Welcome to welcome to Natura & Co's Conference Call to present the Wave 2 kickoff. On this call today are João Paulo Ferreira, CEO of Natura & Co Latin America, and Guilherme Castellan, CFO of Natura & Co Latin America team will join for the Q&A session. The presentation they will be referring to during this call will be available on the Natura & Co Investor Relations website. I will now hand over to João Paulo. Good morning, everybody, and thank you for joining our call today. Following the announcement of our Q2 2023 earnings yesterday, we are now here to bring you even more detailed information on the initiative that intends to reshape our Latin America business, which we call Wave 2. What is this initiative? It is basically the acceleration of Natura and Avon's business integration in Latin America. Its main goal is to boost the profitability of the Avon brand in the region, and as a result, improve the profitability of the consolidated business unit. It is also an enabler to explore new cross-selling opportunities that Natura and Avon can achieve together. Something that we predicted since the acquisition, but we could only pursue after the achievement of certain milestones, which includes the simplification of Avon's commercial model and the optimization of its portfolio. We're now ready to take this step. You can see on this slide the main topics that we will cover during this conversation before we move to the Q&A session. Before we dive into Wave 2, let me take a step back and put everything into context. You know that we acquired Avon in early 2020, right before the world stopped with the COVID-19 pandemic. On top of that, in Q2 that year, Avon faced a cyberattack, which we disclosed to the market at that time. We began the integration process already in that period, despite these challenges, particularly in the supply chain functions, followed also by the beginning of the portfolio optimization. As COVID became more under control, we decided to start rolling out the new commercial model to Avon in Brazil. You may recall that this was more challenging than we initially expected and resulted in a big hit on the distribution channel around Q3 2021, which took us a while to stabilize. Later, through 2022, we continued rolling out channel segmentation to other countries and optimizing the portfolio, especially in Fashion & Home. In addition, we integrated all the back office areas and made important investments in marketing. We acknowledge that we underestimated some of the difficulties associated to those changes, but now we have a much deeper understanding of Avon's distribution channel, including the opportunities, the challenges, and especially the reactions to the changes in incentives. Using the learnings from that period, we decided to start Wave 2 in Peru and then in Colombia, before we rolled it out to Brazil, which will happen right now. The remaining countries in Latin America will follow in 2024. What are the challenges that Wave 2 is intended to address? We announced Waves 1 and 2 right after the acquisition of Avon. Wave 1 was expected to improve the top-line dynamics and also contribute to the margin evolution, given the healthier distribution channel that would emerge as a result of the new commercial model rules. In the countries where we rolled out Wave 1, we did see improvements in the quality of the distribution channel, with much higher rep satisfaction and lower churn. We also saw a healthier top-line dynamics within the beauty categories. However, we failed to see any significant improvement in profitability. As much as we optimized our portfolio and increased prices, that was not enough to compensate for the high cost inflation of that period. At the same time, we resumed investments behind the brand and improved the service level to our representatives. It was in that context that we decided to leverage the potential of Wave 2, not only exploring cross-selling opportunities, but also integrating the Avon portfolio into Natura's commercialization and distribution processes. By totally integrating our networks of representatives and consultants under Natura's business foundations, we will achieve significant simplification in logistics, in technologies, and in G&A, and also accelerate the promotion of cross-selling opportunities, thus delivering a significant profitability improvement to the Avon portfolio. What exactly does full integration mean? Well, the Wave 2 has been built on 3 pillars. First, the channel combination, creating 1 single and strengthened network of more than 4.1 million beauty consultants in the region, operating with much higher productivity, and hence delivering better earnings for the consultants. Second, an optimized portfolio that combines the strongest offerings of each brand, which will increase the likelihood of cross-selling and improving profitability. Finally, the third pillar will deliver a simpler and leaner structure, as most processes and tools will be harmonized. The marketing and R&D functions, though, will remain separate to make sure that we keep the different identities of each brand. We mentioned in previous occasions that Avon is much more exposed to lower productivity reps than Natura. By the way, different from Natura, those smaller reps deliver a negative contribution margin. By combining the portfolios and using Natura's commercial rules, there will be a higher number of much more productive