Track & Field Co S.A. ($TFCO4)

Good morning, ladies and gentlemen. Welcome to Track & Field's Conference Call to discuss the Results for the First Quarter 2026. This conference call is being recorded, and the replay will be available on the company's website at www.tfco.com.br. The presentation is also available for download. [Operator Instructions] Before proceeding, please bear in mind that forward-looking statements are based on beliefs and assumptions of Track & Field's management and information currently available to the company. These statements involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not occur. Investors, analysts and journalists should consider that events related to macroeconomic environment, the industry and other factors may cause these results to differ materially. Joining us today are Mr. Fernando Tracanella, CEO of Track & Field; Ms. Patricia Abibe, CFO and IRO; and Mr. Fred Wagner, CEO of TFSports and Vice President of Strategy and New Businesses at T&F. I will now turn the floor over to Mr. Fernando Tracanella who will begin the presentation.

First of all, a good day to all of you. Thank you all for your time. We're very satisfied with the positive results. And I would like to congratulate the entire team of Track & Field and the franchisees. This is a result that, of course, has a very difficult comparison base growth on a quarter where in '25, we had grown 25%. The sell-out growth now was an excessive growth of 16.4%. And it's worthwhile highlighting the growth of sales. And I believe that this growth, of course, has a great deal to be with the context that continues to be very positive, favorable to the business that we work in wellness, where people tend to be more engaged. They want to be healthier, they're losing weight. This is a favorable scenario, but the result also refers to other adjustments that we have carried out from the marketing viewpoint. We have a winter collection that has had very good acceptance. On the part of the customers, the digital sales growing considerably as well. We have a program for the remodeling of stores, bringing about expressive results. Therefore, we have the combination of a scenario that is favorable with wins in our favor and a strategy for the ecosystem that will help us to explain our figures. It's a number of events for the brand and much more. I will begin here with the highlights. I have just mentioned the growth of sell-out same-store sales and the growth of the renovated stores, which was somewhat more than twice the speed of same-store sales for the network, something we truly believe in. We already have 33 stores that have been renovated. And for this period of the year, that is quite expressive as a figure. Now net revenue grew at a pace faster than the sell-out. Patricia will comment on this further ahead. We had an important effect of sell-in that increased the pace. And of course, this points to the success of the collection that was launched in March. And I will repeat today that what we see today will ensure the loyalty going forward. In sell-in, the growth was almost 30% quarter-on-quarter, also pointing to an important sell-out for the second quarter now. So we consider that the first half of the year will be quite positive. The company continues to grow in terms of profitability. There is pressure, of course, on our margins because of our mix. We have more sell-in and the margins are pressured downwards because of this. And in the second quarter, we should be able to invert this have a positive pressure, a positive trend. And despite all of this, we were able to grow almost 3% once again, on a very difficult base of comparison and net income, once again with a growth of 6.3% and some fixed expenses of comparison that we will refer to further ahead. In the first quarter of last year, we ended up increasing the pace in the second quarter. Our investments in marketing were comparable to that of last quarter. But we had a difficult base of comparison because of the first quarter in '25. And throughout 2025, the company made significant adjustments in the company, which enabled us to eliminate any production or logistic bottleneck. We invested in the field of operations. This year, we increased the headcount in logistics and distribution. We have implemented a second shift in logistics back in November of '25. So this increased administrative expenses. So some line items are difficult to compare with last year. Regarding expenses, we have anticipated the challenges of the scenario, the political scenario and other complicated challenges. There are more challenges than in 2025. We try to anticipate this working with cuts in terms of headcount and general expenses. And of course, this will enable the company to operate in a more lean and a lighter way in the second quarter. All of this should aid and abet the results of the year. This was a very uncertain move that we begin to see now in the second quarter. We continue on with a robust operation. We have 66% of the sales coming from e-commerce, a very robust sector, and we include the franchises in this figure. And we also have evolution. We have reached almost 400 stores operating in that modality from the viewpoint of expansion, we inaugurated 6 stores. We have 441 stores in the network and 3 renovated franchises. What is important for you is that this year, we have 38 stores contracted with the contract signed or already undergoing work analyzing the project. So we have 38 stores already for renovation, but we have a very high interest rate. But despite this, we have a good pipeline of stores looking ahead, customers truly believe in the business and no sign of a slowdown when it comes to an organic expansion. The pace of last year has practically been guaranteed. The same holds true for remodeling. We have 35 stores scheduled. Now for this period of the year, it leads me to believe that we're doing very well in terms of expansion. Lastly, I would like to highlight something that is not even in the slide, our operating cash generation. We're speaking of a quarter where we had BRL 51 million of cash generation. This is important because we're speaking of the first quarter. For the Retail segment, it's a greater challenge to generate cash. We have to have great discipline to work with all of the variables to ensure growth. Of course, we have expenses, working capital, and we were able to achieve good cash generation. These are the main highlights that I wanted to share with you. And I will now give the floor to Patricia.

