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

Good morning to everyone, and thank you for standing by. I'm Beatriz Silva, Head of Investor Relations with Espaçolaser Today, we're here to host the Third Quarter Results of 2025, which we shared yesterday with the market. This release is available in the ICM (sic) [ CVM, ] and IR site or RI. We inform that this video conference and slides are being transmitted via the Internet through the site, ri.espacolaser.com.br, where the presentation is also available for download. [Operator Instructions] Before continuing, I'd like to clarify that any declarations that may be made during this teleconference relative to the perspective of business of the company, projections and operational goals and financial goals constitute beliefs and premises of the management of Espaçolaser as well as based on information currently available to the company. Future considerations are not a guarantee of performance and involve risks, uncertainties and premises, which, since they deal with future events, which may or may not happen. General economic conditions, industry conditions and other factors can affect the future results of the company and lead to results which are different -- which are materially different from those expressed in these considerations. Today in our conference, we have Magali Leite; and Fabio Itikawa, CFO and Director of Investor Relations. I'd like to now pass the word to Magali Leite to start our presentation. Please, Magali. Please go ahead.

Thank you, Bea. Thank you for participating in our results call for the third quarter of 2025. I'm going to start with slide -- of the highlights on Slide 4. The third quarter of 2025 was marked by important advances for Espaçolaser, reflecting the consolidation of our strategic initiatives, which sustain the transformation and the new moment of the company. Even though this -- in spite of the seasonality, in which the third quarter is usually a slow, a challenging period for retails, our numbers show resilience in the business model and the strength of the brand, of the Espaçolaser brand. In the operational environment, we present BRL 421 million of system-wide sales in the quarter, and the accumulated for 2025 sales were at BRL 1.3 billion, representing growth of 4% and 9%, respectively. The indicator of same-store sales presented an expressive advance of 7% in the accumulated for the year compared to 0.5% negative registered in the third quarter of '24, which is a gain of 8 percentage points, reflecting the evolution of the performance of the units and the assertiveness of the commercial actions which have been taken. Beyond that, our average ticket grew 8% in relation to the third quarter of '24 and 13% in relation to the 9 months -- first 9 months of 2024, reinforcing our success in our initiatives and the pricing and improvement in our mix of services. On the financial area, Espaçolaser has continued converting its operational advances into solid results. The gross profit reached BRL 92 million in the quarter, a growth of 15% and growth of 10% in the year-to-date of 2025. The adjusted EBITDA totaled BRL 46 million in the quarter, an increase of 4% in the annual comparison, also in the accumulated for the year, year-to-date, our EBITDA was BRL 191 million with a margin of 23% and growth of 9%. Finally, the net profit, adjusted net profit added up to BRL 24 million for the year, representing an expansion of 76% in relation to the same period of 2024. Under the accounting -- from the accounting point of view, the net profit was BRL 5 million, reverting a loss of BRL 3 million registered in the year-to-date in 2024. Our net debt continued to drop, our indicator of leverage reached the best level in 16 months, reaching 1.9x debt compared to EBITDA. The satisfaction of our clients also has continued to be our priority. Efforts of our team have helped it to reach an NPS of 87.3% -- 87.3 points in the quarter, an advance of 2 percentage points when compared to the third quarter of 2024. Not just our clients, not only are they satisfied, but our employees as well. We're very proud we have conquered the sixth time in a row the, say, Great Place to Work being once again recognized as one of the best companies where you can work. Beyond that, we have joined the ranking of the FIA, F-I-A, which awards the 150 Best Companies to Work For in the country. Passing over to Slide 5. As I mentioned previously, we had another quarter of growth in sales. The system-wide sales growing 4% in the quarter and 9% for the year. On the graph on the right, we see the same-store sales also growing in the quarter by 2%. And for the year-to-date, 7% with an increase of 8 percentage points when compared to the year-to-date numbers for 2024. On Slide 6, we highlight the central elements that contribute to this positive performance. We continue to implement the adjustments in our price policy initiated last year with a focus on greater commercial discipline and a capture of value. As a result, our average ticket grew by 8% in the period. This evolution has reflected a strategic orientation of the quality of our services and the positioning of our brands, favoring the monetization -- more effective monetization, both of the current base as well as in new sales. For the year-to-date, the price adjustment was approximately 13%. This advance comes from structural adjustments in our price list and the gradual reduction of discounts prioritizing higher value per treatment and a better allocation of our capacity -- of our machine capacity directed to areas with the highest returns and the highest efficient operational efficiency. This dynamic has compensated eventual retractions in volume expected in the context of our repositioning. On Slide 7, we highlight that Espaçolaser maintains its position as a reference in client satisfaction. We closed the quarter with an NPS of 87.3, and in the end of October, we reached a net of 8.5 in the Reclame Aqui above the average for the sector, while other players have been registering bigger challenges in this indicator. This performance reflects the consistency of the experience that we deliver. Beyond that, we will serve the continuity and the movement of the closing of stores by other players in line with what we shared since the third quarter of '24. This environment reinforces our positioning and generates opportunities, additional opportunities for Espaçolaser in the market. These were the highlights for the quarter. And with that, I'm going to close this first section of our presentation. I would like to pass it over to -- for the analysis of our financial performance, which will be conducted by our CFO and IR leader, Fabio Itikawa.

