Q2 2026 Vivara Participacoes SA Earnings Call

August 6, 2026

Operator: We'll now collect our questions. Remembering that to make a question, just send your request to the Q&A icon on the platform on the bottom of your screen. Let's go to our first question from XP Investimentos, and we'll send it over to turn on your audio. Please go ahead. Dani. Good morning, Thiago and Caio. Good morning, Elias and the rest members of the team. Thank you for taking my question. I have two from our side. First is focused on Life by Vivara. We've seen a scenario which is more challenging in terms of growth. Obviously, it's at a level which is healthy looking at the brand overall, but we see, for example, some signs of points of attention. For example, in the general conditions on bringing other challenges from the side of pricing.

Speaker #1: We'll now collect our questions. Remember that to ask a question, just send your request through the Q&A icon on the platform at the bottom of your screen.

Speaker #1: Let's go to our first question, from XP. We'll send it over to—turn on your audio. Please go ahead. Please go ahead.

Speaker #2: Bom dia, Tiago.

Speaker #1: Dani, good morning. Tiago and Caio, good morning, Elias. And the rest of the members of the team, thank you for taking my question. I have two from our side.

Speaker #1: First is focused on life: we've seen a scenario which is more challenging in terms of growth, obviously. It's at a level which is healthy, looking at the brand overall.

Speaker #1: But we see, for example, some signs of points of attention. For example, in the convectors on bringing other challenges from the side of pricing.

Speaker #1: So I wanted to understand a little bit how we can define this strategy going forward. Especially at moments when it's the biggest challenges that we see.

[Company Representative] (XP): I wanted to understand a little bit how we can define this strategy going forward, especially at Moments when it's the biggest challenges that we see. We don't depend only on the direct competitors, the category that we're seeing for the first time in this exposition on the macro side, those who are present, but also have to see a little bit how to think about this evolving over time. To understand a little bit, what's your strategy in relation to the brands from the standpoint of the balance of growth, margins, et cetera, and innovations and eventual changes in terms of repositioning and pricing? That's my first question. My second question is in Vivara, a little bit about the head of the pricing area.

Speaker #1: So we don't depend only on the direct competitors. It's a category that we're seeing for the first time in this exposition on the macro side.

Speaker #1: Those who are present also have to see a little bit—how to think about this evolving over time. But to understand a little bit: what’s your strategy in relation to the brand, from the standpoint of the balance of growth?

Speaker #1: Margins, etc., and innovations and eventual changes in terms of your positioning and pricing. That's my first question. My second question is in Vivara, a little bit about the head of the pricing area.

Speaker #1: You talked about on the YouTube video that you have no additional material, but we have some adjustments especially below the commercial area from Red Wings and so forth.

Thiago Borges: You talked about, on the YouTube video that you have no additional material, but we have some adjustments, especially below the commercial area from wedding rings and so forth. To look at some SKUs, see some going up in terms of categories. Thank you, Dani, for your question. This is Thiago. Talking about the first part of the scenario which you described. We have evolved quite a bit, the brand overall, to become more and more less depending on one category, which was 50% of our business, and transforming the brand into a complete jewelry brand. We involved other categories in the brands, especially collections, more commercial questions, and wedding rings. We've seen an attraction through this lens in the commercial area. We also commented on this, the growth, which is very healthy growth in that area in Q2.

Thiago Borges: You talked about, on the YouTube video that you hav no additional material, but we have some adjustments, especially below the commercial area from wedding rings and so forth. To look at some SKUs, see some going up in terms of categories. Thank you, Dani, for your question. This is Thiago. Talking about the first part of the scenario which you described. We have evolved quite a bit, the brand overall, to become more and more less depending on one category, which was 50% of our business, and transforming the brand into a complete jewelry brand. We involved other categories in the brands, especially collections, more commercial questions, and wedding rings. We've seen an attraction through this lens in the commercial area. We also commented on this, the growth, which is very healthy growth in that area in Q2.

Speaker #1: To look at some SKUs, see some going up, in terms of categories. Thank you, Dani, for your question. This is Tiago. Talking about the first part, of the scenario which you described, we have evolved quite a bit the brand overall to become more and more less depending on one category, which was 50% of our business, and transiting the brand into a complete jewelry brand.

Speaker #1: So we involved other categories, in the brands, especially collections commercial, more commercial questions, and wedding rings. We've seen an attraction through this lens in the commercial area.

Speaker #1: We also commented on this, the growth, which is very healthy, growth in that area, in the second quarter. As far as the collections, we've— we have a calendar of launches, very robust.

Thiago Borges: As far as the collections, we have a calendar of launches, very robust. We have the revenue from Life by Vivara and products launched during the year, which previously ran around 40%. This year it's below 20, but we're looking at this number, and we think there's a correlation, very important correlation of this number with same store sales and the growth of our business in the stores. Just a few things that we've been doing which have appeared, perhaps not completely appeared, but in the internal data shows that we're on the right road to looking at same store sales of Life by Vivara at a level which is much better than we've ever done in the last 2 quarters due to the calendar effect. As far as your second question of pricing of Vivara, we had a scenario of very high growth.

Speaker #1: We have the revenue from life and products launched during the year, which previously ran around 40%. This year, it's below 20, but we're bringing this number— we're looking at this number, and we think there's a correlation— very important correlation with— of this number with same-store sales and the growth of our business in the stores.

Speaker #1: So just a few things that we've been doing. Which have appeared perhaps not completely appeared, but in the internal data, shows that we're on the right road.

Speaker #1: To looking at same-store sales of life, at a level which is much better than we've always done in the last two quarters due to the calendar effect.

Speaker #1: As far as your second question, pricing, of Vivara, we had a scenario of very high growth. The principal commodity which affects us, working a great deal on the categories: gold and silver, and Vivara silver.

Thiago Borges: The principal commodity which affects us, working a great deal on the categories gold and silver and Vivara silver, going from 5% or 6% to 10% participation in Q2, which helps a great deal to have products which are in the entry level, which are more competitive with our business, as well as several initiatives for engineering or product engineering, which we are doing, and technology in the manufacturing process. The movements that we have done of pricing, we do not see any changes, but it is a good market. When we look at the price of gold in the last 60 days, it has been an unprecedented fall in the value of gold and the price of gold above 50% during this very short period of time.

Speaker #1: Going from 5 or 6 per 10 to 10% participation in the second quarter, which helps a great deal to have products which are in the entry level which are more competitive with our business, as well as several initiatives for engineering of product engineering which we're doing, and technology.

Speaker #1: In the manufacturing process. And the movements that we've done of pricing, we don't see any changes, but it's a very good market. And when we look at this— the price of gold in the last 60 days, it's been an unprecedented fall in the value of gold, and the price of gold.

Speaker #1: Above 50% during this very short period of time. And so then we have to adapt to that, but also the principal consequence is that all of our initiatives that I commented internally—the most important is that when we look at all of the levers of value that the company has presented over its long and successful history, it has always followed gross margins of 69% to 70%, independent of the scenario of the price of its principal raw materials.

Thiago Borges: We have to adapt to that, but also the principal consequence is that all of our initiatives that I commented internally, most important is that when we look at all of the levers of value that the company has presented over its long and successful history, has always followed gross margins of 69%, 70%, independent of the scenario of the price of its principal raw materials. I think that in H1, we have the highest gross margin in history and looking at the highest levels, showing that we have several levers within our business. Beyond that, the strength of the brands and the customer experiences within our stores, which the clients have had more than 3,500 salespeople. We have been able to put our policy of markup to maintain our margins.

