Magazine Luiza S.A. (MGLU3) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for waiting. Welcome to Magalu's conference call related to the quarterly results. For those of you who need simultaneous translation, just click on the interpretation icon in the bottom of the platform and then choose the language of your choice, English or Portuguese. We would like to inform you that this event is being recorded and the recording will be available on the company's IR website at ir.magazineluiza.com.br, where the earnings release and the presentation is also available in both languages. The link for the presentation in English is also available through the chat button. During the presentation, all the participants will have their microphones disabled. And next, we will open the Q&A session. For questions, just click on the Q&A icon in the bottom of the platform, write down your name and the name of your company and the language of the question. Once your name is announced, the request to activate your microphone will appear on the screen and then you must activate your microphone to proceed with the question. Questions received in writing will be answered later on by our Investor Relations team. Now, I'll turn the floor to Fred Trajan, Magalu's CEO. You may begin, Fred.

Good morning, everyone. Thank you very much for joining us today in our conference call to discuss the third quarter results of 2024. This has a very symbolic significance because it rectifies the advance of our current strategic cycle. And with that, I would like to start our earnings release call, giving you a broader concept about our results and I will refer to our strategic cycles. Next year, 2025, in the current administration, I am the CEO and I work together with the leadership that they have been with me since the beginning of this journey in 2016, so we will celebrate 10 years ahead of Magalu's operations. And my style is such that I like to have bi or pluriannual strategies, just to make very clear about what our strategic objectives are. And so -- and I split these 10 years, I mean, part of that cycle will be concluded at the end of next year. So I would like to divide that in 2 strategic cycles and they are depicted on Slide 3. And the first cycle is Magalu's digitalization. When I took over as a CEO of the company back in 2016, my mandate involved digitalizing Magalu. We had started back in 2000 and Magalu wanted to promote a very significant digitalization of its operations, already anticipating that digitalization of the retail industry in Brazil would be very impacting and very significant in the years to come, but more particularly in the categories where Magalu was more traditional, like durable goods. And in fact, today when you look at the market, even though only 15% of Brazil's total retail, more than BRL 3 trillion of total retail is online it's 50% penetration in traditional categories. Therefore, there came the time for us to take a deeper dive into digitalization. And so we took upon ourselves to initiate that process. And I think in the 5 years that followed that, we ramped up one of the most successful digitalization process in the world. Magalu, if you fast forward to the current date, we have -- I mean, at the end of the year, we will have about 50 million of MV online, the second online operation in Brazil. We are far ahead when you compare to #3 in this category. Worldwide, we are one of the few companies that started analog, and we are leaders in the e-commerce segment in the country. In China, I mean, we have traditional -- not even in China or in India, not even in the U.S., we get companies like that. These are companies, countries dominated by pure play companies. I believe this cycle was concluded in 2020. That's when even with the closing of 1,300 stores because of the pandemic, that year alone, we grew 70%. So 100% online was our total growth. So back then, we showed concrete numbers to justify and ratify the fact that that cycle of Magalu digitalization was very successful. 2020 was a year where we concluded the digitalization cycle. So Magalu is now totally digital. And so what would come next? That's when very much inspired by the Chinese model. So the first cycle was inspired by Silicon Valley, and the second cycle inspired by the Chinese model. That's when we started to consolidate our digital Magalu ecosystem. Now in economic terms, just to justify that strategic cycle, we focus on the digitalization of the results of the company. In the first cycle, we digitalized Magalu, but we haven't yet diversified the bottom-line of the company. So in the second cycle, in my view, had to be a cycle that we had to implement so that our results wouldn't be so cyclical. I knew that in the first cycle, digitalization alone, I mean, we had reduced a little bit of the volatility because the physical cycle is not as cyclical, but the results were still very much dependent on durable goods and also loans related to durable goods. So that came the time to turn the key and do something different. And back in 2021, we started that cycle, and the cycle is to be concluded in 2025. So next slide. We made several acquisitions, more than 20 acquisitions, in addition to organic growth. And we started to put together our ecosystem. We bought 5 logistic companies, and I'll talk about some of them. We also acquired some fintechs, and they became now MagaluBank. We also acquired some tech companies. Today, we are consolidating them within Magalu's Cloud. And we also acquired content companies, content portals, to increase our base of advertisers in the monetization of our audience, in addition to all of the other acquisitions