Ambev S.A.

Good afternoon and thank you for waiting. We would like to welcome everyone to Ambev's second quarter 2025 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, ri.ambev.com.br, as well as through the webcast link. We would like to inform you that this event is being recorded and all participants will be in the listen-only mode during the company's presentation. After Mbev's remarks are completed, there will be a Q&A session 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 Unbev'd 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 second quarter 2024 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 will turn the conference over to Mr. Carlos Lisboa. Mr. Lisboa, you may begin your conference.

Good afternoon, everyone. Thank you for joining our second quarter 2025 earnings call. It is a pleasure to be here with you today. On our last call, I highlighted that Q2 would be a decisive moment, almost like a transition quarter, as we prepare our business to continue to deliver another year of growth with value creation. And I'm glad that our brands demonstrated their strength and supported the results to achieve this quarter, positioning us well for the remainder of the year. given the anticipated acceleration in costs. As leaders in our category, I am confident that we made the right decisions for our business, executing with discipline our growth strategy with special focus on revenue and cost management. This drove a high single-digit organic EBITDA increase with 110 base points of margin expansion, despite soft industry volumes in several markets, mostly due to adverse weather conditions. But rather than focus on only one single quarter, like in soccer, halftime is a good moment to step back and assess our year-to-date performance. Therefore, important to highlight that our brands continue to improve equity. Topline grew mid-single digits. EBITDA grew double digits, with 160 base points of margin expansion. EPS grew 6.5%. And cash flow from operating activities remained resilient, growing 4% despite our working capital dynamics. Also, given our year-to-date performance, the Board of Directors has approved another intermediary dividend payout of R$ 2 billion, totaling R$ 6 billion declared this year. The foundation for our performance is based on the execution of our growth strategy. Starting on Pillar 1, Lead and Grow the Category. This quarter reinforced our confidence in the choices we made across our portfolio. Market share pressure linked to revenue management initiatives was softened by the strength of our brands built through a consistent execution in investments over the last years. And even in the face of software industries, the underlying performance of our strategic priorities continue to deliver solid results. Our premium and super-premium brands delivered low teens growth, expanding 7 out of top 10 markets of Unvev. The Balanced Choice portfolio maintains strong growth momentum, expanding in the low 20s, addressing evolving consumer preferences and needs. Activations on platforms like FIFA, Club, World Cup and Roland Garros yielded positive results. Our brands stood out as the most recognized in these events, generating engagement and strengthening brand equity. As for core segment, while brand equity remains stable, volumes decline, giving its highest sensitivity to industry environment and to our revenue management decisions. As for pillar two, digitize and monetize the ecosystem. B's marketplace continued its momentum, with GMV growing in the 90s and reaching an annualized amount of R$ 7.4 billion, led by partnerships such as Nestlé and L'Oreal. On the direct-to-consumer front, Z Delivery achieved a 7% increase in GMV, despite a soft industry environment, supported by a 11% rise in average order value. Additionally, our digital platforms are further strengthening our core business through better services to customers and also consumers, benefits that may not always be visible externally. Over the years, our customers have been spending more time with us. In Brazil, for instance, we now engage for nearly 40 minutes per week through bees and also in-person visits, five-fold of what we had pre-bees. This deeper and more frequent engagement has allowed us to set missions to our business developers to focus on sell-out rather than sell-in. And as a consequence, we continue to evolve on number of brands and SKUs per POC, growing 3.4% this year only, and to better manage price and promotions, driving efficiencies to our net revenue per activator. As a result of a higher customization and a more data-driven approach, NPS of customers continue to improve, achieving all-time high levels, close to 70 points this quarter. As for DTC, today e-commerce is the fastest growing channel for Ambev, and ZE is leading that growth. However, it is not just about growth, but about who is driving it. Gen Z LDA and millennials represent nearly 80% of ZE's buyers. well above their share in the population. Moreover, ZE has become a powerful engagement platform for the category lovers. According to our internal data, ZE consumers have a 47% higher frequency of beer consumption compared to the category average. Therefore, being close to them means being close to the trends, and that drives our portfolio forward. It is not a coincidence, but a consequence that both premium and balanced choice brands have a higher mix on the platform. For example, in H1, 14% of ZE users add at least one product from our balanced choice portfolio in their baskets. which grew almost twice as fast on Z compared to the total business and reached 3.6% of total platform sales. And on Pillar 3, optimize our business. Some of you have probably heard me saying this before. Muscles have memory. Our discipline focus on cost efficiency more than offset non-commodity cost inflation. representing a saving of over 500 million reais in the quarter. In SG&A, we offset the impact of lower scale from volumes in distribution expenses. Overall, these efforts were essential to achieve an operational leverage of 2.2 times in the quarter. Moving to the performance of our business units, Consistent with the first quarter, all BU's delivered a bit of growth and four of them expanded margins as we continue implementing our growth strategy with discipline across our footprint. In this quarter, our diversified geographic footprint contributed in a meaningful way. Now, let's look at the commercial highlights of our main markets. In Brazil beer, our volumes declined 9%, mostly driven by unfavorable weather with 65 colder days compared to last year. June represented over 60% of the quarter's volume impact, with critical regions for the category facing 2 to 4 degrees Celsius lower temperature versus last year. Even so, brand equity improved again in this quarter, softening the market share impact from our revenue management decisions to a low single-digit decline. Our premium and super-premium brands grew mid-teens, gaining market share in the segment. Above-core brands sustain almost 30% of our volumes and maintain our leadership in the segment. As for the core segment, it declined by low teens, giving its higher sensitivity to industry performance and to our revenue management decisions. And lastly, in our balanced choice portfolio, Stella Pure Gold more than doubled its volumes. Michelob Ultra grew over 60%, and non-alcoholic beers grew mid-teens. As a matter of fact, These brands represent around 2.5% of our volumes in H1, up from 1.4% last year. In Brazil net, volumes were slightly positive in the quarter, despite mid-teens decline in June. Top-line performance was driven by healthy net revenue per hectare as our brands showed resilience, gaining market share according to our estimates and the non-sugar portfolio growing above 30%. Moving to Argentina, volume performance presented another sequential improvement, with beer volumes returning to growth after 7 pours. despite underperforming the industry as a result of our revenue management choices. The premium segment grew double digits, while the health of our mega-brands improved once again. Overall, we continue posted on the recovery of the category in the country. In the Dominican Republic, the consumption environment presented a sequential improvement. In this environment, beer gained share of throat as our main brands remained healthy, with the President family gaining brand equity in the quarter. Lastly, in Canada, volumes grew 0.8%, more than offsetting a soft industry affected by colder temperatures. Our performance was mainly driven by 1. the Ontario industry that continues to grow given the route to market change that took place last year. Two, the non-alcoholic beer industry that expanded mid-teens, with our brands outperforming by growing mid-20s and now representing almost 5% of our volumes. And lastly, the execution for our strategy and investments behind our brands, resulting in the fastest growing beer brands in the country, with share of throat and market share gains according to our estimates. All in all, we delivered the best EBITDA growth for the second quarter in years. Now, let's move on to our financial performance. Florie, over to you.

