CVC Limited

Good morning everyone and thank you for waiting. Welcome to this video conference to present CVC Corp's third quarter 2025 results. Today we have simultaneous translation into English available. To access, just click on the globe icon at the lower bar of your screen, look for interpretation and choose your preferred language, Portuguese or English. After choosing the language, there is an option to mute the original audio in Portuguese by clicking on Mute Original Audio. We'd like to inform you this video conference is being recorded and will be available on the company's IR website, w3cvccorp.com.br, where you can find complete information about our earnings. You can also download the presentation. The link will be in the chat window, also in English. During the company's presentation, all participants will have their microphones disabled. After the company's presentation, we'll begin a Q&A session. To ask a question, click on the Q&A icon at the bottom of your screen and send us your question to join the queue. When we call your name, you will see a prompt on your screen to activate your microphone. Please activate your microphone to ask a question. If you have more than one question, please ask all of them. We want to remind you the information in this presentation and statements that can be made during the video conference in relation to business prospects, projections, operational and financial goals of CVC Corp. represent beliefs and assumptions of the company's management. as well as information currently available future considerations are not a guarantee of performance they involve risks uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur Investors should understand that general economic conditions, market conditions, and other operating factors may affect CVC Corp. future performance and lead to results that differ materially from those expressed in such forward-looking considerations. Today with us... fabio godinho ceo and felipe gomez cfo and investor relations officer at cvc corp i will now turn it over to mr fabio godinho morning everyone welcome to cvc corp third quarter 2025 earnings conference call as usually we will speak about our highlights in terms of growth profitability and improvements in our capital structure as to growth we've opened 42 new stores in brazil and argentina so now we have nearly 1600 operating stores despite the challenging volatility in both countries so 31 new franchises in brazil and 11 new franchises in argentina Confirmed bookings had a robust growth overall in CVC Corp of 15%. Brazil contributed 14%, mostly thanks to a robust growth in B2B. And here, our new Connect Us unit and also Trend, Visual and RecStore Advance, which accounted for nearly 80% of this volume, growing above 20% in Q3. In B2C, despite the challenges in consumption, credit, household debt and delinquency, we can show a few highlights in Q3. The Brazilian Civil Aviation Authority, ANAC, added about 7% capacity to Brazilian airlines. And we grew slightly above this in the domestic market. So that is good. On international, The overall capacity increased 11% and we added 16% more passengers in Q3 alone. So now we have started to gain share of international travel. Of course, as we mentioned last time, the major stressor was maritime travel. While the overall capacity plummeted 30%, we had a 15% drop in the number of passengers. So we have gained market share from other companies in this turbulent scenario. With a 30% decrease in the overall capacity offer, our 15% drop, well, it ended It ends up being good news. Argentina up 20%, boosting the corporate 15% growth. And while showing the Argentine market is recovering. Net revenue up 4%, mostly thanks to our sales mix. also in Brazil with B2B growing faster than B2C, mainly in our customer base. We've gained share of domestic customers and a significant portion of our growth came from international travel sales. Today, Regster's largest customer is trip.com and Connect Us has increasingly more international customers. So this will help boost more growth in B2B, which comes with a lower take rate, but it requires no working capital. So with a 15% interest rate currently in Brazil, well, this is not so bad. Argentina net revenue up 7%, also thanks to our sales mix. where Ola is growing faster than Almundo. In Argentina, we have a positive working capital. That is why we are bringing cash from Argentina to Brazil this year. Now, in terms of profitability, our EBITDA surpassed 130 million BRLs, growing nearly 5% compared to last year. EBITDA margin neared a healthy 35%. And net profit gave us a surprise, 62 million BRLs, almost 36% higher than in Q3 last year. But the highlight this quarter, I think, is in our capital structure. Our operating cash generation before interests neared 150 million BRLs. Again, mostly thanks to our sales mix. When B2B sells more than B2C, then we consume less working capital overall. So this is the benefit we can see looking at our operating cash generation, which led to a significant debt reduction of almost 200 million BRLs versus Q2 2025. We've recently advanced a debt payment. of November, 2026, 200 million BRLs, including interest and principal, showing the strength of our company cash generation. So now the company leverage, I mean, considering the balance of debentures, which is 400 million BRLs, so the overall leverage of 0.5 times the EBITDA, which is way below the current BOVESPA average. Looking at our B2C strategic pillars, as we usually report in our earnings conference call, we can see progress in three of our four pillars. So alternative payment methods, we are now less reliant on credit card payments, which is really important for us to