Earnings Call: Q3 2018

Oct 25, 2018

Good afternoon, ladies and gentlemen. Thank you very much for waiting. Welcome to Via Varejo conference call to discuss the results for the third quarter of 2018. This call is being broadcast via intranet at our website, www. Beavares.com.brir, where you also find the company's presentation. The slide selection will be managed by you. The replay will be available after the call is finished. The company's press release is also available at its IR website. This call is being recorded and all participants will be in listen only mode during the company's presentation. After Via Varejo's remarks are completed, there will be a question and answer session when further instructions will be given. Before proceeding, we should say that forward looking statements made during this conference call regarding business perspective, projections and operating and financial goals are based on the beliefs and assumptions of Via Varejo Management and also on information currently available to the company. Forward looking statements are no guarantee of performance they involve risks, uncertainties and assumptions because they relate to future events. And therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of Via Varejo and COGS results to differ materially from those expressed in such forward looking statements. Now I would like to turn the floor to Mr. Flazer Diaz, CEO of the company. Good afternoon, everyone, and thank you very much for participating on our conference call quarter of 2018. Here it was me. I have Paula Nadiaza, our COO, Cindy Bieniedron, our CFO, Isabel Brangos, our CHR and And for the first time with us on this call, Mauricio DiFucci, our CEO that has joined our team recently. Weeks ago, and he is taking care of IAC Marketing Marketplace And E Commerce. In this quarter, we have taken some crucial steps in the transformation pace of the company. And we had gain of market share in both channels, both in brick and mortar stores as well as on the online channels. But we have faced a difficult market and our other challenges that have affected our profitability in the period. The good events in our process of integration and transformation of the company, a lot of them that materialize in the past months have brought important changes to our operations, especially in our British motor stores, when we implemented BMI, it's important to say that we are coming to an end of a year now 2018. In order to have decided to integrate replaced or at least to reengineer a lot of the systems and the critical processes of the company. In addition to being very calm about our strategy and also this new value proposition that comes with it. We are sure that the more structural part of the process, that is the most difficult one and very sensitive part of the process is already behind in this year of 2018. Therefore, we can say for sure that we have paved the road on which we'll be able to accelerate our operations in 2019. And despite of important progress, we know that this is a long journey and a lot of challenges will lie ahead. But it's important to say that in a way of turning this progress more tangible, I would like to share with you on its is still very recent, but we already have a promising results coming from the 1st stages of this transformation. Starting by the amount that it had its roll out to all the stores, up to the end of August today. We are already going over 70 percent of transactions that those are going through this new system, and we already have benefits there. The conclusion time per se is that it has reduced an average 60% versus the current, our prior sailing system. Variation, a change in the performance of the heavy users of EMR. First was the heavy users of the account that are still using that old system, there's clearly a performance difference of 30% higher in the CDC for VMI than 20% more services and also with some gain in the performance of sales and margin lower than 5%. But that should increase especially as soon as we go forward with mobility, not only in the learning curve for the new system, but also with the functionalities that come with the mobile system. That should be in the next week. We believe that by the end of the year, we will have all transactions already running in this new system, Avianonika also is our sophisticated tool for data and allows us another level of customization in our media strategy. And also CRM that has allowed us for an instance in August to have an increase of 63% in email sales and basically 70% increase in our ROI and our activity. It's also important to talk about ever our virtual assistants integrated as an app. And it also contributes a lot for the improvement of the performance, especially of those that are getting more engaged with the app, we have our measurement of those that are more or less engaged. And we see the 10% of target meeting of the most engaged ones and 20% more of average productivity. That is very important figures as well. I should also comment the launching of our new app for cousin Valle. It was much said we did a soft launch of that app at the end of July. We worked throughout August so that we could fine tune the app. And in September, we had the 1st month with our whole base of customers using this new app. And here in September, we had 300 percent more of orders versus our best month in the year so far. With yet, which had been June. So we did have an important significant lead there. And now in the past few weeks, we are just seeing the share of this app growing consistently. So as a challenge now, we should expedite the acquisition of new clients and customers that will download the app. We are working on that and we are very excited about this possibility. Last week, we just launched also a point of free use app with the same capabilities of Kazakhstan app. This is a native