Grupo Multi S.A. (MLAS3) Earnings Call Transcript & Summary

Good morning and thank you for holding. Welcome to Grupo Multi's Fourth Quarter 2024 and Year 2024 Earnings Conference call. [Operator Instructions]. We inform that this video conference is being recorded and will be available at the company's website at ri.multilaser.com.br, where the complete set of materials of our earnings release is also available. You can also download the presentation on the chat icon also available in English. [Operator Instructions]. It's also important to note that the information presented and the statements that may be made during this conference call relating to Grupo Multi's business prospects, projections and operation and financial targets are based on the company's management's beliefs and assumptions as well as on currently available information. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and hence depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of Grupo Multi and lead to results that differ materially from those expressed in such forward-looking statements. For the full disclaimer, please check the second last slide on the presentation. So today, we have myself, Flavio Lima from IR; Ale Ostrowiecki, our current CEO and future Chairman of the Board; Andre, our future CEO, Richard Ku, our recently arrived CFO; and Eduardo Belelas, our controller. So Ale please, you may begin the presentation.

Good morning, everyone. Thank you for attending our call. So let's look at the highlights for the year. I believe that this year compared to 2023, if we think about a video film of the company, it's a year of a lot of evolution and some normalization of numbers. So we are on a long journey with profitability and '24 was an important year to clean house with some results already appearing in terms of revenue. We virtually moved sideways from '23 to '24 but we need to consider that we had almost BRL 500 million to seek on discontinued businesses, such as smartphones, security and so on. And also the government pipeline that was more smaller this year. So BRL 300 million less for government, BRL 200 million of discontinued and we went after BRL 500 million in revenue to replenish. So we were 3% below last year. It would have been better to deliver some growth. But thinking about the continued portfolio, there was a slight increase and it was possible to replenish this revenue. Gross margin. It is a normalization that we see. The margin had been very squeezed in 2023 and there was a great evolution of almost BRL 200 million in margin to BRL 768 million in '24. So I won't say it's a good margin yet. We still need to gain a lot of basis points on the current margin to be healthy but it moved 80% of what we needed to resume normalcy. So that's a positive point. In terms of percentage margin, we see here that we were working with 26% in 2022. And then it dropped steeply due to write-off and inventory sales in '23. We talked about that in the calls and the purchasing needs and the need to have more inventories, the migration of the system, pushing sales forward. So on the technology products, when you sell it too late, you burn a lot of the gross margin. In '24, we jumped to 23% in margin but we still need to advance. And from now on, there's no silver bullet. It's [ 0.1 to 0.1 ] in every measurement and breaking rocks to improve the margin a little by little, both in terms of streamlining the portfolio, launching new products, improving price points, a lot of items to manage to get this margin to climb. And here, we see our EBITDA that last year in 2023 or 2 years ago, was destroyed with minus BRL 650 million in EBITDA, an important value destruction due to all of those problems we talked about. And now in '24, crossing the waterline with a slight positive EBITDA driven by the fourth quarter mostly. So that's good. It's good that this positive came from the fourth quarter rather than the beginning of the year. It's an improvement of almost BRL 700 million. So that's -- is it a good snapshot? No, it's not. The picture is bad but the movie, the film, the long film is good considering this evolution. But of course, there's no giant leaps forward in the future. So now we have to go little by little, picking up every crumb so that we can achieve a better profitability. But really, we did evolve greatly in terms of EBITDA. And then we have the exchange rate variation. Everybody saw the net income that is a result of this exchange rate variation that came at the end of the year and a huge leap in the dollar appreciation in the fourth quarter. So we had a huge FX effect at the end of the year. It's been a long time since we saw an almost 30% depreciation of the real. We started the year under BRL 5 and ended the year above BRL 6 to the dollar and that really affects, especially the suppliers should be paid, the shipped suppliers that generate a huge hit on the P&L on the bottom line. So that's why the positive EBITDA translates into a lower net income driven by the foreign exchange. This quarter, some of that has already resumed. The U.S. dollar went down a little bit. So there should be a positive exchange rate variation in the first quarter, which does not completely offset the year because it started below BRL 5 but some of it will be reversed in the first quarter. And we'll see this effect in absolute numbers later. In terms of inventory, we're now supplied. We are well supplied. We purchased a lot and paid off a lot of items. Here, you see in blue the share of inventory that is in-house available today. So it went back to a high level. We have a strong