have better credit control, and lower delinquency using our own payment slips and developing a partnership with other banks, Santander, Bradesco, and other financial institutions. So the number moved from 31% in Q3, 2023 to 37% in Q3 2024 and 42% in Q3 2025, showing a clear progress. By opening more stores in small and medium towns, we are tapping a blue ocean for CVC, confirming our guidance of 200 new stores in Brazil and Argentina this year. And the penetration of our digital sales model neared 60%, confirming this is a successful strategy. Our omni-channel approach features good results month after month. Now, looking at exclusive products, we remained flat compared to last year. Why? Well, the blockings we used to have, you know, because of a weaker demand and airline price changes in Q3 2025, the blockings were no longer competitive. But, you know, as we're no longer doing chartering, we could simply cancel the blocking sometime before the flight. So with that, we hold no risk. We then had no loss. We ended up flat. mainly because of spot price changes in regular airline flights. As we look at our current blockings for Q4 and then for Q1 2026, and considering the current spot price of air tickets, we will probably go back to levels above 20%, which is really key for our working capital. About preferred hotels, we often say CBC business is based on volume concentration with 80% of our volume in 20% of our partners. And this is what we can see now. We came from 50% of our volume concentrated in preferred and recommended hotels in Q3 2024 up to nearly 80% now in Q3 2025. So we can ensure room availability for CVC, more competitive pricing, and a differentiated service reaching the highest NPS of our industry. Again, it's important to mention CBC has become an NPS benchmark in Brazil. According to Reclame Aqui platform, we're the only travel agency to have the RA1000 seal with the highest NPS of the industry. Now, this quarter brings important news about ConnectUS. ConnectUS was incubated under trend, but now it has become a key element for international B2B sales of RecStore Advance. That's air products and the distribution of land products, which we can distribute in the whole world. So we are talking about general international and domestic products, hospitality services, land products. We're using ConnectUS as a tool to make connections with partners in Brazil and abroad. Obviously, we prioritize international or global customers. And we've been working to develop Brazilian customers too. So in a few years, we expect our B2B, which currently accounts for 50% of our sales in Brazil, we expect it will be split. into 50% foreign customers and 50% Brazilian customers. So we will reduce our exposure to the volatile Brazilian economy. We have a number of new agreements and partnerships with distributors, hotel chains, and our agreement with Avoris. So selling hospitality together with CVC all over the world, well, except in Brazil. Here in Brazil, we have more than 8,000 agreements for land products, including hospitality and other services. This is a scalable fee-based business. And we have three employees working at ConnectUS. We've grown eight fold comparing, you know, the first nine months of 2024 to the same period of 2025 and using no working capital and very little OPEX. So now we have a new general director there, Bruno Sa, who he came from a CVC competitor, but he's had a long track record working with Rexter Advanced. So he knows the business and his work has been key for this growth. If we take the last two, three months Connecta sales annualized, the result exceeds 200 million BRLs. We're using no working capital with very little OPEX and adding important revenue diversification with more non-Brazilian customers. In conclusion, so looking at our capital structure, and this is a top priority, as we've clearly told the market in previous quarters, well, every time we've spoken with market analysts and investors, this has been our focus this year. So where do we stand as we close Q3? Considering cash and unencumbered receivables that we can use for financing, we have 600 million BRLs. And after the payment of 200 million BRLs, including interest and principal debt, we have more than enough cash You know, today, considering cash and receivables, we have much more than enough to pay for our obligations of 80 million barrels in October 2026 and then in 2027 28 which places CVC in a sound financial position. and with peace of mind to move forward in the next few years. With that, we witnessed our credit rating be reviewed upwards. So from a junk bond rating in December 2022, we now have a triple B rating, which means basically investment grade with a favorable outlook. even in a difficult economic scenario, you know, for retailers in general, especially for high ticket, discretionary demand, and the interest rate is 15%. So as we see it, you know, this management has delivered our commitment to consistently reduce our leverage and improve CVC capital structure. I'll hand it over to Felipe Gomez now, who will take us through financial details of Q3 2025. Thank you all. Good morning, everyone. Thank you, Godinho. Let us talk about our numbers in Q3 and the first nine months of 2025. So on the financial side, we will continue to use the same format adopted in previous conference calls. On the first slide, Brazil sales. revenue and take rate. On the top left, confirmed bookings had a 14.5% growth between Q3 2024 and Q3 2025, reaching 3.3 billion BRLs. The first nine months of the year, 9.5 billion BRLs, up 13.2% versus 2024. On the top rate, net revenue growing 3% in Q3 2025, compared to Q3 2024 with a take rate reduction from 10 to 9.2%. Gauteng has already