Good morning. Welcome to Smart Fit's conference call to discuss the results of the first quarter of 2026. For those who do not know me yet, I am Matheus Nascimento, Investor Relations Manager. Before starting, a brief message for those who choose to follow the conference in English. Today with us we have Mr. Edgard Corona, Founder and Chairman, Diogo Corona, CEO, and José Luís Rizzardo Pereira, CFO and IR of the company. Participants will be in listen only mode during the company's presentation, then we are going to start a questions and answer session when further instructions will be provided. We remind you that the slide deck will-
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leadership for the third consecutive month. We have good KPI to track future market share.
In Mexico, we continue to see a quite solid performance, keeping the leadership in active users with 81% market share in addition to a download share of 77% in the quarter. This evolution reflects a combination of different strategic levers. We continue to invest in brand building, advancing B2B expansion, increasing capillarity and diversity of the network with new corporate contracts, and at the same time accelerating the penetration in a segment with greater recognition and appreciation of the benefit by employees. As a result, we exceeded the mark of 2 million end users, reaching 2.1 million B2C customers at the end of the quarter, 25% growth compared to Q4 2025. Perhaps most importantly, is the gradual increase in its relevance within Smart Fit Group ecosystem.
In Q1 2026, the other line, mainly driven by TotalPass Brazil, already accounted for 9% of the group's net revenue and 15 of the group's consolidated gross cash profit. We continue to see a very relevant potential for this business, supported by structural trends related to health, corporate well-being, and digitalization of the customer journey. Moving to expansion. We are evolving very consistently and sustainable growth of the company. We ended the first quarter of 2026 with 2,013 gyms after net addition of 29 new units in the quarter and 354 new units in the last 12 months, a growth of approximately 20% compared to Q1 2025.
This pace of expansion reinforces our confidence in the continuity of favorable structural trends for this industry and our ability to execute, combining scale, strong capital discipline, and strong local growth in the market where we operate. Geographically speaking, we continue to see an increasingly more diversified expansion of the network. Brazil remained as the top market in terms of additions in the last 12 months, accounting for 47% of net openings, while Mexico accounted for 21% and in the other countries, 31%, reflecting the growing relevance of our international operations and the broad opportunities still existing in the region. In addition to the very fast expansion, we continue to note a very healthy evolution in the maturation of the network.
In the Smart Fit concept, we ended the quarter with 1,668 units, 68% mature, a very consistent level despite the strong pace of growth of recent years. We remain very confident in our ability to continue expanding the network in a disciplined manner, capturing relevant opportunities in the different markets in which we operate. With that, I would like to give the floor to Rizzardo, who's going to present the financial highlights of the quarter.
Thank you, Diogo. On this slide, you can see our year-over-year growth in our membership revenue per unit. Moving to operational indicators, we continue to see a very healthy dynamic of growth in membership and revenue per unit, reinforcing both the strength of demand, the resilience of our business model.
We ended Q1 2026 with a membership in gyms of more than 5.6 million members, a growth of 6% compared to Q1 2025. It's important to remember that this number does not include the customers and users of aggregators that gained relevance. In Q1 2026, the check-ins of the TotalPass access show the highest quarterly increase in the last three years. In addition to the growth of the base, we continue to advance in productivity and optimization of gym revenue. In the quarter, average annualized net revenue per company reached BRL 4.4 million, a growth of approximately 3% vis-à-vis Q4 2025 remaining at a very solid level.
This performance mainly reflects a combination of growth in the average number of members per unit and an increase in the average ticket, reinforcing the company's ability to continue expanding revenue without sacrificing the quality of the operation competitiveness at local level and customer experience. Overall, we believe that these indicators demonstrate the resilience of Smart Fit model underpinned by a very competitive value proposition, strong brand awareness and favorable structural trends for the fitness and wellness industry. Continuing the presentation, slide eight, we are going to talk about investment income starting from net revenue. Q1 2026, we exceeded for the first time the mark of BRL 2 billion net revenue in the quarter totaling BRL 2.1 billion, which represents a solid growth of 25% versus Q1 2025 and 8% compared to Q4 2025.
In addition, this has been the 19th consecutive quarter of revenue growth, reinforcing the consistency of our expansion strategy and the resilience of the business model throughout different cycles. This performance was mainly driven by the combination of the expansion of the Smart Fit network of owned gyms, the growth of membership and robust increase in the average ticket, which showed an evolution in all regions of operation. Average ticket has been benefited by the increase in check-ins in Total Pass users in Smart Fit gyms, both in Brazil and Mexico, as well the evolution of the distribution strategy between different plans of the platform.