Thank you, Magali. Looking at Slide 9. We registered a gross revenue of BRL 339 million in the quarter, representing growth of 7% in relation to the same period of the previous year, reflects the results of our commercial strategy of repositioning our price initiated in the beginning of 2024. For the year, we presented a net -- a gross revenue of BRL 1.1 billion, a growth of 6% in the period. The highlight is the growth of 17% in the revenue from royalties, reaching BRL 34 million for the year. In relation to the rate of cancellation, we reached 12% of gross revenue in the quarter, a fall of 0.4%. Even though the scenario of increased nonpayment in the market in general, we have had results -- we reduced our rate of cancellations. And for the year, the rate has reached 11.1%. On Slide 10, the total net revenue totaled BRL 262 million for the quarter, growth of 10% in relation to the third quarter of 2024. This growth in net revenue at a level higher than the growth of gross revenue is a reflection of the lower level of cancellations and the greater efficiency, tax efficiency in our expenses with ISS. For the year-to-date, the net revenue has had a growth of 8%. In the graph on the right, we see that the gross revenue reached BRL 92 million in the quarter, a growth -- annual growth of 15%. Our gross margin reached 35%, an increase of 1.4% in comparison with the same quarter of the previous year. This improvement reflects principally a reduction in the cost of cooling gases, which totaled approximately BRL 5 million in this quarter, and where Magali will comment further on that going forward. For the year-to-date, the gross revenue was approximately BRL 311 million with a gross margin of 38% -- adjusted gross margin, 38%. These gains and margin gains reflect the efficiency of the changes made in the period and greater austerity in the management of costs. Passing over to Slide 11. Adjusted EBITDA reached BRL 46 million for the quarter, a growth of 4% in relation to the third quarter of '24. For the year-to-date, we reached BRL 191 million of EBITDA or adjusted EBITDA, a growth of 9% when compared to 9 months of 2024. The EBITDA -- the adjusted EBITDA margin reached 23%, 0.4 percentage points above the EBITDA margin of the same period of the previous year. On the right, we had a greater impact on the financial results due to the interest rates, which is higher in '25 when compared to '24, which brought a loss -- a net revenue loss of BRL 7.6 million for the period. For the year-to-date, the adjusted net revenue had a growth of 76% in relation to the same period of the previous year, reaching BRL 24 million. This growth is a reflection of the greater generation of cash and the reduction of expenses with income tax, partially compensated by the financial -- by the greater financial results. Looking at Slide 12, we now maintain our discipline in financial management with a focus on efficiency and consistent cash generation. We closed the quarter with BRL 84 million in operating cash, an advance of 46% in relation to the same period of 2024, beyond a conversion -- expressive conversion of 183% of the EBITDA in cash. For the year-to-date, the generation of operating cash reached BRL 197 million, which represents a conversion of 103% of the EBITDA -- adjusted EBITDA in cash, reinforcing the solidity of our model, the capacity of transforming financial results into liquidity. Looking at Slide 13, we demonstrate the evolution of our capital structure over time. The net debt continues with its trajectory of falling, reflecting our focus on the generation of cash, financial efficiency and the reduction of leverage. If we observe the trajectory of the recent years, the evolution has become even more evident. In the third quarter of '22, our debt was BRL 766 million with a level of -- leverage of 3.4x in the ratio of net debt to EBITDA. At the end of the third quarter of '25, this number had fallen to BRL 526 million, a reduction of 32% and with a leverage of only 1.9x EBITDA. This quarter was one more quarter of reduction, not only of our rate of leverage, but also is the 14th consecutive quarter of the reduction of this indicator, but also a reduction of our net debt. This movement reflects a financial discipline and continuous focus on the improvement on the profile of our debt. As a part of this strategy, Corpóreos, our operational subsidiary included at the end of September a capture of BRL 70 million at a cost of CDI plus 2.95% per year in a period of 5 years. This capital was the first step in the direction of having a movement of the restructuring of our financial liabilities. We concluded in October the third issue of debentures, our subsidiary where -- which is detailed on Slide 14. As a subsequent event to the quarter, we also gave a little more detail about the restructuring of our financial liabilities. The objectives of this restructuring are to improve the profile of the debt with a capture of new debt at better rates and longer payment periods and limiting the inefficiency, fiscal inefficiency by the segregation of the debt between MPM, our operational holding, and Corpóreos, our operational subsidiary. Previously, the debt of the company were divided between MPM and Corpóreos, which generated a fiscal inefficiency with relevant risk currency once it limited taking advantage of the financial expenses for deductions against our income tax. With the third emission of -- third issue of debt of debentures by Corpóreos, BRL 593 million at the cost of CDI plus 3.25%, with a 4 or 5-year period, and the capture of BRL 70 million at the end of September, we liquidated a mountain of BRL 682 million in debt with a cost of CDI plus 4.5% and periods that were shorter, payment periods that were shorter. With this restructuring, we now have a structure -- a debt structure, which is longer with a lower financial cost, more competitive with the reality of our business and significantly below the previous debt. Beyond that, all of the debts are centralized in Corpóreos, which helps us in our tax efficiency and optimizes the generation of cash. On the left-hand side of this slide, you can see the new profile of financial costs and the chronogram of amortization of our new debt. On the right-hand side of the slide, we present an exercise, a theoretical exercise of the potential economic benefits, considering a rate base of 34% -- tax rate of 34%. This example illustrates the impact of the -- taking advantage of the total expense, financial expenses as deductions on our income tax, evidencing the potential reduction in our tax load. This restructuring aligned with our financial discipline reflects a structural evolution which is important for the company, resulting in a capital structure which is more healthy and prepared to sustain the growth of the company. Finally, as was mentioned in October, we realized the sale of 4 of our own company-owned stores in the cities of Bauru and Macaé, 2 franchisees of our network totaling BRL 7 million in sales and the royalties that we will receive from these units. The units generated sales, net sales of BRL 6.7 million and contributed to a consolidated EBITDA of the company of BRL 1 million in 2024. The objective of these sales was to optimize the management of our portfolio of company-owned stores, prioritizing the position in strategic regions. It's important to point out that these were the only stores in their own cities, avoiding any risk of competition among franchisees. I'm going to pass it back over to Magali, who is going to give you a short update of several other initiatives within the company.