explained it's related to our sales mix because B2B is growing faster than B2C. So we see a drop in the take rate. Looking at each product line in B2B and B2C, you know, each product keeps the same take rate. But our sales mix in our units and within each unit has brought our take rate down. In the first nine months of the year, our revenue growth neared 9%, reaching 881 million BRLs with a take rate drop. from 9.7 to 9.4%, you know, as we mentioned. In the charts below, a few highlights, you know, already explained by Godin earlier on. So our focus here is on international customers who have driven our year-on-year growth at RecStore Advance and Connectus. New store openings have also helped, especially as we open more stores in small and medium towns where we see a potential blue ocean for CVC. We're providing more detailed information about confirmed bookings in the press release, but our B2B confirmed bookings grew 27% in Q3 2025 compared to Q3 2024. And that's mostly thanks to international customers, as we can see in the first chart. The launch of ConnectUS platform, as Godinho mentioned, and we have a slide on that. This unit was operating under trend and we believe it is very scalable and so it will drive company growth in the next few years. On the next slide, basically the same numbers now in Argentina. So we continue to see growth in Argentina with 19% higher confirmed bookings in Q3 2025 compared to Q3 2024. reaching 923 million BRLs this quarter. Year-to-date, an expressive 47.5% growth in the nine first months of 2025 compared to 2024, nearing 3 billion BRLs in confirmed bookings. On the right side, net revenue intake rate in Q3, We can see a 6.7% growth reaching 58 million BRLs net revenue and a drop intake rate explained by our sales mix. Our B2B brand in Argentina, Ola, is growing faster than our B2C, Almundo, so pulling down our take rate. In Argentina, the overall result is quite positive. despite a lower take rate because we are using less working capital, as Godinho explained a few minutes ago. Our operations in Argentina require no working capital. So the take rate is lower, but the net balance is favorable. In the first nine months of the year, we're nearing 200 million BRLs revenue between January and September, posting a 20% growth year on year. And take rate moving down from 7.8 to 6.7% because of the sales mix between Ola and Almundo. The highlights are strategic position in Argentina, mostly thanks to our blockings. that helped boost OLA B2B sales. The blockings were successful, you know, Argentinians coming to Brazil, Maceió, Rio, Cabo Frio, Pernambuco. And the second highlight here is Argentina EBITDA margin that soared 19% in Q3, reaching 11 million BRLs. I'll give you more detailed information in the next few slides. 11 new franchise store openings, which is significant in Argentina. So now we have 181 operating stores, which is a record number of active stores since we started our operations. And this is a relevant number showing confidence in our brand, Almundo. And as we mentioned, the take rate is automatically reduced when B2B grows faster than B2C. Moving on to the slide with our consolidated numbers. On the top left, the net revenue of both operations and then Expenses. But this is only Brazil. In Argentina, we still have foreign exchange issues. So to keep our numbers clean, we continue to show our performance in the same form. But there's more information in the press release. So in the chart on the left, CVC Corp revenue growth of 3.6% this quarter, reaching 376 million BRLs. The overall take rate dropped from 9.4 to 8.6 because of our sales mix change. You know, between B2B, B2C, and also between Argentina and Brazil. Argentina is growing faster than Brazil. In the first nine months of 2025, our revenue growth neared 11%. So we hit 1.8 billion BRLs compared to 975 million in Q3 last year. So up 10.8%. And the take rate dropped from 9.3 to 8.7%, as we already explained. The other two charts, they feature our expenses. And you know, this is a relevant figure for us, which we track daily. So when we look at G&A expenses in Brazil, and then we look at our net revenue, we can see an increase of 3.3% from 140 million BRLs to 144.8 million, which means we've delivered our commitment to grow expenses below the inflation. Our GNA expenses have being kept flat at 45 percent of the net revenue, very close to the number we pursue, which is to keep it below 50 percent and as close as possible to 45 percent. In the first three quarters of 2025, our G&A expense increased 3.4 percent. So again, in line with our commitment. And it starts to come down, you know, in relation to our net revenue. because last year it was 52.3 percent now 49.7 percent and the seasonal effects you know in q4 it tends to help further improve this ratio because it dilutes expenses compared to revenue so we expect this number to further improve The last chart on the right shows sales expenses compared to confirmed bookings. We track this ratio because it shows our sales. In Brazil, in Q3 2025, we can see a 13.4% growth and the same ratio relative to sales, 1.8%. So our sales expenses are growing in line with sales, which makes sense. When we look at the first months of 2025, the growth was 17%, moving from 1.8 to 1.9%. And this is because of a few marketing actions following our strategy to gain market share for the company. But it's in line with our plan for this year. There are three highlights we've already mentioned. So a higher net revenue. Mainly thanks to a strong B2B performance in Brazil, G&A growing below inflation, again, as we explained, leading to a significant reduction year on year. The first nine months, 2.6%, moving to 49.7%. which means