Veste S.A. Estilo (VSTE3) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Veste S.A. conference call to discuss the results of the fourth quarter of 2025. Joining us today are Mr. Alexandre Afrange, CEO of Veste; and Ms. Elisa Lima, CFO and Investor Relations Officer. We inform all participants that the earnings release of the fourth quarter of 2025 is available on Veste's Investor Relations website at www.veste.com under the Results Center section. Before we begin, I would like to make a brief disclaimer. This conference call is being recorded and simultaneously translated. After the call, the presentation materials will be available on Veste's IR website. All questions must be submitted in writing through the Q&A icon. Please feel free to send your questions at any time during the presentation. Any statements made during this webcast regarding the company's business outlook, projections and operational and financial targets constitute management's assumptions and are based on information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the company's future performance and may lead to results that differ materially from those expressed in such forward-looking statements. We will now begin Veste S.A. results presentation.

Hello. Good morning. It's a pleasure to have you with us this morning. I'm Alexandre Afrange, CEO of Veste S.A., and I'm here to present the highlights of our 2025 results. Next, Elisa Lima, our CFO, will provide further details on the financial performance. I would also like to welcome you here at the Le Lis flagship store in Vila Nova Conceicao, Sao Paulo. This space brings together all the brand concepts, comfort, thoughtful product display and an architecture that feels inviting. It represents an evolution of the renovations we have already carried out in our shopping mall stores. Sao Paulo is a city with many charming and elegant [ addresses ], and this Le Lis flagship is located in one of them. And it is from here that I'm pleased to share our outstanding results. Our net revenue reached BRL 338.9 million, representing an 8.4% increase compared to the fourth quarter of 2024 with same store sales up 10.7%. The fourth quarter shows an excellent track record of results in 2025, a year that was very important for Veste, a year in which growth and profitability moved together forward with discipline and scale. And this was only possible due to the alignment between strategy, daily decision-making and execution. In 2025, total net revenue amounted to BRL 1.243 billion, representing growth of 10.4% with same store sales up 9%. For the year, adjusted gross profit totaled BRL 793.8 million, a margin of 63.9%. The 0.3 percentage point increase reflects commercial discipline, a better product mix and a high share of full-price sales. Adjusted EBITDA reached BRL 266.7 million, an 18.6% increase compared to 2024 with a 1.5 percentage point margin expansion. And adjusted net income totaled BRL 33.2 million, confirming the company's meaningful and consistent improvement in profitability. These results achieved within a corporate environment that conveys solidity and confidence and is supported by 3 major pillars. The first is the strength of our brands and growth with identity. For yet another year, Le Lis delivered excellent performance with sales growing 11.6%. Our active customer base expanded by 3.6% with a strong share of full-price sales. The brand continues to be the company's main value generation pillar. BO.BO consolidated its strategic role within the portfolio, posting significant growth of 14.8% over the year, gaining relevance in total revenue and delivering consistent margin expansion. At Dudalina, we took essential steps to accelerate growth starting in 2026. We moved from 7 franchises at the end of 2024 to 22 by December 2025 with [ Veste ] by sharing success with our partners. We focused efforts on efficiency gains. Brand inventory decreased 43% compared to December 2023 and 21% compared to December 2024. We increased the brand's EBITDA by more than 20% during the year. At John John, we delivered what was expected, stability. And we focused on important processes such as mix adjustments, operational efficiency and positioning, preparing the ground for new growth cycles. Now moving to the second pillar, scalable and profitable channels. The digital channel closed 2025 at a new level. The full migration to the VTEX platform was completed, enabling greater scalability and improved customer experience and clear efficiency gains. The digital B2C channel grew 26.5% in the fourth quarter and 21.3% for the year with margin expansion and increased share of mobile apps, which now account for 24.3% of digital sales. And the B2B channel also delivered strong progress with revenue growth of 13.7% margin gains, advancements in transforming the model, highlighted by the expansion of Dudalina franchises. And our third pillar, operational discipline and financial strength. 2025 was the year that discipline set the tone, discipline in inventory management, in expenses and in capital allocation. With discipline, we reached 177 days of inventory coverage, a reduction of 44 days. We improved the expense to net revenue ratio by 1.2 percentage points and paid the first installment of our debentures, closing the year with net debt of BRL 114 million versus BRL 143 million in September 2025. Supported by operational consistency, we continue to reduce leverage and strengthen our balance sheet. We closed 2025 confident in the strategy we chose. [ Because ] more than just good numbers, the past year leaves us with lasting foundations that propel us forward: a larger and more engaged active customer base; a more integrated omnichannel shopping journey; a repositioned growth of B2B operation; technological infrastructure ready to scale; and an organization better prepared to grow profitably. Today, Veste operates at a new level of maturity. This is why we entered 2026 very confident in a much stronger position than in recent years of our history. We are ready for an excellent execution. I'll now turn it over to Elisa, who will go deeper into the numbers. Thank you.

