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

Good morning, everyone. Thank you for holding. Welcome to Magalu's conference call regarding the quarterly earnings. [Operator Instructions]. We inform you that this event is being recorded and will be made available on the company's IR website at ri.magazineluiza.com.br. The earnings release and the presentation are already available in Portuguese and English. The link to the presentation in English is also available in the chat. [Operator Instructions]. I would now like to give the floor to Fred Trajano, Magalu's CEO. Fred, please, you may take the floor.

Good morning, everyone. Thank you for attending our earnings conference call pertaining to the second quarter of 2026. Again, I'm here with all of the officers and leaders of verticals of the Magalu ecosystem to answer your questions at the end of our presentation. So as we said on the first conference call this year, in 2026, we entered a new strategic cycle at Magalu after digitalization and diversification and creation of the ecosystem. And in this new cycle, we've defined some value creation pillars. I joined these pillars into 2 main blocks. First, to consolidate our AI omnichannel leadership, it's basically dedicated to all of our retail assets. And the second block is to accelerate services monetization through the growth of our services platform, the companies that we acquired or built during the ecosystem cycle. The first block to consolidate the omnichannel leadership, we have very clear initiatives, and we made progress in pretty much all of them in the first half of this year. The highlight here is to the acceleration of growth of physical stores, not only for durable goods, but for other companies in the group, such as Netshoes, Epoca Cosmeticos, KaBuM! and even Estante Virtual that we opened the first unit at Galeria Magalu. The first half of the year was very good. The second quarter was extraordinary in terms of physical stores. We resumed opening physical stores with the unit in Ceilandia, and we also opened Galeria Magalu at the end of last year, and it is doing very well in this first half of the year with highlight to all of these formats that I described of our partner companies that were only online before. So to resume growth, resume the company's focus on physical stores is a major pillar of this new strategic cycle. The second is to increase or expand online reach with profitability. So we have 2 paths for that in the very short-term, one and another one in medium long-term. In the short-term, the way we found to resume online growth is through partnerships formed with third-party platforms. We announced the partnership in this second quarter, specifically. We started to operate in June, but the full month was July, which is our partnership with Amazon. And as I will talk about a little bit later and describe it, we will announce other partnerships in the coming months or even the coming weeks. So we also see a path here by offering all our 1P products and third-party platforms, we believe we'll be able to resume growth in the online segment that was hindered in this first half of the year with profitability. What is nonnegotiable in this resumption of the online growth is to grow with profitability, and we believe there's a way to do that in the very short-term, by listing these 1P products in these other platforms. I'll detail this further during the presentation and tell you what specifically we've done in this quarter and how we tend to evolve for the coming months. And the third point is to redefine digital positioning with experience, creatorship and AI, especially. At the end of last year, we launched 2 major things, Galeria Magalu that I talked about, and it's doing very well this first half, and we intend to replicate it going forward. And the other point is Lu's WhatsApp, and we've been able to get more than BRL 100 million in funding, and the highlight in these first couple of months. And we'll also share some figures during this conference. Obviously, it is an initiative more for the medium- to long-term. The main products and third-party partnerships is a very short-term initiative to increase or to resume growth online. But for the long-term, our main focus is Lu and the pioneering innovative AI commerce experience that we created in Brazil via WhatsApp, and we will take it to the app in the second quarter -- second half of the year. The second block is to accelerate services platforms. We have 3 major companies, Magalog, Magalu Cloud and MagaluPay that are growing quite well and one that is not a company, but it's a service platform that's Magalu Ads, all of them with very positive numbers in the second quarter and even better with the extraordinary outlook for the segment in this cycle. So this cycle now has very well-defined pillars, and we believe strongly that the second quarter already showed we are on the right path, and we have a lot of engines to create value to our shareholders. So now getting into the quarter highlights specifically, I'd like to make 3 major highlights, and Beto will give you more details about the financials. But overall, the numbers, the main highlight was the growth of physical stores at double-digit rates in a complex context, an economic context. So it's exceptional coming from a strong basis from last year with BRL 5.2 billion in sales, 9.7% same-store sales growth. So I think that's a number that's above everyone in the segment, not only in durable goods, but overall. We also benefited from the World Cup, and I'll talk more about that later. But I also want to show that other categories that are not TV sets also performed great in the quarter, and Fabricio Garcia will be here to give you more color on the Q&A. We had a very strong gain in market share for physical stores. And it's important to grow in physical stores because that's the channel where we can achieve better profitability. So we're being very strategic, focusing our growth where we have the conditions to gain more positive contributions. Online has slightly more competition and without so much rationale. But in the stores, we have the possibility for growth, and we are focusing our efforts here, not exclusively, but with a focus in physical stores. That's why gross margin