Welcome to Vivara's Earnings Video Conference for the second 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 the initial comments of Paulo Kruglensky, CEO of the company, and the analysis of financial performance made by Otavio Lyra, CFO, was posted yesterday 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 Zoom screen. After clicking this button, choose the language of your preference, English or Portuguese. If you're 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 name of your company using the Q&A icon of Zoom, and then we will enable 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 the screen. We ask all the participants to send their questions using the Q&A button on the bottom part of Zoom. If your question is not answered during this video conference, the investor relations team will contact you later to answer them. 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. Marina Rodrigues, Investor Relations Officer. Please wait while we collect the questions. Good morning, everyone. Before we open the Q&A session, I would like to first thank you for attending this meeting. I would like to thank the Vivara's team for its effort, because we can only achieve that because we have a fully committed team, you know, right from the office, the sales team, everyone was involved. This is why we achieved these good results. If this is not the best results we've ever had in the second quarter, this is definitely one of the best. Vivara has had a significant increase in sales, a 19% increase in sales, and also very strong EBITDA results of 33%. With that, we have a growth in sales and good financial results. If you add up both sides, we will move to these strong groups because that will be over 40% growth. We are generating value. We are creating value here. Thank you very much. We are going to talk more about details of our deliveries based on the questions you sent us, but it is a pleasure to witness this good moment of the company and to be able to disclose these results together with my team. This is just the beginning of life and Vivara in the market where we can grow so much yet. Now, let's move to the Q&A session. Thank you. Let's start with our first question from Thiago Macruz, sell-side analyst. Thiago, we are going to enable your camera and your microphone. Please accept the request. Hello, I'm sorry, it took me a while to release my microphone. First, I would like to congratulate you for your results, and I agree, this is one of the best result levels in retail. I have two questions. The first one relates to Life. We see the journey of these brand, this new avenue for growth you have created. We ask ourselves, couldn't that be much bigger than the expectations you have? Because this is a very democratic brand, so why should you limit the expansion of these brand to over 230 stores? Why can't we have more store than that? The second question relates to Vivara. We have follow up, the same-store sales of Vivara, a little bit lower than inflation in previous quarters. What type of initiative could you implement internally to expedite and to pick up the same-store sales? I believe there is a cannibalization effect in place, but these are the questions I have for you. Thank you, Macruz. Thank you for your question. Let me first talk about Life. If we look at the performance level of those stores that we have and how mature they are becoming, yes, and of course, it is in our pipeline to revisit the expansion plan to see how present can we be in the Brazilian market, how much of the market can we take. In previous video conferences, I've talked about that as well. We see a very fast maturation of the Life brand usually selling 20% above our plans. We see mature stores performing very well, delivering almost BRL 6 million, and the same-store sales has increased by 38%. We have a small percentage of mature Life stores, but they keep increasing. I don't know what will be the ceiling of growth. We have a minimum level. We expect them to grow, but they can grow much, much more than that. Stores that are at some of the shopping malls, they are not so obvious. Maybe they are performing very well, this leads to opportunities that we are analyzing internally. Now, talking about Vivara. During the pandemic, and even a little bit after the pandemic, I remember mentioning that we have implemented the omni-channel strategy. It doesn't matter where the sales were made, by a salesperson, at the website. What is important to us is that customers consumers are purchasing Vivara products, and omni-channel is picking up. Customers sometimes choose to make their purchase on the website and getting the product at home or picking them up at stores. Joias e Nação project is growing higher than our growth in the digital channel. You see that the salesperson is at the core of the commercial strategy, it's the point of sales at store or at the site that closes the deal. We are changing the structure so that Vivara brand can grow. When we talk about jewelry and Vivara, we have a 9.5% growth. We've talked a lot about that in retail. In the future, we will not be able to tell whether the customer closed the deal in the store or at the website, whether it's an omni-channel or not. What's important to us is the growth of the brand. I would like to add something to your first question related to Life, and to share with you some of the assumptions for this growth that we have shared before. The ROIC, with returns above 25%, it's much higher than the capital cost of the company, and the capital cost is dropping, and we expect it to drop even more. Every percentage point, every 5 percentage point that is dropped in this new opportunity, and now with a lower interest rate, now, indeed, maybe this is the