Azzas 2154 (AZZA3) Q4 2024 earnings summary

Executive summary

• 2024 was a transformational year with the merger of Arezzo & Co and Grupo SOMA, forming Azzas 2154 and creating a diversified leader in the R$71.8 billion Brazilian fashion market.

• Pro forma gross revenue grew 15.1% in Q4 2024 year-over-year, with three of four business units growing above 17%.

• Integration of financial areas, operational synergies, and portfolio optimization included discontinuing or selling underperforming brands.

• Net income was impacted by non-recurring tax issues (Law 14.789/23), with legal actions underway to potentially reverse this effect.

• Strategic priorities for 2025 include operational efficiency, capital allocation optimization, and maximizing cash generation amid high interest rates and economic uncertainty.

Financial highlights

• Q4 2024 gross revenue reached R$4.2 billion, up 15.1% year-over-year; 2024 gross revenue was R$14.2 billion, up 10.8% year-over-year.

• Q4 2024 recurring EBITDA was R$443 million, margin 13.0%; 2024 recurring EBITDA (pre-IFRS 16) was R$1.6 billion, margin 13.5%.

• Q4 2024 recurring net income was R$168.9 million; excluding Law 14.789/23, it would be R$241.5 million. 2024 recurring net income was R$590.7 million, or R$907.3 million excluding the law's impact.

• Recurring gross margin in Q4 2024 was 55.5% (-60bps); 2024: 55.1% (-10bps).

• Net financial expense in Q4 2024 increased 8.4% year-over-year, mainly due to higher currency and monetary variations.

Outlook and guidance

• 2025 will focus on operational efficiency, SG&A reduction, and maximizing cash generation, prioritizing high-return projects.

• Growth expected in B2C channels, with continued expansion of Farm and Hering brands, new store concepts, and selective expansion in men's apparel.

• Non-recurring expenses and impacts from discontinued brands are expected to be minimal in 2025.