Good morning, ladies and gentlemen. Welcome to Vivo's First Quarter 2024 Earnings Call. This conference is being recorded, and the replay will be available at the company's website. The presentation will also be available for download. This call is also available in Portuguese. We would like to inform all attendees that they will only be listening during the presentation, and then we will start the question-and-answer section when further instructions will be provided. Before proceeding, we would like to clarify that any statements made during this conference call regarding the company's business prospects, operational and financial projections, and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry, and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. João Pedro Soares Carneiro, IR Director. Now, I'll turn the conference over to Mr. João Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

Good morning, everyone, and welcome to Vivo's first quarter 2024 earnings call. Today, our CEO, Christian Gebara, will walk us through Vivo's performance in connectivity and digital services for both B2C and B2B, as well as present our ESG advances. Then, our CFO, David Melcon, will give more color on cost and CapEx management and free cash flow generation, followed by an update on shareholder remuneration for 2024. With that, I'll turn the call over to Christian.

Thank you, João. Good morning, everyone, and thank you all for joining us today. Before starting, I would like to express our solidarity with the population, our employees, customers, partners, and everyone affected by the tragedy in the state of Rio Grande do Sul. We are directing all efforts to restore our services in the affected areas as quickly as possible, acting on several fronts in this time of crisis. We joined forces with all operators and enabled roaming so that customers of other telcos can connect to our network. In addition, we are offering a data bonus of 10 gigabytes to our prepaid and hybrid customers in the region, and considering the difficulty of accessing some of the most impacted communities, we are providing the civil defense of Rio Grande do Sul with 60 satellite phones meant for use in extreme situations. Moreover, through Fundação Telefônica Vivo, we launched a national match funding campaign open to the entire population to help with items of greatest need such as food, hygiene, and cleaning products. Regarding the operation, we are evaluating the impact on infrastructure stores and the provision of service as a whole as we also face difficulties in accessing some locations due to roadblocks and lack of electricity and damage to our network. Now, moving to the results. We kick off 2024 reporting another robust quarterly result with revenue, EBITDA, and net income growing above inflation. Our customer base expanded in our main products. Postpaid access was up 6.6%, while homes connected to FTTH grew double digits at 12.3%. Total revenues increased by 6.5%, mainly driven by an outstanding performance of mobile service revenues that were up 9.3%. Our profitability figures were also highlights. EBITDA grew 6.8% year-over-year and net income expanded by 7.3% on an annual comparison. As a result of the strong operating momentum coupled with stable CapEx intensity, operating cash flow summed up R$3.4 billion, while free cash flow generation reached R$2.4 billion in the first quarter of the year. The strong start to 2024 reaffirms Vivo's solid position to continue delivering sustainable growth and returns. On Slide 4, we show the breakdown of our top-line expansion. Mobile service revenues represented 64% of total revenue in the quarter and grew at a fast pace fueled by the double-digit increase in postpaid revenues. Fixed revenues posted a positive evolution as FTTH expanded at a mid-teen rate, compensating for the seasonal volatility of B2B digital revenues and the decline of other legacy services such as fixed voice and broadband. This solid performance derives from our best-in-class value proposition for both B2C and B2B customers, combining connectivity with the broadest portfolio of services beyond the core. In the first quarter of 2024, B2B digital services summed up with B2C new businesses to represent 9.5% of Vivo's total revenue, up 0.9 percentage points year-over-year, which confirms the trends seen so far of the escalating significance. Turning to Slide 5, we highlight the main levers of our ongoing growth in mobile. Postpaid access continues to gain share in our customer base mix. Within the postpaid segment, the upselling from hybrid to pure postpaid increased by 75.7% year-over-year. As Vivo is in a unique position to meet customers' ever-growing needs for connectivity, we see them staying longer and spending more with us. Postpaid churn remains at its lowest historical level of 0.97% per month, while ARPU increased by 7.7% year-over-year, considerably above inflation. Now, moving to fiber. Vivo's FTTH footprint is available to 26.8 million homes and businesses throughout Brazil, getting close to our target of 29 million homes passed by the end of this year. We continue to outpace the market in additions with more than 170,000 new accesses during the quarter, totaling 6.3 million homes connected. As we offer a more premium portfolio in terms of speeds and digital services, FTTH ARPU reached R$91.4, its highest value in the last few years. The average FTTH speed sold has been accelerating, going from around 260 megabits to over 310 megabits. Vivo Total is an important driver of our outstanding performance in fiber and postpaid. Our convergent offer totaled 1.5 million customers, more than doubling compared to the previous year while presenting churn that is 1 percentage point lower than the standalone fiber. Vivo is in a privileged position to further increase its FTTH take-up rate and leverage its distinctive capability of offering a combined fiber and mobile plan on a nationwide basis. As we mentioned at our Vivo Day, we want to start giving you more color on our results split by customer segment, underscoring how new businesses are contributing to the top-line expansion. On Slide 7, we show the evolution of our B2C revenues in the last 12 months, which represented around 76% of Vivo's top line. B2C revenue grew almost double the inflation in the period because of our second-to-none connectivity, which has been complemented by the advance of our new business portfolio. Revenues from these services summed up R$1.4 billion in the last 12 months, up 34% year-over-year, representing 2.6% of our total result. The distribution of 2.7 million subscriptions of video and music OTTs generated R$597 million in revenues, whereas financial services contributed with R$425 million in the last 12 months. One of the highlights was Vivo Money, which ended the quarter with a portfolio of R$420 million in personal loans. Our credit portfolio will further accelerate with the advent of new products, such as financing of fixed transactions paid in multiple installments. On Slide 8, we showed the increasing relevance of digital services over total B2B revenues. During the last 12 months, B2B digital services reached R$3.5 billion in revenues, up 20% year-over-year, representing 31% of our B2B business and almost 7% of Vivo's top line. In the first quarter of the year, we showcase our absolute leadership in B2B by developing customized private network solutions for some of the most relevant companies in Brazil. We are confident about the opportunities to further increase the relationship we have with our 1.6 million B2B customers as we combine the best connectivity in the market with an unrivaled ecosystem composed of top-notch partners to support the digital transformation of Brazilian companies. Turning to Slide 9, I highlight some advancements in our ESG agenda. CDP has already considered Vivo as part of the A list on Climate Change and also recognized us as the only Brazilian telco leading in supplier engagement. Additionally, we rose three positions year-over-year in Merco's Corporate Reputation Business Monitor, placing us in the top 20 companies with the best reputation in the country. On the social front, Vivo continues to invest in black talents. For our Youth Apprentice and Internship programs, half of the positions were reserved for black students, and the latter ended up with 60% of positions filled by black candidates. I'm also glad to share that Vivo was awarded by the United Nations for this initiative regarding the movements of 2030 ambition, Race is Priority, and Mind in Focus. Due to these and many other ESG accomplishments achieved over the years, we were considered the most sustainable company in Brazil among all sectors in the latest ISE B3 ranking. Now, David will comment on our financial performance.

