Good morning and thank you for holding. Welcome to Grupo Multi's Conference Call today discussing the earnings release of the first quarter of 2025. If you need simultaneous translation, this tool is available on the platform. Simply click the interpretation button at the bottom of the screen and select the language you prefer, Portuguese or English. For those listening to the conference in English, there is also the option of muting original audio. We inform that this conference is being recorded and will be available on the company's IR website, where you will also find the complete set of materials for our earnings release. You can also download the presentation on the chat icon, also available in English. During the company's presentation, all participants will have their microphones disabled. After that, we will begin the question and answer session.
To ask a question, click on the Q&A icon at the bottom of your screen and write your question to join the queue. When your name is announced, you may enable your microphone, and we ask you kindly that all your questions are asked at that time. Note that the information in this presentation and statements that may be made during this conference call relating to Grupo Multi's business prospects, projections, and operational and financial targets are based on the company's management's beliefs and assumptions, as well as on currently available information. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions, as they refer to future events and, hence, depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future performance of Grupo Multi and lead to results that differ materially from those expressed in such forward-looking statements. For the full disclaimer, please check this presentation's second-to-last slide. Here with us, we have the company's executives, André Poroger, CEO, and Richard, CFO and Investor Relations Director. I turn the floor to Ms. Poroger to begin the presentation.
Good morning. First, it's a pleasure to be here for the first time officially as CEO. It's a pleasure to have you all here. I'll talk a little bit about our results of the first quarter of 2025 and some highlights now. Then I'll turn the floor to Richard, who will bring you more details on the financials details. Then I'll go back to talk about results per business unit and some of the initiatives that we started working on at the beginning of April. Okay, to talk about the first quarter of 2025, I think it's important for us to give you some context of what was happening at the end of the year. We're talking basically about January, February, and March. All of you know what was happening at the end of December.
We had a hike in the USD appreciation, getting as high as BRL 6.26 to the dollar or close to that. Of course, this scenario affects our costs and generates a lot of uncertainty in terms of the demand. We started the year with a turbulent scenario with uncertainties. The last quarter of 2024, we concluded indicating a price increase, especially due to the appreciation of the U..S dollar. We also had, obviously, the impact of costs and CPV and the products that were provisioned and paid in this period from January, especially January and February. The year begins with a lot of challenges and turbulence. We will see a little bit of our highlights. Even within this scenario, I think we were able to maintain an increase in our revenue, 4.5%, compared to the same quarter of last year.
It is important to mention that we exclude the products that are already discontinued and inventories have been concluded, such as our own-brand smartphones, home appliances, and some lines of the security division. We were able to slow down and discontinue these lines. If we exclude them, we grow 11.2% compared to the same period of last year. That is good news of revenue increase compared to the same period of last year. Now, in terms of EBITDA, we understand that our EBITDA is still below our plan, below ideal. At the same time, we understand that considering all of the scenario and what we saw happening in terms of contacts, especially in the beginning of the year, we understand that this is a good result. We are within positive numbers.
As you know, Multi is coming from a period of recovery in terms of the results. If I'm not mistaken, it's been some quarters, almost a year since we've been achieving positive EBITDA every quarter. It is still below what we would want, what we aim for, but this is results that show recovery. Maybe not as fast as we would like, but it is consistent recovery. This is very important. Noting that we had impacts, even with impacts of cost increase, as I mentioned, driven by the FX variation at the beginning of the year. There is also the carryover of inventory that were from higher operating costs. In the fourth quarter, we also had the impact of the drought in Manaus. It is a lot of operational costs, logistics, and inventory storage. There is also cost pressures from that.
Within possible, we were able to pass through this in terms of price increase. We are still far from what we would want, but it is the results that we have that is positive in this first quarter. The good news comes from net income. The year started turbulent. Nobody knew our partners or where the FX rates would reach, but the exchange rate gave. Last year, we struggled a lot, as you know, with FX variation. It is a lot of variation throughout the year, and that obviously affected our sustainability with such high variation, which is uncommon. Now we are able to turn this loss around a little bit. I think it is good news. That is always good. We are happy to turn the profit again and remaining at this level now. We believe there still may be increases in the coming quarters.
So basically, I think that shows a little bit of our recovery and the sound historical levels, not as fast a recovery as I said, but it's important to maintain revenue. Revenue is what enables our machine to move and all of our structures. Even without the products that we discontinued, we concluded projects and had lines growing. That's all good news in the turbulent scenario. I'll turn the floor to Richard to talk briefly about the numbers, and then I'll come back for the business units.
