Morning, welcome to the earnings call conference for the fourth quarter of 2022 with Vivara. We will dedicate 100% of this video conference to the questions and answers session. The video with initial comments from Paulo, the CEO, and the analysis of the financial results made by Otavio Lyra, CFO, is available and can be accessed at the RI website for Vivara. If you require simultaneous interpretation, you can follow this meeting in English, clicking on Interpretation, then English or Portuguese. For those who are following this video conference in English, you can mute the original sound in Portuguese and hear only English. For analysts, we allow you to participate online. All you have to do is to send a message using the Q&A button with your name and the company you represent, and we'll open for questions in the sequence to which you have enrolled to ask your question. You can open your microphone and your camera to ask your question. All you have to do is to accept the invitation to open both your camera and your microphone. Please send your questions using the Q&A button at the bottom bar of Zoom. If your question is not answered during this meeting, the investor relations team will get in contact with you later to clarify the questions you may have. As usual, we have Paulo Kruglensky, the CEO of the company, Otavio Lyra, CFO, and Milena Rodrigues, Investor Relations Director. This is the Vivara team here with us today. Please wait a second while we collect your questions. Good morning, everyone. Thank you for joining us in our earnings call for the fourth quarter of 2022. While we collect your questions, I would like to express again some of the messages we have made before. We have consistently delivering results since our IPO, and this quarter was no different. We have achieved new record highs in sales, margin expansion. We are very proud of the results we have achieved so far. We have invested and achieved revenues in a sustainable way without discounts. Our growth has been shown, not organically, not only in stores, but also in other channels. This is recognized not only in our total revenue, but also in our profitability. There has been a significant expansion of profit. I would like to take this opportunity to thank the Vivara team for its dedication and its hard work so that we could achieve these excellent results. We will now open for the Q&A. Here is our first question. First question is with Thiago Macruz, analyst of the sell side with Itaú BBA. Thiago, you can open your microphone. Hello. Thank you for taking my question, and congratulations on your results, for the fourth quarter, one of the best in retail. We saw a different level of gross revenue in this quarter. Is this a new level which is associated with the new mix of the company now that you also have the Life brand? You also talk a lot about the economics of Life. Can you please update us on what you expect to be the economics of a Life store? What is the profitability you expect, the potential revenue you expect to get? Thank you. Thank you, Thiago, for your question. The expansion of Life has been very extensive to us. We have mentioned that in previous calls, but now these results are clearer. The ramp-up of this expansion is really quick, and we do not know how far it will get because we can only establish a target once it is a more stable or mature business. Last year, stores had a BRL 5.5 million rise in revenue, and we expect those stores to grow. We can say at this point that this is a sustainable growth, and I think that maybe Otavio can move into the details related to the financial aspects, and Milena can also tell you more about Life figures. This gain in margin is an assumption that we have for this year, something we expect for 2023. Thank you. Let me start by talking about the Life stores. We have 72 stores, and that was the total number at the end of December. 13 stores we consider to be mature and the rest that is maturing. For the mature stores, we've had over BRL 5 million revenue per year in those stores. This is due to the product margins. Usually, the EBITDA margin for these stores in the fourth quarter reached 45%. That has contributed a lot together with the stores that are still maturing, so to speak, has led to the margin results we have ultimately achieved. Based on what has been realized in the past 24 stores, consider the more mature stores, the maturing stores have similar levels of revenue than compared to the mature stores. Just to be clear, in the third year, we expect to have revenue levels above 5.2%, so slightly higher than it was last year. We expect this effect to be recurrent, and this will end up lifting the level of revenue. We have over BRL 300 million rise in revenues in this quarter, this 5.6% share that we have grown in a quarter vis-à-vis the other quarter. Life has gained a share, especially in gold, considering the categories of products we work with. I think that these results are being expressed more clearly in our final results. We have invested a lot in inventory in jewelry in the past two years. The gold jewelry category, it performed very well. We have reached very good results. Jewelry has gained in share. In the past two years, in terms of penetration of sales, some categories have not moved so much. Now that the benefits in