Thank you, Christian, and good morning, everyone. On Slide 10, we show the cost evolution in the first quarter of the year. We were able to increase OpEx below revenues, even with enhanced business performance. The increase in the cost of services and goods sold was driven by greater revenues from digital services and sales of consumer electronics. The evolution of cost of operations was mainly related to higher commercial activity and customer base expansion, which was partially compensated by the advances of our digital channels, such as the launch of Vivo's new app in March this year. We also point out that we registered a lower level of other revenues in the quarter due to reduced tax recoveries and sale of unused equipment compared to last year. Going forward, we are confident in our ability to further improve our cost efficiency while supporting the growth of new businesses. Moving to Slide 11, CapEx totaled R$1.9 billion in the quarter, representing a CapEx-to-sales ratio of 13.8%, in line with the trend of lower CapEx intensity expected for the next years. 5G deployment continues to be one of our investment priorities, with Vivo being the only telco covering all Brazilian cities with more than 200,000 inhabitants using this technology. This combination of robust operational performance with controlled CapEx translated into a strong operating cash flow generation, amounting to R$3.4 billion in the first three months of 2024, leading to an operating cash flow margin of 23.6% for the last 12 months. Moving to Slide 12, net income expanded 7.3% year-over-year, reaching close to R$900 million in the quarter. Vivo's cash position at the end of March this year surpassed financial debt by R$1.9 billion. In April this year, we used part of our cash position to pay R$2.2 billion in interest on capital. Even considering IFRS-16 leases, leverage remains under control at 0.5 times EBITDA. Free cash flow generation reached R$2.4 billion in the first quarter of the year. The year-over-year comparison is negatively impacted by the compensation of tax credits amounting to almost R$500 million last year. Overall, Vivo's strong financial position provides flexibility to combine an attractive return to shareholders while investing across our main revenue drivers. Slide 13 shows the main components to meet our guidance of paying out at least 100% of net income in 2024, '25, and '26. In March this year, we announced our new share buyback program, planning to invest up to R$1 billion until March 2025. As of today, we already bought back R$53 million in our own shares. The first tranche of the capital reduction in the amount of R$1.5 billion will be paid out on July 10th this year. On April 23rd this year, we paid out R$2.2 billion of interest on capital declared during the previous year, while the interest on capital declared in the first four months of 2024 amounted to R$680 million. These initiatives demonstrate that Vivo is on track to meet its shareholder guidance, reaffirming its unique position as one of the top Brazilian companies regarding growth, profitability, and shareholder remuneration. Thank you. And now, we can move to the Q&A.