Thank you, André . Good morning. Let's talk a little bit about our revenue, income, and gross margin. As André highlighted, we had an increase in net revenue at 4.5% compared to the same period of last year and 11% if we exclude the effect of discontinued products.
The evolution compared to the fourth quarter is basically due to seasonality, as you all know. The last quarter, the second half, especially the last quarter of the year is stronger. The effect here when we compare the first quarter to the last quarter is due to seasonality. On gross income, the highlight, as André mentioned, is our gross margin. We were able to maintain the same level of gross margin that we achieved in the last quarter of 2024, the fourth quarter of 2024. Despite the increase of costs due to FX variation and challenges in the logistics side and the reduction of our margin due to the manufacturing project effect, we were able to maintain margin. That also due to our ability to price our family. We were able to evolve 1.2 percentage points in margin compared to the first quarter of last year.
On the next slide, our EBITDA, when we look at its effect in the fourth quarter, BRL 5.5 million compared to the first quarter of last year, it's very favorable. It's a recovery of BRL 32 million. The last quarter was BRL 34 million. That's a decrease, but it's important to highlight that in the last quarter of 2024, we had approximately BRL 32 million of favorable effects of extemporaneous credits and investment assets. In the comparison, we have to consider this extemporaneous effect one-off in the last quarter. In net income, when we look at the progression here, it's extremely positive of BRL 64.6 million positive, in part effect of our positive EBITDA and the effect of a favorable FX variation in this quarter.
The financial result of the first quarter of 2025 was positive in BRL 65 million due to the positive FX variation of BRL 139 million. If you look at the last quarter, the FX was unfavorable in BRL 210 million. It is important to note that due to the change in FX variation from the end of last year to this first quarter, it affected the net income. A point that we always mention is in terms of our inventory. This chart here shows you the inventory in-house and shipped, raw materials, finished goods in-house and shipped. As you can see here, our inventory for this first quarter of 2025 reached a level of BRL 1.7 billion, a BRL 200 million increase compared to the fourth quarter of last year. This increase is basically due to an important factor here behind screens and projects.
We anticipate the purchase of screens in this first quarter, even to be prepared for the potential risk of a drought in Manaus, as we had at the second half of last year, the drought. This year, we're moving ahead, purchasing raw materials to produce screens to protect ourselves against the potential drought in the second half of the year in Manaus. That explains part of this increase, BRL 150 million that you see at the bottom of the screen from BRL 452 million to BRL 605 million. Part of it is because of this purchase of raw materials for screens, as well as the ramp-up of our manufacturing project. These two items are making our inventory levels increase. The increase in inventory is due to these two aspects. We're maintaining our discipline in purchases and in turnover for the other items in our portfolio.
When we look at this chart, there's a low increase of 4% in our inventory of other items in our portfolio, BRL 45 million approximately. This is our focus for the inventory in the first quarter. The increase is basically due to this anticipation of screens and our projects. Now, on cash flow, we started the year with BRL 744 million cash, and we're ending the quarter with BRL 472 million approximately. There was significant consumption of BRL 330 million of operating cash. When we look at this chart, basically, it's working capital. We had cash generation positive coming from EBITDA, BRL 7.5 million, and some items is BRL 14 million. We had BRL 139 million of positive FX variation in our results with BRL 43 million approximately favoring our cash position. Then we have working capital, BRL 251 million unfavorable. That's consumption.
That effect of BRL 250 million comes from the payment of the purchases we made in the third quarter of last year. As you remember, the company, due to all of the uncertainties in logistics and the drought in Manaus, we started advancing the purchases with important purchases in the third quarter of last year and delays. The products took a while to get here. We negotiated a more dilated maturity with our suppliers. The maturity of these purchases was now in the first quarter. That justifies, that explains that consumption of BRL 250 million. In tax credits, we had a buildup of BRL 83 million, most of it coming from the increase in inventory. As we said in the previous slide, we increased our slide and our inventory in almost BRL 200 million, and that explains this.
In others, we had a consumption of BRL 31 million due to the payment of interest rates, BRL 18 million, and other variations in our liabilities, basically in payments of freights, conditions, and so on. Of these BRL 330 million of cash consumption, most of it is due to working capital. That is the payment of the purchases and the accumulation of tax credits. This will be timely. Once we sell the inventory, we get this tax credit back into our cash. After that, we had BRL 15 million in investments and basically most of our factory in Extrema to support the expansion and production and the logistics side as well. We have also gotten funding of BRL 76 million, almost BRL 77 million in funding, and we paid almost BRL 90 million of our debt amortization in our lines, and we were able to fund BRL 170 million. That helped our cash with BRL 76 million.