increased 1 percentage point actually 0.1 percentage points versus the same quarter of last year. Here, we have the highlights of our rationality. We had moments of prices in products like memory components that around the world have an impact for telephony, games like PlayStation, for example, and all the IT product items that impacted Magalu and KaBuM!, and we passed through that, even accepting a drop of share in the online segment, but with the maintenance of our strategic consistency and tactics, maintaining profitability. And with that, we've been able to present an EBITDA of BRL 709 million with a margin of 8%. Even with a higher share of TV sets, overall, we maintained a margin of 8%. And here, I'd like to highlight our strict expense control. We'll be able to give you more details in terms of how we're doing that. And we have frozen new hires since the beginning of the year. We have a strong control of all of the accounts with matrix management of expenses with the consultancy giving us support, and we have a lot to extract from this expense control. Total expense at Magalu represent more than BRL 10 billion per year. So there's a lot of opportunity in pretty much all of accounts for us to continue to work on. All of the directors and managers are focused to continue executing this agenda. So we have not reached the end in terms of the expense control. There's still a lot to be done. Our headcount dropped basically by freezing the workforce, both at the controlling company and the other companies, even in the FinTech. So there's a highlight here about this control, this rationality that is very clear. We didn't enter any major package for the World Cup, no major sponsorships. We knew the World Cup was going to be good, but we did not go overboard in marketing investments. In the last or the past World Cup, we sponsored the games and we joined packages with hundreds of millions of BRLs by sponsoring the World Cup. And this year, we were very grounded and sought not to make any major investments. EBITDA is also benefiting greatly by another excellent performance of our financial operations, not only Luizacred, and we'll talk about that going forward, but also the other operations of our financial products umbrella. Consortiums went very well, insurance and the new financial company that operates the CDC, and I'll give you more details about that, and Guilherme is here as well to answer any questions you may have. So the next one, those were the main highlights, physical stores, the increase of gross margin and expense control and our financial operations. Bringing you more details about physical stores. We grew 9.7% same-store sales in physical stores. Of course, the World Cup helped. So we grew 39% in physical stores in the television segment, but we made it a point to show you that it was not only TV sets that increased. White goods grew 15% in the quarter. Even furniture grew 10%. So showing you that the performance of Magalu in physical stores is a sound performance. It's a performance that is distributed in different geographies and categories. We have innovations in physical stores, such as the implementation of physical stores for our formats of the group like Galeria Magalu there has been a huge success. And we had here first half of the year, fantastic with a lot of visits, a lot of spontaneous media, a lot of footfall. It's very difficult to get footfall in physical stores. And with the model that we implemented, with Galeria Magalu and the constant presence of influencers, YouTube theater with a series of events that was Harry Potter's birthday there last week at the store. So we've been able to break this cycle of losing clients at physical stores. And this is a format that I think is interesting worldwide. And we -- as I said, we also opened a store in Ceilandia, and we should open new stores in the second half. Fabricio can give you more details going forward in the Q&A as well. On the other hand, online, we maintained our consistency. We raised BRL 9.3 billion in the second quarter of this year. So even if on the online, we did well in the TV set category, we maintained our discipline and our focus in growing with profitability with commercial performance. We had some impact in some categories. As I said, there's a pass-through of cost for mobile phones, computing hardware and games as well. We can give you more details about price changes. Fabricio and Julio from KaBuM! can give you more details. And we pass-through. I think whenever we have a cost pass-through in the first quarter, there's an accommodation from consumers. They were there paying BRL 3,200 in an iPhone 16E and now this phone is at BRL 4,000. So there's an accommodation in the beginning. iPhone 16E is the first price based on the Apple products, but they get used to it, and we can capture that. But in the first, the same thing with the pass-through for PlayStation video consoles and all the hardware computing products. And that's because of the memory drives because of the global crisis, data centers are buying memory. You saw what happened with the stock market in Korea, the growth of companies that produce memory like Samsung and its competitor there in Korea. So these are companies that are having very high results, and they are passing that through to other categories. We maintain that discipline. So we grew in physical stores where we're getting profitability. We sacrificed a little bit of the share online, but it does not mean we're not working to bring growth to resume growth. The base of the first half of last year was heavy for the online segment. The second half is a lot smaller. Looking forward, what was the main solution there, and I want to detail this further that we found and is part of a strategic cycle to resume growth online, and we believe we will be able to do that in the second half, especially the fourth quarter, but already in this first month of the third quarter, it's to sell on partner platforms. So what's the rationale here? I just wanted to explain that because I know we're going to get a lot of questions about that. The idea is for us to position Magalu's own channels or consolidate our leadership in 1P products. Magalu is one of the biggest platforms in Brazil, but it is the main seller in Brazil