We are going to start the question-and-answer session for investors and analysts. Our first question comes from an analyst with Bank of America.

Hi. Good morning, everyone. Thank you for taking my questions. I have two here. The first one is on the net adds dynamics. You have had very solid mobile service revenue growth for the past few quarters, which was also boosted by the net adds. How can we think about net adds going forward? Is there room to continue having positive net adds not only on postpaid, but in absolute numbers? Why are we seeing still a growing base of users in the market as a whole? Is that something that you think could be sustainable, and for how long? And second, on prepaid, we have seen a lot of price movements and some offers being restructured, but we haven't seen hikes in terms of the minimum you have to pay to be connected for a month. So, I wanted to know if there's space for price hikes in prepaid still in the short term or not, and how are you seeing the dynamics for the prepaid competitive market? Thank you.

Okay. Lucas, it's Christian. I will start with the net adds. What we see is, we are gaining customers, so we see a positive trend. More than just talking about the absolute number, we see a very healthy and very positive migration across the segments that are relevant to us. In prepaid, we are trying to envision much more migration to hybrid, and we've been doing that in a very positive way. That's why you also see a very good evolution of the overall mobile ARPU, which is at 77.7%. More importantly, we are migrating within the hybrids. That's why we just launched, a few months ago, the new hybrids that have entertainment, health, or education embedded in the value proposition. More importantly, we are migrating hybrid to postpaid. And that's a movement that, if you follow the last few years, was not so usual, and it became very relevant in our strategy. So, if you see the number that we had, the migration of hybrid to pure postpaid was more than 75% higher than what we had in the first quarter of the previous year. Not to talk about the penetration of digital services and the new businesses that we described or the Vivo Total conversion. We are very positive about mobile movements. We're keeping a very low churn, below 1%. Our ability to attract new customers is strong, and we are also able to migrate and upsell to our customer base that we have. These two movements are very strong in the right direction, so we are confident about our ability to continue to monetize and keep customers more loyal, having more products for the same customer base. Regarding prepaid, we had several different movements in pricing. I don't know if I got your question, but we now have an entry-level of R$17 in the biweekly offer, which used to be R$15 last November. We also increased the face value of our top-up, as most channels outside Vivo are R$20. And so, we are moving up. Additionally, we continue to migrate customers from prepaid to hybrid, which is driving ARPU up, supporting a 7.7% ARPU evolution in the period.

Oh, very clear. Thank you.

Sure, Lucas.

Next question from Marcelo Santos with JPMorgan.

Hi. Good morning, Christian, David. Thanks for the opportunity to ask questions. I have two. The first, to Christian, I wonder if you could comment a bit on the fiber ARPU dynamics. It was up 2% year-over-year. In the fourth quarter, it was up 3%. Maybe you could discuss a bit the adjustment schedules and provide some color on how this line should go forward without any guidance, of course. And the second question is on the CapEx outlook for David probably. David, could you provide us some view on how CapEx should behave this year? Should we expect a similar number to the previous year? Or are there any variables that should change that this year? Thank you very much.

So, Marcelo, thank you for the question. Yes, you are right. There are many factors in the ARPU evolution. First, we've been able to be the winner in net adds of the market in the last quarters. In the first quarter of 2024, it was the same; we are the ones capturing more customers, and we are capturing customers in a very rational way. This rational way combines having the right pricing for the quality of the service that we're offering and also the ability to upsell through higher speeds. The average speed we sold last year was close to 250 megabits, and we are now above 300 megabits. Secondly, we are able to package more digital services with fiber. When we talk about the 2.7 million subscriptions we have in the video and music OTTs, a lot is connected to fiber sales. Then, there is Vivo Total, which I also mentioned during my introduction, reaching over 1.5 million customers. This is also important because it improves ARPU in general. The client ARPU increases when fiber is combined with Vivo Total versus the standalone one. Going forward, we believe we will continue to drive higher speeds and services to our fiber customers. We are also focused on what we call smart homes, selling services driven by WiFi connection in different rooms, also services connected to installing smart devices. We are very positive about ARPU evolution. Regarding price increases, we had one for part of our customer base in January. We will have another for another part in June. So, we have two rounds of price increases, one in January and one in June, which we'll keep due to inflation over the period. However, more than just inflation, the ability to offer more services to our customer base will be key in driving ARPU up and revenues in general. I leave David for CapEx. I don't know if you have more questions here, Marcelo?