app, much lighter, and it's using the same platform, and it should bring the same type of benefits to Havana. I also should highlight another important step we have taken regarding the future of the company in terms of names of payments. We find no partnership and we have already disclosed it. Air a partnership with Air Fox, it was incubated at Harvard Lab. And by this partnership, we will act decide the process of digitization, not credit operation. And we will have more productivity for our and sell person because the process will be automated. We also have gone forward with our digital portfolio, and we open the front to new services which is allowed by this partnership. Air Force is already a digital portfolio that is operating And also, we have another partnership with Getnet to develop a sellers portal that will work as a white label platform for Via Vallejo. And in addition to additional tools. They will also offer bank products to all our sellers and all partners just by one it's very easy, very simple. And to conclude, I should say that just recently, we signed an agreement with Zurich. And after that agreement and now Via Varejo is concentrating most part of its insurance portfolio in this same company. And now we are starting to standardize the products and the offers from all the different channels. And that will have a significant contribution to our omnichannel approach. I end here my comments. Now I turn the floor to Lisa Negron, our CFO, and he will be talking about the quarter's results. Good afternoon, everyone. Thank you very much for being here with us. Let's start talking about the results of the third quarter of 2018 and business perspective. On Slide number 5, In the third quarter of 2018, we had growth of the net consolidated revenue of 4.4% reaching BRL6.4 1,000,000,000. Net revenue was up 5.2%. In the online channel, revenue was up in 1%. We should remind you that over the quarter, we did have important to such as VMIs that have contributed positively to the future performance of the companies that are still in the process of maturation and learning on Slide number 6, Envoyced GMP for 3P increased 19.5%. And the performance of AVOD GMV for 1P have grown 11.6%. The click and collect still is showing important growth reaching 31.3% in the main categories. The Click And Collect is very strategic for Via Varejo, once it allows us to really have better customer service, lower logistics costs, and also the possibility of having upsell and cross sell both for products as well as for financial services. Which is very important for our profitability. We have around for pickup 980 stores and 6000 post office branches. On slide number 7, The competitive environment post World Cup has contributed to pressure in our results. In addition to that, a lower approval rate for credit operations and lower efficiency and the filing of financial has resulted in a reduction of the gross margin of the company from 32.3% to 29.2%. We have important gains in productivity, in expenses such as, PDA And Logistics, but we did have greater investments in marketing in the period as well as increased the number of last two settlements. An increase, and thanks to the legal factory project. The greater expenses with marketing is very important to increase sales of the company and also to process the download of the new app and the legal fact settlement also impacted the short term, but they do bring value to the company in the long term. We still have several projects that aim increased efficiency of the company without hurting customer service and without compromising the delivery of projects that are important for the future of the company. As a result of that, the SG and A as a percentage of the net revenue went from 26.3percentto27.1percent. Because of that, our adjusted EBITDA margins dropped from 6.9% to 2.5%. On slide number 8. The next financial results, 34 adjustment went from 3.9 percent to 3.2 percent. The company had a loss in the period of BRL 79,000,000. On slide number 9. The company maintains its found financial position with a net cash of 1,600,000,000. I conclude here my comments and open for the Q And A session. So the Q And A session is now open. We would like to ask you to ask all questions at 1. From Intel BBA has a question. Hello, good afternoon. My question is about what you announced this agreement with Zurich is this agreement that you have signed recently. I would like to have more information on that. How does this agreement has happened? What were the financial issues? What used to be getting once? And I think it would be nice to have more information on that, please. Good afternoon. So let me explain and put this into context. We did have 2 contracts with Zurich. 1 was regarding extended warranty in bricks and mortar stores. This was from 2014. And another one was covering all the other products with them. And this other contract was for 20 16. So these were contracts in which the economy was under different perspectives. We had another agreement that was with Cinnov and TWG regarding extended warranty on the online channel. For products there, sign off of others. As Farjid said, now we have to integrate the activities of both companies And so it becomes difficult to separate what is an online and an offline sale. So we have different channels. So it's difficult in the context of these contracts to determine this is an offline sale or this is an online sale And that was also impacting the contracts we have, we had, and, the goals meeting and also the profitability of the company. So it would make the goal of 1 channel, and that would have an impact for profitability. And if I would tell be another channel, that would impact the other channel. And also because these contracts had been signed in the year of different the targets and also the profitability was different for