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

Good morning, and thank you for holding. Welcome to Grupo Multilaser's conference call today discussing the earnings of the first quarter of 2026. [Operator Instructions] We inform that this conference is being recorded and will be available on the company's IR website, where you will also find the complete set of materials for our earnings release. You can also download the English Note that the information in this presentation and the statements that may be made during this conference call relating to Grupo Multilaser's business prospects, projections and operational 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 Multilaser and lead to results that differ materially from those expressed in such forward-looking statements. For the full disclaimer, please refer to the second to last slide of this presentation. Here with us today, we have the company's executives, Andre Poroger, CEO; and Eduardo Belelas, CFO and IRO. I turn the floor to Andre, who will begin the presentation.

Hello. Good morning, everyone. Thank you for attending our call to discuss the first quarter of 2026. Before we begin talking about the numbers, the summary of the quarter, I have a personal disclaimer to make. In April, it's been 1 year of the new management in Grupo Multilaser. So I would like to thank everyone for your trust. I thank my team as well, everyone helping and contributing greatly to the trajectory of these results and the transformation. So we'll talk a little bit about the summary of this quarter. So talking about the quarter, we have 5 important indicators to summarize things. We have good news here in all indicators, which makes us very proud of what has been done and is being done in net revenue, we presented growth of 14.3%, a decrease compared to the fourth quarter, but it's normal with seasonality and the fourth quarter was greatly driven by the sales of Black Friday, seasonality of electronics at the end of the year. So significant growth compared to the first quarter of '25. In gross margin as well, we have excellent news. We reached the level of 30.4% extraordinary growth compared to the same quarter of 2025, where we had 23.7%. So gross margin is due to very strong work being done by the team in terms of pricing, the best mix. As you remember, we had an important reduction on the product mix. We came from more than 3,000 products to currently 1,700 products in our portfolio. So this adjustment in the mix greatly contributed to the gross margin results. We have an effect here as well of a one-off situation. As you know, we are seeing an effect due to the increase in the cost of electronic components, especially memories, processors. And at the same time, obviously, this price increase continues. It has not stopped. This is a global factor that impacts all manufacturers, not only Multilaser, both in Brazil and abroad. It's a global issue. And we've been able to pass through this increase to the price. So that's good news. That's also -- that was also a factor of an anticipation, the concern of the market see a continuation of this increase. We have customers who preferred to advance their orders. So that also brought us the possibility to improve margin specifically this quarter, but the trajectory is very good. I mean there has been an impact, and we've been able to capture, and that's the good news. We've been able to capture this on gross margin, but the trajectory is very good from 23% to 25% in the last quarter, the fourth quarter. I understand we maintained consistent improvement of gross margins. As for EBITDA, another excellent piece of news. We delivered BRL 96.5 million, a leap of almost BRL 91 million when compared to the first quarter of '25, where we made BRL 5.5%. So the reflection of gross margin and control of expenses. Our expenses, even though the margin grows and revenue growing 14.5%, our expenses dropped 4%. So we have more awareness of our net revenue and still being able to have a nominal reduction of expenses is a reflection of the work done by all of the team, their dedication to have a very efficient operation, and this is an ongoing work. We have not stopped. This is ongoing. We also had a reflection in the net income, BRL 123 million, an increase of 91% when compared to the first quarter of last year. It was good last year with BRL 65 million. So there's an improvement here of EBITDA gain in gross margin, reduction of expenses, a positive exchange, foreign exchange variation. But even without that, we remain positive. So that's a very significant important consistent trajectory. And maybe what really makes us happy and gives us peace of mind is cash generation. If you remember, we had cash burn in the first quarter of last year. We burned slightly more than BRL 330 million. And this quarter, we've been able to generate cash. We know that this is always a more challenging quarter in terms of cash generation. We were still able to generate BRL 65.8 million, and that's a progression of more than BRL 400 million year-on-year. So that's an indicator that we monitor very closely and it makes us very confident. And obviously, this cash generation is a huge relief. We had a net debt last year of BRL 190 million. And all of these indicators are very exciting for us with the trajectory. There's still a lot to be done. We're working hard on the portfolio, looking at new opportunities and capturing the opportunities that appear even in a challenging scenario. I will now turn to Belelas, our CFO, to talk about the financial numbers, and then I come back to give you more color on the different segments.

