Magazine Luiza U/Adr

Good morning, everyone. Thank you for waiting. Welcome to Magalu's conference call regarding its quarterly results. For those of you who need simultaneous translation, please click on the Interpretation button, the globe icon, at the bottom of your screen, and choose your preferred language, English or Portuguese. We inform that this event is being recorded and will be available on the company's IR website at ir.magazinelouisa.com.br where you can also find the earnings release and presentation in both Portuguese and English. The link to the presentation in English is also available in the chat. During the presentation, all participants will be in listen-only mode, and later, we will hold a Q&A session. To ask questions, click on the Q&A icon at the bottom of your screen and enter your name, company, and the language you speak. When you're announced, a prompt to activate your microphone will appear on the screen, and then you must enable your mic to proceed with your question. Questions received in writing will be answered later by the investor relations team. Now I would like to turn the floor over to Fredy Trajano, CEO of the company. Please, Fredy, the floor is yours. Good day, everyone. Thank you very much for attending our conference call referring to fourth quarter 24 in full year 2024. I am here once again with all of the executive committee of the company. Myself and all of the officers will be available to answer your questions after my presentation. I will be speaking as well as Roberto Bellissimo, our CFO, and then the Q&A. Before we specifically talk about the earnings, I would like to put things into context as part of our strategic cycle. In 2025, I will complete 10 years as CEO of the company, and we are completing and concluding our second strategic cycle. The first strategic cycle was digitalization from 2016 to 2020. I took the company with 10 billion GMV, 2 billion online. and our first mission my mission and of the exco was to digitalize the company in a world that was becoming more and more digital particularly e-commerce especially e-commerce of discretionary goods So that was our challenge at the company. So we had this cycle from 2016 to 2020 that was very successful. And the litmus test was that in 2020, in the pandemic year with 1300 brick and mortar stores closed, in that year, in 2020, we were able to grow 50%. We lost 50% of our business and still we were able to grow, showing that the company was digital and had completed its digitalization process. If we fast forward to date, Those $2 billion online became $46 billion of GMV. So that was a very significant growth. And it was a cycle that left a legacy for the company. We are a digital company. When the Magalu digitalization cycle was complete, and it was very much inspired, by the US experience in our trips to Silicon Valley and by US digital companies. And we found in China the inspiration to build an ecosystem. Initially, the first cycle was to digitalize the business. The second was to diversify our revenue streams and profit sources so that we would make our results less cyclical. We had digitalized Magalu, but even in the online business, a good part of the result came from the gross profit cycle. of purchasing and selling electronics and home appliances. We were highly dependent on 1P retail. It was multi-channel, but still we relied a lot on 1P retail of one specific category. In the second cycle, we were inspired by Chinese companies, Alibaba, was one, and we did strong work. We had a number of acquisitions. We diversified results. We added Netshoes, Kaboom, to the portfolio. We bought five logistics companies that became Megalog. We acquired one big fintech and other smaller payment processors that became Megaloopay. We had a number of movements. We launched Magalu Ads, Magalu Cloud. In other words, we had a number of movements to be able to post results even in negative high interest rate cycles, something we never managed in the past. I took over in 2016, and that was a time in 2015 we had had a hike in interest rates. And we had a negative result because interest rates were 7% hiking to 14% in 2015. So it was a hiking cycle of interest rates. And you can see in companies that operate in this sector, when there is high interest rates, a number of companies file for Chapter 11 or go to court reorganizations. And this is what happens. But we've been in this business for 65 years. We've lived through many economic cyclicalities, but I had a challenge with my team in this cycle of creating and consolidating the ecosystem, which was to make the results less cyclical, right? a litmus test in the digitalization cycle which was to grow our revenue even with the closed brick and mortar stores and this proved itself in the second cycle we have to be profitable even with high interest rates and this is exactly what we posted in the last quarter of 2024 and on the next slide you can see that the magalu ecosystem proved itself we posted a significant increase in EBITDA margin, and we had the fifth consecutive quarter of net income in a context of high interest rates. In the beginning of 2024, we had shown, actually, we had shown recovery of results in Q423, and we continued to post a positive net income. When we started 2024, our expectations were The Focus newsletter said that we would end the year with 9 and 9.5% interest rates. The Selic was not 9, it was 13. And the interest rates tend to continue at this level. But still in 2024, the company had positive results. we grew our ebita by forty per cent thirty nine per cent to be more precise we had our ebita standing at three billion which was a little higher than the consensus for our results in the beginning of the year We were able to reduce financial expenses in a year with increasing SILIC rates, and we had an adjusted net income of $277 million. The accounting net income was even higher, but adjusted net income x non-recurring events, $277 million. Again, rebuilding a result that was negative in 2023. It was a significant leap, unquestionable improvement, very consistent work of all of the departments of the company, all of our subsidiaries. All companies, Magalupe, Louisa, Cred, Kaboom, Netshoes, Magaluette, that is already contributing to the results. 3P, which improved a lot. its profitability. One peak that was able to recover all the default that we lost in 2023, which was a huge work. We lost five points in the margin, seven points in one peak of net shoes. We lost nine points of margin. So that was spectacular work of the company, we were totally focused to resume our profitability level, we always like to be profitable, we had come from two difficult years 2022 23 with negative results, and it was absolutely crucial to prove. the success of our cycle, and also to motivate our team to recover our results. And I would like to highlight generation of operational cash, 3 billion EBITDA converted into 3.1 billion of operating cash generation. Roberto Bellissimo is going to talk more about this. And I'd like to highlight two things. First, working capital. We had a very competent and efficient working capital management by Fabrizio. And this was also competent management by our subsidiaries, Netshoes, Kaboon, all of them with working capital control, inventory control. And I would like to highlight our work to monetize tax credits, which was one of the highlights of the year. This is complex work that involves the legal and operational departments of the company, as well as finance. So that was very