this reduction that might not be this big, right, because the costs won't be like Casas Bahia. It's going to be a lot smaller, but we saw search for this reduction. And so from the more operational lines of the debt, we're really going after this, and we need to understand that ever since March, we've been modifying this. And it's not like in a month or 15 days, we're going to already see the final effects of this, right? So there's no doubt in regards to the need for transformation. And now it's just this natural process. The macro scenario is still difficult. But from the company's perspective, I do feel like there is a relevant improvement.

For our next question, we're going to call Gabriela from Goldman Sachs.

So it would be great to get into this give us some color on how you've been seeing this difference between the category mix and different partnerships with Shopee and MELI. And we already have a bit more data on the average ticket and even the customers' profile. And still with the partnership topic since you've been leveraging the operational logistics, how have you seen this reflected in the gross margin dynamics? Have you already seen a dilution of the logistical costs affecting the gross margins? And how can we expect the evolution of ahead? My second question is on the credit environment and delinquency. You've been very controlled with the concession terms and over 90% has been pretty stable, but we've seen a bit of a deterioration. So any color you can give us on this and how you've been seeing the dynamics and how to consider the risk appetite from now on, that would be great.

So excellent. Thanks for the questions. And first about the marketplace. We have an agreement with them, and there's a lot of discussion on not disclosing one to another, right? So here, I can't give you too much detail, but I can mention that there is complementarity. There is some kind of a shadow with some of these and others are still kind of niche. But then we have an NDA with them, and we cannot provide this strategy so that the others don't compete with the others. So it's not going to expose them, right? But there's clear dominance in some categories and types of these marketplaces, right? So all of them have this target for the investment plan, and they're going to be able to advance significantly, right? But then when you look at the gross margin dynamic and looking up ahead, also, we see a lot of combined effect. And so it's difficult to go over them, right? But when you look at the marketplace overall, so sometimes there's even a better gross margin and the impact -- and so today, we have the pure operational leverage. And you can see this is a little bit higher to be very transparent here. I think it's a challenge for everyone in the current scenario, right, to keep this percentage of logistical costs, right? I think we've been capturing other efficiencies to offset this because fuel goes up, that impacts freight and logistical costs for everyone in the country. And so in my view, we do have some idle capacity, right? But we're addressing this a little bit better, and maybe we need like another year to capture this significantly, right? And so besides this, the gross margin dynamic the impact of this mix of products, physical stores a lot more profitable. And when you increase this online and physical stores and in categories, it's really different margins. So here, you have 2 challenges, right? The per basis is the most restrained, and that's the biggest public in physical stores and also for furniture, right? So from a guidance perspective with this scenario and the macro environment that's so challenging. And I think the dynamic here with the inflow of partnerships and other levers of service improvements and increasing take rates, they have been contributing a little bit, right? And if we consider this, I think it's going to be a little more conservative until we can have this improvement. And that's going to be considering this fiscal agenda, right? So on the other side, when you talked about the credit, you see the fourth quarter has a lot of volume and then production is pretty big. But then when we look at this, I don't have any concerns in the short term or midterm. We adjusted the safety bar, so historically, it's been like this, and we see this with a lot of precision. And basically, next week, you already know what's going to happen according to the different batch. On the day, people start estimating this with a big level of certainty and everything is kind of under control. So it's like everything is the same. Our customers have a worse ratings. So we do see control and high predictability here at our NPL and our profitability and our delinquency indicators. So the funding cost, then of course, the margin -- the net margins are going to get better, and that should improve over time, right?

And just to add on here, it's exactly what Renato mentioned. So there are different risk profiles, right? And clearly, delinquency in the market as a whole, we see as a challenge. It's more difficult, but this quick adjustment is really important because we've been careful with our execution discipline. And of course, we've focused a little due to the higher delinquency from different batches, we had to adjust in the first quarter and the beginning of the year to be able to get it right and be certain that the second quarter would be in line with parameters and indicators that we consider as objective. So it's really quick and it comes in -- it happens really quickly, right? And so what we see -- and we've been monitoring this daily, have this predictability of really seeing what's going to happen with these indicators. As it started to grow, we also performed the necessary adjustments in the first quarter to be able to work around the results of delinquency in the second quarter.

I'm going to call Lorenzo from Bradescor.

On our side, we have 2 points. First, on the optimization of the store network. You guys have been advancing with this. In this quarter, we had 3 closures. And I wanted to see how much space you see to continue to advance. And so we've seen a very positive effect, right, with unleashing core deposits, but there's still relevant potential here that you could see as an important lever for cash generation, right? So I wanted to ask you guys how we can think about the evolution of this lever and any color and magnitude of what you guys can bring in, that would help a lot.