Also noteworthy is the strong contribution of the other line, which doubled in size compared to Q1 2025, mainly reflecting the evolution of TotalPass in Brazil, the consolidation of TotalPass Mexico, and the continuous progress of other ecosystem initiatives.
Another important point was the continuous strengthening of our geographic diversification. In the quarter, operations outside Brazil continued to gain relevance in the consolidated approach with Mexico and other countries together accounting for 63% of revenue of company's owned gyms, an increase of 1 percentage points compared to Q1 2025. In short, we continue to combine a growth in membership, evolution of average ticket and revenue diversification, sustaining a consistent cycle of expansion and value generation for the company. Now moving to slide nine, you can see that the cash gross income totaled BRL 1.89 billion, an increase of 28% compared to Q1 2025 above the growth in net revenue in the period.
As a result, we achieved a record gross cash margin of 51.8% in Q1 2026, representing an expansion of 1.1 percentage points compared to the same period of the previous year. This evolution was mainly supported by operational resilience of mature units, by the consistent maturation of units that we opened in recent years, and especially by the increase in the relevance of the other line in the consolidated numbers, which has an average margin that is higher than our gym business. In the quarter, the other line accounted for approximately 15% of the company's gross cash income versus 8% in Q1 2025, mainly driven by the solid operating evolution of TotalPass in Brazil.
It should be noted that the other segment had a gross margin of 85.7% with an expansion of 13.3 percentage points compared to Q1 2025, reflecting gains in scale, product evolution and greater operational efficiency of the business. Moreover, when we disregard pre-operating costs related to new openings, gross cash margin reached 52.7% in the quarter, an expansion of 1.3 percentage points compared to the same period of the previous year. Going a little deeper into detail of this analysis, which in our view reflects the robustness of our business model, we move to the next slide. Here you can see the analysis of the gross cash margin before pre-operating cost by business segment. This analysis is important because it eliminates the time effects related to pre-operating expenses related to new openings.
This provides us a clearer understanding of the profitability of existing operation, the structural evolution of our business model. From this perspective, as I said, the consolidated gross cash margin reached 52.7% in Q1 2026, an expansion of 1.3 percentage points compared to Q1 2025, reinforcing the company's operational robustness despite the scenario of strong network expansion. When we look at the core business, we see a very resilient dynamic since Smart Fit's own operations. Gross cash earnings before pre-operating costs grew 18% versus Q1 2025, while the margin remained at a very healthy level, totaling 49.4% in the quarter. Despite the 128 company-owned units added in the main markets in the last twelve months versus 80 in the previous comparison when we talk about Brazil.
This performance mainly reflects the continued maturation of the network. Operational resilience observed in other geographies. It's worth noting that the contribution of vintage 2025 for the margin of the quarter was lower than that seen in the vintage 2024 and Q1 2025, considering that 55% of 2025 openings occurred in December and are still in their initial ramp-up stage. It's also worth noting that the gross margin of mature units in Brazil reached 48.5%, which the observed level similar to that of 2025, reinforcing the operational quality of the business despite the strong pace of expansion.
For the Bio Ritmo and other segment, we saw a margin of 46.2% mainly impacted by the opening of new units still in the ramp-up process, which naturally operate with levels that are temporarily lower in terms of profitability. On the other hand, the other segment continued to demonstrate a solid performance, ending the quarter with a gross margin of 85.8%, significantly above the company's other segments. This segment has kept an extremely high level of profitability, mainly reflecting the solid operation evolution of TotalPass Brazil and the consolidation this quarter of TotalPass Mexico and [Fit Master]. Moreover, it's worth highlighting the positive effect of the change of the company's earnings mix.
In Q1 2026, others started to account for 15% of gross cash income before operating costs versus 8% in Q1 2025, thereby providing a significant contribution for the expansion of consolidated margin on an annual basis. In short, the company once again demonstrates its ability to deliver solid results despite the context of strong expansion and maturation of the unit base, also driven by the contribution of new business units. Now, moving to slide 11. Once again, we can see the consistency and predictability of the Smart Fit gyms operating model through different maturity cycles. For the 12th consecutive quarter, mature units have posted a gross cash margin of 52%, fully aligned with the historical range expected by the company and very consistent with recent quarters.
In addition, annualized gross cash income per mature gym reached approximately BRL 2.5 million in Q1 2026, a growth of 2% versus Q4 2025, reflecting the resilience of the business model, operational efficiency gains, and the continuous evolution of units' productivity. Another important highlight of the quarter was the performance of the units opened in 2024. These units have had a gross cash margin of 56% in Q1 2026, remaining above the level of mature units for the third consecutive quarter. Annualized gross cash profit per unit of the 2024 vintage reached BRL 2.6 million, 7% versus the previous year, reinforcing the quality of the operational ramp-up of these gyms.