consultants in that network, delivering, therefore, a much better profitability. Now, imagine that effect in countries where Avon has a much larger network of representatives than Natura. In that case, Natura will receive, in one single day, a network that would have taken years to develop. Natura's digital platform will be used to enable these cross-selling opportunities and, at the same time, eliminate frictions by combining everything into one single order. By doing so, we are placing the beauty consultants at the center of everything we do. We are living to our DNA, simplifying the consultant's journey and increasing their prosperity. Up to a few years ago, whenever facing declining activity levels amongst the reps, Avon's reactions included launching new and additional SKUs, this way, expanding the portfolio. As much as it helped driving activity up in the short term, it also made the portfolio even more complex, jeopardizing its profitability and its attractiveness to the final consumer. In addition to the portfolio reduction that we have already implemented along the last two years, you can see on slide eight, the much that these portfolios will be further optimized through Wave 2. A bit in Natura, a significant amount for Avon CFT, and even more so for the Home & Style product line. The new combined portfolio has been designed building on the strengths of each one of our brands, maximizing the value proposition to our consultants and to the end customers. The selection will reduce the risk of cannibalization and eliminate less profitable SKUs. The simplification of the commercial and administrative structures is another important pillar of Wave 2. As the integration accelerates, the overlap of functions will become more evident, and some assets will become idle. IT is a good example. Avon's IT systems are obsolete, complex, and require a high level of maintenance. The current IT architecture and infrastructure pose serious limitations to speed and innovation. By migrating Avon's business into Natura's IT systems, we shall reduce the number of systems from around 800 to less than 200 in the region. As regards logistics, eventually, all products will be delivered to our consultants in one single box, bringing additional efficiencies and reducing the environmental impact. Even though we are pursuing additional simplification, marketing and R&D will remain as separate structures to maintain, differentiated, the brand identities, their positionings, and value propositions. As we talk about brand differentiation, it is worth mentioning that we will use part of the efficiencies generated through this combination to invest behind the innovation and the communication of our brands. For Natura, we will double down on its essence, the concept of Bem Estar Bem, delivering high-performance products with ultra-sensorial experience, powered by bioinnovation and by our sustainability commitments. As regards Avon, we will focus on delivering progress for women through a diverse beauty at irresistible value. To power the engine behind those brands, we have reviewed the innovation processes to reduce time to market and introduce new governance to make sure that the identities of each brand are protected and the products remain differentiated. Now, when we say that Wave 2 will improve the company's results, we are obviously referring to triple bottom line results, as it should also maximize social and environmental positive impact. We are combining the mobilization power of Avon and Natura to contribute to better standards of living for our consultants and for the society in the countries where we operate. As already announced in Peru and in Colombia, we are expanding the support to our network and their families to fight against domestic violence. We're also extending telemedicine to 100% of our consultants and helping them with the early detection of breast cancer. In addition, with the expected increased penetration of Crer Para Ver, our social impact crowdfunding mechanism, we also plan to offer more scholarships to consultants and members of their families. Finally, as regards to the climate crisis, we continue to increase the number of communities we work with in the Amazon, now including communities in Colombia and in Peru. We are also transferring knowledge from Natura to Avon to neutralize its carbon emissions and increase the amount of post-consumption recycled material into its packaging. Let's shift gears and discuss what you have been waiting to hear, the initial and expected data from the launch of Wave 2 in Peru and in Colombia. Before we look closer at the data, I need to disclose that up to the beginning of this combination, we had not rolled out Wave 1 in Peru. Therefore, the data reflects the simultaneous implementation of Waves 1 and 2. The first number that calls our attention is the overlap or interpenetration, referring to the percentage of our consultants that are ordering products from both Natura and Avon. That number is now above 70% and well ahead of our expectation. Now, let's drive our attention to the beauty consultants count. You can see that the number increased right after the implementation, because we gave Avon's reps a grace period of three campaigns, as if they were just initiating at Natura. After that period, the number starts to drop and will eventually stabilize at a slightly lower number along the coming campaigns. The main reason for that