our sales expense have remained stable in relation to sales in Brazil. Next, more consolidated information, and then Brazil and Argentina EBITDA and adjusted profit. Now, the top block shows our EBITDA and the EBITDA margin, first in Brazil, then in Argentina, finally the consolidated number. On the first chart on the left, Brazil EBITDA in Q3 2025, The adjusted EBITDA hit 119.5 million BRLs, growing 1% compared to last year with a 37.8% EBITDA margin. As we look at the year to date, we've grown 13.5%, nearing 280 million BRLs in the first nine months of 2025. a bid down margin moving up from 30 to 31.5%. Now, I want to make a comment about last year. Last year, we made a foreign exchange hedge adjustment, and it had a positive impact last year, which distorted a comparison between 2025 to 2024. but it's diluted in the nine-month view. So this 13.5% EBITDA growth is even more significant. In Argentina, we can see a significant growth in Q3 hitting 11 million BRLs versus 6.5 in 2024 and 19% EBITDA margin compared to 12% in 2024. a 30% growth versus the first nine months of 2024, reaching 50 million BRLs EBITDA. Both countries combined, Q3 posted a 4.7% growth, hitting a 35% EBITDA margin, which is significant for the company, reaching 130 million consolidated adjusted EBITDA in this Q3. In the first nine months of 2025, the consolidated EBITDA neared 330 million BRLs with a 30% EBITDA margin. This is a number we pursue, 30% EBITDA margin. You know, and that is what we delivered year to date compared to 280 million EBITDA last year with 28.8% margin. Further down on the left, our adjusted net profit and a description of the calculation as in previous disclosures. And the press release has more details. In this Q3, we delivered 62.5 million BRLs, adjusted net profit. 36% more than in Q3 2024. Year-to-date, the number is 70.6 million BRLs compared to 45 last year, growing 56% between 2024 and 2025. Then two other charts, we've already mentioned the EBITDA evolution year on year, the margin and the adjusted net profit in Q3, 62.5 million BRLs. Now, our last slide today, As Godinho mentioned in the opening, that's information about cash generation and capital structure. So on the left, operating cash generation in the last few years showing the seasonal effects that we experience usually in Q3, which we know so very well. So, 145.9 million BRLs operating cash generation this year versus 141 million last year versus a consumption of operating cash of 61 million in 2023. The progress is clear and it helped reduce the leverage. So, on the right, the overall debt. including information about cash and debt, comparing Q3 to Q2 2025. On the first line, a reduction of 266 million BRLs in the company overall debt in one quarter only, mostly thanks to a prepayment of our debentures, and part of the amount also came from an acquisition or an out that we posted, But then we crossed out and so it also helped reduce the overall debt. Next, the net debt and deducting cash equivalents. 198 million BRLs net debt. which shows a significant reduction compared to the last quarter of almost 200 million barrels, a significantly lower net debt now in the company. The company leverage had a huge improvement, and this is the net debt over EBITDA moving from 0.9 to 0.5 times in the last 12 months. And that's how we measured the company debenture covenants. And here, additional information we usually disclose because we believe it's relevant for the market, 422 million B or L credit card unencumbered receivables and 1,120,000,000 B or L credit card receivables already used as financing. Well, that's the number at the end of the third quarter. and our debt repayment. So as we look at our net debt and we add up the balance of receivables, our net debt fell almost 85 million barrels, reaching 896 million net debt plus the balance of receivables in Q3 2025. We're also disclosing the overall debt over EBITDA. in the last 12 months, a significant drop from 2.3 to only two times in Q3. That was it on my side. We are now ready to answer your questions. Thank you all. We will now open the Q&A session. If you have a question, click on the Q&A icon in the lower bar of your screen and write your question to join the queue. If you want to ask on the microphone, write your name. When your name is called, you will see a prompt to activate your microphone. Please unmute and ask all your questions at once. Our first question comes in writing. Can you please speak about what we can expect with the recent foreign exchange fluctuations? Is it going to impact international travel in your view? Hi, this is Godinho. Thank you for your question. I believe now with more stability and the recent drop of the US dollar in relation to our currency, round about 5.3, which is what we see now. then international travel has become a good surprise for us in Q3. And so I believe if we don't see a change in this trend of our foreign exchange, I believe we'll continue to grow at the same pace in Q4. So as we mentioned, we've added capacity. You know, international travel has 11% more capacity in terms of international airline seats. And CVC has grown 16% in the number of passengers, showing we've gained share. And this was across the board. We're talking about 17% growth in Europe, you know, in European destinations, 11% in South America. Caribbean destinations, a growth of almost 70% in terms of the number of passengers, and other destinations in Asia and Africa, also a growth of almost 30%, showing the robustness of our services combined with our omni-channel approach. So we expect a very positive outlook, you know, now in Q3, but also in Q4 on the international travel market.

Our next question comes on the chat window.