good work of reducing and monetizing our tax credits, which were in our balance sheet. so this was very good work focused the work showing consistent results and a consistent operation and even with all of these achievements we gained practically two points in ebitda margin 5.8 to 7.8 i think it's very hard to see a retailer gain two percentage points in ebitda margin Even with all this effort to adjust the margins and the profitability, still the company grew. Still the company grew from 63 to 65 billion BRLs, a GMV of 65 billion, 46 billion BRLs in e-commerce. We were one of the most relevant players in Brazilian e-commerce. And here we would like to mention a highlight, the almost 20 billion sales from brick and mortar stores, almost 12% same store sales. We did close some stores in the end of 2023, but same store sales growth in the year was 12% in Q4, 8%. And I would like to highlight the competent work by our operational team led by Fabricio Garcia, who will be joining us in the Q&A. So we're living in a very good moment. We had a difficult moment for the brick and mortar stores, the physical stores in 2021. That was a hangover of the pandemic. We reported minus 18% same store sales. So minus 18% in Q3 2021. Never had we reported this negative number. And the market was questioning our strategy for physical stores, saying that brick and mortar stores were a thing of the past, that they were going to end. that they were an anchor for a future strategic problem for the company. But today, brick-and-mortar stores have proven to be not only profitable, but a fundamental channel in terms of online results. And I'll speak more about this. But this was very good work. We maintained our investments and we kept our field team motivated. An intact team continued to invest in technology to improve store processes, particularly store pick up and ship from store processes. As well as level of service, mobile cash out, fast cash out. We made a number of investments, changed the POS of the store. So we maintained investment in the physical stores, even when the market was skeptical regarding them. And we're reaping the fruits now. We'll continue to do so looking forward. Not just that, and this is the big news, not just for Magaluz format, but also we started a process, which I believe in the last year of the cycle is very symbolic, which is the opening of physical stores of the companies of the group. We had the Kaboom store opening last year. And this is the store that we opened next to our mega store on Tietê Marginal. It attracts thousands of shoppers a year and has been bringing great results for Kabuma. I know we replicated that just two weeks ago. Opening the first net shoe stores in 20 years. And we opened the store at the same location. We ended up occupying the whole building. And this is a net shoes outlet. It has proven to be an amazing success with huge checkout lines. We had to open a new parking lot. And this is proving the success of the previous cycle, which was based on multi-channel capabilities. We are 1B winners in Brazil because we have the option of store pickup and ship return, ship from store. And this is a differential of Magalu that we want to replicate for other brands of the group. And very soon, we're going to have an iconic location, Conjunto Nacional, the old store of Cultura Bookstore. We are going to have a space for the Magalu ecosystem with all of the brands, not just Netshoes and Kaboom, but also including Epoca Cosmeticos. In other words, we're very excited with this experience and we are convinced that it's going to be successful given the success of these two stores that we opened. This is a point of no return and will increase the number of physical stores of these brands of the group because multi-channel has always been and will continue to be Magaluz Differential and One Strategic Differential. No one knows how to operate brick and mortar stores like Megaloo. And in the brick and mortar stores environment, we have a competition which is much less fierce than what we see in the online world. I'd like to mention the online world. About the online world, I'd like to make some important highlights. We continue to lead in tickets above 1,000 PRLs and we are doing significant work to broaden our leadership we launched the magalu fulfillment in 2023 and we doubled its share i'll speak more about fulfillment in a minute we doubled its size last year and one of the differentials here is that it gives the possibility of seller stocking products with a higher cubic volume no other operation can do that we can do fulfillment of furniture of stoves refrigerators and so on and so forth so we have focused on gaining fulfillment market share and grow this business looking forward fulfillment is going to be an important part and i'd like to highlight some points regarding fulfillment we started in 2023 we launched it slightly after the other market options. But our idea regarding fulfillment was, like I said before, to replicate the multi-channel capability in fulfillment. So our fulfillment is multi-channel. Sellers stock their products exactly in the same DCs of our 1P. And consumers may choose to have the same possibilities of shipping when they buy from a fulfillment seller because they can for example have store pickup we had an increase from 12 to 24 percent of the 3p orders more than 4 000 sellers the level of service is 95 percent we have nine dc's and it is very hard to get authorization in each state to be able to operate and have this operation and make it work from the fiscal standpoint. We were able to increase from four to nine DCs last year. And I guess that the benefit of fulfillment is in addition to increasing conversion by two fold, and I'll speak more about this momentarily, it also help us in a focal point. Every year we have the theme of the year. Last year, the theme for Magalu was increasing level of service. We spoke about Magalu delights, Magalu enchants. And we had come from cycles where the year theme was operational simplification. In other words, integrating the acquired companies to our business. And that was very successful. We had one year which was profitability. We were also very successful. Last year, we wanted to increase our NPS. To a global benchmark level, we increased the corporate NPS of the company from 67 to 77. That's a level way higher than local operations. And a good part of these growth of 10 points in NPS came from 3P. We did very strong work. And of course, fulfillment contributed a lot to that. In 3P, NPS increased from 55 to 71%. practically 15 percentage points increase in the full year. And this helped the company improve the current NPS level. And the NPS of the stores is 83. So the more fulfillment increases its share in the total business of the company, the more this number will improve and we'll get to a corporate NPS above 80, which is very hard. So we did work which was not limited to fulfillment. We did a lot of work to facilitate cancellations by consumers, making it possible for them to cancel the purchase and return the product. They don't have to return the product through the postal system. We were able to disconnect sellers with a low reputation, offered new forms of payment. We improved level of service logistics. and the time to process refunds. So when we choose a theme for the year, we focus very much on that. And the result of this focus and of our team happens. And I'm sure that this will happen today, this year. I'll speak more about the theme of the year in a minute.