drop comes from the fact that Avon reps started to face a much higher minimum order, which drove productivity significantly up. By the way, that number shall continue to improve as the total count comes down and minimum order goes up again in the near future. Another result worth noticing is the planned reduction of Home & Style, which decreased from more than 15% to less than 10% of the combined revenues. I imagine you might be interested in other metrics, such as household penetration, consultant satisfaction, and the churn of our total base of consultants. However, it is still too early for us to share any accurate measure of those KPIs. Now, let's move to slide 14, where we can see data from Colombia. There you'll find basically the same trend, but with much larger productivity gains. I have to call your attention to the fact that in Colombia, Wave 1 had already been implemented last year, and it is also a fact that the Avon brand is much stronger there than it is in Peru. However, I must warn you that the data is very preliminary, as it refers to only one sales cycle. I want to close this section highlighting some of the main learnings and challenges from the rollout of Wave 2 in Peru and in Colombia, which helped us preparing for Brazil. I can tell you, we've learned a lot and proven that entering other countries before going to our largest market was a very good choice. Let me detail some of those points. The first has to do with the differences of minimum orders between Avon and Natura. By the way, those differences vary by country, and we know that when we increase the minimum order, that has an impact on the activity level and on the rep count, especially for Avon. Therefore, the harmonization path has to be tailored by country, and is not the minimum order, the only thing that differs by country. The social, political context, the competitive scenario, and more importantly, the brand power, also vary on a country basis, thus requiring adaptation to our implementation strategy. Other very helpful learnings came from the preparation of our IT infrastructure, both the back end as well as the front end commercial platform, so that we could start feeding all the consultants information upfront, especially that related to Avon's network, which is much less digitalized than Natura's. Finally, the biggest challenge we had to face was no doubt the changes in the commercial structure and in the commercial rules, as we had to rezone the entire country, redefine sales leaders, sales managers, basically resetting the whole commercial network. Given all the knowledge acquired, let me now explain how the implementation process will take place in Brazil. To begin with, let me remind you that Brazil represents roughly 50% of our business in Latin America, and the complexity of this operation is significantly higher than of any other in the region. We have to take into account the size of the market, the complexity of the logistics network, the importance of credit to our beauty consultants, as well as the significant overlap that already exists. In addition, we benefit from the fact that the Avon brand is relatively strong here in Brazil in comparison to other countries. After putting all those elements together, we designed a unique implementation process, which I'll describe to you right now. The rollout in Brazil will be split into two different phases. In the first phase, we'll integrate our IT systems, especially the commercial platform, and we'll also fully integrate our sales force and, of course, our beauty consultants, who will follow one single commercial calendar and benefit from one single progression and incentives program. During the first six months, though, consultants will log into their app and place two orders, which will be delivered in separate boxes. By Q1 next year, the logistics infrastructure will have been fully integrated, thus allowing us to eliminate any remaining friction. The rollout to the other Hispanic countries is expected to happen throughout 2024. Let me now hand over to Gui, so he can further discuss the financial details of this initiative. Hi, everyone, and good morning to all of you. As João already mentioned, the main goal of Wave 2 is to improve the profitability of the Avon brand in LatAm, and consequently, of our consolidated figures in the region. However, this will not come without an initial impact on revenues, as we have already made it clear in the past. Why is that? This slide is important because it shows just how balanced Natura's distribution channel is, not only from a revenues perspective, given the healthy balance of the most productive consultants into total revenues, but also because we see very healthy contribution margins among all the clusters of Natura's consultants. On the other hand, you can also clearly see the imbalance of Avon's current commercial model. Not only Star 1 and 2 clusters represent a greater percentage of total revenues compared to Natura's clusters, as João previously showed during his presentation, but also because it results in negative contribution margin for the less productive reps. The goal of Wave 2 is to balance the commercial model of Avon by using Natura's foundation, which should then harmonize Avon's commercial model in full. Of course, this entire process should lead to improving profitability for the region overall. What are the main drivers for that? We'd like to maintain the healthy