[Non-English Content] everyone. Thank you for waiting. Welcome to 's conference call about the fourth of 2021 results. For simultaneous translation, please click on the interpretation button at the globe icon on the lower part of the screen and choose your preferred language, Portuguese or English. We inform that this event is being recorded and available at company's IR website, ri.magazineluiza.com.br, where you can also find the release and the presentation both in Portuguese and English. The English presentation link is also available at the chat. During the presentation, attendees' microphones will be off. Afterwards, we will start the Q&A session. To ask a question, please click on the Q&A icon on the lower part of your screen. Please write down your name, company, and the language of your question. When your name is selected, your microphone will appear on the screen and you may ask your question. Questions received in writing will be answered later by the IR team. Now, I would like to turn the floor over to Frederico Trajano. Fred, you may begin. Good morning, everybody. Thank you very much for participating in our call for 2021 and the as a whole. Again, I'm here with all the executive officers and we will be available to answer any questions that you might have at the end of the presentation. Besides my presentation, our IR manager, Vanessa Papini, will talk about the results. Sadly, the father of our CFO died yesterday, and all our sympathy to him and to his family, and Vanessa will be stepping in and she will participate in the Q&A. In 2019, after finishing the most successful transformation process of a company in Brazil in terms of digitalization, we started a new strategic cycle based on the construction of the multi-channel marketplace, the entry gate for thousands of analog retailers. With these retailers, we did what we did with Magalu. We conveyed our technology and our know-how, our knowledge, so that these merchants could be participating in the digital world as well. The strategy also involved the diversification of revenues and the radical creation of the product base, offering this to our over 37 million active clients. We made many acquisitions, many investments and many organic investments as well in order to reach the objective. After three years of the end of the strategic cycle and two years of the pandemic that hit the whole world and also Brazil, we consider that we have many things to celebrate in terms of our figures. We are really doing walking the talk, and we have a lot to do still for the next two years. I'm going to share some of these figures with you and part of the progress of the implementation of the strategic cycle and that corroborate all that. First, of course, I would like to highlight the growth once again. Even in spite of two years of the pandemic, we prepared our total GMV, including physical and online. We reached BRL 56 billion of GMV in 2021, or twice what we had in 2019. A growth of 28% vis-à-vis the previous year. Already with 71% participation of e-commerce in the year as a whole. One of the drivers of our growth has been online, and we doubled our GMV online and we tripled the sale of e-commerce from 2019 to 2021. We sold over 200 million items in the whole system of Magalu, delivering 39% growth in spite of being a very high growth base and the retailer that grew the most in the first year of the pandemic. Although we had a very high base, we were able to grow an additional 39% in 2021, which means that once again, we were able to achieve this extraordinary growth. In online, the focus, our focus, as I said at the beginning of the presentation, was the marketplace. We grew 4-fold our marketplace vis-à-vis 2019, from three to 13 GMV, 69% growth in 2021, and over an exponential growth of 156% that we had in 2020 to 2019. You can see these are very robust figures, very important figures for the digital world and for the Brazilian retail as a whole. In terms of marketplace, I would like to highlight a historical fact. Now in February, after five years of its launch marketplace, the GMV of marketplace has already exceeded the sales of the physical stores. The participation is already higher than the physical stores in the overall sales. February was a month where we repriced our prices for sellers, and in spite of that, we had a growth that was higher than the market. With much better margins in the marketplace than we had in the previous years. Well, some platforms were not even charging the sellers a fee and the competition was very fierce. In spite of that, in spite of the change in prices, we were able to reach GMV higher than the physical stores. In February, also a very good performance, better than the Q4 of last year. This is evidence of a strategy. I will be going into details about everything that we have been doing in order to generate this outstanding growth in this channel, which is so important, which is marketplace. Of course, we have been acquiring new sellers in outstanding figures from 26,000 to 160,000. This is a very steep growth there, 160,000. 40,000 sellers in the Q1, 45 million offerings for the total and over 61 million offerings diversifying our product lines and the average ticket offered to the client. I will go into detail about the geography regarding the sellers that we are putting on board, which is a very good strategy. It's very different from most of the players in the market. It's very important to reinforce that. As I said, we have a focus on the digital seller but also on the analog seller as well. We created at the beginning of the pandemic a platform, a very adequate platform and totally focused on analog sellers, which is a Parceiro Magalu with end-to-end technology involving the online billing, inventory management, delivery management, totally different from the digital sellers who are native digitally. Just to give an idea, last year, 80% of the sellers that we acquired on the platform came from Parceiro Magalu. These are analog sellers that by means of our marketplace were able to offer their products to clients in the whole world by means of the digital world. This figure will continue to grow and I will talk about the importance of physical stores in terms of attracting these sellers. One interesting point is that they have a profile which is different from the product mix. Most of the products that are coming on board, they are long tail products. They're not traditional categories. These sellers already give us two different characteristics. The main one is the fact that we have a very wide geographic base. We are deconcentrating Brazilian sellers from São Paulo and bringing on board sellers from all over Brazil in order to offer their clients to Magalu clients that are also scattered throughout Brazil. For logistics, this has to work because in Brazil, if you have a centralized and low ticket logistic, you will never