Another highlight that I'd like to talk about was the strategic partnership between Magalu and Alibaba that we talked about last year. It's a huge complexity issue. And complex because it's a huge company and the number of systems we have to work with. But to AliExpress, it is also complex. They have the same platform around the world pretty much. So to make adaptations locally specific for Brazil would involve a huge number of people. And we were able to do that on record time and launch it. So Magalu is selling our products on their channel very successfully. And we also have Chinese sellers through the choice line. Aliexpress's choice line are on our platform, expanding our, the diversification of our categories. And we see a lot of partnerships in things like logistics looking forward, but we're very satisfied to be able to put that on air and the evolution that we're seeing as well in this business. I'd like to note, and I'll turn the floor in a minute to Roberto, but for me, another two important points that greatly contributed to our profitability and that have the potential to continue contributing looking forward. And we don't think we've reached the maximum of our margin. We have the potential to increase it even further with our 46 billion GMV online. One is Magalu Ads. We had... an extremely productive year with a lot of deliveries from Magalu Ed's teams. Now with the leadership of Celia Goldstein that we brought in the beginning of last year, she leads a very high level team in the commercial side and the product teams. We also had and platform and product significant improvements in the algorithm, performance, usability of the UX, the beginning of the self-service model for large customers so they don't have to speak to someone in the group to run their ads, and we enhanced the display product, doubled the ads revenue compared to last year, increased by 15% the number of key account and the number of visits is very high, but there's still huge potential. It already contributes to that increase on EBITDA margin that we announced with the year's results. But I think the trend is, as a lot of these deliveries were in the second half of last year, this would still be expressive in coming years, especially this year now. I'd also like to point, and Beto will talk about this in more detail, but I must mention that the increase in the results of all of the operations under Magalu Pay's umbrella. It was Magalu Payment, but now it's Magalu Pay. We can't call it Magalu Bank anymore due to central bank's rules, but we had extraordinary results. Exceptional for Louisa Cradd with an ROE much higher than the market average. And Beto will talk about this on the fourth quarter. Even with capitalization, ROE being very high in the quarter. And the delinquency levels are at an all-time low. We received permission from the central bank to operate the financial institution that we're waiting for approval. We received it last month. the financial institution of Magalu Pay that will operate products that are not under Louisa Cred, such as CDC, especially direct-to-consumer credits at stores and the online operation as well that we announced last year. We had a very positive year for the acquiring of Magalu Pay. Our payment processing company, you saw the difference. It was a very positive year in terms of results. And Magalu Consortium, Consorcio Magalu as well, It was a very good year, and they all contributed greatly to that increase in two percentage points on our EBITDA of last year. One year of delinquency completely under control. There's no reason why we shouldn't accelerate more credit. So with the authorization of the central bank and the tax efficiency and the stake in CDC to the financial company, but we can expand credit as well through credit cards or CDC. delinquency levels have been very low for many quarters. So that confirms, again, that it is time for us to accelerate credit, and it will be one of the growth drivers looking forward. Always being very cautious, right? We always have that attention to this type of operation. Next slide, and I will turn the floor to Roberto to detail the financial results, and I'll talk a little bit about our perspectives for 2025 afterwards, and then open for questions. Thank you, Fred. Good morning, everyone, and thank you for attending our earnings conference call. I'll start by reinforcing the main highlights of the quarter. So, reinforcing the total sales of $18.4 billion in the quarter, a growth of 3%, a highlight being the brick-and-mortar stores with same-source sales of 8%, Again, reaching a gross margin above 30%, pretty much stable compared to the same quarter of last year, but a margin that is considerably high. We reached EBITDA in the quarter of nearly 850 million with a margin of 7.8%. Adjusted net income recurring of 139 million BRL. Again, the accounting... Net income, including non-recurring results, was $295 million in the quarter. In the EBITDA level, we did not have non-recurring expenses of any relevance. Most of that difference between the recurring net income and the accounting net income is in the line of income tax credits and social contribution tax in the subsidiaries and the companies that we acquired. And this quarter, we also had cash generation of $2.1 billion, very strong cash generation, ending the year with a total cash position of nearly $8 billion. So when we talk about the year overall, we sold $65 billion. Again, a growth of around 4%, with a special highlight to brick-and-mortar store, with same-store sales of 12%. Gross margin even higher at 30.6%. In the year overall, we expanded gross margin by 1.4 percentage point, which greatly contributed to this EBITDA of 3 billion, 7.8% margin and net income of 277 million adjusted net income for the year. Considering here the dilution of expenses, the improvement of LouisaCred's results and the reduction of financial expenses as well. And again, when we talk about the accounting net income, we got close to 450 million BRLs, including tax gains, especially in income taxes, social contributions again, and cash generation for the year, more than 3 billion BRLs. Ending the year at 8 billion in cash position plus receivables at the end of the year. Moving on, just to bring you more details about this quarter, our gross margin was virtually stable, varying 0.2 percentage points. In the fourth quarter of last year, we already had a very significant increase in gross margin. So the base was already more comparable. We had already concluded the pass-through of default and increased margins as a whole. But I highlight here the dilution of operating expenses, SG&A contributing with 0.3 percentage points. Again, we had noted this in the last quarter. And this quarter, again, we deliver operating expenses pretty much stable compared to the previous year, growing about 1%, even considering a bigger growth in sales and inflation. So that's a result of the whole company's work in managing operating expenses. And the highlight here is Louisa Cred contributing with 0.6 percentage points. In previous years, Louisa Cred closed or pulled our EBITDA margin down. And this year, it was outstanding, especially this quarter, contributing to the EBITDA margin, explaining or responding for most of this increase from 7.2 to 7.8% in EBITDA margin. When we look at the year overall, The improvement was in all lines. The increase of two percentage points includes gross margin, dilution of operating expenses, equity, Louisa Cred and everything else. So it was very consistent and complete results. On the next slide, we talk a little bit more about working capital. This again, highlighting the evolution of working capital in this last quarter. contributing 1 billion BRL to cash generation. Cash generation in the quarter was 2 billion, 1 billion in working capital, but there was also another one coming mostly from EBITDA and other improvements in the recovery of taxes, for example. And when we look at the 12 months, we also see the evolution of working capital and about 400 million BRLs also contributing to the generation of operating cash. When we talk about financial expenses, here we show consistent dilution of financial expenses in all quarters, even on the last quarter with the CDI increasing again. We were still able to dilute financial expenses again, getting to a level of 3.6% on net income. or net revenue, sorry. And we always say that one of the indicators that we pursue, it's not a part of the guidance, but it is one of our targets. It's financial expenses over EBITDA. On the last quarter, we had reached about 50%. And this quarter, we reduced it even further. That's why we're close to a level of 45% already. And this is a result of the reduction of indebtedness levels, generation of operating cash, improvement in means of payment, especially the increase in payments with PICs, payments with interest rates and