Empreendimentos Pague Menos S.A. (PGMN3.SA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Pague Menos' earnings call to announce the results of quarter 2, 2025. This call is being recorded and the replay will be available on the company's website at ri.paguemenos.com.br, where the presentation will also be available for download. [Operator Instructions] We also inform that this conference call will be conducted in Portuguese by the company's management and that you can listen to the simultaneous translation in English by clicking Interpretation. To those listening to the English version, you can mute the original audio by clicking on the button Mute Original Audio. The presentation will be shown in Portuguese and the English version is available for download at ri.paguemenos.com.br. Before proceeding, let me mention that any forward-looking statements that may be made during this call are based on the beliefs and assumptions of the company's management as well as information currently available to the company. These forward-looking statements may involve risks and uncertainties since they refer to future events and, therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should understand that events relative to the macroeconomic environment, to the industry and also other factors may lead to results that differ materially from those expressed in such forward-looking statements. Today, we have with us Mr. Jonas Marques, CEO; and Mr. Luiz Novais, CFO and IR Director of the Company. Now I would like to hand the conference to Mr. Jonas Marques to start his presentation. Mr. Marques, you may proceed.

Good morning, all. We're starting this earnings call with a lot of energy and joy. I have been listening to a lot of comments saying that I am always full of energy and enthusiasm, and enthusiasm to me is to have God inside of us. I am on vacation, but I have to lead by example. So in these 5 days, I have been having a lot of fun, relaxing with my loved ones. But of course, I had to be present here with you today because of all the respect that I have to our employees and our shareholders, because here, I am only a spokesman. And talking about our employees today, I wanted to look at this screen. Here we have a photo of [ Irvina Duarte ]. [ Irvina Duarte ] is one of our agents in our Beach Park store, and we know that everybody loves vacationing. So whenever you go to the Beach Park, which is one of the largest water parks in Latin America, there's a store there now. And we also have [ Clicky Farma ]. Sometimes we take our kids and they get hurt. So now you're being well taken care of in the largest water park in Latin America as well. So I want to send hugs to all our 26,000 employees, to their families. And this is so important. We read some news in the media saying that joy leads to profit, and we truly believe in that, because in the end of the day, everybody was born to be happy. And I also had a very good surprise, that I was just told that our entire extended leadership team is present in a room in our headquarters in Fortaleza watching the call with us. And this brings a lot of energy to this call. And we are all united by the same purpose, which is bringing health with love to all people in Brazil. But you as an investor, you're looking at the screen and I know you want to see the numbers. And numbers follow behaviors. So Rena, can you show them our numbers to prove that everything that we're doing is so consistent. We had yet another quarter of record-breaking numbers, historic records in all our variables. But 8 bullet points a lot? No. We could have 18 here, but we only chose 8 because we don't want you to get confused. So I'm going to mention some things that are in BPs. First, our market share. For more than 13 months, we have been seeing an increase, a consistent increase in our market share in all regions of Brazil, with special highlight, if you see our results -- Novais is going to talk about this -- with special result to the North and Northeast with a large number of points being gained, very expressive growth. And why? Because it comes from our active customer base. We're growing our number of clients. We're growing our average ticket, and we are growing the frequency of these customers in our stores. And why do I say behavior? Because we embrace our customer. Pague Menos' customers are not numbers. They have a story, they have a name. And nobody goes to a drugstore to buy shoes or clothes. Nobody wakes up happy and goes to the drugstore. So that's why our customer service is record breaking, and this is what's bringing us additional customers. Also, the share of our digital channels. Beautiful work being done by [ Varicella ], Renato and our digital team. It reached 18.7% share of our sales. It's more than 50% increase. And this has been going on for more than 6 months and there's more to come in the future. Also vaccination, more than 500 increase in our vaccination rate. And vaccination is so important because it also brings credibility to our customers because vaccines are extremely necessary and have really changed humankind. So if you want to offer complete services, we need to offer vaccination services. Also, average sales per store, we are looking at an alligator's mouth, but it's not an alligator's mouth, it is a steel bar and this is inverting very quickly. I don't -- this is not here, but it is in our earnings release. We grew the number of -- over BRL 1 million revenue store, more than 4x. Comparing quarter 2, 2024 to quarter 2, 2025, it was a four-fold increase. And we also used telemetry to recover our stores that used to have a negative EBITDA. I'm not giving guidance here, but we will continue to close this gap and we will do this faster in the future. Our EBITDA margin reached 6.1%. It is the highest since quarter 2, 2021. Jonas, can you repeat, please? Yes. The highest EBITDA margin since quarter 2, 2021, 6.1%. Nearly 2 years ago when I joined the company, this was the main question that I got, "Your EBITDA is still very low." Thank you for your feedback. You see that we really hear it and we really make it happen so that we can deliver good numbers. The ROIC was 22.9%, and this is the magic of growth. Growth can solve a lot of issues. So we're growing, we're diluting our expenses and we're improving the use of our capital. And PME, which is the average stock time, is also a record. It is the best since quarter 2, 2019. You remember that 1 year ago we were managing our in productive stocks. But retail is about the details. And here, there's no magic bullet. Here we have several things that need to take place and our obsession for retail. Retail starts with a V in Portuguese, V for vida, V for life in Portuguese. So that's why we pay attention to details. We need to have a very sharp eye to details, and we should never stay in our comfort zone. There's no compliance allowed here. Now let's go to the second chart. This chart even makes me emotional, and people think they have vision problems when they see these numbers. But here you see on the left, our real growth. This was on the news. We are growing 5x the inflation rate, 5x. Reaching a same-store sales level of 18.1% is spectacular. And you ask me, "Will you continue to grow?" That's what we're working for. And we cannot give guidance. But if you look at this, it's 9 months, 9 consecutive months that we're over 17%. And you will see that a great part of this growth is about volume. Do not be mistaken, when you see companies presenting their same-store sales, look at the composition, what comes from the mix and what comes from volume. And ours comes from volume. So just a note, I don't want to focus on our competitors. Competitors will only improve our muscle tone so that we can continue to fight. So you see on the left our same-store sales growth, and in the center, we see our EBITDA margin in the last 12 months. So you see that in quarter 2, 5.1%, the accumulative is 5.1%, also an upward trend. The PME is dropping. The net income has exponential growth. You see that in '23, we had a loss. But since we started delivering profit, we haven't stopped growing. But we know that we are at a time of high interest rates, and that increases financial expenses. But if you want to make it happen, you find a means to it. If you don't want to, you find an excuse. And the ROIC, I had already mentioned it. So these are my initial announcements. And now, I'd like to hand the conference over to Luiz Novais. Thank you.