agenda for sales of taking this out to generate more cash. We have a lot and a huge potential for cash generation in-house but we're still paying a lot of our suppliers. The shipped inventory is also robust at around 15%. And what's smallest is orders that are in development. So we controlled orders at this time and that generates a short-term cash burn and cash generation in the medium term. We'll talk more about cash later. In the coming months with the cash consumption and then generating stronger cash in the second half of the year due to all of these products here that we're buying less of and selling now and you'll be paid, you receive this cash later. In logistics, we are seeing some normalization and the supply chains are more normalized. International freight is going back to historical levels and we're working strongly in logistics efficiency, green channels. So there's a lot of quick release of merchandise and working strongly in our operations department. Remember that we restructured it. We unified all of our supply chain areas. We had basically procurement and foreign trade and these 2 areas reported to Andre, who is here with us, and he will be our next CEO. And purchases and imports responded or reported to Andre. National logistics and industry with me. We created a supply chain VP with Laury Johnson and he's working in this entire integrated chain to optimize this. So we're working very strongly, tightening freight and renegotiating freight, a tighter [ S&OP ] to calibrate purchases when -- precisely when it's required. So anticipating some purchases where we were having stock out but also holding off shipments in China. We're holding shipments in China when we believe that we don't need that merchandise so fast. So we're already having shipments under this new operation. And it's very important to consider the expansion of Hisense, our partners and the new warehouse in Manaus, which will help logistics greatly. We'll consolidate 3 warehouses in one and the factory, the plant as well there. So we'll improve this operation. And the fight this year to be able to get the OEA certification, that's the authorized economic operator certification that expedites shipments with the government. It really helps with customs clearance processes. Now talking a little bit about our earnings in more detail. The discontinued products that we mentioned were basically BRL 200 million in discarded revenue. I'm not going to say it's loss because it was the company's choice. But we have here mobile devices, especially in smartphones that we dropped -- reduced sales in about BRL 100 million. So now we have the baseline smartphones that -- what's -- it's going to be the only one we're going to maintain in line. And in office and IT, we have essentially security cameras that we reduced the lines greatly. So this revenue was left out. And the others are less relevant, a little bit of home electric products here, some appliances and tools that were taken out and kids and sports, it's pet accessories, baby accessories, some lines. So we removed from our base, BRL 200 million, reducing the number of SKUs, the number of lines that we work on at the same time so that we can focus in fewer businesses that are bigger. So Multi wants to have bigger businesses and not spending so much in different areas. Combined to that, government was a pipeline of about BRL 300 million -- BRL 310 million less. So that's BRL 500 million in revenue that we replaced by growing other lines. Here, we can see revenue by quarter. So it's a positive point here, the revenue of the fourth quarter, which accelerated compared to the previous year. So we grew revenue again, we resumed growth, 19% higher than the third quarter and almost 15% higher than the same period last year. This was driven to a slight resumption of government. The fourth quarter was a little bit better for government. Gross margin has not turned yet. We are struggling with the macro scenario in retail to be able to generate gross margin. It is not easy to sell. It's not easy to generate gross margin and they will continue not to be easy. So there's no major miracle in gross margin in the short term. For the year, we showed the evolution of margin as we went back to a level close to normal but we still need to gain some points to reach an interesting profitability for capital and for the company's risk. I talked about BRL 310 million for government. It was actually BRL 320 million of loss in government businesses. That was almost BRL 700 million in '23. And last year, there was a drop of about, making BRL 371 in government, in this pipeline. The challenge this year is that there's a lot of deals going on. We see the auctions happening and we need to work hard to resume growth in government to deliver better numbers. EBITDA, we talked about the year that it crossed that line. It became -- it turned blue, driven mostly by the fourth quarter. Fourth quarter last year had been almost BRL 300 million negative. So we reversed greatly from minus BRL 283 million to plus BRL 34 million, almost BRL 35 million. It's a strong improvement in EBITDA, which was what we had to deliver. There was no way we could remain in the negative EBITDA levels. So at least that step was taken. And then net income, the big point of concern. But 80% of the impact, if we combine interest rates, amortization and income tax and all nonoperational results, 80% was due to FX, both in the quarter, BRL 160 million in impact and in the year, BRL 252 million in terms of impact. So our EBITDA inverts and we closed the income at the year of minus BRL 300 