MPM Corpóreos S.A. (ESPA3) Earnings Call Transcript & Summary

Good morning to everyone. Thank you for waiting. I'm Beatriz Silva, Manager of Relations with Investors for Espaçolaser. We're going to give you the results of 2024, which were released yesterday to the market. As you can see, you'd find it at the CVM or on our site of RI. These slides are being transmitted also, www.ri.espacolaser.com.br, which will also be available for downloading. [Operator Instructions] If your questions were not answered during the conference, we will send you an answer via e-mail. Before continuing, I'd like to claim that any -- in relation to the perspective of the business of the company and the operational and financial are based on the current beliefs and premises of Espaçolaser based on the information available to the company. Future estimates are not guarantees of performance as they are based on circumstances which may or may not happen. The general economics of the industry and other factors could affect the future results of the company and bring us to results which are quite different from those expressed here. Today, the meeting will be headed by Magali Leite and Head of Relations with Investors. I'm going to pass it over to Magali Leite to start the meeting. Magali, please go ahead.

Thank you, Beatriz. Good morning to everyone, and thank you for your presence in our results call with reference to the fourth quarter and the full year of 2024. We're going to start speaking about the principal highlights of the period. I will complete now 1 year as the CEO of Espaçolaser, and I'm extremely happy to share with you our results that we have reached -- the results that we have reached. We finalized the year with the best performance since 2022, reaching important advances in all of our lines of our business and all lines of our results. We have been able to not only revert our losses, but also have expressive growth in our principal financial indicators and operational indicators in a period filled with strategic advances and important conquest on several fronts of our business. Going to Slide 4 and keeping the commitment that we have with our expansion strategy, which has been set up during 2024, we opened 24 -- 27 (sic) [ 47 ] new stores. And with that, we closed the period with a total of 806 stores and 66 in Latin America, reinforcing our presence and growth in the regions in which we operate. And the second highlight, we see that the system-wide sales totaled BRL 517 million in the quarter, growth of 3% in comparison with the fourth quarter of '23. And in the year, the sales reached BRL 1.7 billion with a gain of 2%. As we highlighted in our last release, we continued in our journey of improving our governance. In October, we announced the election of Ana Zamper as an Independent Board Member in our Board of Directors to add her personal experience, especially in the areas of technology, digital journey and artificial intelligence. More recently, in January, we realized a change -- a strategic change in the directory of operations with the integration of Hamilton Baez to our C-level, who is leading the front of commercial and marketing and has been leading important challenges such as segmentation, pricing and commercial policy. Mentioning some results, we presented in the quarter a gross profit of BRL 99 million, growth of 16% in relation to 4T '23 with gains in margin of 5 percentage points. For the year, our gross profit was BRL 383 million with an increase of 12% and gains of 3 percentage points in gross margin. Our EBITDA -- our adjusted EBITDA in the quarter was BRL 48 million, representing a growth of 9.6%. And accumulated for the year, the adjusted EBITDA reached BRL 223 million with an increase of 5% in comparison with 2023. Our cash generation has continued to be a highlight both in the quarter as well as for the year. The conversion of EBITDA in operating cash was 138% in the quarter and 103% for the year of 2024 with a cash generation of BRL 231 million in that period. In the quarter, the net profit was BRL 10 million in comparison with a loss of BRL 7 million in the fourth quarter of '23. For the year, our net profit -- adjusted net profit was BRL 23.4 million, a growth of 255% in relation to '23. It's worth mentioning also that we have had a reversion in the losses on the accounting division as well, both for the quarter as well as for the year of 2024. In the quarter, the net profit -- accounting net profit was BRL 5 million in comparison with a loss of BRL 19 million in the fourth quarter of '23. And for the year, our net profit -- our accounting profit was BRL 2 million in comparison with a loss of BRL 25 million in 2023. Finally, we have been reducing our net debt, which was BRL 553 million in the end of the period, a loss of 7% -- a reduction of 7% and diminishing our indicator of leverage, which reached 2.1x net debt in relation to EBITDA, a reduction of 0.3x compared to fourth quarter '23. Looking at Slide 5. As we mentioned, we closed the year and went to our expansion plan and have been continuing opening franchise stores. Over the year, we opened 31 franchises in Brazil and 16 stores in other Latin American countries in which we operate. It was a total of 47 inaugurations in the group this year. Going to Slide 6 and bringing more details about our system-wide sales, we had a record -- a quarterly record of sales which reached BRL 517 million in the quarter and a record for the year, reaching BRL 1.7 billion in sales for the entire network. In November, we had the highest sales in our history in our company-owned stores, and we reached the second-highest day of sales in the history of the company during Black Friday. The results of those periods were driven also by the opening of new franchisees, by the increase of the average ticket and by the optimization of our mix of services with a focus on areas of the body parts which are -- have a higher added value. It's important to mention, even with the closing of some of our stores during the year, we've had growth in the system-wide sales of this group of units. On the graph on the right, we are showing an increase -- an expressive increase of approximately 17% in the average ticket over the year of 2024, which is above inflation in that period, which shows the resilience of demand and our capacity to pass through costs even in a macroeconomic scenario which is still quite challenging. On to Slide 7. We continue to be a reference in client satisfaction, closing the quarter with 86 points of NPS and a score of 8.1 in Reclame Aqui, considering the data of February of 2025, while other players in the sector had an important fall in their -- in this indicator, an important reduction in this indicator. These were the operational highlights of the quarter for 2024. And with that, we close this first section. I'd like to pass it over for the financial performance, which will be presented by Fabio Itikawa, our CFO.

