Grupo Casas Bahia S A : Q4'23 Earnings Release

Casas Bahia Group presents an update on its transformaon plan and Q4'23 Results, with the best annual free cash flow in the last 4 years

We have progressed with the Plan and now have the iniaves started and in place for capture by 2025.

The fourth quarter of 2023 confirms the ongoing Transformaon Plan presented in Q2'23 and reinforces the high delivery capacity of the iniaves, which connue as planned and will be gradually captured throughout 2024 and 2025.

• • Management model based on new margin and cash cycle metrics

• • Inventory reduction of R$ 1.4 billion in Q4'23 vs. Q2'23 (beginning of the Transformation Plan)

• • Overhead reduction of 8.6 k positions in Dec/23 vs. Dec/22 and 42% of leadership positions

• • Marketing Expenses 30% lower as a percentage of net sales

• • Closure of 55 stores - 17 stores in Q4'23 and 4 DCs downsized

• • Migration of 23 subcategories with negative margins from 1P to 3P only

• • Change in Buy Now Pay Later financing model - in progress

• • Net monetization of tax assets of R$ 682 million in Q4'23

• • Capital structure strengthening and extension of debt profile to 3 years

• • +60% CAPEX reduction in 2023 vs. 2022

  Q4'23 Results Highlights

• • Free Cash Flow of R$ 721 million in Q4'23 and R$ 648 million in 2023, the best in the last 4 years

•

•

•

Cash balance, including receivables, at R$ 3.6 billion in Q4'23 Inventory reduction of R$1.2 billion in YoY and R$605 million vs. Q3'23 Reduction of 18% in people vs. Q4'22

•

Net tax monetization of R$ 682 million in Q4'23 and R$ 1.3 billion in 2023

•

•

New bank debt raise of R$ 682 million in Q4'23 and renewal of R$ 1.5 billion for 3 years Digital consumer credit reaches sales in 90% of the cities in Brazil

•

Launch of Casas Bahia Ads platform

(R$ Million)

Gross Revenue

Net Revenue

Gross Profit

•

Gross Margin

SG&A

Adjusted EBITDA

Adjusted EBITDA Margin

Other Expenses

Financial Results

EBT

Income Tax & Social Contribution

Net Income (Loss)

Var.

-11,3% -11,8% -5,4%

200bps

-4,4% -11,4%

0bps

36,7% 10,9% 21,1% -13,7% 51,6%

Status of the Transformaon Plan

Execuon of the transformaon plan has advanced, iniaves have progressed, adding up to R$ 1.5-1.6 Bi in opportunies.

Efficiency in Services Pricing and Promotion Sales Channels

Review of Mix and Assortment

Marketing Efficiency Commercial Efficiency Indirect Costs Renegotiation

Review of Headcount Technology Costs Store Profitability Optimization of Freight and Distribution Centers

3P Assortment Migration Inventory Reduction Review of Payment Terms

Transformaon Plan - work in progress, but the following results can already be observed:

Inventories: the Company proposed R$1 billion reducon in older inventories and non-core categories. A R$1.2 billion reducon in inventories was observed YoY.

Assortment Migraon: 23 subcategories migrated from 1P to 3P, such as beverages, baby line, cleaning products, toys, home and construcon, among others.

People: headcount reducon in 2023 reached 8.6*k posions, corresponding to about 20% of the Company's staff. This movement was stronger in the 2nd half of the year and YoY we observed a reducon in people expenses of 17.8%, equivalent to +R$152 million, part in the COGS and part in the SG&A. Addionally, it is worth menoning that there was a 42% reducon in senior leadership posions.

Store Closures: the Company proposed the closure of 50 to 100 underperforming stores. In 2023, 55 stores were closed.

Markeng and indirect expenses: reducon in outsourced expenses by R$90 million, 11% lower YoY. Benefit will be fully captured in 2024.

Capital Structure and Liability Management: in addion to the R$623 million raised in a stock offering carried out in Sep/23, there were R$ 682 million new funding with financial instuons throughout Q4'23 and extension of debt maturity of R$1.5 billion by 3 years.

Tax Credits Monezaon: net monezaon of R$1.3 billion in 2023 vs. R$ (74 million) in 2022.