be able to reach the economic BRL 30-BRL 40 average ticket going from the southeast to the northeast, for instance. You will never be able to get a good revenue in this platform because the margin will be negative because the participation of the freight cost in the total GMV and the take rate will be extremely high. We are deconcentrating and concentrating on the average ticket on the geographic locations. Our growth strategy of our marketplace is decentralized and sustainable and we believe that it will be more and more efficient in terms of economics. One important highlight is that 56% of the new clients are coming from the marketplace. This has been helping Magalu to conquer clients that were not clients that bought the products of the company. Most of the new clients that are coming to the platform, 56% come from the marketplace. One of the reasons why we have been able to significantly improve the volume of sales of the marketplace and also the conversion rate were all the logistics investments that we made as of 2021. We made a follow-on and the objective of the follow-on was to increase our logistics. We went from 31 with cross-docking and DCs, exclusive DCs to 72, much higher than the guidance that we gave you in the follow-on. The total warehousing area going to 1,389 sq m, increasing 2.1-fold. We increased the coverage of our own acquisitions,, Sode and Logbee was already with us in order to increase the position of our own fleet in Magalu Entrega, Magalu Delivery in the total GMV. Now some figures that I would like to share with you. 80% of all the orders of prepaid Magalu went through Magalu Entrega. Almost all these orders went through our own network of Magalu. We don't have to rely on the postal service or third-party trucks. This generated two very important factors. The first one, we increased quite a lot our delivery in up to 2 days from 18% to 30% last year, significant increase. This also increased the conversion rate of 3P last year, increasing 50%, which is very significant vis-à-vis 2020. I would like to mention that when the client buys a product on the platform, they buy 1P and 3P. It's important to buy with a good price and a very good delivery. In 1P, we already have a very good service level, much higher than the average of the market, 78% of the deliveries in 48 hours, and we are further improving the participation of this quick delivery in the sale of 3P. One P was already a representative part, and the experience that we have, you can see that we already have 78% delivered in 48 hours or up to. We are the only company that we do not mix 3P with 1P in the Reclame Aqui, which is the customer complaint website, for instance. We had a growth of 10 percentage points in the NPS. We are also in the Ultra Fast ship from seller up to 24-hour delivery. Over 1,000 sellers are already participating because of the investment that we made and over 21 capitals with a coverage of ship from seller. Now I would like to highlight the role of the physical store in our marketplace. It has already been very important in our growth and our leadership in 1P. 45% of all the 1P goes through digital, physical stores, and it has become a major competitive advantage. This is why I say that our marketplace is multi-channel, and we resignified once again our physical stores and it is extremely important. They are extremely important both for our clients and our sellers and everybody who interacts with our marketplace. I would like to highlight two points. The first one is the transformation of the stores into Agências Magalu. The local sellers that the store brings to the Magalu system, they can deliver in the Agência Magalu. We shared some of the results from these sellers with you. We have almost 10,000 sellers that are using this as their main point. 150% growth with a drop in the cost of freight in relation to the traditional, postal costs. Stores are also 3P pickup points. We have 1,100 stores already doing this with the store pickup. The difference that really made Magalu the leader and the benchmark is being transported to the marketplace world. We want to re-emphasize the importance of the stores. The stores are much more than a point of sale. It is a logistic point, not only for 1P, but 3P as well. Besides selling financial products, it is much more than a POS. The stores, even if all are breakeven only, we will be happy because we will have over 1,100 points. It is very important to have this role being performed by the physical stores. You can see that this is an evolution, and it became a very big competitive advantage. 50,000 of the sellers came through the service delivered by our stores, so you can see the importance of the physical stores attracting sellers. Magalu is a multi-channel company and not a POS company. We're going to talk about this a little bit later. You know, of course, that there will be some difficulty in the last quarter, but overall, for the full year, we were able to keep the resources higher than in 2019. We had already grown 1% vis-a-vis 2019 and now 6%. The sales for the year as a whole was very resilient, and we believe that after this moment is water under the bridge, it will come back again and generating more contribution to the business and playing a very important role for the whole ecosystem. A second point. I talked a lot about the multi-channel marketplace, and now I would like to mention a very important point I referred to at the beginning, which is the diversification of revenue streams and the coming on board of new categories and also new lines of service revenue. We made quite a lot of acquisitions, 20 acquisitions over the last couple of years, mainly Some before that, such as Netshoes and Época, and we are sharing this with the market to show this very clearly. Although we had a very good performance in durables and we continue to be the leaders, it took us six decades for us to become the leaders. Our diversification of categories has a very good result and it's very important to give visibility to you. These long tail categories which are not the traditional categories represented about BRL 20 billion. We will be talking about KaBuM! a little bit later. 