CDC. And when we look at the year overall, the reduction was of more than 500 million BRLs from 2 billion to 1.5 billion in operating financial expenses. So the improvement in the overall results was 1 billion in EBITDA and 500 million in financial expenses. in the evolution of results as Fred mentioned, that's very significant in retail. So moving on to the next slide, when we talk about the cash generation in the quarter, in the quarter we increased our cash position in 1.3 billion. And since the generation of operating cast was with 2.1 billion minus investment in the payment of leases and interest rates. We also re-bought the ventures in the secondary market, paid interest rates, and still increased greatly the cash position at the end of the year. And on the next slide, we talk a little bit more about how we see cash generation overall for the year. Again, we start from a cash of 3.1 billion operational cashflow. As Fred mentioned, the conversion of EBITDA into cash generation was extremely high. And again, Between these two, we already include the costs of the receivables discount, that's a financial expense in the P&L, but in the cash flow operations, it is under operational cash flow because it's related to accounts receivable. And the discount was of around 900 million last year, and we offset all of those costs with the improvement of working capital that was showed, the monetization of taxes and other assets that were on the longer term. So that's one of our targets that we've been able to achieve, converting EBITDA into cash generation. After this cash generation, we also have investments of 700 million BRLs. We have the capital allocation at LouisaCred and other subsidiaries of 600 million BRL, leasing, over $800 million as well. So after all of these events, we had a free cash generation of $1 billion. And if we excluded that allocation of capital at Blizzard Credit that was somehow a non-recurring event, we would have a free cash flow of $1.5 billion BRLs in the year 2024. And after this cash generation, we have interest expenses on the loans of $600 million with a lot of cash flow available for the payment of debt as well. So last year, we had an increase in private capital of 1.25 and paid 2.8 billion, reducing the balance of the debt in almost 3 billion, which is very significant. So overall in the year, our total cash position went to 9 billion to 8 billion. a reduction of virtually 1 billion, but also reducing 3 billion in debt, total debt. So we greatly improved our net cash position. That's what we show on the next slide. Before we talk about net cash, just to highlight that this cash flow on the operations of 3.1 billion was the best in our history, exactly the same as we had in 2020. That was the height of the pandemic. But at that time, a lot of that cash flow was generated by the increase in sales and the variation in working capital that were returned when the sales slowed down. This cash generation now is more sustainable because, again, it comes from the profitability of the operations themselves. So when we look again at cash, we expended and 1.6 billion BRLs in a position of 3.3 billion. And in the next slide, we show exactly what this cash position is. 7.9 billion of cash plus receivables already net present value minus a total debt of 4.6 billion amounting to 3.3 net cash. On the right, we show the reduction on net debt as well as the debt of extension that we worked on at the end of last year, 2 billion that would mature in 2025, 2026, were extended to 2027 and 2028. So our debt now is well distributed over the next four years. Finally, talking about LouisaCred, a major highlight in LouisaCred results this quarter, Delinquency dropped significantly. NPL above 90 days and below 90 days at historically low levels. Provisions went down 20%. With a capital increase, we also reduced the cost of funding in about 30%. And with that, net income at Louisa Cratch that was already evolving got to a level that is record at 245 million and a quarter, close to 3 million in the year. So that's an evolution of virtually 400 million BRLs in the year, reversing the state that we had in 2023. And all that growing again, increasing the credit portfolio higher than 20 billion and also increasing the provisioning and the coverage getting to close to 160%. And again, ROE above 30% in the quarter, so very capitalized and prepared to accelerate growth in the coming quarters and years. I'll turn, thank you, and I'll turn the floor back to Fred for his conclusion. Thank you, Beto. conclude here before opening for the questions and answers session, giving you an overview of the scenario this year and looking forward. As we've been communicating to the market very consistently, our focus on recent years has been almost exclusively in the improvement of profitability, although we have also worked in other topics such as simplifying the operations, integrating the acquired company's and the service level for our customers, especially in the last year. So that's an agenda with great focus on the increase of profitability of the company. And I think this year, that's the last year of that ecosystem cycle. We'll continue to look at the increase of profitability. I don't think we've got to the maximum level of margins and monetization of our GMV. We will continue focusing on it. But this year, we also start to look at sales. The challenge that we have specifically for 2025 is that it's still a year where costs, especially financial expenses, tend to continue to increase due to interest rates. The interest rates tend to increase. The consensus today is that it's going to be 15. I think this is... reasonable consensus it's difficult for the interest rates not to continue moving up so but the band remains strong so if we look at today we're at a situation that's almost full employment employment rates are very low almost all of the benefits and salaries are at a high indexation level so we have the replenishment of the inflation and an actual gain in a lot of the salaries and benefits and there's no reason to be very pessimistic in terms of consumption and demand. And what I say is that it's not difficult to sell. What's difficult is to sell and turn a profit. And I think that that's the challenge of any CEO of retail companies, especially retail companies must earn profits. And we don't have a foreign headquarters to send us cash when there's cash burn. In our case, we need to turn a profit irrespective of the scenario. So in this scenario, the way for us to get balance again of profitability and growth is by looking at a very important index for the digital world, which is the conversion index. So just as we had Monetiza Magalu to monetize, focusing on profitability, simplifying the operations and Magalu Enchants, that was the focus of last year to improve NPS. This year, the index that will together, most of the focus of our operational team involving pretty much all of the company's areas will be the conversion rate. We have hundreds of millions of visits at Magalu, almost 500 million visits per year in the entire Magalu ecosystem, not to mention the visits to stores that are great as well. And we want to make the most of those visits. So the way to be responsible and start to look at growth again without letting go of profitability is by increasing conversion, not necessarily by increasing expenses in marketing.

So here we are going to focus on this focus on conversion is much broader than it looks. So here we are working on generating high quality visits. And this means about building some complex attribution algorithms, complex algorithms, which involve A lot of work, strong work. And also usability, using filters, search machine, UX in general, improving the product page, more information on the product page, indexation. And now I have to start indexing. Not just for the search machines, but also indexing. to the LLMs and the chats. So we're doing a lot of work in that regard. Another important point is the offerings. Variety, assortment of products and having the right product. It's no use having 80 million offers with very high prices or with very bad delivery times. So we have to have variety and the right product. And payment methods. We spoke about credit, digital, CDC, but we have two cards, cards plus bigs, making means of payment easier to facilitate checkout. So we are doing a lot of work. And on top of that, we do all the basics. Best price, shipping, best delivery time. But doing all that in a sophisticated way without giving up on the profit. That's the big challenge for this year. And I'm sure there are teams will do what they need. We choose a theme and we'll be able to deliver it. The challenge of this agenda is that this is a very technological agenda. And it is not a short-term challenge. Looking forward... In companies of any segment, more and more manual processes, more and more human decisions