In our view, this performance is a result of the combination of strong revenue growth, accuracy in expansion strategy, and selection of commercial points in addition to the strength of the Smart Fit brand in the different regions of operation. Moreover, these units have been presenting a structurally more efficient occupancy cost than that observed in our mature base, contributing for very high levels of profitability even before full maturity. We monitor operational evolution of these vintage units and remain very confident in the ability of those units to continue generating solid results throughout their maturity process. Having demonstrated the robustness of the gross margin, now we move to evolution of sales, general administrative expenses in the quarter.
In Q1, SG&A totaled BRL 410 million, equivalent to 19.5% of net revenues, a relatively stable level compared to the same period of the previous year. It's worth noting that disregarding the effects of the consolidation of aggregators in Mexico, TotalPass Mexico, and Fit Master expenses, would have been diluted versus Q1 2025, mainly reflecting the continued operating leverage of the gym business. General administrative expenses totaled BRL 222 million on the quarter, representing 10.6% of the net revenue, an increase of 0.2 percentage points compared to Q1 2025. Once again, in gym business, we continue to observe the capture of scale and evolution of operational efficiency in the consolidated basis.
However, this performance was partially offset by higher investments related to the structuring of new businesses in addition to the impacts of the consolidation of TotalPass Mexico and Fit Master. Selling expenses totaled BRL 272 million in Q1 2026, an increase of 21% compared to Q1 2025, representing 8.2% of the net revenue, a dilution of 0.3 percentage points in the annual comparison. This evolution was mainly driven by the performance of the Smart Fit brand, reflecting efficiency gains, optimization of marketing investments despite the context of continued network expansion and brand strengthening. Finally, it's worth mentioning that pre-operating expenses, which totaled BRL 16 million in the quarter versus BRL 7 million in Q1 2025, mainly reflecting the higher volume of openings of owned gyms in recent months.
Now moving to the next slide, another quarter of strong evolution of the EBITDA reflecting the combination of revenue growth, gross margin expansion and operational discipline. In Q1 2026, the adjusted EBITDA totaled BRL 672 million, the highest level ever recorded by the company, representing a significant growth of 29% versus Q1 2025. EBITDA margin reached 32%, an expansion of 1 percentage point compared to the same period in the previous year, reinforcing the company's ability to continue combining accelerated growth with consistent profitability gains. It's worth noting that this evolution occurred despite the context of continued investment in network expansion, brand strengthening, and development of new ecosystem verticals.
In addition, when, with this regard, pre-operating expenses related to new openings, adjusted EBITDA before pre-operating expenses reached BRL 706 million in the quarter, a record level. From this perspective, the EBITDA margin reached 33.6% in Q1 2026, representing an expansion of 1.5 percentage points compared to Q1 2025. Now moving to net income in the quarter. Recurring net income totaled BRL 207 million, representing a strong growth of 47% versus Q1 2025, with a recurring net margin of 9.8%, a 1.5 percentage point increase compared year on year.
This performance mainly reflects the company's operating leverage, supported by the consistent profitability of mature units, the solid ramp-up of the units that we opened in recent years, and the growing contribution of new businesses of the ecosystem. In addition, it's worth noting the higher share of satellite businesses in the consolidated, especially aggregators and studios that have lower capital intensity of the capital invested, and consequently lower depreciation of the revenue generation. Depreciation amortization line grew 25% compared to Q1 2025, growing at a slower pace than consolidated net revenue.
It's also noting that in comparison to Q4 2025, net income was impacted by the higher effective income tax rate in the quarter, especially to the significantly higher amount of interest on equity booked in 2025, which totaled approximately BRL 503 million versus approximately BRL 40 million in Q1 2026. In the last 12 months, the recurring net income exceeded BRL 800 million, totaling approximately BRL 808 million and recurring net margin of 10.5%. To talk about our investments and impact on the variation of the net adjusted debt, we move to the next slide.
In Q1 2026, the adjusted net debt increased BRL 99 million, mainly reflecting the investments made in the period and with a focus on expanding our unit network in addition to distribution of interest on equity and execution of the part of the share buyback program carried out throughout the quarter. These movements were partially offset by the company's strong generation of operating cash, which totaled approximately BRL 635 million, driven mainly by the EBITDA for the period and the high conversion of adjusted EBITDA into operating cash of approximately 95%. CapEx activities burned BRL 550 million in the quarter, reflecting investments related to network expansion. Within this context, CapEx totaled BRL 566 million in Q1 2026, representing a growth of 20% versus Q1 2025.