jewelry have been captured, and now that we get the effect in sales of the maturing stores, our results demonstrate these movements. Yes, we expect to maintain this level of revenue. In the fourth quarter, it's because of its season, it's usually higher in revenue. We are still taking this to a new gross margin level because of the higher number of stores that we have in Life. We expect this expansion to grow even more in 2023 and 2024. We expect a return in these investments. Of course, there is higher cost right now, but we are very confident that we can continue our accelerated growth in this particular channel. Over two hundred and forty-fourteen million BRL in revenue in the Q4. Just in the standalone channel of Life, BRL 102 million. It's 16% higher than last year. Life is growing in all channels, but we are getting more relevance and effect from one of these channels. I would just like to add something. The expansion of the Life business has been very rewarding because there were stores we considered to be a cluster with a good performance. Cities like Cotia, Piracicaba, Pelotas, Recife, Capim Dourado is a small city in the state of Palmas. They are performing very well, higher than our expectations. This is why we are achieving very good expansion in the Life business. It's not just for the busy categories of shopping malls that have increased their sales. We see that, and we expect that for the beginning of this year as well. We grew a lot in Black Friday, for example. The performance is usually very good during Black Friday and Christmas, and we expect the same to happen this year. It's a sustainable business that has come to stay. Thank you very much for your answers. Now, next question from Danniela Eiger, Sell-side analyst with XP. We'll allow you to open your video and microphone, Danniela. Good morning. Thank you for taking my question. I have two questions. The first one is a follow-up regarding the margin question that has just been asked. I understand that this new gross margin level can be sustainable from now on, but I would like to know I believe that it's also going to expand as you expand your share in sales. Is that correct? Do you believe that you could have an optimum gross margin level and invest in price so that you would not expand above that? I would like to know how does that connect with the EBITDA margin. It was very good, in my opinion, that fact that you were able to dilute SG&A enough to make up for the additional costs you're having with this expansion. Do you believe this is going to be the same strategy in the future? How do you believe that the EBITDA margin is going to behave in this next year? I also have a question for the short term, although Paulo has already touched on that. What about the performance of this year? Usually, January is a weak month. There was Carnival in February as well. Not sure how that impacted on the business, but I would like to hear about the preliminary results of the beginning of the year. Thank you, Daniela, for your question. I'll answer the question related to margins, and then you can tell us more about the expectations for the year. I agree with your understanding. As to the fact that this gross margin level has reached, that we have raised the bar, so to speak, and because of the penetration level of the Life business, and this is sustainable to us. As stores become more mature, those 60 stores that have been recently opened, and also considering the new stores will open in the upcoming years, there is a trend of getting more penetration of this business in our results. Obviously, the company costs will have an impact on our results. Having said that, yes, we have room for growth in terms of gross margin in the upcoming years, and supporting growth with the new factory and the addition of infrastructure so that we can provide support to the increased volume we expect to have. I think that the pace we expect this to happen is explained in what we have already disclosed. We expect to grow 50 BPS a year, is something we could expect. The impact on the EBITDA margin, and in the gross margin benefits of this year were used in our operational business. We had this impact on SG&A. Now the maturation growth is going to become more stable along the years. We do not expect to increase the number of new stores we open each year. Given that, we expect to have more stability because there is some pressure with the expansion, we understand that, especially related to rentals. The next waves of expansion of the Life business will not be as expensive in terms of occupancy costs as the first wave was. That is probably going to be helpful and reduce the pressure there, but we expect some pressure related to costs with sales. We expect to see that in this next year. We will probably have some operating leverage related to SG&A so that we can keep offsetting this effect. Considering the short, medium, and long term, I think that in the short term, our plan for 2023 is to see a year that is going to be similar to 2022 in terms of trends. We expect to keep growing, also growing in profitability, even though we are still investing in this cycle of maintenance of the new businesses. For the next years, we expect a continuity of that. I think that the impact of the Life business is very high. Once we have the new