Yes, Alexandre, we are truly ready to execute. We closed 2025 with a more balanced capital structure, stronger cash generation and greater financial predictability. Gross revenue in 2025 totaled BRL 1.529 billion, representing a growth of 8.7% versus the prior year. And the fourth quarter revenue reached BRL 423.3 million (sic) [ BRL 426.3 million ], an 8.5% increase compared to the same quarter of 2024. Here, growth came from all channels and all brands. Among the key highlights with double-digit growth were digital B2C and B2B; among the brands, Le Lis and BO.BO. Now, turning to the numbers. B2C grew 10.7% in the quarter with same store sales also at 10.7%. For the year, the channel grew 8.3% with same store sales of 9%. The consistent growth of this indicator is an important demonstration of the success of our organic growth strategy focused on store renovations, customer experience and continuous digital innovation. Digital B2C once again delivered accelerated growth of 26.5% in the quarter and 21.3% for the year. B2B also had an excellent year, growing 13.7%. In the quarter, there was a 4.6% decline. As previously anticipated in our last earnings release, in 2025, we strategically concentrated year-end billing in the third quarter. This ensured adequate inventory supply to our clients, which explains the fourth quarter performance. However, in the second half as a whole, channel growth was 13.9%. The outlet channel remained stable for the year with growth of 1.2%. Alexandre already shared some of the full year brand figures. I will now present some quarterly highlights. The success of our main brand, Le Lis, continues doing strong with growth of 12.7% in the fourth quarter and same store sales of 11.8%. Le Lis has always been a benchmark brand for gifting, and this year was no different with an outstanding December. BO.BO revenue was 16.8% higher than in the same quarter of the previous year with very strong same store sales of 14.4%. At Dudalina, the highlight was quarterly same store sales of 10.8%, influenced by B2B performance and the transfer of 5 company-owned stores to franchises. Total brand revenue growth was lower at 5.2%. Individual delivered meaningful full year growth of 8.10%. In the quarter, however, also impacted by the B2B billing calendar, revenue declined by 24.1%. This growth was entirely driven by full-price sales, which represented 84% of B2C sales in the quarter, virtually in line with the prior year. Our focus on full-price sales allowed a slight expansion in adjusted gross margin, which reached 64% in the quarter and 63.9% for the year, 0.3 and 0.4 percentage points above the respective periods. As a result, adjusted gross profit reached 9% in the quarter and 10.9% for the full year. In addition to the gross margin gains, we kept expenses under control. This was a key factor behind the strong 10.9% growth in adjusted EBITDA for the quarter, which reached BRL 76 million and -- for the adjusted EBITDA totaled BRL 260.7 million (sic) [ BRL 266.7 million ], 18.6% higher than 2024. As a result of all these advancements, we continue to deliver net income growth. In the fourth quarter, adjusted net income was BRL 17.3 million, 31.6% higher than in the same period of 2024. Net margin was 5.1% in a quarter that clearly demonstrated the evolution of our results as we delivered growth with operating leverage gains. For the full year, adjusted net income totaled BRL 33.2 million. With an increasingly strong operation, we are able to grow while maintaining a healthy capital structure. Net debt stood at BRL 113.7 million at the end of December, equivalent to 0.6x adjusted EBITDA over the last 12 months. Following the repayment of BRL 67 million payment in debentures in October and the receipt of BRL 37 million from [ Finep ] in November, our debt profile has also improved. A core pillar of Veste's financial strategy and essential for sustainable growth is inventory control. We ended the year with BRL 218 million in inventory, a 12.5% reduction compared to December 2024. It's clear that we are able to sustain sales growth while optimizing the use of invested capital. This allows us to invest in new opportunities across our portfolio of brands and channels. Thank you very much for your participation. We will now begin the Q&A session.