will be automated. And these decisions will be made automatically by software systems, algorithms, and by artificial intelligence models. With AI, I think that this is going to be even more. More and more companies will be undergoing a strong automation process. And that is why we have just announced a big change in our structure. The merge of two vice presidencies of the company. One which was responsible for the technology part of the company and the other one responsible for the digital channels of the company. They merged into one vice presidency. Andrei Fatala, who was our CTO. And who is responsible for technology will take over the digital business department as well. We are merging the two vice presidents because we believe that these two teams have to be 100% integrated. We will not evolve in the conversion agenda if we don't evolve the automation of our processes. And in deploying AI models, sophisticated algorithms for pricing, sophisticated algorithms to define shipping delivery times, Incrementability models, attribution models. So we needed to bring these two teams closer together, working in a more integrated fashion. And to reinforce the team and Fatala's big challenge, we brought in two very seasoned leaders, people of high quality. Ricardo Garrido is taking part in our first earnings call. He has a vast experience in the market. And nine years at Amazon and for almost five years running the marketplace of Amazon. And Marielle Paiva taking over as a growth executive officer. We had not focused on visits. And I spoke a lot about this at length. And we have somebody heavyweight to help us. We had hired more people last year for the digital business team. Kyle has run a commercial. Raul, who's running cross-border and platforms. and Celia for ads. So we have a very strong team and I am totally convinced that we have a high capacity team that is able to deliver a proven team so that we can continue to evolve and to overcome the challenges that any company operating in Brazil will have. With that, I would like to thank you for your attention and we are going to open the floor for questions. Again, all of our officers are here and available to answer your questions. Okay, let's start the Q&A. We will now begin the Q&A session. In order to ask a question, click on the Q&A icon on the bottom of your screen. Type in your name, company and language of your question to get in line. When announced, A prompt to activate your microphone will appear on the screen and you should enable your microphone to ask a question. Our first question comes from Gustavo Sendai with XP Investimentos. Gustavo, go ahead. Hello. Good morning. Thank you for taking my questions. First question, if you could detail the equation of growth and profitability this year. You have a number of initiatives, the Magalu convert, the new financial license. So how are you thinking about growth in the different channels? That would be quite helpful. And in terms of profitability and gross margin, what do you see gross margin on merchandise can improve or whether the improvement in the future will come from the mix of services gaining more share and less improvement coming margin on merchandise and my second question is about suppliers i think that there was big progress this quarter Is this a one-time initiative? Is this more structural change? We see new players talking about new entrants in the market with more aggressive terms. So I would like to understand if this improvement was a one-time off or whether it's something more structural. Thank you. Hello, Gustavo. Thank you for the question. I will start answering, then Fabrizio will speak about the margin on merchandise and Beto will address the part on the suppliers. Okay. So again, this is the last year of the ecosystem cycle. As I mentioned in my presentation, we have a number of initiatives that we developed throughout the recent years and that we hope to get to reap the fruits of those. One of them is that all of the companies under Magalupe, including LouisaCred, continuing to improve their profitability level. We launched digital cdc in the end of last year so it's a gaining share of online purchases our penetration of credit online is way below the physical stores so this tends to improve intense to help monetize the online results So we have some margins to capture, both in terms of credit for online purchases, as well as to increase the sale of insurance, online insurance, online consortium. So there are a number of initiatives under the umbrella of Magalu Pay so that we can continue to increase the margins through these financial operations. And we should accelerate credit. given that the ROE is high, and there's no reason why the company would not step on the gas for credit, which tends to improve profitability. And also, Magalu adds, I spoke about this, I think it is an important monetization agenda. We did the work on the fundamentals last year, and now it's the time to reap the fruit. We have a senior team there, The commercial team, the product has improved a lot. It's getting a lot of compliments by the advertisers. We still have inventory to sell quite a lot. So it's not just Magalu, we have Netshoes, Kaboom, and monetization of Lou, our digital influencer. She has just run some campaigns during Carnival for Uber. She's done campaign for WhatsApp, for Amstel. So we are monetizing even our digital influencer, Lou. We still have a long way to go for ads. We're going to have ads for brick and mortar stores. So I guess that all of these are important points. to grow margins and also to increase sales at the brick and mortar stores. Again, now we'll open stores for companies of the group. We'll have that location of where the Cultura bookstore used to be. And we continue to operate very efficiently. We continue to have a huge market potential. Our share in physical stores is very low compared to online. Our online share is higher than the physical stores share. We can still grow our share a lot and we continue to be excited with the possibilities related to brick and mortar stores. Overall, we have a more difficult comparison because we had a good year, particularly the comparison in terms of margin, but we still have a lot to benefit. Regarding the gross margin, Fabricio, this is Fabricio. Thank you for the question. Regarding the margin, we had a progress of the margins in the last two years. As Fred mentioned, we had a challenge of increasing the margin. And then after passing through default, maintaining our margin, Higher than in 2021-22. And we did it. Actually, we did it really well. So the margin on merchandise this year should remain stable. There is no price increase movement in the radar, which is also good for us. Are you focusing on selling? And I think that we have opportunities in addition to ads, some opportunities regarding services because services are growing more than sales in brick and mortar stores. So we have a good opportunity for services online, 1P and 3P, which are performing better than in previous years. So that's what I can say about the margin. Hello, Gustavo. I will speak about suppliers because you asked about those. Well, actually, there was no relevant change in the terms, purchasing conditions. There are some suppliers with longer terms. There are new entrants and so on and so forth. But on average, our average purchasing time remain practically flat. if we adjust for the fact that in the fourth quarter, we purchased more than in Q4 23. In the end of 2023, We had a dynamic of reducing the inventories, so we purchased less. At the time, we mentioned that we also made some prepayments for some suppliers in the end of 2023, which reduced the supplier's balance in the end of 2023. But now, in the end of 2024, we sold more. And we also purchased a little more. We kind of reinforced the inventories in the end of the year because we had a fantastic sale on January 3 this year. It was very early. So we ended up getting a little more merchandise in the end of Q4. So it was something more specific, no structural change. I think that in the supplier's line item, we have an average. term of purchases, which is healthy for inventory turnover. And the more we improve inventory turnover, which we believe we will be doing a lot this year, the greater the opportunity to improve this financing of suppliers and inventories to generate more cash. So we are very optimistic about a working capital growth. with an expectation of generating more cash this year, coming from this relationship, the supplier-inventory relationship, and also with the monetization of taxes. As you could see, that accelerated in the end of last year, and this tends to continue along 2025. We should continue to monetize taxes organically in the operation. And even more than what we had last year. So we are very optimistic about working capital. Thank you. Perfect. Thank you very much.