The main highlight continues to be the expansion CapEx, which grew 40% year-on-year, totaling approximately BRL 489 million in the quarter. This evolution mainly reflects the full disbursements related to the units that we opened in Q4 2025, especially the units that we opened in December. In addition to the investments in the units that opened in this quarter and those that we are planning for future periods, maintenance CapEx totaled BRL 63 million in Q1 2026, a reduction of 15% compared to Q1 2025. It's worth noting, however, that the company should gradually intensify investments in maintenance throughout 2026, with a focus on preserving the high quality of the units, improving the customer experience, and expanding the offer of strength training equipment in the gyms.
Finally, other activities added approximately BRL 184 million to the adjusted net debt in the quarter, mainly reflecting the payout of interest on equity and share buyback. With this level cash generation capital discipline, now we are going to talk about leverage. Despite a accelerated CapEx, a continued expansion of the network and payout of capital to shareholders in Q1 2026, the adjusted net debt to in the last twelve months, disregarding the effects of IFRS 16 related to lease, we ended the quarter at 1.71x, a reduction compared to 1.78x that we had in Q4 2025. We consider this level to be quite healthy, especially when consider the company's high operational predictability, the strong recurring cash generation, and a very long debt profile.
In addition, when we analyze the leverage considering the annualized EBITDA of Q1 2026, also excluding IFRS 16, the indicator is approximately 1.56x . Also disregarding pre-operating costs and expenses related to new openings, this ratio would be approximately 1.49x , further reinforcing the solidity of the company's capital structure. Another important point is the debt amortization profile, which remains quite well-balanced and long for the next few years, contributing for a more efficient and flexible financial management. We have continued to fund locally the need to expand operations locally. Today, the net debt is distributed among the different geographies where we operate, with approximately 47% in Brazil, 24% in Mexico, and 29% in other countries.
This diversification provides us with greater financial flexibility and allows us to optimize capital allocation considering market conditions and funding costs in each region, even capturing some markets' more favorable movements in interest rates. Overall, we remain very confident with the company's current level of leverage and confident in our ability to continue funding growth in a disciplined and efficient manner, delivering good return on invested capital. I would like to end the presentation by thanking everyone who contributed to our results and all our investors. I would like to give the floor to Matheus, who's going to coordinate our Q&A session.
Thank you, Rizzardo. We are now going to start our questions and answer session. If you have a question, please click on the icon of questions to post your question.
We are going to collect the questions. We are going to answer them as we receive. Please stand by while we collect questions. Our first question from Luiz Guanais from BTG.
Good morning, everyone. We have two questions. The first one, could you tell us about the evolution of the mix of plans for TotalPass? Is it important for the evolution of the average ticket? How has this evolved for the different TotalPass? I would like to go deeper into the main drivers. How much of the improvement comes of improvement in pricing and mix and related to operating and efficiency gains?
Good morning, Luis. This is Diogo answering your question. Well, actually, when we talk about ticket, there is copay and then a transfer, and then you don't need to increase it.
For the top plans, we need to separate. We have an agenda. We have Smart, TP1, TP2. We go up little by little. This is natural. Talking a little bit about our vision. What has improved the financials is scale. The business model is slightly different than Smart. There is lots of fixed costs and G&A. G&A in sales is combined and then everything together in P&L. Once you have scale, you dilute the G&A, you have more bargaining power. Scale is very favorable. What makes it better is scale. We need to look at slightly different. Consider that this is slightly different than the gyms. We are not locking into the short term. TotalPass is not a priority. We are not expecting good financial results this quarter, next quarter.
We're not looking in the short term. We are gaining share. We want to improve the product, improve the brand. This is what matters now. A practical example is that we did not increase prices in January. If we were looking at short-term results, we would have done that. We look very much at the long-term strategy and what helped Smart Fit with the scale gain, which was expected. The longer we are in the business, the better the financials.
Thank you very much, Diogo, for your answer. Our next question comes from Julia Rizzo from Morgan Stanley.
Good morning, everyone. Thank you very much for taking my question. I would also like to explore what the management thinks, and this may have been the first quarter with TotalPass with a significant scale. I would love to hear from you. How do you see this? What happened? If you add up the two things, if you isolate Mexico and other countries, how do you see this first summer with the combined company in terms of bottom line, Smart Fit and looking into the future, what we should expect?
Hi, Julia. This is Rizzardo. Thank you very much for your question. This is very much in line with what we were seeing and also our company. When we look at the member and capture metrics in Brazil, it's increasingly less relevant considering the market and the aggregator overall has been gaining relevance more and more and should gain increasingly more relevance considering the mix of the business.
This said, when we add up everything, when we add up the two sides of the equation, in terms of inflows, in Brazil, it's very similar to our historical levels pre-COVID, which is a good and healthy level. As we said, it's not when we had the recovery after the pandemic, which was when it was well above the historical leverages, as we usually had in Brazil.