million. And if there was no FX impact, it would be only minus BRL 70 million. So it would be a lot more comfortable. This is basically the remarking of suppliers payable, the liabilities in U.S. dollars. Part of this loss was reversed and it will be seen as positive in our P&L with this resumption of the U.S. dollar. Now in terms of debt, the bank side is about 100% in BRL. So we have working capital in foreign currency that we take loans in U.S. dollar for exports and a small for imports but this is locked in Brazilian reals. This cash closing at BRL 745 million in the year. And this is our amortization schedule for '25, '26. And after 2026, all of the bank debt, we have an amount in cash that is higher than the bank debt levels and we have suppliers to pay. So what's burning cash -- consuming cash at this time is paying our suppliers. In this quarter, we are paying off -- so far, at least I didn't see the numbers for March but about BRL 150 million in suppliers that brought this number down, so that we'll have the products already paid for, so that we can make the sales and generate cash. So we're going to see in the coming months, we'll still see some cash consumption in the first half of 2025 -- cash consumption. And in the second half, the expected cash generation as fewer goods will come in and we'll start to receive that money, there's an important tax effect as well because we are -- we have tax credit, federal tax credit. So we have an important balance of tax to recover. So as we start selling, not only the margin goes to cash, but all of the taxes on sales because that will become cash and will offset our taxes to be credited and that's our current scenario. Now breaking down our revenue by channel. We brought an additional year here to give you a better long-term view of the profile of the company's sales. So the first thing is that our e-commerce, our own e-commerce has been evolving gradually in a sound way from 7% to 8% to 11% last year, 11% of our own e-commerce direct-to-consumer sales. And that's an important strategic asset for the company because it's a capacity that's difficult to replicate. We spend a lot of money to consume an e-commerce ecosystem. We need systems, logistics, all of the internal processes and the cash effect is more significant than with EBITDA because you're billing products at the full price and consuming federal taxes at a faster rate. So e-commerce contributes to cash generation for the company. Note that the company in equity terms has a significant equity, BRL 1.5 billion in inventory, BRL 1.2 billion of net receivables, real estate, also cleared on the company's name. So it's -- in terms of equity, the company is very strong but we want to improve this cash consuming those federal taxes and the balance that we have. Specialized channels grew greatly. Corporate was important last year as well. There were some important negotiations. Providers also growing. So we see all of the areas growing overall and government with this drop that we saw from '22 that we built more than BRL 1 billion and it went to 15% to BRL 700 million. In 2024, it was really rough and it went down to BRL 300 million. And I believe we are fully able to resume that. There's no reason for us not to grow in government strongly again. We're at a very low level but it's mostly due to the pipeline. The market share that I see that we can gain with the new bids, what I feel is that it remains stable over time. We are not making -- or gaining more or less deals than normal levels. It's the pipeline of government purchases that are seasonal. And small retailers, we had a reduction here over this period. Part of that came to e-commerce but not all of it. And part, we see that there were some deals that we left and mobile phones that we stopped working on and so on. Looking at revenue by quarter, it doesn't really change from the previous slide. We see the fourth quarter of '23, the previous quarter and the current quarter. Note that in the current quarter, what we had was a small recovery in government. It went back from 9% to 14%. And major retailers started purchasing more again in the fourth quarter, so it went up to 13%. Those were the main highlights in the fourth quarter. By segment now, we see growth of Kids and Sports. This is very much driven by drones. The drone DJI is a very promising business. It has become the top 5 for the company. So it increased from 10% to 13% to 15%. The other line items are stable. Toys, baby, pet, pharma, et cetera but drones all this up, home electric products, very much driven by TV sets. Here, we have speakers, TV sets, home appliances. But the big leap is due to TV sets. Office and IT supplies is flat. Here, we have ISPs, accessories, et cetera. Here's a big drop in mobile devices for those reasons mentioned. #1, reduction in government. And #2, smartphones that posted a reduction. So basically, all families growing and mobile devices, which was the biggest line for Multi 2 years ago, it is the smallest and I believe it has a lot of potential to come back because of the partnerships. OPPO is a very promising partnership and we're billing quite well this quarter and they are part of mobile devices and also resumption of government. And breaking down the same number by quarter, we can see a similar profile of mobile devices coming back a little bit because of the government purchases. The rest is kind of stable and office and IT supplies in Q4 a bit weaker because the ISPs didn't help much. And lastly, showing a little bit every family, the highlights for 2024. Like I mentioned, this year, we should