Thank you, Andre. Good morning, everyone. So now talking a little bit more in more details, as Andre has already anticipated, our net revenue in the quarter was BRL 872 million, a decrease compared to the fourth quarter, but this is due to seasonality. If we look to the first quarter of 2025, we had an increase of 14.3%. And if we break it down by segment, Andre will give you the details, but we are able to see how strong we were in the corporate segment, especially in network and memory lines, also due to that anticipation that advance of purchases from our customers to guarantee a lower price considering the increase in prices of memories and components in the global market. Going into gross margin, although we are talking about a reduction of amounts when compared to the fourth quarter, the percentage was 30.4%. And when we compare to the same period of last year, it's almost 7 percentage points of an increase. Here, there's an aspect of the portfolio mix, the focus of the company and more profitability of products, not worrying as much with sales volume. And we are still able to show better sales volume than the first quarter of 2025. On the next slide, EBITDA, we delivered EBITDA of 96.5% of net revenue, the highest EBITDA for the company since 2022, speaking of the different quarters compared to the fourth quarter of last year, that was a good quarter. We doubled gross EBITDA margin and in absolute value, we delivered almost BRL 40 million more. So this is a reflection here that Andre already mentioned of gross margin, product mix and a small share of that advance of the price pass-throughs that we've been able to do, capturing that opportunity. Expense management that has been developing quarter-by-quarter, you can monitor and keep track of the percentage of expense compared to revenue has been decreasing. And all that combined brings EBITDA to a much higher level than what we have been delivering. And the magnitude of these results is that it's 100% operational results. There's no reversion of provisions or anything that is nonrecurring in these results. Now on net income, we delivered BRL 123 million. Here, there's an effect of BRL 35 million positive of FX. So despite the positive foreign exchange variation, net income is consistent and very close to the EBITDA that we delivered. Comparing to 2 recent quarters in '24, it was negative due to FX variation. That's the opposite effect from what we're seeing now. And the first quarter of '25 was heavily impacted by FX as well. So just as EBITDA, it is operational net income without nonrecurring events and net income is reflecting that FX variation. Talking a little bit about cash flow. We generated BRL 65 million of operating cash. In the same period of last year, we delivered an operational cash burn of BRL 330 million. So that evolution led our cash generation during all 2025 to be close to BRL 60 million. So when comparing to the entire year of '25, except for the first quarter, our cash generation would have been robust. So this effect that we see now in the first quarter with the discipline with our accounts, the management of the payments and receivables from our customers gives us this perception that the strategies have been well executed. And today, we have cash that allows us moving to the next part of this flow of having distributed or paid out dividends of BRL 40 million this quarter. Reducing our debt by BRL 40 million and noting that even in this first quarter, we also captured BRL 50 million with BNDES. So if it wasn't for that, the reduction of our debt would have been even greater. Now on indebtedness. I apologize. We closed the first quarter with gross debt of BRL 433 million with cash of BRL 624 million, therefore, net cash -- negative net debt of BRL 190 million. This cash would have been sufficient for us to pay 2.4x the short-term debt. We have the short-term debt, but that's no concern for us due to how robust our cash position is. So concluding the financial portion, the company remains focused on the delivery of results with discipline in expense management, managing the mix and gross margin, capturing opportunities that arise, and we will be increasingly more prepared for whatever comes from the macro scenario. Andre will give you more details. In addition to the memory scenario, there's also the freight and so on. So we continue with this discipline to be a company that is cash generating and is capable of paying its shareholders. Thank you. Andre, you have the floor.