Godinho, what is your view on the air market capacity for next year? Well, again, thank you for this question. Now, on domestic travel, the capacity is growing about 8%. Now, in international travel, the capacity growth will be around 12%. I do not believe This capacity addition will change next year. I mean, on national travel, domestic travel will continue to see an 8% growth approximately. And maybe the international capacity can grow a bit more. Especially, I mean, I believe maybe it can grow 15%. I believe that's possible, especially if the foreign exchange rate remains stable at the same levels we see now. Now, but what I think, I mean, I think we'll have a different mix, a different sales mix in terms of domestic and international. and also airlines, you know, the sales mix between airlines will probably change. And we can see that in the documents of, you know, chapter 11, that their CAGR in the next five years, their CAGR in the next five years will be around 3%. And whereas Go and Latam will certainly grow much faster. And so I think that's good news for CVC because these two, they don't have an operator, whereas Azul has Azul Viagens and we could see that they had growth. in the first half of this year through Azul Viagens, through their operator. Azul Viagens grew in domestic travel and also in international Azul flights. Azul Viagens grew 60% and the market grew seven, 8%. Why? because of price dumping, because they killed the price, because they needed cash to invest in their airline before the Chapter 11. And so when you see this change in sales mix, and because we have a partnership with Go and LATAM, so So all of this will be favorable for CVC next year. I mean, of course we grew. CVC, you know, before our management never even had any relationship with Azul. Today, we even share chartering with Azul Viaje, their travel agency. But of course, they will always give priority to their own operator and they're now doing price dumping in the first half of 2025. But also Azul, they introduced a new member of the board, AIRCAP. And so the other lessors decided to work with other competitors you know so as their agreements expire they are changing and they're more like working with goal and goal will continue long-haul operations with the a330 that are coming from azu to go I believe we'll see a big growth of ASK in go long haul products. That will be basically for leisure travel or vacation travel. I believe that CVC will be able to contribute with sales, with significant sales for our big partner goal. And so that's what we see on the domestic and international market for 2026. Our next question comes from Victor Fusihara from Santander, and your microphone has been enabled. Hello, good morning. Good morning, Felipe. Thank you for taking my questions. The first one is about leverage, which was reduced in this quarter. So what is your guidance for the end of 2026? And are you going to change your plan in terms of using receivables financing. Now about store openings, I think you've opened 100 stores in the first nine months. I'd like to hear about the performance of your new stores. Hi, Victor. It's Philippe. Thank you for your question. Yes, we had an improvement for sure in the company leverage in line with what we've announced to the market. This was a decision that we made with shareholders and the board. So this was our focus. We will continue. to reduce our leverage and also we expect the interest rate in Brazil to come down, which will help the company as a whole. About our closing of 2026, we'll continue all operating cash generation, all improvements we may have with working capital will be channeled to deleveraging the company. So we will continue to do that. We want to reduce the leverage. It's not a guidance specifically, but the expectation is to continue to reduce leverage. You asked another question about receivables financing. Look, we've obtained very interesting negotiations. You know, the cost of our credit card receivables loans or loans secured by our credit card receivables has been very favorable. So we've been working to further reduce the spread of our debentures. And if that does not happen, so then the idea is for us to continue to try and obtain good negotiations to obtain loans secured by our receivables, provided that we get attractive rates. So that's what we will continue to do. And the other question I think Odina will answer. Hello, Victor. Thank you for your question. that was an excellent question also because after we took on the management of cvc we have opened more than 450 new stores so the performance of these new stores is something we track daily well i look at that weekly But in details, you know, state by state of Brazil, kind of store, you know, the different formats. And, of course, our performance teams look at that every day. Now, these 450 new store openings, I mean, remember that most of these new stores, they are not in capital cities. They are in small and medium cities. in medium-sized cities or towns. So we're not cannibalizing. We're not opening stores where we already have five, as is the case of Moema neighborhood in Sao Paulo City. So we're opening stores in small and medium-sized towns with a very low CAPEX in this format and very low OPEX. I mean, these new stores, they cost between 50 and 70,000 BRLs. mean for the franchisee so they invested very little capital or if they needed loans then the leverage is not so big and basically this is a couple of franchisees plus one employee as we saw with the citric model in china you see so these uh 450 um new stores are split into two groups stores between zero and 12 months the first year which we call the nursery school and then from 20 to from 12 to 24 months which is the ramp up after that it goes into the group of same store sales now these two groups they're performing 90 percent 90 of the average performance the normal performance but if you consider that they may be paying interest on their leverage this was already expected but if you look at the cost of these stores it's very low and so the payback who will take perhaps one two three more months but i mean stores that are losing money, the performance compared to our projection would have