accelerate manufacturing with OPPO. Every month, we have been selling important smartphones by OPPO. We manufacture and we bill customers directly. But commercial management is with OPPO. We changed the retail PCs line. It's well accepted. And for tablets, we resumed profitability with a good market share. In mobile devices, we can see a drop year-on-year on the right, margin crossing and becoming more positive. It had been the biggest offender of gross margin in 2023, minus 46.6%. And in the quarter, it grew again. Margin is still a big challenge. I'd like to remind you that gross margin, when we compare the line of mobile devices, for example, with kids, it's not just looking at gross margin against the gross margin because there is a fiscal point here. When we look at the mobile devices margin, there is approximately -- this is a complex calculation, by the way but close to 10% of tax credits are there below the gross margin. So we would have to add that to have a fair comparison between mobile devices and a line of imported products like Kids and Sports. But still, that's a challenge. We need to increase the margin. In terms of office and IT supplies and this router, we had a technology migration. The margin is very much hit last year because of the WiFi 5 line had a lot of inventory. We sold those to avoid losses. And now with WiFi 6, we have a healthier margin. IT accessories. We changed the portfolio. Gamer line, we changed the portfolio. And here, the same, the margin increased from 9% to 21% in Q3 '24 and up to 22.3% in Q4. In the full year, the margin is down to 16% because of the sales of WiFi 5. You have the discontinued line. We have security cameras that gave us a loss, a big loss and it was discontinued. Net of WiFi 5, the discontinued lines and net of the discontinued lines, the margin would be 22.5%. This line has a fiscal effect but it's a mixed effect. A part of this line is imported. The other part is manufactured. I haven't got the numbers at the top of my head but about 70% is manufactured. So this 70% entails fiscal credit. The remaining 30% don't. So when we look at the gross margin, we have to add some but not as much as mobile devices, which is practically 100% entailing fiscal or tax credits. Now speaking about home and electric products. The main ones are TV sets, home appliances and audio. We started a strong Hisense partnership to manufacture their products. They have 3 brands, multi-brands entry level under our control, the 100% Toshiba brand. We buy the parts from Hisense, we manufacture and we sell with the Toshiba brand and the Hisense brand. That's a partnership for manufacturing and sales of Hisense. It's a smaller margin but it is hedged and we don't have the commercial risk of having inventories sitting there and not selling. We're already manufacturing at large scale this year. This line should have a ramp-up. And also with the Pulse partnership, we renewed with Wesley Safadão for the speakers line. We have a gross margin which is relatively healthier at 27%. There's no fiscal effect here. If there is some, it's immaterial, perhaps one monitor or other but this gross margin is the final one. No tax credits after the gross margin. We presented growth last year of BRL 900 million to BRL 1.1 billion. So this was healthy growth. There was a 1% gain, 100 bps in gross margin. That's an important step. We should continue to improve this. This margin is not sufficient, 26.7%. But we have to work hard to improve. And in this quarter, we had important end of year sales much higher than last year and much higher quarter-on-quarter. So this was a positive. Lastly, Kids and Sports. We mentioned DJI a lot of launches. We launched a new drone called Neo, totally innovative category. It's a blue ocean, we're starting to navigate. It's a high-performance done. It's very lightweight, very small. We launched new scooters and self propellers by Watts and also the Precor, Lifemotion partnership, new fitness equipment for the gyms. This is in line with a very interesting gross margin. Here, there is no fiscal effect and we don't need that because we're talking about 36% margin. We want to continue to invest in these products with a healthy margin, which also generate a positive fiscal effect. We have to remember the products in this line are 100% imported, showing that Multi has an important commercial vocation of launching products quickly, serving customers quickly, supplying the market. And this is an important point that we get asked all the time and they ask, are you tax player? Do you rely on tax incentives? It's not true. I think we've had imported lines for over 20 years. They are the healthiest of the company. So Multi gets a product, imports the product, distributes the product, generates margin. And we use the high taxes to consume tax credits. So this has an even better cash effect than an EBITDA effect with those line items. So that's important to stress. And last year, well, actually, a quarter -- this is not very clear in the chart. But year-on-year, there's a slight reduction. But in the full year, we have a super important growth of almost BRL 50 million, almost 10% increase in this category of Kids and Sports. Here, we are talking about drones as being the main category, then we have baby with many strollers, toys, that's stable business for us. And lastly, operating progress. I think that our operation is much better oiled now. The new management is very much focused on improving the operation. We reduced the number of families, the number of segments, choosing the games better, reviewing the portfolio. This