Earnings Call: Q2 2025

Aug 14, 2025

Summary

Adjusted Q2 operating results were positive for a third consecutive quarter as cost reductions and profitable-contract focus advanced the transformation. Debt restructuring strengthened liquidity, while the next phase targets profitable growth and completion of operational changes by Q4 2025.

Good afternoon, everyone. Welcome to Infracommerce's second quarter 2025 earnings webcast. My name is Bruno de Andrade Vasques, CFO and IRO, and I'll be hosting this earnings call alongside our Global CEO, Mariano Oriozabala. Before we proceed, I'd like to highlight that both the slide deck accompanying this discussion and our audited financial statements are already available on our investors relations website. This presentation and our management's remarks may contain forward-looking statements based on current and reasonable assumptions. However, it's important to know that such statements are no guarantee of future performance. Various factors, including risks and uncertainties, may cause actual circumstances or events to differ materially from those discussed herein. Consequently, the company's future results may vary significantly from those expressed or implied in these forward-looking statements. Finally, we recommend that the metrics discussed today not be analyzed in isolation. For a comprehensive view, please refer to the full financial statements available on our website. The second half of the year marked another critical milestone in Infracommerce's transformation journey, shown not only by our positive operating result as measured by EBITDA, excluding CapEx, receivables, financing expenses, leases and impairments, but also by the completion of our debt conversion into mandatorily convertible instruments, thereby optimizing our capital structure for the medium term. Let's get started with an overview of our consolidated financial results. As in the last quarter, we measured operational performance through accounting EBITDA, deducting lease expenses, CapEx expenditures, both technological and structural, and adding expenses related to the add back of receivables financing cost, which are accounted for as financial expenses, thereby neutralizing the impact of advance revenue recognized in the 2024 income statement. Finally, we excluded non-cash impairment effects. With these adjustments, the accounting EBITDA reflects, in an assertive and transparent manner, the company's operational cash generation capacity. All calculations are thoroughly detailed in the earnings release and can be directly reconciled with the financial statements. That said, we highlight a positive operating result of BRL 4.6 million this quarter, reporting positive numbers for the third consecutive quarter and reversing a cash burn of BRL 103.6 million in the same period last year. In Brazil, we resized the organizational and logistical structure, optimized systems and processes, and captured efficiency gains and synergies across operations and geographies. As a direct result, total costs and expenses this quarter, excluding impairments, amounted to BRL 187 million, representing a significant 50% reduction year-over-year and a 6% decline quarter-on-quarter. Customer profitability is shown by a six percentage point gross margin improvement versus Q2 '24, excluding advance effects driven by our focus on profitable clients aligned with our value proposition. We stabilized operations in Brazil, reversing a challenging cash burn scenario of BRL 146 million in the first half of '24. In the rest of Latin America, we continued our trajectory toward operational profitability in our major markets, capturing scale efficiencies, post consolidation of the acquisitions made throughout 2023. This is demonstrated by a positive operating result of BRL 7.5 million for the semester, up BRL 21 million year-over-year. The company's consolidated net income is significantly impacted by financial expenses, which will largely be subject to capitalization and depreciation amortization of past investments. The reduction in CapEx demonstrates our management's commitment to strictly necessary and profitable investments aligned with our transformation agenda. The company's liquidity analysis is intrinsically tied to our liability restructuring plan. Currently, the company has 865 million BRL in financial instruments recognized as liabilities, which will be settled through capital increases under the respective instruments term within five years. Therefore, our adjusted net debt, excluding balances from financial instruments that will not have cash impact upon settlement, shows a positive position of 29 million BRL. This means that our cash balance of 101 million BRL at the end of Q2 '25 exceeds the financial liabilities, which will have a cash impact of 29 million BRL, providing greater clarity to the company's future liquidity metrics, post-capitalization of convertible liabilities. As for shareholders' equity, currently reported at a negative balance of 201 million BRL, this position will be restored once the convertible instruments are effectively converted to equity. Our management has dedicated all efforts to renegotiate and restructure our main debt obligations continuously and diligently analyzing the most appropriate structure for financial recovery, always acting in the company's best interest. Good afternoon. Thank you for joining us. Over the last nine months, we've executed approximately 75% of our transformation plan. Our objective has been simple and consistent: to streamline the company and enhance operational consistency across the region. What has changed during this period? We've simplified both our portfolio and operating model. We prioritized value-generating contracts and channels, removed friction from critical processes, and reinforced cost discipline. As a result, operations have stabilized with more predictable service metrics, higher productivity, including automated distribution centers, and regional coordination working under common standards. On the technology front, through our alliance with Google, our artificial intelligence initiative is already delivering measurable operational impacts. We remain focused on optimizing service efficiency and quality, prioritizing projects with tangible returns and scalability. This AI-first model, centered on automation and concrete execution, is what we've been communicating. From a financial perspective, we maintain disciplined capital allocation, carefully managing cash and liability organization, which ensures management predictability. On the commercial front, we focused on process and contract discipline, prioritizing revenue quality over volume. Our focus on securing new clients with solid midterm contracts support disciplined growth and enhance revenue predictability. We enter the second half of the year to complete the final stage of our plan. We will optimize our client portfolio and operations, consolidate processes with proprietary technology, and scale the AI use cases that have already proven successful. This operational completion positions us with a unique service and cost standard for 2026, along with a clear innovation investment roadmap. Our purpose remains to connect brands with lives and make it simple. None of this would be possible without our teams. To those who persevered through the most demanding moments and to those who joined with fresh perspectives, thank you. The talent that transforms the way things are done remains our most valuable asset. To our clients, thank