time for us to give more visibility about the possibilities we have in this environment. This is why we are talking about hundreds of traditional stores for Life. We are on the way of building a stronger brand. We are making strong investments in marketing and branding for Life stores. There will be a time when we are going to have Life stores in shopping malls, where we don't have Vivara stores, so that will be our brand in a given shopping mall. There will be a time when it is the proper time to consolidate the brands in those shopping malls, and with that, we will increase the opportunities of penetration and higher than our Vivara stores have. That absorbs the 10-15 more mature stores we opened this year. A minimum ROIC of 25%, that's 1 point. We need to determine the size of the opportunity between 20%- 25% of minimum ROIC, or between 50%- 20% of minimum ROIC. We are talking about at least additional 150 healthy stores generating value to shareholders. We need to map where are those shopping malls where we don't have presence of Vivara stores, and we also plan to bring our brands there. Thank you for your questions. Continuing, the next question is from Vinicius Strano, sell-side analyst with UBS. We will enable your microphone and camera, Vinicius. Please accept the request. Hello, good morning. Good morning, Paulo, Otavio, and Marina. Thanks for taking my call. Again, about the Life brand, could you give us more detail about the shopping mall profile that you are considering for the expansions you plan to implement in the next 1 years-2 years? How will these shopping malls be different from the ones you already have stores in today? If you also could talk a little bit more about levels of productivity and margin of these stores, I'd appreciate it. I know that you have started testing these new stores in shopping malls where you don't have Vivara stores today. What about expanding the Vivara and Life stores to street stores rather than in shopping malls? What about the competitive landscape? What have you observed in terms of opening and closing of competitor stores? Let me start by answering a question related to Life. The expansion plan for the next 1 years- 2 years is still focused on A and B level shopping malls, where you already have the Vivara stores. This is the main focus of our expansion plan until 2026. We plan to test different profiles of shopping malls in a different scenario. We have run a first pilot plan to shopping malls where we don't have a Vivara store, but I think it's too early to infer any conclusions or potential avenue for growth taking this path. We haven't even started operating for a month. It's a pilot project to test this model. Street stores are also an opportunity, but they are not part of the pipeline for the next 4 years. Eventually, at some point, we may decide to have a pilot project for street stores, but this is not part of our short-term expansion plan. Indeed, that would open new opportunities that are not yet included in our expansion plan for the next 4 years. That's what I had to say about the Life brand. Paulo, would you like to answer the question about the competitive landscape? Well, we obviously think about jewelry stores. That's the first segment we think of, and in that segment, we don't see a lot of changes in the players and their investments of opening of stores. When you consider about competition, what is the competition for Life or Vivara products? We compete with giftable, something you would give for someone on Valentine's Day, on Mother's Day, on a birthday, we could be a solution for the perfect gift. If someone goes to a shopping mall to buy their mother a gift, they could purchase a jewelry or a, or a perfume or maybe something else. I think it's important to emphasize that in these interactions we have, because our addressable market is much bigger than the jewelry market. Yes, we are building this market. We are opening with new competitions, and it's not because our market share in the jewelry business is of 80%, that we don't have a bigger opportunity. Yes, we are a brand that Vivara brand that grows by 10%. Life grows even higher than that. This competitive landscape includes jewelry stores, and they are performing the same level we were. I think it's important for you to consider that our competitors include a much bigger group of companies and business. Thank you. Now continuing, the next question is from Daniela Eiger, sell-side analyst with XP. Please accept a request to open your camera and microphone, Daniela. Hello, good morning. Thank you for taking my questions. I have 2, one relates to profitability and Life, because profitability has been the major lever to expand the margins you have consistently shown increasing. How much potential should we expect to see of this lever? What about product mix? You mentioned that collections now are more representative than just the Moments collection in Life. Could this product mix contribute to the margin increase and not just the gain in market share, but also the mix of products that are collectible products? That's my first question. My second question relates to the migration of the factory. I know that this is one of the points that increase profitability, internalization of processes, reduction of losses, I understand that operation efficiency is impacted by this movement. I know that in July, you have just completed the first phase of this migration with the jewelry business. How much potential of expansion in profitability do you expect to have as a result of this migration, probably next year? In terms of Life profitability dynamics, we already have a very high profitability level in this segment. Gross margin is above 80%. Some subcategories of Life have