is an ongoing work, releasing working capital with more assertive procurement, so that we can have just what we really need, the partnerships, projects and working to improve margin and profitability. And to illustrate what people ask us frequently about partnerships. So what is the current constellation of business? If you look at the bottom, in terms of type of partnerships, the one that adds the least value that are very simple to the ones that add more value and complexity to the chain. It doesn't mean we are earning more or less money but it's the amount of activities that we have in the creation of value. So the black lines are exclusive distributions in Brazil. Multi only works with exclusive distribution and not with multi-distributors. And we have Targus ,Razer [indiscernible], Fisher-Price for baby products and Precor fitness equipment. Multi imports and Multi is the face of the brand in Brazil. Then in gray, we have our partnerships in which we don't handle commercial. The partner chooses to whom they're going to sell, how many products, at what price, Multi simply imports the parts, manufactures the products according to all international standards and Brazilian regulations, PPB, et cetera and we'll handle those logistics. But we are not responsible for the product, trading, avoiding the risk of the disaster we had in 2023 of having to liquidate this inventory with negative margin. And we have OPPO, Hisense, the TV sets and now we started with Royal Enfield for motorcycles. This is one of the biggest Indian brands in the world and that should increase a lot the sales of our motorcycles plants. And Fisher-Price, development and licensing our own products with that brand and our distribution but Multi develop products. And lastly, what adds the most value is manufacturing and distribution. Let's talk about ZTE and Toshiba. ZTE in networks, Toshiba in TV sets. We import the parts, the whole portfolio, we manufacture, we sell, we do after sales. We are responsible for the whole brand in Brazil. That's the top of added value to partners. Multi is the brand in Brazil. More than that, it's just when the brand is ours. That's not included in the slide because they are not partnerships but we have our private label, Multi brand, Pulse, Multi Kids, et cetera. But then it's our own product, 360 degrees in our hands. We have everything. And as Flavio mentioned, I'd like to introduce Richard. We are very happy to have our new CFO, somebody who's very seasoned in the segment. He will be available during the Q&A. He has just arrived. Richard is in his second week at the company. Multi -- it's all like a dog's life, everything times 8 or times 7. So we had an advisory of that. Richard comes from good companies with a very solid career. And Andre Poroger, you all know him, if you didn't know him, he was in the prior call, has been with us for more than 20 years, running all Multi business. I'm truly confident that he's going to do excellent work -- working forward in this long journey that we have ahead of us to recover the company. Well, you know me, you've known me for a long time. I am now the Chairman of the Board. I intend to remain very active I will be with the company every day. The whole governance is structured. We have our Board meetings, just as we've had for 20 years. We created 4 committee. Finance Committee, Fiscal Committee, People Committee and the Auditing Committee. I have a seat in all 4 committees. And I will be here whenever the management wants me to be here and they ask me to speak with a customer, the client, to speak with somebody, I'm available to the company to collaborate with them. But now as Chairman of the board. so -- and I hope to be able to collaborate a lot. We see a macro scenario in Brazil that you know well, a hike in interest rates, consumption retracting, a lot of complaints from retailers, So Brazil is not going through the easiest moment. We had a gigantic FX effect. Foreign exchanges has changed a bit but it's still high. Retail is under a lot of pressure. We are also concerned about credit, so sales are being held back due to the risk of delinquency retailers are being conservative. No problems have materialized but everyone is kind of concerned overall. I don't envision wonderful things in the future. I think it's blood, sweat and tears and the management will have to deal with that. However, the company as an operation is a much better-oiled company. Customers are paying compliments. They say well, you're shipping and delivering fast, the warranty is good, the quality is good. So the structure is in place for us to work hard with a long-term focus to reap the fruits and, of course, maintaining the Multi values. We have been talking about this at the earnings calls. And internally, this is a mantra. People in the company here over and over about the values of Multi. We concentrated on 3 values. We don't have 7, 10 or 20 values and a lot of things posted on the walls. Sometimes I talk to an employee and I ask them what are the Multi values and most of the people get it right. They know doing the right thing in the right way, create value to customers and sincerity with respect. As you can see on the screen here, we have a summary of Multi's mantra and culture. Our goal is to make in our culture, our DNA and now under a new management, then we'll take the company to a whole new level. With this, we are ending the part of the presentation. We are going to have the Q&A. [Operator Instructions] The other executives are joining me. We have Belelas, from accounting; Flavio, IRO; Andre; and Richard, CFO.