in 1P. In addition to other platforms with 1P, 3P with direct sales channels, we're the biggest 1P operator in Brazil through our brands. Magalu, we're a leader in electronics. Netshoes, we're a leader in sports goods, mostly 1P. Epoca Cosmeticos, we're one of the leaders in beauty products Estante Virtual and KaBuM!, obviously, in the gaming category. So we are leaders for 1P in these categories. We were only selling 1P products for 50 million active users at Magalu, people who are always visiting 500 million visitors, but 50 million unique users that visit our platforms. We know that the web audience is a lot larger than 500 million users that access or visit KaBuM!, Magalu in the direct channels. So we decided to introduce these 1P products into third-party platforms. We had already done that with AliExpress in 2024. That was a big success. AliExpress is a very good partnership, and we continue to increase this partnership. So what's the rationale for us here? We believe that the audience of Brazilian e-commerce is spread out and will be more and more polarized. There are a lot of platforms fighting for the customer's audience. So why not list our products in other platforms that are not only in Magalu. So we started these negotiations at the end of last year. In the second quarter, we announced an important partnership with Amazon in Brazil. Go back to the previous one, please. And we will announce others in the coming months. So what's the rationale here in these negotiations? First, these negotiations, since we're the biggest seller in Brazil, Magalu wants to have special aspects and reciprocity. So one of the assumptions for us is that we're only going to list in third-party platforms, if the profitability on those platforms is potentially higher than the average of Magalu's online channels. Obviously, it's going to be smaller than when the client goes to our direct channel, but it must be higher than when, for example, we bring a customer through a platform like Google, Meta, Facebook, so a customer that comes through paid media. So the profitability of those channels must be higher than paid media because this customer belongs to the third-party platform in the long-term, not in the very short-term because it's our sale, but we need to have that rationale. So it takes us long to announce partnerships because we want to reach that negotiation that guarantees us a positive contribution margin. We want to resume online growth, but we will only do that if we have a contribution margin, if it makes sense for the business. And another thing we expect from these partnerships is a minimum of reciprocity for the services of the Magalu ecosystem. We're focusing strongly on Magalog both in sense of everything that I sell on these platforms. The idea is that Magalog delivers them, but we want to try to leverage it. We have a global platform, and I'll talk about Magalog and how well it's doing this quarter. Magalog is one of the biggest logistics operators in Brazil. It's open to sell for third parties. So we also consider important for us to close the deal to list our products and third-party platforms to bring volumes from those platforms to Magalog, not only from our sales, but from the -- their 1P operations or other sellers' operations. So that expands the density of Magalu's logistics network, generating scale through Magalog. So we need to have that profitability above our average and a level of reciprocity, especially now focusing on our logistics operation for light and heavy products also with the potential product pick up in the Magalu's physical stores. So now specifically about Amazon, we closed this partnership in June. We started sales in the month of June. We had the first full month in July with sales above initial expectations. We approved Magalog was certified as Amazon's logistics partner. It's a slow process, very complex, but we've been able to certify Magalog as Amazon's logistics operator. So this quarter, we're going to have a full quarter of the sales. Fabricio can give you more details later of course, without disclosing information that's not public. But the idea is that it's a staged process. Today, we are competing in the back office as a regular seller, but we're going to go in with a model that's at the on-site. And starting in October, maybe slightly before that, we will have our products carrying in the Prime badge with the potential to boost sales even further. So we believe this quarter is going to be a full quarter. It's a quarter with specific high volume of sales. So it's going to make the most of the good moment of our e-commerce. But the last quarter, especially with the Prime badge will give us a more positive quarter. That's the fourth quarter. And Magalog starting in the next few months, we will be offering logistics services to Amazon. And we expect the entry of both light products, but also heavy items, and we're very positive here about this, and that's going to help again our logistics density. And as I said, we are in the brink of announcing new partnerships that shall unfold in the coming weeks. I'd like to highlight that selling in third-party platforms is a very short-term solution for us to resume a positive growth for the online. But in the medium-term, we believe strongly and one of the major innovations that we launched in the recent years that was Lu's WhatsApp. We disclosed to the market last month that we reached BRL 100 million of GMV. We launched in December. So we started in the last few months, and we're ramping up strongly for this operation. We've generated more than 18 million conversations since launch. So it's a channel where you have authentication of conversations and the post-sale services in the WhatsApp channel. You don't have to go to the app to make a purchase. So this sales channel, agentic e-commerce was awarded Cannes Lion now this quarter as one of the most creative solutions for e-commerce or the use of artificial intelligence in a digital channel this quarter. We still have a conversion rate 3x greater than our app, and we already have a good number, 20% of the customers who made purchases, the majority of those customers who made purchases in recent months have already come back, and this ramp has been going up. January, February bigger than