Looking to the future, what do you imagine? If I may ask a second question considering the CapEx, it got my attention that there is a growth and part of the payments of the fourth quarter came to the first quarter. Thinking what would be the guidance, what should we expect in terms of CapEx for this year? Is it going to the bigger than the expectation because it rolled a little bit?
What can you tell us in terms to help us project the company's CapEx and cash?
When we think of CapEx per unit, every year considering the high concentration of units that open in the final quarters and construction. We kind of delay part of the payments for the units to the following month or quarter, depending on when the construction ends. In Q1, 26 is no different. The only difference is that carryover is even greater because we opened almost 55% of our own units in December, especially in the last two weeks. We have this effect together with the opening of our proprietary units higher than we had in 2025 with a different mix.
We opened five Bio Ritmo with a CapEx that is higher than the average CapEx of a Smart Fit. And this has already happened. All that said, when we think about CapEx per unit for 2026, we are not expecting any significant changes compared to last year. We're still working on efficiency to reduce the CapEx per square foot of unit. There may be some minor variations in footage up or down. You can use the CapEx per unit that we had last year, assuming the number of proprietary units that we are going to have this year within the guidance published, which is the only guidance that we publish to the market. Then you have a good estimated opening caps for the year.
Our next question comes from [inaudible] from Bank of America. Bob, you may ask your question.
Good morning. Thank you very much for taking my question. I have two questions. What do you think about proprietary or private label and lease units? How do your partners assess you? How are you managing this value proposition for third parties?
Hello. We still have 80/20 in terms of franchisees that are growing with good performance. Apparently we pay better and take better care of the units, these 35 units with TotalPass. The best thing is to ask them. We pay better, we take better care, and the network grows more. Our internal assessment is that we are the best product considering the competition. Just adding a little bit to your question. How do they see?
Well, it depends on the sales channel. Customers are being intermediated. Customers prefer to buy through the aggregator, there is a sales channel for them. It's not like they are fans that will accept one or another. It's like Mastercard and Visa. You need to have both, if you don't have it, you can't really pay. We have more than 40,000 units in Brazil, 35,000, if we take that, it's not one thing or the other. It's not either/or. This is the new normal in the market.
Thank you. You seem to be at an inflection point in terms of membership in Mexico. What is driving that?
When we look at Mexico, and this has to do with operations of units, marketing as a quite accurate expansion strategy, not just reducing the CapEx, being very assertive. This is what we are seeing for the ramp-up, the most recent vintage in Mexico. Considering the nature of the gyms, improvements do not take place overnight. They are gradual. This is what we expect to continue seeing in future quarters, considering the inherent challenges of the countries. As you know, Mexico in the macroeconomic scenario is one of the countries where we have the highest challenge in comparison to the other countries where we operate.
If I may, along what Rizzardo said, one of the main indicators that we've been monitoring over recent months that really confirms our value proposition, our differential in terms of competitive positioning, is the evolution of members of the Black Plan. We look at Mexico, there has been a significant growth comparing to the same period last year, closing the gap that there was compared to consolidated. Today, members in Black Plan consolidated is about 70% in Mexico. Due to historical structural reasons, there was a quite significant gap, but today this gap is closing. We are on the high single digits. In Mexico, the penetration's about 63%, 64%, closing the gap considerably in terms of consolidated numbers. In our opinion, this is a silver lining in terms of value proposition considering our market position.
In closing, the last important point to mention is that Mexico is a country that is very big, as Brazil with lots of real estate opportunities, but compared to other countries, it's more difficult when you think of cost of occupancy versus average income. Rental accounts for a much higher percentage of revenue as compared to other countries where we operate.
Thank you so much. Congratulations on your accomplishments.
Our next question comes from Irma Sgarz from Goldman Sachs.
Hello. Good morning. Thank you for taking my question. The first question, and there are two related questions, what should I think about the ideal balance between members in private label Smart Fit units and those that come through TotalPass plans compared to Smart Fit members?
Related to that, I may have missed this in the release, but I don't think you mentioned it qualitatively, but you didn't really give the number of check-ins through TotalPass in Brazil Smart Fit units. I would like to see that. It's about the balance between the two types of members going to your units and how we should think which metrics do you think investors should look at to be sure that there is no cannibalization between the two things.
Irma, this is Rizzardo. Answering your question, I think that you didn't find it in release because we did not publish this in the release. This KPI is not there. We only publish it when we close the year, the average. We never publish it by quarter.
