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

Good afternoon, everyone. Thank you for waiting. Welcome to the conference call of Unicasa Indústria de Móveis S.A. to discuss second quarter 2026 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 outlook, 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. Now I will turn the floor to Mr. Oliveira to start the presentation.

Good afternoon. Let's start on Slide 4. Here, we can see that the company's consolidated gross revenue totaled BRL 66 million in the second quarter of 2026, a reduction of 13% year-over-year. Performance was primarily impacted by the export market, where revenue fell by 41%. This decline stems from lower contribution from corporate projects in North America and Latin America as well as the effect of the BRL appreciation during the period. In our company-owned stores in the United States, revenue recognition was 25% lower, already excluding the Orlando store, which closed at the end of 2025. This performance reflected delays in delivering customer projects, which lengthened the cycle of converting sales into revenue. On the other hand, commercial performance improved significantly with sales of 4x higher than those recorded in the second quarter '25. In the domestic market, exclusive stores showed stability on a same-store basis with a 0.8% decline. New stores that are still maturing helped partially offset the effect of the smaller base of active stores. Although store closures remained the main factor, putting pressure on the channel's revenue. Sellout at exclusive stores in Brazil continued to outperform the 2025 level, primarily reflecting the strategic changes implemented late last year, including a review of the product portfolio and pricing adjustments. On Slide 5, we have a chart showing the performance of our exclusive and multi-brand points of sale. We ended this quarter with 113 national exclusive stores, 15 export exclusive stores, 66 national multi-brand stores and 5 export multi-brand stores. Moving on to Slide 6, we see the company's executive summary. Net revenue totaled BRL 54 million, down 14%, while the gross margin was 26.3% a decline of 4.5 percentage points. Gross margin was impacted by lower dilution of fixed costs due to lower revenue and due to the increase in the cost of raw materials associated with the oil supply chain. The price adjustment implemented at the end of the quarter had a limited effect in Q2 due to the time lag between the implementation of the price adjustment and its conversion into revenue. Selling, general and administrative expenses remained virtually stable, rising by 0.2% among the main factors, we highlight the increase of BRL 1.3 million related to contingency expenses serviced to customers of closed stores. This was partially offset by lower expenses from the Orlando operation and reduced advertising costs. As a result of these factors, we ended the quarter with an operating loss of BRL 7.2 million, negative EBITDA of BRL 2.3 million and a negative EBITDA margin of 4.2%. Net loss was BRL 5.2 million. Net financial result was negative by BRL 0.5 million, an improvement of 37%. This improvement resulted from lower foreign exchange expenses and higher income from financial investments, which offset the rise in interest rates on debt. In terms of cash flow, as shown on Slide 7, cash generated from operating activities after working capital variations reached BRL 10.9 million, a 93% increase. Taking into account investments, debt repayments and other transactions, net cash outflow decreased by 72%, reaching BRL 3.9 million. The company ended the quarter with net debt of BRL 71 million. We continue to monitor our capital structure, the debt amortization schedule and operating cash generation with a focus on preserving liquidity and implementing initiatives to restore profitability. The company's management continues to work toward restoring the company's profitability. Product and pricing changes implemented in late 2025 are already contributing to sales performance at exclusive stores, although their effects have not yet been fully reflected in revenue. We have also made progress on opening key stores, which are currently in the showroom development phase and they are expected to contribute gradually once they begin operating. We would like to thank our shareholders, dealers, employees, suppliers and other stakeholders for another quarter delivered. I now turn the floor over to the operator to begin the Q&A session.

[Operator Instructions] First question from [indiscernible].

The gross margin fell 4.5 percentage points to 26.3% and EBITDA margin went from 5% to a negative 4.2%. What are the main initiatives to restore profitability? And when should price adjustments and portfolio changes begin to have a more significant impact on the results?

Here, when we look at revenue, we have to consider volume and price. Volume, we made a number of changes in terms of product and price positioning in the end of last year. And we can see the sellout sales of the stores. In other words, an improvement in sales performance. However, after we sell at the stores, it takes some time until this becomes a recognition of revenue. So this is one of the actions that should have an effect on improving our revenue. Another point is price. We had inflation of raw material in the second quarter resulting from the war in the Middle East involving Iran and the United States. And that has an impact on all products related to the oil supply chain. So we did a price adjustment in the middle of the quarter and this impact should start being seen as an impact on the margin starting in Q3. And then we have expenses. We are very disciplined in managing expenses so that we can turn the EBITDA into a positive number.

[Operator Instructions] Next question from [indiscernible].

He asks, what are the proposals for sales recovery in the corporate market? Is there a proposal of new markets according to funding programs?

Well, to answer your first question with the proposal for recovery of sales in the corporate market, we have been working more actively in the corporate channels, and we can see a rather consistent pipeline in that market. However, these are sales which are kind of long. We can see them, but that's the kind of sales that will take a little longer until we can see the results of these sales in our income statement. I'm not sure I understood your second question. So if I answer differently than what you meant, please let me know. You asked about perhaps the development of new markets, which we announced due to a requirement of the loan with BNDES, we raised BRL 35 million with BNDES last year and one of the requirements was that we increase is that we have a certain level of revenue, $6 million in markets other than the United States. So yes, we have adopted actions to open stores to sell corporate projects in Latin America because we need to comply with this level of revenue required. When we accepted this requirement, well, our track record indicates that the average sales for ex-U.S. market will meet the criterion of $6 million in a period of 5 years. In addition, we are adopting actions to increase our sales in these markets as the [indiscernible] forth.