gross margin of the Natura brands, while significantly improving Avon's too. This will be mostly driven by the portfolio optimization that João just mentioned. It's important to highlight, though, that the biggest benefit will come from contribution margin. Just to be crystal clear, the way we calculate the contribution margin is by subtracting gross profit minus freight costs and marketing expenses, and dividing it by net revenues. While the contribution margin of the Natura brand is pretty healthy, the contribution margin of the Avon brand needs to improve in two ways. The first one is the increase in minimum orders, which helps improve the freight costs per order as a% of net revenues. Second, the integration of the Natura and Avon logistic routes and infrastructure, which will ultimately increase both logistic density and freight efficiencies as a% of net revenues. Furthermore, credit losses are more concentrated on less productive representatives, which means that this entire process creates an opportunity to improve our provision expenses. These effects, combined with a more efficient sales team and a simpler IT infrastructure, should result in a healthier, consolidated EBITDA margin. Finally, let's not forget that Wave 2 also creates an opportunity to invest more in marketing, given the other efficiencies that we expect to materialize. Of course, this process will not come without costs. Although we are not closing the OpEx and CapEx expected to be invested, we can expect costs to intensify depending on which phase of the integration we are rolling out. I'd like to highlight that we may partially offset the cash effect through the monetization of some assets that become more idle as the integration accelerates, which João also mentioned earlier in his presentation. As you can imagine, this transformational process comes with risks that we're currently working to mitigate. One example of our careful risk mitigation strategy was to implement Wave 2 in smaller countries before moving to the biggest one, which is Brazil. What are those risks? Logistics integration and IT simplification are activities naturally exposed to operational risks. As we already highlighted, the process will involve the downsize of the distribution channel, which might be even more intense than we initially expected, mainly impacted by the increase in the minimum order. Furthermore, a more intense portfolio cannibalization is another potential risk that we need to follow closely, which we are already addressing through the initiatives mentioned during this presentation. Finally, the operational leverage above our expectations remains a risk. We believe that over time, this risk will be mitigated by the overall improvement in productivity, especially in the CFT category of the combined network of beauty consultants. On top of that, the expected gross margin benefits coming from Wave 2, plus the significant contribution margin improvements driven by logistics and the efficiencies in the G&A mentioned earlier, will be more than enough to offset any potential volatility in revenues as we implement this important milestone in the region. Before I hand the call back to JP, let us share a video of everything that we have been experiencing in the region over the last couple of months related to the implementation of Wave 2. [Foreign language] Thank you, Gui. I hope you have all enjoyed this video and got a feeling for what is happening in the field. I know we shared a lot. I wanted to wrap up by highlighting just a few takeaways. First, the growing CFT productivity will lead to improvements in the quality of our network as well as, and most importantly, to increasing the prosperity of our consultants. Yet, we are expecting a hit in the distribution channel, which might temporarily affect revenues, particularly for the Home & Style category. However, when combining the harmonized portfolio, the cost structure simplification, the improved logistics density, this should lead to an evolution in profitability and on the return on invested capital. Should also maximize socio- environmental impact, and finally, place us in a position to explore new opportunities to further invest in innovation and in the strengthening of our brands. Thank you very much. Ladies and gentlemen, we'll now open our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the keys. Our first question comes from Daniela Eiger with XP Investimentos. Please go ahead. Hi, good morning, thank you for the presentation, and congrats on, on the project. I, I wanted to follow up on Brazil's first phase. From my understanding from what João mentioned, it would be slightly different from Peru in terms of, like, the integration between the two orders. At this first stage here in Brazil, Avon's reps will only, like, feel the heat of the minimum order increase without being able to use Natura products to complement to, to get to this higher order. I, I wanted to, to check if that's, that's right, and then in Q1 next year, we should see this integration happening. How you are doing to mitigate any potential effect on, like, consultants leaving the base because they cannot get to this minimum order at this first stage, because they will not be able to use Natura products to get there, and if there will be some kind of grace period, as I think João mentioned that, that there was in Peru? Just to try to understand how you address this potential