products and both for Via Varejo as well as for the insurance company. So if I were to sell one product more than another, I would find a profitability impact for Via Varejo and for the insurance company. And actually, the customer should choose that to the channel and who choose insurance. And that's where it all started in February. We started a negotiation with the insurance company to try and unify everything to have everything under the same umbrella, all the contracts, there's the same umbrella and all the products in a way that they are equivalent. That is a customer may choose product A or B according to this buyer, and that would be better for our customers for the company and for the insurance company. And so that's how we started. So in this negotiation, We have a rebalancing of our goal considering our current economic perspective Also, we have an extension of the firm that goes up to 2023 contracts and now are a single contract with Zurich. And so we have product A and product B. And it depends regardless of the channel, this is insurance for the product. This was very good for the company, and this was our main reason to unify the contract. Because of that, there was a great improvement in our VPN for the company. So if we check the cash flow, our current contracts and this new contract is generating value for our shareholders, which is very important. Also, we see no difference that is significant in our EBITDA for the next years. So if there is a positive impact, it's because our customers will be buying better. We'll be able to provide better service, and these customers will be buying more. So I believe with this, we'll have a positive impact in the financial results because with this transaction, we will have a total of BRL 830,000,000, BRL730,000,000 and BRL 715 have already been advanced. And the remaining part should be in by the beginning of next year, but probably by theendoftheyear, this should be settled. So I think that's it. We'll have a positive result in our net income for the next few years. We'll have value generation. And these are the main reasons why. Perfect. Felipe, thank you very much. So in summary, if the effect in EBITDA is going to be neutral looking ahead, the net net of this transition a good proxy of value for you. It's a good, positive result. That is I won't have to do any negative adjustment year after this transaction with Zurich, right? It's Richard Catcock from Bradesco VDI. Good afternoon, everyone. I have two questions. The first one is about the pricing strategy of the company we see that you had a margin drop in 5% average And I would like to understand if you have if you have a problem in terms of pricing, And if you have a problem there, what are the initiatives that you were taking to address the problem and maybe grow in a more expedited fashion. Considering that you have that lower gross margin. And my second question, maybe can you quantify what you see for next year? In terms of legal claims, cost reduction. Hello. This is Naliato. I will talk about pricing. And then I'll turn it to Felipe. We will talk then about the legal claim process. Well, as you mentioned, the margin, we don't have a problem of pricing. Year. We do have a strong investment on our tools, our pricing tools for online channel for brick and mortar channels. This is growing in an important way. We did have a quarter with 2 distinct moments with the quarter right after the World Cup. It was a post World Cup effect is a more competitive environment. And as Flavio has mentioned, we work to implement several tools, and that is very important for the company. We had to do that type of accelerations, and that's rolling out in the series so that we could adjust ourselves and restart the 4th quarter in a more competent fashion been able to benefit from all these tools. And in addition to that, Vianonika, that Slabio mentioned as well, it is helping us work in a distinct fashion our marketing investments and marketing investments with better flow generation and demand in different channels. That also is helping us positively. In terms of our pricing strategy. We see a scenario of education in this third quarter. Was a higher investment in marketing that is reflecting in our results. We are using all technology that we have been developing over these past few months with the Alonika project. And now we are working in an integrated way with our pricing tools so that we can have better prices, sales increase with margin increase. I think that what is our outlook for pricing. Good afternoon, reserves and facilities. Now about the losses first, we should say that these are expenses that are fixed. They did not just stand in the short term sales of the company. As I have been saying, there is an ongoing project, which is in line with. Actually, it's better than what we had planned. And we are now delivering exactly what was budgeted for the year. For this year, we still have a final quarter to go, but so far, we are in line with the year budget. For next year, we are still working on our budget, so I'll only be sure in a month from now. So I believe that is nominal for labor expenses, which are the main expenses in this line, we will have a reduction from 10% to 20% compared to this year starting on the first quarter. And that will depend on our will to reduce more or less the number of legal lawsuits, and that will be balanced. So as you know that net revenue depends on, the revenue as well on the sales as well. And so we are bringing down the number of lawsuits. And also, we expect a higher level of sales. Okay. Just to understand that reduction from 10% to 20% that you mentioned. In March figures, this would be for the whole year or just the first quarter or 1st month. So for the whole year, business for the whole year. We will have a behavior that will be specific for us the quarter. So