Morning. Welcome to Vivara's earnings conference for the first quarter of 2023. In this quarter, as in the previous one, the company will dedicate 100% of this video conference to the Q&A session. The video with initial comments of Paulo Kruglensky, CEO of the company, and the analysis of financial performance made by Otavio Lyra, CFO, was posted on Friday and can be accessed at any time at the investor relations website of Vivara. If you want to follow the simultaneous interpretation, click on the interpretation globe on the bottom bar of the screen. After clicking on this button, choose the language of your preference, English or Portuguese. If you are listening to the video conference in English, you can mute the original audio by clicking on the button, Mute Original Audio. Sell-side analysts can ask their questions live. Just send a message with your name and the name of your company using the Q&A icon of Zoom, and then we will release your microphone following a queue of first come, first served. Your name and your company's name will be announced so that you can ask your question live with microphone and camera on. Just click on the request message you'll see on your screen. We ask other participants to send their questions using the Q&A button on the bottom bar of Zoom. If your question is not answered during this video conference, the investor relations team will be in contact with you later to answer those questions. As usual, we have with us today Vivara's team, represented by Mr. Paulo Kruglensky, CEO of the company, Mr. Otavio Lyra, CFO, and Ms. Melina Rodrigues, investor relations officer. Please wait while we collect your questions. Good morning, everyone. I will take this opportunity that they are collecting questions to give you some first messages. First, I would like to thank all of you for your attendance, for your interest in participating in this earnings call for the first quarter of 2023. The results were aligned with our expectations, with a robust growth in revenue in an organic way. Again, we were able to have a first quarter without effects or some sort of campaigns that could be detrimental to our brand. The first quarter is very important for us so that we organize the company to prepare ourselves for other seasonal activities. We are now moving to the main events of the year for us, Mother's Day. We are working at full speed, increasing our inventory, running campaigns, running training sessions to have a great Mother's Day campaign. This first quarter had really a wonderful performance, and our omni-channel platform was really very positive and complemented the sales in stores. We are getting closer to Mother's Day and also Valentine's Day in June. We are working on the planning for the second half of the year, especially for Black Friday and Christmas. We will open the Q&A session. Thank you. The first question is by Eric Huang. Eric Huang, sell side of Santander. Eric, please proceed. Eric, we cannot hear you. Not yet. We cannot hear you, Eric, unfortunately. No. Eric, we will take the second question as you correct your audio issues, and then we'll open for you again. Rodrigo, next one in the Q&A queue. The next question will come from Daniela Eger, sell-side analyst of XP. Daniela, please accept the command to open your audio and video. Can you hear me? Yes. Okay. Good morning, and thank you for taking my call. I have two questions. We like to ask about profitability. The gross margin was very positive. We expected that from the Life mix, but I think that the gross revenue levels were even higher than we expected. What do you see related to that? What are your perspectives? We have had these positive surprises in the past quarters, so how do you expect this trend for the future? How much more can you gain from that mix? And what about the behavior of operating expenses? How do you expect those expenses to be diluted over the next quarters? I understand this quarter was also had the pressures of store maturation and seasonality. I would like to hear your perspectives on that. I would like to connect that to my second question. I would like to have more details about the marginal expansion of Vivara. Will also get more fresh in operating expenses from less productive stores or not? What about marginal ROIC for Vivara? I would also like to understand that for Life as well. Those are my questions. Thank you, Daniela, for your questions. I will address them in the sequence that in the order you asked them. We were very pleased with the gross margin of the company, and not just in this quarter. This is something we expect to see in the following quarters as well. This is the benefit of the Life mix that now has a higher share, an increase in 5.2% in the share of our sales. Like in the last quarter of last year, we are also have lower losses than we had a year ago. I think this is a benefit, and in terms of expansion that we expect to see in the future as well. Thinking about the medium or long-term, the share of Life is still relevant. Most part of our expansion still focuses on Life and is supported by new Life stores that are being opened. The productivity levels of Life stores is similar to the productivity of Vivara stores that we are opening, this is why there's a contribution not just of the new stores, but also more mature stores we opened in the past two years have contributed to those good results. Considering the operational profitability of the company, we had some pressure on margins in EBITDA margins compared