Unicasa Indústria de Móveis S.A. ($UCAS3)

Welcome to the conference call of Unicasa Indústria de Móveis S.A. to discuss fourth quarter '25 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. [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 prospect, 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, with us, Mr. Guilherme Possebon de Oliveira, Investor Relations Officer. Now I will turn the floor to Mr. Oliveira to start the presentation.

Good afternoon. In today's presentation, I will discuss the company's performance and annual changes, therefore, let us move on to Slide 4, please, to review the company's sales performance. This year, we made significant changes to product across all of our brands. This enabled us to report a 10.5% increase in same-store sales. The expansion of factory capacity allowed New and Casa Brasileira products to be customizable across all 3 axis, just as was already the case with Dell Anno. In addition, this year was marked by a period of consolidation for Dell Anno's new closet line launched in the second quarter of 2024. In 2025, we made changes to how we conduct business in the multi-brand, corporate and export segments, which laid the groundwork for the performance of these channels. In addition, greater flexibility in our product offerings was a factor that contributed substantially to increasing our market penetration in the multi-brand segment. Returning to the performance of exclusive stores. Despite growth in revenue and volume, closed stores reduced revenue by BRL 18 million. Closed stores throughout 2025 contributed to a reduction of BRL 8 million in revenue for the year. Thus, 2026 carries less of the revenue reduction impact caused by stores closed in prior years compared to -- for stores in prior years than in the year of 2025. As reported in our quarterly earnings releases throughout the year, the share of showroom revenue in 2025 was higher than historical averages. On the downside, showroom revenue impacts our margin because we offer promotional pricing given that these products differ from those installed in our customers' homes, particularly in terms of showcasing the wide range of available accessories. On the other hand, renovated showrooms boost the performance of our stores. In 2025, approximately 19% of the company's consolidated revenue came from the United States. And business with that country was marked by a lot of uncertainty due to high regulatory volatility. In April, the U.S. federal government announced global tariffs of 10% on products that we export to the U.S. market. In August, they increased the tariff by an additional 40%, both based on the International Emergency Economic Powers Act. Then in October, the U.S. imposed a 25% tariff on products related to the furniture industry based on Section 232 of the Trade Expansion Act of 1962 effective until January 1, 2026, when they were then increased to 50%. And subsequently, on December 31, 2025, the U.S. extended the application of the 25% tariff until January 1, 2027. In February 2026, the U.S. Supreme Court ruled as unlawful the tariffs imposed by the U.S. President under the International Emergency Economic Powers Act. Consequently. On the same date, the U.S. President imposed a 10% tariff based on Section 122 of the Trade Act of 1974, and therefore, to date, the tariffs applied to our products entering the United States are as follows: 25% for kitchens and bathrooms effective until January 1, 2027, when it will increase to 50%, and 10% for all other items, which will seize in August and will require approval by the U.S. Congress to remain in effect. Since our competition in the U.S. market comes from Brazilian and European brands, we had to monitor changes in tariffs applied to Brazil, to the European continent and to some specific countries. We had to analyze pricing trends for consumers. You see consumers attuned to these changes and trends began comparing more brands and began seeking out alternative products, which in turn impacted prices to end consumers. Overall, we observed that we began selling more in Miami and New York. However, we offered discounts that were higher than average. The increase in consumer contracts signed for these operations was 60%. In the Orlando market, we saw the opposite situation, a downturn, and we decided to wind down the operation. Accordingly, we recognized expenses of BRL 4 million in our financial results related to the write-offs of deferred taxes, commercial goodwill paid upon acquiring the operation, costs associated with terminating the lease agreement and fixed assets. There are still customers from that store to be served, and they will be served by our Miami team. Moving on to Slide 5, we see that our domestic distribution network was decreased by 4 points of sale. It is important to note that in 2025, we strengthened our new business team. Aiming to increase our potential for opening new stores, we entered into contract agreements for 5 new Dell Anno stores, 1 store under the New brand and 3 Casa Brasileira stores, all of which scheduled to open in 2026. On Slide 6, we present a summary of the results of Q4 '25. Regarding gross margin, in addition to the impact of showroom sales, it is important to mention depreciation of new equipment, the sale of discontinued raw materials in the second quarter and increase in personnel expenses as we had to shut down temporarily a piece of equipment at the factory for structural renovations, we had to shift part of that production to less productive equipment that requires more human capital. The machine in question resumed regular operations at the end of 2025. Contingency expenses were the main factor contributing to the increase in operating expenses. In this line item, the primary impact stemmed from serving customers of a retail chain that closed its operations in 2024. For 2026, we expect few contingencies arising from the stores that closed throughout 2025. In other operating expenses, the highlight was the write-offs related to the closing of the Orlando store. On the revenue side, the positive impact came from the extraordinary recovery of approximately BRL 6 million in tax credits. In the financial result, the main impact was exchange rate fluctuations. In 2025, we posted an expense of BRL 2 million. And in 2024, we recorded revenue of BRL 2.5 million. Additionally, the impact of interest on debt in 2025 resulted in an increase in expenses of BRL 4 million. As regards to income tax, the main impact are due to our operation in the United States due to the reversal of deferred income tax related to the Orlando store following its closure, and the suspension of deferred income tax recognition of the remaining operations. On Slide 7, we analyze our cash flow. Here, we can see that despite the net loss for the period, we generated BRL 23 million from operating activities while total cash and cash equivalents generated by operating activities totaled nearly BRL 27 million, almost double the amount in 2024. Investments in PP&E remain high, in line with our strategic plan, and totaled BRL 38 million for the full year. In funding activities, we raised BRL 62 million in 2025, stemming from the completion of the second and third tranches after funding raised with the FINEP, which began in 2023. And after funding of BRL 35 million raised with BNDES and BRL 10 million raised with BRDE, both in the wake up programs created by the federal and state governments, respectively. These programs were created to support exporting companies impacted by import tariffs imposed by the U.S. government. We ended the year with net debt of BRL 67 million. We believe that current debt levels are consistent with the investment time line set forth in the company's strategic plan. Our debt has a long-term profile, and therefore, we believe that it does not jeopardize the company's financial health. I would like to thank our shareholders, dealers, employees, suppliers and other partners for the end of another year. I now hand over the floor to the operator to begin a Q&A session.