we expect to have that in the first quarter, but distributed over the years. If we decide to expedite the reduction, in the number of lawsuits to close to settle these lawsuits. So, that could then that will vary between those 10% to 20%. It will depend on the decision that we'll make next year. Once again, we have not closed on our budget for next year yet. And so that's what we estimate for the Mr. Ruben Skosso from Santander has a question. Good morning, everyone. I have 2 questions. First, can you tell us more about B2B segment and health services on the online channel? Because we see JPY 1,000,000,000 growing, but I would like to have more visibility about the of the online channel, what can we expect for the fourth quarter? And in addition to that, I would like to hear from Mauricio as well, how is the digital positioning of Via Varez as an increased investment in marketing that we have seen in the third quarter was one time off because of the app. We have structural change, something that we'll see next year. So I would like to see and to hear a little bit more of him on what we should expect in terms of marketing as well. Hello to Slabia when I will address the first part of your question. About other businesses B2B has good performance was an important growth when compared to prior year. Another component that is important here is wholesale. And then for wholesale, we are we work in the process, reworking the business, and that's the importance of impacting sales share, less years, there was a greater share there. And other things are part of these figures, but the main deterioration comes especially from wholesale. Which is positive. We understand it's just the right movement, and we want it to grow again. But following a more sustainable and profitable model. So B2B is going very well. It's growing. There are no partnerships coming in. The volume is increasing. We do have opportunities in wholesale. About marketing, yes, I can tell you a little bit. And but then and I'll I'll turn to Maurizio for his initial remarks on that. But I'm sure that with the maturity that we are gaining with Vianca. We have been able to have a a good visibility on the returns better than what we had before. Therefore, we can make better choices, choices based on the statistics on data and new attribution models, we see the increase of the customer lifetime value This is important. We didn't measure that before and now this is being translated on how we see now people were coming and buying with us more frequently. We do have a lot to improve, but there's an example of the increased sales via EMEA. And that reflects another direct coming we have had a better conversion rate because of greater relevance that we have now thanks to our advancement and segmentation. Therefore, we see that components of reviving and the importance of CRM growing as the Alunica matures and also increasing our returns on investments. And yes, we do have more investments to be made to make at the top of this funnel to acquire apps. That as we had in the 3rd quarter, and it should continue, maybe not at the same speed like, when compared to revenue. But instead, yes, we will have, important investments there. We we will have apps there implemented to improve our results from now on. I think that the trend for the next years that our understanding is not to increase the marketing investment as a percentage of the company GMV. We do have though with efficiency gains to be able to continue doing this type of rationalization, but we do understand that This is important, and we already see how this is going to reflect in the sustainable parts. Good afternoon. I would like to Ed. We are heavy and more precise. Are to sit in terms of marketing and investments in terms of our decisions? And it's very clear, maybe if you consider the variety and types of investments and all the fronts in which we invest with marketing and products. And together with that, we have an evolution on our technology base the growth in the app use, which should play a very important role in terms of sales channels in the next 2 or 3 quarters. And this also has to do with our marketing costs in order to reach sales because So, I mean, what he was saying, we have fundamentally a scenario in which we do not foresee increase in our marketing investments regarding our GMV and we have the opportunity ahead in this sense. Very clear. Thank you very much. Mr. Luci from BTG Pacto, I would like to ask a question. Good afternoon, everybody. My question has to do with the growth of the marketplace. Could you talk about the evolution in the number of sellers and SKUs over this quarter and Another question. What about the evolution of newcomers? What about the development of this and the last few months, what about our platform, the number of sellers, because you have been launching quite a few initiatives. And I believe that BMI will contribute to the growth of marketplaces in the next few years. So I would like to understand this evolution, please. Market base had a very good evolution in number of sellers over this quarter and a few quarters ago, we made a decision to make a more restrictive attitude in terms of the coming onboard of sellers. And this was very important for us. We were able to restructure the process. And in the last few months, we were able to combine an important inflow of sellers and maintaining our standard of quality With about 4100 sellers, active sellers and exceeding 2,000,000 SKUs in the same timeframe. And you saw the growth in sales is also coming very well and with a very good evolution and our participation is increasing overall. And we believe that this will in you from now on. So this is an important point. Now regarding to full commerce, we had the implementation and the launch of the store, the Filiposa, and we have other contracts that are being