Good morning, Jonas. Good morning, everyone. Thank you for the introduction. Jonas, yes, you have really high levels of energy. It's hard to keep up, but I'll try to follow your example. We have a lot of good news to share with you this quarter. So let's start on Chart 7 with more details on our gross revenue. Gross revenue grew by 18% driven by the elements that are on the right side of this chart. Branded drugs is the most important category right now to us or to any drugstore, with a very important increase in the customer base that we call continuous care customers. This is a reflection of better customer care, better assortment and better stores execution. Our sales campaigns, we have our sales team supporting us, the marketing team supporting us with sales campaigns. For example, in May this year, we had the Pague Menos Anniversary Campaign, and we grew 22% supported by all the sales campaigns that were executed with the industry. Digital channels are also having spectacular performance. We reached a very high share in the company's sales. We had growth in all components of our sales, the customer base, the frequency and the size of the shopping cart. A very balanced growth in all of these components and also our operational levers, telemetry, CRM, marketing and store execution. So all the sales components. So a very positive evolution this quarter. On the next chart, we give you more details about our sales growth. On the first chart, we have the same-store sales by region. We have a low dispersion in our growth between regions. All regions are growing more than 17% and all states are growing above 15%. We didn't have any states growing less than 15%, and this shows that our growth is structural and not just localized. The second chart shows the components of this growth. This is very well balanced. About 0.5% -- or 8.7% is the growth in our average ticket and 8.6% in customer service. And the 2 average ticket components, the number of items per shopping carts, very important, and half of this –- or half of this is the inflation, about 4%. And customer service or customers served, we had a balanced growth in the frequency of purchases from these same customers, and also -- we also had a -- see a growth in our customer base. There's a large proportion of new customers that are now visiting our stores. And finally, the growth by category, branded drugs and generic, 23.7%, 18.7% increases, very impressive. Prescription drugs accounted for 54% of the company sales. Weight loss drugs had a very important share in this quarter. We executed the launches really well. So congratulations to our sales team and store execution teams. And hygiene and beauty was the one with the lowest growth rate, 11%. But 11% is also very significant in this category. We see a recovery compared to quarter 1 this year, where we had a 7% growth. So we are now growing more with hygiene and beauty as well. On the next chart is a reflection of this growth in our sales. The market share, just like you heard from Jonas, we had yet another quarter of very strong growth in our market share, reaching 6.6% national share, 44 bps more than quarter 2 last year, growing in all regions in Brazil. And very important highlight to the Northeast, where we grew 110 basis points. We went from 19.5% to 20.6% share. And we didn't have so many new openings in this period, only 12 new stores, a smaller proportion. And here on the right side, comparing with Abrafarma and the industry as a whole, our performance was much above these 2 comparison blocks. On the next page, we see the components for this market share gain. Here we have a very important highlight. For example, in the first column, based on IQVIA data, the market grew at 10.5% composed by 5.5% participation of new opening, 6.8% average price and 1.8% closing of stores. And then there's a small proportion there from volume, which had a reduction of 0.5%. So the entire market lost 0.5% of its volume compared with quarter 2 last year. And the second column is Extra -- Pague Menos and Extrafarma. We grew 18.4% in IQVIA data, nearly double what the market grew. This is composed by 1% of new openings, 6.5% price and 11.5% volume. So it's very striking the difference in volume. When we look at the other peers here, none of them grew in volume, only Pague Menos and Extrafarma. And this was very significant growth, 11.5%. In the third and fourth column here, we have chains and associations with very well aligned growth, but they're losing volume. And independents is the one that lost the most. Nearly 4.5% of their volume and 3.8% in the closure of stores. On the next chart, gross profit and gross margin, another good news. We grew 30 bps our gross margin year-on-year. The gross profit increased 19.2%. So 2 items put pressure on the margin in this quarter. We had a lower inflationary gain. In the second quarter, there was a readjustment of about 3.7% in the price of drugs, and last year, it was 4.5%. And the mix, we have a share -- we had a relevant growth in prescription drugs, we gained a lot of share. And this category has a slightly lower margin than our entire portfolio comparatively speaking. But we offset that with 3 elements. Now