January and March bigger than February, June and July were the main highlights of Lu's WhatsApp. So 20% of customers return to shop on Lu's WhatsApp, and it's going to increase even further. This 20%, considering the crop we have now is already positive, and it's way higher than the app, noting that we work with products with higher tickets than the market, and this recurrence is not usual. It's very positive. And NPS of 85 that's generating that Lu's WhatsApp and our e-commerce initiative is one big highlight. Now going to the service platforms. I'd like to highlight Magalu Ads. We had a growth of CTR sponsored products of 51% versus 2Q '25. Active sellers advertising increased 13%. I'd like to highlight, especially here, we are a platform not only for sellers and brands that sell through Magalu, but we have all of our audience. We have our stores, more than 20,000 panels and displays at stores. So we have a platform of retail media that works for other brands as well. And the main highlight for ads in the second quarter was the fact that Hyundai chose Magalu's media platform, Lu of Magalu to launch i20. That's the big launch of Hyundai in the Brazilian market. It is the second car produced in Brazil and the platform in Piracicaba to launch their product. And they launched it with Lu, Lu got a driver's license, launched the product. Our efforts to advertise this new car were not limited to Lu's presence in communication. We used all of our media channels, social media, and we are using all that. And Hyundai i20 is already the third best-selling car in Brazil and a lot of dealerships. They're out of product, so showing the possibility for us to monetize our audience and the good work done by our ads team. This is a strong highlight. We were very happy with this partnership, and we're happy that they're happy as well with the sale of their car. Of course, they have other communication fronts, but this was one of the highlights here of their launch. Now this is for Magalu Ads, and I'd like to move on to MagaluPay, as I said, one of the major financial highlights of our business. I'll mention the numbers quickly, but we can get into more details in the Q&A. Luizacred, another very good quarter with BRL 15 billion TPV, portfolio of BRL 20 billion, BRL 135 million in income in the quarter, 32% growth year-over-year, and ROE of more than 23%. Our IF, starting with the portfolio growth. We already have 100% of consumer credit originations in the new financial institution. We also have a portfolio in retail that's going down, and we can explain it later, but our IF started with BRL 17 million net income. We launched the CDB for our IF this quarter. So it operates our CDC, started operating 100% of consumer credit this quarter. So a very positive start. I'd also like to highlight the insurance portfolio for operations with 8% growth with 11 million in premiums in the quarter and 11 million actually insurance contracts. And we have one of the biggest consortium operations in Brazil. The sales were of BRL 2 billion in the second quarter, 30% increase year-over-year, more than BRL 11 billion of assets, active portfolio under management and net income of BRL 15 million in our consortium. So overall, our financial businesses are doing well with a very positive outlook, especially with the ramp-up of our financial company, and we would like to be able to give you more details in the Q&A. I'd also like to highlight Magalog with an increase of 15% in orders delivered for third parties in the second quarter without considering the volume with Amazon that will start from the third quarter. We have new clients coming in like TPL Logistica, Fini, Nestle, Samsung. We announced and closed the contract with them. Very positive numbers here. We increased the number of hubs. So in addition of having the stores, we have the pick up basis in our main distribution centers. Now we have 200 units in operation. We opened 27 new hubs in the logistics network, and we are working very strongly on operational efficiency and the use of technology, but there's nothing as great as increasing volume. So Magalog is in a very positive context with a lot of opportunities. Very few carriers have its same level or NPS above 95% as Magalog has and its cost and the fact that these volumes are shared with Magalu help us have a very competitive offer for the market. We are excited with this possibility. Finally, before turning to Beto, I'd like to highlight Magalu Cloud, the first Brazilian cloud with a global scale. We went from more than 1,700 clients, growing 24% with external clients. We also announced this quarter that we had approved funding of BRL 300 million with BNDES for Magalu Cloud. This number is not going to be disbursed all at once, but it's going to be BRL 100 million starting this quarter, and we will increase these disbursements in the coming quarters. And it will be -- the invested numbers are mostly in research and development. That is the main focus here of this funding for our team who's creating very good products. For example, we launched our first AI product at Magalu Cloud. So now we're able to provide our Magalu clients inference, both for GPUs that are in our infrastructure and for models that are outside of Magalu Cloud, models that we call bedrock-like and model to be able to provide that to clients in the central system and have that in first for everyone. Fatala can explain this further. And we extended 3 availability zones in the Southeast and expanded data centers. So we are getting more and more certifications as well, such as ISO 27001, NIST, SOC 2, a lot of certificates that are either fully achieved or being activated. And that's for us important, especially to sell cloud for public services. That's one of the biggest focus for the national sovereignty of data, that's more and more critical. That's the main opportunity for Magalu Cloud, that is in this growing aspect of this data sovereignty and these certifications are crucial for us to be able to provide these services and take part on government bids or regulated private sectors as well that I believe are very important. So we're here at a very good moment for Magalu Cloud, and we can give you more details in the Q&A. I'll turn over to Beto for the financial highlights.