Speaker #1: So I think that in the first semester, we have a— the highest gross margin in history. And looking at the highest levels, showing that we have several levers within our business.

Speaker #1: And beyond that, the strength of the brands and the customer experiences, within our stores, which the clients have had more than 3,500 salespeople. And we've been able to put our markup, our policy of markup, to maintain our margins.

Speaker #1: So we're very confident that we'll continue in that trajectory in the next quarters and next years. Very well, thank you. Our next question is from Eric Jung from Santander.

Operator: We are very confident that we will continue in that trajectory in the next quarters and next years. Very well. Thank you. Our next question is from Eric Yumii from Santander. Eric, please go ahead. Good morning, Thiago, and everybody else, for your space. I have two questions. The first is more on the side of expenses. We saw a higher increase in the price of raw material as a whole, which has an effect on the stores. We also have to understand a little bit better if there is anything of expenses that are operating expenses in the stores during H2.

Speaker #1: Eric, please go ahead. Good morning, Tiago, and everybody else. For your space. My question is more of two questions. The first is more on the side of expenses.

Speaker #1: We saw an increase, a higher increase in the price of raw material as a whole, which has an effect on the stores. But we also have to understand a little bit better if there's anything of expenses that are operating expenses in the stores during the second half of the year, and also what we should look at at the run rate of OPEX, thinking about perhaps for the rest of the year, and then so we can see if there's any space for the looking at a more comparable base of expenses in the second half of the year.

Eric Yumii: Also, we should look at the run rate of OpEx, thinking about perhaps for the rest of the year, then see if we can see if there is any space for looking at a more comparable base of expenses in H2. The second one has to do with, you mentioned, Thiago, about the evolution of the collections, and I think that I would like to understand how is your mentality. How are you thinking about H2, and also in the product acceptance, which products are really a point at the lead. Again, we have looked at this trajectory of Life, which is sequentially very hooked up with our calendar. We look at the same store sales, which is very stable and very consistent. Hi, Eric. Good morning, everyone. I am going to start with talking about expenses.

Eric Huang: Also, we should look at the run rate of OpEx, thinking about perhaps for the rest of the year, then see if we can see if there is any space for looking at a more comparable base of expenses in H2. The second one has to do with, you mentioned, Thiago, about the evolution of the collections, and I think that I would like to understand how is your mentality. How are you thinking about H2, and also in the product acceptance, which products are really a point at the lead. Again, we have looked at this trajectory of Life, which is sequentially very hooked up with our calendar. We look at the same store sales, which is very stable and very consistent. Hi, Eric. Good morning, everyone. I am going to start with talking about expenses.

Speaker #1: And the second one has to do with— you mentioned, Tiago, about the evolution of the collections. And I think that I'd like to understand how— how's your mentality?

Speaker #1: How are you thinking about the second half of the year? And also in the acceptance of product, product acceptance, which products are really a point at the lead.

Speaker #1: And again, we could look at this trajectory of life which is very sequentially very looked up with our calendar. And we look at the same-store sales, which is very stable.

Speaker #1: And very consistent. Hi, Eric. Good— good morning, everyone. I'm going to start with talking about expenses. We have— when we see our level of operating expenses, compared to the first quarter of last year, it's up to— we've grown 10.5%, 10.5 gross sales of gross revenue.

Elias Lima: We see our level of operating expenses compared to the Q1 of last year, we grew 10.5% net growth sales, or growth revenue. We look at the 2 percentage points that we have seen in this H1 due to the calendar effect and the World Cup, it has an effect on our operating expenses. We also have to remember that in this quarter and in this H1, this quarter, we had to look at the results. In other words, we had this during the period of 10.5% of growth in our operating expenses, with a dilution of growth of almost 2 percentage points in our revenue, which you would have to have due to the calendar effect, and principally the expenses on comparable basis. In other words, we're already able to see that this dilution is happening over time.

Speaker #1: When we look at the 2 percentage points that we have seen in this semester for the— due to the effect of the calendar effect and a couple of World Cup, and it has an effect on our expenses, on our operating expenses, we also have to remember that in this quarter, in this half of year, this quarter, we had— to look at the results, in other words, we had this during the period of 10.5% of growth in our operating expenses, with a dilution of growth of almost 2 percentage points in our revenue, which we would have to have due to the calendar effect and principally the expenses and uncomparable basis.

Speaker #1: In other words, we've already— we're already able to see that this dilution is happening over time. But when we look at the— we have different effects on each one of them.

Elias Lima: We look at the, we have different effects on each one of them. On the line of personnel, we had a natural increase in the hiring of people because these are new stores that we're hiring. We're accelerating the number of stores we're opening since last year. We have 51 stores open in the last 12 months versus 43 last year in the same period. This naturally impacts not only the stores that are already open, but the stores that I'm going to open. We're looking at, we've researched that our guidance, we have several stores that are under construction, where people are being hired right now, and that will be opening during the H2. Part of this effect is already in the numbers, but we're waiting for these stores to open.

Speaker #1: So on the line of personnel, we had a natural increase in the hiring of people, because these are new stores that we're hiring. We're accelerating the number of stores we're opening.

Speaker #1: Since last year, we have 51 stores open in the last 12 months. Versus 43 in the last year in the same period. So this naturally impacts not only the stores that are already open, but the stores that I'm going to open.

Speaker #1: And we're looking at— we've started seeing that our guidance, we have several stores that are under construction, where people are being hired right now, and that we'll be opening during the second half of the year.

Speaker #1: So part of this effect is already in the— it's already in the numbers, but we're waiting for these stores to open. So we hope that this increase of personnel from the new stores will continue to be diluted as these stores open and mature, and the gross revenues grows.

Elias Lima: We hope that this increase of personnel from the new stores will continue to be diluted as these stores open and mature and the gross revenues grows. On the other side, we're already able to see several actions which bring a dilution or a lower level of growth in revenue and expenses during the H2. We thought in the release, and the principle was that freight, which we have reduced quite a bit to zero, the number of transfers between stores starting in July. We did this since the Q3 of last year, which is several sales of several items without the need to change anything. If there's anything that we can do of the transfer between stores on that line of freight compared to gross revenue, it's been stable.

Speaker #1: On the other side, we're also able to— already able to see several actions which bring a dilution or a lower level of growth in revenue.

Speaker #1: And expenses during the second half of the year. We thought in the release and the principal was that freight, which we have reduced our quite a bit to zero, the level— the number of transfers between stores starting in July.

Speaker #1: We did this. Oh, since the third quarter of last year. And which is several sales of several items without the need to change anything.

Speaker #1: If there's anything that we can do of the transfer between stores, on the line of freight compared to gross revenue, it's been stable. So this item of freight here is, for instance, checked and we think that going forward we shouldn't have any pressure on that line.

Thiago Borges: This item of freight here is, for instance, checked, and we think that going forward, we shouldn't have any pressure on that line. The line of operating expenses, as I mentioned, could continue its dilution, which we've seen in the Q2. As far as Life, as is Thiago speaking, you asked for a little more visibility about that. These initiatives that we've done to transform the mix of products more completely between the stores, this has been happening, and we expect that this number of new products versus the total that we have in the stores can accelerate even more, starting with the Q4. We've seen a little bit how this mix has reacted very well. We're very optimistic about Life for 2027.

Speaker #1: And the line of operating expenses, as I mentioned, could continue its dilution, which we've seen in the second quarter. As far as life, as Tiago's speaking, you asked for a little more visibility about that.