to be below 55%. And we don't see that because today it is an average of 90%. So perhaps they're not making so much money as they could. or as we planned because basically because of economic macroeconomic conditions. But these stores, they are absolutely not losing money. No. So these stores, you know, the digital sales performance in these stores is much higher than stores located in capital cities. If you exclude maritime travel, that's Brazil aid. the stores in Brazil, in Brazil. So that's Brazil wide. The stores in small and medium sized towns, they grow five times faster in sales than stores located in capital cities, which again shows that these lower cost format stores using the digital sales model with a low capex, with a low OPEX in small and medium towns, This is a winning strategy for us and for the franchisees. Thank you. Thank you for the answers. Our next question comes from Wellington Santana from the Bank of America. Wellington, your microphone's been enabled. Hello, I'm Rene Godin. I'm Rene Filippi. Thank you for taking our questions. I have two questions on my side. First, focusing on B2C in Brazil, can you tell us the main headwinds you are facing in terms of consumption and competition? That would be interesting for us. And what strategies of mitigation would you have, you know, for these two points? And again, about your pilot project you've announced this year. What is the performance? Thank you. Well, thanks for the question, Wellington. I think, I mean, what I see happening, in fact, the domestic market is performing well in line with the capacity we have for domestic travel. International, we're gaining share in relation to the overall market capacity, but maritime is still a challenge. As we mentioned in the last conference call, and the same thing will continue in Q4 and possibly in Q1, 2026, because now you cannot change. you know, this 30% capacity reduction that we had in maritime travel for the next season, the summer season. Excluding maritime travel, we've had an excellent growth both in domestic and international travel. International, there's more capacity of partner companies for next year, you know, partner airlines. We have redesigned our international operations with a new director, Renata. She has more than 25 years of experience in the international market as one of the main executives in negotiations for hospitality. on the international market so she will help us improve the competitiveness of our international products for 2026 and in the domestic market we have more blockings also we have a new director of activities which we did not have before and i believe that business front can help bring a significant portion of sales. So these are, you know, trends for services, other partners that we sell very little or tickets for different events. And so because the take rate is very interesting. So we're taking initiative in this sense. The major stressor this year is maritime travel because, you know, the other units are performing in line to what we expected and gaining share. But yesterday I had lunch with the world president of MSC Maritime Liner and also the director of the company in Brazil and the whole local team of MSC. And they have already ensured we will have one more cruise ship for next year. So that will grow capacity by 10%. Now Costa, maritime liner we're still negotiating with them but they will probably also increase capacity for next year and there are three other maritime companies interested in beginning operations in brazil not through chartering by cvc cvc will not charter these uh cruise ships but If a few players reduce capacity, maybe other international players are interested in investing and starting operations in Brazil. And CVC accounts for one third of all maritime sales in Brazil. So of course, we can also help newcomers to the Brazilian market. Only two maritime operators is not perhaps enough for Brazil. So And then maybe we have room for another player. But again, as I said, CVC will not be chartering cruise ships. But we believe we will certainly have more capacity in the next season, more than in this season of maritime travel. Now consultants, I mean, we are now concluding the business plan. We believe it's going to begin next year. We have already presented that to the franchisee network, to the master franchisee. They are really excited. Let me give you an example. We looked at the whole of Brazil and we have data from 4,000 municipalities below 15,000 inhabitants. Look at Sorriso municipality in the state of Mato Grosso. Our stores there, 84% of the customers live in Sorriso. However, there are a number of small towns around Sorriso. So then we can have a consultant in each one of these villages. For example, Feliz Natal. This is a small town very close to Sorriso and we don't sell very much there. Why? Because they buy from independent travel agents who live locally and so they don't buy from Sorriso store. even though we have the digital sales model. That's why we are thinking about having these consultants. And we already have the numbers. So in these, you know, 4,000 small towns that have fewer than 15,000 inhabitants, our sales penetration is still low. So there will be value in having these consultants. 12 master franchisees applied to participate in the pilot project i believe it will begin early next year and i think it has a potential to add value to cvc that's great thank you our next question is on chat congratulations for your performance this quarter growing confirmed bookings and growing the EBITDA margin by 34.6%. Now, the pressure on take rate that is now 0.8% lower with B2B growing faster than B2C, what do you expect in terms of profitability in the next quarters? do you think you can recover the take rate and recover margin with digitalization initiatives? Considering the new level of leverage 0.5 times and your BBB rating with a positive outlook, then what do you expect in terms of capital allocation in the future? Can we expect more investment in technology and international expansion, or will the company continue to prioritize deleveraging and financial efficiency? Hi, thank you for the question. I have a lot of information about this. Look, we will continue. in