Thank you very much, Fred. Good morning, everyone. Thank you for being with us in this conference call for the second quarter of 2026. I will briefly go over the financial highlights once again. We have reached a gross revenue of BRL 11 billion in this quarter, a variation of 2%, a reduction of 2% and major highlight. I believe the audio was not very good. Just one second. So resuming, our main highlight was the growth in physical stores. Gross margin, one of the highest for a second quarter around 30.6%. Our EBITDA with an 8% margin. Our net result was a loss of BRL 50 million in this quarter, affected by the interest rate that is very high and also impacting our financial expenses, and we'll be talking more about that. And we ended the quarter with a robust total cash position, almost BRL 6 billion and almost BRL 1 billion of net cash. On the next slide, we have the consistency of our EBITDA margin over the past quarters. For over 2 years, we have been able to maintain the EBITDA margin close to 8%. We talked about the gross margin and merchandise gross margin with the share of the stores and also with the help of services revenue as well as the increase of the CDC Buy Now Pay Later share. So physical stores also growing the expansion of fulfillment, omnichannel strategy, also very strong SG&A control. Fred talked about this. We were able to reduce sales expenses around 3% to 4% compared to the past year, considering Brazilian inflation of 4% to 5%. And also, we were able to maintain administrative expenses basically stable vis-a-vis last year and despite of inflation. So we have been able to control well our operating expenses. And Luizacred and MagaluPay's results once again, have been very strong. On the next page, we have the breakdown for our EBITDA margin. And comparing to last year, the gross margin has improved. SG&A also has improved 0.10. So here, we have also improved our equity income in 0.20. So all of these positive factors have offset an increase in provisions of 0.4%. And I will go over the details on this variation regarding the provisions. This had already happened in the first quarter. And once again, this is very much related to the improvement of our CDC portfolio, which has grown from June of last year from BRL 1.5 billion to June of this year to BRL 2 billion. So it went up over 30%. Provisions have increased in the same period in 25%. So they have gone up lower than the portfolio. And this is in line with our strategy of measuring sales by the CDC, the Buy Now Pay Later. And this portfolio reflex also allowed us to have more interest and more -- which more than offset the increase in provisions. Most of the interest are still in retail accounted here in this merchandise gross margin. But also here, we are transitioning to our financial company, and this is going to be clearer because the financial company portfolio has already increased and interest tend to migrate in the next 12 months totally to our financial services branch, and that's going to be clearer for all of us in addition to all of the other benefits of the financial services because we will have transparency, tax benefits, funding costs and so on. On the next page, we have our working capital. And I have an observation here. We call it adjusted because these are operating adjusted assets and finance liabilities. So when you compare that to last year, we have a better position. We are going from BRL 1.9 billion to BRL 2.3 billion. In this specific quarter, our working capital was sideways, but there was a qualitative improvement that was very important, and I will go over it. In this quarter, one of the main highlights in terms of working capital was that we were able to reduce inventory levels in almost BRL 600 million, one of the main reductions for a single quarter. And also, we were able to bring down receivables, which is very much related to our CDC, which is migrating to our financial company. So here, our receivables in the consolidated has come down over BRL 200 million. So on the side of the asset, we improved BRL 800 million. And on the liability side, we reduced the balance of suppliers and almost BRL 800 million as well. So for the assets, we improved inventory turnover. This is very important. And also receivables reduction will keep on happening on the next quarters as well. And on the liability side, the balance for suppliers, it happened -- it was a reduction, and it happened because as we said in the prior quarter, we purchased a lot in the first quarter, so that we could be prepared for the World Cup and also to avoid a stock out of products and products that were related to a global scarcity of memory chips. So this was a bad. It worked to increase inventories. In the second quarter, we sold everything, and we reduced inventory levels once again. Therefore, we had a payment volume for the second quarter that was slightly higher than usual. Therefore, bringing down the suppliers' balance. And the good news is that we now have room for payments in the third quarter to be lower. So to the right, we have our financial expenses, and we see that it was basically stable vis-a-vis the first quarter. Interest rates started to come down. They could have been lower, but we did have some of this effect, higher payments for suppliers, therefore, also a receivables prepayment higher in the second quarter, which tends not to happen in the third and fourth quarters. So the perspective from now on is to have lower payments and we purchased less in the second quarter. We will pay less in the third quarter. We will have less prepayment of receivables, and we will have a stronger cash generation in the third quarter and also lower financial expenses. And combining all of that with interest rates that is now coming down, we have also a better perspective for financial expenses in the second half of the year. Turning to the next slide, we have our total cash position. And we see that the operating cash flow was around BRL 300 million. Once again, this could have been much higher if it were not for the concentration of suppliers' payments in the second quarter, but it was enough to cover our investments and also our leasing account. Now the cash variation here is associated to the payment of interest as well as dividends, which have been paid in the second quarter. We paid interest that were provisioned in the quarter -- prior quarter. So our total debt basically came down from BRL 5.1 billion in March to BRL 4.9 billion in June. Therefore, reflecting in the cash variation here. On the next slide, our total liquidity here, BRL 1.8 billion of cash and BRL 4 billion in receivables available, minus BRL 4.9 billion of gross debt. Then we ended with net cash of BRL 800 million. We are now reporting here the position for CDC of our financial branch and also CDB for our financial company. So we have new accounts in our balance sheet so that it is more transparent to all of you. Here, we also include in the capital structure the credit portfolio and also the funding from CDB. So our net cash goes up to BRL 1 billion. We ended the quarter with BRL 450 million in net portfolio and BRL 250 million in CDB. So there's a difference here of BRL 200 million that increases our cash or net cash plus credit portfolio. And finally, our debt schedule, we have here a final amortization of the debentures issuance in the fourth quarter, we will end the year with basically BRL 4 billion. We started the year with BRL 5 billion. So there's a downward trend here for our debt schedule of BRL 1 billion for this year. On the next slide, we have information on Luizacred, a portfolio of BRL 20 billion, growing 2%, a base of clients of 5.7 million with an ROE of 23.5%. Luizacred is very well capitalized. Once again, it ended the quarter with a Basel ratio of almost 15%. I mentioned that starting -- based on this Basel ratio, it already has to pay dividends and to return this profit to shareholders. Delinquency has come down year-on-year significantly, both the short-term as well as the long-term one. And it did have a quarter that was significant with a profit or a net profit of BRL 135 million, growing more than 30% even with the increase of the social contribution tax rate on the financial company. On the next slide, to conclude, I have some highlights for MagaluPay. The credit portfolio growing significantly since May, we have turned the key, and we started to originate 100% of our CDC in the stores within our financial branch and the portfolio already has reached an amount -- well, considering interest to compare that with retail, we've migrated over BRL 600 million out of the total portfolio of BRL 2 billion gross. This is how it is accounted for in retail. But we already have around BRL 600 million in our financial branch and BRL 1.4 billion in retail. So we have migrated around 30%. And this portfolio should briefly go over BRL 1 billion. So funding in CDBs over BRL 250 million in very few months. We also capitalized our financial company in the beginning, BRL 200 million. So we have a Basel ratio of over 50%. And also, we have posted results for this quarter with a net income of BRL 17 million. These figures will increase. But in this quarter, analyzing this quarter, we have already had an ROE of over 30% in our financial institution. These were the main financial highlights. So now I turn the floor back to Fred.

