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

Good morning, and thank you for waiting. Welcome to the video conference to announce the earnings of the second quarter of 2026 of Grupo Multilaser. [Operator Instructions] We inform that this video conference is being recorded and will be made available on the company's IR website where the complete set of materials of the earnings release is also available. You can also download the presentation from the chat icon. In Portuguese and English. [Operator Instructions] We emphasize that the information contained in this presentation and any statements that may be made during the video conference regarding the business prospects, projections and operational and financial goals of Grupo Multilaser constitute beliefs and assumptions of the company's management as well as information currently available. Future considerations are forward-looking statements and not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect Grupo Multilaser's future performance and lead to results that differ materially from those expressed in such forward-looking statements. For the full disclaimer, see the second to last slide of this presentation. Today, we have the presence of the company's executives, Andre Poroger, CEO; and Eduardo Belelas, CFO. I turn the floor to Mr. Andre to continue with the presentation.

Good morning, everyone. First of all, thank you for attending another earnings conference call. Today is a very special day. We are here from a hotel in Campinas where we are gathering our sales group for a national sales convention, more than 350 people here from the commercial team, salespeople, reps -- we are here gathered for 2 days. So it's a very special day today. We're happy to have all of you attending here. I will begin with the highlights, and then I'll turn the floor to Edu and he'll give you more details on the numbers. And then I'll come back to talk about the different business units results. Next slide, please. So here, we have the indicators that we've been disclosing. We have net revenue getting close to BRL 960 million a slight increase compared to the same period last year. On the -- in the year, we are growing 8% to give you an idea. So revenue grew 8%. So it's worth noting or remembering all of the work we've done to review and optimize our portfolio. The group about a year ago, about 4,000 SKUs, different products in the company's portfolio. And today, our portfolio is actually 1,700 some SKUs. So it's a significant reduction in the number of SKUs. We cut more than half of the SKUs, preserving revenue. We increased revenue by 8%. Now we grew 3% compared to the same period of last year. So it's a very positive number to optimize the portfolio, reducing the number of SKUs and still able to maintain and even grow revenue. So that's good news. And it's also good news on the gross margin side. The main objective of optimizing the portfolio was to recover gross margin. I think this is one of the main highlights that we've been able to deliver. When we look at the comparison with last year, we had more SKUs, and we still grew almost 10 percentage points. So that helps us in our position of recovery. So adjusting and having a healthier portfolio being able to maintain revenue and bringing good results. It's also important to say that, as we mentioned in the last call, part of this effect -- there's 2 effects here. One is part due to the optimization of the portfolio, as I said. And the other effect would be an advance in anticipation of margin. As you know, the cost of electronic components this year at the end of last year to this year increased steeply. We've been repricing our products. So there's a lot of work from our pricing team, repricing it by the replacement cost, knowing that the costs will go up. So what we also have here is a pricing repositioning with an actual reflection of the accounting cost. I mean, before the new costs come in and the inventory, we also worked ahead of time. And I would say that we're going to see this even more in the business units of this advance and a very strong work to optimize the portfolio. This also has positive impacts in the EBITDA. As you can see, great growth. We got to 12% actually 12.4% EBITDA. That's a very positive number. It's been a long time since we were having single-digit growth in EBITDA and now double digits. So that also counts with the effect of gross margin, which also impacts our net revenue of BRL 142 million. I think there's 2 indicators we work a lot within the company. The first is gross margin with the optimization of portfolio. And the second is the cash in a scenario of very high interest rates and where we've been trying to work very strongly in cash generation, and that is reflected here in this half year. So we have now BRL 405 million net cash in the quarter. We also reduced the debt level. We went from BRL 453 million to BRL 371 million in gross debt, a 14% reduction in this period. And if we compare it to the previous year, the reduction in the debt, we went from BRL 656 million to BRL 371 million. So there's a significant debt reduction of -- which reflects in the net cash and obviously also help us achieve healthier results reducing the payment of interest on debt as well. So within our scenario, I can say that we are in a very positive position, still very cautious due to this advance of the pricing. But obviously, gross margin should and probably will be tighter. Despite all the work that's been done, we continue relentlessly working to reduce and achieve efficiency with our expenses. And we expect that this joint work may be offset by better efficiency in expenses. We understand it a little bit better. I'll turn the floor to Edu, and he will give you more details.