Thank you, Fabio. Going to Slide 16. We're going forward in a relevant way in the implementation of our project of coolers, closing the quarter with 354 stores already equipped, which corresponds to 63% of our start -- of our company-owned stores. In this quarter, it's already important -- it's already possible to see the benefits of this project, which has, as its focus, improve the client experience while it reduces the cost, the operating cost. The impact is clear. We registered a reduction of 25% in the operational costs in relation to the same period of the previous year, driven principally by the falloff in the consumption of gas with this new technology. This movement represents an approximately BRL 5 million in savings when compared to the third quarter of 2024. Now starting to Slide 17. The market, the capital market is still impacted by the macroeconomic -- the challenging macroeconomic scenario marked by high interest rates and inflation, which is still in the process of deceleration. But even in this environment, the shares of Espaçolaser have shown resilience. In the year-to-date from January until September '25, the ESPA3 presented an increase of 70% in value, reflecting the confidence of the market and the consistency of our deliveries and the trajectory of transformation of our company. Additionally, we had an increase of coverage of [ independent ] research homes for our shares whose recommendation represent an average, an upside of 150% in relation to the current price of our shares. We also updated the data of the IDAT, which continued to show the power of the beauty sector. Even in a scenario of deceleration of retail, which was expected for the second half of the year, the beauty segment continues leading the growth within the service sector in 2025, supported by the recurring consumption and by the search for well-being factors that reflect the resilience of the category and sustain the demand for our services. On Slide 18, we show the reinauguration of our Espaçolaser store in Eldorado Shopping in Sao Paulo, which was totally reformulated within the project, the rebranding and retrofitting of this [indiscernible] standard, a visual standard aligned with the model already used in other stores around Brazil. It reflects our focus on modernization and comfort and efficiency. Our objective is to improve the experience of the client and turn our units even more receptive and functional. Now Slide 19. We point out that the Laser Shop in the quarter, we implemented things aimed at the masculine public, the male public with the highlights of the campaign realized in August in which certain stores received in a different -- a temporary environment inspired by barber shops, offering a differential experience. This movement contributed to the increase of the penetration of masc in public, which came back to 14% of our clients in August. This advance is part of our structured effort to increase the presence of masculine, our base masculine presence in a base, in a relevant segment and with significant potential for growth for the company. Going over to Slide 20. It's -- we're very proud to announce that we have reinforced that Espaçolaser was named for the sixth year in a row, was recognized as a Great Place to Work. This result is notable, reflects our focus on promoting an environment -- work environment, which values people, stimulates development and strengthens the collaboration among the teams to reinforce this competition. We also went into the FIA ranking as 1 of the 150 best places to work in Brazil, a mark, which celebrates the inspiring environment of our company, which we're building together. This recognition is not by chance. It's the result of a culture or a living culture, which evolves together with our team and translates the pride that believe our brand and believes in people and in the confidence. And for that reason, in this journey that over the quarter, we took one more step launching the new culture, organizational culture of Espaçolaser, reaffirming our proposition to be confident in ourselves and reinforcing our values which accelerate intention, excellence, leadership with focus on results and things that potentialize people. I want to take advantage to share another important moment, which I had the honor to represent Espaçolaser in the program, [ Liderança S/A Globo ] or GloboNews, next to the President and CEOs of large Brazilian companies with excellent opportunity to speak about leadership, challenges and principally about the importance of building relations, solid relationships and deliver results, which are relevant for our business. All of these conquests show that we are on the route, on the right road. We are, above all, strengthening our cultural base to continue growing in a solid and sustainable way. Finally, on Slide 21 and 22, we continue advancing in our digital journey, always focused on the customer experience, a strategy, which is fundamental to bring more agility to make it easier and more comfortable. Within this evolution in the app, we have made available a new function. Now when a client seeks a unit that does not have an available list, he's invited to enter a waiting list and he will receive an immediate advice as soon as an agenda becomes available for him. It's important to remember that since the third quarter of '24, we have included in this presentation the best -- the continuous improvements that address our principal challenges in our journey of scheduling. Among the solution is already implemented, we had the updating of the visual appearance of the app, the relaunch of new screens of recommendations, personalized by store and by time, the screen for the regularization of nonpayments as well as crucial projects for the optimization of our agenda, of our schedule and implementation of a project of no shows and the reduction of combos and overbookings. All of these evolutions will bring us greater agility, intelligence and digital experience for our clients' digital experience, having it to happen with more fluidity and more comfort. This reflects clearly our priority, our maximum priority, which is to put the client in the center of everything that we do. With that, I close now the presentation, and we're going to go into our session of questions and answers, which will be conducted by Beatriz Silva, our Head of IR.