to diversify into other categories. Today, I mean, we acquired Netshoes, and they are leaders of sporting goods in the Brazilian online industry, so they are very large in Latin America. And also, we have leaders in peripherals, a product that is totally different from our core business, but it is complementary. I mean, and then we have a delivery company. It's not in Sao Paulo, in Rio, but they are one of the largest players in Brazil, the second largest in terms of food delivery in Brazil. And Época Cosméticos, Época is one of the leaders in the cosmetic industry in Brazil. All of this helped us to diversify our sources of results or our earning streams, and we were also able to shield the company from collateral effects. We will be less cyclical. And why am I bringing this subject? I'm doing this because the result of this fourth quarter or this third quarter, I mean, is very relevant because it gives us some very sound financial KPIs, and this really justifies and is a testament to the success of our strategy. The third quarter of 2024 is the fourth consecutive quarter of profits. Despite the fact that the Selic rate is quite high, maybe 5 or 6 years ago, an operation like that of Magalu, I mean, the traditional Magalu operation, would be almost impossible for us to deliver profits at the level that we have today. So the results for the third quarter -- I mean, the fourth quarter, also will post positive results regardless of the fact that Selic rate is high. I mean, our bottom-line, our results are less volatile and more robust. We are reducing our beta, and we are just ratify that at the end of the strategic cycle that will be over next year, there are still new things that will be incorporated to our results and our P&L next year, and I'm certain that this will show our investors and our stakeholders in general that this cycle is equally successful when compared to the first cycle. It's just as successful, and I think now we have to improve our EBITDA margin from 5% to 8%. We want to reduce financial expenses by 20%. We want to grow our operating expenses by 47%. This is how much we grew this quarter, and net income of BRL 70 million, despite all of the bad signs from the central bank. Our financial expenses is not tied to Selic. It's tied to future interest rates. So it already reflects a pessimism in the market, and we are considering a higher Selic than that of the quarter. Therefore, this is a number that just ratifies that all of the efforts by the company in terms of making that strategic move, the fact that we are working hard to reap the benefits, makes us certain that next year we will prove that the company is on the right track to execute another strategic cycle, and this will certainly make us less cyclical, not totally uncycled, but we will be less volatile. Now speaking still about the third quarter of the year, I would just like to underscore that even though there was a 5.7% to 8% increase in EBITDA in the quarter, we were able to grow our total GMV by 7%, and we reached BRL 15 billion of GMV. When we took over in 2015, we had BRL 10 billion GMV a year, and now it's BRL 15 billion with a 70% stake coming from online. And in online itself, we have 40% penetration of marketplace. Almost half of our online is already in marketplace. We have 3 very balanced GMV physical stores, 1P and 3P. I often say that my strategy never means creating something new by destroying the past. When we made 1P, we continued to grow our stores. When we got the company, the revenue from physical stores in Magalu was BRL 8 billion, and this year we are reaching BRL 20 billion. We grew 1P not in detriment of the physical stores. In 3P, we are not growing in detriment of 1P or physical stores. It's always one break after the next, on top of the next, so that all the channels are totally integrating. We are not cannibalizing the channels. One of the highlights of this quarter, once again, please, next slide, was the growth of physical stores. Physical stores or brick-and-mortar stores are very much related to the macroeconomic activity. When GDP is strong, physical stores have a good performance. When GDP is not going so well, the same thing happens to physical stores or brick-and-mortar stores. So this year, our same-store sales was 15%. I think this is the highest same-store sales growth of any other retail company in the country. This is an exceptional number. Even retail stores that do not grant credit, but very few retailers are posting growth of this magnitude. And the macroeconomic situation also has an impact. The GDP, I think, would end the year with 3%, very low unemployment, historically very low. There is a large number of people that can now afford to make their purchases. Magalu is more focused on the lower bracket of the population, but also our operating teams are focused on gaining market share. So not only we have the economic macro scenario, but Magalu, despite all that, is gaining market share in our physical stores as well. Many companies were struggling, they left the categories, or they even disappeared, both regional players and larger companies. And this gives room for other operators that have more capital, they're a better structure. I mean, every time, during all these periods, we kept investing in our stores, our teams, and we managed to capture the good momentum of physical retail. Whenever there is a hiccup in the physical store, I mean, I would like to remind you that physical stores play a very important role because there is great traffic in the stores, not only that, but this also opens greater possibilities from omnichannel. So 1P is even shipped from the store, and