Thank you, Sundari, for your question. Our next question, Luca, UBS Bank. Please, Luca, you may go ahead. Good morning. Thanks for taking my questions. The first about Louisa Cred. Louisa Cred's results had been improving over the past few quarters, but now on the fourth quarter, the improvement was quite expressive. So we'd like to understand how we can think about the evolution of these results in 2025. And my second question about e-commerce, you addressed it slightly, but We'd like to understand your mindset about the trade-off between growth and profitability, especially on e-commerce for 2025. Thank you. Luca, thank you for your question. So, Luisa Cred, I'll talk about it, Beto. I don't know if you're going to want to add something, but yes, I think we've been improving gradually the results there quarter-on-quarter. we've gotten to these results on a return on equity of around 30% at the end of the year. That's fantastic results. And I believe this is the ground for this year, the base. I think we already have sufficient elements to accelerate credit again, to resume accelerating growth of that line. But I think we have very good perspectives for the year. And the results come And the coverage of provisions have actually increased in the fourth quarter compared to 2023. 140 to 160, as Beto mentioned. But it's very sound numbers. The indicators are very comforting. I think it's the time now for us to think about accelerating this agenda. And I think that's what would be the right thing to do right now. And We'll discuss that with the board of directors at LuisaCred, but I believe the numbers make it clear that this is a safe and correct strategy for the year. So looking at it that way, we're at a good moment here with the results that have been very well controlled in the quarter. And that's a concern of the market a year ago, a year and a half ago, right? And it has been. Just as brick-and-mortar stores are a concern, this has been one of the highlights. As for e-commerce, as you mentioned about conversion, I think we've already answered that, but this recovery, this resumption comes from an agenda of efficiency and a very strong focus on making the most of our visits to make the visits better and take more advantage of them, make them take more of them. So it's a change in focus, but that's very, cautious as well financial expenses continued pressured with the increase in interest rates so we need to work that in such a way as we grow turning a profit not growing to the detriment of profits I will not accept that agenda so our work here the entire team's work is to focus on these conversion agendas we talked a lot about the initiatives and visits usability checkout and the quality, working on the quality of the offers with Fatala's team, Garrido's teams, Marielle, a lot of different departments here at the company will be very focused on improving those aspects. It's a complex agenda. It's not simple. It depends a lot on technology, but I believe we have everything we need to evolve in a sustainable, gradual, constant way, being very careful, very cautious, And this is the last year of the ecosystem cycle. And this ecosystem cycle, its main focus is to turn a profit even with adverse conditions. So that remains the company's focus. That's very clear. Thank you for the answers. Our next question, Philippi Citibank. Please, Philippi, go ahead. Good morning. Thank you for taking my question. I'd like to explore a little bit more about the changes in the business structure that you already gave in details, but I'd like to understand a little bit more of how it changes in terms of growth initiatives and capital allocation between online and brick and mortar stores. Thank you. Thank you for your question. I'm going to start talking about the allocation of capital. Nothing changes. It's more what I explained about the integration of the technology departments with the digital business departments. So we remain focused. Noting that we have an omni-channel operation. So if I expand physical stores and I favor the online because physical stores are a distribution center for online sales. It's a pick-up point, a drop-off. So lately, our CapEx has been... almost exclusively focused on technology. In terms of allocation, capital allocation, nothing is going to change. But in terms of the organizational side and what we're thinking about, I'll let André Fatala describe a little bit of what he's thinking about. He's just taking over and there's a lot still to define, but I think he can give you highlights of what he's thinking about this structure. Thank you, Fred. Filipe, thank you for your question, explaining a little bit about the focus that we have to bring and approximating a strategy for the business structure, especially in the marketplace. As we can see in our marketplace, and Fred mentioned it quite well, the growth front comes from evolutions that we need to make in terms of conversion. And when we look at conversion, Usability is extremely important, consumer usability. So here, all of the work that needs to be done to facilitate and remove friction between what the consumer wants and the best offer we have in the platform is greatly based on a lot of evolutions in the technology front. And another point that's important to highlight is that growth will also come from how much we can empower and facilitate the management of of sellers' sales within our platform. So all of the retail categories where we don't have the sales assistance for that seller, all of the tools and services that we need to build to facilitate this operation and the retail so that this growth is very important for this growth. So everything from the tools that will be available in the seller portal, such as including services in the logistics front, the evolution of fulfillments that are already contributing with 25% of orders. It's a great growth. And we see, giving you some numbers as examples, when we look, for example, in the Southeast, we already have the 3P GMV higher than 1P. It's 51% in 3P GMV in the Southeast and other regions that we still need to seek there's greater penetration. And when we look at this, the reasons, one of them is closely related to delivery times. And in the 3P front, it's highly focused on fulfillment for us to improve that. Looking at Sao Paulo as an example, we are already able to promise full delivery at 75% of them up to next day. this LDO. So taking this type of experience to other regions are very strong drivers of growth, of conversion for our 3P sales. And as Fred mentioned, all of that requires very strong work for us to optimize and seek more efficiency in all types of processes through technology. And the final point, as from now on, we're going to start working even more. Magalu has a lot of initiatives Using artificial intelligence in our operation in the day-to-day, we already have part of the pricing and dynamic delivery times and the supply side. There's a lot of things already on AI and we started already with generative AI for consumer experience. summarizing reviews, improving translation of what comes from AliExpress's catalog to adapt to Brazilian Portuguese, to make consumer searches easier. But there's a lot of other aspects that are still possible to improve and evolve through artificial intelligence. And we've been working, as was already mentioned to the market, in the development of a new channel. We've been talking a lot about having this focus and already making the most of this technology, creating an AI commerce, a lot of our focus here and work for the future. And another front we're also working on strongly with AI is how we can optimize the logistics network for Mangalú and reduce costs. the delivery times more and more. So, Felipe, to summarize what changes at the end of the day is to have this close, great approximation of these business teams with the technology teams to start to work as if they were multidisciplinary teams focused on the major objectives that we have. And based on that, we shall seek this opportunity growth front and all of the opportunities that we see without deteriorating what has already been built in the past few years in terms of profitability. Thank you.