No. Just on this, I mean, what about last year? Did you also increase in January and June? Was it the same pattern of increase, or just want to understand the seasonality here?

Yes. More or less, exactly the same months; we have a larger customer base now that will be impacted by the increase because our customer base has increased.

Hi, Marcelo. Regarding your second question, as we discussed at our Vivo Day, the plan for 2024 is to reduce the intensity of CapEx. Last year, we closed with a CapEx intensity of 17.2%. The plan for this year is to reduce it compared to last year. In the first quarter, we are showing intensity of 13.8%, and the comparison with the previous year is that we are anticipating accelerating investment to maximize the return of this CapEx throughout the year. Keep in mind that the revenue is coming from new businesses that are not consuming CapEx. At the end of the day, this is one of the key levers we will use to ensure this intensity continues to reduce.

Perfect. Thank you very much for both answers.

Thank you.

Thank you, Marcelo.

Next question from Marco Nardini with XP Investimentos.

Hello. Good morning, Christian, David, and Vivo team. Thank you for taking my questions. The first one is a quick follow-up regarding fixed broadband from the last question. FTTH ARPU is growing consistently over the last few quarters. Can you comment on churn, please? And regarding EBITDA margin, can you comment on the flattish performance year-over-year? What can you expect from EBITDA margin performance for the next quarters, please? Thank you.

Marco, regarding churn, we don't disclose churn numbers. Currently, what I can share is that we have 6.3 million FTTH customers, with 1.5 million in Vivo Total, which is increasing quarter-over-quarter. In the first quarter last year, it was only 0.7 million. So, we have doubled Vivo Total, and the fiber churn is 1 percentage point lower than standalone fiber. We have about 25% of our customer base already in Vivo Total, with more than 80% of fiber sales in our stores coming with Vivo Total. We see a strong positive trend of decreasing churn. ARPU is driven by speed and the services we package together. We started with OTTs, and we are now adding smart home services, not only selling devices but also offering installation services, which will also contribute to higher ARPU. I hope I answered your question, Marco, regarding...

Yeah, that's perfect.

And EBITDA, David will talk about it, but it's important to note that we now have more than 9% of our revenues coming from new businesses, as David mentioned before. New businesses are driving revenue growth, customer loyalty, and that's our strategy we've defended for a long time, first in B2B and now in B2C. Our ability to offer a complete and broader range of services to our customer base is essential. With 113 million accesses in our customer base, our key objective is to monetize as much as we can and provide more services and benefits to these customers, going beyond our core of just offering connectivity. Our strategy supports that the services representing over 9% don't have CapEx. Most of them are CapEx light or CapEx zero. Our acquisition cost to sell these services is almost zero when we use our app, but they do provide higher EBITDA margins. We will discuss absolute evolution beyond inflation, as we presented in the last quarters. Also, when looking at operating cash flow margin, the free cash flow margin will be key indicators driving our strategy going forward.

Yes. Hi, Marco. Just to complement, as Christian mentioned, we are keeping focus on activities to reduce our OpEx through digitalization and simplification. Regarding margin, we look at operating cash flow margin. As you can see on Slide 11 in our presentation, we have the highest operating cash flow margin, which is 23.6%. You can observe the trend, which is the highest over the last couple of years. Here we are including EBITDA but also CapEx. So, we focus on operating cash flow margin, and we see the positive evolution expected to continue.

Yes. I'm also keen on the operating cash flow margin; I find it interesting because our operating cash flow margin was at 21% in the first quarter of '23. Now we presented one that is 23.6%, with an operating cash flow that is positive at R$3.4 billion. Looking at the free cash flow, our yield is at 8.8%, free cash flow over sales at 14%, and it's positive at R$2.4 billion as well. So, we discussed revenue and EBITDA, but it's also important to pay attention to the cash flow generated by Vivo and its evolution over sales in the last quarters.

