Ouro Fino Saúde Animal Participações S.A. (OFSA3) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Welcome to this conference of results in the third trimester of 2025. My name is Marcelo, I'm the CFO of the company. And alongside with Kleber Gomes, our CEO, we're going to do this conference here to bring you the main highlights of the company in the first 9 months of the year and the third trimester, talk a little bit about the results, the financial part of it, what was the performances in the businesses, the cash flow, how is our financial structure now. And by the end of this section, we're going to have a space for questions and answers. For this first part in our conference here, I'm going to let Kleber talk. He's going to start talking about the main events and releases in this trimester that supported the investments in the company. So Kleber, good morning.

Hello, everybody. Good morning, everyone. Can you hear me well? Well, we're approaching the end of the year. We are disclosing our results here in the third trimester, third quarter. It's been a very profitable year. We had growth. We had product releases. We had recognitions, a lot of hard work that we have been doing in this management. The quarter itself, we had a growth that is significant. It was 26% in the revenue and a growth of 30% also in the quarter. The improvement in the expenditures and the accumulated growth in both revenue and EBITDA around 20%. So we understand that the year has been a recognition of all the hard work that has been done, as I said before. And also, it has been very -- we have been boosted this year for the long-term work that we have been doing, especially on research and development. Last year, as you know very well, we released 7 products that were very important. This year, actually in the fourth release, and we still have 2 minor releases in the end of the year. So we see that it's a very important moment that we are getting the results from the work that has been done since last year. And we have here the presentation, very important product, the first one we released this year, which is the vaccine shot. It's the second one in the world, as we say, a technology that was a single player for decades. And we managed to do this with the scientists in Brazil. This option for immunocastration in Brazil, which has been very important. We had a market share for just 1 year, very considerable with this vaccine here. Also after that, we had a strategic alliance. It is within our proposal to connect to the animals in the world. We have the boosting, which is a product that considerably increases the production of milk in the country. It's a big product. Unfortunately, we had a setback in the production of this product in Korea. There was an incident going on. You know about it. But from next year on, we should have a significant volume for this product, and it's a very big product. And it opens many doors for this market -- in milk market for us. And now more recently, in the second quarter of the year, we released NexLaner. It is a pesticide for all the external parasites like flies and bugs. It's the second product in within this category in the market. So it's a major success, and we have been getting good results from it. And also following in the same pattern with the internal development, there is a product that is not exactly like the products that are in the market. It has a different formulation. And we are very satisfied with the results that our researchers developed for the market. And now more recently, we had the release of WellPet. It gives us the ability to access the greater veterinary market in general, which is a market that in the animal market is 1/3 of the total market. Also for parasites based in [indiscernible] , a molecule that is very well known in the market. It's been improved the efficiency of this molecule, but also the product is very different from what we have in the market already. It's also our own development with our researchers. It is it is a tablet that has more protection than its competitors in the market. It protects the animals for 45 days. It is a pallet. It's different, but it is tasty. The dogs love it. There's no much effort to give them to the dogs. They enjoy it. Dogs can play around, go to the field, go to the street, and they will be protected. There's a very high efficiency during 45 days. The mechanism is super quick in 2 hours, the protection is going on already and all the bugs that are maybe in the animals start dying within 2 hours. This product has been released in the end of September. So we still have a lot to do along the year, but it's a great start already. It's been penetrated in the market already, even though it's been released in a very good release. But this product has everything to be a best seller by Ouro Fino and it's going to set Ouro Fino Pet at a new level. So this is a recognition of this work that we have been doing in research and development with over 100 researchers, masters and doctors who have been doing these new products that are very specific that are not direct copies from the other products in the market. Those medicines, we develop thinking about how to solve -- to better solve the problems for our clients. So we're happy with this product. We're going to raise a very aggressive marketing campaign for this product. We've been working a lot with this product on the media because it's targeted for the end consumers. The box, as you can see, it looks good. It's different from what we have in the market. There are some protection mechanisms that our competitors don't have. As you can see, there's the image of the real size tablet on the box, showing you that it's easy to give to the dogs. As a recognition of this work that we've been doing in research and development, we have the honor and the pride to mention the FINEP, the agency of the government that deals with this, they started doing -- they resumed the award program again for the best companies that are more innovative in the country. We have won deals award last year again in the company category, and now there's the region phase to elect the companies that are more innovative in the country. And we have been recognized by the FINEP award for the Southeast region category. So it really shows that our R&D is very robust, and we appreciate FINEP, which is a great support of the company in this sense. And the data is shown here. If we sum up the products in the past few months, we are talking about 8 products. And if we look into the past 2 years, we are talking about 12, 13 products already released in the market in 2 years. So it's really good to see that. The company is still very healthy in the financial point of view. It's been robust. The debts are long term with good quality. So the results speak for themselves. But in the fourth quarter, it's very important for us. We want to continue growing and getting good results from these releases. We are just in the beginning. So we see a strategic horizon, which is very important. And also to position the company, we wrapped up our study for strategic positioning for the next 5 years, and we have bold goals. for more penetration and more deepness in the South America and also portfolio expansion. But I'm going to leave it for discussion in another call, another moment, so we don't -- I don't use all the time here. But I want to say that all the work that we have been doing is based on a good structure for planning in a view for growth that is always sustainable. The financial aspect of the company is very healthy. So in general terms, we understand that the mission is being accomplished, but we want more, and we need to make Ouro Fino one of the leaders on the market, in fact, and we have this planning into the future. I'm going to give the word back to Marcelo, and he's going to explain the financial part of the company, and I'll be available for questions and answers. For now, thank you, everyone.