signed now. And it is also important to say that the integration of the company had an impact. And in terms of what we intended to launch in Food Commerce Systems and that will bring to us So a few months so that we may have a higher number of clients being included in the platform. We are progressing in these negotiations. A lot of people are interested both on the industry side and the seller side. And some new implementations are already happening and will continue to happen still within 2018. And our expectation is that as of the beginning of 2019, we might be able to have a more scalable and more massive coming onboard of new clients as soon as we are able to deliver all these adjustments, all the fine tuning that we are doing now. So we do not expect an impact. So within 2018, we will still see this format. But for 2019, this will be an important component of our strategy and evolution of the model as well as the revenue inflow that we will have because of the coming on board of new clients. From UPS would like to ask a question. Good afternoon, everybody. I would like to know what went wrong in this quarter. So for little has been said about BMI. And I would like to know, well, you already have 60% and the time for conclusion is much shorter. The performance is as you described. So with all that, the impact should have been positive, but I understand you had problems in terms of the implementation. Now what kind of problem did you face? Was it pricing problem or systems problem or maybe a blackout situation because we hear so many things that we don't really know what is going on. So what went wrong in this quarter with this implementation? Because it came as a surprise to us, And I would like to understand already linked to this. You talk about lower sales and services and credit operate Is this associated to the problem that you are facing in the operation of stores with the new systems, or is it just the change in your policy. So I would like to better understand. Carlos said that the court has started very difficult with competition and the problem of the World Cup, but I understand that you expected a certain improvement over the quarter and this did not happen. I would like to start with the impact of the systems implementation In this quarter, more specifically, and this was important because we made an in-depth change in the infrastructure of our stores. And in terms of connectivity, so that the new system could be implemented and also the implementation of the app. So I'm talking about 2 things. And like any other change, any other major change, there are some initial instabilities and some adjustments that are necessary, and they have already been carried out. Now we already have the system in place and the adoption was lower over the course of it. It started accelerating after we reach the higher degree of confidence in terms of stabilization of the system and the advantages that you mentioned that I talked about the problems that we saw recently, and that helped us in the quarter, as I'm always told said, we had 2 moments in the quarter, 2 different moments in the quarter. And the second moment was the moment in which we started to reap some benefits already. And we could have achieved a better performance if we had not needed to carry out the adjustments. And because of all that I have just described, we had we delivered the performance that you referred to And I would like to ask her to add Well, as Klabin said, as far as we were concerned, it would be fundamental for us in the 3rd quarter. Going back to Richard's questions to have these implementations in place so that we could go through this robust change. And in order for us to get into the 4th quarter already reaping the benefits of these changes and not having this only in 2019. So in case about these changes in the third quarter, that will this was very important for us. Of course, there is an adaptation period, a period in which we have to do the fine tuning because of that, we cannot reap all the benefits of all the advantages that are brought about by these tools and facilities. Referred to a change in our credit policy as well, and this was extremely positive for the company. And it is very positive for the company. If you look at the P And L And Financial Services, however, it brings about a lower revenue inflow and benefits in terms of our PDA and this revenue generation has an impact in issuance that's on our gross margin. But we already see a positive situation. And this is why I'd say that in the 3rd quarter, we had 2 different moments at the end of the 3rd quarter, with the tools already in place, mainly with BMI and the stores, we already see a gain in productivity in the offer of services especially Financial Services and Direct Consumer Finance, but we already allows us to go back to the trend of offers and sales, going back to the previous level, the level that we had before implementing these changes. And then this brings us the benefits that we expected from the implementation of the 2s. And we also have investment and adjustment in our marketing strategy that you can see in our results in a very positive manner. This has been showing a very good impact on the traffic of clients into the stores and also online integrated to the pricing policy. And here, I go back to what Richard was saying, allowing us to have an important evolution in our pricing model. Evening at the best. The best offer for the best margin and the balance between our offer and the margins. So in a nutshell, we had 2 different moments in the quarter. And in the second part of this quarter, we had very positive signs with a recovery of insurance operations and financial services and improvement in the traffic of clients. And the volume of our business as well. That this will continue for the next few quarters. Yes, I think it's a little