In fact, the aggregators continue having a presence in the revenue when in the use of any unit. This must be going on for the entire market. This has been going on inside Smart Fit itself. On our end, we are not worried how this mix is going to evolve a long time. Why not? Because in our vision, the economics of members that go to Smart Fit, regardless where they come through TotalPass or our own members, it's the same. Obviously, if we look at the numbers that we published in 2024 and 2025, there was a gap between the revenue generated per user coming from each channel. Of course, this gap has been being bridged. It's 50/50, 70/60, whatever percentage.
It's very difficult for us to estimate right now what this will be, and it should not matter for the profitability of each unit. For Brazil specifically, it makes much more sense to look at gross profit and profitability per unit than looking at trying to differentiate our own members and aggregate their members, and it might lead you to a difference what is going on in the business which is different from the reality.
Our next question comes from João Soares, Citi.
Good morning, everyone. Congratulations on your performance. Along the same lines, I would like to see with you, what about extra check-ins? How are you rolling this out? How should we think about other ways of monetizing and maximizing the lifetime value of users here apart from the opportunity?
Another thing, just for me to understand about partners. Now we need to be more aggressive to pay more for partners. Can you explain this line a little bit better to me? Thank you.
João, this is Rizzardo. I'm going to answer your questions about extra check-ins. The main thing about extra check-in is to provide a feature that TotalPass users were asking for to improve their perception of value of the product and the satisfaction with the product, much more focusing on that than necessarily thinking of maximizing profitability per user or any other short-term metric for TotalPass. Remembering that our main strategy for TotalPass continued to grow, to gain market share, and we were able to do that with profitability without necessarily thinking about all the possible levers of the business. The extra check-in is something that we've been doing.
The rollout is more and more for members of the base with a high level of satisfaction. This is a feature that everybody was demanding. Very good marketing for TotalPass, obviously it's not yet widely used as a feature. We already have the standard member behavior. They don't always go to the units, and then the feature make it possible for them to have two check-ins on a single day. In terms of use, this is a small number of people who are effectively going to use that, but it's important to give this freedom and autonomy for those who would like to do that, to use this feature. In terms of the behavior of the competition, considering the network of units, it's very difficult to answer considering what they are doing.
What we do, as a reminder, and remembering what Edgard said, we think that we are close partner of our third-party networks, improving the flow more and more with good payment per check-in. The growth of TotalPass and the gain in market share should benefit the entire network of TotalPass partners.
Super clear. Thank you so much. This is very clear in terms of CapEx. Maintenance CapEx. Should we Do we need more equipment? Is there any guideline, a range or something for the CapEx for us to remember?
We have no guidance for maintenance CapEx. Once again, as you can imagine, that percentage of maintenance CapEx over net revenue for mature units of Smart Fit in 2026 should be higher than 2025 because you are continuing investing in strength training equipment, as we have more mature units than we had last year. Unfortunately, we do not have a guidance to publish to you.
Thank you so much.
Our next question comes from Danniela Eiger from XP Investimentos.
Hello, good morning. Thank you very much for taking my question. I have two questions. The number one is about the competition. You were slightly more emphatic earlier this year. Many investors worry about that. We talk a lot about that.
We've been hearing from players in this industry that we see some indications of some players, they're slightly weaker, having some financial difficulties. Could you give us an update about the competition? Because we hear that, but we see other players that are better structured, more funded. I think it would be good to hear from you to have a more up-to-date vision. Connect it with the contracts that you have signed this year vis-à-vis last year. Does it have any kind of connection? Are you being more selective, as you've been saying? My second question is about TotalPass. How much of the improvement comes because there are more companies and more members using the platform?
How much comes of scale that you have more bargaining power and having a better negotiation to the transfer to the partner companies, that there has been an adjustment in those numbers earlier this year? Was it just for some partners you may have reduced that transfer? Thank you.
This is Edgard. Thank you so much. In December we were saying, there is more, people are exercising more, losing weight with the new medications, so we have users and customers. I think that the aggregators end up leading to a slightly lower ticket. When there's an expansion in your network of units, we start going to regions where there was no offer, so that customer or user that would not work out because it was too far from where they lived. They have a proximity offer.
In December, we said that this year, this market, everyone was really excited. This has been growing. We have these markets with no entry barrier. They may grow with the distortion, and we need to be cautious to understand how it works. I think that TotalPass, in the past, one aside comment, it helped a lot because this aggregated ticket not to deteriorate. As we have competition, the two players end up paying better. If we had just one the other one wouldn't suffer. The cost would be different. There's Visa, Mastercard, Amex. If you have everything, we have a more appropriate cost. This happened for the aggregator, too. When we look at a fairer ticket, we need to pay a lot. It's very expensive. There was an adjustment.