45% of the online sales coming from new categories. Home accessories, peripherals, beauty, grocery, food delivery, all the categories that are growing very cheaply and with the marketplace and with the companies that are coming with the group, we are being very successful. I would like to highlight that the acquisitions, besides contributing to the top line, they are contributing to the bottom line as well. We are very successful in terms of bringing companies to the group that help us expand GMV. That will help the company to be more profitable. I would like to mention that they are all in line or higher than the original forecast. The acquisition strategy is already bearing fruits and the numbers corroborate this. I would like to mention each one of them just to illustrate. I'd like to start with KaBuM!. KaBuM! is the youngest in the group. We announced the acquisition in July, but we were only able to integrate it into our balance sheet in November fifteenth. The results of KaBuM! will be integrated in 2022. It is a company that it's like the Disneyland of gamers. It's a leading technology in gaming, e-commerce site, BRL 4 billion GMV, BRL 300 million profit, more than 2 million active customers. More than 60% of them have never bought in the Magalu ecosystem. It will bring a new customer base that is different, loyal and in a category that is growing worldwide, gaming. It is totally complementary to Magalu. We are talking about IT accessories, peripherals, things that people buy for gaming. Also people buy these, accessories for Bitcoin mining. More than 20,000 items assortment. This has a loyal, customer base and we'll be doing a lot jointly in the universe of technology and gaming e-commerce. This is going to be a very successful acquisition as was Netshoes acquisition. We are celebrating record results in this universe of lifestyle categories that we added to Magalu, particularly with the acquisition of Netshoes. For Netshoes we had some record marks last year. GMV of BRL 4 billion. The highest profit in our history, BRL 135 million with the back office integration, logistics integration, store pickup and a number of advantages that Netshoes alone did not have. Integrated to Magalu ecosystem we were able to reduce G&A and of course we had wonderful management. 250,000 items assortment, 7 million active customers, a loyal base and one of the main sports, e-commerce channels in Brazil. Very high organic access and it's proven to be one of the main e-commerce brands. We sold more than 10 million pairs of athletic shoes and 1 million soccer team jerseys as we are responsible for managing most of the club stores, soccer club stores and we manage those. With Netshoes there comes Zattini, one of the main fashion channels in Brazil. There with it came a team with a lot of expertise, know-how. Silvia joined with her expertise to help the Brazilian e-commerce of fashion. For fashion, GMV was BRL 1 billion at Magalu, 170% up year-on-year growth, more than 300 brands available. I would like to highlight the fashion marketplace. 50% of the fashion GMV was 3P last year. We can see 30,000 sellers in the category. Some came with the acquisition of Netshoes and Zattini. We have increased the sellers base and also via hub we included 8 industrial hubs. We have a number of factories connected directly to our e-commerce. Also the fashion category has grown a lot and we are very confident that we will continue to provide and deliver very positive results. We are one of the leaders in fashion and will continue to grow above market average. Another highlight last year was Época and the beauty category. GMV of BRL 1 billion in 2021. 60% year-on-year growth of GMV, plus 3 percentage points of share in the category. It is profitable. Netshoes, Época, KaBuM!, it's added to Magalu ecosystem, adding to the top and bottom line. Altogether, lifestyle categories represent BRL 6 billion in total sales in a very strong combination of 1P and 3P with a lot of growth potential looking forward. I'd like to remind you that these categories are under-penetrated in Brazil. Now I would like to talk about the groceries category. BRL 1 billion. This is the GMV of groceries in the whole ecosystem. Last year, we acquired VipCommerce, an e-commerce platform that helps analog retailers of supermarket products to join the online world. It is the only specialized platform in supermarkets. These customers gave us a GMV of BRL 330 million. This is still a SaaS model. 200% GMV growth year-over-year, 190 million items sold, more than 280 es served. We should be able to integrate a good part of these customers to our ecosystem, particularly to our Super App. We'll have some news for you soon to be announced to the market. We will integrate all of these customers, all of these cities. VIP has been able to grow with the SaaS model. The groceries category growing a lot, BRL 1 billion GMV, but in terms of items sold, it has a relevant share in our total sales, being responsible for bringing customers to the Magalu platform. I would also like to highlight our food delivery, although it's not present in the capital cities. Magalu generated BRL 1.3 billion of GMV in food delivery and became the second-largest player in the Brazilian market with the exit of Uber Eats. 5.3 million total customers. We are creating a platform based on. We have 30,000 active restaurants in food delivery, and I'd like to highlight that our food delivery is profitable. iFood has always operated profitably in a profitable way. We are still focused on small and mid-sized cities, but we're expanding our services to other profile of cities, and we are very excited with this potential growth. I'd like to remind you that we integrated iFood in the Super App last year, and we are reaping the fruits of that kind of integration. Another successful acquisition that has proven to be positive both in the top and bottom line. I would also like to highlight our Magalu Ads or ads initiatives. We bought three content channels., one of the largest content channels in Brazil. Steal the Look, totally focused on the fashion, beauty, home category. Steal the Look. In this category, you don't need just the products, you need content. One of the most loved channels in Brazil, Jovem Nerd. With the acquisition of KaBuM!, it's going to be more and more representative in our ecosystem. Altogether, including the audience of these three channels, KaBuM!, Netshoes, Época, Zattini, we had more than 450 million sessions accessed in December 2021 across all of the Magalu ecosystem. Perhaps we are the ecosystem with the highest audience in Brazil. Last year, we had a tie with specific advertising, and we were able to sell BRL 100 million in advertising revenue, particularly with the development of new features, self-service, the inclusion of Magalu Pagamentos to the platform and also with the Magalu Ads that will facilitate for key sellers to advertise across all of the platforms in a large ecosystem. With such a large audience, many sellers will definitely want to enjoy many of the functionalities we are offering. We're very excited with diversification of revenue. 