That goes to our final cash of this first quarter of BRL 472 million, almost BRL 473 million. It's important to note here when we look at these numbers, we had an effect this quarter, the delay of payment in our accounts receivable. Some of our clients at the turn of the quarter did not pay us. They paid us on April 1st. There is something here about this delay, this one-off delay in payment of clients of around BRL 20 million. If it was not for that, the result would be slightly better in terms of our cash position. Finally, talking about our debt amortization timeline, with this cash of BRL 472 million, we are able of covering 65% of our debt. We have BRL 293 million maturing this year.
Most of it will mature at the end of the second quarter, beginning of third quarter of 2025, and we have important installments to pay, the BRL 245 million in 2026, half of that in the first quarter of last year, and so on. That is a little bit of a snapshot of our cash and the amortization timeline. I'll turn the floor back to André to talk about the different segments.
Talking a little bit about home electric products, that is basically our screens, lines, and TV sets, audio, video, that we have the Bose brand in the market, the portable appliances division for home products and kitchen appliances, and the healthcare line on the third-party devices for blood pressure thermometers that we have on drug stores. The good news here basically comes from gross margin, as you can see, a margin recovery.
This margin is greatly due to a better mix in the first quarter. We were able to get an extension in certain lines of our own brand. So a better mix. In the fourth quarter, we had a tighter margin due to the TV set mix, basically, that brought the margin down with our projects. It is good. We see this margin recovery as well as a revenue recovery, as you can see, 24% when compared to the same period of last year. This is an interesting trajectory that we were able to reverse. Talking a little bit about the office and IT supplies division, that is basically all of our operation of networks that we have in partnership with the providers. That is the second biggest global player in telecommunications.
We have an exclusive partnership here for Brazil, where we distribute telecommunications and optic fiber equipment for providers and suppliers in Brazil. We have a strong peripherals line, flash drives, and our gamer line, where we have the Arion and the Razer brands. We have the exclusive distribution in Brazil. Here, it's important to say in terms of what happened, we saw a slight red line there. Basically, we have two effects here that I want to explain. The first of them in the fourth quarter was the advance of credit for campaigns that were concentrated in the fourth quarter of 2024. If you annualize the results, we get to a gross margin of 15.6%. We had this effect with an extemporaneous margin in the fourth quarter, but it's basically in line, the margin in the first quarter, in line with last year.
Below ideal, it's a margin that we consider low, but it does not drop, even with all of the effects that we mentioned in the first quarter. There was also a drop in sales as well because December, there was an increase of the U.S. dollar that has an impact more in the corporate clients who were a bit spooked with the dollar increase and decided to advance their purchases due to this FX volatility. We also had an increase of sales in the fourth quarter due to that advance in purchases, and that ended up bringing an impact to the results in terms of revenue in the first quarter. Even with this revenue drop, we were able to maintain margin in line with the previous year. We consider this margin low.
We really do want to see a recovery here, and we'll basically seek this recovery. Talking about the mobile devices line, that's basically our telephony, tablets, and PCs in the company, they are important lines. The good news here is the revenue. As you see, there's a growth of almost 80% compared to the same period of last year. It's an important increase. At the same time, we had a drop in margin. We need to look at in this division, we also have OPPO's operation that we started at the end of last year. This is an operation where we manufacture and run OPPO's operation in Brazil. OPPO is one of the biggest players in smartphones around the world and coming to Brazil with an expectation to grow strongly. Multi was chosen to be a manufacturing partner, so everything in terms of fulfillment, logistics, shipments.
The good news is from this increase of revenue due to the mix, the drop in margin is due to the share is a smaller margin, the project, but it doesn't carry the risk. We don't have the business risk. It's not on us. It's a smaller fixed margin. During turbulent times, to have a growing operation with a fixed margin without risk, so to speak, is somewhat of an important protection. Now, on kids and mobility, this line, including Multi-kids with toys, baby products distributed in baby shops and toy stores, in addition to the traditional channels that we, the retailers we work with. We have the pet line, wellness. We have some brands in wellness. We have international partnerships there and work with gym equipment for gyms around the country and grew quite a lot. We have the drone and camera division.