Or better yet, we will start the Q&A, and I'm available -- we are all available to take your questions. Thank you.

[Operator Instructions] Our first question is from Luiz Guanais from BTG.

I have 2 questions. The first one, Fred, is if you can go over the partnerships once again with the 3P partnerships. How can we think about the unit economics of these partnerships compared to your 1P? I understand that we have a number of opportunities here with services, as you mentioned, with Magalog, but if you can break that down so that we can understand the potential of this unit economics. Now a second question, talking about the increase of monetization of traffic that you also talked about. If you can give us more color on the advertising platform performance and progress and what can we expect for the performance of unit economics also for ads?

Thank you very much for your question. Now regarding the first question, rationale is very similar to what I said in the presentation. The sales in third-party platforms has to give us a contribution margin that is higher than the one that when I say I sell via a media channel like a click on Google, for instance. So I have 2 large groups, those that come in organically and purchase and those that come through media channel. I consider these platforms equivalent to the media platforms. The channels are similar to these media platforms. So the assumption that we have been executing is that this has to be higher than the media channel. And why? Because that client not necessarily is a recurring client because the partner has the information on the client. When someone comes to us via Google, we can have the whole information on the client. So as an assumption, this has to be high in the non-media channel, and it is lower when the client comes to us and purchases directly from us. So this is what we have in terms of a healthy partnership and sales process. So when -- what we pay a take rate and receivable terms and delivery. So we consider all of that. And in addition to that, we have to have some level of reciprocity with the group services. For instance, Magalog or another possibility of reciprocity or the categories that we mentioned, we got that with AliExpress and in these new platforms, we also might have this reciprocity in the catalog. The second question about advertising. If you can go over the size of the opportunity to you. Well, the fact here is that we have an audience of 500 million visits a month and also stores visit. So for us, for the expansion on physical stores with the CDI is still high. Of course, the retail media -- well, Galeria Magalu was feasible because of retail media, we signed contracts. This was a store that was developed to be a brand place. So we have closed the whole year with advertising. The ads team worked hard to sell physical areas, physical spaces. There are also packages that can make the best use of the store. The store has a lot of LED panels. So both in the physical and the online, that is very important for us. It's very important to have this participation of ads. As I told you, we had 13% growth in active sellers. We have a higher CTR, specifically about 3P, which is where we have an effort to improve profitability that's where things are more challenging, we have been able to double the footprint of ads year-on-year, which helps us improve our contribution margin for 3P. So specifically for 3P, this is very relevant and for the stores as well. So here, we see the main opportunities. And as I said, sometimes we have opportunities that we call nonendemic. These are brands that are not in the platform such as Hyundai that we mentioned, which is something that is an added value and it contributes to our results.

The next question is from Irma, Goldman Sachs.