100 million is very significant for Brazil, and we will continue to grow. I would also like to highlight our fintech, which achieved a significant TPV, BRL 65 billion last year. We launched our POS machines of Magalu Pay focused on analog sellers. We are also in the process of launching a corporate account. The fintech was profitable last year. We had almost 5 million digital accounts created in the Super App, Magalu Pay. The participation of Magalu Pay in sales integration of Magalu Pay with Pix helped us a lot in terms of cash-in, so that we could have money in the account for customers to use and enjoy exclusive promos. The onboard of Magalu Pay is totally simple. You just have to have the Super App and some additional steps. It's totally integrated with the SuperApp, a lot more than other digital accounts in the market. Three million new credit cards issued in 2021 with the focus on Magalu Card. Geared to online shoppers. It generates cashback. You can look at your balance in the Magalu SuperApp. Our credit portfolio for LuizaCred totaled BRL 17.5 billion last year. Much higher number than a good deal of the neobanks in Brazil. Showing the potential of our ecosystem to escalate the business. The fintech is doing quite well. Here we see the breakdown of GMV, BRL 65 billion, BRL 41 billion in credit card, BRL 16 billion of prepayment of receivables, and also banking as a service with Hub Fintech. One of the acquisitions completed in July of last year. It is responsible for a good part of innovations and new features on our platform. To end, I think that the numbers clearly indicate progress of our strategy, of our omni-channel approach, diversification of categories and revenue streams with a balanced ecosystem. Now we'll speak a little about the financial highlights of the quarter and the full year. Vanessa will be handling that part, and then I'll be back to answer your questions together with the whole executive management. Thank you very much. Thank you, Fredi. Good day, everyone, and thank you for joining us in our conference call. I will go over the financial highlights for the year in Q4. Starting with the full year. While Fredi mentioned some of the growth, but it is important to stress the marketplace grew practically 70%. Our e-commerce, BRL 40 billion, tripling in size, growing 39% in 2021. Physical stores, even with all of the difficulties related to the macroeconomic situation in the Q2 of the year, grew 6% and are at levels higher than pre-pandemic. We grew almost at 30% total sales, BRL 56 billion, more than double than in 2019 when we had only BRL 7 billion in sales. That's a super highlight for the year. In terms of results, Magalu reached 1.5 adjusted EBITDA in the year, a margin of 4.2%. Adjusted net income was 114 million in the year, equivalent to 591 million accounting net income. On the next slide, we have the highlights for the quarter again. Marketplace grew 60%, more than BRL 4 billion. Total e-commerce grew 17%, BRL 11.1 billion in the quarter. Brick-and-mortar stores, given a greater concentration of higher average ticket and higher interest rates, higher inflation, posted a retraction of 18%, resulting in total sales 4% up in Q4 2021 over Q4 2020, with BRL 15.5 billion total sales. Adjusted EBITDA, BRL 243 million, equivalent to an EBITDA margin of 2.6%. We had a retraction of the sales of our physical stores, as mentioned. We had negative BRL 79 million in adjusted net income and accounting net income of BRL 93 million considering non-recurring events. On the next slide, we have the EBITDA margin evolution, how it performed compared with Q4 2020. We see a positive contribution in terms of gross margin because of the greater share of services revenues on expenses. Selling expenses and administrative expenses, lower dilution of expenses because we have lower sales of our brick-and-mortars, or as mentioned before. The company is working on an agenda to make our 1P durable goods operation more profitable. We are working on a gradual pass-through of the increasing costs we had and inflation of costs in recent quarters, and also to reflect higher interest rates. We've been doing this along the first months of the year. On the next slide, we have our capital structure. Again, we had working capital contributing to the capital structure of the company. Here it is important to highlight that we have been working a lot to improve inventory turnover. In the first months of 2020, we had a reduction of BRL 1 billion in the level of inventory, so that we can work with a more efficient inventory turnover in the short term. In terms of net cash, we ended the year with BRL 5.5 billion in December of 2020. When we look at the next slide, we see our cash flow. I think we have to highlight our capital structure. We ended with the highest cash in our history, BRL 12.3 billion. In the quarter, we invested BRL 300 million in CapEx, and we captured BRL 4 billion in debentures with a long maturity, 4-5 years maturity. It means to reinforce our capital structure even more. We ended with a net of BRL 4 billion. There we can see the receivable of BRL 8.2 billion. Fred spoke a little bit about the portfolio, but it's important to mention that we ended the year with more than 7 million cards issued in the year. Practically 2 million. We had end of 2020 with 5.3 million cards. We end up with 7.2 million. Here we have to highlight the Magalu Card launch was very successful. We launched it in April, and we reached 1 million cards issued, complementing Luiza Card. In terms of TPV, 41 billion TPV for the year growing 40% over last year. 80% of this TPV is outside Magalu stores. So our customers use the Magalu cards both inside our stores, in our e-commerce, and also outside Magalu. This was driven by the Magalu Card. The quarter TPV grew 40% with 12 billion BRL. Lastly, speaking a little bit about the indicators of the card, we ended the quarter with one of the lowest default levels. Our long NPL, look, 5.6%, a little bit higher, but still much lower than the pandemic levels, showing how healthy our loan portfolio has been. The growth of our credit portfolio, the growth of our card base, that has been very solid. Very solid growth, which improves more and more in our relationship with the clients. In terms of results, in the year, Visa card had practically BRL 300 million net income according to the methodology of the central bank. In IFRS, you can see the numbers. This is related to the growth of the card base and growth of our sales. The portfolio indicators in terms of delinquency remain fairly low. Well, I think these were the financial highlights, and we can now begin the question-and-answer session. [Non English Content] Now we will start the Q&A session. In order to ask a question, please click on the Q&A button on the lower part of the screen. Please write your name, your company, and the language of the question to join the queue. When you are announced, a request to activate your microphone will appear on the screen. Please unmute it and ask your question. . Good morning, everybody. Vanessa, Fred, thank you very much for the call. I have two questions. The first one has to do with the short run. How do you see the evolution of demand for the other categories? Maybe this is a point of attention. Fred, could you talk about the challenges short-term changes in the long-term strategy of