Ambev S.A.

Good morning, good afternoon, and thank you for waiting. We would like to welcome everyone to Ambev's 2024 Fourth Quarter Results Conference Call. Today with us we have Mr. Carlos Lisboa, Ambev's CEO, and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br, as well as through the webcast link of this call. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After Embev's remarks are completed, there will be a Q&A section when we kindly ask that each participating sell-side analyst asks only one question. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of MBEV's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of MBEV and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with 2023 fourth quarter results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of UMBEV's normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, operating profit, and EBITDA on a fully reported basis in the earnings release. Now, I will turn the conference over to Mr. Carlos Lisboa. Mr. Lisboa, you may begin your conference.

Thank you for joining our fourth quarter and full year 2024 earnings call. Today marks my first earnings call as CEO of Ambev, and it is a pleasure to connect with you. Returning to my home at Ambev on its 25th anniversary and lead its amazing people is a dream come true. This is the place where I grew as a professional and over the years has shaped who I am as a person. Dreaming big, having an ownership mentality and not taking shortcuts will always be pillars for everything I do. Stepping into this role made me realize that a lot has changed since I left Brazil, and there is plenty to learn from new and familiar colleagues. At the same time, I bring 32 years of experience with the company. Throughout this time, I have had the privilege of leading marketing functions at Ambev and also global brands at ABI. I also manage businesses in more developed markets like Canada, as well as in emerging markets in Latin America South and more recently in middle America zones, the largest zone for ABI. As I embark on this new and exciting chapter of my career, I am confident we can shape a bright future for our company. I'm glad today Ambev is stronger than it was five years ago, thanks to Jean-Gilles Satt's leadership and the team. Today, we have a unique portfolio of domestic and global brands that hold significant relevance for our consumers in each of our markets, positioning us to lead the category into the future. We also became a digital company, with over 88% of our gross revenues transacted through Biz, our B2B platform. Our digital transformation has emerged as a key enabler in our evolution into an even more customer and consumer-led organization, enhancing our effectiveness in meeting their needs. Finally, over the past five years, Consolidated EBITDA grew by 37% and generated nearly R$65 billion in free cash flow to equity, while investing approximately R$30 billion in capex and R$33 billion in sales and marketing. N24 played an important role in this journey. First, we maintained top-line momentum. the beer reputation remains strong as the most relevant category within alcoholic beverages, having gained or maintained share of throat in the majority of our top 10 markets. In those markets, beer currently has aggregated share of throat of over 60%. We remain BEA leaders in eight of our top 10 markets, continue to develop the category, not only by offering loved brands, but also bringing innovative liquids and new packaging solutions to address multiple consumer needs and consumption occasions. As a result, our volumes, excluding Argentina, grew by 1.4%, with our mega brands increasing by 7.6% and improving brand health in most of our markets. Our digital initiatives continue to progress. Biz was live in eight of our top 10 markets by the end of the year and achieved 1.3 million monthly active buyers, an increase of 14% versus last year. As for DTC, Z Delivery in Brazil fulfilled over 66 million orders, 10% higher than in 2023, providing 90 million consumers with the convenience of having cold beer and other marketplace products quickly delivered right to their homes. Our top-line performance and digital transformation coupled with a disciplined approach to our cost and expense management led us to a bit of growth with margin expansion in all our business units. delivering a double-digit consolidated EBITDA growth with gross and EBITDA margin expansion for the second consecutive year. On top of that, we generated nearly R$18 billion of free cash flow to equity, a 37% improvement versus last year. In terms of capital allocation, we have executed approximately 45% of our current share buyback program as of today, and also completed the payment of IOC and dividend payout approved in 2024. Moreover, yesterday, our board of directors approved the distribution of intermediary dividends of around R$ 2 billion to be paid in April. Now, I would like to share the commercial highlights for the year in our main markets. In Brazil, beer industry remained resilient, growing by low single digits in the year, even with a decline in Q4, mostly driven by bad weather, which impacted key beer consumption occasions. Our full year volumes increased by 0.6%, driven by market share gains, according to our estimate. Above-core brands grew by low teens, led by Corona, Spaten, and Budweiser, while core brands dropped by low single digits as Brahman Antarctica growth was offset by the decline of Skoll, which is a priority for us in 2025. Furthermore, we continue to lead non-alcohol beer segment, growing in the 20s, led by Corona Zero and Budweiser Zero. Still in Brazil, NAB volumes rose by 4.1%, led by our focus on non-sugar CSD, sports, and energy drinks. Guaraná Antarctica grew volumes by high single digits, driven by Guaraná Zero, and reached over 1 million customers for the first time in history, supported by bees. In Argentina, the overall consumer environment remained challenging throughout the year, with beer industry down in low 20s. However, our continued work to be better prepared for the future led to a stable market share, according to our estimates, while our mega brands improved brand health. Moving to Dominican Republic, volumes grew by mid-single digits, led by the president family of brands, which achieved all-time high volumes and drove gains in the brand health of our mega brands. Moreover, we estimate to have gained market share in the year. And lastly, in Canada, our mega brands grew volume by low single digits, led by Corona and Michelob Ultra, while also improving brand health. Total volumes declined by 3.1% in the year, despite a positive performance in the fourth quarter. Now Lucas will cover our financial performance in more details.