Thank you, Edu. So let's talk a little bit about the different segments. As you well know, we have 3 main segments of activity that we call the corporate segment involving all of the B2B operations from gym equipment to buildings and gyms. We have a large operation of distribution and manufacturing of optic fibers equipment for Internet providers. We have a mobility factory in Manaus, where we produce our Royal Enfield and our electric mobility brand, Watts. We have a memory operation, Brasil Componentes. Brasil Componentes that produces memory for the main industries in Brazil. We have our manufacturing partnerships as well with Oppo and Hisense and more recently, already captured in this first quarter, our new partnership with Sennheiser, that's a global reference for professional audio equipment for major events, promoters, broadcasters that we started to ramp up in this first quarter. The second is what we call Tech Consumer of our technology brands as well as partner brands that we fully operate where we run the full operation from our manufacturing, distribution, marketing, sales, post-sales. That's where we have our brands, Multi, [ Nartools ], DJI. And the specialized consumer segment that is basically our kids line with toys and baby products and MultiSaúde, which is a retail operation for health care technology products for pharmacies. Now talking a little bit about the distribution, the breakdown of these 3 segments. In the corporate segment, it was a driver of the growth for this quarter in terms of revenue. So we had significant growth of revenue compared to the first quarter of last year. There is a seasonal aspect, as I mentioned in the beginning, compared to the fourth quarter. So it makes the revenue drop. But the good surprise here is the additional margin increase. As we mentioned, this segment tends to have lower gross margins because their B2B operations and partnerships where we work with a service fee that is at the same time lower, but it is free of risk, and it helps dilute the company's expenses. There's a lot due to the operation of capturing the anticipations. We were able to have a good pass-through in the memory sales as well as for government. But still, we understand that we would have had evolution here. This is an area where we're contributing a lot, and we're very focused on our corporate customers. Moving on to tech consumer. You can see a drop in revenue of around 15%. And this drop is not a surprise, quite the opposite. This was a strategic decision the company made to focus on profitability. With that shortage of memory of components and making the cost of products to rise globally, our inventory loses value as a consequence. So we prioritize profitability instead of volume right now. So that had a positive reflection. As much as there is an impact, the line that had the greatest impact was TVs that we made the decision to hold back and make it more profitable due to those future increases. And if it weren't the screens in the TVs and tablets line, there was also an effect of cost increase due to memory all of these lines would have been growing 42%. So it is a strategic effect. So strategic that when we look at gross margin, we see that even if the revenue is 15% lower and preserving inventory, we deliver the same nominal volume in terms of margin compared to periods where the revenue was higher. So I understand that here, we're able to make the current inventories more profitable, also capturing that margin. And in this category, we have important lines, audio, PCs, notebooks and portable appliances. This line has been growing. In audio, we had growth compared to the previous quarter of more than 40% -- almost 40%, actually 36%; PCs, 54.2% and home appliances, 31%. So these are lines we've been investing heavily. These are thriving categories with a lot of potential for growth. In addition to the others that we also understand that the focus is profitability, definitely, but we tend to focus on the growth of these lines as well. Maintaining profitability, of course, the focus, we won't let go of this focus in profitability. So that's good news. Despite the loss of revenue, this is very good and very exciting to see in categories where we're growing and affirming our position as a major player in this retail. In specialized consumer, there's also a decrease here in revenue. This drop in last year, we had a significant divestment where we left the Pet division. We had a factory for hygiene mats for dogs. That was one of the main pet markets. So there's an impact here. We had a revenue base from the pet business at the beginning of '25, and that's no longer present. So we feel a little bit of that effect in the top line on revenue. But the focus here is the same as we've been working on in consumer tech. That's the search for profitability. This is a division that although has a smaller revenue has been bringing profitability, contributing to gross margin. And here, we see an opportunity for growth with this space, it may be more difficult. But over time, we have good projects in these segments, basically health care, kids and toys. So revenue is reduced, but that was strategically -- we prioritize profitability due to revenue, and we understand the strategy is working well. Here to give you more color, we talked a lot about this. You have a shortage, as you all know, everyone who works on the electronics market knows what's happening in the global market. There's a rush for the manufacturing of the AI servers in the world, and this rush led the price of components to go up overall. And the more traditional electronics industry consumes chipsets and processors, memories that are not as sophisticated as the AI servers, and they struggled more because the global manufacturers prioritize demands of higher tickets and profitability. So that has been affecting the whole industry. It has impacted the industry of computers, network equipment that we have with providers. So overall, just to share a little bit with you about our sentiment, when there's a global increase that affects all of the manufacturers the same way, we don't worry as much because it is a bad impact, of course, increasing prices. But since it is something happening for everyone, we understand that the market adjusts to this new reality. So a TV that used to cost less than BRL 1,000, you see now a TV cost BRL 1,200, BRL 1,300. So in that sense, the market will adjust. Nobody is going to stop buying TV because of BRL 200, BRL 300. The market adjusts to a new reality. So here, of course, there is a point of concern, but I think it's a relatively mild concern as long as we're able to pass this through and that maybe there will be a transition. We've been able to capture positively this quarter, and we're monitoring it closely. We have involvement with the supply chain and the local memory production. So I think we are in a good position. Obviously, we're monitoring it. There will definitely be an impact, but we are looking at this closely, and we are very confident. And here, the initiatives to conclude, we have been in a trajectory that makes me very proud. And the comments that we see in the P&L and the main indicators, especially net cash makes us very confident with the operation in the future and situations or crisis that may arise. I think we are a lot stronger. And this is a work that is ongoing. It doesn't end. It's -- I think the whole team -- it's not the work of one hero. It's the whole team dedicated to finding opportunities to reduce expenses, very strong working capital management that we monitor day-to-day, portfolio optimization, I think that was very right on. We are closer to the consumers, closer to our clients, defining together this portfolio. So that's another win, and I think that will bring more results. We are in this process. And now we're also going through a situation of monitoring opportunities. Multilaser is always a business company. We're always looking at new businesses, looking at opportunities. We grew a lot in recent years, and now we optimized it. We're not going to do anything crazy, quite the opposite. But obviously, we will always look at our radar opportunities that maybe considering our learnings, our lessons from the past and trying to capture opportunities, both in new lines and so on. So I think that's it. And to conclude here, yes, that's it. So thank you very much for your participation. Let's open for questions.

[Operator Instructions] Our first question in writing from Rodrigo Chavez, investor. Congratulations on the results. Considering the cash excess and the return to profits, have you considered a more recurring dividend payment?

It's good that this question only comes up because of the cash generation we're presenting. Our current policy of dividends and bylaws has a minimum mandatory of 25% of net income compared to 2025. We did that, exceeding that. And right now, our intention, our priority is to continue to reduce indebtedness. We have an important share in the short term of BRL 70 million. And we will, without a doubt, this is in the agenda of the Board of Directors to discuss dividend payment, always in line with the profitability that the company will deliver, as well as cash availability. So we are considering, but the priority right now is still to reduce indebtedness to at least comply with the bylaws of the minimum 25% payout.

Just to add here, what Edu said is perfect. But with a long-term view, I think that, of course, whenever there is a possibility for cash generation, we do want to be a company that pays dividends. So this is our focus. Of course, always prioritizing the company's financial health, but we do want to have this recurring annual payment.