the company? Will you change priorities? Will you accelerate some and slow down some others? Because there are some initiatives that are really working well, and the company is setting up the whole ecosystem. I would like to know what you're going to accelerate and decelerate. Thank you very much for your question. Good morning. In the last call, I talked about the short-term, almost being like a macroeconomist, and I spent quite a lot of time in our financial statements at length about it. The only difference is that we are prepared for what is going on in the second quarter of last year. In a way, the macroeconomy was rather surprising, maybe in terms of the intensity of the change, the headwinds that we had. I believe that nobody was prepared, not even the very important hedge fund managers were prepared here in Brazil to face what happened in terms of inflation. Everybody had to revise their portfolios. Nothing changed in relation to the short-term situation that you read about in the news. The only thing is that we are prepared. Vanessa has already mentioned some of the adjustments in order to make the operation more profitable and adapt it ourselves to the size of demand. In terms of the strategy, it is quite the opposite. As I said during my presentation, also in the message from management, the strategy since 2019 is in the diversification of categories. What happened is that we had this pandemic, and everybody had to buy durables. I was not going to say to Brazilians, "Well, don't come here to buy a smartphone or a refrigerator. I want to diversify." Of course, we would never do that. After six decades, we became. We were very happy about that. We were the leaders in the category of durables. Of course, there is some headwind in terms of the pandemic, but we will be much better than the average, and we are already very well-positioned in order to tap into this market. We are very well-prepared to face a period. I'm not an economist, I don't want to be an economist in this call, but maybe we will have to wait for about one quarter. The strategy was very good. All the acquisitions were in different categories and adding new revenue streams, and they are all performing very well. Very successful, BRL 20 billion GMV, 45% participation online, most contributing to our business. We will just accelerate the implementation of the strategy and the connection between and among all these companies. KaBuM! is happening. We are doing BRL 100 million, but we can do much more. Everything is going very well. Basically, we have to execute the plan, which is something that we are already doing, that we did from 2019 to 2021, and we will continue. Of course, focusing on multi-channel, that is bringing sellers from all over Brazil with a very special focus on analog sellers. We are not going to change our strategy. We will continue to implement it with discipline and continuing with the traditional categories. We know that there are cycles, so we have been through many cycles before. It's very difficult at a certain point because everybody wants to be in the category. Our next question is from Irma Sgarz with Goldman Sachs. Go ahead. Hello. Thank you for taking my question. Fred, I would like to know more about the design of the logistics network. I think that you have an approach a little different than some other players in the market. Could you please elaborate on where you stand? What are the work fronts you will be focusing this year? Trying to improve average delivery time for... The recording has stopped. This meeting is being recorded. Will you be expanding the assortment, onboarding more analog sellers? Or will you be working on physical assets? Well, you brought forward the opening of some new stores, so I would like to hear what are the hurdles in the short term to improve the delivery rate even faster, even more. Well, thank you very much, Irma, for this question, 'cause this is a question that we get frequently from investors. I think that we are disclosing some important numbers now to clarify our strategy. I would like to highlight the expansion of our network. Logistics capacity is very important. We increased from 30 cross-docking stations, cities, and DCs to 272 last year. Our focus on logistics is based on practically all of the points that you mentioned. First, you have to bring in sellers and decentralized catalog. I have to have a decentralized seller base present all over Brazil. We were able to do this through our hunting efforts by our brick-and-mortar stores and through the Magalu partner program. We are bringing more and more sellers, more and more outside the Rio and São Paulo area, because in Rio and São Paulo, that's where we have around 70% of the sellers. Now we have people from the Midwest, the Northeast, and the catalog is expanding. With our cross-docking stations, we can collect from those sellers and ship directly in our network without necessarily having to store goods, because the sellers already have their goods stored in their own stores. Having a logistics with a lot of flow and local inventory, that's the logistics we are aiming for. Our focus, as you said, is to make the goods travel a little distance. If a customer in Franca, in the countryside of São Paulo, is buying a product which is available in the fulfillment in São Paulo or in a local seller in the city of Franca, we want to ship the good from that seller near Franca, avoiding long distance transportation. Now, with fuel prices increasing, the main cost of e-commerce is shipping and freight costs. The less the goods have to travel, the better. When I speak about smaller tickets, lower tickets, BRL 30, BRL 40, it is impossible to have a profitable sale if we are selling a small ticket and making the good travel a lot. We're increasing the logistics base, 272 that help drop-off and shipping. We are making our 1,400 stores work as logistics drop-off points. 