For drones, we have the exclusive retail distribution of DJI. That's the global leader with more than 90% of market share in the drones market. That's also growing. The electric mobility line, electric motorcycles and projects that we talked about that we started now at the end of the first quarter of 2025. We started our partnership with Royal. That's an Indian company that is very strong and already with a presence in Brazil. Multi begins manufacturing the motorcycles of the Royal Enfield brand in Brazil in partnership with them, also with the margin of service providers with a locked margin, also diluting operating costs of our plant in Manaus of electric motorcycles without the business risk. We have that protection in the electric motorcycle segment. The good news here is from the revenue increase and the recovery and increase in gross margin.
That's good news here considering the scenario. To conclude, as you know, we took over starting April 1st with a new management here, me and Richard. Even though I'm in the company for 21 years, working with Ale for a long time, participating in this with Alexander throughout this history for Multi, we are now at a new chapter. I think we are very attentive and mindful. As I said in my letter, we're cautious. We're coming from a recovery that is very important and sound, a little bit slower than we would like, but I believe that soundness and consistency end up being more important at this time considering the turbulences. We have two main points of focus, what we did here. The first is a readjustment of our structure, a general review of all expenses and personnel structure. We started that already.
We started this initiative in the month of April. It's ongoing. We have a target to have a reduction between 8% and 10% of payroll expenses, to give you an idea that represents about BRL 60 million a year in savings. Everybody's working strongly on that. At the same time, we're working, starting a project in May of revisiting all of the general and administrative expenses of the company. This process is ongoing right now, and that should also bring good results within operating efficiency. We also have focal initiatives to deliver to our clients intelligent or smart freight using the closed trucks that we have. Important gains here in the shipments and deliveries. That's already ongoing as well. We should expect efficiency in freight in addition to reduction in commercial expenses. It's a line we're very mindful of and working right now within operating efficiency.
The second pillar that we're working on very strongly is the optimization of working capital. We have very strict policies in terms of inventory review and coverage. Our goal is not to let this inventory grow. The company has that very strong focus on inventory turnover, and we have important locks both in procurement and shipments in case of products that are not performing or turning as we determined. If the product doesn't sell, if it's not performing accordingly, we're going to lock it and hold on purchases and shipments. It is a more strict policy with the reduction of coverage as well, inventory coverage. We're also reviewing now the SKUs with a lower turnover and margin. The idea, as you know, we've been doing it and reducing portfolio for some time.
This agenda continues, strongly focusing especially on those products that have small representativeness in the portfolio, but it requires effort from the operation, but bring a low margin. That is very active work. As we mentioned, we are also very mindful of the cash situation. All of the initiatives here tend to improve that cash perspective throughout the year. We are very confident. We also have here a line that is accounts receivables that is above BRL 1 million that we do not use. Historically, we never used it. We have the possibility. We are evaluating alternatives for FIDC and assessing alternatives of funding through our accounts receivable.
Basically, that's what we wanted to talk to you about for this first quarter of 2025, bringing a little bit of what we're working on and this focus that we have, the work we're doing right now, saying we're very focused on reducing expenses, inventory coverage as well at healthy levels, and very focused on preserving cash without growing our debt. We're very focused on these three things right now. All of that, we expect that during this journey, we're able to increase our profitability, as is our main objective, to have positive EBITDA and resuming the EBITDA levels that we historically have. Thank you all for your presence, and we're open to take your questions.
We will now begin the question and answer session. Please note that to ask a question, you shall click on the Q&A icon at the bottom of your screen.
You can write down your question to join the queue. When your name is announced, you will see a request to enable your microphone. You should then enable your microphone and ask your questions. We kindly ask that all of your questions are asked at that time. Our first question from Maria Clara, Sell-side Analyst at Itaú. Maria Clara, please, you may go ahead.
Good morning. Thank you for this opportunity. I'd like to ask you to explore a little bit about the growth expectations and the top-line recovery for the year. We already see an important recovery and recurring revenue in the first quarter, but I'd like to understand how you see a potential deterioration in the competitive environment with more supply of Asian players' products here, possibly affecting the growth trends for the year or possibly not having an impact.
If you could, please comment a little bit about this and how you read the competitive environment. That would be very helpful. Thank you.
Good morning, Maria Clara. Thank you for your question. Really, we are attentive and cautious. These are very important words here in this situation with the tariffs that impact and generate uncertainties. We talk about this inflow of Chinese products and products being directed to Brazil. We are very attentive, mindful. We have not seen any major change yet in this scenario. Chinese companies were already with an appetite to come to Brazil. Brazil is a very important market. The Chinese companies that we see are companies who already have that interpretation of Brazil even before the tariff impact.