bit more clear that is to say the adoption today is also more than 60% or almost 100% with BMI. Well, 70, 75%. And on a, but we will be finalized. We've ended the 3rd quarter with a certain in the fourth quarter, we will have a total limitation. And it is important to say that in terms of security. We have the 2 environments operating for those who had difficulty regarding the use of the new platform. The old platform is there. As a contingency and also being flexible as much as necessary in order to cater to everybody. And lastly, you talked about the volume of sales and that you have already recovered the level that you had before the implementation of the changes. Correct? I think this was this is what you said. We had an important evolution in the volume of sales over the quarter. And the shows a good level of productivity of the team, but especially the more positive combination of all factors, productivity offers, pricing and presence. For traffic of clients. With that, when you're talking about credit, I would like to add to what Paulo said. We have been talking very frequently about the change in our credit granting policy, credit assignment policy, and 3 years ago, it was around 70% approval. And now we have about 50% approval rate. So you can see credit revenue, you can see the improvements in RPA, part of the pre DDA is in credit. And you also have the financial expenses in the last quarter. We grew over 50% because of the credit operations. And this has an impact on the gross margin. This is important. But at the end, it is positive for the company. And as Paulo said, inside the store. We will be able to offset this lower rate of approval. So we will be able to offset this. There are other initiatives outside the stores as well. That will make our process much faster. And we also will be starting a pilot for our employees on December 5th, and this is part of what we call the digital CDCs. And And if you don't have a purchase approval because of your credit limit on your card, and this happens quite often. We will be delivering this as of December 5th, starting with our employees with our employees just to see if it really works. So then we will be pre approving this. And afterwards, we will make this delivery delivered or made available for everybody. What would be the effect of this lower credit approval rate on your margin. You had almost 400 BPS in terms of effect on your gross margin. Well, this has to do with revenue from credit operations and merchandise operations. With this impact on the gross margin because of our P and L, you have the interest revenue, of course, come into play. And you have the PDA and collection, etcetera, the financial expenses that you can see. So it's very easy to check the math of that, and you can see the impact there. Joseph Giordano from JPMorgan. I would like to ask a question. Good afternoon. I would like to ask a question. You talked about competition and that this had an impact the quarter. And when we look at the level of inventory of the company, you mentioned that this was kept due to strategic reasons. And I would like to understand the market in general. The inventory is slightly higher. And I would like to know if we should expect Via Varejo being a little bit more aggressive commercially speaking. May be waiving a little bit of the gross margin in order to recover growth and Felipe talked about the cost. And I would like to understand besides the consumer direct, the CDC, what could we see on Air Fox And how would you monetize this platform initially? And if possible, could you give us some details about the economics that beyond this. Hello. This is Paulo, and I will be addressing the first part of this question about this best quarter. We are prepared to have a strong quarter. We know that we are just in the beginning of the 4th quarter it is a period that has great influence with Black Friday and Christmas. So our performance depends upon what lies ahead. But all investments that we're making now that all those changes and a well positioned inventory that we have All of that allows us to have a robust planning. I think we are well prepared. Visavis or negotiations with the industry, also pricing model models evolution and marketing as well. We are starting this quarter with new configurations. The app is the 1st one that we will see if the app is going to be available. We'll be able to offer different things to our consumers. We'll have more for the givoting more ability to serve customers. So we are optimistic about a good execution in this last quarter. And the combination of factors and a well sized inventory for a robust sales period make us feel comfortable about facing this moment. Good afternoon. About AirFox. Let me give you more information on this. On December 11th, We will start a pilot of AirFox. We'll be able to conclude all the credit operations in the stores that we'll be selecting as pilot stores. So you will be able to have that type of availability of credit operations at those stores. We are already operating right now. We are just concluding the process. The bid for the prepaid card in the digital account is So we are working with a banner, also another for a processor, another one for the card issuer. In December, we will conclude the bid for these three areas. So we should have the prepaid card linked to the digital wallet very soon. Brand is very important for us. We have everything ready in our portfolio, but we have suspended another area right now because we are studying the the brand. We're working with that with AirFox to see if AirFox is the name that we're going to see if we will change that name or to which brand, which name we will switch if that's the case. So right now, we are working on a strategy to tap into clients, but start, we will depend on the conclusion of the study, which should happen in