Speaker #1: These initiatives that we've done to transform the mix of products more completely between the stores— and this has been happening— and we expect that this number of new products versus the total that we have in the stores can accelerate even more starting with the fourth quarter.

Speaker #1: We've seen a little bit what's— how this mix has reacted very well. So we're very optimistic about life. For 2027, the new stores that we've opened have performed well.

Operator: The new stores that we've opened have performed well, and several points have appeared. Some new stores or good locations have appeared and retail has reacted more widely than us. We see opportunities between shopping centers with other brands who may optimizing their store portfolio. We're taking advantage of these spaces to continue expanding the Life brand and the best points in shopping centers. We've seen a pipeline, a very qualified pipeline of new stores, so that together with the same store sales of Life, will help us to continue to help the brand to grow. Very well. Thank you very much for your answers. Our next question is from Felipe Hassid, from Goldman Sachs. Felipe, please go ahead. Hi. Good morning, everyone. Thank you for that. I want a little more detail about your performance in the month of July during the World Cup.

Speaker #1: And several points have appeared. Some new stores with good locations have appeared, and the retail sector has reacted more widely than us. We've seen opportunities between shopping centers with other brands who may be optimizing their store portfolio.

Speaker #1: So we're taking advantage of these spaces to continue expanding the life brands in the best points in shopping centers. And we've seen a pipeline— a very qualified pipeline of new stores so that together with the same-store sales of life, we can help us to help the grow.

Speaker #1: Very well. Thank you very much for your answers. Our next question is from Felipe Hassid from Goldman Sachs. Felipe, please go ahead. Hi. Good morning, everyone.

Speaker #1: Thank you for that. A little more detail about your performance in the month of July, during the Cup, during World Cup. Thank you for that.

Felipe Hassid: Thank you for that. Seeing the impact of this growth, I want to understand a little bit how was the flow of sales in the days in which there were no Brazil games compared to April and May. That is just to separate a little bit how much of this deceleration came from the World Cup and how much was due to other factors. If you can give us these details and how has been the recovery after the Cup, that would help us great after the end of the World Cup games. Felipe, this is Thiago. This analysis that we did of the impact of 2% on the top line of the company in Q2, in H1, BRL 19 million, behind the World Cup was the calendar effect.

Speaker #1: And see the number of growth. And I want to understand a little bit: how was the flow of sales in the days in which there was not— there were no Brazil games, compared to April and May?

Speaker #1: The idea is to separate a little bit: how much of this deceleration come from the World Cup, and how much was due to other factors?

Speaker #1: So if you can give us these details, and how has been the recovery after the Cup, that would help us greatly after the end of the World Cup games.

Speaker #1: Felipe, this is Tiago. This analysis that we did of the impact of 2% on the top line of the company in the quarter, in the first half of the year of 19 million reais, beyond the World Cup, was the calendar effect.

Speaker #1: And the way we look at it is when there are days on which we had games, the World Cup games, Brazil games, our stores were 100% in shopping centers, with the exception of one on Oscar Freddi.

Thiago Borges: The way we look at it is when there are days on which we had games, the World Cup games, Brazil games, our stores were 100% in shopping centers with the exception of one on Oscar Freire. These, if you agree with me, that the shopping centers basically don't even hardly open during those days or with very few hours in operation. We saw that compared to what we'd see on a normal Sunday compared to what we saw on the days when there was a game, and we were able to calculate this impact. This impact of 2%, half of that effect is from the World Cup games, and a half is the calendar days of holidays which came during this Q2, which hit us in this period with Corpus Christi, which came very close to the Dia dos Namorados.

Speaker #1: So these— if you agree with me that the shopping centers basically don't even hardly open during those days, or with very few hours of in operation, and we saw that compared to what we'd see on a normal Sunday, compared to the— what we saw on the days when there was a game.

Speaker #1: And we were able to calculate this impact. This impact of 2%, half of that effect is from the World Cup games, and the half is the calendar days of holidays, which came during this quarter, which hit us in this period with Corpus Christi, which came far from the— very close to the Dia dos Namorados, which Valentine's Day, which is a very important date for us, and last year we saw part of Tiradentes, which happened on a week— on the same one weekend.

Thiago Borges: Valentine's Day was a very important day for us. Last year we saw part of Tiradentes, which happened on same one weekend, and this time it was two. Which wound up being long weekends on holiday weekends. The number of work days compared to last year. When we see all these effects, we always look at how things have been going on Fridays, on Thursdays, and on the weekends before those games. This is the number that we come up with. However, in general, even with these impacts, we've had a month of growth without much difference compared to the other months. Felipe, this is Cassiano. Also to complement what Thiago said, this was my first June here with Vivara, and I was very impressed with the distance of Dia dos Namorados to the business.

Speaker #1: And this time it was two. So which wound up being long weekends, on holiday weekends. So the work— number of workdays compared to last year.

Speaker #1: So when we see these affect— all these effects, we always look at the— how things have been going on Fridays, on Thursdays, and on the weekends before those— the games of the games.

Speaker #1: This is the— this is the number that we come up with. However, in general, even with these impacts, we've had a month of growth.

Speaker #1: Without much difference compared to the other months. Felipe, this is Cassiano. Also, to complement what Tiago said, and this was my first June here with Vivara, and I was very impressed with the distance of Dia dos Namorados to the business.

Speaker #1: It's very strong in terms of the magnitude of the impact. It's close to May, so it was very close, very strong. And an event on Valentine's Day, Dia dos Namorados here—comparing the month of June, it was very, very well—very successive days.

Cassiano Lemos: It is very strong in terms of the magnitude of the impact. It is close to May, so it was very close, very strong. An event on the Valentine's Day, Dia dos Namorados here in the month of June, it was very successive days. 11 and 12 were very good days for sales. It was a month that had a good performance, it was very important. This effect of the World Cup, it passes the visibility because it was very specific on those days. For the month of June overall, it was a very good month, even with these external events. I would add to Cassiano, if you look at the day, at the 12th, which is the Girlfriend's Day and Mother's Day. Both of these dates were the best. It was the best Mother's Day in our history and the best Girlfriend's Day in our history.

Speaker #1: 11 and 12 were very good days, for sales. It was a month that had a performance— a good performance. It was very important. And this effect of the World Cup, it passes the visibility, because it was very specific on those days.

Speaker #1: But for the month of June overall, it was a very good month. Even with these external events. Also, I would add, this is to add to Cassiano, if you add— look at the day of the 12th, which is the girlfriend's day, and Mother's Day, and Mother's Day.

Speaker #1: Both of these dates were with the best— it was the best Mother's Day in our history, and the best girlfriend's day in our history.

Speaker #1: But in other— but it's not just this effect. So it had the effect of execution. That we were able to bring excellent days of sales for Mother's Day and Valentine's Day.

Thiago Borges: It is not just this effect. It had the effect of execution, that we were able to bring excellent days of sales for Mother's Day and Valentine's Day, the Brazilian equivalent of Valentine's Day. With several of our stores hitting their sales records for those dates. More than 100 stores reaching record sales on Mother's Day or Valentine's Day. In consequence, some of the other stores had their best days ever. We look more at profitability, and I think that the gross margin was a highlight, which was beyond sales. We wanted to see this in this quarter. Thank you very much. Thank you. Cassiano and Thiago, I am interested to know, because other retailers and other shopping center operators said that the flow during the month of June was relatively weak, and it only came back a little bit after the Cup.

Speaker #1: The equivalent Brazilian equivalent of Valentine's Day. It was several of our stores hitting their records— record sales— record sales records for those dates. More than 100 stores reaching record sales on Mother's Day, or Valentine's Day.