also 20% in 3P. So multichannel is a competitive differential of our online operation, it's not something isolated. Now speaking about e-commerce. Magalu -- and I like to split the e-commerce market in 3 different ticket brackets. I'm talking about the e-commerce market as a whole. And Magalu is a leader in tickets above BRL 1,000. Magalu is a leader in higher ticket amounts and brand products. We have a very outstanding position in home appliances with a good share of our suppliers, going from 25% to even 30%. So Magalu has great leadership in durable goods. And this is depicted here, both in 1P and 3P in our online operation, when consumers want to buy a good product from a good brand that is not fake, they certainly trust Magalu, and Magalu is a firm destination when it comes to purchasing household appliances. We want to grow our revenue of products between BRL 200 to BRL 1,000. That's an intermediary bracket. And one of the strategies that we're using involves the acquisition of networks, like KaBuM!, Netshoes, Época Cosméticos. We grew these operations as well. And today, everything that I say that is not stoves, flat screen TVs, et cetera, they already account for half of our online GMV. We have a very outstanding presence with suppliers like Adidas, L'Oreal, and Dell Computers and Components, and many other important brand operators. In addition to the acquisitions we made early last year, and I would like to insist on that, we launched a different fulfillment. We launched a fulfillment which is multichannel. And the main purpose of this fulfillment was to bring into 3P the same advantages of the multichannel system that made us so successful with 1P. It took a little bit longer because it's much easier for you to have a 3P fulfillment only. Then take a system of 1P stores and WPMS or PMS of these systems and adapt it to 3P. Our tech teams put a lot of efforts to allow our DCs to operate goods from Magalu, but also from several other third-party sellers. And this requires enormous efforts to customize legacy systems, but we were able to do that very successfully. In the first quarter of last year, we launched that, and today 24% of all 3P orders go through our fulfillment. The major advantage of our fulfillment model, and I think this has to be well understood, is that it's much cheaper than the market fulfillment traditionally. So even though we were investing in expanding Magalu's fulfillment, there was, I mean, a lot of operating leverage, but not a lot of increase in operating expenses, and Beto will talk about that. Our SG&A, I mean, is still good, even though we increased the penetration of fulfillment in the company. I mean, the seller, in terms of Magalu's fulfillment, goes through an amazing improvement in terms of performance. The average time falls -- drops almost half, and freight is also significantly reduced. There is a reduction of approximately 20% of the total cost because store-pick up is much cheaper, so that's why the cost goes down. And this generates a conversion rate that is twice as high, and NPS is also higher. So the focus of the company was to -- not to prioritize some things, especially, delivery from partners. It brings a lower NPS for the company, and then we are focusing on our own fulfillment with click and collect. We enable new DCs. Yesterday, I just visited our operation in Pernambuco. It used to be a Netshoes DC, and now it's Magalu's DC. We just enabled also our DC in Rio, so we will do fulfillment from Rio. There is great idleness in that DC, but I'm sure we will be able to reduce a lot of delivery time in Rio. We have products from sellers in that location, and we increased fulfillment, and fulfillment has high NPS, 154% in the first 9 months of the year vis-à-vis the rest of the year. In the other modalities, there was a drop in the first initial months of the year, so we are focused on sales with low lock-in and low NPS. So part of the strategy of the company is focusing growing this fulfillment. And then, when we look at how this impacts the members, and we are disclosing the numbers to you, we see that the company's NPS as a whole, I mean, grew a lot. It went from 67 to 80, the consolidated NPS. I mean, it is certainly the highest in the industry -- in the country. Customers that buy at Magalu, they are extremely pleased and satisfied. That was a major improvement that we achieved this year, and a great part of that comes from 3P. Once we migrated the partners to 3P, the NPS from 3P was 52 years ago, and today is 75. And more than half of the orders come from 3P, and also the NPS service comes from 3P, the whole average of the company jumped to 80. I mean, the pay in stores operation was 84, but as fulfillment increases penetration in the group, we will certainly improve that score as well. There are some new things coming this year, like now, even the client that buys through 3P, they will be able to return the product in our physical stores and also other share stores. So we already have a high penetration of store pick up, but now there is a new modality, because in the past they had to return their products in the post office, but now they can return their products in our physical stores. So this really increases our multichannel operation. So this is something very important. This goes beyond price discounts, because our customers trust the brand, the Magalu brand. Our qualitative indicators are quite high, and that's what allows me to trust that we will grow the company even more in the future, because our service level with our clients is increasing. Now speaking about very low tickets, below BRL 20, in addition to the fulfillment thing that I