Thank you, Andre. Good morning, everyone. Moving on to the next slide, please. So here on the slide, we see the increase of our revenue, especially comparing to the second half or second quarter of 2025, which was already a recovery for the company. We are growing -- we're changing the profile of the portfolio since as Andre mentioned, we have fewer SKUs, taking 34% of gross margin and a much higher gross profit as well than on the other 2 quarters. If we can go to the next slide. Just one second, please. So going back here -- I apologize for the technical problems here. So going back, we delivered this quarter 12.4% of EBITDA based on the gross margin, but also when we go down and look at the reduction of expenses, we delivered significant expense reduction, especially administrative expenses and sales expenses, which has been at a percentage compared to net revenue, although it increased, it's offset by the gross margin and the possibility of having more budget for retail due to a higher gross margin. And that has a direct impact on net income, BRL 142.2 million of net income of 14.8%. There's an effect of the FX variation, but there was also robust net income based on the EBITDA. Can we go to the next one? Here, we brought an additional slide. Comparing with the EBITDA we are delivering or we have been delivering since 2024 in this specific quarter as well as net profit with the comparison of the same quarter of 2024 and '25. So we see the evolution. There's no impact of seasonality here. Actually, the company's performance, both in gross margin and expenses. So in 2024, this quarter, we delivered 3.4%, '25 that was the year of the recovery. It was twice as much as 2024 and now twice as much than we had in 2025. And then reinforcing what Andre mentioned, there are some effects of that anticipation of the pricing pass-through advance or anticipation of purchases by some customers, this 12.4% is something we're going to fight or to maintain it, but we do expect gross margin to be tighter in the second half of the year. And then we won't double this percentage of EBITDA again, but we will work very hard to maintain it at this level. As for the net profit, it maintains the same trend. And as I mentioned, unlike what we saw in the second quarter of 2024 and the second quarter of '25, where the effect of FX variation helped the results not be even worse in 2024 and in '25, this specific quarter, irrespective of gross margin, we would deliver very robust net income. Next slide, please. So the cash flow, this quarter, we've delivered BRL 235 million in operating cash based on the EBITDA and some inflow from government, especially that we had this quarter. It was expected to be -- to come into effect in the next quarter. So we've been able to pay off the debt. We have lower debt levels, and we still were able to deliver a cash position higher than the beginning of the first quarter. Now talking about indebtedness, where we can give you more detail on the next slide. We closed the quarter at BRL 777 million in cash, gross debt of BRL 371 million. That's already a level that's BRL 67 million lower than the last quarter. We delivered net cash of BRL 405 million. This gross debt has a significant representativeness in the short term in the next 12 months, and the company has been working to adjust the profile of the debt much more due to opportunities to increase the duration of the debt with a reduction of cost. But even if we didn't do that, we would still have cash more than sufficient to pay the short-term debt, the long-term debt, and we would still have BRL 400 million left. So that's the move that the company is making now based on the opportunities, reducing the cost of debt. We delivered leverage of minus 1.19 versus 0.76 that was already excellent leverage in the first quarter. And when we compare it to the previous year where we had net debt position, we were at 2.10x. So we reversed it and still have an additional point in leverage. Next slide. So here, we have our brands, and I will turn the floor back to Andre, and we'll be open to your questions after Andre concludes the presentation. Andre, I turn to you the floor.