to last year, there were some reasons for this pressure on this margin. We believe this is an one-off event. We know that in the first quarter, usually for any retail business, we sell less in the first quarter, in the first quarter is when you concentrate the changes you want to implement in the business since this is where you feel the least that type of change. Yes, that effect has an impact on profitability from gross margin to EBITDA, and that's the pace that we impose in terms of production, the mix of production that we also impose on the factory. In the first quarter, our mix was more complex in production, and this is why we lose average productivity in the factory. For example, with an addition of the share of products with gems that are more complicated, and consequently, the productivity level is lower than the production of other items. I think it's important to mention that and to put it you at ease because this is something we do in the first quarter. In the end of March and mid-April, we are already observing higher levels of productivity vis-à-vis last year. Everything depends on the growth of production levels. The more the growth curve is lower, the less the re-representativity of the presumed credit of ICMS in our results as part of the deduction rationale, that kind of lower the responsibility of that effect with the revenue that will reduce deductions in terms of tax credits. If we move to important items to be able to supply the company considering more, more reasonable, more important seasonal campaigns, such as June, sometimes we have this pressure. We also are moving to a different factory. We are implementing a step-by-step move for the second half of the year. In the first quarter, we start dealing with that, and this is why we are increasing inventories in this quarter. We can talk about that when we talk about cash. That has also impacted this line of presumed credit that reduces the growth of net revenue compared to gross revenue, and that affects the operational results in different lines of costs and expenses of the company in the quarter. That's an one-off event because of the mix of production that was concentrated in the factory of Manaus. We believe we will see a more regular advance in the upcoming quarters. Again, the representatives of the presumed credit also affect expenses. This is why we have this one-off pressure. There were some points we're already feeling pressure because of expansion. Especially related to rentals, not as much related to staff or people or sales expenses. This is due to a very productive round of Life stores that were opened. In average, we have higher levels, slightly higher, but not something to be worried about. This is to be expected considering the new points of sale that we opened. We did have our results as expected according to the plans we had for 2023. Our expectations for the results of this year are unchanged. This is a year of potential growth for us. This is a year with the possibility of a small expansion. It's more focused on stability, and this is what we expect for the rest of the year. I'll just like to add to this first point. According to our plan, we also need that the sales, there will be sales related to Carnival, if it was much stronger than last year's Carnival. That also had an impact. As part of our plan, we also needed to be a higher effect on costs because of the stores that were renovated. We had 14 stores that were renovated, the main ones of our set of stores, preparing those stores for Mother's Day. Considering that this was a quarter with lower revenue, we took this opportunity to renovate these stores and organize our stores. If you look in the company and we really had a good performance internally. Yes, good point, Paulo. In these stores, as we mentioned in the video for the earnings call we shared with you earlier, some of the stores that really sold the most in the company, in a quarter, they sell the annual average of new stores, for example. This is how profitable they are. Well, as to your second question related to the marginal expansion of Vivara, I think it's important to highlight that nothing has changed. The productivity of Vivara's expansion since the IPO has always been focused on shopping centers with lower productivity, but with a balanced productivity and balanced return because of a lower occupancy cost and also a lower entry cost. Now in this expansion phase of Vivara, we do not pay upfront fees. Also, sometimes we had some grace period to start paying our rentals or other agreements, which was not the case of Life, as was mentioned before, because Life is in a different stage of expansion. More precisely related to economics, for Vivara, we have stores with annual sales at about BRL 3.5 million, gross margins at 67%, 68%, balancing the mix between life, jewelry and watches. They can keep returns over the invested capital above 30%, ranging from 30%-35%. For the future, we still have 80 Vivara stores that we expect to open in the next years. Following this profile of sales and profitability, and we expect to have lower margin return. We expect to have return margins in the future, but still very interesting margins, very good returns on the investment. Again, as I mentioned in the beginning, this expansion is focused on Life stores, and we expect to have better returns, to have very productive stores with increasingly lower costs. That's only natural as part of Life expansion cycle. To see the occupancy costs lower over