mentioned to you, I was trying to find a way to have a more relevant share in certain categories. We had a difficulty to operate in tickets below BRL 20. We were trying to make that operation more feasible, and we went looking around for more strategic partnerships, and then we made a strategic alliance. We discussed several possibilities, but in this past year, we became very closer to one of the largest global e-commerces, which is Alibaba, Alibaba International. They have an international arm, and so they have the brand AliExpress. We made a strategic agreement. It's a win-win deal. The 2 companies are complementary. We sell what they don't sell, and vice versa. Together with other Chinese companies, they are leaders in selling tickets below BRL 200. So they dominated this category in Brazil. So I said, okay, if we cannot win them, why don't we become partners? And they also needed a partner that could sell products with a higher ticket. So this is a win-win deal. We would include their entire catalog. They have more than 600,000 items, and now they are present in our digital channels. In less than 4 months after the announcement of this partnership, at the end of June, and we already listed all of our more than 7,000 items in that 1P in AliExpress platform. So we have -- they have our Magalu 1P products in their own platform. And just 2 weeks ago, we launched the Choice line in our Magalu system. So now we are showing great progress in this partnership. Strategically, this is very good for us, because not only we can grow 1P with the audience of AliExpress in Brazil, because that's 1/3 of that of Magalu, but also our 1P will also benefit from this partnership. At the same time, we will be able to sell products with a ticket below BRL 200, and we will definitely be part of this new game in Brazil. And this will also give our clients a much broader spectrum of products. And so in the fourth quarter, we have high expectations, because there are very good signs from the first initial months of this partnership. So certainly, so we are moving in this direction. Now moving forward and talking about the evolution of our ecosystem, one of the issues is when you put together a strategy to create an ecosystem, right at the beginning, you encounter some operating difficulties. You buy a lot of companies, you have to integrate the companies, you have to integrate cultures, leadership, and systems. And we made incredible progress in the last few years. And I think one important thing was the introduction of Magalog. We announced that a few weeks ago. We have 5 different company taxpayer -- we had five 5 different taxpayer numbers for companies. I mean, and now we put everything into one single company, and this Magalog is serving this entire delivery ecosystem. Magalog delivers Netshoes. We also deliver almost everything from the app. And part of the 3P operation is being delivered by Magalog, which is already integrated in our ecosystem, and now it became a company. Magalog stems from our acquisitions and the spin-off of our logistics department. We created a new company that will generate revenue for the company, and it will generate results with very little competition. I mean, the post office, the postal service still have some issues, and I think Magalog will be in a very privileged position. Magalog starts with an amazing revenue, things that were even coming from outside the ecosystem. Renner, Centauro, Petlog, and many other companies in Brazil trust Magalog because Magalog operates logistics with the service level that we have at Magalu and with Magalu's cost control. So I think it already starts being very robust from the beginning. We can access the entire ecosystem, and also, we can sell to other companies. Not only that, this is a very good opportunity to increase our revenues. We do not anticipate an astronomic profit coming from Magalog, but I think this will help us turn a center of expenses into a center of results or revenue. Magalog will -- is here to simplify this ecosystem. And I think another important pillar of our ecosystem is Magalu Ads. Today, I mean, it's good to remember that whenever we talk about Magalu, we have to consider the entire ecosystem, not only Magalu's audience, which is very high, but we have to consider a very high audience from footwear, Brazil Netshoes, and then cosmetics, Época, a high audience in terms of content, and that's the tech and job in Dutch. And so we also have the flow or traffic from the stores. So all of the audience of Magalu on and offline will be put available to all of our advertisers through Magalu Ads. It's almost like a no-brainer here. When we look at the growth of Magalu Ads, I mean, social media, it's an important reality all over the world. I mean, 5% of GMV in ads, well, we have more than 6%. Even companies that started earlier, like 1% or 2% of GMV in ads. Almost all companies that enter in a journey of retail media have seen a significant improvement in their results. I mean, 2 points of GMV, a great contribution margin. When we talk about that, we are talking about 1 additional EBITDA point. So the company is putting great effort in this new platform. Part of this investment will be -- of our investments, will be earmarked for Magalu Ads. In this quarter, we just launched our new ads platform, and this allows advertisers to introduce new campaigns. They can have a much more robust model. They can add a campaign with a keyword. So not only that, but we have to mention usability. We launched this platform 2 weeks ago, and we already have 3,000 active advertisers. So this is a platform that is generating 48% of revenue in terms of our