Speaker #1: And so in consequence, some of the other stores had their best days ever. So we've— we've— we've spent more— we looked more at profitability, and I think that the growth market— the gross margin was a highlight, which was beyond sales.

Speaker #1: We wanted to see this in this quarter. So thank you very much. Thank you, Cassiano and Tiago. I'm interested to know, because other retailers and other shopping center operators said that the flow during the month of June was relatively weak.

Speaker #1: And it only came back a little bit after the Cup. So the calendar effect and all that seems— it seems to be very positive.

Operator: The calendar effect and all that, it seems to be very positive, your impact compared to the others. Our next question comes from BTG. Please go ahead. Diogo, Elias, Kyle, two questions from my side. One, about stocks, your inventories. We see it as an improvement in the inventory cycle due to the reduction in the amounts of raw materials, and our finished products has remained high. How do you see that this line will behave during the next quarters in this scenario, more constant scenario of the price of this commodity? That is my first question. The second question is, the revenue that you have been receiving rebates for the planning and seasonality with the revenues with the level of production in the factory in Manaus. These two questions, with the amount of subsidies that you have received. This is Cassiano.

Speaker #1: Your impact compared to the others. Our next question. Comes from BTG. Please go ahead. Yeah? Tiago Elias, Caio. Two questions from my side. One, about stocks or inventories.

Speaker #1: We see that there's an improvement in the inventory cycle due to the reduction in the number of raw material— in the amounts of raw materials, and of finished products, has remained high.

Speaker #1: How do you see that this line will behave during the next quarters, in this scenario of more constant scenario of the price of this commodity?

Speaker #1: That's my first question. And the second question is, the revenue that you have been receiving rebates for planning and seasonality with the revenues from these— with the level of production in the factory right now.

Speaker #1: So these two questions, with the amount of subsidies that you've received. This is Cassiano. I'm going to start with your first question, about our evolution of our inventory.

Cassiano Lemos: I am going to start with your first question about our evolution of our inventory, and we are continuing in line with our plan. The same mission, to return to the historical levels of inventories to 400 to 450 days during next year, during 2027. Our approach in relation to inventory can be divided into two major blocks. The first, that the raw material, which is approximately 30% of the total, it comes from two segments. One, our objective to have greater efficiency in the chain, it is doing well. In terms of the components, a large part of the variety, a big part of our business, we work with the age and efficiency in these numbers. The second block are the finished products, which represents 70% of our total inventory.

Speaker #1: And we're continuing in line with our plan, the same mission, to return to the stark levels of inventories, to 400 to 450 days during next year, during 2027.

Speaker #1: Our approach in relation to inventory can be divided into two major blocks. The first, that the raw material— which is approximately 30% of the total— it comes from two segments.

Speaker #1: One, our objective is to have greater efficiency in the chain. It's doing well. And in terms of the components, with a variety— a large part of the variety— a great part of our business, we work with the age and efficiency in these numbers.

Speaker #1: And the second block are the finished products, which represent 70% of our total inventory. And on this front, we're working especially in the management of categories, looking at each sub-level on a specific level with assortment to increase the presence of the items which have the highest turnover and getting rid of the ones that have lower turnover.

Cassiano Lemos: On this front, we're working especially in the management of categories, looking at each sub-level on a specific level with assortment to increase the presence of items which have the highest turnover, getting rid of the ones that have lower turnover, because we want to increase our inventory of high turnover items. Looking at these initiatives, the objective is not the reduction of inventory by itself, but to increase the efficiency of our inventory and create conditions to accelerate this turnover. I think that this quarter we've seen that the biggest highlight is cash generation. We reached the highest level of conversion of EBITDA to cash in our history. Also the principal reason for that was the reduction that we've seen in days of inventory.

Speaker #1: Because we're going to increase our inventory of high-turnover items. So looking at these initiatives, the objective is not to reduction of inventory by itself, but to increase the efficiency of our inventory and create conditions to accelerate this turnover.

Speaker #1: I think that this quarter, we've seen that the biggest highlights is cash generation. We reached the highest level of conversion of a beach into cash in our history.

Speaker #1: And also the principal reason for that was the reduction that we've seen in days of inventory. So we've been talking about this since the second semester of last year, always looking at what actions we're taking, and now we're starting to see since the first quarter, but now even more strongly in the second quarter, in a more cash generation.

Elias Lima: We've been talking about this since H2 of last year, always looking at what actions we are taking, and now we're starting to see since Q1, but now even more strong in Q2, in a more cash generation. This effect on the reduction of production and cash consumption of inventory has affected both the revenue from our subsidies, answering your second question, as well as affecting the net profit. In Q2, we've seen based on a very comparable base compared to last year. But looking forward, we have a different dynamic between the factory and the subsidies coming from our district centers. Last year, as industry saw, we had a subsidy a little bit higher depending on the state, but we also had a factory in a production level that was lower than Q3.

Speaker #1: So this effect of the reduction of production and cash consumption of inventory has affected both the revenue from our subsidies— bringing— answering your second question— as well as the affecting the net profit in the second quarter, we've seen based on a very comparable base compared to next year.

Speaker #1: But looking forward, we have this dynamic of a different dynamic between the factory and the subsidies coming from our distribution centers. Last year, we— as industry— so we had a subsidy a little bit higher than depending on the state, but we also had a factory in a production level that was higher, was lower than the third quarter, and this year we have to DC in the factory continuing in its production level close to the second quarter.

Elias Lima: This year we have the DC and the factory continuing in its production level close to Q2. We tend to have, in the DC, a lower level of subsidies in this quarter. Q4, we see the dynamic which is more comparable from last year. This dynamic of subsidies and inventory reduction also winds up affecting our levels. When we isolate that effect, our net profit has been increasing by 25%, as we mentioned in our release. It's important to show the efficiency of our business, excluding these effects of subsidies and accounting advantages. Thank you, Elias. Thank you very much. Our next question is from Vinicius from Itaú BBA. Vinicius, please go ahead. Thank you.

Speaker #1: So we tend to have in the DC a lower level of subsidies in this quarter. In the fourth quarter, we see the dynamic, which is more comparable from last year.

Speaker #1: And this dynamic of subsidies and inventory reduction also winds up affecting— and this affects our levels. So when we isolate that effect, our net profit has been increasing by 25%, as we mentioned in our release.

Speaker #1: Important to show the efficiency that our business, excluding these effects, of subsidies and accounting advantages. Thank you, Elias. Thank you very much. Our next question.

Speaker #1: Is from Vinicius from Itaú, Itaú BBA. Vinicius, please go ahead. Thank you. Our question is, we're talking about the buy-side since yesterday that the growth of the top sign is the biggest concern for the second half of the year.

[Analyst] (Itaú BBA): Our question is, we're talking about the buy side since yesterday, that the growth of the top sign is the biggest concern for H2. You said that it was a little bit below what you expected due to the impact of the World Cup and so forth. When you look at the trajectory of growth since July, especially after the World Cup, if you're seeing a recovery of growth more accelerated with Vivara. Based on this performance, if you think that it's possible to look at a higher level of growth, a double-digit level of growth. The second point is about gross margins. You said that in this level of commodities, which is a little higher, want to understand what do you still have in the way of levers to be able to expand this even more, that margin expansion.

Speaker #1: You said there was a little bit below what you expected due to the impact of the Cup, the World Cup, and so forth. When you look at the trajectory of growth since July, especially after the World Cup, have you seen a recovery of growth, more accelerated, with Vivara, and with— based on this performance— do you think that it's possible to look at a higher level of growth, a double-digit level of growth? The second point is about gross margin.

