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

Good afternoon to all. Thank you for waiting. Welcome to Unicasa Indústria de Móveis S.A. Conference Call to discuss Third Quarter 2024 Earnings Results. [Operator Instructions] We inform you that this conference call is being recorded and can be accessed at the company's IR website, ri.unicasamoveis.com.br, where you'll find the full package of our financial disclosure. You can also download the presentation from the chat icon, including the one in English. [Operator Instructions] We emphasize that the information contained in this presentation and forward-looking statements that might be made during the conference call relating to Unicasa's business prospects, projections and operating and financial targets are based on the beliefs and assumptions of the company's management as well as on information currently available. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect the company's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today, we have with us Mr. Guilherme Possebon de Oliveira, Investor Relations Officer. I will turn the floor to Mr. Oliveira.

Good afternoon. In this quarter, the main factors contributing to our results were the U.S. operation, which is still maturing and operating below breakeven point, mainly due to the addition of the New York store in October of 2023. Also a reduction in turnover in the domestic market, exchange rate variations and the result from the sale of assets held for sale. On Slide 4, we see our sales performance. Revenue from owned stores in the United States grew by 109%, while contract signings grew by 27%. Revenue from exports, excluding the performance of our own stores in the United States fell by 10%, primarily on account of the shipment of new store showrooms in Q3 '23. In the domestic market, we posted a drop in revenues, mainly in the Dell Anno brand due to delays in the civil construction chain. Slide 5 shows the evolution of our exclusive and multi-brand points of sale. We ended this quarter with 126 national exclusive stores, 15 exclusive stores abroad, 75 national multi-brand stores and 6 multi-brand stores abroad. The distribution network abroad underwent a registration cleanup. In other words, exclusive stores that didn't meet the criteria to be considered exclusive were reclassified as multi-brand, and the multi-brand stores with no sales invoice for more than 6 months had their registration canceled. In the domestic market, no contingencies are expected relating to store closures. Moving on to operating expenses on Slide 6. The increase in operating expenses was driven by the New York store, which opened in October 2023. Looking only at the Brazilian operation, operating expenses fell by 1.8% when excluding the impact of BRL 800,000 related to the donations we made to those affected by the floods in the state of Rio Grande do Sul in May. On Slide 7, we present the executive summary of the results. The increased share of revenues from owned stores in the United States continues to be the main effect driving the margin upwards. Excluding the export market from the comparison, we see a slight reduction in gross margin due to the concentration of showrooms shipped and invoiced this quarter. In addition, as mentioned in the previous release, we launched a new product in the Dell Anno family. And as a result, updated several of the network stores to showcase this new product. At the end of August, with the aim of strengthening the company's cash, given the investments planned for the coming years, the company issued its first commercial note in the amount of BRL 23.5 million. The book-entry commercial note was subject to private placement carried out under the terms of law 14,195 dated August 26, 2021, without any public effort of sales and/or distribution to investors and the market in general by an institution that is part of the securities distribution system. We would like to thank our shareholders, dealers, employees, suppliers and other stakeholders for the end of another quarter. I now hand over the floor to the operator to begin the Q&A session.

[Operator Instructions] Our first question came from [ Mr. Anderson. ]

What is the estimated time for all the U.S. operations to mature and start generating positive results?

Anderson, thank you for the question. When we work at the operation of our own stores in the United States, we have to keep in mind that the New York store opened in October of last year. And this is the store with the highest fixed cost, highest rent, highest personnel costs. Being open for a year now, it is still lagging a bit behind in terms of reaching the accounting breakeven point. So when we look at the operations as a whole, we have to keep this fact in mind that the New York store will take a little longer to mature. When we look at our own 2 stores, which are already in operation. There, we're getting closer to the breakeven point because of the portfolio development and all the work that was developed with these 2 stores. In the end of the second quarter, beginning of the third quarter, we did a correction positioning of the stores in terms of their target audience. And the target audience, we are trying to reach out to. We changed the team and we already see an improvement in the markup of these operations. So these operations are closer to achieving their accounting breakeven point. But to directly answer your question, I cannot give you an estimated time because it involves strategic information of the company. So that's all I can tell you for now. In the earnings release, I tried to provide some information so you can identify the performance of the operations as a whole. So this is the kind of information that we included in the release for these stores.

[Operator Instructions] Next question from [ Camila. ]

In the last year, the company has considerably increased its debt level. Is the company's cash generation insufficient to meet its obligations?

[ Camila ], thank you for the question. To directly answer your question, the answer is no. The company is not -- the company's cash generation is not insufficient to meet its obligations. So we were able to do so even without the funding. What led us to this funding was that we enjoyed some investments that -- we took advantage of some investments that we were going to make and took advantage of good funding conditions. And that is the FINEP debt. The FINEP and the commercial note debt are both with a very long maturity. The commercial note has a 20-year payment term. And the FINEP, an 8-year payment term, and we are still in the 2-year grace period of the operation. The commercial note indeed required some investment that we made, which was not initially considered in our forecast, and that's why we have this funding. But this investment will give us fruit in the long run to pay for this specific funding in our planning and the visibility we have of the operation. This funding will not impair the company, the investment will not impair the company's ability to meet its obligations in the future.

[Operator Instructions] We would now like to hand over the floor to the company's closing statements.

Well, thank you very much for your participation. I wish you a good afternoon and a great week. Thank you very much.

Unicasa's earnings video conference call for the third quarter 2024 is now closed. Thank you very much to all participants, and have a good rest of the day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]