15% store pickup. This is economically feasible for lower tickets. Just like Agências Magalu that became drop-off point for sellers. This brings a reduction of 50% in the cost. More than 10,000 sellers are using Magalu stores to drop off their goods. From the standpoint of customer experience, the structural change in the searching algorithms and of the data structure that we have, it's all monumental. We have to make local products available to local customers. It's a total reengineering of our categories. IT platform is already prepared to serve local customers with local sellers. The change in logistics and in IT is very, very complex. A lot more complex than it sounds. We have a very solid team working on geolocation because we believe the more the local customer buys from local sellers, the better. Of course, we have to continue to hunt for local sellers to make sure that their products are active in our list of products. It's a holistic work. Now with all of the investment made in storage area, and also with the fact that 1P durable goods that had consumed practically all of the storage area that we had, it tends to create more space in our DCEs. In idle space, we'll use that idle space for the fulfillment by. We'll add fulfillment by to our possibilities available to sellers, and we believe that all of these factors together will help us improve the share of Ultra Fast deliveries for 3P. 1P already has very fast delivery. When you buy an Amazon product, you don't see whether it's 1P or 3P. In Brazil they say, "Oh, 1P is not good, 3P is good." In the US, it's not like that. 1P or 3P, it's the same for customers. It's delivered fast. Customers actually prefer to buy from 1P. The market prefers a 3P. We don't do what the market wants, we do what the customers want. With that, I believe that we are going to improve also our 3P. As I said, improvement was very significant last year. We're going to have more stores working as Magalu Agencies, and we'll improve the algorithm. Even Magalu Ads. We have features in Magalu Ads so that sellers can advertise to local customers. This is being shared by all of our business teams, with the highlight going to labs. I'm sure that we will continue to evolve in that indicator looking forward. Thank you very much. Our next question comes from Maria Clara from Itaú. Maria Clara? Hello, Fred, Vanessa. Thank you for taking my questions. Well, I have two questions. The first one has to do with the work dynamic about the inventory of the company. When do you expect to finish the process? The second one has to do with the physical stores, with the multi-channel ecosystem and the sales through the platform exceeding the ones in the physical stores. What could we expect in terms of this evolution? Thank you very much. I will start, and then Fred will answer. About inventories. In December, at the beginning of December or at the end of December, we had the inventories of KaBuM!, and close to December 15, the result was about these days. This impacts the nominal figure. Magalu, it also prepares itself in order to sell inventory by means of our big sale. We have to prepare ourselves during this period. Over the quarter, we had this turnover. We had an improvement in the turnover. This continued during the first months of the year. We proposed ourselves to do this. This was very intense. At the beginning, the sale was very important for our inventories. It was very important for us to sell the inventory that was there in our storage. In the first few months, we already had this significant reduction of about BRL 1 billion in the inventory, bringing it to the levels that we consider as more adequate for the operation. Thank you for the question. In terms of the future of the physical stores, I have already talked, and I will reinforce some points. We will talk about the adaptation of the stores and to give them a new meaning at this level. I have already emphasized the strategic importance of the physical stores. In order to post the products, in order to have the store pick up. This is fundamental for 1P and very fundamental as well for 3P nowadays. This is a very successful channel in terms of sale of financial products as well. It is much more than a point of sale for physical merchandise. This is where we sell financial products and also a very good support for sellers and more and more it becomes fundamental. We have a very big discipline in what we do in stores. Our stores are very lean. We have small stores. The cost per sq m is lower than similar ones, and we have a cost per sq m that is extremely low, and most of the costs are variable, so we are able to adapt to what it is generating in terms of revenue. If they stay on the break-even, it's already very good. We are talking about 1,400 points of service in our ecosystem. I would like to call Fabrício to add to what I have already said. Fabrício? Good morning. Thank you for the question. Fred has already talked about the stores, and we found their role to be played and in our ecosystem in these last two years as a support for 3P. There is a very big concentration of the core products of Magalu in the physical stores, and we are in a complex situation right now. This is going to improve and therefore the physical stores are going to improve in this regard as well. We have been working with some pilots in some categories in the stores, very successful pilots. We should be placing new categories and remove a little bit of concentration of the core product. We have been investing quite a lot in technology in order to improve productivity, usually at the back office, the support area, so we can operate the store with less people, and this brings down our costs. We were able to open the new stores at a very low cost, with a very profitable operation. The low-income population needs credit and the stores, the physical stores are where the people in these lower income brackets of the population can come and get credit. Just adding to what Fred had already said. Our next question is from Robert Ford with Bank of America Merrill Lynch. Go ahead, sir. Thank you, Vanessa. Good day, everyone. Freddy, could you elaborate on your cost structure and how should we think about the EBITDA margin evolution this year? I'm sorry, Bob, could you repeat the question, please? Hello. Could you speak about the cost structure? And how should we think about the evolution of the EBITDA margin this year? Oh, Bob, we did not have reversals. Oh, we did not have reductions. I'm sorry, I had not understood. Okay, Bob. I think given the performance and the volume of sales that we posted in the second half, particularly in Q4 of the year, it becomes clear that these numbers were below our expectations. The brick-and-mortar sales were below our expectations. We had a capacity size for volume that did not materialize in Q4, and we had to adjust the capacity in all aspects. We're adjusting variable costs, fixed costs that involve contracts, service provision, the team capacity. In other words, we are making a number of adjustments to adapt our structure to the volume that the market is supporting right now. We are working very hard in all fronts. People productivity, Fabrício mentioned a little bit of that. Shipping, logistics, optimization. We have teams focused on optimizing itineraries, routing, logistics options to reduce the shipping cost as a share of gross revenue. In marketing, we are making an effort to improve the ROI of our marketing. Regardless of the market being more competitive or not, CPI is increasing. We are working to make our processes and databases more sophisticated to derive better results. We've been successful in absolutely all work fronts vis-à-vis last year. Like I said, Bob, we were not expecting what we had in Q4, and that's that economic slowdown. Now we know what's happening, so now we are prepared in the Q1 for that. This