Our competition, because there is a lower competition cost. Sometimes we need to gain scale. This is within the reality. It's going to be 30 years this year considering Bio Ritmo. Lighting and everything, and I need to put everything. We implement a new unit looking at the model. How we redesign Bio Ritmo and TotalPass and everything, so there's a lot going on. We have a very operational team working very intensely. There's lots of people that were highly leveraged. If we look at the market, there are 4 or 5 major manufacturer that are very consistent, that make everything with robot. Electronic welding. It's not handcraft, and those manufacturers may have a higher cost, and they do not get loans.
We see lots of equipment, and then we go to China, go see the factory, the lab manufacturing, and we are sure that a piece of equipment will not last for five or six months, that we'll start having problem. Once people start working out, maintenance cost is going to go up, and it needs to be replaced. The pieces of equipment do not have the same performance. If we have a new Smart Fit, these people are going to suffer. Invest a little bit of money in the real estate, got a loan for the equipment. For sure, the excess competition, they're going to suffer. We forecast that, and we could have a reduction. It would get a little bit worse for the gym, a little bit better for the aggregator.
We are looking at Brazil, 40%-45% of this. The other 55%, we have a very well-structured operation, and we are not experiencing that. We did that on purpose, when Brazil kind of slowed down in the past, and we thought, "How can we protect ourselves?" We are very strategic. We, as a group, we don't look at the quarter. We look into the long term. What needs to be done? We need to think in two, three years how to operate in the macroeconomic scenario. This is a kind of business that is not too easy, it's a business without entry barrier. How can we be protected to have the best deliveries and to outperform? This is what we've been doing for the past 30 years.
While the new generation is doing better than what I did, I'm very confident. We are going to have World Cup, lots of bank holidays. Maybe in the future, and I'm sure, well, we are going to be better than we are today.
Thank you so much.
Our next question comes from Rodrigo Gastim f rom Itaú BBA.
Good morning, everyone. Two questions. The first one, going back to TotalPass. You talked about the evolution of the economics. I would like to take a step back and to understand more about the top line, especially gross profit. Even adjusting by the consolidation in Mexico, when we have the adjustments, is that the gross profit of TotalPass in Brazil created lots of value, and this was what we were expecting. This is specific. Gross profit and gross profit for TotalPass.
One thing that got the attention, the cost control for Smart Fit Brazil. Despite the more challenging and competitive environment, cost control was really amazing. As you mentioned in the release, a stable gross margin in Brazil for the first quarter. Gross margin expansion for mature units in 2025. Cost control per mature. If you could explain, [inaudible], in terms of cost management, and everything that you've been doing to hold the gross margin, and what else is yet to come in terms of levers for the cost management. Thank you so much.
Hi, Rodrigo. This is Diogo. Well, about gross profit, we don't break it down. The gross profit of TotalPass, we do not get too specific, but we can explain to you on a higher level.
We are at a very good timing because the market is getting more competitive. This is not new for anyone that offer in the market is growing more than demand. Supply is higher than demand, but TotalPass gain scale at a very good timing for us. This is a business that depends on scale, considering bargaining power and the companies. This is a very good time for us to gain scale. It's a time of lots of competition. This is very clear. TotalPass is quite robust and strong, branding, everything. Just the right timing. I think that we were It was a combination of luck and competence. This is number one.
It's important to say that for TotalPass, as I said before, we are not focusing on a short term, but it's not that we are destroying value or We are gaining share because the product is good. We are not destroying value or anything. TotalPass gain scale. Then we have visits and ticket. Part of the reason why the margin is good is because we're bridging that gap. We are bridging it. We are bridging it when TotalPass gain share as a good brand. I think that our product today is super competitive, and I think that it's even superior to the competition, for example, in São Paulo. This is what we're thinking. We might be biased, but this is what we're thinking. We are very optimistic with this agenda.
A little bit about cost. Well, Smart Fit's model is related to low price, the merit is related to management. It's strategy and management, everything that we do, and the team and everything, and the controls. We're always looking at that every month, every week. It's our day-to-day work. Of course, we work very hard, for example, in terms of energy efficiency, especially in energy. Also efficiency in calculation, instructors per hour, members, staffing, utilities, water, power, automation, and everything that we've been talking for many quarters. More than that is discipline. Because if we stop looking at that, we lose control. We are looking at the details, and this end user experience. All of that, the challenge is to balance out. We are very successful.
This is one of the levers that shows that we are prepared for when the competition increases in our industry.
Thank you so much. Super clear.
Our next question comes from Lucas Esteves from Santander.
Good morning. Thank you very much for taking my question. I have a few follow-ups on about aggregators. TotalPass, as we said, has reached the scale when it's a very important driver, not just in terms of revenue and profitability. Now, thinking in terms of growth in this period, how do you see the contribution coming from new corporate contracts versus the higher use of the legacy base? Going more into margin, I know that you don't disclose it so much.