*8 k direct employees and 600 third pares

Understanding 2022, Q4'23 and 2023 results

2022 Income Statement Reclassificaon: the Company idenfied that personnel expenses directly aributable to the costs of services provided by Asap Logísca and CB Tecnologia were classified as "SG&A" and such expenses were reclassified to "COGS", according to the standards already adopted in 2023. Therefore, there was no change in the consolidated results according to explanatory note 2.6 in the financial statements. Total amount of R$ 376 million in 2022.

4T23: there were non-recurring factors, specific to this quarter, as a result of the Transformaon Plan, and also Tax topics. Namely:

Stock Clearance Sale: the Company proposed reducing R$1 billion in older stocks and non-core categories, at a discount. In Q4'23, the remaining part of this inventory was sold, generang a short-term impact on gross profit and EBT of R$105 million.

Restructuring and Others: the Company observed a non-recurring short-term negave impact in the period, in the amount of R$5 millions in Gross Profit, R$3 million in SG&A and R$289 million in other operang revenue and expenses, linked to restructuring, mainly personnel reducon, store closures and asset write-offs. The impact on EBT was R$297 million.

Provision for DIFAL: the Company observed a non-recurring negave impact in the amount of R$197 million in other operang revenues and expenses, and R$24 million in the financial result linked to DIFAL. Impact on EBT was R$ 220 million.

Accounting and Pro-forma Result Q4'23 and 2023

Q4'23

(R$ Million)

Gross Revenue

Net Revenue

Gross Profit

Gross Margin

SG&A

Adjusted EBITDA

Adjusted EBITDA Margin

Other Expenses

Financial Results

EBT

Income Tax & Social Contribution

Net Income (Loss)

Var.

-11,3% -11,8% -5,4%

200bps

-4,4% -11,4%

0bps

36,7% 10,9% 21,1% -13,7% 51,6%

(R$ Million)

P&L Impact Cash Impact

Co-branded credit card renewal

317 1.750

Inventory Reduction ("Saldão")

Reestructuring and OthersDIFAL Provisions

(105) 506

(297) (49)

(220)

-

2023

(R$ Million)

Gross Revenue

Net Revenue

Gross Profit

Gross Margin

SG&A

Adjusted EBITDA

Adjusted EBITDA Margin

Other Expenses

Financial Results

EBT

Income Tax & Social Contribution

Net Income (Loss)

Co- branded card renewal

(350)

(317)

(317)

- -(317)

- - -

(317)

108

(209)

Var.

-2,9% -4,0% -3,6%

0,1p.p.

-0,6% -14,1%

(0,8p.p.)

n/a

34,5%n/a

35,8%n/a

(R$ Milhões)

EBT Impact Cash Impact

Co- branded card renewal

317 1.750

Omnichannel

Total GMV YoY dropped (12.0%) and (3.7%) in 2023. Physical stores GMV was lower by (7.3%) in Q4'23 and +0.7% in 2023. On the other hand, 1P Online GMV went down (22.5%) in the period and (15.0%) in 2023. 3P omnichannel GMV was lower (5.8%) YoY and increased +8.9% in 2023.

Gross Revenue Performance by Channel

In Q4'23, consolidated gross revenue decreased (15.5%) YoY, to R$ 8.8 billion and was (5.5%) lower in 2023. If we exclude the addional revenue of R$350 million from the agreement with Bradescard in Q4'22, the variaon would be (12.6%) in the quarter. The variaon results from both the decline in revenue from stores and the decline in the online sales revenue, despite progress in marketplace revenues.

Physical stores - GMV and Gross Revenue

Gross GMV from stores totaled R$6.3 billion, and gross revenue was R$5.7 billion, a drop of 12.4%. Excluding the partnership with Bradescard, in Q4'22, the drop would be 7.4% in Q4'23. Despite the high basis of comparison, due to the World Cup in the previous year, stores performance reflect weak demand, less credit available to consumers and the closure of stores. Same-store performance (GMV) was (5.8%) in Q4'23 and +0.7% in 2023.

Throughout the quarter, in line with the Transformaon Plan, we closed 17 underperforming stores, ending Q4'23 with 1,078 stores. In 2023, 55 stores were closed. Most of the closures took place in municipalies with mulple stores.

1P and 3P ONLINE - GMV and Gross Revenue

1P Online GMV went down (22.5%), reaching R$3.1 billion YoY, as a result of: (i) lower investment in the B2B channel and other media (we priorized more profitable partnerships, focusing on results), (ii) the market decline and (iii) a more restricve scenario for online purchases. Despite this context, in 2023 we strengthened our presence in the core categories, in line with our stated posioning strategy.