Thank you, Edu. So let's talk a little bit about the different segments here. We have the corporate segment involving B2B business that we have in gym equipment and the machines in addition to our wellness brand. We also have telecommunications, production and sale of optic fiber equipment to large providers and ESPs. We also have electric mobility operations in partnership with Royal Enfields and manufacturers in Manaus. We have the memory and division with Brasilcomponentes manufacturing memory devices and manufacturing partnerships. These are -- and then we have our other 2 divisions, tech consumer with all of our technology products of our brands that are listed there. And we also have what we called specialized consumer, which are basically our brands and products that are non-tech. So we have toys, health care and baby products. So let's talk a little bit if we can look at the next slide. So the corporate segment remains an important driver of growth and maintenance of the company's revenue. As I mentioned at the beginning, we're growing revenue. Here, the corporate has been playing a strong role in this. And we also have an important recovery of gross margin, noting that we have 2 important segments here. One is our government area where we have significant growth of more than 50%. And we also have our memory drives division, which has an important reflection of the revenue, the ticket of the products because the component price went up. This favors an increase of revenue, obviously. And we also have -- which contributes greatly along with government is the anticipation of margin of the memory operation, as we mentioned. So we have a very positive trend for margin evolution and revenue evolution as well. We also have an increase of our telecommunications area. As I said, we also started very well with the motorcycle operation as well. So there's a combination of businesses here and the gym part as well, gym equipment also grew a lot. And we have good deals that have been bringing this engine. The corporate engine remains. It's an area that we look at very closely, and we are maintaining strong work on that in the company. And that obviously helps us greatly, and I think this has been shown one of the objectives was to reduce costs and expenses of the company, maintaining revenue, optimizing our risk and the operations we work with a fixed margin. So these are all things that protect it and benefit the company. Now on Consumer Tech on the next slide. Here, we already see a drop in revenue, as you can see, this drop in revenue comes along a margin recovery that is very important, which is the result of what we've been doing, optimizing and reducing the portfolio. This is a very positive reflection. This drop in revenue, when we talk about the different segments that we have in this division, one of them is the manufacturing of TV sets that we accumulate with the Toshiba brand in Brazil with the exclusive representation and the Multi brand. These are the 2 brands we have today in the portfolio. And this is a line where we've been -- we had issues in profitability last year, and we decided deliberately to focus on profitability. And these are lines where the cost has been also increasing. And we've been able to recover margins significantly. Of course, letting go some of the revenue that was a very right on strategy, even making or with a smaller revenue, we are getting a higher margin now. So I think that's a good step forward. And now we'll talk a little bit about our focus is the big challenge for the management is to go back to recovering revenue. That's also very important, while maintaining a very healthy level of gross margin. Now next slide, specialized consumer. Most of the lines here grow. So we have an audio line growing and the portable appliances are also growing. There's the drone line also increasing PCs audio -- so different categories doing very well. TVs, the drop of TVs brought on this abrupt decrease, but these lines are something we're very optimistic about. They are already growing. Now specialized consumer, which are our known tech brands, we already see a recovery of revenues, noting that when you compare it with the second quarter of '25, we see a decrease, but this decrease is explained because we sold our pet operation. The pet operation was on the base in the second quarter of 2025, and it's no longer part of our base now in the first quarter as well. So we see this decrease, but the big news here is that in specialized consumer, we already see a resumption of growth. So the work that I talked about that we've been doing in tech consumer had more of an impact on TVs. But here, it's an increase in revenue with a margin recovery. And this line does not have the effect of that margin anticipation of the cost provisioning. It's more focused for electronics on the tech products. So here, this effect is not in play of the margin anticipation. So we see a recovery of revenue, a recovery of gross margin without that effect of anticipation even. So this is very positive. And we will work to maintain this trajectory of margins and revenue growth. Next slide. Here, we recently announced a very -- a partnership we're very excited about. As you know, we also work with major partners and global brands. And we just signed an exclusivity contract with Philips, the AquaShield division. It's a division of water purifiers. It's a very interesting large market, and Philips globally has a position among the leaders of this segment in the market of this segment. And in Brazil, we'll start running that operation as well. We'll start local production soon. So this is a division that is new for us. There's an increase in revenue, obviously, in the segment. And then initially, we will hold the Philips brand for this segment, and we will seek to also have our Multi brand, our own brand to be able to work on a global brand being in a more premium segment and the multi-brand playing in a mid or entry-level segment, where we've been able to reach many consumers being able to reach a larger market. So we are very excited about this partnership. Now on the next slide, please, here sharing with all of you a little bit of the initiatives and what we are now right now working on very strongly. We have been working on this since the closing of the second quarter and now the beginning of what we started. So there's a whole part of cost and expense efficiency. This is very important that we have month by month, achieving efficiency gains, working capital management also strongly based on the optimization of SKUs that we've been working on and a better commercial planning as well. We discussed a lot of these topics and the initiatives to improve our commercial plan, sales expectations and so on. The third very strong initiative is the active pricing. So all of the pricing -- the cost increases or even cost reductions, we have an active or a pricing team that we call our margin region. They're very active. They're responsible to guarantee the margin of all of our segments and business units. That's a very important area. And the work that we've been doing now to recover or resume sales of our own brands. So we start work strengthening the brand and also working in depth with our clients. So there's also -- we hope to have good news soon, the resumption and the growth of our own brands as well in the tech retail. Next slide, please. Okay. So that's it. We would like to thank you all very much for your attendance and your trust. And we will open now to take your questions. Thank you.

[Operator Instructions] Our first question in writing Juan Paulo [indiscernible].

So about the approximately BRL 2.65 billion in fiscal contingencies, including the BRL 1.5 billion of Proinox and the other ICMS, customs processes, IPI. Considering there are alternatives that could reduce the effectively due amount, does the company understand that this amount doesn't represent an integral outflow of cash? What would be the effect of risk? And what projects have the best conditions to Multi?

Thank you for your question. [ Juan ], this amount of more than BRL 2 billion in contingencies that are not provisioned -- relating to the Proinox, when we talk to our legal consultants, all of them have a prognostic of possible loss. However, when we look into each one of them, the company does not expect to have any cash disbursement, specifically talking about that largest contingency that you mentioned, the Proinox, we have very sound arguments to sustain our defense, remembering that this proceeding had a tie in the fiscal initiatives committee. And if it wasn't for that, we would have already won this lawsuit. And this tie gives us a huge opportunity following what we see in the law to obtain the gain in the judiciary because it's 100% a fine process. And in the case of a loss or quality vote, the fine is disregarded. So the other proceedings have their specific issues, but all of them based on what we've achieved with our lawyers, we are discussing this because we believe in the merit of this question. At Multi, we have few amounts provisioned with a probable prognosis because once we understand that there is no possibility for discussion, we pay the installments and liquidate the issue. So being an objective answer, the company does not expect at all to have any cash outflow on that fine due to the losses that are with a possible loss prognosis.

Our next question also in writing from Leonardo from Itaú BBA.

Could you comment on the level of normalized gross margin you expect for 2027 after the accommodation of margins in the second half of 2026 and considering the progress in the optimization of portfolios, could you also comment on the priorities and capital allocation considering the positive cash generation trend for the company? And how to think about the optimum capital structure that you desire looking forward?