reduction -- a relevant reduction in the stock loss rates. We have been improving our stock losses after the Extrafarma integration. We also had relevant improvement in sales conditions. The industry is supporting our campaigns, and we were able to maintain and improve our margins. And [ AVP ], which is the non-cash effect, which is a combination of average interest rates and payment terms, which positively contributed to the margin this quarter. On the next chart, we have excellent news, the dilution of our expenses. We were able to dilute our expenses by 60 basis points. We went from 25.1% to 24.5%. This is due to relevant growth in our sales and a much smaller growth in our expenses. So the operating leverage was really high. We also had some variable expenses that increased in the quarter because our sales are increasing a lot. So variable expenses tend to increase as well. We also made relevant investments in in-store employees to improve our customer service and operational efficiency. And since we are growing greatly in categories that depend on assistant sales, for example, continuous care customers with more participation of PBMs, we also had relevant growth in a popular pharmacy program, which is a process that is a little more complex in our stores and this demands more employees. This is what we saw this quarter. And also in the back office, we have been reinforcing and training our corporate team to be able to sustain and advance the company's growth. We also had an incremental variable remuneration increase considering that we are exceeding all operating targets of the company. As a result of the growth in our sales, growth in our margin and expense dilution, our EBITDA increased nearly 40% in the quarter. We went from BRL 177 million to BRL 244 million, which is a record-breaking margin of 6.1%. We grew nearly 1 percentage point on margin, which also happened in quarter 1 this year, while growth of 0.8% in quarter 2, with contributions from the improved margins, expense dilution and a small increment in our administrative expenses. And on the next chart, as a consequence of all this, we had a super relevant improvement in our net income. We went from BRL 44 million to BRL 60 million, a 36% increase. In the past 12 months, we are accumulating more than BRL 200 million in net income. And on the right, we have the bridge of our net income. Very positive effects from our sales, BRL 32 million, and a margin, in fact, of BRL 35 million. And in quarter 2, we also had an important impression on our financial results of BRL 50.6 million. A combination of interest rates that are 4 percentage points higher than quarter 2 last year. And we also have a pain point which is related with growth, the financing of a larger working capital, which is a consequence of the company's growth. So the financial expenses were slightly higher. On the next chart, we have more details on our working capital. And other very good news, we're improving the company's working capital. We reduced it 3 days year-on-year from 56 to 53 days. And this improvement was concentrated in stock management. So a lot has been done to decrease our low turnover stock in our stores and distribution centers and improving our reverse logistics. The average payment term, there was a higher share in prescription drugs, which is a category with longer payment terms. So there's a marginal increase here of 1 day. And the average receipt time, we also –- we had the same proportion in quarter 2 last year. But we have the effect of anticipationcy and advance this year. If we exclude the effect of advances here, we also see an increase in the average customer payment term because of Popular Farmacia program that has longer payment terms, and also the prescription drug category that we are offering more financing options to our customers in this sense. Next page, indebtedness. We follow our deleverage strategy. We go from a net debt plus advances of 3.4x to 2.6x. It's nearly 1 EBITDA of reduction in 1 -- over 1 year. So 0.8x the EBITDA compared to quarter 2 last year. And in addition to this, relevant reduction in the net debt-EBITDA ratio. We also had a very important reprofiling of our debt. Our entire finance team was working hard for a historical fundraising for the company with a spread reduction from 1.65 to 1.55 for a total of BRL 830 million raised. When we look at Pague Menos' ratings, there's a 20 bp distance here. So this was very strong work being done by our finance team working with the banks to be able to raise these funds. And we also prolonged our debt terms from -- the duration, from 1.44 to 2.38. So we're very comfortable in the management of our debts. And the last chart, as a consequence of this important improvement in our operating results, management of our cash cycle, we had a very strong improvement in the company's ROIC, as you heard from Jonas in the beginning. So growth in our average sales, operating margin and improving our working capital allowed us to achieve nearly 23% ROIC this quarter. It's practically a 10 point increase year-on-year. So with a lot of good news, I finish my part of the presentation. Yes, so many good -- so much good news.