Thank you, Trac. Welcome, everybody. We're going to begin speaking about the sell-out. In this first quarter, we recorded almost BRL 443 million, expressive growth because in the quarter last year, we were growing 34%, as mentioned by Tracanella. Same-store sales with robust growth, 12.1% vis-a-vis last year. And here, I highlight the renovated stores. The stores renovated in the network last year had a growth of 26.5%. If we zoom into our own renovated stores, the figure was of 35.6% in owned stores and 20.9% in franchises. Very well, we have the e-commerce growing almost 29% vis-a-vis the first quarter '25, a representativity of 1.2 percentage points more year-on-year, gaining share in our network and allowing the customer to feel ever more comfortable. And I'll speak about omnichannel now. We have 66% of deliveries this quarter being delivered through our brick-and-mortar stores. Of course, this helped optimizes our working capital and also enhances customer experience. Let's go on to our net revenue with a growth of 18%. All the growth we had in sell-out, of course, additionally to expressive growth of our sell-in, which is the sale of merchandise to our franchisees with a growth of almost 30%. It has gained representativity of 2.5 percentage points. As Tracanella said, the sell-in today is a royalty for the future. When we look at the portrait of the year, our sell-in and the royalty operation, if added will be very similar to our sell-out. It's interesting to follow up on this. Now in the Track Sports, we have a reduction of almost 7%. What's the reason for this? I'll speak about the PERSE. PERSE was a benefit of federal taxes for event industries. It ended in the second quarter last year. Since then, when we compare results, it causes this pressure. This impacts our net revenue. And this year, we no longer have it. We have neutralized this effect. And if we take away this effect for our line of events, we have a growth of almost 6% vis-a-vis last year. Very well. Gross profit, in this next slide, our gross profit grew almost 16% vis-a-vis last year with the margin reaching almost 60% of net revenue with a drop of 1.2 percentage points. This is due to the channel mix for sell-in. If I have a greater share of sell-in in my net revenue, this, of course, will pressure gross margin. It's our channel with the lowest margin. This will be offset going forward, but we have to take it into account. It will also impact our EBITDA by neutralizing these effects, if I had the same behavior of net revenue last year, what would happen with gross profit? It would be aligned with 2025. It gives you a visibility that channel by channel when we zoom into our business, they're all aligned or have small gains. Let's speak about our operating expenses. Once again, we show you significant discipline. This is part of the DNA of our company to strengthen to carefully manage all of the line items whether they are fixed or variable. This is something we do intensely in-house. And this quarter is a proof of that. Tracanella at the beginning said that the investments in marketing. If we look at last year, the investments increased the pace in the third quarter, we had robust investment in an organic way required less investment. In the third quarter, we increased the pace a bit. So this will cause pressure on expenses with sales and general and administrative expenses despite all of the initiatives we put in place to support the growth last year in logistics, increasing headcount, enhancing the operation even with that weight in the administrative expenses, we were able to neutralize the effect of increase of expenses in sales. So we're aligned with last year. 35.3% was our percentage of operational expenses. Let's speak about our adjusted EBITDA. We grew 12.6%, reaching almost BRL 62 million. That growth of 3% vis-a-vis last year, a marvelous result, operating results. But when we compare the EBITDA margin, there's a pressure of 1.2 percentage points. The expenses are in line with last year. And here, we're speaking of this weight that comes from an unfavorable mix of business this quarter without taking into account that, our margin would be the same as last year. Adjusted net income, it grew 6.3%, totaling BRL 41.5 million. We have the reduction of 1.8 percentage points, the 1.2% in the EBITDA, 0.4% from financial results and 0.2% of depreciation to give you greater clarity. And we're in line with what we achieved last year because of shareholder equity that is more robust. This contributed to having the same representativity that we had last year. Cash position, and here, we summarize the financial health we're referring to. We generated BRL 51.4 million in operating cash, BRL 11 million in investments, basically for store renovation, store expansion, enhancement of TFSports platform to continue on with all of the initiatives of our ecosystem. And in financing activities, a reduction of almost 50%. Why? Because last year, we were working with share buybacks. Since then, we have eliminated that. So we have that reduction of 47.1%, contributing to our final position of BRL 63.6 million. Now considering our credit cards and cash equipment, we have BRL 63.6 million in total liquidity, a structure without indebtedness. This is how we continue, and we can finance all of the initiatives with our own resources. Okay, Fred. Will you speak about TFSports?