3P omnichannel GMV dropped (5.8%) in Q4'23 to R$1.6 billion, but with a revenue growth of +5.1% to R$193 million. In 2023, GMV advanced 8.9% with 18.0% revenue growth, reflecng the aim of higher profitability and enhanced customer and seller experience through a greater number of services offered in our plaorms, such as logiscs and credit. We closed the quarter with a take rate of 12.1%, up by 120 bps YoY and a take rate of 12.2% in 2023, +90 bps vs. 2022.

Gross Revenue Breakdown

Gross revenue from merchandise was pressured by 1P online GMV and stores decline, declining by (15.0%). Services revenue declined by (44.9%), but excluding the effect from the partnership with Bradescard, there would be a +11.4% growth. Freight revenue remained flat and revenue from financial soluons advanced by +7.4%. Observing the full year of 2023 and excluding the partnership with Bradescard, we would have had revenue from merchandise declining by (5.8%), +19.9% in freight, (1.2%) in services and +7.4% in financial services.

Our installment plan remained a valuable tool for building customer loyalty and a compeve advantage as well, with a penetraon of +13% over consolidated gross revenue. Cash payment growth is prominent, mainly due to greater share and appeal of payments via PIX.

Gross Profit

In Q4'23, gross profit totaled R$2.0 billion, with a gross margin of 27.6%, down 170 bps., but with recovery of 460 bps compared to Q3'23. Margin is jusfied by lower net sales, in addion to other non-recurring factors, mainly by the reducon in the remaining low-turnover inventory (in line with the Transformaon Plan). The remaining reducon in inventory (clearance sale) had an esmated impact of R$105 million in gross profit. It should be noted that with the end of the clearance sale (Q3'23 and Q4'23), we have already observed the gross margin coming back to historical paern. In 2023, gross profit was R$8.1 billion, with a gross margin of 27.9%, corresponding to a reducon of 190 bps., resulng mainly from the reducon in inventory (clearance sale) carried out in Q3'23 and Q4'23.

Selling, General and Administrative Expenses

In Q4'23, SG&A expenses went down by (4.2%) YoY and advanced by 320 bps. at (26.2%) of net revenue, due to the sales drop. This results from the (11.8%) decline in selling expenses, with an emphasis on staff reducon (17.8%), reducon in installment plan losses (-8.5%), in addion to a general improvement in the control of expenses in the period, mainly the raonalizaon of third-party service spend (-10.8%). SG&A expenses, in 2023 declined by (0.5%).

Adjusted EBITDA

Adjusted EBITDA reached R$ 163 million in Q4'23 and a 2.2% margin, lower by 490 bps. YoY, mainly reflecng non-recurring factors that impacted the previously explained reducon in sales and reducon in gross margin. Regarding Q3'23 there was an increase of 320 bps QoQ. For the same factors, in 2023 adjusted EBITDA reached R$1.2 billion and a margin of 4.3%, 340 bps. lower vs. 2022.

Financial Result

In Q4'23, the net financial result was R$(734) million, 270 bps. higher as a percentage of the Net Revenue (9.9%). In 2023, the net financial result was R$(3.0) billion, 320 bps. higher as a percentage of the Net Revenue (10.5%).

Net Profit

EBT was R$(1.5) billion in the quarter, reflecng market performance and also non-recurring factors related to the Transformaon Plan, related to restructuring, staff reducon and closure of stores. The net income (loss) was R$(1.0) billion and net margin of (13.5%) in the quarter, with a reducon of 1,170bps. YoY. In year 2023, EBT totaled R$(4.2) billion with net profit (loss) of R$(2.6) billion.

Financial Cycle

(+/-) Q4'23

Q4'22 vs. Q4'22

Inventory ended Q4'23 with a reducon of R$1.2 billion (18 days) YoY and a reducon of R$605 million vs. Q3'23. The variaon is the result of the strategy applied to opmize older and low turn-over inventory addressed in the Transformaon Plan, which allowed for a higher quality inventory for the Company and released R$ +544 million in the Cash.