What we're seeing now and looking at is the United States will find a way to bring these products to the U.S. from other countries. There is no huge movement, but we do see it as a scenario that we're keeping up with and monitoring, even though nothing has really happened so far. We're very attentive, but we have not yet seen any major change so far. What we understand that may also be an opportunity, and people are approaching us to produce since we have factories in Brazil, to produce here to sell to the American market, although it's not the focus right now. If the tariffs remain, this may be an opportunity in that sense. There are no expectations. I'm just sharing this with you. In terms of the top line, we're conservative, understanding that now we have a streamlined inventory level that's all healthy.
There are some categories in TV sets, audio with an excess of supply in the market. We are very mindful of that, addressing those points. The good news here are our projects. As I said, we are partners of Hisense, OPPO, and they are global giants, and they are leaders in their segments. They may come as a happy surprise in terms of top line this year. We do not have any real expectation, but we could see something with the projects that we have and with low risk exposure as well.
Very clear, André . Thank you for your answer.
Our next question. Next question in writing from Ramon Fonseca, Sell-side Analyst at UBS.
Good morning. This is Ramon Fonseca from UBS.
If you can talk about the expectation in terms of working capital this year, considering your focus in optimizing it and advanced purchasing in the first quarter, at what level should we expect it to reach? In addition, if you can talk about the ramp-up status of the partnerships and your expectations for the year and impact on the margins.
Ramon, thank you for your question. I'll try to answer these two points. I believe in terms of working capital, our expectation, as André said, in this project is to manage our inventory well with the turnover, especially SKUs with a lower turnover, lower margin. We know that working capital at Multi is a long working capital. It's high. It's more than 100 days. We closed at 150 days of working capital this quarter with almost 190 days of working capital, especially considering the advance in purchases we made.
The idea is to distribute this turnover. If the working capital is too high and the turnover is too high, it is a pressure to our cash, as you saw in the first quarter. The idea here is to work at healthier working capital levels. We started our work on that now, as André mentioned. We already started that. You saw we're being more disciplined in our inventory purchases, and you'll see the results of that in the coming quarters. The intention is to dilute that. We for now do not have the adequate level that we expect in terms of working capital, depending on the business. Considering all the uncertainties that we see for this year, it is more dynamic, but our goal is to reduce it and to manage it very well.
In terms of the ramp-up of our partnerships, your second question, we're coming with the open Hisense partnership. OPPO is ramping up. We started with OPPO at the end of last year. We see that it already came in with a higher volume compared to the previous quarter. It's ramping up. It will expand. We have positive expectations for that. The other side of this ramp-up and partnerships in the revenue side is the impact of the dilution in the margin. We work with the margins here in this segment that's a little bit lower. There is an effect in margin dilution. There is a trade-off in revenue increase and a margin dilution, but maybe getting more mass in the margin.
Thank you, André . Our next question is in writing from Marcelo Afonso, By-side Analyst from Belvedere Club.
Good morning.
How do you see the beginning of the second quarter? Was there any evolution in sales and gross margin in April? How do you expect the cash to evolve in coming quarters?
Marcelo, thank you for your question. What we see here in terms of operating cash, we understand that we should see stabilization of this cash for the coming quarters. It is an important topic in operating cash. It is not operating cash plus amortization of debt. We have important amortization payments to be made by the end of the year that will happen at the end of this quarter and the beginning of the third quarter with important cash consumption there on the amortization of debt. Our operating cash should be stabilized and even be better due to all these things that we are working on.
To give you an idea, the month of April indicates already an improvement in our working capital. On the beginning of results of this discipline and inventory management, we see data already bringing results. Our concern is to manage this very well, maintaining operating cash at a healthy level, also due to the amortization of debts that we're going to have during this year, current year. Thank you.
Thank you, Richard. The questions and answers session is concluded. We would like to turn the floor to Mr. André Poroger for his final remarks.
Thank you for all our partners, shareholders. Even though the main motto here is caution, we are very confident in this evolution of revenue, the Grupo Multi, and this consistent search for profitability.
We are working very strongly with very tough decisions that people, it's not never easy, but these decisions and measures must be made for the company's longevity and future profitability. You can count on us. We will be closer now from coming oncoming calls. I thank you all for your presence.
Grupo Multi's Earnings Conference Call of the First Quarter of 2025 is concluded. The investor relations department is available to ask any other questions and doubts you may have. Thank you all very much for participating. Have a great day.