I would like to ask about something that it might be too early about this partnership with Amazon. Can you tell us about learnings or what has surprised you in terms of client profile or type of product? So maybe the journey of this client and the platform? And also, in terms of operations, this integration? And the second question, also the consumption environment. We have seen a few companies. And we have seen also data pointing to a potential deceleration in the second half of the year. So I would like to hear from you about your expectations regarding that end. And obviously, if there is a -- I know that there was a demand peak because of the World Cup, but things now are normalizing. So how do you see the second half of the year?

Irma, this is Fabricio. Thank you for your question. I will be answering about Amazon in the second half of the year as well. So at Amazon, sales have surprised us in the beginning. We started Amazon and we do not have the Prime feel yet with that badge. It will be there in October. So we are delivering an average price -- average term of delivery that is not the final one. So the main highlight here is on the white line as we expected a heavy items that we operate very well, I think, better than everybody else in the market has been a highlight. But the category is performing well, TV, furniture. We are very happy about this partnership. And we believe that as we get this Prime badge, we will have an even better performance. So this is a very positive perspective for the second half of the year. And again, for the coming months, we are very confident because now we should go back to growing online with our partner platforms. And we will have El Nino this year. The warm weather makes a big difference for us because that line of air conditioning really moves the needle also refrigeration. And when the weather is warmer, this helps us. So we are very well planned. We are already receiving those items that should help us in the second half of the year. We believe that the coming months will be good. We will have a good performance.

The next question comes from Lucas Esteves from Santander.

I have 2 questions. The first one is about agentic e-commerce. I think you talked a lot about this on the release. And I would like to know how you foresee the future of e-commerce, agentic e-commerce based on proprietary platforms such as Lu? Or if you believe that the foundation channels will be the main channels with the clients? And how Magalu intends to maintain that direct relationship with clients and tapping into value from this ecosystem? And my second question more related to profitability. In the last 2 years, you have prioritized profitability rather than growth. So when do you believe that the company will be comfortable to go back to accelerating digital without letting go the margin discipline? And if you have a specific trigger for that?

Lucas, this is Fatala. Thank you for your question. I will address the e-commerce question. Yes, we believe that major platforms are developing experience on top of a purchasing experience for clients. And we have seen an initiative of OpenAI that tried to do the checkout as well and then they went back. They took a step back with the movement. They learned a lot from it. So we already see a model with Google as well. And some different retail fronts developing their own experience. We believe that the asset that we have with Lu that has been created over the years is a differential and also the development of an experience, which is very much focused on details. Many of these major models that are doing something that is more generic end up not having this detailed work of the experience and that hinders conversion. And since the beginning of this work with Lu, we are focusing on it. We try to understand the consumer journeys. And we remove friction, so that we increase conversion. This is what we have been looking for and Fred was talking about it. With the figures that we already have that are very good compared to what we have seen in the market. And there is a lot to be developed in the process. In our case, what we want to do with Lu now is that -- she can have the full understanding of the consumers' preferences to store a memory of everything that they do of Lu and also in the sales channels. And based on that, we can have a customization level very much directed and focused on that person. So understanding the preferred brands, the categories and what is the shopping moment of that client and therefore, delivering that experience that should be more customized and keep on growing in order to have a higher e-commerce conversion when compared to traditional channels.

Thank you for your question. About the second part of your question regarding online growth, as I said, we truly believe that especially in the fourth quarter, but also starting a few months in the third quarter. We will be harvesting the fruits of these platform listings and third-party ones. As I mentioned, we will be announcing at least another one in the very short term. We are very quick in implementing our catalog in these platforms. And we have a very good penetration with our logistics all over Brazil, also inventory levels all over the country. So in the very short term, the way that we can go back to growing on online with the profitability that is our pre-requirement is by these partnerships. And according to our estimates, there is a great possibility of being able to switch this trend already in the fourth quarter and in a few months of the third quarter. We are confident about it. And when you go in, like Fabricio mentioned, you start with a solution that is an intermediary one. But then you learn how to sell in these platforms or if you increase the possibility of gaining buy-box in these platforms with a number of things that will be announced from now on. I believe we can do that. So the possibility of selling and having great volumes and platforms is great because we are a seller that have a national penetration. We can have good prices and our service level is excellent. So we are going to get these buy boxes. So there is a great chance that we'll be able to make this reversion in the second semester.

The next question is from Giovanna from UBS.

The first is about the sales performance after the World Cup, how it's been? And how do you imagine the same-store sales evolution going forward? And the second, you talked about the impact of memory chips prices. I'd like to understand your expectation for this scenario going forward? And how you see the margins evolving in coming quarters.