factory, we expect to gain in efficiency. Of course, we will invest in quality as well, as we have mentioned before. The Life business penetration will be related to that. In the medium and long term, we might have additional gains in operating efficiency. I believe there is room for this company to raise the EBITDA margin even higher. I'll turn over to Paulo so that he can tell you about the beginning of the year. Otavio gave us a spoiler already. Good, he's a messenger of good news. We started this year very well. As you mentioned, the basis of January had a significant growth. We faced some challenges in Carnival, but they were related to calendar days, and this has already been reverted in March. We saw growth in this month. Our performance level is higher than we expected for the beginning of the year. Our performance is in line with the performance we achieved in the last quarter. Of course, we are concerned in keeping control of SG&A and of course on margins and growth of margins. We expect the year to keep as positive as it has been. Regardless of economic changes and different political scenarios, our performance has been very sustainable, and that's what we expect for 2023. We still have the assumption of keep growing sustainably. That's our assumption for the business. In the last quarter, we wanted to grow, but grow profitably, protecting our margins and depending less on discounts or sales campaigns. That we could work with the brand in a sustainable way. Vivara is based on a tripod, so brand management, portfolio, and factory. We are being very diligent in controlling all of them so that we can achieve profits from our, our investments. In the last quarter, we reaped the results of everything we've been planting since 2019, and the performance is expected to be the same this year. Thank you and congratulations on your results. Okay, next question now will be made by Vinícius Strano, sell-side analyst with UBS. Please open your video and audio and ask your question. Good morning, everyone. Good morning, Paulo, Otavio, Milena. Thanks for taking my question. Congratulations on your results. You have invested a lot in production capacity in the Manaus factory, and you have been hiring more employees. What is your production capacity today, and what is the expansion you expect for the future with what you have done so far? Can this expansion be supported? What about inventories? How does that connect with the tax benefits that you expect to get since the factory is located in Manaus? I would like to ask a question to Paulo as well. Looking forward, do you expect to have more street stores of Life? What about expanding to the international market? Let me start by answering your questions related to our factory. We need to enable the factory so that we can grow. We cannot open new stores if the factory does not have enough capacity to support that. In 2019, we had 200 employees in our factory. Year-over-year, we've been doubling the number of employees we had in our factory. Today, we have 850 employees in our plant with the production capacity that can support our plans for 2023 and 2024. When you look at the factory expansion plans, in the second quarter, we plan to open a new factory because that will focus in our long-term future, the size of the business we expect for Vivara and for Life. This is why we need to have tools in place to support such growth. We are looking not only to grow in our current factory, but also bring new technologies. Go back when we talked about direct production, different technologies to be used. I've mentioned that during our Vivara Day meeting, we want to expand the factory but also improve the quality we have, which is already a very high quality factory, but we want to improve even more. Otavio, would you like to talk about inventory? Yes. Then I'll talk about expansion. Vinicius, let me recap about the investments we've made in inventory, especially in the jewelry category. In the past years, this has been the main, in fact, that has led to increased inventory, especially in finished goods. We have over BRL 700 million in inventory with finished products. BRL 480 million in finished products to be more exact, because this is what accounts for most of the inventory levels we have. Most of the addition we've had in inventory has already been completed. Considering the growth rate we've had, especially because of our organic growth, we expect this to keep growing at a lower rate than it did last year. In the case of 2022, our investments focus more on the Life business. It takes less investment than a Vivara store would. It requires less capital over the years. Also considering the speed of expansion, the expansion is usually will not grow as fast as we've had. We have over 300 days of finished goods in the company in 2022 as inventory. This is higher than the inventory levels we've had in 2021. We have bet in some areas of inventory where we had losses in past years. Of course, you can see that there was a 20% increase in this category in 2022, and we also grew a lot in 2021. Because of that, our revenues have increased and our profitability has increased as well. As of this year, we have internal targets to reduce our bets where maybe we didn't get it so right. We have some targets to reduce Coverage, especially for