Speaker #1: Growth margins. You said that in this level of commodities, which is a little higher, what I understand, what do you still have in the way of levers to be able to expand this even more?

Speaker #1: That margin expansion? Have we done a lot in terms of product engineering and if there's any other levers that you still have to use to increase— to improve those numbers?

Thiago Borges: We've done a lot in terms of product engineering and if there's any other levers that you still have to use to improve those numbers. Vinicius, thank you for your question. This is Thiago speaking. I would like to think that the way we look at this internally, we have maintained the growth of Q2 of 11% to 12%, and the other quarters, it's more effect of calendars, of the calendar effect. What we see is the type of pace from the growth of our business, and retailing has been very dynamic, the scenario, and these levers of growth which we've been having. The number of stores opened and something that we've done here, we want to comment on the digital side as well to improve the experience, the customer journey.

Speaker #1: Vinicius, thank you for your question. This is Tiago speaking. I would like— I think that the way we look at this internally, we have maintained the growth of the second quarter.

Speaker #1: Of 12, 11, and 12%. And the other quarters, it's more effective calendars, of the calendar effect. What we see is the type of pace from the growth of our business.

Speaker #1: And retailing is done at a very dynamic. This scenario and these levers of growth, which we've been having, the number of stores opened and something that we've done here, which you comment on the digital side as well, to improve the experience, the customer journey, and we've had a very good space in this channel.

Thiago Borges: We've had a very good space in this channel, so much so that we've started to continue to release the same-store sales with the presence of digital. Now the client chooses, and all of its efforts and its physical points, you see it in a integrated way. The same-store sales in Q2 has had this calendar effect with more or less 10%, which is a very healthy number growing on the macro side that as we know very well. We have several internal initiatives, and we're very confident about the top line in relation to the gross margin. It's important to mention that this company, if we look at its history of 10 years back of our implementation and our institutional plans, the margin is 69% to 70% year after year.

Speaker #1: So much so that we've started to continue to release the same store sales with the presence of digital. Because now the client excuses and all of its efforts and its physical points.

Speaker #1: You see it in an integrated way. And so the same store sales in the second quarter has had this calendar effect. It was more or less 10%, which was very, very healthy number, growing on the macro side that we— as we know— are very well.

Speaker #1: So we have several initiatives, internal initiatives, and we're very confident about the top line. In relation to the gross margin, which is important to mention that this company— if we look at its history— of 10 years back of our implementation and our institutional plans, the margin is 69% to 70% year after year.

Speaker #1: Whether it’s rain, sunshine, whatever—interest rates up, interest rates down—no matter what happens, the margins are the same. So we have several levers to say that our margins, due to external levers—there are internal levers, the strength of our brands, and so forth—to be able to continue to process any external effects and return this to the client in an easier way.

Thiago Borges: Whether it's rain, sunshine, whatever, interest rates up, interest rates down, no matter what happens, the margins are the same. We have several levers to say that our margins due to external levers, there are internal levers, the strength of our brands and so forth, to be able to continue to process any external effects and return this to the client in a easier way. We're continuing to look at this and the efficiencies that we'll have here in-house. The base, the main preference is to pass this to our clients through productivity and maintain our brands more and more leaders in their respective segments. I'd like to add to that, Luciano, about the gross margin. We have two approaches. One is looking at the products and then looking at the portfolio of products.

Speaker #1: So we're continuing to look at this and the efficiencies that we'll have here in-house. The main preference is to pass this to our clients through productivity and maintain our brands as more and more leaders in their respective segments.

Speaker #1: I'd like to add to that, Tiago, about the gross margin. We have two approaches. One, is looking at the products and then looking at the portfolio products.

Speaker #1: We look at the products, which we consider to be very— the performance and city, the way in which it's located, the raw material involved, and also what's happening in the unified numbers.

Elias Lima: We look at the products, what you consider to be the performance and the city where in which it's located, the raw material involved, and also what's happening in the unified numbers. We look at the total portfolio of products. We see the opportunities, as Thiago mentioned earlier, to look at the lighter pieces, new technology, new production technology, and also to give greater emphasis on categories such as silver and gold. We have to read the market, see what's happening, look at our products, our portfolio, and look to make these adjustments in such a way as so that the variation of the raw materials is only one component of the total picture. We have several elements that mean that we're able to be hitting the mark over time and continue to maintain the stability of our margins for the business overall. Very well. That was very clear.

Speaker #1: And we look at the total portfolio of products. We see the opportunities, as Tiago mentioned earlier, to look at the lighter pieces, new technology, new production technology, and also to give greater emphasis on categories such as silver and gold.

Speaker #1: We have to read the market, see what's happening, look at our products, our portfolio, and look to make these adjustments in such a way so that the variation of the raw materials is only one component of the total picture.

Speaker #1: And we have several elements that mean that we're able to be hitting the mark over time, and continue to maintain the stability of our margins for the business overall.

Speaker #1: Very well. That was very clear. Thank you. Our next question. Is Alexandre Namioka from Morgan Stanley. Alexandre, please go ahead. Good morning, everyone. Thank you for taking our question here.

Operator: Thank you. Our next question is Alexandre Nagatomy from Morgan Stanley. Alexandre, please go ahead. Good morning, everyone. Thank you for taking our question here. I wanted to ask two follow-up questions, one in relation to the top line of Life, which I think was the first question of the call, focusing especially on Moments, the Moments collection to try and unlock a little bit how did that performance, if the performance of that line is being impacted by the lack of new launches in the segment. And also like to reinforce, if you could repeat to us what are the levers for this growth, specifically for the segment of Moments. It would be very interesting. As far as the gross margins, we also felt that in general, it was a positive highlight for the quarter.

Speaker #1: I wanted to ask two follow-up questions. One in relation to the top line. Of life, which I think was the first question of the call, focusing especially on moments, the moments collection.

Speaker #1: To try and unlock a little bit—how is that performance, that is, the performance of that line, being impacted by the lack of new launches in the segment?

Speaker #1: And also like to reinforce— if you could repeat to us— what are the levers for this growth specifically for the segment of moments? It would be very interesting.

Speaker #1: As far as gross margins, we also felt that it was, in general, it was a positive, highlight for the quarter. And also we thought perhaps it would be important to see what are the levers that you've commented on the recent calls, one of them specifically was in the segment of life segment, which you mentioned.

Alexandre Nagatomy: We thought perhaps it would be important to see what are the levers that you've commented on recent calls. One of them specifically was in the segment of Life, which you mentioned the increase of growth in the share of direct functions. I want to understand how much of this increase is already impacting the gross margins and how much time there is to grow in this method of production. As far as Life goes, I'm not sure how much you can share as far as the initiatives of new alloys, new metal alloys, because we've seen these products in Life arriving in the market. How much we should think about the entrance of these products and the impact of these products over the next few years. Thank you. Thank you for your question.

Speaker #1: The increase of growth in the share of direct functions. And I want to understand how much of this increase is already impacting the gross margins.

Speaker #1: And how much time there is to grow in this method of production. As far as life goes, I'm not sure how much you can share as far as the initiatives of new alloys, new metal alloys.

Speaker #1: Because we've seen these products in life, arriving at— in the market. And how much we should think about the entrance of these products and the impact of these products over the next few years.

Speaker #1: Thank you. Thank you for your question. As far as starting here, I think all of us are in a certain way in the same boat, looking at life.

