Veste S.A. Estilo (VSTE3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to our earnings release conference call regarding the second quarter Veste S.A. We have here today Mr. Alexandre Afrange and Mrs. Elisa Lima, who is responsible for financial planning. And we inform our participants that the earnings release is available for download at www.veste.com in the Results Center section. Before we start the conference, I'll make a quick disclaimer. This webcast is being recorded and translated simultaneously. The slides are being presented in our IR website and webcast platform. All questions should be asked via chat on this platform. Please feel free to submit questions throughout the broadcast. Please be advised that any statements that may be made during this webcast regarding the company's business outlook, projections and operating and financial goals are management assumptions and information currently available to the company. Future outlooks are not guarantees of performance. They involve risks, uncertainties and assumptions because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry and other operating factors may affect the company's future and lead to results that may differ materially from those expressed in such future statements. We now turn to the presentations of Veste S.A.'s results.

Hello, everyone. Good morning. I am Alexandre Afrange, CEO of Veste S.A.; here Elisa Lima, our IR and Financial Director. We have a very positive results for this quarter. But before we go over, I would like to highlight a very relevant event. Our B3 in June '23 to celebrate our [ vast ] IPO. It's so timely to celebrate this event that the company shows great results. Our IPO and since we opened in the shareholder list, that had allowed to transform our brand into a reference brand where we showed excellence in our results with positive numbers. We show revenue growth with a gross margin gain and net profit generation with a very high lack of customer satisfaction. All of that, thanks to a very straightforward strategy, which was very successful. We had risk the essence of our brands. We had now a great customer experience with marketing and communication. Our stores are going through a renewal process. They give it to customers what they are looking for. With that, we may ensure sales with efficiency and building up a sustainable business. All of that, thanks to a team that is challenging themselves, always aligned and respecting themselves enthusiastically. With all of that, our sales are doing really fine. Let me highlight Same Store Sales, where we have reached a 12.5% growth in relation to the same quarter 2022, which was a very difficult year-over-year in comparison. Now we have 9 consecutive quarters. Another highlight is our gross revenue of BRL 360 million, 8% growth. A great performance for the B2C channel, which grew 8.1% and B2B 11.2% increase. Once again, we have reached record sales in the Mother -- say, Mother’s Celebration day, especially for Le Lis, which is a reference brand for women's gift, the [ B2B ] 42.2%. Our channel is very significant for sales with profitability and yield as we see 3.2 percentage points in the gross margin and increase in the [ EBITDA ]. We are doing whatever we can to offer communication, experience and consistent strategy in all channels at the time they went and where they are. Our growth was with yield. Our focus is in the full price, and we are very strict with our prices to guarantee better ROI. We have 3.4 p.p. of gross margin, 2.3 percentage points of EBITDA. And this is the net growth, BRL 27 million of net adjusted profit and Veste hopes to follow this pathway in a very sustainable way. And part of that strategy is continuous satisfaction of our clients. We are driven by patient-centered satisfaction. We reached a consolidated NPS of 86. And these indicators, they just keep on growing. We are investing on future growth. The implementation of the concept of our stores is another fundamental pillar. We will have another 13 ready and refurbished stores for this year. We have concluded that [ Veste ] gives essence to BO.BO, Dudalina and John John. We are pretty sure that all brands are clearly shown a steady growth and to grow with sustainability. Veste sees SAG with an intrinsic part of our business. I would recommend you to read our sustainability report, which is available at our website. And it's exactly about this performance with solid robust numbers, that I will hand over to Elisa.

Indeed, our performance was amazing this quarter. This is just a consequence and a continuation of everything we have been showing in the past quarters. Let's go deep into those numbers. Let's start by channel income. We had great results with a consolidated of 8%, B2C that has grown 8% as well as B2B, which shows an increase of 11.2%. [ B2C ], let me highlight some indicators. The first one, Same Store Sales, which has increased 12.5% versus the same quarter '22, which had been very good. We also see a very positive performance in the store revenue. B2C Digital was very good in the quarter with a growth of 42.2%. That was the best result in our series with a great profitability. Returning to B2B, we are investing, recovering customers in individual and Dudalina with a very strong power. We are trying to increase and qualify our client base for BO.BO and Dudalina as to outlet stable sales, just 0.3% in relation to the same quarter last year, where we were implementing this current strategy, full price sales strategy and less sales generating less leftovers to the outlet. We can see the maintenance of this strategy over here where full price sales proportion in the B2C was closer to last year, 84%. We foresee a good distribution, which collaborates positively to our rentability. Now the EBITDA of the period and the gross margin, BRL 195 million in the semester, 13% growth with a gross margin of 67.7%, plus 3.4 percentage points in relation to the same time last year. The quarter gross margin evolution is due to this margin effect and thanks to gain in both channels, B2B and B2C. Once the composition of our channel mix did not take to any relevant margin alteration in relation to the prior year. Adjusted EBITDA, BRL 65.3 million in the semester, a significant growth of 19.6%. The adjusted EBITDA margin growth was of 22.6%, that is explained thanks to the gain of gross margin. The adjusted EBITDA SG&A showed an increase of [indiscernible] percentage of the net income, we had reached 45.7%. Operating expenditures performed similarly to last year, where we invested on awareness, marketing and branding. As our goal is to strengthen our brands in the long term. We also had more expenditures with personnel. Our sales had grown due to good results. And as of this year, we have results participation. All this increase has been planned, and we are very strict in controlling our expenses. We are investing on what will generate return to the company with high efficiency. As Alexandre said, our sales efficiency supported by a solid financial resource. Our net income shows, so we had an adjusted net income of BRL 27.2 million. Net margin -- adjusted net margin 9.4%. In the quarter, we had adjusted some nonrecurrent effects, which had affected our results. We had non-adjustment accounting net income. I will go into details about those adjustments. The first one was an amortization of the intangible assets of software license, BRL 1.2 million. We are investing in new solutions for our digital channel. That's why some technologies have to be replaced. The second group of adjustments is due to the high level of inflation. The net impact is of BRL 20 million. The inflation impact refers to the exclusion of 2018 of ICMS of the calculation base over the gross revenue. Such an exclusion was done according to the STJ resolution where they decided that ICMS would not be part of this calculation base and STF has decided to go for this approval. With that STF has adjusted such thesis. In case of an eventual judicial discussion, we decided to go for 0 impact where the fiscal and payment of judicial shares, which are open, where we were able to pay 52% of the whole amount. The rest will be paid in 9 monthly installments, the first installment was paid last June. This is an extraordinary impact and nonrecurring. And we are still committed with sustainability in the long run. Our indebtedness shows a net indebtedness of BRL 96.513 billion, almost 100% of indebtedness is in the long run. Our last topic is the opening of investments in the same period. In the last half, CapEx has grown in relation to the prior year. Let me highlight investments of BRL 16.8 million in operations and stores. Most of that amount was driven to the implementation of new concepts. 10 new stores were opened between April and July. Such a renewal of stores is a strategic pillar where we are able to reach revenue increase, thanks to this new experience linked to our brands, reducing expenses. We will keep on investing in our future, enhancing our basis for good operational results similar to those achieved this half. Well, these are the main comments and highlights for the second half, which are detailed in our release available at our website. We are now opening for the Q&A session, and your questions may be submitted by the chat. We are now opening the Q&A session. If you have any questions, please just submit them throughout the webcast platform throughout the Q&A icon on the left of your screen. [Statements in English on this transcript were spoken by an interpreter present on the live call.]