the jewelry category, and that's what we're going to implement along 2023. We will expect a lower growth year-over-year vis-à-vis our previous years. We expect to gain efficiency, and since these benefits we would get from this jewelry category has already been achieved, Our expansion relies on a higher number of Life stores. As to the tax benefits that you mentioned in your question, the volume in tax benefits is driven by the number of transactions between our subsidiaries, between the industry and retail. Increased stock levels in previous years, of course, had an impact on the volume of transactions between companies that will lead to higher tax benefits. When you look at the volume of tax benefits that was disclosed in our earnings released, you will observe that they were much higher than they were back in 2019. Those benefits, as well as our revenue, will have a benefit. In relative terms, we expect those benefits from tax, the volume of tax benefits will reduce because of this trend of increased inventories. We do not expect to observe any reduction in the representation of these tax benefits and how they would impact profitability. They will not grow as much in the following years related to the increased number of transactions. This is also affected by the volume in a Life business because the volume is high, but the average ticket is lower. That's what we expect for the next year, specifically. Let me tell you now about expansion of our business. First, let me talk about the Life brand. It is good to see such a young brand with a significant level of results, and our potential in shopping malls is still untapped. We just have presence in 75 shopping malls. End consumers and shopping mall owners love this brand. The footprint of Life has shown a very good performance because the performance is good across the country. We see a huge potential of growth in shopping malls. Life by Vivara is a young democratic brand. It's a brand with great inspiration. The main growth driver for this expansion will still be the expansion in shopping malls. As to expansion in street stores, we aim to have a pilot plan start with one store as a pilot store, and maybe in a second wave we can expand in those. We plan to expand in street stores. We have grown less in terms of Vivara because of the cost of opportunities, if you consider the ROIs of an expansion for Life by Vivara business, comparing Life by Vivara business and Vivara business. We have had good performance of the Vivara stores we opened last year. We still see potential to grow in Brazil, actually good potential to grow. Our organic growth in Brazil is our priority in the short term. Thank you very much for your question. For your answer, actually. Thank you. Next question from Eric Huang, sell-side analyst with Santander. Eric, please ask your question by opening your microphone and camera. Good morning. I guess you can hear me now. Yes, we can. Thank you for taking my question. On our side, focusing on this new plant, I would like to hear from you, focusing on the timeline of migration, what are your expectations related to the new factory? What about the potential risks related to a change to a new plant? Part of these increased levels of inventory would be related to a preparation to this migration. More specifically, looking into the Vivara brand, because now that the separation is closer, it's clearer now that the Life stores are separate, what are the opportunities you see for the Vivara brand in terms of expansion of sales, mix of products? Thank you. Let me start by answering your question related to the factory. Our business model works with this level of inventory because we work both with industry and with retail. Sometimes analysts focus on business models that focus only on retail, but we need to consider both. Sometimes our inventory levels are higher than companies that work only with retail. Our inventory load is related to a commercial opportunity because we want to grow. In some specific categories, our performance was lower, and that's what the fourth quarter results showed. We achieved results by using this new inventory composition. It was something we did right. As to the migration to a new factory, I think that it's a simpler process. We need to change lines of production. We would move one part of the silver product line and then another part of the gold product line. I don't think we will see a lot of change until the second half of the year. We moved to the VTEX platform last year, we implemented the SAP system. When we implemented those two platforms, we ran into more risks than we would now with the migration of factories. I think we are reducing risks even more. According to our production pipeline and planning, everything is well controlled. Otavio, would you like to add something? Moving to your second point. We've witnessed a consistent performance in the category as a whole, in jewelry as a whole. We've had growth in this category. It's a category that has been with levels higher than 7% a year. We expect to have a consistent growing performance. Especially considering the shopping centers where we had stores and where we do not. We expect the jewelry category to grow less in shopping malls where Life stores have been opened in the past quarter. Something a little bit higher