risk of maybe losing reps that would be able to keep the minimum order if they would have access to Natura products to add on the same basket. I think that that's my key doubt here. Thank you. Hi, Daniela. Thank you for the questions. The minimum orders will increase even for the Avon products. It's not for Avon reps anymore, because there is no such a thing anymore. It's one single combined network. There will be Natura orders and Avon orders, and for the Avon orders, the minimum order will still be slightly lower than Natura's, but higher than it is today. Now, having said that, we also created some smart shortcuts, so to say. Bundles of products that can be easily added to one basket or the other. If you're getting close to the, to Avon's minimum order, there will be a few Natura products available for consultants in general to try and complete that minimum order more easily, so to say, and the other way around. We're getting the, the fast-moving items from one brand and the other, and making them available, sort of a one-click buy, to be added to one basket or the other. Hence, we will incentivize cross-selling from day one. That's one of our goals. Now, by doing so, we also think we're gonna mitigate significantly the risk of losing some of those smaller reps. However, I have to say that we will lose some of them, and that's okay. We will, we will create mechanisms to, to try and, and turn them into, our best consumers rather than smaller, reps. Just to follow up, these products that you mentioned, João, are the Unbeatables that you put on and you highlighted on the new magazines. Are those the ones? Probably those are the ones with the higher turnover, like better sales dynamics, so also trying to already give a positive impression for reps on the other brand's products, right? Not, not only those, Daniela, not only the Unbeatables. When you log to the app, you're gonna see in the, in the sort of the, the, the carousel, these, these, rightly available bundles, based on studies that we did in the in recent past of, of potential cross-selling. Those will be added only to the app, beyond those, Unbeatables, that you referred to, that are already printed in the magazine. Perfect. They will come in the same box, right? Those that you add on the click on. Yes. That the one-click buy, cross-selling will come in one single box, together with the, the, the, with the order of one, one brand or the other. Yes. Perfect. Thank you for the answer. Our next question comes from João Soares with Citibank. Please go ahead. Thanks, good morning, everybody. Thanks João and Gui for the presentation. Great detail. I have two questions. The first one, I just wanted to understand, how is the communication happening with Natura consultants in Brazil? Where are the consultants of this integration and the cross-sell opportunities? The second point, you discussed some potential asset sales to mitigate some of the higher costs related to the integration. I just want to understand, what are the opportunities there? Can you talk a little bit about the size of this potential asset sales? Thank you. João, can you repeat your last question, please? ... on, on the asset sales, you discussed some potential asset sales. I just wanted to understand what size and, and, and further details on that you mentioned in the presentation. Yeah. Good, thank you. I'll take the first, and I'll ask Gui to jump in and take your second question. You asked about the communication to our, to our network. That is already spreading. All of our consultants and reps have already received the magazines from the other brand. The sales structure is already in place. The sales managers, the leaders, they are all, they all have been appointed, and they are now... They have started already contacting all of their consultants and reps to make sure that they understood the communication they already received through, through the digital channels, in the boxes. That is spreading. As you know, it's more than 2 million people. We cannot be totally sure of how that message is landing, but that is the focus of the sales force as we speak. They are aware. By the way, as I mentioned during the presentation, that we have been feeding the consultants and reps information into our systems upfront, which allow us to contact them directly through SMS, WhatsApp, the push cards in the apps. That is also either being used already or will be used as we see that they are not active. There's a whole script of context that will be deployed if any of those consultants are not being active. With that, I'd like to hand over to Gui to talk more about idle assets. Please, Gui. Thank you, João, for the question, and thank you, João, for the first answer. Moving to the asset divestment, as we highlighted in the presentation, it will be an important part to mitigate the cash investments that we have in the next few months. Basically, João, as you can imagine, part of the assets, they were already integrated, especially admin assets, right? They were integrated in the first phase, in the first wave of the integration in LatAm. However, there are still offices, distribution centers, et cetera, et cetera, that again, we're gonna have the ability to divest as part of this major integration, which is Wave 2. Now, it's hard for us to predict, of course, the timing of those divestments, but again, as we, as we, as we disclose in the, in the presentation, that is