Good day, everybody. Thank you for attending our earnings results call. Now in this next slide, we will show you how we have been able to build that platform, that ecosystem in a coherent way. We grew 37.6% of users year-on-year. We had a very significant adoption of users in the platform. Since last month, the platform is also important with the digitization part. We can carry out sales through the tfmall, or we can sell through events. We have a slight reduction in terms of coaches because of the registration we carried out. This is simply something structural. More than 1,000 events held in the quarter, a growth of 27.8% exponential growth because of all of the initiatives that we have the experience and all of that -- all of this through our platform, 130,000 participants participating in our events with a growth of 21.8%. People are highly connected to sports to the initiatives in our platform. And we ever more observe the importance of physical activity, but also social connection. And we have a growth in net revenue, as you can see that is quite interesting, the GMV of tfmall, 117% growth year-on-year. Several products relating to physical activity are being sold with very interesting brands, and we're quite enthusiastic with this. And the TFC mall is also part of the application and connected. Now to speak about our experimentation. We have 16 stores opened with TFC 2 are presently being opened. We're working of wellness, also healthy food at the Café, all of this connected through our digital omnichannel with deliveries through the marketplace. TFC with a growth of 54% year-on-year, truly extremely good 40% more customer service in the stores. We recently connected to platforms like iFood, 99 and Wrap because of the attraction we have with the delivery for healthy food. And all of Brazil use our stores as small distribution centers, and we have connected to partner brands that are selling in TFC. This is a very positive initiative. The NPS of the company, of course, we're centered on the consumer. Now the NPS should be above 90%, but in TFC it's 81%. Our consumer receives quality, receives experience, differentiated service, fashion, technology, all of the attributes of the brand. And this is a company with an ever-growing addressable market. That is all. Thank you very much. I think we're now ready for the Q&A session.

[Operator Instructions] The first question comes from Laryssa Sumer from XP.

Congratulations for very strong results. We have 2 topics we would like to hear more about. First of all, the renovation. You maintained the goal of 70% with a new concept until the end of the year. Which is your relationship with the franchises, the situation to carry out renovations and how you assess the pace of renovations? Can you speed it up or not? A second topic, speaking about Europe, you inaugurated the third store in Portugal, and you spoke about the e-commerce that would service the region. If we could hear an update on your vision for this initiative and assortment in the region, if it is similar or different, how you're managing this adaptation? That's all.

Well, let me begin and then Patricia can add to this. Thank you for the question, Laryssa. Regarding the renovations, we're highly engaged with the renovation -- we have seen a significant demand for new projects. And of course, the priority are the more relevant stores in terms of sales. Our goal is to renovate the entire network. Last year, we got to 60%. And this year, we have 40 stores that should enter this process. We already have 33 stores that have been scheduled with a project. And certainly, we will attain that figure of 40 stores or overcome it. For the franchisees, this is an important process, not only financially because it brings back a good return for the business and increase in sales, but also because of the protection of the brand. It allows the franchisee to maintain the store updated with a more attractive environment for the customer with greater efficiency. There are several benefits, therefore, and I think the franchisee sees this. In terms of international expansion, we're quite satisfied with the results. We have a highly engaged franchisee in Portugal. We opened a third store at the beginning of the year. And we're about to inaugurate 2 more stores in Portugal, 2 in Lisbon. We're quite satisfied with the results. The strategy is to take the entire ecosystem there, the model with franchises and the organization of events. The brand has been very active in terms of event organization in Portugal, and we have been successful. Regarding the e-commerce, we're beginning our relationship with a multicurrency, multilanguage site. And we want to begin to understand the attraction of the brand in Europe to carry out shipping based in Portugal, where we are already operating. Of course, this is still very incipient, but we do believe in this process. And it's interesting to understand in which other countries the brand would have that opportunity for expansion. We observe the traffic of customers. We see what countries they're coming from. And we can also see this through the site. Once again, this is still very incipient, but it could be promising.

That was very clear. Congratulations for your results.

Our second question comes from Mr. Bob Ford from Bank of America.

Thank you for your results. How much of the growth of the store comes from the assortment? And are you thinking of expanding your assortment? Could you speak about the marketing of Nike because of the closeness of the World Cup when we speak about overlaying categories.

Now to speak about assortment, Bob, good morning, and thank you for your presence with us here. We do have a collection structure where we're always looking for new assortment, putting aside the assortment that has lost its relevance. It's something more dynamic, not necessarily structured. It has nothing to do with the footprint of the store. It's about number of SKUs. We refine this constantly taking into account fashion, new technologies. This is our day-to-day, and we have a structure that responds to this. Now regarding the World Cup, as part of our line, we don't have a direct link that would be overlaid on brands like Nike and Adidas who are sponsoring the World Cup. We do see that these companies get a relevant part of their results coming from that. And in general, we end up being able to service the market. They offer more space in the stores for these sales, and we can service the customers with our product. There is no overlay of these products, I believe. The way we carry out our operation is very different.

And the growth of volume, the physical growth?