service revenue, and this will pay an important contribution in the future as well. We have a state-of-the-art team. We have an outstanding commercial team being -- they under being managed by Celia Goldstein. So the audience is quite significant. In addition to all of Magalu's audiences, we are leaders in social media, 20 million followers. We are monetizing on Lu. Lu is getting money from advertisers. She was just hired by Burger King to be an influencer through WhatsApp. So whatever we can monetize out of our GMV, we will do so. And we are also focusing on Magalu Ads because with the results from Magalog and Magalu Ads, we want to have a less cyclical results. We want to reduce our bidder. We are heading towards a full monetization of our GMV, which is the focus new -- this new strategic [ sub ]. So in this concept of high interest rates, we want to monetize GMV, not only Magalu is doing that, but everybody else in the industry is doing the same thing. So, before I turn the floor to Beto, I would just like to highlight our progress, which has been extremely outstanding in terms of our financial operation. We are making important progress. We are very close to Itau's ROI. We are growing a lot more than 18% ROI in the quarter with a trend to grow even more towards the fourth quarter, regardless once again of the economic landscape that we have at the moment. And we also see an amazing opportunity to grow our penetration of financial products in the digital platform. It's very strong offline. It's offline for 1/3 third of our GMV, physical stores, but it's not yet totally penetrated in 1/3 of our GMV, which is online. So a great focus of our digital operation is towards selling more financial products, loans and insurance products online where penetration is still low. The insurance business for instance, I mean our revenue is BRL 1.5 billion through physical stores, but penetration in stores is 10x higher than online penetration. So the focus is to increase penetration of insurance all insurance products online. And in terms of credit, we have a large operation of CDC. Everybody likes to talk about that offline. And we are launching what we call, [ Carnezinho Gostoso ], is a digital CDC totally integrated to the app this quarter with personalized rates. You can hire that online and you do all of the management through the Magalu app. And this will help us sell more online. And in addition to that, we will be leaders in higher tickets because the digital CDC or DCC will help us increase our online ticket and we will increase our online contribution margins as well. Contribution margin online are higher than online 1P. So we want to increase penetration of consumer credit -- digital consumer credit and our focus will be better and will be more robust. So the last thing I wanted to mention was MagaluBank and with that we just gave you an overview of the progress that we are making in the strategic evolution of our ecosystem. So now I will turn the floor to Roberto to give you some of our financial highlights.

Good morning, everyone. Thank you so much for joining us today in our earnings release presentation. I would like to briefly go over the financial highlights. Again, we reached BRL 15.5 billion in total sales in the quarter. We posted a 4% growth. The highlight is the amazing growth in physical stores, especially we grew 15% same store sales. And then we talked about the growth of our gross margin. This quarter, we reached 30.4% of gross margin is the highest in many years and this reflects our efforts in terms of product margins and service margins as well. And again, we reached an EBITDA of over BRL 700 million with 8% growth in the quarter. Year-to-date, we have almost BRL 3 billion EBITDA, [ BRL 3.9 billion ] and year-on-year about 40% to 50% growth. So this means that we are posting very robust results. And once again we reach a recurring net income adjusted net income of BRL 70 million considering CDI and very high Selic rate. And our accounting net income published was BRL 102 million meaning that the nonrecurring results were positive, which also helped us to increase our recurring net income by over BRL 30 million. This quarter, we didn't have any nonrecurring expenses. There was no relevant adjustments in EBITDA. We had other positive nonrecurring results in the [ PL ] line and income. Our operating cash was almost BRL 600 million. So operating cash generation total cash was BRL 6.6 billion. Total cash and this cash generation in fact reflects a high conversion between EBITDA and the cash flow of the operations as we will mention in the next slides. This next slide refers to the sequential evolution of EBITDA. EBITDA margin grew quarter-on-quarter and the highlight goes to the gross merchandise margin after default pass through in 1P this quarter we reduced our operating expenses, especially fixed sales -- fixed costs. We had -- we made progress in the service revenue. We talked about fulfillment already. We talked about the growth of physical stores and also high profitability coming from Luizacred. In this next slide, we show how the EBITDA margin went from 5.7% to 8%, an increase of 2.3 percentage points. In terms of gross margin, there was an increase of 1.1 percentage points with the highlight going to merchandise margin, which also reached a record level reaching 24% for product margin and with a service contribution also reaching a high level. So the gross margin goes to 31.5%. This quarter, we were able to dilute our SG&A, not only we were able to reduce sales expenses, but also general and admin expenses. Here, we had a dilution through operating leverage because we grew 2 digits