Perfect. Thank you very much, Christian and David. Super clear.

Thank you, Marco.

Our next question comes from Vitor Tomita with Goldman Sachs.

Hello. Good morning, all, and thanks for taking our questions. Two questions from my side. The first one is if you could give us an update on how you are seeing the competitive price dynamics in the fiber business? And the second question, as a follow-up to the discussion on upselling and prepaid to hybrid migration, do you believe that you are close to reaching a ceiling in terms of how many prepaid customers can be migrated to hybrid or postpaid, considering customers’ profiles and suitability to hybrid plans, since they imply some credit risk? I have to believe that a large portion of the remaining prepaid customers just will never be suitable for postpaid. Thank you.

I don't think so, Vitor. On the contrary, our ability to migrate prepaid to hybrid is still there. What I just highlighted is that the same ability is also there for hybrid to pure postpaid, and that is also there for hybrid with new businesses packaged together. We have a strong sales machine that is difficult to replicate in any sector. We're talking about 1,800 stores, 23 million unique users increasing in the app, our WhatsApp using artificial intelligence, and a call center driving far more sales than previously. Our ability to sell more to our customers and upsell, seeing migrations from prepaid to hybrid, hybrid to pure postpaid, and pure postpaid to Vivo Total, adding additional services is still growing. Thus, I maintain a different perspective on that; our capacity in this regard is on the rise. The discussion about prepaid to hybrid or hybrid to postpaid depends on offering the best value proposition to each customer segment, which is why we have vast data allowing effective segmentation to provide relevant offerings. As for price tenders in the FTTH and competition, our pricing is rational. It's tough to discuss competition; we are the number one in network, in the number of homes passed, reaching 29 million by year's end. We lead on customer numbers, at 6.3 million, we lead in net adds, and we are the ones increasing speeds, increasing ARPU, and reducing churn. We know how to compete, and we have a value proposition that is very, very difficult to replicate.

Very clear. Thanks a lot for the reply.

Thank you, Vitor, for the question.

Next question from Carlos de Legarreta with Itau BBA.

Good morning. Thank you for taking the question. I have two on my side. I guess probably for David. During the quarter, the effective tax rate was typically high, if I'm not mistaken. So, I was wondering what's the nature of that. And secondly, regarding the size of the leases, I know they have been increasing by double digits year-over-year for the past couple of quarters. But, at the same time, I know you're also decommissioning sites from the Oi acquisition. So, I'm just wondering how to reconcile those two and how to think about the motion of leases going forward. Thank you.

Thank you, Carlos, for the question. Regarding the first one about effective tax rates, the tax rate is impacted by the value of interest on capital that we distribute every year. If you look over the last year, in Q1 last year, we declared R$396 million, and this year we declared R$300 million. This means R$96 million less, which has a direct impact on that expense line. For Q2, we are seeing that, so far, we have declared R$380 million compared to R$320 million from the previous year. This means that in the second quarter, there will be an opposite effect when comparing year-over-year. Regarding the leases, as you mentioned, last year, we accelerated the negotiations with the tower companies from the contracts we acquired from Oi. We decommissioned around two-thirds of those, so at the moment, if you look at the liabilities in our balance sheet at the end of March, they are almost in line with the same figures from the previous year. We have R$13.4 billion at the end of March, compared to R$13.6 billion at the end of December. This is going down. To reconcile with the payments, if you look at the evolution, we are applying efficiency initiatives, and in the first quarter, we paid R$651 million. The average amount paid over the last 12 months has been R$689 million per quarter, which corresponds to a reduction of almost R$40 million. Going forward, we expect benefits from the reduction in interest rates, which will also help in the future. Also, regarding bad debt, this quarter, we witnessed low bad debt levels, reducing historical numbers over the last few years with this quarter reflecting 2.1% over gross revenues. If you compare this to the previous year, it was around 2%, indicating a slight upside increase, but so far, in April and the first week, we are seeing positive trends driven by lower churn and an efficient collection process. Just to provide clarity on these key cost items.

That's very helpful. Thank you, David.

The question-and-answer session is over. We would like to hand the floor back to Mr. Christian Gebara for the company's final remarks.

Thank you everyone for participating. Again, we had a very strong and solid quarter aligned with the strategy we've been communicating over the last years. If you have any additional questions about numbers or any other topic, please feel free to contact us. Thank you again for participating in our call.

Vivo's conference is now closed. We thank you for your participation and wish you a nice day.