time, we did not approve stores with total occupancy above 10%, for example. Last year, we opened some of them at 12% or 15%, but the average has always been between 10 and 12, now it's between 8% and 10% for Life stores. We will see some benefits in the profitability of Life stores compared to this initial cycle of expansion. On the other hand, the initial cycle of expansion brings a lot of sales because those stores are more productive than the average. I hope that I was able to answer your questions. Yes, you did. Thank you very much. Okay, next question. Let's try again, Eric Huang. Eric, please proceed. Good morning. I hope that now you can hear me. Thank you for taking our questions, and I'm sorry for the first technical glitches. We have two questions. First, looking at the comments you made related to adjustments in net income, I would like to understand what were the major drivers for this change. What criteria did you use? In terms of accountability, we understand that there is a more accounting impact rather than a cash impact, and I'd like to understand whether my understanding is correct. Could you bring us more details about this change? My second question focuses more on operational issues, and it's related to Daniela's question. Focusing on some stores where the stores you renovated, Vivara stores you renovated in this quarter. How do you see sales of other categories, especially the jewelry portfolio? How has those sales evolved now that these stores are now 100% back in operation? Do you intend to have more renovations in the future? Thank you, Eric, for your questions. I think it is worth giving you more details about the adjustments we made to make it very clear for everyone, and that relates to the point you have already raised. Yes, it's a purely accounting adjustment without a cash effect on the profit of the company. These adjustments had to do because our internal our external auditors had a different perspective and their understanding, and that changes the deferred tax rate, also contribution on net income, the ones we use to eliminate the non-realized profit. In the consolidation of results, we talked about that in the past quarters over and over because the line of income tax has shown some trends, even of changing directions in previous quarters. We've always made it very clear that 34% rate that was used in the elimination of non-realized profit between the two companies. That was not about cash. We agree with these adjustments because they are it's intended to get the profits of the company and the net income of the company closer to the values, to the cash values. Maybe in a pace that maybe the company cannot use it. We are making those changes now, implementing them. We chose to make this disclosure on how the profit would have been if these adjustments were kept being made at a 34% rate. This disclosure was intended just to show you how the net income evolution had to do with the rest of the operation. Between EBITDA and net income, maybe a more representative depreciation of the results and with an impact on the financial results. Showing that that is in line with the capital structure that was worse than previous years. We are using cash to grow the company, and it's only natural to see that. Now we will use a 20.84% rate in eliminating the net income between the non-realized operations between two companies, and the net income of the company will be updated at this rate in the future eliminations we make. In this year, we will keep these adjusted net income records to better understand what is coming from the operation and what is coming from an accounting adjustment to impact cash. The recurring net income for the company, not only for this year, but for future years, will be adjusted at a lower rate and consequently with less benefits from these adjustments to the net results, net income of the company. We show the adjusted net income for comparability purposes. If you use the same rate, what would have been the net income? For the next quarters, we will show you this difference along the next quarters, because all quarters of last year used the 34% rate, and for this year, there will be an adjustment. For comparability purposes, when you compare the quarters of this year with the quarters of last year, we will see a difference. We will show this difference. This is what we are going to do from now on. For comparability purposes, we find it's important to disclose these figures to give you this idea of how much of the net income or how much net income difference comes from the difference in the tax rates. I would like to answer your second question related to the renovation of stores. Since the IPO, we opened almost 150 stores, even during the pandemic. Almost 30% of our stores are new stores, and the Vivara store today does not need a lot of renovation because of their usual layout and design. What we did was renovated some stores from the past, but usually our group of stores are usually better than retail in general because there are some stores that are usually depreciated, they require renovation because they're old. Our brand positioning is very important and we focus on that. In the second half, we're probably going to renovate other five stores, but not as many as we had in the first quarter. This is aligned with this new set of stores that the new ones will not require a retrofit. The renovations made in these 14 stores, we partially close the corner Life the Life corner of these stores just to adapt so