All right. So let's start with Laryssa Sumer's question. She wants to ask a live question, please. Laryssa with XP.

Congratulations on the results. On our end we have 2 questions. First, regarding profitability. Ale in his speech was very vocal about the intent to improve margin even further. But we also understand there is an effect of more partnerships that will have margins which are naturally smaller. So I'd like to understand if you could give us color regarding what will be the levers to improve the margin in the future? We understand that there was a great improvement in the lines themselves. So how much more can come from that, an improvement in the category? So that is #1. Second question, Ale just mentioned a more difficult year, macroeconomic environment that is more challenging. Could you comment on what is happening in the beginning of the year and make a brief comment by category? If you can do it, that would be very helpful.

Well, the agenda to improve the margin is a constant effort for us. I think that you interpreted this well. The partnerships have a lower margin. For some of them, we provide the service of manufacturing with a fixed margin. So this is good. There's not a lot of oscillation and we would not have any FX losses. But it's a smaller margin. When we look at the margin overall for the company in the top line, comparatively with the track record, it might be lower because of the partnerships. However, the trend is that these partnerships will bring us a positive result. The agenda to increase the margin exists. We're trying to pass through prices. You saw last year, we had a very high pressure from the dollar price. It was difficult to pass through the whole increase of 27% to our prices. It involves a price increase line and a very aggressive line, which is cutting expenses. So the work to cut down expenses is something that is in our hands. We have more control over and that's a strong agenda at the company as well. Was there anything else in your question? I don't know, Laryssa, whether I answered everything you asked.