even 84% gross margin. It's a very robust margin for this category. The leveraging potential for the consolidated margins in the company will be related more to product mix than expansion of individual margins per category. When Life becomes more relevant in the product mix, this shall be reflected in our consolidated margin levels. This year, we are probably going to have margin levels close to 70%. That's the margin we are witnessing growing over time. As of next year, this gain is going to be more gradual, because this year, the Life expansion is leading to a leap, and next year, we expect to have a more incremental gain. We have the opportunity of improving results, and Paulo is going to talk more about the migration of factory. I think part of the efficiency gain we are going to have with the new factory will lead to improvements in the products. We're probably going to see that in the product quality, and part of this gain will be shown in the quality of the product, and maybe not significant increases in the individual margin of Life products. About product mix, I know that our strategy was very accurate in depending the dependency of collectible items. They are fast fashion items, so we work on Life strategy to focus on diversification. Collectibles are more relevant in the Life product mix, and we are more flexible in our pricing strategy. We can add more value to their prices, so this is also a lever of profitability for this category. This product is a differentiated product. We can sell it with a different strategy. We don't have a lot of competition because those are designed, Life signature products. We don't have competition for that. We have a more robust margin for them. Maybe Paulo will now talk about the factory migration? Well, first, related to what Melina just said, it's very important to have the collectible items. It's great that when we launch them, we see a good performance of these products, because this strengthen the Life brand. We see that this brand is becoming more independent, and we empower the brand with these collections. We also reduce our dependency on Moments collection. We do not depend so much on the charms, and that's something that we aimed. When we said that we wanted to lower this dependence in the medium term, now we are seeing the results for that. Milena explained very well that as we expand our share of Life stores, Vivara as a whole, is going to have better margins and profits. As to the factory migration, the main point that we pursue is the improvement of quality of our products and enabling the company to be ready for a future growth wave. It's not just about lower losses. We know that our purpose is doing more and better and delivering products at lower costs. We want customers to gain in terms of quality and to receive a product with high quality in the long term. We are very pleased with the factory migration. For the past month, we delivered Everything we planned according to the deadlines, very good volume levels. We have migrated most of our jewelry and watch business, in the upcoming months, we're going to migrate the rest of products. It's a new environment. Over 800 people working in the factory, they're even happier than they were before. Now, they have a new house, and, you know, happy people perform better. They do more. Thank you for your answers, and congratulations on your results. Now, the next question is from Joseph Giordano, Sell-Side Analyst with JP Morgan. We are going to open your audio and video. Please take that. Good morning, everyone. Good morning, Paulo, Otavio, and Milena. You had a very strong operational results, and of course, we keep asking: What can you do even better about working capital? Otavio, how much can we expect in terms of improvements in inventory to release more cash and to improve the return on investment? A second question related to growth strategy. Life is performing very well. In the past, we talked about, about M&A. How much does the Life brand performance change our perspectives about M&As? Maybe would you plan to export this model to a different area? Thank you, Joseph. Thank you for your question. Let me start with the first one. We are working on investment in larger inventories because of the accelerated expansion we have implemented in the past years. We are also betting on a market that finds more difficulties in replenishing products and after the pandemic, prices that are still at the level of ranging from BRL 280-BRL 310, that's the-- how much the gram of gold costs. Year-over-year, we are adding more capital to support growth and to provide support to this growth. This year, in the 1st half of the year, we have added capital significantly to this area. There are some important points for us to highlight, and they are related to the previous question asked by Daniela. There is a change in the factory location. This is like a snapshot that we take, and of the month previous to the lines that were changed to a different location. Now, we have not moved the line that deals with gold yet. Every time we are before a new season, like Valentine's Day or even Christmas, that is upcoming, and of course, we prepare ourselves to be ready to meet even higher demands that we have planned for, so that we can work on a safe zone, have a buffer zone. In a year of change, we have more finished goods and more raw material inventories. That also relates to our decision. There are 20 Vivara stores that were opened in the past 12 months. There are yet 11 Vivara stores in maturation stage, 31 stores therefore, that have not yet diluted the inventory levels that we have put them to work with, and we still have lots of Life stores that are yet to mature. In addition to the 70 Life stores, we have