that Life stores within Vivara stores, we use the same architectural design as other stores. Since those are very productive shopping stores, very relevant to our operations, internally, we decided to keep the Life corner in the stores, but just updated that to have an updated communication system with them. It's too early to analyze the results of those stores with you because those renovations have just been made. We can bring that information in future discussions. The results we've had so far are not enough for us to conclude whether the profile of sales has changed or if there was any change in classification of categories. Okay. Thank you very much for your answers. It was very clear. Thank you. Our next question is from Vinicius Serrano, sell side analyst of UBS. Vinicius, just accept the request you'll see on your screen to open your camera and audio. Good morning. Good morning, Paulo, Otavio and Melina. I have a question related to Life expansion. When you break into premium and non-premium cluster, how much of that expansion will come from more premium clusters? In the consolidated results, how does the sales performance of shopping mall stores comparing premium and non-premium clusters? I would like to have that information both for Vivara stores and Life store. I would also like to know what you expect for stocks, for level of stocks and inventories and working capital in the long run in terms of days of inventory. Can you give me more information on that? Let me talk about expansion first. I think that this mix of cluster, more premium, less premium clusters should consider the scenario of Brazil. Most of the shopping centers are less premium, and we need to expand according to our national scenario. Stores of less premium clusters, as you're calling them, are performing very well in Life stores. It's been a very positive surprise to us because their performance levels are above our expected levels. Almost 20% above our expectations. We feel more at ease to grow in this model even more. This also allows us to have more visibility of Life stores and how they can accelerate for the future. When we talked about what Life would be during the IPO, we believed in this project back then, it's proven to be very good. I don't think there is any brand in Brazil that can grow as much as Life has, not just in our own segment, but in the segment of giftables, especially considering the short or medium term. I think Otavio can say more about profitability, but we feel at ease. We feel comfortable with those levels and with this expansion. I'd just like to add by saying that, as I mentioned in the question I asked, I answered to Daniela. We are able to keep good results between those two profiles of store because of the differences that they have in terms of entry cost and total occupancy cost of the company. We are much more mature in terms of Vivara expansion. When you compare 2022 and between 2023 and 2024, we're probably going to see the same effect carried out to Life stores. Because we have lower values of upfront fees, for example, and that has led us to some balance. The return on the invested capitals has been of about 45%, sometimes 50% in those stores with occupancy rate under 10%. When there's a lower entry cost and the occupancy cost between 8% and 10%, ROICs are above 50% in Life stores. Productivity at about BRL 3.5 million-BRL four million per year in sales. That's very good for these levels of return considering future years in Life stores. We have almost 200 stores with returns above 25% of the invested capital. When we talk about Vivara expansion, we also expect to see similar results with Life as we move to shoppings that are less productive. We see differences, especially between gold and silver and in average, in considering the average profitability. You can take stores that are not so profitable, but that will still give good return. Now answering your second question. We are now in a year when we are going to move to a different factory that's going to be implemented in the second half of the year. We still have relevant levels of inventory in the first half of the year and of working capital. In the first half of the year, we usually have higher levels of inventory. We expect to have inventories to the end of the year aligned with this initial inventory levels we have. We can reduce inventories in 2023. We expect between 20 to 30 days to December. December vis-a-vis the other December of last year. Moving forward, as the company grows less, we can become even more efficiency. That's only natural if the company invests a lot in stores and in stores that are becoming more mature. Of course, this expansion based on Life make those stocks to be renewed more quickly. Then we can also show this lower inventory turnover. In other components related to working capital, if you compare vis-a-vis last year in the first quarter, you have a cash flow that is benefited, but the company keeps growing very fast. Along these lines of payments, we need to make an installment. This does not make a lot of changes in our profile, but we expect to also get resources related to this line. Of course, this is part of the revenue growth plan we expect to implement. In terms of working capital as a whole, we will invest cash this year related to the growth we expect to have. Perfect. Thank you. Next question is from Victor August, sell side analyst from Itaú. Victor, please accept the message and open your camera and microphone. Hello, can you hear