Thank you, Lisboa, and hello, everyone. Today, I'll cover three topics. First, cost and expenses management. Second, net income performance. And third, cash flow generation. So, let's get started. As Lisboa mentioned, quarter two was a transition quarter. We were expecting cross pressures, especially in Brazil, and we chose to act, protecting margins by controlling what we can. That meant disciplined resource allocation, proactive cost management, and targeted SG&A initiatives. The execution of our strategy is already making a difference. Let me walk you through one example in cost of goods sold in Brazil. Effects and commodities account for approximately 45% of our cash cogs. Most of that is hedged, which means the impact was largely locked in before the start of the year. But the remaining 55% is where we can act. And that's exactly what we've done. We've been focused on curbing cost escalation where we have control. rationalizing our operations. In 2025 alone, we've reduced the number of SKUs by around 10%, eliminating low churn items, therefore increasing the productivity of our breweries and distribution centers. To put it simply, this SKU rationalization means fewer line changeovers at our breweries and better productivity, helping our cost performance in Brazil beer to be within our guidance for the full year. Before we move on to net income, I would like to remind everyone that in Argentina, our results under IFRS, including EBITDA, were significantly affected by the Argentinian peso devaluation of 12% in the quarter, with the currency impacts of the year-to-date being carried out in the second quarter. Now, moving on to net income and starting with net financial results. The increase in financial expenses continue to have the same drivers of the first quarter. One, effects carry costs in Brazil coming from the interest rate differential between Brazil and the U.S. Two, effects losses related to the dollar purchase in Bolivia. And three, a non-cash impact linked to depreciation of the BRL during the quarter from hard currency cash balances translation. And for income tax, our effective tax rate for the quarter was 18.4% compared to 28.6% in second quarter of 2024. The year-over-year decrease is mostly driven by, first, a non-recurrent event in the second quarter of 24 related to accrued withholding taxes over undistributed profits from LABA, coming from the depreciation of the BRL against the Canadian dollar during that period, in accordance with IAS 12 accounting standards. Second, the effect of income tax exemption over part of our state VAT government grants, following favorable court ruling obtained in the second half of last year. And lastly, a favorable country mix of earnings this quarter. On a year-to-date basis, our effective tax rate remains at the same level as prior year. In the quarter, the resilient operational performance and disciplined financial management led to a net income of R$2.8 billion, a 15% improvement versus last year. Last topic, cash flow generation. In our half-time review, cash flow from operating activities grew 4%, led by debita growth. In the quarter, our cash flow from operating activities reached R$3 billion, The 9.2% decline versus last year reflects the volume dynamic in the quarter, with lower sales tax payables partially offset by better receivables and inventories. Cash flow from investing activities was 1 billion reais negative, driven mainly by CapEx investments during the quarter, similar to the investment of last year. And cash flow from financing activities reached R$4 billion negative, primarily due to the payment of intermediary dividends in April, the repurchase of shares according to our buyback program, and Bolivia fees to purchase dollars that, as I mentioned, impacted the financial results. Before I hand it back to Lisboa, I would like to reinforce the message that we remain focused on delivering sustainable value creation to our shareholders through a diligent execution of our capital allocation priorities. Thank you for your time today. And back to you, Lisboa.