Welcome to our call, Bob, and about the growth of stores and different measures in terms of price. We're focused on pieces. We have a lower price, a lower average ticket for pieces, and this is very healthy. We're focusing on the increase of tickets on the focus of our customer base and less focused on price. We want to have a competitive brand with a fair price because our brand, as you know, is very strong when it comes to presence, this has become more important in our business. This is one more reason to always be very careful with price. We want to remain competitive at a fair price. And well, we don't want this to be the main factor of growth of sales.

[Operator Instructions] Our next question comes from Mr. Kelvin Dechen from Itau.

My question is a follow-up on your reduction of headcount you carried out at the beginning of the year. If you could give us more color, which was the magnitude of savings this will generate and the size of the cuts.

Kelvin, we had a good reduction. It wasn't radical, and it wasn't concentrated on any area. These were opportunities that we foresaw in optimization, enhancing expenses. and also cuts in the general expenses of the company. The work offers outsourced work to third person's marketing. In marketing, we saw the opportunity of gaining efficiency. There was no concentration. We analyzed the budget this year, considering that this will be a challenging year for the retail market, we decided to anticipate cuts at the beginning of the year, even coming from a very positive year in 2025. It's an important moment. It has been done. And I hope you will understand that we won't offer you more details on this. All of this will help us navigate through the rest of the year in a lighter fashion and because of our expenses until the close of the year.

Our next question comes from Mr. Renan Sartori from [indiscernible].

I would like to know a bit more about sell-in, which was strong this quarter. How are the purchases now? Has there been a recovery of sell-out and a recovery of royalties?

As exactly what you mentioned, Renan, there's something I ended up not mentioning that is important to underscore and value. The sell-in was a result of a very good collection, good acceptance from the franchisees and the customers, but a better operation with the change of collection. We were able to change the summer collection for the winter collection with more novelties. That's why we had a greater sell-in and with a better logistic operation without delays in the delivery. We did face those delays in delivery last year. So we had a well-rounded operation this year with more novelties in the change of collection. And of course, this had a positive impact on the second quarter. We have the whole quarter with a new collection that's doing very well. We have novelties, new colors. We also launched new things, new technologies, new fabrics, mini collections. The capsule collections are doing very well. So there is a positive trend for sell-out as well in the second quarter. And if this is confirmed, it will increase our gross margin.

Our next question is in writing by Ms. [ Sarah Gulezian. ] She says, the gross margin was strong even with a stronger sell-in in the quarter, which means that other channels have even stronger margins. Is that it?

Sorry, it's the composition of a net revenue with the factor of sell-in that was the only factor that caused pressure. We had no change that we carried out at the beginning of the year. The share of these products in the sales was very similar to last year. So even with this neutralization, the margin was strong as it was in the first quarter last year.

[Operator Instructions] Our next question is in writing from Mr. [ Antonio Luiz from Inter. ] If you could speak about the growth of the sector as a whole, share, changes in behavior of customers and much more. You have already approached this indirectly, but could you give us more color?

I will begin and then Fred will complement speaking about TFSports and the ecosystem. It's very difficult to make statistics tangible here. We have to have statistics to prove what we're saying about the sector. There is a trend that began very strongly after the pandemic and increased the pace beginning last year. We see people that are very engaged with physical activity. The younger generations are ever more engaged and then we have the advent of people losing weight. A favorable trend for the sector going forward. I can't mention statistics, but all of this began with the pandemic and grew stronger last year. A very good outlook for everything related to wellness and healthy nutrition and the practice of sports, of course.

That is precisely what I wanted to remark on a greater awareness of people. Obviously, physical activity, good nutrition, sleep and -- we are very well positioned to be able to service people in that realm. We have all of that operation for athletes, the events that we organize. We're offering healthier nutrition and the trend of society as a whole that is to seek a better quality of life and social connection. And I think that we now have gained greater connectivity at work as well. Artificial intelligence has increased productivity at work. And there's that trend for people who truly want to live their lives more and have a healthier life. And the company is well positioned for those 2 aspects. We're quite enthusiastic with us, that ability of connecting people with the goal of a healthier life in mind.

Very well, the Q&A session ends here. We would like to return the floor to Mr. [ Fred Tracanella ] for the closing remarks for the company.

I would like to thank all of you for your attendance. We're extremely satisfied with the results presented with the growth of the company, with the health of our figures and with very good outlook at the beginning of the year, although it will be more challenging. I would like to congratulate our team, thank the team for the very good results, thank our franchisees. They're a fundamental part of our business, of course, as well as the suppliers and all the stakeholders of the company. We're at your entire disposal should you have any additional doubt. Please call us, send a message, and have a very good day. Thank you very much once again.

The conference call for Track & Field ends here. We would like to thank all of you for your attendance. Have a very good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]