our estimates at this point. As I mentioned before, it will be an important source of, of funding as well for us to, to mitigate these, these, these important investments that we have ahead of them. Perfect. Thank, thank you both for the answers. Our next question comes from Joseph Giordano with Banco J.P. Morgan. Please go ahead. Hi, good morning, everyone. Hi, J.P. Hi, Gui. My question is on the overlap, right? Different from the other regions where the overlap of sales reps was below 10%, in Brazil, we have something around 40%, as you guys flagged. My first question here on this front is: If you add the sales that those reps have on Natura and Avon side, how does it would rank them within the clusters? My question here is if, like, in Brazil, we could be thinking about a lower churn than we actually saw in the other regions. Again, like, the churn would be higher because you're not counting 2 reps, but I mean, like the sales, the overall sales would be less impact. That's the first thing. The second one, we go into. We move those Avon reps that on the first cluster, we put them on the cluster three, when we combine with the Avon sales, with the Natura sales that they have on the other side. How much higher would be the contribution margin if I move one rep from the first cluster to the third cluster? Obviously trying to compare that with what Avon has. Just to give us some grounds to run some more detailed numbers here on the model. Thank you. Okay, I'm not sure I can totally help you, Joseph, let me try. As regards to the already overlapped consultants, they are skewed towards the higher tiers, so Silver plus, right? However, they are subject to different commercial rules and including different credit rules. There will be upsides by eliminating those frictions and looking at their combined transactional histories with us. We know that for sure, because you may remember that I referred in other occasions, that we have tried, we ran many trials with the elasticities of combining that network through different mechanisms. That's the answer to question number one. As regards with your second question-... You know, I'm not sure I, I got it totally right, but let me try, and if, if I don't get it, you let me know, okay? I mean, in, in the case of Natura, the contribution margin of each segment is being designed to be very similar, from Bronze through to Gold, right? Of course, the, the size of each one differs, but the contribution margin is similar, which is not the case for Avon, as Gui depicted in one of those slides there. That sort of distortion that exists in Avon will basically disappear, 'cause everyone will be subject to, to Natura's rules. Is that helpful? Yeah, I was just trying to understand the fully, right? If I add, like, those 40% of sales reps that overlap, right? Probably, like, they don't have the same tier on Avon and Natura. When I combine those sales, it's like I would be seeing a materially higher contribution margin versus what we see today. Basically, like, let's say that I have a rep that's like Diamond in Natura and level one at Avon, right? Obviously, Diamond is high, is already very high, but let's say that when I add these Avon sales, like how this would change the overall profitability of the business. Let's say, just try to put some numbers here to try to quantify. Thank you. Well, indeed, their average order size will go up and, with, with, but all the, the cost to serve, will not go up at the same proportion. Yes, the, the profitability should go up, Joseph. Okay, perfect. Thank you. Our next question comes from Thiago Macruz with Itaú. Please go ahead. Hi, guys. Good morning. My question is regarding profitability. You showed us a very interesting bridge chart, giving us an idea on a profitability improvement as time goes by. I just want to understand, if everything goes according to plan, if that estimate holds water, by when do you expect to reach peak margins? Whatever it is, by when do you expect to reach peak margins? My second question, I think it's a follow-up on the previous one. As you clean up Avon's -- now it's gonna be a consolidated, but Avon sales reps, level one and two from your base, shouldn't we expect immediately a step up in profitability, if and when that happens? Those are my two questions. Thank you. Hi, Macruz. Let me try and answer that, and I'll invite Gui to comment if he has additional comments. When are we expecting to peak on profitability? Of course, when transition is over. How long will that take? I cannot be sure. It's not a two years transition. It's not a six-month transition, so somewhere in between. Not taking into account, of course, non-recurring, non-recurring transformation costs, which have nothing to do with the operation. Just focusing on the commercial activity, it's more than six months to stabilize the whole thing. It's not a two-years journey. It's less than that. As regards the other optimizations of IT systems, infrastructure, G&A, et cetera, et cetera, you know, that has, you know, different timings for different reasons, as we operate the entire region and, and are subject to other timings. But the other thing that you said is, if, if and as much as we migrate the lower tier Avon reps to Natura, shouldn't we see a kick in profitability as soon as that happens? Yes, we should. Fantastic. Well, I, I can just add here, one comment. I think, Macruz, you're, you're, you're right, that that