year, the margins, in my view, will improve gradually. Of course, for the Q1, just like Vanessa said, we still have some inventory adjustments to make. Part of the capacity adjustments were done in the Q1 of 2022, but we already see improvement compared to what happened in Q4. Significant improvement, particularly as of the month of March. We believe that this is going to continue along the year. We'll continue to improve as we are successful in our initiatives to improve efficiency. If the economy is not doing well, we have to do our homework in-house. In other words, we have to optimize, rationalize, improve the share of interest-bearing sales. There are a number of initiatives that the company is implementing to try and improve and adapt our core. As you know, new initiatives, as I showed you, are doing very well in terms of top line and bottom line, but we need to adjust the size of the company to the new macroeconomic scenario. We have a number of initiatives ongoing, and we're executing them according to plan and to schedule. Along the year, this will become very clear in our results. Thank you for the question. Ruben Couto from Santander. Ruben, you may proceed. Good morning, everybody. Adding to the previous question, and in terms of cash generation for 2022, could you talk about how these drivers that you have just mentioned will be impacting the result of 2022? Do you believe that the second half could be improving in terms of cash generation? What other actions are important so that you may go back to the previous cash generation? Is it the marketplace or the relevance of 1P vis-à-vis 2P, 3P and recovery of margin and also cash generation for 2022? What can you tell us about that? Good morning. Thank you very much. I will start, and Vanessa will join me. In terms of cash generation, there are many aspects involved. The first one is the working capital, Ruben. As I said, we have been very vocal about that. We have been adapting our working capital. We have always had a lot of discipline in terms of generating cash and also a good management of working capital 1P. It is good when you have a good planning for sales and for inventory, and you have a very good market reading. This year, there is a lower unpredictability than last year. We have been working to go back to the traditional levels of Magalu having a positive working capital. We are working on that. We still have an adjustment to do this still in the next quarter because it consumes cash. Because of the natural cycle of the company, we are very much focused on going back to our normal levels of working capital of the past. We have, let's say, monetization of assets. The default of last year did not become cash. In many locations, it will be cash and other assets. Of course, there is a discount. We will only do things that are positive for the company. We are working on that only if we have very good opportunities, and we prefer to monetize assets as the case may be. We would never do anything that could hinder our result. I also see many benefits. Marketplace was not good last year for cash generation because as the whole market was having zero take rates and free freight, it consumed more cash than generated cash. In February, we changed this, and now we have a positive contribution. It is now what it should be always, an economic model of positive cash generation because the market is more rational now. I think this is very positive. I'm not saying that it is good in 1P and bad in 3P. No, it depends. Because you can have a 1P that is a very good cash generator and a 3P that is not a very good one. It has to do with your juggling with these. The scenario makes things more difficult, but we have a very good team and a very good team in our physical stores as well. I would like to go back to our physical store team. They are spectacular. We have a great culture. We have thousands of people who work there and deliver results, and they deliver the goods, and they give service to the sellers and to the clients. You must not forget that the physical stores has a very big difference or competitive advantage, the most motivated team that we have in this area in Brazil. Our next question is by Vinicius Strano with UBS. Go ahead. Hello. Thank you for taking my question. In the previous earnings call, you mentioned a premium Black Friday. I'd like to know, what is the company thinking regarding the product mix? Do you intend to focus on more premium products in core categories? What is the general competitive landscape? Perhaps the competition is a little bit more aggressive right now. If I may ask another question, Freddy, could you speak about the initiatives to increase organic traffic for the company? Thank you very much. Well, I'll answer the first question, and then I'll let Edu answer the second question. Thank you very much. Well, unfortunately, in Brazil, we have a situation in which the low-income classes lost purchasing power, given the economic issues. We feel that at the brick-and-mortar stores because the profile of our buyers in the physical stores earn an average of BRL 2,500. Of course, the impact of inflation is huge on family income. I'm not going to speak about macroeconomics, but I had to mention this. In the presence of inflation, Brazil is for just a few people. Just for the people who feel less the impact of inflation of food items, of power, inflation of fuel. The premium categories remain more resilient than low-ticket categories. This is bad for the Brazilian economy. It's bad for Magalu and for practically all retailers in Brazil. There are very few that are exclusively focused on premium customers. Black Friday happened as it did, but of course, we want to sell to everyone. We have the passion of Magalu to bring products to low-income consumers, to bring digitalization for small sellers. We are inclusive. This situation makes me sad, and I hope that we can quickly go back to controlling inflation, to again continue to distribute income so that Brazil will be for many and not for just a few. The characteristic of Black Friday was what it was because of the macroeconomic situation. As regards our audience, Edu will answer the question. Eduardo Galanternick. Speaking about organic traffic and reducing the reliance on marketing investments, there are two dimensions to answer the question. One is a tactical dimension. Continuous work that we do to evolve SEO and CRM. Whenever we add customer base by growing Magalu brands or adjacent brands, we can enrich our recommendation algorithm and improve our CRM strategy. But these are more tactical aspects. From the strategic standpoint, though, what makes a difference, what we have observing, and we saw that a lot in the second half of 2021, is that adding new categories increase the frequency, particularly in our app, increases recurrence and makes customers to end up choosing a better traffic