the next quarters, we will continue to see a sales mix change with B2B growing faster than B2C. But our competitor, our digital competitor that was acquired recently and Expedia now recently said exactly the same thing. So across the board, all travel companies in the world that work with these two divisions, B2B is growing much faster than B2C. widespread on the market. So I believe we will continue to see this kind of pressure changing our sales mix. Now, gaining operating efficiency to recover margin. So then I will break our digitalization initiatives dash operating gains in three blocks. So everything happening in IT. Today we have two important initiatives with CET. I think you probably know CET from Campinas. They did all the digital transformation of a number of companies, including Itaú Bank. We have two large projects with them. Now concluding, now in the last week of the IT assessment, looking at the whole organizational structure. So we hired three new directors. That was not a replacement. These are three additional directors, one coming from 20 years of Itaú, the other one from Door Network. and the other one from Patria. So who had also a long career at the United Health Group. So these three directors will bring lots of experience and with also lots of experience with MNA. Piling up systems that have to be simplified later on. But anyway, CVC is also working to improve and to modernize project management and we have a number of initiatives for next year so that We have a more lean production with more IT initiatives. Today we have more than 200 IT initiatives that will have to fit our CAPEX and our OPEX. So that will bring efficiency gains to CVC. The second project we have with CET is the digital CCO, which is our post sales activities. When we took on the management of CVC, Two years ago, we only had 100 employees and the lowest NPS in the travel industry in Brazil, measured by Heklamyaki. Today, CCO has 550 employees, and we are the only company holding an RA1000 CEO, the highest NPS in the industry. This was great work, you know, improving quality, reducing cost. And we hired CET to digitalize and implement AI, artificial intelligence, in most of our processes that can be automated, of course, in our CCO, in our post sales. So that that will also bring cost gains, cost savings for us. The second block of IT initiatives is using artificial intelligence in Fidgetal, both in SDR, that is when we receive the lead before we send the lead to the store. So we look at the customer, we look at the credit scoring, we prepare that lead before we send it to the store. And then, well, sales co-pilot, where AI together with a human salesperson will help find the best options, you know, of destination package, flights, hotels, and also financing options. And the third major initiative in technology is training our digital team. So finally, now we have concluded the training. We now have the whole team. So we have the director who came from Magalu department store, Rafa Baga, who takes care of digital plus digital and three executive managers. one dealing with CRM, e-commerce and growth. So I believe that in the next few years, this will also bring, this was also bear fruit for us, for CVC. So let me remind you that if you have a question, you can click on raise hand or send your question in writing on chat. Let me go back to the second part of the question. So thank you. That is about leverage and capital allocation. As Godinho mentioned, we're very much focused in technology, innovation, growth, but We continue, I mean, it's still very relevant for us and it will remain relevant, you know, because we want to deleverage the company. We want to reduce our leverage, so we're making the investments we have to make. Our Capex level goes all to technology to support these initiatives that Godinho just described, but our focus remains to be, you know, reducing the leverage. I believe we can still continue to do that in the next quarters. So, yes, we will continue in the same process of reducing leverage. Thank you. Our next question is in writing on chat, considering the impact of lower maritime travel sales, what about regional sales in Brazil? Well, that's good. Thank you for the question. I think we've already answered the small and medium towns is growing five times faster than capital city sales, basically because of new store openings, but also because we know that the presence of our franchisees, you know, our forms of financing, the CVC brand, our service, our level of service, that makes a big difference in small and medium towns. And that's very clear in the numbers. Now, When you look at origination, the southeast of Brazil is growing strong. The south of Brazil is growing also strong. The north and the northeast are growing high single digit. In the southeast and in the south, we are growing double digit, excluding maritime. The only region that is not growing sales is the center west region. And for two reasons. One, because of Azul decrease in terms of flights to Mato Grosso, Mato Grosso do Sul. I mean, because Azul was strong in that region and also the agriculture had a difficult performance had a challenging performance this year so that's why the center west region is not really growing so that's it about the regional growth our next question comes from victor rogatti from itaubi Victor, you can already begin. Your microphone's been enabled. Hello, Godinho Filipe. Thank you for taking my questions. Three on my side. Three, a follow-up on your comment about excluding maritime. Is that growth consolidated with new store openings or it's only same store concept? What is the percentage for marketing in terms of the revenue for the next quarters? And thinking about working capital in Brazil, what do you expect? I mean, maybe with B2C growing less than B2B, so what can we say about working capital? Can working capital improve its performance because of the sales mix in the next few quarters? Hey, Victor, this is Godinho. Thank you for your question. Look, growth, I mean, this is consolidated. All the numbers that I mentioned are consolidated. Same store sales growth was a bit negative. But when we exclude maritime, then it's 2% positive. Overall, I think it's 2% negative. 