more than 40 Life stores we plan to open in the second half of the year. Preparing for the factory expansion, plus providing support for the stores that are not yet mature, and also providing support that stores that we haven't even opened yet. This leads to opportunities in terms of improvement in efficiency because of the inventories that we have carried so far. It's not something we are going to do all of a sudden, not something you're going to see in 2 or 3 months. Indeed, we can have, by the end of the year, better inventory levels. The high season is December. The inventory levels of the 3rd quarter vis-a-vis the 4th quarter will probably show differences. Until then, in the new factory environment, we will have made some adjustments in the raw material purchase cycle and also metals in general. Indeed, we are still showing very high levels of capital in inventory, and we are aware on the return it has on our business. We see potential to improve efficiencies, not just until the end of the year, but also in upcoming years. Yes, let me talk about M&A. Even before I do that, let me remind you of our focus. We are a very strong industry. We work with brands, and we work with retail. Any M&A that could help us accelerating or improving these channels, of course, we'll open to address opportunities like that. When we talk about Vivara and Life brands, we believe that this is a market at the top of the pyramid, and maybe it's not aspirational for customers, but there is a market under our brands, and we also see some space. We believe that, yes, we have room to somehow compete in the markets where we are not competing today. Whether this is a priority to us today is something else, because we have a very clear avenue for growth for Vivara and Life brands, and in the short term, that's the path we are going to take, the path we have decided to take. Yes, there are other markets we could tap into, but as Macruz questions answer-- Macruz question is that: Why can't we expedite this avenue for growth? It's because in the short term, we have a lot of room for improvement in that path, and that's our focus. Now, I failed to mention a few points related to other initiatives that we are making so that we can achieve even higher return. That relates also to the question of inventories, but there are also internal initiatives that are important to be mentioned. They are on your radar, of course, when you look the company from the outside. In the past years, we have a very relevant tax credits, especially in Pernambuco and in São Paulo, related to the purchase of gold.... In Pernambuco, we have already addressed that. We're already using these tax credits month-over-month, a little bit over BRL 9 million last year. This year, we're probably going to reach BRL 16 million-BRL 17 million in tax credits. Most of it, it relates to the purchase from Minas Gerais that is applicable in the São Paulo business. BRL 61 million or BRL 62 million have-- are already free to be used, already approved to be used, and now we are also waiting for another interdependence scheme so that we can achieve benefits for the retail. We are looking for this approval. This also relates to our expectations of reducing the capital of the company used even further in the future. There was also a reduction in the tax rate of non-realized profit, although there were some disadvantages when you compared fixed results, it makes adjustments in different assets of deferred taxes, something that happened in the past, but is no longer true, stopped growing. As we have a more mature growth level in the future, retail is going to generate more profit, we are going to use these deferred assets so that we can have even higher returns in future years. That's great. Thank you very much for your answers. Next question is from Eric Huang, Sell-Side Analyst with Santander. Eric, please accept the request to open your microphone and video. Good morning. Thank you for taking my questions, congratulations on your results. We have 2 questions. In your earnings release, you mentioned that in the actions related to Life brand, you have good acceptance of products with higher ticket. Do you see space for more products at this price point? Was that a test that you were running? If there is space for that, would that have any space in terms of cannibalization with the Vivara business? Related to digital sales, we saw that the digital evolution was very strong, difficult to beat what you've had so far, but what kind of potential do you see for that? You talked about some of the benefits, especially affecting Vivara brand, but what will be the potential benefits for Life brand since it has a lower ticket value, but at the same time, you have a stronger digital trend? Let me talk about the higher ticket for Life products. Between the two brands that we operate, Life and Vivara, we had a gap, a price gap. That was the first entry price of Vivara and the last price for Life. This is an opportunity to close the gap. By providing this product, we close this gap and move into a stronger competition with other jewelry players with higher ticket. This product strategy is intended to close the gap and capture this opportunity, to seize this opportunity. We are closing the gap with the Vivara portfolio, and I think there is also some space to seize this gap, you know, between the cheapest Vivara product and the most expensive Life product. Since Life is now out, separate from the Vivara stores, we see this as an opportunity. There's also opportunity to have more assortment in this level. The items that were launched were well accepted, collections were well accepted by our customers. We are also working on differentiating the marketing initiatives of that to empower