Thiago Borges: As far as starting here, I think all of us are in a certain way in the same boat looking at Life. The Moments collection category, you have different pieces, bracelets and so forth. We have a lot to do with these two fronts. New product launches should start arriving at the market more strongly starting in Q3 in our stores, and that's what's going to change the category. I think that certainly there'll be lots of space for this category to continue to be relevant in our business. We're going to look at the question of the level of prices we can protect it for that category, and look at the work of evaluating the costs to see where we'd have space to cut costs.

Speaker #1: The moments collection category, you have different pieces: bracelets and so forth. We have a lot to do with these two fronts. New launches, new product launches should start arriving at the market more strongly in the third— starting in the third quarter in our stores.

Speaker #1: And that's what's going to change the category. So I think that certainly there'll be lots of space for this category to continue to be relevant in our business.

Speaker #1: And we're going to look at that. The question of the level of prices, we can protect it for that category, and look at the work of evaluating the costs to see where we'd have space to cut costs.

Speaker #1: And so your next question in the direct answer— it's more directly connected to gold. But it also— after I migrate to silver— silver, of course, has a— it's just a few centavos of the price of gold.

Thiago Borges: Your next question, and the direct answer, it's more directly connected to gold, but it also have to migrate to silver. Silver of course is just a few centavos of the price of gold, so it has a direct impact on gold, and it has a comeback that's much quicker. We focused on this margin, as you saw in H1. As a direct function, it helps, but something marginal in turn, because the company has been doing this work in the direct function for a long time, this migration for the products that we can touch. Our mapping today of products, which is possible to have space to increase, which is already being done in a direct result, the 60% more or less. We've been working on month after month to increase that percentage.

Speaker #1: So it has a direct impact on gold. And it has a comeback that's much quicker. So we focused on this margin. As you saw in the first half, as a direct function, it helps.

Speaker #1: But something marginal in terms— because the company has been doing this work in the direct function for a long time, this migration, for the products that we can touch.

Speaker #1: And our mapping today of products which it's possible to have space to increase— which has already been done in the direct results in the 60%, more or less.

Speaker #1: And then we come in work— we've been working on month-on-month-to-month to increase that percentage. In relation to the new alloys, new metal alloys, this is a subject which is very strategic, very important, for our sector in general.

Thiago Borges: In relation to the new alloys, the metal alloys, this is a subject which is very strategic and very important for our sector in general. We have accompanied the worldwide tendencies in relation to that subject and different market standards depending on the geography in which we're looking at. We've accompanied this very closely and we've also been working on to have this in-house, this technology and the methods that are necessary to be able to react quickly. I think it's part mercatological and part industrial, and which we have evolved to be able to be ready if necessary, when necessary. Not even so much if necessary, more or less when necessary. For our business, we understand that we can continue changing.

Speaker #1: We have a company— the world tendency— worldwide tendencies in relation to that subject and standards of the— with different market standards depending on the geography in which we're looking at.

Speaker #1: We have a company that's very closely and we've also been working on to have this in-house, this technology and the methods that are necessary to be able to react quickly.

Speaker #1: So I think it's part is mercantological, and part is industrial. And we should have evolved to be able to be ready if necessary, when necessary, not even so much if necessary, more or less when necessary, for our business.

Speaker #1: We understand that we can continue changing. As far as new alloys, I think that it's a characteristic very similar to what we saw with the mix of metals at the beginning.

Operator: As far as new alloys, I think that it's a characteristic, very similar as it was the mix of metals at the beginning when we introduced Life Silver 15 years ago, when we introduced the gold, silver in Vivara innovation as a laboratory product. Innovations, I don't see any break in this line, much more a continuity of what we have always done using new alloys as we have done over the history of the company. Very good. Thank you very much. Very clear. Our next question is from Guilherme Domingues from HSBC. Guilherme, please go ahead. Good morning, everyone. Thank you for the space. I have a question about the digital sales, which continues to grow well, very strongly.

Speaker #1: When we introduced the life silver 15 years ago, when we introduced the gold, silver, and Vivara, and innovation, as a laboratory product, innovations— I don't see any break in this line.

Speaker #1: Much more continuity of what we have always done. Using new alloys as we have done over the life of the company, over the history of the company.

Speaker #1: Very good. Thank you very much. Very clear. Our next question. It's from Guilherme Dominguez from HSBC. Guilherme, please go ahead. Good morning, everyone. Thank you for the space.

Speaker #1: I have a question about the digital sales, which continues to grow well. Very strongly. In the quarter, there was a lot of growth in the app, and we wanted to see how do you see the opportunity to increase the digital penetration in the next years.

Guilherme Domingues: In the quarter, there was a lot of growth in the app, and wanted to see, how do you see the opportunity to increase the digital penetration in the next years? To what point this growth could happen without impacting the productivity stores? That's my first question. The second is in relation to competition of Pandora investing heavily in Brazil markets and the launch of new products. If you see this as an important change in the competitive environment. Thank you, Guilherme. This is Thiago speaking. Starting with the answer to your first question, we analyze in external benchmarks, we see a penetration of digital sales above ours, which gives us confidence that there's still space to work, to grow there, to work there, to increase our participation in that channel internally in a consistent way over the next years.

Speaker #1: And to what point this growth could happen without impacting the productivity of the stores. That's my relation to competition of Pandora, investing heavily in Brazil.

Speaker #1: Marks in the launch of new products. If you see this as an important change in the competitive environment. Thank you, Guilherme. This is Tiago speaking.

Speaker #1: Starting with the answer to your first question. We analyze external benchmarks. We see a penetration of digital sales above ours. Which gives us confidence that there's still space to work, to grow there, to work there, to increase our participation in that channel internally, in a consistent way.

Speaker #1: Over the next few years, I think the company has been doing that, and very successfully. However, there is still space to increase even more our participation in that market.

Thiago Borges: I think the company has been doing that and very successfully, however, there's still space to increase even more our participation in that market. In the short term, this has made an evolution of our digital platform and the layout of several pages have already seen the increase of the rate of conversion. In several others on the customer journey and several other pages, we have improved the experience, increasing the time of involvement that the client spends, which has reached almost 2 minutes on the site. The initiatives looking at these fruits is the participation in the app. The conversion of the app reaches more than 2 times the conversion of the site. The client who's more faithful, who communicates more efficiently, more constantly.

Speaker #1: And in the short term, this has made a evolution of our digital platform and the layout of several pages. I've already seen the increase of the rate of conversion.

Speaker #1: But in several others, on the customer journey and several other pages, we have been improved the experience, increasing the time of involvement that the clients spend, which has reached almost 2 minutes on the site.

Speaker #1: The initiative looking at these fruits is the participation in the app. The conversion of the app reaches more than two times the conversion of the site.

Speaker #1: The client who's more faithful, who communicates more efficiently, more constantly. We have a number of relevant number of clients in our app already, which already helps us with the launch of new products and the speed of reaction.

Thiago Borges: We have a relevant number of clients in our app already, which already helps us with the launch of new products and the speed of reaction. These actions have been happening, have been accompanied in operationally our delivery periods with our relationship with our clients and several other items which are the backbone of digital sales. We've evolved quite a bit. However, there has been an evolution in search and personalization, the big agenda of content, and we see lots of space for the digital to continue to grow at strong rates of growth and for various semesters to come. At the first moment, we see lots of synergy with the stores. Between 20% and 25% of our sales, the digital sales, are done with the code of the salesperson.

Speaker #1: So these actions have been happening, have been accompanied in operationally. Our delivery periods with our relationship with our clients and several other items which are the backbone of digital sales, we've evolved quite a bit.