Thank you, Philippe, for the question. Next question from Kelvin with Itaú. Kelvin, go ahead. Good morning, everyone. Thank you for taking my question. I have two questions, actually. First, could you give us an update on the initial stages of the partnership with AliExpress? And what is your expectation in advancing this partnership to become the logistics partner of AliExpress? And secondly, exploring growth, as you mentioned. 2025 should be a challenging year in terms of consumption, surging interest rates. When we look at data or proprietary data, we see some indicators pointing to weaker consumption in the first months of the year. So what is demand like in this first quarter? And particularly in brick and mortar stores? These are my two questions. Thank you very much. Morning, Kelvin. Thank you for the questions. Let me briefly address both questions. As regards to AliExpress. As I said earlier, we have been evolving quite well in our conversations with them, both in and out. Again, this is a very complex operation in terms of integration of systems and customization and adaptation of the systems to integrate the partnership. And We are in a positive trend in terms of inbound, outbound. We don't disclose the numbers of the partnership, but what I can tell you is that we are quite satisfied with what we've been seeing. And we are talking about broadening this partnership to other channels. The most evident one would be logistics. So both parties are willing to evolve in that area. But when that is formalized and closed, we will communicate that to the market. Okay, but we are excited. I think that this has been a good start. And it is a partnership that has a big potential to evolve. As regards the very short term, well, I do not see an issue regarding demand. Like I said in the beginning, we have an economy which is indexed. We have collective bargaining agreements that will adjust salaries to inflation rates so we don't have an income issue in Brazil. The result of LouisaCred proves that we have low delinquency because low income workers who are the clients of LouisaCred have enough income to pay wages. for their expenses. I do not see a demand issue. Our problem is interest rates. The problem is not selling, but rather selling with a profit. And this is the big challenge of the company looking forward. And the only way to be able to sell in a profitable way is by increasing conversion. So this has been the focus for the year. That depends on systemic changes. I can increase conversion by giving discounts on the products and operating with a lower gross margin. That's not the goal. I can increase sales, accelerating marketing expenses, but we are not necessarily increasing conversion. We are reducing our EBITDA margin. So we have to increase conversion and we have to be profitable, being smart. And the only way to do it is by increasing conversion, as we have mentioned at length. So again, I want to stress, I don't see a demand problem. I don't think that the economy of Brazil will decelerate as people are forecasting. I'd like to remind you that last year's GDP surprised everyone, 3.4%. They will decelerate this year, but a lot less than what people think, because the economy is indexed with real gains for salaries in the private initiative. our collective bargaining agreement in commerce was above inflation and also considering social benefit programs the economy is highly indexed so it should not bring us a lot of losses since unemployment is low i don't envision a demand issue now How to make this demand translate into results. That's the challenge with increasing interest rates. Prepayment of receivables is more expensive. Capital cost is higher. There is also the dollar exchange rate. So there are some other points that are more related to cost rather than to demand. And that is why it is important for us to continue with our agenda to monetize and make the company profitable. Super clear. Thank you very much. Thank you for the questions. Next question from Irma with Goldman Sachs. Irma, go ahead. Hello. Good afternoon. Oh, good morning. Thank you for the opportunity. I have two quick questions. kind of related, but perhaps you could elaborate on the reduction of revenue from services. There might be some temporary effects, but if you could explain the dynamic of Q4 regarding that, and perhaps tell us how we should think about that line item. I know it accounts for very little in terms of revenue, but the profitability was higher. So since this was a line item that posted a drop, I would like to understand because it hits a little bit the gross margin. My second question is about fulfillment. There has been a lot of progress in terms of penetration in 3P in the yearly comparison, but the level is still at 25%. Of course, I don't want to discredit the steps so far, but I just want to understand where would you like to get? Where does it make sense to get? And any challenges that you have been facing with your sellers in the marketplace in terms of convincing them to bring them to fulfillment? There are a lot of offerings in the market from other marketplaces also trying to bring sellers in. And Fred, as you mentioned now with hiking interest rates, perhaps the sellers do not have enough working capital to have inventories in several fulfillments at the same time. So I'd like you to explore that. How should we be thinking about that? Thank you. Good morning, Irma. Thank you very much for the question. I'll start with the last part and then Beto will speak about revenue from services. Well, I guess I did a correct analysis regarding fulfillment, but fulfillment is an absolute success. We don't have more because it is related to Mangaloo. It's zero difficulty in convincing sellers to bring their products to us. I'd like to remind you, we launched it in 2023 with zero. The primary competitive offering was from a player that has a big fulfillment operation, which is Mercado Livre, ML. Well, they started their fulfillment about six years ago, and in two years, we increased from zero to 24. And we did this at the limit of our capacity to deliver. If you look at their curve, our curve is above what they had in the second year of operation. It is very complex to expand fulfillment internally because we need to have authorization from all states of the Federation. We need specific authorization to be able to operate so that it will be worthwhile for the sellers to operate. And we're doing this with strong work from all of the departments. We launched our fulfillment with the possibility of having the fulfillment of big products, sellers and manufacturers, Sometimes manufacturers or sellers on the platform do not have a place to hold those bulky products. So I think that we are evolving a lot. It took a little bit longer because we wanted to launch fulfillment at the same DCs, One Piece, so that it would be a creative, that it would help us. operationally and not just opening a DC for fulfillment. That would be easier. We do have some for fulfillment, but the focus is almost exclusively on operations with 1P, given the benefit of multi-channel capabilities. So it's just a matter of moving forward. And I think that in a timeline... We are progressing very positively. We'll continue to improve. And in time, we'll get to the level of the benchmark of the market, which is now 50%, but after five years. So I think that we're evolving quite well. Perfect. It's very clear. Thank you. Now I'll turn the floor to Beto to answer your first question. Good morning, Irma. How are you doing? Thank you for the question. Let me speak a little bit about Rose Margin. actually gross margin on goods increased a little bit, total margin decreased a little bit, but very small variations, slight variations. And this variation, the consolidated gross margin, is related to your question. Revenue from services reduced a little in Q4 24 compared to Q4 23. In the full year, it grew, but in Q4 specifically, it dropped slightly. But your question is actually good. It gives me an opportunity to clarify that this reduction is not related to any change in the strategy or in trend. This was a one time specific event. Basically, two things explain it. One. Revenue from banking correspond to the reduced. That's revenue when we build services to LouisaCred and these services are related to our own sales force and to services that we provide at the stores for LouisaCred products. And we had a very high efficiency in the operation of the stores this year. So this ended up passing on to LouisaCred and helps the operating expenses line item of LouisaCred. So that's basically the reduction in revenue from banking correspondence and also reduction in logistics of Megalog, which was also very slight, very specific, but the most important revenues. of the marketplace of the fintech of fulfillment ads and cloud grew continue to grow and continue to have an accelerated growth tendency or trend for the next years and these will be influencing an expansion of our gross margin moving forward So perfect. So this dynamic was just specific to Q4 regarding the banking correspondence, or did this start in Q4 and should continue in the coming quarters? This dynamic of banking correspondence was intensifying along the year as we increased productivity of our stores throughout the year. So this tends to continue. It will continue, but it has a small impact on the gross margin and on the total earnings of the company because It reduces revenue from services, but it's actually related to the fact that we reduced operating expenses of Magalu. So one offsets the other in our SG&A. And we showed this. There was a dilution of costs. And in addition, it reduces the cost of LouisaCred as well. This productivity gain ends up benefiting the result as a whole because there's a reduction of cost at LouisaCred. So this will continue, but marginally smaller. Okay, perfect. Thank you very much. And the net result is positive. Yes. Thank you.