mix for us, more organic traffic. This is not data that we disclose, but our share of paid sales in the year was reduced, more specifically in the second half of the year, and a lot because of this growth of new categories added. I'd like to remind you, last year, we completed the integration of Aiqfome in the Magalu app, still at an incipient stage, but we completed that. As Freddy mentioned, we are completing the VipCommerce integration into Magalu. KaBuM is already fully integrated in our marketplace. As we move forward, as we convert Magalu customers to these new services and new categories, we'll have higher frequency and a reduction in the need for investments. We can choose to invest or not. It's our discretion, but in an aggregated form, we'll see a reduced need for investment. This is our app. Diversification of categories is a strategy for us. Okay. Daniella from XP. Well, thank you for the question. I have two questions. The first one has to do with your inventory provision made in the last quarter. How much has been provisioning in this quarter and how much we expect remaining for the Q3 because I believe that will have strategies adjusted. The M&A strategy. You've very much focused on that especially during the follow-on, even before the follow-on. Given a high uncertainty in the macro scenario. Are you going to wait a little bit for the strategy? Maybe carrying out smaller M&As in the short run. Maybe you could give an update on your frame of mind about future M&As. About the provision, we used a significant part of that during the quarter, as I said before. The inventories started at the beginning of the Q4. They continued at the beginning of 2022. With the fantastic sale, we gave one additional step in this direction. In February the level was much more adequate, so it was used in the Q4, but also in the fantastic sale as we call it. I will give you further details later on. Thank you for the question. Still about the M&A, 20 acquisitions in two years. Now we will have to digest all that. We have a lot of work in our hands. Our integration team has a lot to do in order for us to reap all the fruit from all these acquisitions. Although all these acquisitions are performing very well. We believe that right now, not because of the macroeconomic scenario, but due to execution reasons, we are going to focus more on the assets that are already here with us and evaluating all the possibilities and making all the connections among all these acquisitions. We are going to halt this for a while, and we are going to focus on doing the best possible with what we already have inside our system. Our next question comes from João Soares with Citi. João, go ahead. Hello, everyone. Thank you for taking my questions. I have a couple of brief points to raise. First, I'd like you to elaborate on the 3P growth, which was very positive in this quarter. I'd like to understand what are the main drivers of 3P growth? Is it the arrival of new sellers that you hunted in recent months? Is this a legacy seller selling more or the maturing of some other sellers? Could you give us more color on 3P growth? Also, Fred, you have a lot of services that you are providing, that you are offering. When we look at Magalu Agencies and Magalu Ads, you're selling advertising, so you're evolving a lot in your service offering. How does this reflect in the take rate and the commission that you're charging from sellers? The last point, if I may, regarding the short term. I don't want to insist a lot, Freddy. I know that this is a little unpredictable, but lately in February, we saw an improvement in the foot traffic of some stores and the whole sector being more optimistic. I don't know if you share this optimism. Could you share what you're thinking? Thank you for the question, João. I will let Leandro Soares, responsible for our marketplace, answer your first question. He can give you more color on that, and then I'll come back to answer the rest. Hello. Thank you very much for the question. Well, marketplace growth has two components, as you mentioned. There's a component of new cohorts. We added a large amount of new sellers over the year. They started slow, but after a few months they are selling at an accelerated pace. The component of old cohorts, I think that there's a little of both. We can see that this growth stems from both factors, the new sellers, and the old sellers in this centralization, so that we can start selling across Brazil at affordable costs. In September, we also had our free shipping policy that accelerated this process. We were offering free shipping for up to 100% discount for our partners. Now, starting in February, we updated offering up to 75% discount in shipping costs. That changed a little. From the standpoint of billing, we maintained the percentage. We added a BRL 3 fee, and we adjusted shipping to make it economically feasible to serve all of our partners and so as to sustain growth for longer. I think that this is the main component that explains the growth that we had in Q4, and of course, sustainability for the coming quarters. We are now ending the Q&A session. I would like to turn the floor to Frederico Trajano for his final statements. Freddy, go ahead. Well, I think that Vanessa's response came too early. Let me answer the second part of João's question. Well, like I said initially, I didn't see significant change in the macroeconomic scenario from Q4 2021 to Q1 2022. The difference is we are more prepared to cope with this new scenario that we're dealing with. In my opinion, we believe the most significant improvement will happen in the second half of 2022. I think it's the opposite of last year. First half will be a little harder, second half will be a little better from the macroeconomic standpoint. The company's prepared for that more challenging scenario. We're improving our operation along the quarters. This is what I envision for the future. Again, I don't have a crystal ball. Things might get better before anything can happen, I should say. I'm not expecting great surprises, though. Thank you. We are now closing the Q&A session. Freddy, let's move to your final statements. Well, I would like to thank all of you for joining us in this earnings conference call. We have all the management here with us, and I would like to thank the management. I would like to thank all Magalu employees who are working hard to execute our strategy. I would like to say that we obviously understand all of the challenges and short-term scenarios, but we are absolutely motivated and excited to execute on our strategy. Instead of looking at a snapshot, we wanna look at a film. A film is better than a photo. Thank you very much. Magalu earnings conference call is ended. Our investor relations team will remain available to answer further questions and doubts. Thank you very much for your participation, and have a good day.