[Operator Instructions] Our first question comes from Kelvin Dechen of Itau BBA.

My first question -- I have 2 questions from my side. The first is about sales, which is very -- the fourth quarter is very important for you. How do you feel about this demand in the stores, these units. We've seen that several segments since June of this year. I'm just trying to understand if you have observed if this demand continues resilient for you? And the second question is about the retrofit of the stores. If you can give us a little more color on how many retrofits were done in the quarter and how we can expect for this both in the fourth quarter as well as in 2026? And if you've been able to see results of these retrofits in terms of the cleanliness and better flow in the stores? And if you can give us that information, it would be very helpful.

Kelvin, thank you for your questions. This is Magali. We're -- we have a fourth quarter, which is going very much in line with what we planned. We had in October, which was very good with the results, and we have a positive perspective in the fourth quarter. As far as our retrofit project, as you've seen in August of 2025, we were able to close with the BNDES a line of BRL 100 million for 6 years at a good interest rate. And here, obviously, everything -- including everything that we've already retrofitted, we're going to be adding to that line, and we also have done, on average, 15 units per region in the retrofit. We had an improvement of 12 percentage points in the NPS when we compare with the same period of the previous year. And with several improvements in our stores, in our app as well that this line also helps to offer both the updating of our stores with these reforms as well as the concept of CapEx, as you must have seen, which is natural as we were needing to do an updating of our park beyond the project of the coolers.

[Operator Instructions] Our next question is from [ Andre Oviadi. ]

Congratulations on your results. Two quick questions. First, about the effective rate that you're looking forward at the renegotiation of your debt. You're doing an exercise, a theoretical exercise where -- I might have some more details about this rate. You're talking about 12. What do you think you'll be able to do for the next year? And a little more detail about the coolers. You said that you've had invested more than BRL 5 million. How much do you project for 2026? And what's the potential of savings with this CapEx that you're doing with the coolers? These are our questions.

Andre, this is Fabio. Thank you for your question. I'm going to answer your first question about the effective rate. In fact, the company at the end of October did this entire process of restructuring of our financial liabilities with 2 main objectives: to eliminate the tax inefficiencies and also in a certain way, lengthen out our debt, at the same time, having a debt cost, which is more adequate for the profile of our business. So this entire process of restructuring of the debt, and we've been able to concentrate on these 2 points at one time, which was by restructuring all this debt. Looking forward, we, in fact, are going to work with a load -- an effective rate of income tax, which is well below that, which is the nominal rate of 34%. The company will go from a rate of almost 80%, which is in September of 2025. And going forward, we're going to work with an interval well below that, which was -- which is the nominal rate of 34%, which the company still has some benefits, which we have taken advantage of in the operating company. So now with our expenses concentrated in the operating company, certainly, we're going to have greater benefits. We work here. We did a simulation, a theoretical simulation. However -- but I think it is very realistic to work with an estimate that we could put here of approximately BRL 17 to BRL 20 million, BRL 17 million to BRL 20 million in potential benefits, fiscal benefits that we'll have going forward.