Speaker #1: However, there has been an evolution in search and personalization. The big agenda of content and we see lots of space for the digital to continue to grow at strong rates of growth and for various semesters to come.

Speaker #1: At the first moment, we see lots of synergy with the stores. Between 20% and 25% of our sales are digital sales, which are done with the code of the salesperson.

Speaker #1: So our salespeople are very well trained. And they don't lose sales. If the client is willing to go and buy online. Or come back later, come back 2 or 3 letters to the store, 2 to 3 letters to the store.

Thiago Borges: Our salespeople are very well trained, and they don't lose sales if the client is willing to go and buy online or come back 2 to 3 days later to the store. We've done this work very carefully, incentivizing our sales team, which is one of the strengths of our company, to not lose sales and use the concept to the maximum. Not only the competition, as you mentioned specifically, but we also measure in the shopping centers that we have stores, and Pandora also has. How was the Life by Vivara performance compared to the Life by Vivara in shopping centers that don't have a Pandora? We see that there hasn't been much correlation. It's very little coincidence. We even actually grow slightly more in shopping centers where Pandora is present.

Speaker #1: We've done this work very carefully, incentivating our sales team, our strength of our sales team, which is one of the strengths of our company, to not lose sales and use the concept to add to the maximum.

Speaker #1: And not only the competition, as you mentioned specifically, but we also measure in the shopping centers where we have stores and Pandora also has stores—how was the like-for-like performance compared to the like-for-like in shopping centers that don't have a Pandora.

Speaker #1: But we see that how there hasn't been many correlation. It's very little coincidence. We even actually grow slightly more in shopping centers where Pandora is present.

Speaker #1: So we see that in relation to the relations that they're doing compared to what we've shared in the way of results. Obviously, we're not immune to what they do.

Operator: We see that in relation to the relations that they're doing compared to what we've shared in the way of results. Obviously, we're not immune to what they do, but our actions today are affected by internal effects as well. Thank you very much. Our next question is from Ayrton Santana from Bank of America. Ayrton, please. Thank you, Thiago and Elias. Thank you for taking our questions. A couple of quick questions from my side. The first is on the question of the expenses and the marketing line. I want to understand a little bit about if you could separate how was the higher marketing level due to these commemorative dates like Mother's Day and Valentine's Day compared to the past.

Speaker #1: But our actions today are affected by internal effects as well. Thank you very much. Our next question is from is from Ayrton Santana from Bank of America.

Speaker #1: Ayrton, please. Thank you, Tiago and Elias. Thank you for taking our questions. A couple of quick questions from my side. The first is on the question of expenses.

Speaker #1: In the marketing line, I wanted to understand a little bit about if you could separate how was the level of higher marketing level due to these commemorative dates like Mother's Day and Valentine's Day compared to the past.

Speaker #1: If you could look at the seasonality perhaps this is a level of marketing which is which you who have done a higher level of marketing in which we can expect going forward.

Ayrton Viana de Faria Santana: If you could look at the sales seasonality, perhaps this is a level of marketing which you have done a higher level of marketing and which we can expect going forward, and how we should think about that going forward if we're able to deliver that as well. The part of generation of cash, you've had a good cash generation in this quarter. However, one of the questions that has caught our attention when you look at the receivables from last year, it was a question of you having anticipated a little bit last year, but we also have this tendency that you are closer to the consumers with more time sales, more monthly payments plans. Finally, another quick question given this interesting performance and the question of watches. If there's a little color about the growth in that category, that would also be interesting to hear.

Speaker #1: And how we should think about that going forward if we're able to deliver that as well. And the part of generation of cash. You've had a good cash generation in this quarter.

Speaker #1: However, one of the questions that caught our attention when you look at the receivables from last year was about you having anticipated a little bit last year.

Speaker #1: But we also have this tendency that you are closer to the consumers with more time sales, more monthly payment plans. And so, finally, another quick question.

Speaker #1: This interesting performance and the question of watches. It gives us a little color about the growth in that category. That would also be interesting to hear.

Speaker #1: This is Elias speaking. We also your first question. Regarding our marketing expenses, we see that the biggest in growth that we've had was in the first quarter.

Elias Lima: This is Elias speaking. In your first question regarding our marketing expenses, we see that the biggest growth that we have had was in Q1, when the growth is much higher due to the comparative base of Q1 of last year, which was a growth in expenses compared to our historical levels. We work here to maintain our marketing line along the historical lines of 4% to 5% of net revenue and dividing those expenses between what we spend on the online marketing and the offline marketing. This online marketing, we invest a great deal in performance marketing as well as in sales to bring the customer to the store to communicate with him, the Golden Week and so forth, and all this attached to our brand and the performance that we use to promote sales.

Speaker #1: When the growth is much more and much higher, due to the comparative base of the first quarter of last year, which was a growth in expenses compared to our history, historical levels.

Speaker #1: We work here with to maintain our marketing line along this historical lines of 4 to 5 percent of net revenue. And dividing those expenses between what we spend on the online marketing and the offline marketing.

Speaker #1: In online marketing, we invest a great deal in performance marketing, as well as in sales, to bring customers to the store, to communicate with them about Gold Week and so forth.

Speaker #1: And all this attached to our brand. And the performance that we use to promote sales. In the offline market, the events and the influencers all of the actions that build our brand in the medium to long term.

Elias Lima: In the offline market, the events and the influencers, all of the actions that build our brand in the medium to long term. The biggest part of the increase that we have had was in offline marketing. It is where we had the biggest reduction last year, and we saw this sequential difference of increase this year. This is an investment which brings returns in the medium to long term, building the brand. Also most importantly, for Life. We have a brand that is younger and that is building this brand over time. It is a brand that is more and more our own brand, a complete jewelry store, and a brand that does not compete with the Vivara line. Looking at the two lines together, the two markets on and offline, we see growth in offline, gaining efficiency. We are improving our ROAS year after year.

Speaker #1: So the biggest increase that we've had, the biggest part of the increase that we've had was in offline marketing. It's where we had the biggest reduction last year and we saw this sequential difference of increase this year.

Speaker #1: So this is an investment which it brings returns in the medium to long term. Building the brand and also most importantly for life. We have a brand that is younger and that is building this brand over time.

Speaker #1: More and more it's a brand that's more and more our own brands. A complete jewelry store. And a brand that doesn't compete with the Vivara line.

Speaker #1: Looking at the two lines together, the two markets on and offline, we see growth in offline gaining efficiency. We improving our ROAS year after year.

Speaker #1: As far as working capital, we see that the biggest driver for cash generation is our inventory. In other words, the reduction in number of days or whether it be in the reduction of the advances that we make to suppliers especially suppliers imported products.

Elias Lima: As far as working capital, we see that the biggest driver for cash generation is our inventory. In other words, the reduction in number of days, or whether it be in the reduction of the advances that we make to suppliers, especially suppliers of imported products. This generates more cash. It uses more cash as we have reduced our inventories. We also see the behavior of the consumer when the interest rates are high, there is a tendency to pay things over time. The percentage of time sales done on credit cards does not change too much. The percentage of these sales which is done paid, which was cash or made in only a few payments, has increased up to as much as 10 monthly payments. We have a minimum payment for both brands since our average ticket and many clients have decided to use time payments for these purchases.

Speaker #1: This generates more cash. It uses more cash, and as we have reduced our inventories, we also see the behavior of the consumer when the interest rates are high.

