Ambev S.A.

Good afternoon and thank you for waiting. We would like to welcome everyone to Ambev's 2025 First Quarter Results Conference Call. Today with us we have Mr. Carlos Lisboa, Ambev's CEO, and Mr. Guilherme Fleury, CFO and Investor Relations Officer. As a reminder, this conference presentation is available for download on our website, ir.umbev.com.br, as well as through the webcast link. We would like to inform that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a Q&A section, during which 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 Ambev'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 2024 first 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 Unbev'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'll turn the conference over to Mr. Carlos Lisboa. Mr. Lisboa, you may begin your conference.

Good afternoon, everyone. Thank you for joining our first quarter 2025 earnings call. I'm truly delighted to be here with you today. This quarter was particularly significant for me. Although it's my second earnings call, it marked my first three months leading this organization. From the very beginning, we have focused on three key objectives that define my mission here. First, avoid disruptions. Second, maintain momentum. And third, build a stronger company. And I'm pleased to share that we kick off maintaining momentum and delivering a solid step towards making 2025 another successful year for Ambev. And this is why we had a good start to the year. Top line, remain resilient, rising by high single digits with a 0.7% volume growth achieving all-time high levels for our first quarter, and net revenue per hectare leader increasing by roughly 6%, supporting gross margin expansion of 150 base points. EBITDA grew by double digits with 180 base points margin expansion, and we delivered a vitrally flat net income despite a tough comparison given last year's tax one-off. Such results were driven by a consistent execution and performance across each pillar of our strategy. Regarding pillar one, lead and grow the category. Our volumes grew in half of our main markets, which represent almost 80% of our consolidated volumes, bolstered by carnival festivities at the beginning of March. Like beer, carnival is culturally relevant in several Latin American countries, especially in Brazil, enhancing our category's image by joining a national passion with one of the most anticipated celebrations of the year. The execution of the Carnival as a mega platform, combined with our efforts to bring more consumers into more beer occasions, resulted in, first, our core beer segment performing in line with or above the industry in most of our main markets, according to our estimates. Our above-core brands increasing volumes by high single digits. Three, our non-alcoholic beer brands improving volumes by mid-30s. And finally, our mega brands growing volumes by mid-single digits while gaining brand equity in eight of our top 10 markets. As for pillar two, digitize and monetize our ecosystem, Now that we became a digital-enabled company, we have been working to better meet our customers' and consumer demands, thus strengthening our core business while also building new growth engines. On the B2B front, we have been expanding our transactions via Bs, not only through an increase in the number of customers using the platform, but also by boosting the quantity of products sold. In the quarter, monthly active buyers rose by high single digit and SKU per POC ratio improved by low single digits versus last year. On the marketplace side, Our GMV grew by 60% with the number of customers purchasing known and bad products increasing by low teens. As for DTC Front, ZDeliver fulfilled nearly 17 million orders in the quarter, a 5% increase versus last year, enhancing our understanding of consumer behaviors. This enables us to address consumer needs such as affordability and convenience by offering the brand they love in the returnable glass bottle at home, evidenced by a higher RGB mix than we have in our total business, and a wider assortment of products and brands, especially from premium segment, which holds more weight in Z than we have in our total business. Furthermore, Z delivery has also been helping us develop new products. Here, our most recent innovation, Beats Red Mix, is a good example. It was developed based on consumer surveys regarding liquid and packaging, conducted through the platform, and has become the biggest launch among the Beats flavors, both on and off set. And in Pila 3, optimize our business. The synergy of our top-line performance, the digitalization of our business, and our disciplined approach to managing costs and expenses translated into the 10th consecutive quarter of consolidated beta growth together with margin expansion. Additionally, EBITDA growth led the generation of R$1.2 billion of cash flow from operating activities, an increase of 68% versus last year, as well as a slight EPS increase. Looking ahead, as indicated by our guidance for Brazil Beer Cash Cogs per hectolitre, we expect to face a significant FX and commodities pressure starting in Q2, which present an important challenge for us. Nonetheless, we will continue to pursue our ambition of expanding consolidated margins in the year. As we continue to consistently implement our growth strategy across our footprint, once again, most of our business units deliver a bit of growth and margins expansion in the quarter. Let's take a closer look in the commercial performance and highlights of our main markets. In Brazil, we delivered record volumes for our first quarter in both beer and NAB on top of a strong performance from last year. In beer, volumes remained resilient, increasing by 0.7% amid a more dynamic consumer environment. The activation of our brands resulted in the Carnival with the highest volume in our history. Our above core portfolio of brands, composed mainly by Corona, Stella Artois, Spaten, Original and Budweiser, represents roughly 30% of our volumes and holds the leadership of this segment. Our premium super premium brands grew in the 20s, while in the core plus Budweiser rose by high things. In the core segment, Brahma and Antarctica jointly increased volumes by mid single digits. On top of that, non-alcoholic beer volumes expanded by approximately 40%. As for net revenue per actuator, performance resulted from the timing of our price increase after Carnival later this year, coupled with a lower carryover from last year. Nevertheless, it grew by 2.5%, which was ahead of our anticipated COGS per hectare leader, driving a 260 base points improvement in our gross margin. Our revenue management decisions in the quarter put us in a good position for the year in the light of increasing cross pressures in the upcoming quarters. In Brazil NAB, double-digit top-line performance was driven by volume growth from non-sugar CSD and sport drinks, coupled with our revenue management initiatives. Volume rose by 3.2% with Guaraná Antarctica Zero and Pepsi Black growing by mid-20s and mid-30s, respectively. We also estimate to have gained market share within carbonated soft drinks. Moving to last, In Argentina, we continue to deliver sequential improvement in volumes led by beer business, as the overall consumer environment remains on a recovering track. The beer industry declined by low single digits in the quarter, and our market share remained virtually flat, according to our estimates, while our mega brands improved brand health. we are ready to lead and shape near future category growth in Argentina. Turning to CAC, in the Dominican Republic, while cycling our toughest comp from last year, volumes declined by mid-single digits, impacted by a softer macroeconomic environment, as well as a widened price relativity compared to other alcohol categories. We remain confident about the beer category health and our business fundamentals in the country. Lastly, in Canada, adverse weather conditions and easter phasing impacted industry volumes. However, we estimate to have gained beer market share in the quarter, with our mega brands rising volumes by low single digits, thanks to the performance of Michelob Ultra and Bush. Now, let's take a look at our financial performance in more detail. Following Luca's departure, I'm pleased to invite Guilherme Fleury, our new CFO and Investor Relations Officer. Fleury, welcome to the team. We are counting on you to lead our value creation journey. Over to you now.