Next question, Gustavo Patini, Bank of America. Gustavo, you may go ahead. Good morning. Thank you for the opportunity. I'd like to talk a little bit about your crediario that's outside of LuisaCred. the booklets, and we've been seeing on financial expenses that increased significantly in the fourth quarter, close to 20% year on year. On the other hand, in the next page, there is a break in the delinquency side, and it seems that delinquency increased twice as much, so maybe it's not related to that alone, but we'd like to understand what caused this increase in delinquency of past dues and how you see the evolution for the quality of this credit now for the beginning of 25 and the rest of the year. Thank you, Gustavo. I continue, there's an echo. Okay, so. First, during last year, we evolved the portfolio of Crediário, and we've been evolving this consistently for two years. And this portfolio has a very controlled delinquency rate, very low. It's a very profitable portfolio, as Fred mentioned. On this portfolio, it's direct consumer credit. It's already very profitable. And once we migrate to the new financial company that we just got the license and should start with the transition in the coming months, this portfolio tends to be more profitable. First, because of the tax efficiency, because we no longer pay ICMS, PIS and COFINS that have very high rates on retail to work with the tax rates of a financial institute. especially in particular IOF of 3%, Biscoffins of 465. So as a financial institution, the tax burden is a lot lower than what we have on retail. So it tends to be even more profitable as a portfolio. And without mentioning the improvement of capital structure and funding and as a financial institution. So the trend for this portfolio is, is to continue to accelerate moving forward. So except for the fact that delays of past dues increased more than the portfolio in this last quarter, it's a calculation mathematics aspect. It is related to the curve of the portfolio's acceleration. Since we accelerated this portfolio one, two years ago, and the trend of recent growth was slightly lower, And the participation offset you see in the physical store has reached a more stable level. And the delays always take a little longer to get to as the past two payments. So since the denominator didn't grow as much and the numerator grew, that generates that type of effect. But I think the good news here is that we are very well provisioned for this portfolio that we show here, $1.5 billion with close to $300 million of past due installments. We have 500 million in provisions. And the indicators of concession or granting for new vintages are very low. They're very profitable, as we already talked about, both in Luisa Trad with the cards and CDC. For physical stores and for online sales that we started are escalating, and this is already escalating at a profit as well. I think that was it. Thank you, Gustavo. Very clear. Thank you, Beto. The next question, Ruben Bolton sent in there. Ruben, you may go ahead. I think he must have had an audio issue. So the next question. Andrew Rubin from Morgan Stanley. Andrew, please go ahead.

Hi, thanks very much for the question. I'm just curious how you're thinking about the outlook for the physical store footprint. I know there's been some closures in recent years. If you could just remind us if you think there's any more room for the store base to be optimized, or on the other hand, what you would need to see to get back to select store growth. Thank you.

Good morning, Andrew. Thank you for your question. So as for the stores, as I said, I think we are now very focused on these experiences that we're having with the formats of the physical brick and mortar stores of the companies themselves. or the group stores. I talked about the Netshoes store and the Conjunto Nacional that will have all of the stores at a single space. I talk about the Kaboom physical store as well. So we're exploring the possibility of having this physical expansion through brick and mortar stores of the companies that we have acquired, that companies in our ecosystem, Netshoes, Kaboom, Epoca has great potential as well. And the possibility of this expansion could happen both in existing stores points absorbing the spaces that are idle or areas that we will convert so that we can have a store in store at the Magalu stores or exclusive points, large stores such as the Livraria Cultura store and exclusive for the brand category. So we still need more data. But as I said, the very short term data is very comforting and encouraging in the sense that they confirm that this is a good way to go to open brick and mortar stores for these companies that are part of the group. And when we accelerate it, we will accelerate it more in the sense of opening store in store for those brands, specific stores as well. And Magalu has some regions where we don't have stores, for example, in the state of Amazonas and some states in the north of Brazil. And there's one or two places in the states that we already have. But I see potential here. to open brick-and-mortar stores in-store or standalone stores in this format, such as we'll have in Sao Paulo, Conjunto Nacional, looking forward. But there's little data, little information to tell you more than this.

That's very clear. Thank you.

Thank you for the question. Next and last question from Ruben Cotto with Santander. Can you hear me now? Yes, we can. Good morning. Thank you for the question. I believe that all of my questions have been answered, but I have some follow-up questions. First, regarding fulfillment, Fred, in this evolution of 25% to get to 50% eventually in a couple of years, how are you thinking about... monetizing this movement now in the first two to three years when it got to 25%? Did you need to invest a lot in subsidies for the sellers to incentivize them to migrate to your fulfillment? And... How should we think about this looking forward? Will this be margin neutral or not? And in the cross border of products, we followed some news about a strike of the Brazilian IRS, which apparently is hurting the clearance of some goods. When you have this partnership with AliExpress, have you felt any impact in this first quarter of 2025 or nothing significant? And I'm sorry for the technical problems we had earlier. No problem, Robin. Thank you for the questions. Let me start with the second question. We are not feeling any issues. I'd like to remind you that our cross-border is fully PRC, so of course the proceedings are fast-forwarded by the Internal Revenue Service of Brazil, so no operational stress. I actually didn't even know about that. So I think that our operation is well-oiled and, like I said, with a big potential for evolving. And as regards fulfillment, that's also a good question. We have been growing in areas that were idle. So we didn't need subsidies because those were areas of the DC where we had idle space to be occupied. I'd like to remind you that we have a multi-channel fulfillment operation, the same 1P operation. So with the reduction of inventories, we had freed some areas for sellers' inventory. So indeed, in some situations, we didn't charge the sellers, but this is a subsidy that was not expensive for the company because I was occupying spaces that were free and costing me. And by selling more products from these sellers, increasing revenues and increasing selling commissions, we ended up being accretive. I believe that there's still some room to occupy some DCs. Some of them are rather full, such as the DCs in the northeast, in extrema, some DCs in the south. We still have some room to be occupied. Eventually, we might have to expand to DCs, but we'll do it carefully. When it makes sense, we'll have a monetization strategy. For now, it has not been necessary. One important thing about fulfillment, as Fatala mentioned, we have some technology points. We had 60 integrators. These are software companies integrating the seller's systems to our systems. We got a lot of feedback regarding the need to improve the integration system. We're doing quite well since we are just a two-year operation, but we have a lot of room for improvement in terms of providing more control to the sellers, providing them with more visibility. So we are still progressing in that area. I am improving the technological platform to facilitate the onboarding or integration of these sellers with our platform and with their integrators as well. So there's still some challenge in that regard, but the teams are integrated so that we can execute the technology agenda faster. And that's how we're moving, looking forward. But this continues to be an important, promising agenda for us. Our focus will be to have more control over the delivery process as a whole via fulfillment or via Magalu entregas, Magalu delivery. Excellent. Thank you very much. Thank you for the questions, Ruben. We are now closing the Q&A session. I would like to turn the floor over to Frederico Trajano, CEO of the company, for his final statements. Fred, go ahead. I would just like to thank everyone for attending our conference call, and I would like to congratulate the whole Magalu team for the 2020 for earnings. Thank you very much. Have a good day. Magalu's earnings conference call is ended. The investor relations team is available to answer any further questions you might have. Thank you very much for attending. Have a great day.