No, this was super clear. And my second question is about the macroeconomic environment, what you're seeing in the beginning of 2025?

I think Ale mentioned the macro scenario is proving to be challenging. The good part is that the dollar price depreciated a bit. So this is a tailwind for us compared to the end of last year. Now in terms of the interest rates, well, this -- the hiking interest rates makes the country more retracted. We are working with a level of inventory with a higher frequency of purchases but fewer inventories in-house. So We see a challenge in the macroeconomic environment. Would you like to comment on anything, Ale?

No. I was just looking at the order of questions.

Now moving to Gustavo Farias' question. Gustavo, UBS.

I have 2 questions here on my side. The first, if possible, I'd like you to comment a little bit about the strategy of channels from now on. There's a lot of echo on his audio. It's not possible to hear him. So I apologize for this. But if you can comment about the channels' strategy specifically. We saw an increase in the share of major retailers in the mix. Is this a one-off, or is another trend? And my second question, if it's more related to the scenario that you're projecting, especially in exchange, especially with [ Argentina ], if you consider that below logistics, if we see if they're already part of the past, how you see that?

Thank you, Gustavo, for the questions. In terms of the channels' strategy, we understand that there was a growth and a good pace of investments in the online channel, that's an operation that grow over time. There's a possibility for that to deliver a better margin overall. But there's also the cash margin side. That's what we see when we sell direct to consumer. Our consumption of tax credits in this channel is very positive. So the cash generated on those sales is very good. So this is a strategy that we're going to pursue aggressive growth in. And we understand that the partnerships as well will -- we will have more corporate sales at a fixed margins and with expressive growth this year as well. And your question about major retailers that grew, that's greatly due to the mix. Our TV set line with Toshiba and Multi had -- was well accepted in the major retailers when they have bigger volumes. But at the same time, we know that those margins are tighter. So these major retailers, we understand as a strategy, we tend to not -- maybe not grow and try to focus more on regional retailers and the great partners that we have, not to grow too much in the nationwide retailers and keep the focus on the digital and regional retailers, that are the options. As for the U.S. dollars, it's very difficult to forecast. We're seeing that U.S. dollar will probably stay at around this level BRL 5.7 to BRL 6 but basically, a lot of our inventory. We had a maxi appreciation as we had last year. We tend to be able to pass through the amount. If the increases are above whatever is acceptable, if it's not 30% again but if it's like we see now 10% in the year or from 5% to 10%, it's passed through that we're capable of making and there will be no negative effect in this FX variation. No major negative effect if there's this variation in the U.S. dollar.

Gustavo, on your question, you also mentioned about our partners. Do you want to ask anything on that line or?

I think that the previous question already covered that. I think it's very clear.

Gustavo, I remember you asked about the logistics as well. In logistics, it's very much normalized. There is a forecast of a drought for Manaus in the second half of the year, starting in August. But in our view, it will be a lot better. It's a better situation than we saw last year. And even if it was the same, in terms of infrastructure and Manaus, the region is a lot better equipped. Now still, we are advancing some of the inventory. We have the freight now dropped. So it's very attractive. There was a significant drop in international freight. So we're trying to also make the most of this decrease now to ensure larger inventory now but that's to make the most of this advantage because the drought, as much as we have a structure for that, it -- freight becomes more expensive with the logistics chain, local operation for transportation, storage will be more expensive during that period. So we'll also try to work ahead of that to have that cost advantage.

Moving now to Maria Clara at Itaú.