But about the utilization on the store network, I think we have major discipline also in assessing the profitability of each store. Today, all of our stores have positive contribution margins, but we do have a classification of some stores that we consider to be like ICUs where the risk of becoming a negative contribution margin is imminent. So depending on the cost of capital, you have stock allocation and especially the funding of consumers and you have to anticipate the capital receivables, and we still have a big part that buy in installments on credit card within the stores. And so we have to keep our eyes open. But of course, the dynamics of the macroeconomic scenario interfere the feasibility of some of these stores, right? But of course, if the scenario gets better, then profitability will increase significantly. If it gets worse, then that's also going to increase the water line and then we could have some footprint adjustments, right? So we've been discussing this and although there's a positive contribution margin, how can I optimize this, right? And so if you look at the ROIC, you can see in an ideal scenario, it maybe will reach 13%, 14%. So how is this profitable? Well, what profitizes this is the buy now, pay later, right? So if the bank were to pay this, then the profitability would increase a lot and you reach this value contribution. Today, it's not a matter of credit restrictions, right? I don't have to adjust it like due to this. There is some relief in the working capital, right? And what we do discuss always and assess as opportunities here. But of course, we don't see a need for a structural or stronger movement, right? And so other places also that maybe is not in the ideal spot, right? But -- and I can leave that up to reopen, but nothing that will be material, right for the store network with over 1,000 stores. So these are like one-off adjustments, right? And that's going to be adjusted over time. And then in the macro environment, we should have more openings in a good or bad macro environment, right? But you can always optimize this and look at the omnichannel approach and how you can migrate this, right? And other service channels without losing sales or losing the least possible. And then that would be added on to another store we perform. So you have a very positive dynamic. Here, we have almost BRL 2 billion of deposits as a whole, and we follow this process with some cases where this already happened positively. We even have like a more bureaucratic process, and that's where we're going to be also searching for in some cases in the past, we even had some cases where we put in cash and then we'll be substituting this, and that could be an important unleashing of value for the company. And so it's difficult to understand the timing. But -- and so it should be another source of monetizing these assets -- and so I wanted to mention that it's not a completely predictable process that's under our complete control.

Thank you, Elcio, Renato. Andrew asked me to share his question here, and I'm going to translate it here, but he just says that the EBITDA margins have been kept at levels of about 8% in the last periods and the path to profitability indicates a few additional things. Could you help us understand what could lever this and the main drivers and how you divide this evolution between efficiency gains and added value in credit?

I think we gave some color during the Investor Day, and thank you for the question. We're looking up ahead, we have an important path for operational leverage. Partnerships are important. Growth in 1P is important, and this helps us bring in. So the first quarter is always more challenging and that helps a bit. And the second quarter is stronger, but the macro scenario as it is, is going to maybe extend the capturing of the operational leverage. And this year, we're not going to see this macro scenario getting better as expected at the end of last year. We got it right again in being more conservative and really believing that this improvement will take a little longer that affects the consumption of discretionary items, and we're actually seeing a setback in certain categories, and that's why we have an important share gain. And at these moments with pressure, our commercial scale and log and financial solutions along with the omnichannel approach really make a difference to continue to capture share. Now this will continue to bring in a little bit of impact, but I think it's really gradual and more focused on next year. There's an increment in digital, but the second impact that's really important is credit. And here, when you're speaking, the company had this project-based called -- used to be called CV25, which was fixing up the operational cash flow and the capital structure. And so we delivered at a level that was better. And so now our plan is called CDC 27, talking about the buy now, pay later and how to increase penetration by the end of 2027, right? So we have a target that's challenging here, but that can transform the company completely go through the physical store and digital. And in digital, we've been advancing. There's a better rating. And even with this macro environment, we're going to be able to advance more and more, and it will demonstrate evolution heading towards the target we have in '27, making digital really profitable. And the increased penetration, it takes -- requires a little bit more of the macro environment. But we're not going to provide more credit by taking on risks we can't control, right? We're going to have to keep this discipline, but it's relevant. And so there is some monetization of the ecosystem. And when you look at the size of the cash that is smaller, when you see some things that are very significant, right? So if you look at retail and you add this up over the year, it's relevant, and it brings in incremental growth, right? So if you look at '25, we closed at 8.5%. We want to add this increment and we want to get close to the target that we believe we need to have with a new level of EBITDA that's an all-time high for the sector and for the company, and that can really support the financial expenses in a more challenging macro scenario. That's what we've been working on is sort of productivity and optimization of the SG&A, artificial intelligence optimization, et cetera, but that's going to offset this and most of the SG&A gains come from the dilution of these expenses, right? So the maximum amount that can be provided here without giving guidance, right? Just sharing a little bit of color here.

Thank you, Renato. We have no other questions here. Now I'm going to pass the word on to you for your final remarks.

Thank you, Gabriel. Thank you, everyone, for your presence and for your questions. Just to reinforce our message here, a lot of consistency on the execution in new company without the challenges, right, that really kind of reflected in a lot of time and energy. And so for 2026, you can expect execution capacity that's more focused on the business levers, adjust the operational efficiency, bringing in operational leverage and monetization of our ecosystem and really changing the value perception. This is our journey. It's long term. There's no silver bullet in the quarter. There's an increment that's gradual. And just as financial expenses are going to evolve, operational will as well, and we'll finish 2026 once again with a company that is very different than the company that started off in '26. Thank you so much for your trust. It was really important to all the team and the group. And let's take advantage of the World Cup special sales by television. We can make a pick that's almost BRL 1,000. TVs just grew. Mother's Day went on so to Sunday. And then all of a sudden on Monday, we had a turnaround, Televisions weren't really being sold, but we had a major peak in sales, and so telephones and televisions and come to our -- one of our 1,000 stores or our app and our website with our WhatsApp also with AI selling a lot. Thank you all. Have a great afternoon, and thank you so much. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]