and this growth came from physical stores. But we also gained -- had gains of efficiencies in the physical stores. Today, our operating expenses in the stores is much more efficient and lean. Not only that, SG&A is much lower when compared to last year because that included the review of all contracts, ZBB, 0 based budget and everything else we did last year. So SG&A is nominally lower than last year by almost BRL 20 million per quarter. Next, we had a very positive contribution. I mean, go back 1 slide please. Luizacred during some time was reducing our EBITDA margin, but this year is now paying a positive contribution to our EBITDA margin of 0.3 percentage points. And here [ all ], this is associated to our consumer credit portfolio is growing at a high pace and this is helping us grow the gross margin for products. Next slide, we show that in terms of working capital, we generated more than a BRL 100 million in cash. So there was an evolution -- sequential evolution in working capital. When we look at last year, I think it's worth mentioning a reduction of BRL 500 million in inventory amount and this improved our inventory turnover. And next, we show reductions in financial expenses. This quarter, our financial expenses were a BRL 100 million lower year-on-year. We reached a percentage of expenses over net revenue of 4% when compared to EBITDA of around 8%, meaning that I mean, we've been saying that one of the main leverage indicators that we pursue is this one. So this quarter, our financial expenses over EBITDA reached 50% and a year ago, this was over 90%. Therefore, this shows an impressive operating deleveraging and the trend is that we will continue to reduce our financial expenses going forward. All of this reduction has to do with interest rates, but even more than a drop in interest rates because now it is increasing again. We paid BRL 3 billion in debt this year. We reduced interest rates over loans, prepayment of receivables. We increased peak sales, interest bearing sales et cetera. And we bought back debentures in the secondary market this quarter. We already bought back more than BRL 100 million of debentures in the secondary market. Next slide, here we have our cash flow analysis. We went from BRL 6.5 billion to BRL 6.6 billion. I mean, there is some rounding figures here, but we increased our total cash position by BRL 160 million. And this increase is very much related to the profits in the quarter, but plus the evolution in our working capital. So when we break it down into details, the cash generation of the operations of approximately BRL 600 million is way above our investments in our CapEx line and also this refers to payment of interest rates and leasing and these are recurring things. In the middle of the chart, we show that we had a capital increase for Luizacred of BRL 300 million. We bought back debt of a BRL 100 million and funding was BRL 400 million. These 3 events were nonrecurring and they one mitigates the other and what remains is the cash flow of the operations which generates an exceeding cash flow, which is higher than the cash requirements of the quarter. In this next slide, we show that this cash flow from the operations in the past 12 months stands at BRL 2.4 billion very similar to the accumulated EBITDA and I would just like to remind you that this is based on an EBITDA but is already deducts all of the cost from prepayment receivables. And one of our focus, is to have a operating cash flow that is as close as possible to EBITDA. In this case, we had one of -- we reached one of the highest levels in our history. And with that, we also increased our net cash evolution by more than BRL 1 billion in the last 12 months. In this next slide, we show our capital structure. It is very clear that we have BRL 6.6 billion and of that BRL 4.8 billion is receivables -- I mean net receivables and net because of prepayment and BRL 1.8 billion in net cash and investments. And on the liability side, we have BRL 4.8 billion in gross debt. So basically here, if we were to discount all the receivables and if we were to pay all of our debt, we would have BRL 1.8 billion in net cash. I would just like to remind you that this BRL 4.8 billion of gross debt will mature at the end of next year and the end of 2026. Now speaking a little bit more about Luizacred, we posted yet another quarter of excellent results. We show here that delinquency is dropping, NPS over -- delinquency over 90 days is better. So we have short-term delinquency at 2.8% the lowest level in our history. There was an increase in the coverage ratio from 140% [ to 100% ] and this reflects our conservative position in terms of our provisions. And even being this conservative Luizacred, we -- I mean just as Magalu, we posted 4 consecutive quarters of net income and our results reached BRL 66 million this quarter and we show a trend to grow this result further in the fourth quarter, and that's why we see a evolution trend of ROE that it has been 18% in the last quarter and now we will supersede 20% in the coming quarters. I would just like to highlight that Luizacred also had a very high efficiency rating below 30%, about 28%. Interest expenses is dropping. The company is well capitalized. Our BIS ratio is very comfortable and the company is well prepared to resume growth and to grow the number of clients, the loan portfolio and to post excellent results in the coming quarters. And with that, we conclude the presentation with the main highlights and we will start the Q&A session. Thank you very much. [Foreign Language] [Statements in English on this transcript were spoken by an interpreter present on the live call.]