me? Good morning, Victor. Thank you for taking my question. A part of my question has already been answered related to the renovation of stores. I'm asking something else. I understand that Vivara and Life are creating a new market of consumers. Except for your, considering the share of wallet of these consumers, not just considering your direct comp-competitors. Who do you believe will be the indirect competitors that you'll be up against, that you would fight for the share of wallet of those consumers? That's a good question, Victor. Thank you for that. We've been working a lot on that internally. Consumer, a consumer who goes to a shopping mall to buy something is our customer, is a potential Vivara or Life customer. We compete against chocolates, purses, cell phones, shoes, technology, anything that is giftable, as we call it. We want to be acknowledged as a brand of gifts that are for special events. To make that moment unique and special. This is one of Vivara's mission. We try to do that every time someone is looking for a gift for someone. We've been getting more market share in the jewelry sector, but that's a very small market considering the potential market we could have if you consider customers that go to Vivara looking for a gift. Our training sessions, our communication strategy will focus on these customers who want to give somebody a gift or want to give a gift to themselves. We are constantly looking for that type of customer. Even in terms of performance comparisons, we try to look for best practices and not just looking at the jewelry competitors to see what they're doing to see if we can improve. If I want to be a company that stands out in the giftable markets, I need to look at everyone. I need to look at the marketing, campaigns, product development, anything we can do to be part of the mindset, that being the minds of our consumers. Thank you, Paulo. As to the renovated stores, Melina mentioned that you also renovated part of the Life segment in the Vivara stores. Someone else asked about the mix, but with this renovation, do you see some sales productivity differences? Did you see just by improving the layout or standardizing the architectural layout of stores, or was it more related to layout, but not necessarily gaining productivity? I don't know if you recall, but when we moved to the IPO, the Life stores used to be white with a different communication strategy. Now we open the Santos store in a salmon color. When the customers would be more interactive in the stores. That model proved to be more profitable than the other model we used for Life. This is why we started to open Life stores using the new model. We are taking those models and taking those that were the old stores of Life by Vivara and moving that to these new stores because we used to have corner stores, not shopping stores, but we used to have the old layout system. This is why we are retrofitting them to use this new Life by Vivara concept. We had good results with the retrofit of the store last year, and that has helped us speed up and take this concept to new stores. We are constantly looking for increased profitability and also a better customer experience. Yes, this is very emblematic. We cannot have two different languages of the same store in the same area. We focus more on branding, on having the same experience, providing the experience for customers who go to Vivara or Life, and then they should have the same experience. Those stores are already very productive. If you take those 14 stores that were renewed, you see that. The focus is much more on providing this brand perception for stores that are relevant to us. Okay, thank you very much. Our next question is from Gabriela Ferranti, sell-side analyst with Safra. Gabriela, please open your camera and mic. Good morning. I guess you can hear me, right? Yes. Good morning. I would like to know what do you expect in sales for Mother's Day and Valentine's Day, and what will be the discount policy you use for the next quarters? I don't know if you know, but if we compare the day to day, we are just one week from Mother's Day. Last year, Mother's Day was on May 8th, and this year, Mother's Day will be on May 14th. It's just a one-week difference. It's early to say, because we still have this week. That week represents to us almost 70% of the sales related to Mother's Day. These first 30% of sales for Mother's Day are as we expected in our plans. We are very positive about Mother's Day. We do not provide discounts for Mother's Day or Valentine's Day. Collections were launched. They're performing very well for Mother's Day, and we expect that the Mother's Day sales will be very good for us. It's still early to say, things are going as planned, considering that the event has not happened yet. In the past 45 days, we've been grown in physical stores in levels aligned with the growth we have had. As Paulo Kruglensky said, the benefits of the campaign are yet to come, we are well prepared with our teams in stores, with enough inventories, and with support from office teams who also go to stores to help in these seasonal events. I hope we are going to have very good Mother's Day aligned with the growth trend we've been showing. Thank you. If there are no further questions, we will now conclude Vivara's earnings video conference. Investor relations department is at your service to answer other questions. We would like to thank you for your attendance and wish you a good day. Have a great day. See you next time.