January. But we are in line with the process with the schedule that we have established and taken to the board next week will come up with a new agenda to see if we can expedite the process. And this is a network effect business, the fastest, the best So that's how we are working now. We are checking how we can accelerate it expedite this process, and we are following this up very closely so that we can deliver all agreed due dates. Tobias Suttelin from Citibank. Hello, everyone. Hello, Fazil. When you're talking about the quarter, you said we are growing and now, once again, you said 77 5% with EMI, but you know you said that we know that we have challenges ahead. And I would like to know what are the great challenges that you see ahead. You have to conclude the rolling out in this 4th quarter. And what is your main concern in terms of challenges now? And Another question. You have been testing PMIs in 100 stores and now you're saying we are expediting the rolling out. These tests that you have before and these 100 stores didn't give you visibility enough. Anything went out of your control, was that Was there something that you did not see in the past? Yes. We do have some challenges ahead. And I think the challenges are always there, but Zealand as structural stage, we need to take the final steps on our integration process. We have gone forward very well in the project. I told several of you, and I don't know if I did talk specifically to you, recently. But we have started the transferring of systems in a partial way so that we could forth and, safe side, we have ran dozens of 1000 of orders from the online, and there's no system of Via Varejo. And by running these thousands of orders, we transfer categories furniture, TVs, mobile phones, and so on. And this partial transfer allowed us to, identify adjustments, but improvements that needed to be made at that moment of the integration. And we have then decided that this transferring process right now so that we could go through Black Friday and conclude this transferring process after Black Friday turning everything into a single system after that. And so that, at the end of December, we would have the total integration of the company starting 2019 with a single system and under a single company ID number. I think this is going to be the most important in terms of operations of processes and systems. But yes, we are following our schedule. We have a learning curve. We are taking the best out of these new systems and new processes. And we do that when we work on it. And now we are working on a continuous improvement system. On top of this margin and business structure, we have designed. It's important for us to know that we have that ahead. We are optimistic regarding the choices we have made that are mitigating risks of such an implementation, but this is a huge implementation and we are working hard so that we have no major impact. About BMI, yes, we did run the pilot project. And when we scale it to other stores, it's only natural that in, in the scaling process. Other things did come up. I think that did not show in the pilot process, but nothing critical. It's important to mention these were natural instabilities of a large rolling out process. They were quickly addressed. And they are part of this type of process, this type of rollouts. And I am sure that other companies that have done the same thing also had the same problems. And we now are confident that we have a stable process and that is already bringing us gains, as we have already mentioned. Just a quick follow-up. If we look at a trend and everything that you have said before, of sales that have grown, but did not grow that much. It was the modest growth. The margin dropped a lot and you have the impact of the financial services that Negron has said. So you had expenses, you had marketing, you did a lot is to grow sales, but sales did not react or didn't react as expected. Obviously, you might and systems and other factors, but the most thing I had, and considering that improvement trend, What can we expect for the fourth quarter? Do you believe the margin will come back to normal sales are towards the better direction because this scenario is different, right? To be assessed as Paulo? Do you know that we do not provide guidance. So I will try to help you in this rationale. As we said, we had a quarter with an important growth in different factors. Those are present at the end of the 3rd quarter with the extent of the performance. We also do depend on market conditions also in this third quarter. But as far as this period is concerned, where we have the great seasonality of the year, we do have a great expectation of sales increase. We also expect it to grow in margin and also a greater demand expressed by our no marketing strategy, considering that all of that is a combination in order to have more sales and more margin. So a better execution, maturing the execution with our investment that we have in Medicaid, that has great tools that are helping us to make decisions in terms of pricing, media, and sales. And we believe that fourth quarter will have a great performance. Thank you very much. And now the Q And A session. We would like to turn the floor back to the company for their final remarks. Very well. Thank you very much for participating for asking questions. And I would like to stress that the whole team is committed to keep on working hard on the company accelerating in this transformation process. And looking for all types of opportunities we can to generate value that is going to be reflected in our P and L in the short term. We have to do both things together at the same time. Working with these strategic partnerships, we, for see a successful path ahead. Although we know that we will have challenges in the future. Once again, thank you very much and have a nice afternoon.