Earnings Call: Q1 2025

May 14, 2025

Summary

Adjusted EBITDA stayed positive at BRL 1.5 million, while GMV rose 4.4% YoY to BRL 399.1 million. Core marketplace growth and a 57% gross margin offset Elo7’s weaker revenue and GMV.

Good afternoon, ladies and gentlemen. Welcome to the earnings conference call of Enjoei for the first quarter of 2025. This video conference is being recorded, and the replay can be accessed on the company's investor relations website. The presentation is also available for download. Please be advised that all participants will be in listen-only mode during the presentation, and later we will begin a Q&A session when further instructions will be given. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the business prospects of Enjoei, projections, operating and financial goals, constitute the beliefs and assumptions of the company's management, as well as information currently available to Enjoei. Forward-looking statements are not a guarantee of performance and involve risks, uncertainties, and assumptions as they refer to future events, and therefore are dependent on circumstances that may or may not occur. Present here in this conference are Ana Luiza McLaren, Chairwoman of the Board of Directors, Tiê Lima, CEO and Investor Relations Officer, Iuri Lima Ribeiro, Growth Officer, Joel Queiroz Junior, COO, and Angela Ferrante, CFO. Now I would like to turn the floor over to Tiê Lima, who will begin the presentation. Please go ahead, Tiê. Hello. Good morning, everyone. Thank you for joining us in our earnings release conference call. I would like to start by sharing with you the main highlights of the quarter. We continue to advance consistently in our main operational metrics. For the sixth consecutive quarter, we reached a positive EBITDA, BRL 1.5 million. In the financial aspects, our GMV totaled BRL 399 million, driven by Enjoei's performance, which grew by 9.3% in this quarter. Net revenue reached BRL 60.7 million, with Enjoei growing 10.6%, while Elo7 declined 19.7%. Part of this decline in Elo7 is attributed to a lower revenue base due to a reduced freight rate table, because logistics of Enjoei was joined to Elo7. That was partially offset by a higher gross margin. Speaking of margin, the consolidated gross margin reached 57%, an increase of 2.7 percentage points. Individually, Elo7's platform grew by 8 percentage points year-on-year, reaching 66.6% in the quarter. As mentioned earlier, part of this drop in freight revenue became a higher margin for Elo7. Our gross profit totaled BRL 34.6 million, up 3.5% year-on-year with a margin of 57%. Another important point is EBITDA, which reached BRL 1.5 million with a margin of 2.6%. This performance was supported by initiatives to reduce administrative expenses, which declined by 4.5 percentage points as a proportion of net revenue. In addition to adjustments to performance marketing strategy, we reduced by 13% advertising expense year-on-year, and Enjoei cut investments 20% compared to previous year. Our operating cash generation reached BRL 11 million, a 51% increase compared to the first quarter of 2024, and a consolidated cash position remains solid at BRL 196.7 million, which shows our capacity to continue to grow sustainably. Our GMV reached BRL 399.1 million, a growth of 4.4% compared to the same period of last year. This shows the strength of our operation despite the beginning of this year, which is challenging. GMV of Enjoei grew by 9.3% with BRL 311.7 million. This shows our strategy of assortment and greater retention of buyers and more engagement of sellers, which is a pillar of our growth. On the other hand, Elo7 had a more challenging scenario with a decrease of 10.4% in GMV. Totally, it's BRL 87.4 million. This was expected due to the seasonality of the period and the base rate that is part of GMV. However, it's important to highlight that we see signs of recovery, especially in the average ticket, which remains high. Finally, our net take rate ended the quarter at 17%, which is stable compared to the same period of 2024, despite a small decrease in the gross take rate, which was offset by the quality of transactions with a higher average ticket for users and greater conversion for channels. These figures reaffirmed the strengthening our business model despite a more challenging performance and environment, which gives us confidence to continue our strategy of sustainable growth. Our number of buyers remains stable at 2.3 million users, which shows the strong loyalty of our user base, which continue to trust the platform. At the same time, sellers grew by 12% when compared to the previous quarter. This growth shows how our platforms are becoming more attractive for sellers, thanks to incentives such as credit and improved sales experience, which results in greater inventory. The number of listed products increased by 8%, with 16 million items in total. In the first quarter of 2025, we advanced in our strategy to open franchises with a new store opening in Goiânia, with very positive initial results. Sales 25% higher than the best opening of Enjoei in the last 30 days, and a very strong engagement in social media. This reinforces the potential of our franchise