Speaker #1: There's a tendency to pay things over time. The percentage of time sales done on credit cards doesn't change too much. But the percentage of these sales which is done paid which was cash or made in only a few payments has increased up to as much as 10 monthly payments.

Speaker #1: We have a minimum payment for both brands since our average ticket and many clients have decided to use time payments for these purchases. So an increase the stretch out their time payments.

Thiago Borges: Stretch out their time payments. This affects us, when we look at the natural cost of cash on hand. Second part, this is Thiago speaking. The last part of your question about the category of watches. This good performance is due to the work of the team, which has been working on this category. We are looking at the internal aspects. We have strengthened our relationship with our partners, also looking at our own brands like Life, which is the second brand of watches in our portfolio, which has been growing year after year. Today, it is the second largest brand, and this shows that this work of selecting external brands in the development of products. We also have a cost, a breakdown of which store is where we are going to put which mix of watches.

Speaker #1: So this is affects us but when we look at the national the natural cost of cash on hand. Second part is Tiago speaking. The last part of your question about the category of watches.

Speaker #1: This good performance is due to the work of the team which has been working on this category. However, looking at the aspect internal aspects we have strengthened our relationship with our partners.

Speaker #1: But also looking at our own brands like life which is the second brand of watches in our portfolio. Which have been growing year after year.

Speaker #1: Today it's the second largest brand. And this shows that this work of selecting external brands in the development of products we also have a cost which store breakdown of which stores where we're going to put which mix of watches and some we have to negotiate with partners and we've been working very strongly with that with our partners.

Thiago Borges: In some, we have to negotiate with partners, and we've been working very strongly with that, with our partners. Also work a lot on the management of the availability of these inventories. It's a category which has no substitute products, obviously. If the client wants a certain brand, that's what he wants. He wants that, and we're not able to offer him anything else. The availability is very important. The online channel also helps us quite a bit in this category. Online is a product which the customer does not necessarily have to prove to protest the amounts. Online and offline, it goes very well. These characteristics explain internally the good performance of the category. Thank you very much. My next question is from Gustavo from Bradesco BBI. Gustavo, please go ahead. Gustavo? You can open up your microphone and speak. Go ahead, Gustavo. Hello? Hello?

Speaker #1: And also work a lot on the management of the availability of these inventories. It's a category which has no substitute products obviously. If the client wants a certain brand that's what he wants.

Speaker #1: He wants that and he's and we're not able to offer him anything else. So the availability is very, very important. The channel online channel also helps us quite a bit in this category.

Speaker #1: Online is a product which the customer does not necessarily have to prove to protest the amount. We need 40 online and offline it goes very well.

Speaker #1: So these characteristics, which explain internally the good performance of the category—thank you very much. My next question is from Gustavo from Bradesco BBI.

Speaker #1: Gustavo, please go ahead. Gustavo, you can open up your microphone and speak. Go ahead, Tiago. Gustavo. Hello? Hello? Okay, sorry. My headphones were turned off.

[Analyst] (Bradesco BBI): Okay, sorry. My headphone was turned off. I just wanted to follow up about the line of finished products. When we look at the breakdown of these products, we see that the participation of Life by Vivara has increased year over year. I wanted to understand a little about the quality of this inventory and a breakdown of how it is in between collections like Moments and collections looking forward. If you can give us a little more, if there's any way to reduce this inventory, and I want to understand your question in terms of gross margin and reduction of stocks of finished products looking forward. Thank you for the question. This is Cassiano. In relation to the stock, you talk about the portfolio and the proportion of stock, if it's well balanced between the different types of products and between products of a high and low turnover.

Speaker #1: I'm just going to follow up about the line of finished products. When we look at this the breakdown of these products we see that the participating life has increased year over year.

Speaker #1: I want to understand a little bit about the quality of this inventory and a breakdown of how it is in between collections like moments.

Speaker #1: And collections looking forward if you can give us a little more if there's any way to reduce this inventory and I want to understand your question in terms of gross margin and reduction of stocks of finished products looking forward.

Speaker #1: Thank you for the question. This is Cassiano. In relation to the stock of you talking about the portfolio. On the proportion of stock if different types of products and if these products with between products of high and low turnover.

Speaker #1: As we mentioned we're heading for an to become a complete jewelry store. Which means that some types of products have a development and a commercial use that is a little more accelerated than other types of products.

Cassiano Lemos: As we mentioned, we're heading to become a complete jewelry store, which means that some types of products have a development and a commercial use that is a little more accelerated than other types of products. With the adjustments, both in the relation of the proportion of product categories, as well as the products of higher and lower turnover, we're able to do with a great deal of constancy all during the year. We have moments in which we have commercial activities, well-structured aimed at accelerating the sale of a certain type of product or a lower turnover product. This product of balance is not a problem in terms of the expectation that this might bring to impact our margins. We don't have this expectation because it's continuous and very well distributed over time. Okay, thank you very much.

Speaker #1: With the adjustments, both in the relation of the proportion of product categories as well as the products of higher and lower turnover, we're able to do this with a great deal of constancy over the year.

Speaker #1: We have moments in which we have commercial activities, well-structured, aimed at accelerating the sale of a certain type of product or a lower-turnover product, and so this product of balance is not a problem.

Speaker #1: In terms of the expectation that this might bring to inspect our margins and this we don't have this expectation because it's continuous. And very well distributed over time.

Speaker #1: Okay, thank you very much. The question and answer session is now closed. I would like to pass the microphone to Tiago Borges for his final comments.

Operator: The question and answer session is now closed. I'd like to pass the microphone to Thiago Borges for his final comments. Thank you all very much for your active participation in our call on Q2, the entire team of Vivara, and our commitment and the great deliveries that they've made. As a final message, I just wanted to reinforce what we had the opportunity to comment on during the call, which is the generation of cash being in the highlight that we perceive is important for this year. Our business model has shown once again its resilience, and we have been able to have a high gross margin, healthy gross margin. Considering the calendar effect, looking at Q1, we continue very confident. To close, I wanted to invite all of you on this Sunday, Father's Day.

Speaker #1: Thank you all very much for your participation and active participation in our call. On the second quarter the entire team of Vivara and our commitment and the great deliveries that they've made and as a final message I just wanted to reinforce what we had the opportunity to comment on during the call which is the generation of cash being in the highlight that we perceive important for this year and our business model has shown once again its resilience and we have been able to have a gross margin, a high gross margin, healthy gross margin and considering the calendar effect looking at the first quarter and we continue very confident and to close I wanted to invite all of you on this Sunday Father's Day if it hasn't yet bought a present in our stores we have a complete mix of rings, collars, bracelets as well as excellent watches.

Thiago Borges: If you haven't yet bought a present in our stores, we have a complete mix of rings, collars, bracelets, as well as excellent watches. Beyond this whole full mix, you're going to find things at the price at which you desire any product in our store. Let's go visit our Vivara stores and Life stores in the next three days so that we can honor our fathers of our families. Thank you all very much and have a great day. The teleconference results for the Q2 of 2026 of Vivara is closed. The department of Investor Relations is at your service to answer any other questions you might have. Thank you very much and have a great day. Thank you.

Speaker #1: And beyond this whole mix you're going to find things at the price at which you desire any product in our store. So let's go visit Tower the Vivara stores and life stores in the next three days so that we can honor our fathers of our families.

Speaker #1: Thank you all very much and have a great day. The teleconference results for the second quarter of 2026 of Vivara is closed. The Department of Interest Relations is at your service to answer any other questions you might have.

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Q2 2026 Vivara Participacoes SA Earnings Call

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