this brand. Life is not a brand with a different positioning when compared to Vivara, because it's a jewelry brand as well. It's just that the purchase journey is different. It's a product someone make for casual wearing for a day-to-day use. While Vivara is a product you buy for a special celebration. With this strategy, we can take the space very well, so that we will not going to increase cannibalizations. Quite the opposite, we complement our portfolio so that we can have both brands covering all price ranges. That is reflected on the performance levels we've had. Now, talking on the digital space, maybe Paulo would like to answer that. Well, it's not just about the new platform, but I think we've also made improvements in this platform. This has led to good results in digital. The smart window shopping and CRM, this is also something we are focusing on. Now that the customer is at the core, the center of the business, and now that the sales people are more empowered, how can we maximize our performance using digital systems? Regardless of the website, it is important to note that the customer is at the core of our business. By improving their journey, we see a lot of opportunities that are yet to be implemented in our omni-channel platform. Otavio, any point you would like to add to that? No? I think you've covered it all. Thank you for your answers. Next question from Vinicius Pretto, sell-side analyst with Bank of America. Vinicius, please accept the request to open your camera and microphone. Good morning. Congratulations on your results, thank you for taking my question. I would like to follow up on Eric's question. You mentioned about some opportunities you saw in new categories for Life, religious pieces, wedding rings. What was the acceptance level of consumers in new products you have added, and what opportunities do you see to new Life product lines? My second question relates to how available is the marketing in terms of rent, and what type of performance indicators would you like to see in those stores to expand, to increase your expansion? Let me answer about the Life portfolio, then Otavio is going to talk about expansion. About Life portfolio, we launched some categories in the beginning of this half of the year. It is performing according to the expected levels, such as wedding rings and watches. Those are the two categories we implemented in the stores, we found good acceptance of that. Life is not just a brand of moments or charms, but it's becoming a jewelry store. The performance level of these items is related to the profile of consumers, so they are younger, something they wear on a day-to-day basis, and it's not just a jewelry piece for a celebration. The performance of these categories are very well. The accessories line, such as wallets, for example, and also some notebooks that we are launching, are also performing well. We have not yet reached the religious items. We might do that in the future. We want the Life stores to work with other categories, not just the moments products. That's, this is the expectations we have for Life stores in the future. Related to your second question, let me address that. We don't see a lot of changes when compared to the availability of store points. We are still in the first wave of expansion, trying to bring our stores to the best shopping malls, and as Milena said, we are still focusing on A and B level shopping malls where Vivara is present. This is an environment we're familiar with. We're familiar with the flow of these shopping malls, and these are environments that provide good returns. The Life store performance, as Paulo said, it's 20% higher than our expected, our expectations for a mature store, and stores are maturing very well. This shows that the sales of mature stores are going to be maintained at high levels in the shorter term. As long as we see these indicators and the maintenance of costs required to put a store in running, as we've seen in the past year and a half, and if we have, in the next cycle, the opportunity of having also shopping malls with total occupancy cost that is lower than we are used to, then Life stores will be at a very good level of total occupancy costs. This is usually true in shopping malls that are not the top shopping malls. Then we're going to move to an expansion movement that is going to optimize the cost. We have our cost that ranges from 8%-10%. The current cost to put together a store in place, the sweet spot of return of investment is absolutely wonderful, with ranging between 45%-55% of invested capital once the store is mature after 3 years. In the medium and long term, what do we need to see to expedite this expansion, even at higher levels that we are planning to, to have? We said that we want to gradually take Life stores to places where Vivara is not. We need to strengthen the brand. What should we see to sustain this speed? We need to see the Life stores performing at very high levels, especially at shopping malls where Vivara stores are, do not exist. We want to have very healthy levels from these stores. Only then we can talk about much higher expansion with levels of return above expected. I think it's important to say that we expect to expand stores in the second half of the year. According to our plans, we are able to deliver results very well. This quarter was an example of that. Our planned expansion is on track. We don't have any bottlenecks related to that. We have everything in place to deliver what we planned for in the second half of the year. Thank you for your answers. Once again, congratulations on your results. If there are no further questions, we conclude Vivara's earnings video conference. The 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.