than 5% and growth of about 10% in the jewelry category in the Vivara stores in shopping malls where we have not opened Life stores yet. Considering the quarter, we have 7.3% adding up those two profiles. Where we have Life stores and when we do not in the same shopping mall. That's the level for performance in this category. Let me try to address some topics that will not compromise our strategy. I can tell you that our product team is focused on development and opportunities. The lab in our headquarters, participation in international exhibits to understand new trends. Vivara has to be a front runner in the market, launching new products and new trends. We need to get new products in our mix. Of course, we need to use technology so that Vivara can take opportunities and even spaces that even Brazil does not have yet. We need to find new opportunities to increase our mix. I cannot go into details, but I am very glad with what this team has delivered so far. There are a lot of things that we could work with in Brazil that is done abroad. Considering the Life strong strategy, once stores become stronger and once it becomes a great driver for growth, our goals with Vivara stores is to strengthen their cores as a jewelry store, because that is the core product for those stores. We should look into the jewelry category. What was the performance level of that category? Stores grew by almost 10% in the jewelry category, this growth will have a lower participation in the direct sales. This initiative has lost relevance in the first quarter because of the branding strategy for not depending so much on coupons, and we decided not to use so much. I think we have had too much discounts, and so we wanted to have a painless operation. I think that the most important point when you look at the improvement in the jewelry category is that this growth was dependent on the volume of pieces. For the past two years, we grew based on price, on our price strategy, and that had an impact of the number of pieces sold. Our performance was based on volume. It grew in the jewelry category by 20% in this quarter vis-à-vis the fourth quarter of 2021. Ultimately, for the Vivara brand, we had a very good performance in those stores. This is a healthy growth, that does not depend so much on discounts and with a good volume. That's what I had to say about that. Great. Your answers were very clear, and congratulations on your results. The next question is from Guilherme Vilela, sell-side analyst with JP Morgan. Please open your video and your microphone, please. Thank you for taking my questions. I would like to clarify a question related to gross margin. In the release, you said that there was the highest penetration of Life business and lower levels of loss that have contributed to this gain in gross margin. Could you break down this information, so what is related to loss and what is related to the Life brand, and what caused the level of losses? Also, I'd like to hear about your thoughts on M&A. In the short term, anything we should expect? Starting with your first question related to gross margin. Guilherme, thank you for asking this question. We've been working very strongly along the year to increase efficiencies in the factory and to reduce historic loss levels. We've also started to work along this year in a process that will be more consistent, a production process that would allow us to even use part of the natural losses that take place in the production process. We've been gaining efficiencies in our production process in the past month. We have achieved very good levels of performance in the fourth quarter. As a result, we improved our historic loss levels. In the breakdown, it accounted for about 90 times the expansion of the margin that we presented, and the rest was related to the effect of the Life business increase as we mentioned today. This is an internal process that we implement that is being also improved in the new factory, and especially considering the changes we expect for the second quarter. We plan to capture that, to capture the volume of continuous improvements we've been making in our business. This is a recurring process. This is an ongoing process. We constantly do that. It's a process improvement that has provided relevant results in the fourth quarter, but that's an ongoing process. Our losses used to be close to 2% of our revenue. With this improvement, it's going to be close to 1%. We've started up our activities related to that in the mid of the third quarter. They gained momentum in the fourth quarter. In the factory processes, we also improved the whole production line. In the beginning of the year, we mentioned that some international consultants who came to work with us, we have also brought experts from other factories in Brazil that have very good expertise in the jewelry production. Is also related to the works we've been doing in our team. We want to do more and better. That's our focus the past two years. I think that in the last quarter, we finally reaped some fruit related to that. Talking about M&A, the jewelry market, there are parts of these market that Vivara cannot serve, and part of that is being served by the Life business. In the past years, we've see that Vivara, there's a market that Vivara does not operate from BRL 2 billion up and