[Operator Instructions] We received our first question from Mr. [ Eugenio ], a shareholder. Given the significant decrease in personnel costs, depreciation and operating inefficiencies at the factory, what changes have been implemented to improve productivity and reduce costs in 2026?

Afternoon, [ Eugenio ]. As regards the company's margin, 1 of the 2 main factors impacting the full year 2025 was the share of showroom sales and also personnel expenses. As regards to the showroom, on 2025, the share of showroom sales was higher, was considerable. So naturally, this entails a reduction in our margin because these are promotional prices when we sell the showrooms. It is a product that brings a much smaller margin so this ends up hurting the consolidated numbers. And as for personnel expenses, as I mentioned in our earnings release in the message from the management and in the management report, during the year of 2025, we had a retrofit of an important piece of equipment at the factory and the production of that equipment had to be shifted to another piece of equipment, which required hiring more people and expenses related to overtime. So we had the extra cost -- an extra personnel cost in 2025. Another important point to note since you asked is that the new equipment that entail more depreciation and help reduce the margin, well, this new equipment allowed to expand the range of products for New and Casa Brasileira. Without these new pieces of equipment, we will not be able to have the revenue increase that we had this year in these 2 brands, New and Casa Brasileira. So for 2026, we have an expectation that our margin will improve. Of course, we have to monitor the consequences of the war in Iran because we are already starting to see some impacts on prices of raw materials that are increasing. So we have to monitor this up close to monitor these costs.

[Operator Instructions] We received the following question. Despite the accounting loss, the company reported positive operating cash flow. How do you explain this discrepancy?

Good afternoon. If you look at our cash flow that we disclosed, you will see that we posted a loss of BRL 11.5 million. And operational cash generation was BRL 26 million, almost BRL 27 million. This is explained mainly by noncash expenses, accounting adjustments we made during the year. A part of it related to the closure of the Orlando store, as we explained in the message from the management, and also because the depreciation totaled almost BRL 18 million. So these are expenses that have a noncash effect. When we look at operating cash generation, it was really positive this year. Another important point to mention in cash generation in the full year is that in the end of the year, in the end of 2025, we had a price adjustment. And this led to prepayment from our customers because they wanted to protect from this price increase. These are the factors that contributed to a very positive cash flow generation in the year.

[Operator Instructions] Mr. [ Rogerio ], the shareholder, asks, could you comment on the decision regarding the closure of some exclusive stores, and how the company views the recovery of this revenue in the coming quarters?

Good morning, [ Rogerio ]. As regards the closing of some stores, the decision to close the store is always avoided, we try as much as possible to avoid it, but sometimes it becomes inevitable. A number of factors contribute to the decision to close down the stores, some related to the company, some related to the dealer. To mention some of the reasons leading to store closure in recent quarters, they involve service below the standards for the brand, execution of a wrong brand positioning, strategic discrepancies or mismatch and the performance of the dealer. Sometimes this also leads to a store being closed. And as for recovery of this revenue, during 2025, we made some adjustments. We strengthened our new business team and -- for 2026, so we have some important stores opening throughout 2026. In the message from the management, I mentioned that we have 5 new Dell Anno stores, 1 New and 3 Casa Brasileira stores. And these are very important stores in very important markets. And we believe that this tends to drive the performance of these brands. It is important to mention that these stores will open throughout 2026, and given the natural maturation time until they start generating sell-in at the factory, we are talking about an interesting sell-in generation for 2027.

[Operator Instructions] The Q&A session is now closed. We would like now to hand over the floor to the company's closing statements.

Well, I'd like to thank all of you for attending the call. For further information, please contact our Investor Relations department. Thank you very much for attending, and have a great weekend.

Unicasa's earnings conference call for the fourth quarter 2025 is now closed. Thank you very much to all participants, and have a good rest of day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]