How do you see the mix between TotalPass and your private label units looking to the future with the proportional increase of TotalPass within our business? I understand that the main focus right now is not profitability, but considering it is scale, is it true that this vertical will be accretive for the consolidated margin? Accretive it's going to more than offset any de-leveraging due to loss of members per unit.
José Luís Rizzardo Pereira Pereira, I'm going to answer your second question first. The nature of the TotalPass business and the way it's booked, obviously there is always a percentage margin that is much higher than the group's units or clubs, and it's accretive.
It's difficult to tell the percentage where it's going to get, but there's so much to happen in the mid and long term, in both in terms of aggregator and in the club. The math has been growing very strongly in the gym business, also with financial health. It should continue to help. If everything remains constant, it would be helpful in the group's margin and its percentage in other business units as part of the whole.
Any follow-up, Lucas?
The first question on growth, do you see the contribution coming from, more from new corporate contracts or more use of the legacy base? What about this mix? How has it been going?
This is Diogo answering your question.
At this speed it was more breakage because the contracts, they grow according to the fee, and members is more proportional. You can do something that is faster in terms of breakage. We want to improve breakage both in scale with negotiation of contracts. We revisited a few contracts. Users try to fraud. We use the AI. This has improved a lot. Slightly different from Smart Fit because of mechanics of the business. I think that the fraud fighting, it's a living agenda. We are always optimizing it. This is always living work. Gain and scale and better negotiation. It evolves faster than what we saw in the first quarter. It has grown this quarter. This is a good point. Fee was not responsible for that.
There were a few exemptions on the fee this quarter. Lots of exemptions. This is public. We even had a campaign for that because of changes in the law. I'm not going to give you details, but there have been a few changes. There were lots of promotions. The fee didn't help so much this quarter. It was more related to breakage.
Thank you so much.
Our next question comes from [Nicholas], Analyst for JP Morgan.
Good afternoon. Thank you very much for taking my question. I have two questions. It's a very quick follow-up for TotalPass. Diogo, you said, and as you had said last year, that the gap between check-ins and the revenue in TotalPass Brazil would close along the year. Has it already started in the first quarter?
The second is related to other LATAM countries, where the margin goes up. What are the main drivers lying behind that? There is some gym maturity curve, or is there anything very specific that is helping to expand the margin? I would like to hear that. Thank you very much.
In answering your first question, as Diogo said before, what we've been seeing along the last few quarters is that we are bridging the gap. We always need to take into account the information that we share at the end of the year as we did in 2024 and 2025. Those are numbers, those are indicators that report the average of the increase in representativity that we've been seeing in TotalPass.
This has been evolving, and 2025 was above the average that we shared with you. The same trend towards the same direction has continued along the first quarter, as Rizzardo said. We do not disclose the indicator, but there's a clear indication that this business unit, the sales channel, is gaining share when we look at frequency. Both frequency of our core business, and we also saw that in our last conference call, and we have a very clear visibility and control of the same value creation levers that converge to a scenario. Not fully completed because of structural features of each business channel, but this gap should be closed along the future periods. About the performance of other countries. This is very consistent.
Across the board, there is a difference in terms of capillarity, in terms of product that differentiates us, considering our main competitors in each target region where we operate. We have a unique value proposition with a network that is getting denser and denser, and this augments the network effect in each target region, and this provides a combination that is very accretive. In terms of competition, we navigate in waters that are much calmer than we see in our main markets. This facilitates and provides very good return. And what we you saw in terms of mix is important, but, this should not lead to any structural changes thinking of the short term.
Thank you so much.
Our next question comes from Renan Sartorio from Safra.
Hello, how are you?
I would like to ask a question about 2024 vintage units. Looking at 2025, 2026, are they going to the openings for these two years, are they going to follow the same trend or is it going to change in any way?
Hi, Renan. This is Matheus. As Rizzardo said, and what we can say is that when we analyze the initial maturation curve of vintage 2025 in the 1st quarter of 2026 compared to 2024 vintage in the first quarter of 2025, that justify this difference in terms of profitability was the time when the units opened. In 2025, most of our units opened in Q4, especially in December, and most of them in the second half of December.
Yes, this has affected, and because there's an issue related to timing when you compare, the performance and the wrap-up, initial curve. Structurally speaking, we are not likely to see any difference considering what we have been seeing, in the last few quarters. Smart Fit as a platform is very well positioned for each one of the markets where it operates. We have a commercial institutional relationship with the main real estate developers. And our telephone is the first one to ring, and for the selection of new points. This is translated in higher financial efficiency.
Thank you so much.
We now end our questions and answer session. Thank you so much for your attendance. The investor relations team is available to answer any other questions you may have. Have a nice Thursday.