I had 2 follow-ups on topics that have been discussed. The first about the growth trends for 2025. If you can talk a little bit about the growth expectations in terms of price and volume, it would be interesting, especially considering this appreciation of the real recently. Do you foresee the possibility to pass this through to the end consumers? That would be interesting to understand how this equation should behave. And the second question is that I'd like to understand a little bit more about the expense efficiency agenda for the year. If you can detail it more, talk about the main initiatives and the potential of improvements looking forward, that would be helpful.

Great. Maria, thank you for your questions. So in terms of the tickets and the volume and revenue, we're not projecting high expectations of growth for this year. I think the focus is on profitability. We're seeking this profitability. We are not all that concerned with the growth on the top line for this year. What we have -- may have growth is with the partnerships. But again, the partnerships brings us a fixed margin. So if there is an opportunity to grow due to maybe a partner with a specific demand, that we understand. We understand it could happen, it may happen. And there may be an opportunity, then we will grow. But for the current lines with our own risk, we intend to be more conservative this year considering the macro scenario. So we understand that the volume should remain in line with no major changes. The focus really on profitability. As for what you talked about, in the beginning of the year, variation. We should not have an impact in the price because we were not able to increase it 100% at the end of last year, which would have been necessary for this U.S. dollar appreciation to pass-through. But now there will be price reductions. In our view, it's quite the opposite. Our margin is still a big challenge. And we will try to pass through without -- well, prioritizing the top line, of course. So what we're trying to do is seeking this margin over time with the pass-through of prices without losing revenue. As for the expenses time line, I would say that along with margin, this is a constant challenge. Expense reduction is something that we understand to be a priority right now. So that's in -- both in terms of reevaluation of our structure that we're going to begin now in April, to understand whether if the company tends to grow, we're going to assess the structure of the company and overall expenses. So right now, we're already looking at this and we'll bring the results soon, both in terms of logistics to serve the internal operations. And we'll share more details with you later but I can say it's the #1 priority.

Very well. It seems that no one wants to ask live questions. So let's start with the buy-side analysts who sent questions in writing. I will read those and we will answer them one by one. Let's start with [ Marcelo Affonso ]. I have 2 questions. Considering the difficulty that the company has been facing to achieve a satisfactory ROIC and the high interest rate, wouldn't it make sense to reduce capital allocated in the business, producing cash, which would have a higher remuneration and lower risk. And the second question is addressed to Ale Ostrowiecki. Is it possible to explain better what led you to make a decision to leave the position of CEO.

Okay. Let me answer this is a reflection that is very strong for us regarding ROIC. This is reflected in the fact that we are more conservative regarding our procurement. Once we have an inventory purchased, the question is how to better sell the inventory, considering its reality. The biggest decision is what we will replenish, what we will bring in, what we will launch. So we are more conservative. We have higher bars now to decide whether a product will be purchased or not, launch or not and hire tighter bars to cover the inventory. Recently, we reduced the number of coverage. And so we will have less working capital allocated and that to work at all fronts. We have to reduce working capital to release cash. That's very important now with the financial cost we currently have. And the second point about leaving as CEO, I had a call, where I mentioned this to people. This is a personal matter. I've been in the same position for 23 years. Doing very similar things, very similar job. I thought it was the moment to change the focus to handle more strategic activities, looking more outside looking at the company in a broader fashion. And now we have a super good management. I have a successor who was very well prepared. He's going to do excellent work. Every company has to have a succession plan. This kind of succession plan started in 2021, Andrea was taking over more and more departments of the company since 2021. He has sales, procurement, marketing, all of the company's business reporting to him. It was a natural succession. And this was seen by all executives and officers of the company as a natural move. I am happy with this move. I'm very optimistic about it. And like I said, it will continue to work for the company, but with a new head.

Next question by Gabriel [indiscernible]. Selling expenses dropped in a percentage of net revenue in Q4 compared to Q3. However, it's still above 2 listed pays. What is the percentage of net revenue we can expect in 2025?