Q4 2024 Grupo Casas Bahia SA Earnings Call - Pre-Recorded

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Hello, welcome to the presentation of the fourth quarter and year 2024 results of Grupo Casas Bahia. The fourth quarter of 2024 saw a return to revenue growth, driven by the strong performance of Black Friday and Christmas, as well as the evolution of the second phase of the Transformation Plan, with initiatives aimed at improving the top-line. I emphasize that this growth is consistent, with the gradual improvement of GMV from previous quarters, highlighting the speed of advancement of our physical store by more than 16% and the resumption of online sales driven by the reduction of 1P pressure and a 24% increase in 3P. Thus, we consolidated structural adjustments from the first phase of the Transformation Plan and, from now on, we begin to capture operational leverage, achieving the fifth consecutive quarter of improvement in income margin. Our credit system is a strategic pillar and competitive differential. In 2024, we reached the largest portfolio in our history, reaching R$ 6.2 billion, with growth across all channels. More than volume, what differentiates us here is the quality of the portfolio. We know our customer well, ensuring sustainable credit granting and controlled delinquency.

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Speaker Change: As a result, we had an annual reduction of 1.5 percentage points in OV90 and kept the net loss stable. Additionally, we started the FDIC operation, which should optimize the financing of the credit operation. The FDIC already has a firm commitment from third-party investors and will have an initial capital of R$ 300 million, with the expectation of reaching R$ 500 million in equity in the coming months.

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Speaker Change: After this first stage, the FDIC may receive additional contributions. Our service monetization strategy is bringing new growth engines. In retail media, we grew more than 200% in Gross Revenue, consolidating our platform as a relevant channel for advertisers. The issuance of cards doubled, increasing penetration in credit and strengthening our financial ecosystem. Additionally, secure services revenue grew 17%, reflecting the potential for additional profitability levers.

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Jeff: I now pass the word to Elcio for the financial highlights. Thank you, Renato, and hello everyone. We launched our Transformation Plan in August 2023 with very clear objectives. To maximize profitability and cash flow with a focus on key categories and creditable items. After six quarters, we remain committed to this, with all operational and financial actions aligned with this vision. The results of the fourth quarter and the year reinforce that we are on the right path.

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Jeff: After a period of strategic adjustments, we have returned to growth. We recorded an 8% increase in net revenue compared to the previous year. This performance reflects a more accurate commercial execution, especially in physical stores, as well as growth in credit sales and greater penetration of services. In previous quarters, we had recorded a revenue decline due to category adjustments in UP, closure of unprofitable stores, and commercial changes aimed at profitability. As expected, this strategy had a short-term impact but positioned the company for sustainable growth. For the year as a whole, net revenue decreased by 6%, but with a positive trend for 2025.

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Jeff: The gross profit reached R$ 2.5 billion, 20% higher compared to the fourth quarter of 2023, with a margin of 30.8%. For the year as a whole, the gross margin was also 30.8%, compared to 27.9% the previous year, representing an increase of 2.9 percentage points. Our commitment to profitability is evident. Even with a 6% lower revenue for the year, the gross profit grew by 4%, supported by a more robust margin.

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Jeff: In SG&A, we remain rigorous in expense control, ending the quarter at 23.8% of net revenue, a reduction of 2.4 percentage points compared to the previous year.

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Jeff: Given the challenging macroeconomic scenario, we acted preventively by adjusting our structure with the closure of eight more underperforming stores, reducing nearly 700 positions. Throughout the year, we reduced expenses by 5% nominally, which represents R$ 383 million, even in the face of an inflation rate of approximately 5%. This discipline will continue to be a fundamental pillar in 2025.

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Jeff: With 5 consecutive quarters of evolution, our EBITDA margin reached 8%, an expressive increase of 5.8 percentage points compared to the previous year. We closed the year with a 7.2% EBITDA margin, compared to 4.3% last year, an advance of 2.9 percentage points. In nominal terms, we achieved an EBITDA of 1.97 billion reais, an increase of 731 million reais compared to last year. This growth occurred even with a revenue reduction of 1.6 billion reais, reinforcing once again, now in the EBITDA margin, our priority of profitability over growth.

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Jeff: The financial result was R$ 921 million, due to the increase in the Selic rate and the impact on cash related to debt reprofiling. The EBIT was negative R$ 660 million and the net loss was R$ 452 million. Both negative, but with a 55% improvement compared to the previous year.

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Jeff: We closed the quarter with a positive free cash flow generation of R$ 1.2 billion, driven by operational performance, capital discipline, whether in working capital or capex, initiatives to reduce labor expenses, and a focus on tax monetization. Year-to-date, we achieved the best cash flow of the last five years, with a positive generation of R$ 976 million, compared to R$ 648 million in 2023. It is worth noting that in 2023, the flow was positively impacted by a reduction in inventories of R$ 1.1 billion. We maintain a healthy and well-distributed debt profile, with 91% in the long term and only 9% in the short term.

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Jeff: Almost 80% of the debt is concentrated in 2029 and 2030. It is worth noting that series 2 of the 10th issuance, in the amount of R$ 1.5 billion, has a convertibility option into shares starting in October 2025, with a conversion price based on the weighted average of the 90 days prior to conversion, with a 20% discount. The net debt was reduced by almost R$ 1 billion compared to the third quarter and remained stable compared to the fourth quarter of 2023. The financial leverage, according to the methodology established in the 10th debenture issuance, closed at 0.4 times, well below the maximum limit of 3 times.

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Speaker Change: And finally, looking towards 2025, in the face of a challenging macroeconomic scenario, we remain committed to more discipline and rigorous execution of the transformation plan. Thank you all very much, and I return the floor to Renato. Thank you, Élcio. We closed 2024 with great advances, highlighting the resilience and potential of the company. We completed the restructuring of R$ 4.1 billion in bank debt, with full adherence from creditors. A great vote of confidence that enabled the extension of the average term from 22 to 72 months and the reduction of the average cost by 1.5 percentage points, strengthening our balance sheet and cash flow. After the structural adjustments of recent quarters and the start of revenue growth in 4Q24, we remain focused on executing the transformation plan to advance in profitability and cash flow generation. We are accelerating the growth of physical stores, our most profitable channel, and prioritizing online profitability, focusing on improving the customer journey to ensure solid and sustainable growth in 2025. The expansion of credit continues to be essential, with careful attention to delinquency. We operationalized the PIDIC to foster credit, diversifying financing and strengthening our competitive advantage.

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Luca: In addition to the Carnet, we continue to advance in monetizing services that utilize our assets without the need for additional capital, such as the example of CBFU, in which we seek to consolidate our leadership in the market and boost the logistics business platform.

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Luca: We thank our customers, our employees, suppliers, financial institutions, and other stakeholders. We are confident that we are on the right path to lead the company into a new cycle of sustainable growth. We will continue with total dedication to you. Thank you all very much. Thanks!

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