Telefonica Brasil S.A.

Good morning, ladies and gentlemen. Welcome to Vivo's second quarter 2024 earnings call. This conference is being recorded and the replay will be available at the company's website at ri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese. To access, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, select Mute Original Audio. Para acessar nossa conferência em português, clique no ícone do globo ao lado inferior direito da sua tela zoom e selecione a opção Portuguese Room. Ao acessar a nova sala, certifique-se de mutar o áudio original. We would like to inform that all attendees will only be listening the conference during the presentation, and then we will start the question and answer section when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry, and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference we have Mr. Christian Gebara, CEO of the company, Mr. Davi Malcolm, CFO and Investor Relations Officer, and Mr. João Pedro Soares Carneiro, IR Director. Now, I'll turn the conference over to Mr. João Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

Good morning, everyone, and welcome to Vivo's second quarter 2024 earnings call. Today, our CEO, Christian Jabada, will walk us through Vivo's performance in connectivity and digital services by business segment, B2C and B2B, as well as present our ESG advances. Then our CFO, David Melcon, will give more color on cost and CapEx management, free cash flow generation, followed by an update on shareholder remuneration for 2024. With that, let me turn the call over to Christian.

Thank you, Jean. Good morning, everyone. And thank you all for joining us today. We had another solid performance in the second quarter of 2024 with our main indicators such as total revenue and EBITDA growing higher than last quarter and is still well above inflation. Our customer base expanded in our main products. Postpaid access were up 7.2% and homes connected with FTTH grew double digit once again by 12.7%. In addition, Our total mobile access broke the 100 million mark, reinforcing FIBO's commitment with our purpose of digitalize to bring closer. Total revenues increased by 7.4%, mainly driven by mobile service revenues that were up 8.8% this quarter. Our robust top-line performance flowed down to EBITDA, which expanded 7.3% year-over-year in the quarter. By combining a strong EBITDA with capex-intensive reduction, operating cash flow totaled R$6.5 billion up to June, with margins reaching the mid-20s level, while free cash flow generation reached R$5.5 billion, representing more than 20% of the total revenues. Moreover, our net income expanded 8.2% over the year in the period, enhancing our profitability. These strong results reaffirm Vivo's solid position to continue delivering sustainable growth and returns while committing to maintain a high shareholder remuneration. On slide 4, we can see in more detail our consistent revenue expansion. Mobile service revenues that represented 65% of total revenue in the quarter grew at a fast pace due to solid commercial operating performance. The 3.9% fixed revenue growth was the highest since 2015, driven by a sequential improvement in FTTH performance with a 17.1% expansion and by an enhanced performance of the B2B segment. In combination with our broad offering of digital services, our leadership in fiber connection for homes and businesses makes it clear that we are on the right path for providing our top-notch services. This solid performance derives from our best-in-class value proposition for both B2C and B2B customers, combining connectivity with the broadest portfolio of services beyond the core. In Q2 2024, B2B digital services, summed with B2C new businesses, represented 9.9% of Vivo's total revenues, up 1.2 percentage points year-over-year, confirming the trend seen so far of de-escalating significance. Turning to slide five, we highlight the main levers of our ongoing growth in mobile, which basically consists in an outstanding combination of lower churn and higher ARPU. We now have 100.9 million mobile access, and the post-pay share in our customer mix continues to grow as this base expanded by an impressive 7.2% rate year-over-year. leading the segment to represent 63.4% of our total access by the end of June 2024. As Vivo is a unique position to meet customers' ever-growing needs for connectivity, we see them staying longer and spending more with us, resulting, for example, in increased upselling activity, both from prepaid to hybrid and from hybrid to pure postpaid. As such, our churn in postpaid remains under 1% mark, while we increased mobile ARPU by 6.3% year-over-year, reaching its highest level since 2019. Regarding our fiber operation, in June, we reached 27.3 million homes passed with Vivos FTTH, up 10.7% year-over-year, getting closer to our target of covering 29 million premises by year-end. Even though our footprint expansion remains accelerated, we have been able to increase our homes connected as a faster clip, up 12.7% to 6.5 million users after adding 199,000 new access during second quarter 2024, making it our best quarter since 2022. Besides spending up our customer base growth, we are also accelerating our ARPO expansion. FTTH ARPO reached R$90.9, growing 4% from last year's second quarter. In addition, Vivo Total, our convergent offer that combines fiber and mobile in a single plan, maintains its excellent performance. In June, we reached a total of 1.8 million fiber customers on Vivo total, more than doubling the number of users year over year, as 85% of our new fiber sales at our stores are being done through this plan. VivoTotal brings benefits both to our fiber business, as the FTTA churn is one percentage point lower than what we have on standalone fiber, and to our mobile business, as we have seen migrations of hybrid customers to VivoTotal offers soar 90% in an early basis. Thus, we are in a privileged position to reap the benefits of convergence as the only player that can offer a combined fiber and mobile plan on a nationwide basis. On slide seven, we can see the steady evolution of our B2C revenues in the last 12 months that represented around 74% of Vivo's top line. B2C revenue grew almost double the inflation in the period because of our second-to-none connectivity that is being complemented by the advance of our new business portfolio. Revenues coming from these services summed up 1.5 billion reais in the last 12 months, up 35% year-over-year and representing 2.8% of our total results. This quarter, we are including information on health and wellness vertical, represented by Vale South Sempre and Atma. our meditation and mindfulness app. Over the last 12 months, health and wellness revenues amounted to 37 million reais, backed by a solid performance of Vale Saúde, which currently has 321,000 subscriptions with growing usage rates. We also continue to develop the existing vertical and such, and as such, we just launched two new financial services products. PIX Parcelado, which allows our customers to make payments in installments using PIX, and a secured credit product linked to the funds users can withdraw from their FGTS on an annual basis called SACI Anniversario. Moving to slide 8, we detail the B2B performance with revenues up 7% year-over-year. The result was driven by the complete portfolio of digital services we offer to our clients that generated 3.6 billion reais in revenues over the last 12 months, up 19% in a year to already represent 32% of our B2B business and almost 7% of Vivo's top line. In the second quarter of the year, we reinforced our leadership in B2B by constantly bringing innovation, such as customized private network solutions for some of the most relevant companies of Brazil, as well as being a strong provider of agribusiness solutions. To boost our portfolio and reinforce our team and operations in digital services, we acquired IPNet, a company that specializes in leading company cloud transformation by implementing solutions from Google, having generated R$ 218 million in revenues last year, up 35% year-over-year. Regarding the ESG agenda, we have some important messages to share with you with the purpose to develop an increasingly more sustainable operation, and we anticipate by five years our net zero target. The company intends to reach zero net emissions by 2035, a challenge considered unprecedented for large companies in the sector. As a contribution to the circular economy, Vivo plans to considerably increase the volume of accumulated electronic waste collected from consumers going forward, collecting an additional 225 tons by the end of 2035. To reinforce our diversity pillar, our target for 2035 is to have women occupying 40% of senior leadership roles and 45% in overall leadership. The company also intends to reach 40% Black people in leadership positions and 45% Black people in the general workforce. In social, we had the 25th anniversary of Telefonica Vivo Foundation always keeping its purpose of educate to transform, digitalize to bring closer. With our latest volunteer day mobilizing more than 10,000 employees and their families benefiting over 40,000 people. During the quarter, Telefónica Brasil received several recognitions related to ESG, of which we highlight the best in telecommunications technologies and media, a category in the 2024 ESG Awards by Izermi Magazine. Now, Davi will comment on our financial performance.