Thanks Lisboa, and hello everyone. Going into 2024, we knew the year would be extremely challenging in terms of financial performance, given the significant tax headwinds in Brazil and the overall environment in Argentina. Nevertheless, we challenged ourselves to deliver another year of free cash flow growth in spite of this. And on balance, the team managed to deliver results that were better than expected. In terms of growth, EBITDA grew 11.4% organically, 12.1% ex-Argentina. Normalized profit declined by 2.3%. Here, EBITDA growth and the best net finance results since 2014 nearly offset a negative impact of almost R$3.5 billion in less tax deductibility in Brazil, which resulted in a step change in our effective tax rate. By the way, this year, nearly 60% of our net value added went to federal, state, and municipal taxes, up from roughly 53% last year. Meanwhile, cash flow from operating activities grew 5.6%, while free cash flow to equity increased 37%. Now, in terms of profitability, gross margin expanded 170 basis points organically, 190 basis points ex-Argentina, and EBITDA margin expanded 200 basis points organically, 220 basis points ex-Argentina. and return on invested capital declined to 18.6%, with better asset turnover more than offset by NOPAT margin contraction given the significant tax headwinds in Brazil. And finally, in terms of value creation, we managed to keep our return on invested capital above our weighted average cost of capital by 6 percentage points, and economic profit was positive despite a higher cost of capital. Now let me double-click on cash flows. Cash flow from operating activities totaled a little over 26 billion reais. Cash flow used in investing activities totaled approximately negative 5.5 billion reais. And cash flow from financing activities totaled about negative 10.4 billion reais. What's more, we ended 2024 with about R$29 billion in cash and cash equivalents, which gives us ample liquidity going forward. Which brings me to the topic of capital allocation. Thanks to our strong balance sheet and resilient cash flow generation, we will continue to reinvest in organic growth opportunities, which are plenty, invest behind attractive non-organic growth opportunities that may arise, and return excess cash to shareholders over time. In the last quarter of 2024, we announced approximately R$12.5 billion of excess cash to be returned to shareholders, an 8.7% increase when compared to our gross payout in 2023. About R$3.8 billion were in the form of IOC paid in December 2024, Nearly R$6.7 billion were in the form of dividends paid in January 2025. And roughly R$2 billion were in the form of share buybacks, out of which approximately R$800 million have been executed to date. In addition, consistent with the Board's decision to commence intermediary dividends, a dividend has been declared totaling approximately R$2 billion to be paid in April. Turning to 2025, we will continue to focus on optimizing our business by managing and allocating resources diligently and in a smart way. Moreover, our ambition is to stay on the margin expansion track despite the well-known cost headwinds, particularly in Brazil, given the depreciation of the Brazilian real and increase of aluminum prices. Assuming current FX and commodity prices, we expect our cash COX per hectolitre in Brazil beer, excluding non-AMBEV marketplace products, to grow between 5.5% and 8.5% in 2025. To overcome this challenge, we will once again rely on our strict financial discipline in terms of costs and expenses, but revenue management will also play an important role. In 2024, although our price to retailers and mix were ahead of inflation, our overall net revenue per hectolitre performance was negatively impacted by higher state VAT taxable base, which should be less of a factor in 2025. It's not an easy task, but the team is once again up for the challenge. Before handing it back to Lisboa, as you know, this is my last conference call. After five years in the role and 20 years between AMBEV and AB-AMBEV, it's time for a break and it's time for me to spend more time with my family. So I just wanted to take a moment to give thanks. Thanks to Mariana, my wife, and our three daughters for allowing me to go all in over all these years. Thanks to the teams I had the privilege of leading and learning from, especially my team as CFO for having my back as well. Thanks to all of those who inspired me, bet on me, challenged me, and gave me feedback over the years. And thanks to the investment community for your trust, your questions, provocations, and your feedback during our interactions. I truly learned a lot. That's it for me. Lisboa, over to you.