increase in, in profitability, it should be immediate, right? As you take out negative contribution margins, reps from, from the base and as your overall productivity increases. However, it's very important to highlight that, especially in the first quarters, right, the first 2 quarters at least, there are one-off expenses to the implementation of the project, right? In terms of events, in terms of training, in terms of marketing, which will impact your SG&A, and therefore, will be very hard to see the full potential of the project within the first couple of quarters, because of these, these investments, right? As, as, as we go, as you know, Macruz, we, we, we are in this journey with, with two different markets, right? However, each market is different in the end of the day, right? It's, it's difficult for us to, to, to, to say that one size fits all, but the things that we're learning right now with Peru and Colombia is that, there are an immediate benefit, yes, coming from productivity, as you saw in the charts, and coming from the, the loss of the negative contribution margins. There are some investments that, again, especially in the, in the first couple of quarters, they, they, they will happen, and therefore, we estimate to see the full potential of these happen after that. Fantastic, guys. Thank you very much for, for the answers. Our next question comes from Felipe Cassimiro with Bradesco BBI. Please go ahead. Hi, good morning. Thank you very much for taking my questions. First one, you mentioned a few times opportunity to intensify marketing expenses. I'm just trying to get my mind around the strategy behind this. Should we see a higher focus on revamping Avon brand perception or consolidating Natura? Just trying to understand a bit more marketing expenses. Second one, you also mentioned how there is an opportunity in credit, okay? Mainly lowering losses. Are there any additional opportunities, maybe in increasing credit offering to the representatives once the Wave 2 is rolled out? Should we see anything on this front as well? Thanks. Thank you, Felipe. As regards our investments behind marketing and innovation, we, we, we are planning to increase investments on both Avon and Natura. We have been working to strengthen the innovation pipeline. I, I, I can tell you that I'm very impressed with the launches to come, starting the second half of this year. You know, going forward through next year, Those products associated with an improved positioning and communication of both brands, will drive additional pull. We do consider this as, as being, a high return investment. We will use part of the proceeds of those efficiencies to reinvest behind both brands, now going forward. That will be very visible for the public, as you can imagine. As regards credit, yes, there are opportunities there. As you know, we've been running the Natura &Co Pay solution for quite a while, primarily for the Natura operations. There, we developed over the last two years amazing solutions as regards credit scoring, financial products and solutions for our consultants. We've retained spreading some of those solutions to Avon because we were on the edge of a full integration. As now we integrate the consultants base, yes, we will extend the quality of credit solutions and scoring that we are already witnessing in Natura to those consultants coming from, from Avon and their. We know that that improves the quality of our channel. Great. Thank you very much. Our next question comes from Irma Sgarz with Goldman Sachs. Please go ahead. Yes. Hi, thank you for taking my question. I just wanted to explore a little bit more what you mentioned earlier in terms of the commercial, new commercial system that you've rolled out, and where you said that you already put the new sales managers and leaders into place. Can you just talk a little bit about what this new sales structure looks like in terms of the different layers? And how the incentive structures may or may not have changed from beforehand? The second question is, Mexico is obviously a pretty relevant market in the region. Just remind us of just how relevant it is in terms of revenue contribution, and also, do you have any early thoughts on what the implementation could look like there, just given that that is quite a different market in terms of commercial model there? Thank you. Irma, the sales structure, the sales incentives program, is basically, is basically Natura's, right? If, if, if you follow those rules, that's basically what is being used now for the combined network. Of course, that when you think about the individuals that occupy those functions, part of that team came from Avon, okay? Also, when, when we think about the short-term incentives, which actually are tweaked every so often, for the first period, there, there's additional incentives to cross-selling, right? To bring in the new, the newcomers to, to, to the network, to, to, to make them more active. It's basically the same, the same routine that already existed in Natura. For the short term, the incentives have been tweaked to incentivize activity, relationship, closer relationship, so that they know each other, given the fact that many of the leaders and managers changed. There's incentives for them to meet their teams, and also to, to cross-sell. By the way, this week, we're putting together all of our sales leaders, more than 6,000 of them around the country, physically