you for your trust. And to our investors, thank you for your ongoing support and constructive dialogue. We continue with disciplined communication and rigorous execution. Thank you very much. Now let's get started with the Q&A session. Our first question comes from Marcel Jelasik, which was sent in writing. He says, "Good afternoon, everyone. I would like to thank the management for their hard work and completion of their structuring plan. The company has been showing good operational efficiency indicators, but the volume of revenue has been decreasing. Can you comment on the operational continuity and how revenues can be increased from now on? Thank you very much. Good morning. Actually, good afternoon. As I said earlier, we've been working hard to optimize contracts, especially those that were not profitable for the company. We now have a positive operational margin in all of the contracts that are ongoing. Since I joined the company, my focus has been to make the Brazilian operations profitable, and we are now reaching this level that we expected. Now we have a new challenge, which is to go back to the market to secure new and better contracts to resume growth. Our operations now are very robust. We've had three quarters of positive results in a row, and we continue working hard to keep up the good work. Our next question is from Clayton Turine. Can we estimate when the Brazilian operations can become profitable? Good afternoon, Clayton. The Brazilian operations has started to undergo an operational restructuring process in the second half of 2024. Very quickly, these operations have stabilized, and that was the main goal of our management. Stabilize cash burn, resume operational indicator levels, take our brands closer to consumers with operational indicators and quality indicators aligned with state-of-the-art players, and this has been done. When we look at the second quarter of '25, the company reports a loss of approximately BRL 61 million. This comes from BRL 43 million of financial expenses coming from the mandatorily convertible instruments and depreciation and amortization around BRL 19 million of past investments. Having said that, we can give a very straightforward interpretation of these numbers. If we exclude the financial expenses effects that are not materialized as cash effects and depreciation and amortization of past investments that the company's now stabilized. As Mariano said in the previous answer, we're now ready to use our scale and expertise to leverage the businesses of our brands and future brands in a digital environment. We have received a few questions that have similar content. They ask for updates on Banco do Brasil and Caixa Econômica marketplaces, and also updates on the contract with the Correios, the Brazilian Postal Service. Thank you for these questions. Our company has as policy not to give individual guidance on contracts, except they are relevant enough to interfere in the company's economic assessment. These three contracts are significant contracts to be added to the other contracts that we manage at the company. We now serve around 200 brands in nine countries in Latin America. The Banco do Brasil and the Correios operations are two of those contracts. The Banco do Brasil operations started to gain scale in the first quarter of '25, but their individual results were not highlighted in our release, and the Correios operations are a bit more incipient. The platform was developed in the first quarter, and it was shared with the audience now. The first fruits will be registered in September's number and released to the market in our next earnings conference call. We have received several questions about the company's debentures and possible impacts on the figures. The management will now comment on this. Thank you very much for your questions. This is a very important topic. We've been communicating our process of restructuring the financial liabilities in the last 12 months in a very transparent manner. In the second quarter, we closed a very important chapter in the history of Infracommerce with the settlement and integralization of convertible debentures. The banking liability of BRL 740 million were converted into mandatorily convertible instruments. The maturity of this debenture is 5 years. From the end of May till these 5 years, these debentures will be convertible, either in an electable manner by the holders and mandatorily at the settlement date. With this, we complete the company's deleveraging process. At the end of Q2, we had a cash balance of BRL 101 million. When we look at the company's debt, the debt level, which will be settled with cash, adds up to BRL 73 million. The net cash, excluding the debt that is mandatorily convertible, adds up to BRL 29 million. This is an important milestone in the company's financials transformation. Our restructuring process has two pillars, the financial restructuring, which has been shown on the slide, and the operational restructuring process that was discussed in the previous questions. The financial restructuring does not interfere in our business operations. On the contrary, it strengthens Infracommerce once it readapt our capital structure and we have a financial stable company, an operational stable company that can now scale the digital businesses of the brands that are already working with us and those that will be working with us in the future. Our next question comes from Jose Enrique Miranda. Good afternoon. You said that 75% of your operational restructuring has already been completed. What will the other 25% refer to? Good afternoon. We keep on working on structural adjustments and office rental cost, distribution centers rental costs. This work shall be completed by the last quarter of 2025. We are taking all of the Brazilian operations to this new level and will start 2026 with everything running smoothly. This is the plan that we have already devised and is now being executed as planned. There's still a lot to be done in terms of technology. We are capturing synergies with the unification of the Latin American operations, and these results will be much more visible in 2026. We have a few questions about some future numbers and guidance on profit and revenue for the coming quarters. Let's hear what the management has to say about this. Thank you for your questions about this. Let me reinforce that the company now has chosen not to give any financial guidance to the market, either related to profitability, net income, speed of the debenture conversion, and so on and so forth. Let me reaffirm our commitment to a disciplined execution of our transformation journey. We're being very strict in assessing all of our investments, and we are prepared to support our existing clients and new brands with digital growth and to complete the restructuring process, as Mariano just mentioned, to complete this stage in all of the countries where we operate. If there are no further questions, this concludes the Q&A session, and I turn the floor back to the managers for their final comments. Thank you all very much for joining us this afternoon, and special thanks to the over 2,000 Infras that have helped us throughout this transformation. We feel full of energy and happy to be a part of this new journey of such a beautiful company with a special mission in our society, which has become even clearer during the pandemic. Which is to bring the different brands from the different segments to different consumers in all the countries where we operate. Thank you