Capital Structure

Our gross debt was R$4.0 billion (not including CDCI and trade accounts payable agreement). For the purposes of Covenants and understanding the capital structure, this liability has a corresponding asset, accounts receivable from CDCI, both presented in the first lines of the table above and in the Financial Statements under explanatory notes 6.1 and 14. The Company showed adjusted net debt of R$(0.4) billion and net equity of R$3.5 billion, with leverage raos at levels within financial covenants. In Q4'23 cash including undiscounted receivables totaled R$3.6 billion. The financial leverage indicator, measured by net cash/adjusted EBITDA over the last 12 months, was (0.3x). Considering trade accounts payable agreement and the CDCI balance, the same indicator was (1.8x).

In Q1'24, there was an announcement to extend the debt in the amount of R$1.5 billion, with 3 years (36 months) at the cost of CDI + 4% p.a. and a grace period of 18 months, reinforcing confidence in the Company and in the Transformaon Plan presented.

Debt maturity schedule - Q4'23 before and after extension

The liquidity posion including undiscounted receivables totaled R$3.6 billion. Observing Q4'23 closure, of the R$4.0 billion in debt, we had R$1.7 billion (41%) with long-term maturies and an average cost of CDI + 2.7% y/y. Now, with the rollover, 69% of the debt is long term. To beer depict the new debt profile, we have the pre-extension and post-extension schedule below.

Pre-extension

Post-extension

Liquidity of Liquidez de R$3.6 billion R$ 3,6 bilhõesLiquidity of Liquidez de R$ R3$,63.b6iblhilõlieons

CCaaixsah 2.573

CaCratõredss

Otuhtreorss

Liquidity

Dívida de R$ 3,9 bilhões

Debt of R$3.9 billion

VMeantcuimriteyn2to4 2m4omntehsses- R- $R$3,31.1337 MM

260

160

• 21 21

  1QT24

  22QT24

  3QT24

  4QT24

  2025

  2026

• 2027 2028 2029

Liquidity 1QT24

Dívida de R$ 3,9 bilhões

Debt of R$3.9 billion

VMeantcuimriteynt2o42m4omnethsess- -RR$$11,.769 MM

• 21 21

  2QT24

  3QT24

  4QT24

  2025

  2026

• 2027 2028 2029

Managerial Cash Flow

Understanding Managerial Cash Flow: Cash flow is currently the Company's main focus of management. Therefore, we adopted the format below for management analysis of cash performance, which will serve for beer understanding, greater transparency and monitoring results of the Transformaon Plan. The flow is reconciled with the accounng flow, therefore it is possible to do the reconciliaon in the spreadsheets on the IR website.

We start with the accounng net profit and adjust the cash profit by returning the costs of prepayment of receivables. In assets and liabilies variaons, we have the lines for working capital with inventory and suppliers, legal liabilies, and other cash variaons unl reaching operaonal acvies and, subsequently, the leasing and investment cash resulng in the line of Free Cash Flow, landing in the enre balance available to sele debts, creditors and remunerate shareholders. The financing acvies were separated into net funding and interest payments, encompassing the amounts of CDCI, debentures, CCB's, trade accounts payable agreement and costs of prepayment of receivables.

Q4'23: despite a net loss of 1 billion, cash profit was posive at 610 million (since many impacts on the Income Statement had no cash effect). The posive effect of the reducon in inventory of R$544 million, resulng from fewer purchases and higher quality inventory, was parally offset by the negave effect of the supplier account of R$110 million. We closed with 77 days of inventory and 112 days of suppliers. In the line of Losses, we had a variaon of +7% vs. Q4'22, in turn, in Legal Liabilies there was an improvement of 14% in the same period. Taxes, R$682 million, was another posive highlight given the level of monezaon in the period. Accordingly, we closed Q4'23 with free cash flow of R$721 million, which was enough to pay interest of R$625 million. Therefore, the execuon of the Transformaon Plan was crucial to improve the Company's cash flow performance. Compared to Q4'22, we performed beer due to management of working capital, taxes and investments, bearing in mind that in Q4'22 there was an input of R$1.75 billion into Cash due to renewal of the partnership with Bradescard.

Indirect cash flow

Q4'22

∆ Q4'23 vs. Q4'22

2.022

2.023 ∆ 23 vs. 22

Profit (loss) for the period Cash profit after adjustments

(163) 1.047

(1.000)

(837)

610

(437)

(342) 4.069

(2.625) 3.104

(2.283)

(965)

73 423

(582)

Final Cash and Balance and Cash Equivalents

3.431 6.153

2.800 3.578

(631) (2.575)

Free Cash Flow 2020-2023 - ex-Bradescard renewal:

R$ 648

2020

2021

2022

2023

CAPEX

In the quarter, Casas Bahia Group's investments totaled R$75 million, with 90% of the total amount assigned to technology projects to support the Company's growth, digitalizaon, customer experience and cost reducon. In 2023, Capex was 62% lower than in 2022.