Giovanna, this is Fabricio. So sales after the World Cup, the TV category, of course, has a bit of a hangover, but our store sales continue to grow. This quarter should grow high-single-digit. And the trend is for it to continue to grow in the physical stores until the end of the year, which has also benefited. And we should continue to see growth in stores increasing market share and we're very confident with that. As for the memory chips, we already had part of the cost pass-through in the coming quarters. We see that the mobile phone category should see a small cost pass-through and notebooks, we imagine should remain stable till the end of the year. But it's not that predictable because demand remains high from the big packs. And the scenario shall stabilize in terms of prices at the beginning of next year. So it's still a slightly uncertain scenario in terms of the memory costs.

Next question, Pedro from XP.

I'd like to explore a little bit MagaluPay. I think you've made great progress at MagaluPay with positive results in the quarter. And as you mentioned, it's still not at its full potential since the CDC at the new financial company is quite recent. I'd like to understand a little bit more how far it can go? Where it can reach? And already linking it to profitability, it all moves towards a good fourth quarter with the partnership with the platforms going well. There's Black Friday. MagaluPay is scaling up. So do you think it will be possible to resume a profit level in the fourth quarter or 2027? Those are my questions.

This is Jorg. For MagaluPay, I'll start talking about MagaluPay overall and then more specifically of the financial company. So as Fred said during the presentation, we have 4 verticals at MagaluPay at different moments, at different points, but which are all going well. So Luizacred, that is a more mature operation. We focused over the last 12 months a lot more in quality control of the portfolio. And you see the reflection of that in improved provisions and efficiency with a decrease of administrative expenses. We have a growth challenge. And we are also implementing platform improvements. There's an important platform change now in the second half of the year, going towards micro services that will definitely improve the exposure of products and client monetization. And we're also focusing on evolving a better value proposition for the cards, leveraging the synergy with the ecosystem. We have IP with all of our digital accounts, processing and insurance. This is also doing very well, a major engine for results. So this aspect of this vertical is insurance that's going quite well, especially in terms of digital penetration with growing more than 20% year-on-year and stores that is also very sound. Quickly about consortium. Consortium is strongly benefited by the interest environment in Brazil. But we are growing through platform improvements and a strong focus on residential and auto consortiums. And we expect these to continue hitting record sales. And the financial company itself, finally, that's a major point here at your question. We have both financial benefits with the new structure. And I think in the last quarters, we've run a lot with the tax efficiency we are able to capture with the replacement of the portfolio coming from the retail where we incurred on ICMS, PIS and COFINS taxes at a higher level for the financial company. We only have IOF,PIS and COFINS that are at lower rates. So there's a tax improvement close to 20% in addition to having the funding of third-party resources and operating at a higher leverage. So there's a financial market that's naturally supported by this change in structure. But we also have operational benefits that you will be able to see over time. One of the improvements we've already been able to start to implement that's the much better seller experience for exposure and payments. And the second part that I believe you'll start to see more towards the end of this year, beginning of next year, which is the strong focus on portfolio quality with an upgrade of credit intelligence and collection. So we are implementing a new credit engine. We have a new team developing and starting to implement in August. The initial tests of the new models that are machine learning-based operating with data from our ecosystem and the new collection system that we believe will also bring a lot of synergies to the operation in the coming year. Thinking about all of that and looking at what we had of results in the financial company and retail. We operated with ROE of 20%, ROA of 2%. We don't have a lot of ROE because as we're going to operate with a focus on capital, this can impact the metrics. But ROA, we believe that without a doubt, we can unlock a lot of value. And this 2% may be more than 3%, for example. I don't want to be too focused on numbers here, but this is only going to come when we have the operations stabilized. We have some implementations, regulatory implementations in the coming half year. And I believe starting in 2027, you'll be able to capture a lot of this potential already.

Pedro, thank you for your question. I'll talk a little bit about this topic. We don't provide a guidance, unfortunately. So we can't be as specific, but I'd like to reinforce this. We turned a profit in the last 2 years. We talked a lot about everything we're doing to resume sales growth with discipline in terms of gross margin, selling more at healthy gross margins. We can dilute our operating expenses even more. We've been able to keep them in control like you noted very strictly. But with more sales we have more room for operational leverage and to be able to improve operating margins overall. With more sales, we can also generate better inventory or to have a better inventory turnover. We believe that in order to meet all of these new platforms, we are able to sell a lot more with the inventory we have today. So we'll also see a dilution in inventory. We will improve inventory turnover with -- through sales increase that increases cash generation, which, as a result, also help reduce the exposure that I mentioned. And we also believe combined to and future interest rates are already lower. Note that this last quarter, future interest rates increased a lot due to the war in Iran, the price of oil, but that also impacted financial expenses in the second quarter. Future interest rates now are pointing down and we believe that's the trend. So we start to benefit in the prepayment of receivables line with this level of future interest at a lower level. So we have Luizacred, delinquency remains very low, very healthy, sustainable profit and everything that we talk about our financials, what Jorg mentioned about the financial companies. So we have the good ingredients. And we're doing everything to strengthen this trend of profitability that you mentioned.