model to increase our presence in the market. Our pipeline of franchisees remains rather active, reflecting a growing interest in the franchise model. In parallel, Cresci e Perdi ended the quarter with 543 stores and solid financial operations. Net revenue reached BRL 16.4 million. EBITDA margin remained high at 72%. In addition, we recognized equity income of BRL 2.2 million related to our 25% ownership stake in the company. These figures show the strength of our expansion model and sustainable growth of the business, which has to do with our strategy to grow in the long run. Now Angela will talk about the financial results. Thank you, Tiê. Good morning, everyone. I'll now detail the main financial indicators of the quarter, focusing on profitability and development operational efficiency. Starting with margin. We reached 57% on gross margin in the first quarter of 2025, an advancement of one percentage point when compared to the previous quarter. This movement is a direct consequence of the dilution of service costs, which remains at a downward trend consistently, and now at 43% of the net revenue, the lowest levels in the last three years. This efficiency has been boosted mainly by the renegotiation of contracts with logistics operations, the integration of Elo7 volumes, and the improvement of system improvements such as automatic freight at checkout, which allows us to tell what's the best cost option. Our net revenue in the third quarter of 2025 was BRL 60.7 million, close to stability when compared to the same period of last year. In operating expenses, we remain disciplined. General and administrative expenses, ex-SOP, totaled BRL 21.7 million, a reduction of 5% when compared to the previous quarter. When analyzed with regards to the net revenue as a percentage of net revenue, they went from 40.4% to 35.9%. Advertising expenses were also reduced by 13%, reflecting the most efficient use of resources and funds with better return channels focused and incentive in media. With that, the adjusted EBITDA was positive at BRL 1.5 million, despite a less favorable macroeconomic scenario and a quarter that has been historically lower in seasonality. We ended the period with a cash position of BRL 196.7 million, which gives us flexibility to advance on the franchise model and making technology improvements to the online channel. In summary, we remain steady in the execution of a lean, scalable, and financially sustainable model. Our indicator shows that we are on the right path with control of expenses, discipline, and capital allocation, and focus on margins. Now I turn the floor over to Tiê for his final remarks. Thank you, Angela. In the future, we remain confident on the consistency of the growth of GMV and revenue of Enjoei, while we adopt a more cautious position regarding future scenario for Elo7. We'll be strict regarding sales costs, especially freight, in order to keep the health of our gross margin. Whereas for expenses, we have reviewed our personnel and made some adjustments to our teams in order to reach further savings in payroll. Our advertising expenses has a CapEx rate over as a percentage of net revenue, always looking at most efficient use of such funds. Our main goal is to maintain an EBITDA margin that allows us to generate a positive cash flow. That is essential for sustainable and efficient capital allocation for investments in the middle and long run. Talking about investments, we will continue to strengthen our platform, investing in projects that increase liquidity and reinforce recurring projects. We are focusing on our payment projects, trying to reduce financial expenses and expanding our share in value chain. As for brick-and-mortar stores, there was a very positive performance with growth in sales. The opening of Goiânia store exceeded our expectations, showing that our learnings are consolidating and preparing the ground for a more consistent growth. Thank you all, and now we're open for the Q&A session. We will now start the Q&A session for investors and analysts. If you would like to ask a question, please click on raise hand and enter your name and company in the Q&A field. Our first question comes from Larissa from XP. Good morning. Thank you for taking our questions. First, in the Elo7 dynamics, we saw a very resilient performance, and Elo7 had some difficulties in this quarter. It would be nice if we could have some color about this logistics change that was so heavy on the BU top line, and what should we expect going forward. We saw on the presentation and on the release that there has been a recovery in the BU dynamics. So what do you expect for the rest of the year? The second question about the acquired company, it would be nice to learn more about Cresci e Perdi. There was a decrease compared to last quarter, maybe some seasonality effect. But if you could tell us about the demand and growth prospects, it would be very nice. Thank you and congratulations on your results. Hello, Larissa. Thank you for the question. I'll start with Elo7 question. Something that you can notice, especially when we look at the subsidiary results for non-consolidated figures, is Elo7 margin increased by 8 percentage points year over