In the quarter, a total of 17 stores were closed, 10 under the Casas Bahia's brand and 7 under Ponto's, totaling 1,078 stores at the end of the period. In 2023, 55 stores were closed and the sales footprint area was reorganized in the remaining stores.

During the period, there was also an readjustment of the usable area in the DC's, for beer efficiency and producvity.

Our Transformaon Plan is sll in progress, and the progress of stores profitability will be closely watched, aiming for return and business contribuon margin.

Casas Bahia

Q4'22

Q3'23

OpeningSquare meter optimization

Closure

Street Shopping Malls Consolidated (total)

Sales Area ('000 m2)

Total Area ('000 m2)

789 188 977 904 1.433

772 - - 7

181 - - 3

953 - - 10

884 - - 6

1.394 - - 9

Pontofrio

Q4'22

Q3'23

OpeningSquare meter optimization

Closure

Street Shopping Malls Consolidated (total)

Sales Area ('000 m2)

Total Area ('000 m2)

88 68 156 86 140

88 - - 4

54 - - 3

142 - - 7

79 - - 3

129

-

- 6

Consolidated

Q4'22

Q3'23

OpeningSquare meter optimization

Closure

Street Shopping Malls Consolidated (total)

Sales Area ('000 m2)

Total Area ('000 m2)

877 256 1.133 990 1.573

860 235 1.095 964 1.523

- - - - -- - - - -

11 849

6 229

17 1.078

9 955

15 1.508

Distribution Centers

Q4'22

Q3'23

Opening

Square meter optimization

Closure

DCs

Total Area ('000 m2)

30 1.290

29 1.263

- -- (85)

-

29

• - 1.178

Consolidated (Total)

Total Area ('000 m2)

Q4'22 2.863

Q3'23 2.786

OpeningSquare meter optimization

Closure

-

(85)

15

Market Share

Market Share - top 5 core categories

We will dedicate greater aenon to the market share of the core categories, for which we are recognized as a desnaon and Top of Mind for the 18th year in a row. Casas Bahia Group's performance is depicted below, according to data from CONFI Neotrust for the core Online market. Data from GFK for the total market follow the same trend.

Market Share Online - Top 5 Categories

CONFI (YTD Jan-Dec/23 vs. 22)

YTD 2019 (Jan - Dez)

YTD 2019 (Jan -Dec)

YTD 2020 (Jan - Dez)

YTD 2020 (Jan -Dec)

YTD 2021 (Jan - Dez)

YTD 2021 (Jan - Dec)

YTD 2022 (Jan - Dez)

YTD 2022 (Jan - Dec)

YTD 2023 (Jan - Dez)

YTD 2023 (Jan - Dec)

EALPEPTLIRAONDCEOSMÉSTICOS

TELLEEPFHOONIEA

TELLEEVVISISIOONRSESCINOFMOPRUMTEÁRTSICA

MFUÓRNVIETIUSRE

Gain in share for the top 5 categories 2023 vs. 2022: telephone +480 bps, Computer +300 bps, TVs +180 bps., Appliances +120 bps, Furniture (40) bps

3P

In Q4'23, GMV at 3P reached R$ 1.6 billion (5.8% lower YoY) and R$5.8 billion in 2023, +8.9% YoY. Revenue for 3P grew by +5.1% in the quarter and +18% vs. 2022, as a result of the increased penetraon of services offered in the marketplace, with take rate reaching 12.1% in Q4'23 vs. 10.8% in Q4'22, an increase of +120bps, and 12.2% in 2023 vs. 11.3% in 2022, an increase of +90bps. This is the role performed by the marketplace in the Casas Bahia Group: a journey of complementarity and opportunity for our customers with a comprehensive shopping experience, in addion to leveraging logiscs and credit.

GMV and Revenue 3P

(R$ million)Take Rate (2023 vs. 2022)

GMV 3PReceita 3P20222023

10

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Grupo Casas Bahia SA published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 March 2024 04:46:05 UTC.