Thank you, Magali. Looking at Slide 9, we delivered BRL 357 million of gross revenue and reached BRL 1.4 billion for the year, both in the quarter as well as in the year. One of the main highlights was the reduction of cancellations, which has been one of our principal focuses. This initiative resulted in a reduction -- a relevant reduction with a fall of 7% in the quarter and 11% for the year, reflecting our gains in efficiency in that area. As we commented in previous quarters, we had important changes in the area of collections as well as actions which we implemented to improve this indicator. Beyond the restructuring of that area, we adopted an approach more anticipated and more frequent in the rules of collection in relation to the previous model. We built important actions in partnerships with a collection agency, Serasa, and we used our internal processes. On Slide 10, we saw that the net revenue totaled BRL 273 million for the quarter with a growth of 2% in relation to the fourth quarter of '23, also benefited by the reduction in the cancellations mentioned previously. For the year, the gains were 3%, reaching BRL 1 billion in net revenue. In the graph on the right, we see that the net profit -- the gross profit reached BRL 99 million for the quarter, a gain of 16% and a gross margin of 38%. For the year, the gross revenue reached BRL 383 million with a growth of 12% and gross margins of 37%. The improvement in the profitability overall reflects the result -- the positive results of the projects of efficiency gains, which were implemented in recent periods, especially in our principal lines -- cost lines, which are personnel, rentals, marketing and commissions for credit card expenses. It's important to mention again that as we commented in the release -- results release, since the first quarter of '24, we have reclassified in our release and DRE and management numbers with the attention of on the best practices in the market. Looking at Slide 11, our EBITDA -- adjusted EBITDA reached BRL 48 million in the quarter with a [Audio Gap] approximately 5% and a margin EBITDA adjusted of approximately 22%. In the graph on the right, we see that -- we show that the adjusted gross profit -- net profit was BRL 10 million compared to BRL 7 million in the fourth -- a loss of BRL 7 million in the fourth quarter of '23. For the year, the net profit was 22 -- BRL 23 million, a growth of 255% in relation to '23. As Magali mentioned previously, we've also had a reversion of losses in the accounting division, both in the quarter as well as for the year of 2024. Beyond the growth of EBITDA, the net profit was impacted by the distribution of JCP, which resulted in an important amount of approximately BRL 9 million in distribution of interest. We also continue to focus on our generation of cash. With that, we closed the quarter with a generation -- a cash generation operation of BRL 67 million, looking once again at conversion of EBITDA into cash of 138% for the quarter. For the year, the generation of cash totaled BRL 231 million, a growth of 15% compared to 2023, and a cash conversion rate of 103%. Bringing more details about our cash flow, we can observe that the operational generation was impacted by the results and also by the reduction of working capital. As far as investments, the falloff in CapEx reflects our strategy of expansion through franchises. Beyond that, reduction of our cost of financing and interest contributed to a generation of free cash of BRL 67 million, which compared to a consumption of 2023. Looking at Slide 13 and speaking a little bit about our capital structure, again, we reduced our indicator of leverage, which reached 2.1x net debt to EBITDA being the lowest level of leverage in 11 quarters. Beyond that, we observed a reduction of approximately 7%, BRL 42 million in the net debt in relation to the fourth quarter '23. As was mentioned in the most recent release, we issued a CCB of BRL 30 million in October taken by our subsidiary completely with a longer period of time and 1 year same payments of principal and a rate of 2.9% plus CDI. In January of 2025, we made a captured -- we captured BRL 15 million with a 3-year period, 1 year's grace period and interest of 2.8% plus CDE (sic) [ CDI ], which reflects a more balanced cost of capital and more in line with the profile -- the credit profile of the company. We have been doing a constant work optimizing our capital structure, reducing our cost of funding as well as taking advantage of the tax shield benefits through our new issues of debt in the operating company. I'm now going to pass it back over to Magali, who will present a short update of other initiatives within the company.