BRL 1.5 billion down. In the short term, we are focusing more on expanding Life stores and Vivara stores. We have a long way to go related to this growth of our own Life stores. Last year, 72 stores accounted for BRL 300 million in revenue, and most of them have not been open for not even a year. Vivara's team is full expansion, and so is the Life team. This is our focus for this year. Thank you very much. Next question from Vinicius Pretto, sell-side analyst with Bank of America. We'd like to ask you to open your microphone, please. Good morning. Congratulations on your results, and thank you for taking my question. I would like to touch on two points related to competition and expansion. With this difficult market, have you seen any changes in the competitive behavior of your competitors related to pricing and promotions? Related to expansion, has it been easier for negotiating your new rental fees for the new Life stores? Let me tell you about competition. There are two points that we should look into. In jewelry, we still feel that competitors are frail and have been fragilized. I think we have gained our market share in jewelry, and I think the competition is feeling our increased participation. We do not see any other jewelry business expanding as much as we have. Pandora, for example, they've been working very well in Latin America countries and in Europe, but not in Brazil. I think we should look at competitors differently because we compete with perfumes, with cell phones, with fashion, even chocolates, because our product is a gift. We have competition with other gifts. If you consider that, this market, something that is giftable, is a much bigger market. That's an insight that we should look at Life and Vivara as a purchase for a gift. This is true for birthdays, bar mitzvahs, bat mitzvahs, first communions and weddings. This is something where Vivara is present. We also have the giftable product market that usually relies on discounts and coupons for a better performance. Now in shopping malls, we want to move away from that, because if we're performing well, relying on coupons and discounts is like when you're driving a car, but the rotation is too high. We should fit ourselves into the giftable products market. As mentioned last year, I think that brands as a whole should consider that from now on. Yes, considering competition, I can say that we already see along the past maybe two or two years and a half, that a good part of players that focus on niche markets, on haute jewelry, high jewelry businesses, they are finding difficulties in growing or maybe to resume their sales more relevantly, given the new levels of prices of gold. It is much more expensive today, and growing quickly is much more difficult too. It is more expensive to everyone, even to ourselves. Those who do not have as much capital, it's of course, higher costs. In addition to that, considering what happened in the beginning of the year and even more recent events, we can say that we have more restricted credit in the market. This is true for retail as a whole, this is true for industry as a whole. The market is more risk averse today, especially considering the recent events. The market is more restricted and gold is more expensive. That obviously can have an impact on smaller players. Maybe their balance is not so healthy because we said that of course, the jewelry market is profitable and even niche companies, they have a good margin balance and a relatively healthy finance. In the past, they needed to leverage their sales. All of that is even worse today. I don't think that we can still see that at the point of sales, but I believe that competition is going to face more difficulties this year. Of course, we need to monitor this. There's a second point related to the expansion of points of sale and what we could do. I don't think we have felt a significant impact related to that vis-à-vis the past years. The expectations we had to have more points of sales and maybe other retailers could not keep their businesses because of the pandemic, I don't think that this expected possibility exists. We feel that the Life business is becoming more relevant, is becoming a stronger brand, and the square meter is very productive, so to speak. That's very good, especially for stores and shopping malls. The acceptability of the Life business for the newest point of sale has been very good. It's been easier for us to execute our expansion project. It's not a transformational change in terms of costs. The differences in occupancy profitability has to do with the profile of the shopping malls and not specifically about difficulties that we could be feeling. Thank you. Once again, congratulations. We have one question in writing in the chat, but I think we've answered those questions in previous questions. Maybe you can just send the answers to Gabriela later. I would like to thank Vivara's team. I would like to thank everyone for the results, and I'd like to thank you for your attendance. We are focused on delivering the best possible results for 2023. If you have any questions or suggestions, please contact myself, Otavio or Milena. Thank you very much and have a good day. The Department of Investor Relations is open to answer any further questions. This concludes our meeting. Have a great day.