year. It went from 58% to 66%. That is due to this freight dynamics. We negotiated freight rates for Elo7. We have the recognition of freight revenue. The revenue decreases the denominator over this space. Since we reduced costs as well, the margin has gone up. When I looking forward, this margin is a bit high. How much we have to decrease margin and have growth with a positive variation? We were a bit more conservative in terms of raising margin because we want to simplify our sales model. This new freight table was essential not to hurt the profitability of the company in the growing process, and the base of revenue is a bit different, is a bit higher. We'll use this margin in our favor to grow Elo7. The revenue by seller is our main focus. We have a lower number of sellers in Elo7, but they sell a lot. We'll apply the same concept of same store sales, so same seller sales to Elo7. We can balance this out. We'll use the margin in our favor to promote growth. We see room for growth in sellers without having to invest more in marketing. This will give additional confidence despite the reduction in revenue, it was offset by the increase in gross margin. Cresci e Perdi, yes, there is a seasonality effect in the beginning of the year. The network is resistant in number of stores. It remains sustainable. In terms of new stores, with the focus we're giving on the efficiency of current stores, we want franchisees to notice that we're focusing on themselves instead of growth. We want to send a message to franchisees that we're focused on the quality of the current network, rather than growing the number of franchisees. Okay. That's very clear. Thank you. I would like to remind you that to ask a question, please type your name and company name and raise your hand. The next question comes from Jessica Mellor from JP Morgan. I have 2 questions. First, I would like to understand how you see the development of margins for this year. I understand that the first quarter of the year has started with some adjustments, rate for Elo7. How do you see this development looking forward? The second question is about marketing, because we've seen a significant reduction in this quarter. I would like to understand, how do you see the dynamics of this line in the next quarters? Jessica, thank you for the question. I'll start with margins. We see a consolidated margin at this level we reached, 57%. This is our goal. The composition of our margin comes from the consolidation of both results, Elo7 and Enjoei. Although Elo7's share in revenue has decreased, the gross margin has increased, so that offset the dilution of the presence of Elo7 in the composition of revenue. Enjoei's margin is also keeping high. We believe that we can balance both margins as Elo7 resumes growth, and then we'll have a consolidated margin at the level of 57%. Elo7 has grown 8 percentage points compared to last year. As revenue of Elo7 grows, we'll create dynamics of growth revenue that won't reduce margin. The net result will be higher. We see dynamics, in freight subsidies and things due to the new freight table, and that is related to marketing. Since we have a very clear goal of reaching an EBITDA level that causes the company's cash flow to be positive, we established CapEx rates or ceilings for all expenses, including marketing and advertising. This year is lower than last year because we are not in a period of growing the number of users. We are increasing the revenue and the number of transactions per user. We saw the customer base growing recently, and now we are improving the dynamics of our customer base. We had a growth of 49% of sellers. We do not need new sellers, and we have liquidity dynamics. We established nominal lower rates and percentage of net revenue for Enjoei. In Elo7, there was a reduction. In this first quarter, this was not favored due to the changes in the sales policy, but we are establishing limits or CapEx rates for next quarters, and we expect it to become stable throughout the year. The two questions are connected, so I hope I have been able to answer both, Jessica. That is very clear, Ti. Thank you very much. If you want to ask a question, please click on raise hand and type your name and company name in the Q&A field. Please hold while we collect the questions. The Q&A session has now ended. I would like to turn the floor over to Ti Lima for his final remarks. Thank you all for attending this earnings conference call. The message is about what we see forward. We were discussing about establishing very clear goals for stability of our gross margin, the growth of business units, also in other lines of SG&A. We are decreasing general expenses. There are dynamics in the payroll expenses. We have implemented this in May. We established limits for payroll over net revenue, CapEx over net revenue. We reduced our staff by 50 people, which had a very positive effect on financial expenses and CapEx, and we are already operating like that. I would also like to thank everyone that has brought the company so far. It is great to work with you, and thank you all very much. Goodbye. The conference call of Enjoei has ended. We thank you all for attending and wish you a great afternoon.