[Operator Instructions]

I would like to thank you very much for attending our call. We have some questions related to our results of 2025. So I'll start answering [indiscernible] congratulated us on the results of 2025 and also for all the work we've made on Veste. We thank you so much. We appreciate that. It was a very successful effort that we made in the past years. He also asks about the acquisition by BTG Pactual. The acquisition relevant were communicated to us in August and October. All the details were disclosed on the respective date, August and October in material facts, and they are available at our website. So our IR is available to answer any details about this transaction. We are now going to move on to the second question by Gustavo [indiscernible], who also congratulates us on the solid results. And he asked us what's the -- how we understand the relationship between the reduction in inventory and increase in online sales? And could this growth have been driven by potential stockouts at the retail level? I will turn the floor to Alexandre for him to answer.

Thank you, Gustavo. It's a pleasure to talk to you. Your question was very smart. We had been working with very high inventory levels, and such reduction made us have a more consistent results in general. And all the actions we carried out in terms of improving our e-commerce platform that -- we completed the migration this year to the new platform, and it was very successful. We are working with VTEX. Omnichannel has been working perfectly. So we have a very high level of assertiveness across the receiving of the orders and their shipping. So we have no problems where the rupture may cause a problem to us. We've been following on our growth plan and the growth of digital dimension. And this stockout does not affect our performance in any way. So we continue to be very focused in very balanced inventory levels, in terms of sales planning. And the integration of channels by omni is exactly one of the tools that allows us to have a very low rupture. Our full-price sales is above 85% when you look at the collections. So, that shows that the rupture is not a problem when we work with that level of store inventory.

So the question is, what's the level of leverage which could be considered to be healthy by the company? We understand we are at a very healthy level, and we have room to reduce this even further, but we are at a very healthy leverage. And the payments of the debentures have been planned for the future periods, and this level will decrease even further. I turn the floor to Alexandre to answer [ Samuel's ] questions. He asks about the expansion process planned for 2026.

Thank you, Samuel. Thank you very much for the question. We are going to continue to focus on our growth plan that we have been presenting so far. So we are very focused on our organic growth plan. So there is one pathway of franchises with Dudalina. We have 22 stores by the end of 2025. We announced that we would reach the number of 30 by the end of 2026. We are likely to exceed this number. We are going to be focused on the B2B channel that brings a lot of capillarity. We're going to be focusing on the channel and the digital growth with all the apps of different brands. And this has accounted for a very important item in the way we sell our products in the market. So we are going to continue on this path and following this plan that has been very structured and very well implemented. And we have our own stores that are going to be open. In March, we are going to open one store of each of our retail brands, Le Lis, BO.BO, John John and Dudalina. So we are going to have stores opened in [indiscernible] in the month of March and some other store openings along the year. So our 2026 expansion plan follows the same format as we have been doing so far in a very consistent manner.

Thank you, Alexandre. So these were the questions for the day. I would like to thank you so much for attending the call. So I'll turn the floor to Alexandre for his final remarks.

We are very happy with the evolution of the company. I would like to thank you for the congratulations you gave us on the performance. And this is a result of the work that we have been doing with a lot of consistence, with a lot of coherence in the past few years. And this is what you can expect from us: seriousness, consistency and coherence to continue growing this company with profitability and with a focus in the long term. Thank you very much for your presence.

Veste S.A. conference call has come to an end. Thank you all for your participation, and have a good day.