Thank you, Lisboa. Hello and good afternoon, everyone. For those of you I haven't yet met, it's a pleasure to connect with you today. It's a true honor to become CFO of Ambev. Now, with the opportunity to help Lisboa and the team to lead this new chapter of our company. Before officially joining Ambev, I had already been working closely with the company for several years, having participated in important transactions dating back to the late 90s as an external advisor. Since joining the company nine years ago, I had the privilege of working in several positions and building deep relationships, both locally and globally. I started at Ambev as head of M&A, later serving as finance director of our Brazil NAB division, and then I spent the last six years at AB InBev, mostly as global VP of M&A and business development. I would also like to take a moment to thank Lucas Lira for his contributions over the past years. Now, turning to this quarter's performance, let me start by saying that we kick it off 2025 maintaining momentum. with solid operational and financial performance. So today, I'll focus on three things. First, capital allocation. Second, net income. And third, our cash flow generation. On capital allocation, yesterday, we announced another intermediate dividend of 2 billion reais to be paid in July, totaling R$ 4 billion in dividends already announced in 2025. This reinforces our commitment to returning cash to shareholders while maintaining financial flexibility. Our normalized net income in Q1 2025 totaled R$ 3.8 billion, flattish compared to last year. driven by strong EBITDA growth offset by net financial results and higher income taxes. Our net financial results totaled minus 856 million reais in Q1 2025, worsening by 450 million reais year on year, driven mainly by three effects. One, The appreciation of BRL during the quarter led to FX losses in BRL from hard currency cash balance translation. Two, cost to upstream cash from Argentina and Bolivia, which impacted the non-derivatives line. And three, in Brazil, the widening of interest rate differential between the SELIC and the Fed funds raised the carry cost on our FX hedging strategy. For further information, please refer to Note 22 of our Intermediary Financial Statements. Turning to taxes, our effective tax rate in the quarter reached 21.7% versus 15% in Q1 2024. This was primarily driven by a one-off benefit of R$215 million booked in the first quarter of last year. If we were to adjust for this one-off, normalized net income in the quarter would have grown by 6% year-on-year. Now, let me walk you through our cash flow statement. Cash flow from operating activities totaled R$1.2 billion in Q1 2025. a 68% increase year-on-year, primarily driven by EBITDA growth and lower cash taxes paid resulting from lower IOC in 2024. Regarding networking capital, despite receivables improving by R$ 626 million, Payables worsened by R$1 billion, mostly due to later parlay payments last year in Argentina. Cash flow from investing activities reached minus R$784 million, an improvement of 56% versus Q1 2024, primarily due to the impact of short-term investments performed last year. And CapEx reached R$ 828 million, approximately 18% lower year on year, reflecting our continued focus on disciplined capital deployment. Cash flow from financing activities totaled minus R$ 8.8 billion, driven mainly by R$ 6.6 billion in dividends paid in the first week of January and 1.2 billion reais in shares repurchased as part of our ongoing share buyback program, out of which we reached 65% by the end of the quarter. To summarize, we've started 2025 with momentum. We remain focused on delivering sustainable value creation to our shareholders through diligent execution of our capital allocation priorities. Thank you for your time today. I'm looking forward to connecting with you in person in the coming weeks. With that, let me hand it back to Lisboa.