1% negative this quarter. But, you know, excluding maritime, it's 2% positive. New store openings will keep the guidance of 200 stores in Brazil and Argentina, even in a challenging scenario. Because we changed, you know, the CAPEX and the OPEX, for the stores and because of the high number of leads, there's a lot of interest in opening stores, especially in small and medium towns where we don't have a presence. I mean, new store openings in Moema neighborhood in Sao Paulo, we don't really have franchisees interested and we are not interested even. But in small and medium towns, we've mapped 2,000 potential stores in towns with less than 15,000 inhabitants. In some cases, we even chose a location. I mean, we had a level of 300 stores, so now 200 stores. Obviously, next year, I believe that we will open fewer new stores. The profile has changed also, I mean, If you look at the current profile and new franchisees, because the first 24, most of them were existing franchisees who were reinvesting in their business. But now these 200 new store openings this year, it's basically new franchisees. joining our business. And that's good. That's good, you know, because we don't want to have franchisees with more than two or three stores. We want the presence of the owner. We want the regional knowledge, the friendships of the owner at the store. We believe this is key for a successful store. So you have a new franchisee. He has one store. So new franchisees, you know, if you already have a store, then you open the second and third store. You need a manager. You will not have the owner all the time at the store. And so it's good to have new franchisees. I think 50% of the 200 new store openings are new franchisees. And these guys, you know, of course, there is a learning curve. It takes a while. But the focus of these guys is there in their store. It's usually a couple of franchisees and one employee. And the rental of these new stores is less than 1,000 BRLs. So the OPEX is low, the CAPEX is low, very much in line with this format of the trip.com stores. Trip.com is the largest travel agency in Asia. It's a 40 billion company in the Hong Kong for an exchange with sales of 70 billion US dollars. And they're vertical of tourism because they have a super app. And so their tourist travel, they have 6,000 travel agency stores. And half of them opened after the corona pandemic. I spent two weeks in China and for two days I was visiting stores opened less than two years before in Shanghai. And it's exactly the same model that we're using in small and medium towns. Low capex, low OPEX, and lots of digital sales.

Hello, that's Felipe.

The other two questions about marketing expenses. We believe, I mean, we'll continue as we've been doing in the last few quarters. So marketing expense, specifically as a function of sales, it will grow a bit faster than the company top line because we believe we can still gain shares. So we'll be growing 15, 20% a year. When we look at sales expense as a whole, including marketing, we will continue at the same ratio between 1.8 and 2% of sales, you know, confirmed bookings. So this is our target and it will continue in the next few quarters. And that was what we delivered this year. Now, working capital in Brazil, you mentioned B2C growing slower than B2B. Yes, we expect an improvement. Actually, this quarter, on page 14 of the press release, we bring more information about working capital. We believe it will improve, you know, after... um after q4 last year we began to see a recovery an improvement and that will continue not only because of the sales mix but also because of a few initiatives we have so that we will continue negotiations with recommended and preferred hotels also negotiations with a few of our customers you know b2b customers who had more time to pay And now we were able to reduce that time. So, you know, adding up all of these initiatives, the idea is for us to release more working capital. So, yes, we expect an improvement in the next quarters. Thank you. Thank you, Victor. Thank you, Felipe. Thank you, Godinho. The Q&A session is now closed. We'll now hand it over to Mr. Fabio Godinho for his final comments. Thank you again. Thank you again for your time, for the time you've spent here with us. This was another quarter of clear progress in sales in Argentina, growing strong. B2B, well, B2B, you know, the numbers talk by themselves with sales growing 23%. It means our strategy is quite assertive in our B2B units. So the restructuring has taken time, I know, but now we are bearing fruit. B2C, everyone knows, I am not going to repeat what we have already said. you know, about the 15% interest rate, high household debt in Brazil. We begin to see delinquency of payments and, you know, also the reduction of 30% in maritime travel. The numbers are not exactly what we expected. However, when we look at each unit, we grow 16% in the number of passengers in Q3. with SK growing 11. So I mean, that's good news. 17% on domestic coupled to the demand, which is positive because domestic airlines are adding capacity. And we also see price increases, price increases in Q3. So in general terms, We are aligned in terms of working capital management and we saw a huge reduction in the company debt. Remember that when we took on the management, the debt was eight times the EBITDA. in terms of leverage. Now we are at 0.5 times, I mean. But if we include debentures plus receivables, then it's 1.8 times. This is the same level of debt of LATAM. and they had to go to chapter 11. We did not. I mean, if you look at Azul, they're now trying to conclude their chapter 11, even after all the haircut with bold actions, there are now 2.5 times, you know, their leverage. Now we, did not have to do any disruptive movements, no delinquency, and we're now at 1.8 in terms of leverage. So this was hard work, but we now see the good results for the company. And as the interest rate is reduced, again, that will bring a positive effect and free cash generation for the company shareholders so again thank you have a great day and see you next time thank you cvc corp earnings conference call is now closed thank you all for being with us have a great day