Unicasa Indústria de Móveis S.A. (UCAS3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for waiting. Welcome to Unicasa Indústria de Móveis S.A. conference call to discuss the results of the first quarter of 2022. Today with us, we have Mr. Guilherme Possebon de Oliveira, CFO and Investor Relations Officer. We would like to inform you that this event is being recorded [Operator Instructions] This event is being broadcast simultaneously on the Internet via webcast, and you may access it at unicasamoveis.com.br/investorrelations, where you can find the presentation for download as well. The slide selection will be managed by you. [Operator Instructions] Before proceeding, let me mention that forward-looking statements that might be made during this call in relation to Unicasa's business perspectives, operating and financial targets are beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore they depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry conditions and other operating factors may affect the future results of Unicasa and may lead to results that differ materially from those expressed in such forward-looking statements. Now we would like to turn the floor over to Mr. Guilherme Possebon de Oliveira to start the presentation. You may proceed.

Good afternoon. Now we would like to turn to Slide #5, where we have the highlights of the period that will be the focus of this presentation. In the first quarter of 2022, the company posted its highest revenue for a first quarter since 2012. We delivered partially 2 Corporate sales that made a major contribution to this growth, being one in Brazil and another one in the U.S. Thus, the Corporate segment grew over sixfold, and Export increased about 60%. On Slide 7, 8, 9, 10 and 11, we can see the individual performance of each one of the segments. Overall, our brands grew significantly in this quarter, the highlight being the New and Casa Brasileira exclusive stores, up by 29.5%. On Slide 12, we can see the 28.9% increase in the average productivity in the quarter per Dell Anno and Favorita store, reaching BRL 121,100 per month, whereas New and Casa Brasileira grew 24%, reaching BRL 61,000 per month. When we compare to the first quarter of 2019, we can see that productivity doubled driven by our objective of increasing profitability of our stores, focusing on resellers who are aligned to our strategy. On Slide 13, we have a chart with the evolution of our exclusive and multi-brand POS. We ended the quarter with 200 exclusive stores and 105 multi-brand stores. On Slide 14, we can see that we closed the quarter with 72 Dell Anno and Favorita operations, 110 New and Casa Brasileira and 18 exclusive stores abroad. Now turning to our operating expenses on Slide 16. We can see a chart with the evolution of our SG&A, which went up by 40% in this quarter. Payroll expenses were driven by the increase in headcount, mainly in the area of support to the U.S. operation and also the support team for resellers, in relation to training as well as drafting and renovation of showrooms. Besides the increase in headcount, the collective agreement in this period accumulated by 7.66%, and this also drove up our payroll expenses. The next quarter, we will show an even higher number of the collective agreement. The negotiations of the category ended in September '22 (sic) [ April ], with the transfer of the inflation of the period, which was 10.6%. Marketing expenses reflect variable expenses related mainly to international sales and the Corporate segment sales as well, which followed the growth in these 2 business lines. Expenses with U.S. operation increased mainly due to the variable cost of sales, referring to freight and assembly. Revenue from the U.S. market went up by 157%, reaching $1 million. Advertising and travel expenses went up due to the resumption of these activities that were suspended because of the pandemic. Third-party expenses reflect the provision for the payment of legal fees due to the successful recovery of amounts coming from the PIS/COFINS lawsuit. Other expenses went down BRL 0.2 million, mainly due to the reduction in delinquency, which brought down our estimated ADA, the allowance for doubtful accounts, BRL 2.3 million. On Slide 17, we have a summary of the quarter results, the executive summary. Gross margin. In the quarter, you can see that it went down due to the increase in the weight of Corporate sales in the domestic and also in the foreign market. Besides, we continue to be affected by the imbalance in the supply chain, but the impact is falling gradually vis-à-vis the previous quarters. At the end of this quarter, the company made a new price increase in order to boost our margins, and the impact on the revenue will be seen as of the second quarter. In this quarter, the process of exclusion of ICMS from the PIS/COFINS calculation base was judged favorably to the company in a final court decision. Thus, we posted BRL 7.2 million in principal referring to March '17 to April '21 to the other operating income line, BRL 1 million in interest and monetary restatement to financial revenues and 500 -- and BRL 0.5 million referring to legal fees due to the successful outcome of the process to operating expenses. The effect on the result, net of income tax, was $5.2 million. The use of the credit via PER/DCOMP will start after the final approval of the credit deferred on April 11, 2022. This credit may be offset with any federal tax. In the release, you can see the executive summary of the quarter, excluding the effects of the PIS/COFINS process. Now I would like to turn the floor over to the operator to open the Q&A session.

[Operator Instructions]

What was the average amount in the last price adjustment that occurred in the first quarter of 2022? How do you feel consumers after this price adjustment? And what do you expect in terms of volumes sold in the last few months? In the second quarter of 2022, will the costs go up? Or could we expect an increase in your gross margin in the short run? Do you believe revenue can be recognized of Corporate projects, of relevant ones in the next few quarters?

Good afternoon, [ Mattias ], in relation to the price adjustment that you referred to, it was 9.36% now at the beginning of March, and we have not felt any effect so far in terms of the volumes sold. And just a moment, please. Going back, [ Mattias ], regarding the price that you were talking about, we applied 9.36%. At the beginning of March, we -- there was no impact to be felt in terms of our volume because of the price increase. And you asked what we could expect for the next few quarters. Well, I cannot say anything about that, and I cannot give you any guidance because we never talk about information -- future information. And you asked about the cost of the [ second, third ]. We use the world "partial." So we still have revenue to be recognized from these projects, from the 2 Corporate projects that we recognize in the [ third ] quarter. So of course, there will be an impact. However, it's going to be smaller than the one that we had in the [ first ] quarter. And another thing that we said in the release was about the price pressure on the part of our suppliers. We are still suffering a bit with the imbalance in the supply chain, but also less than in the previous quarters. I believe I have answered all your questions, [ Mattias ]. Thank you.

[Operator Instructions]

Could you clarify the reduction in the number of stores? And what is the outlook for this year in terms of number of stores?

Good afternoon, [ Gustavo ]. We closed some stores that were not in the strategic planning of our brands. So we are not going to replace these points and we are not going to open new stores in these locations. And we cannot give you any guidance about the number of stores for the future. Thank you.

[Operator Instructions]

I do believe that the cost increase with travel, in support to the U.S. operation, is a new level that we should expect, or was it a one-off situation?

[ Mattias ], in relation to the travel costs, we are at a higher level, and I would say that this is a new level. We are still limiting travel a little bit. Travel is happening, but still below what we consider as the normal levels of travel in our operation. In relation to the U.S., we have a big component of variable expenses this quarter. And this growth that we saw in this quarter was because of some sales. So I would say that it is a one-off situation. Thank you.

[Operator Instructions] The Q&A session has come to an end, and we would like to turn the floor back to Mr. Guilherme Possebon de Oliveira for his closing remarks. Mr. Oliveira, you may proceed.

Thank you very much for your presence, and we wish you a very good day, a very good weekend. And please contact our Investor Relations area should you have any further doubts. Thank you.

Unicasa's conference call has come to an end. Thank you very much for participating, and we wish you a very good afternoon. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]