Thank you, Fabio. Looking at Slide 15. In the last call, we talked about a new subject which we're implementing in the company, which is the project of coolers. We're introducing a new method of cooling of the skin in some stores, substituting the material that we had to consume previously. In the third quarter of '24, we already had 35 stores operating with coolers. Over the fourth quarter, we accelerated project of implementation. And at the end of the year, we have already had 80 coolers working in our operation. This is a machine which is Brazilian. It has a low cost of investment and a payback of less than 10 months. Beyond that, the project offers a relevant potential in economy and our direct costs. On Slide 16, speaking a little bit about the initiative -- the digital initiatives and our client journey. We continue with the solutions and demands related to the marking of sessions, scheduling of sessions. Up until last year, clients who did not appear in their sessions, in their scheduled session without advising us suffered no consequence, which impacted the efficiency of the operation and the availability of that schedule. To mitigate this problem, we implemented a first measure establishing that starting in the second time this happens, the session that was marked will be considered utilized. In the -- after that, we increased that to avoid more cancellations which were made with less than 24 hours of notice. Now in February of '25, we're taking one more step, applying this measure since the first absence without letting us know, reinforcing the importance of appearing since the beginning. The objective of this initiative is to reduce the rates of nonappearance, optimize the availability of our schedule and improve the experience of the clients, guaranteeing greater availability of schedules and taking a better advantage of the resources of the units. On Slide 17, we look at an important change, the reduction of the downtime. Previously, the time -- the schedule was based on an estimate that we considered as a new client, including such as entering into the room and changing their clothes. This resulted in a total reserve which was higher than necessary for the execution of those procedures, especially for return clients. With the reduction of this schedule, we saw that clients that set up several body parts can be attended more quickly than that originally allocated by the app, which prohibits a more tighter adjustment for each session and increasing the efficiency of our units. The project was developed starting from an analysis together with the technical areas, digital and on our innovation committee. The simulation based on the sessions finalized in 2024 indicates a potential reduction of as much as 20% in the time allotted per session. After the test phase, the rollout was concluded in February of '25 with the implementation in all of our stores. Finally, on Slide 18, we presented our principal priorities for the future, which include expansion by new franchises, recomposition of prices with a focus on growth of revenue, increasing efficiency in costs and productivity, improvement in the customer experience to strengthen our differential enchantment and financial discipline to strengthen our balance and reduce our leverage. We are totally motivated and confident of this new cycle of Espaçolaser, and we are ready to share more details about our projects at our Investor Day, which will happen on the 15th of April. The invitation is on Slide 19, and you can confirm your presence using the QR code on the screen. We'll then close our presentation, and we will continue with our question-and-answer period, which will be conducted by Beatriz Silva, our Head of IR.

We'll now begin our session of questions and answers. [Operator Instructions]

Our first question comes from Kelvin Dechen of Itaú BBA.

I have 2. I wanted to understand your expectation of -- and how your sales will be -- go this year. And I wanted to ask how -- in this beginning of this quarter, what do you see with the more challenging in relation to this quarter and then look at how that will affect your sales? And the second question is if you could comment the question of prices and perspectives -- future perspectives in your release. In 2024, you increased 17% the average ticket, which was relevant. How much do you think there's still space to increase prices looking at the -- considering the macro situation in which we face? These 2 questions.

Kelvin, thank you. This is Magali. Thank you for your questions. We're very excited about this phase in 2025. And looking at the results of 2024, we're effectively very well prepared to accelerate our sales, and we're very satisfied with the results that we've had so far up until March. Obviously, as you can see, we've had a lot of discipline, which is very complete in all areas of management. We believe there's still space, more still elasticity for increasing prices. We are working on this and continue with this tendency in 2025. And we still have a lot of potential to capture not only mechanisms such as the segmentation of our base in a way that is more deep, and we also realize that there is -- it's a product that's under-penetrated, and we have a base of approximately 5 million clients, but we continue to perceive that there is this elasticity. And we have not felt any impact in demand in relation to the retail demand. We see we're dealing more with the beauty market. There's a very strong demand for our product. As you can see, we always have a strategy -- a differential strategy to improve our level of occupation of our units and according to the demand. And then we have these operational questions, which are being leveled out as we go forward. We're able to open space to be able to continue growing in terms of same-store sales.

Our next question comes from [ Claudio Nor ], who is an individual investor. Is it on your horizon to do a repurchase of shares?

Claudio Nor, thank you for the question. The company today has a program of repurchasing. And eventually, we have made purchases in the market because we believe that the price of the share does not reflect the potential of the company. So this repurchase program is a way to generate value for our shareholders. As we feel that it makes sense, we will continue with this purchase program.

[Operator Instructions] Next question comes from [ Eduardo de la Peña ].

Congratulations on your results. It was very excellent, the generation of cash and profitability. My question is, how do you see going forward the growth through franchises? I see that there was a strong growth in the expansion of average ticket. How do you see this growth going forward?