Thank you, Kleber. Well, I'm going to share some details about our financial results, showing on the main highlights. This quarter is characterized by a great growth in the revenue, but the growth that is followed by image expansion, which is good, liquidity, cash generation. I'm going to bring you the accumulated result. I'm going to take you -- it's kind of a summary. This is an overview of how we wrapped up the quarter in comparison to 2024, but also the growth of the company grow 26.2%. All of the business units grew in this period. It's significant. We had an image expansion around 30.6%. We had a little pressure in the margin in the first quarter, but Kleber said it is because of the leveraging partnerships and the distribution of products. They have -- distribution has a little margin comparison to the line products. But on the other side, this leverage in sales brings us a spread in sales that brings more profit, operational profit. So we grew 26% in the revenue and 30% in EBITDA as a result of this leverage that reduces the fixed bills. 9 months accumulated growth of 18% growth considerable EBITDA as well in 21% with net growth also been above the net revenue. It's been great number this year. They have been paying the dividends in terms of capital with our stockholders, but the company maintains the margins around 10% over the revenue. Now bringing this vision to the business units, looking into more details, both for the margins and the profit of the units in the consolidated result, the vision in the long term is 26.2% of growth in the quarter. So you see that the company has been growing constantly in the past few quarters, and we have been delivering the 9 months in 2025, in the best scenario with a great profit. So it shows that the company has been able to grow with a healthy portfolio of products, getting growth, but also prioritizing the added value to the product. The beef unit is the one that grew the most, had more impact in this period for the product releases. And now we have the reflects here of the release of boosting [indiscernible], also the expansion of sales for the beef products besides the immunocastration, we also have the [indiscernible] vaccine for this disease in the world. It's a different product, some very innovative. So the line has been growing 29.1% in the quarter and the accumulated growth 21% in the past 9 months, and we have 49% of margin in this line, the biggest margin in this trimester. And this little pressure in the quarter, it's because of the greater importance of the growth of the sales with the products with partnerships. But this growth brings a great decrease in many other aspects, as I'm going to explain later. In the companionship animals, the growth has been a little slower in the first 6 months of the year. I see that in the market is a little bit more under pressure, especially in the retail. We understand that it's a combination of factors that slowed down like the interest rate, which is high, families without the money. So we have been working a lot to do the sellout, both for distribution and also resales. But the impact for the fourth quarter, we see a growth -- accumulated growth of 4.9%. So we are accumulating in the quarter, even though it's just 1 month of revenue with the release of the product with a lot of details, and we have bonds and high speculative because this is a new product. new market entry. The company was not participating in the market. So it's a new segment for us, and we have the opportunity growing significantly both in the fourth quarter and the next 2 years. And -- but the margin is extremely healthy, 9 months at 68% and 69% in the quarter. International operations. We're talking about the local operations with Mexico and Colombia, direct exportation to the other countries in Latin America. So this is a great growth avenue for us. Our purpose is to become the company that is mostly admired in Latin America and the growth for this unit has been relevant with the image expansion also that is very important, 63.9% of image in the year and 63% in the quarter. Besides getting this growth in the revenue, they have a very important component naturally in the company because a great part of our sales is from imported inputs. So the strategic value for growth and profitability, but also the protection for the international transactions. The company has been doing for a long time, this job of growing, but preserving the efficiency. So the efficiency itself is a leverage for growth, and there's a significant decrease in the expenses for the first trimester and also accumulated for the first 6 months. So we have been investing the resources in these commercial structures that are very important to support the growth in sales and keep the expenses alongside with the inflation. And then consequently, the image expansion and preserving, as Kleber mentioned. Preserving the investments in research and innovation. Those are responsible for creating value in the long term. So we have around BRL 75.8 million invested in 2024. This year, we are in BRL 56 million already of our revenue being invested in research and development. We have been doing this constantly. And you see on average, company invests 7% to 8.5% of its revenue into research and development. Now EBITDA. The adjusted EBITDA of the company, as I said, we are growing in revenue, but expanding EBITDA superior to the sales. So 30.6% was the growth in EBITDA in the third quarter, 20% in the accumulated one. So we're growing in revenue, but expanding margin. We have the best margin in EBITDA, 20.6% in accumulated and 27.4% in the accumulated in 3 months. And just to close up this topic, that's the result of growth, but preservation of image and growth that expands -- allows expansion of EBITDA generation of cash. It's been robust and consistent. We generated BRL 32 million in cash liquid for paying interest and taxes, income taxes, that's net value and over BRL 200 million by the end of September, a good level of liquidity and it's good -- it's worth mentioning that to say that there's a higher investment this year in stock. Like Kleber mentioned, many product releases in 2025 that were not in the base of 2024. So we have additional investments in the formation of stocks and the sales are being done now. So this is a greater impact in the operational cash flow that is still very positive. In 2005, this variation is already good in the management of the debt. So we are very comfortable with this cash management because it's also the concept of having very low debt and a leverage of 21.6 lower than it was in 2021, for example, and with the cost composition, which is adequate to our investment profile. And you can see the numbers of the investments in September with the SELIC index in 50%. So what allows the company to remain competitive, we have a composition that is very comfortable with 89% of our debt is in the long run and from 89%, 40% is for 5 years. So we don't have the need of a lot of negotiation, renegotiation for this. Generation of cash with a proper debt profile of investment in the long run, it gives us comfort to keep going on with the business doing the investments for our products. Well, I wrap up this financial part here, and I give the microphone back to Kleber, and he's going to conduct the question-and-answer section.

I think we don't have any questions here. So as a reminder, our team is at your disposal. If you have any questions in the future. And I say goodbye, and thanks to the participation on everybody who was here, and thank you for the trust of our investors, in our management sectors and most especially our team who's working night and day on this matter. So thank you very much.