together with the sales managers, so that they start building more, more confidence on each other, that they start sharing their commercial plans all together. They, they, they experience and experiment all the products, so that they can best activate them with the, with their teams, with the consultants, okay? As regards Mexico, I have not much to say at this point in time. As I said before, every country is different, and we have to customize the implementation strategy. Mexico is certainly the most different of all, and, and we have already a dedicated team working to design that implementation strategy, which should come, come live, somewhere mid-next year. Okay? Yeah. Thank you, and thanks for holding this call. Very helpful. Our next question comes from Robert Ford with Bank of America. Please go ahead. Robert Ford, your line is open. Apologies. Good morning, João Paulo, Guilherme. Thanks for the presentation. Could you share your estimate of the non-recurring one-time transformation costs and the timing of those? What's your estimate of the current earnings drag from the Star 1 and Star 2 consultants in Avon and the rest of LatAm? Unfortunately, I, I cannot share the transformation cost. Gui, am I, am I doing anything wrong? No, no, you're, you're right, as well. I think I'd, Bob, we don't disclose that. All we can assume, of course, is that in the short term, those transformation costs, they will, they will remain high, right? Given all the investments that, that we have ahead of us. Right. As regards your second question, Robert Ford, could you repeat that, please? João Paulo, it's just about the earnings drag That's being created by that Star 1 and Star 2 rep base from Avon in Brazil and the rest of Latin America. The earnings drag? Yes. Can you tell me- the impact, that, that negative contribution margin that you, you alluded to, right? Yes. Because we're just trying to understand how much, you know, you're gonna rededicate those resources, right? To fund the implementation, and I was curious, you know, how big that was, because it seems fairly important. It is. I mean, in fact, I mean, if you look at the profitability of Avon, which you can roughly estimate already, and you get a feel for that in our in our presentation. You know that we've been driving gross margins up in Avon through various activities there. Still, you know, the profitability is much lower than Natura. That has a lot to do with these Star 1, Star 2 reps from Avon. That is not sustainable at all, and that has a huge impact on profitability, and that's the cluster that will progressively disappear. Yes, indeed, we expect as I mentioned before, significant improvements in the profitability from the... Focusing only on the commercial activity, not including the transformation costs, which Gui had already explained earlier. What you're saying is that the delta and profitability is largely coming from that drag of the Star 1 and Star 2 clusters at Avon, correct? Not only. There's also to do with lower gross margin, lower price points, and so on, which we are working to improve. You know, a good portion comes from those lower tier reps, indeed. Okay. That's very helpful. Just one other follow-up, if I could, please. When you look at the brand equity, right, and preference in Avon in the region, can you discuss, you know, how you can really reposition and, and drive much greater preference and recover the brand equity that Avon had in the past? Right. First of all, the, the brand equity varies significantly by country. It's relatively good in Brazil and Colombia, for instance. It's not as good in Chile, not even in Peru it was that strong. It varies. We are starting from different starting points. We still see, I mean, awareness tends to be high. There are some places where quality is not perceived as, as good as, in fact, it is. One of the reasons was to do with the, with the fact that the portfolio was too large. We were wasting the strength of our Avon hero products because, you know, that network was commercializing, you know, far too many other products which were not as high quality as our hero products. By shrinking the portfolio, that already gives us a better platform to strengthen the quality perception. Moreover, the new launches have been designed to drive that, that quality perception and innovation perception. Finally, we will communicate those, excellent, products at a unbeatable value, more often, than we did before. We are confident that we will be able to do that. We will not spread that throughout all the categories. We'll focus on the big winners, coming from Avon. Very helpful. Thank you. Thank you so much. Thanks, Ford. Ladies and gentlemen, that concludes our question and answer session. I would now like to turn the floor back over to João Paulo for closing comments. Please, sir, go ahead. Thank you very much for your attention, for you know, following us in, in this, in this journey. It's transformational, it's complex. We prepared a lot for that. First results are encouraging. However, I mean, maybe turbulent, but we're very, very confident given what we've done so far, and also given the resource we deployed, especially the teams who are working on those, to make sure that this is a success. I hope we talk more often, and hope to see you soon with even better news in, in, in, in the near future. Thank you so much. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.