Thank you so much, Novais.

Yes. Now I hand it back to Jonas.

Okay. Since the start, and by the start I mean January 2024, so 20 months ago, we were talking with our team about our mantra. And our mantra is that every day in all our stores to all our customers. This is our mantra. And this sounded at first like 3 separate sentences, but it is a strong statement and it attests our commitment to a very strong execution. So I always get a lot of questions asking, what's changing about our execution? We're talking about 25,000 people, 26,000 employees, 25,000 of which are in our stores. So we just have to convince them that they have a true purpose about -- to convince them of what they have to do every day and that they have to put their hearts in what they do. Of course, this is not a small task. But one thing that is striking to me is that all this improvement in our operation and operational excellence that we have been achieving comes from one single source and one single type of work, our people, working on our people understanding their needs, because everybody was born to be happy. And this is not just a shrink talk. When we hear parents wishing their kids are happy -- people always want their loved ones to be happy. Parents want the best for their children. And we learn, unfortunately, the world can be very selfish. But if we look at our equals and we let them be who they are and we engage with a greater purpose and if we give them the tools they need to work -- of course, for execution, you need to have processes, you need to have good technology, and most importantly, you need to have active listening, you need to care about what you're doing. And we have to explain it. So that's the type of execution that we want every day in our stores and we wanted to happen every day to all our customers in all our stores. So as I said, there's no magic bullet. We will have a lot of time for questions, but I'm really thankful for your support, for the support from our shareholders. You have all our respect. It doesn't matter if you have one share or millions of shares. You deserve our deepest respect so that we can work with an owner mindset and deliver good results. Because life is not easy for anyone. So if you chose to invest in Pague Menos -- and we hope you will continue to invest in the future and we hope you will believe in our company and what we are doing and how we want to rescue humanity and rescue humankind and bring solid results to our shareholders. So I'm very thankful to our team and their family members and also to you, everyone who believes in us. Please send us your feedback, visit our stores, buy from us, let us know what is working well, what is not. So as I said, there's no magic bullet. There are many aspects that we consider when working to improve our company, and this involves a lot of hard work over time. We're visiting our stores, we're looking at the parking spaces, we're entering the stores, talking to people. Because this is not about us at all. It's always above people. The impact that we can make actively listening to our customers. So I'm very happy to be here in this call with you listening to these very beautiful numbers, not just the top line, but also the bottom line. And I heard that we have truly exceeded all consensus from the top to bottom. And of course, now, we can open for questions, and we are available to support you. Maybe some of the questions, I will leave for our Pague Menos Day, which I will advertise in the end of the call. So let's open for questions now.

[Operator Instructions] Our first question is from Mr. Ruben Couto, Santander.

I have a question about your sales growth, which is still very strong and still accelerating. And looking at this by category, prescription drugs had a very major acceleration in the quarter. Novais even mentioned that you had an effect of weight loss drugs and how much they contributed to the sale. So I want to hear about this dynamic specifically for weight loss products. Have you been seeing an above the normal effect in terms of contribution? In this quarter, there was an important launch, there were some changes in the type of prescription forms. So have you identified any stock movements that have driven this? These numbers in quarter 2 more than what's normal usually. So can you talk about weight loss drugs specifically and how they behaved in the start of quarter 2 after the changes -- sorry, in the start of quarter 3 after the changes?

Yes, let me start and then you can hear from Novais. So the first part of your question, the latest numbers that we heard yesterday will come from Novais. So first, we need to connect with what we said in our first call in February when we announced the results for quarter 4 and quarter 1. The growth in the sales of drugs comes from our strategy that we call CCC or PCC, which is continuous care patient or continuous care consumer. So these are the people that truly need our attention. So these are our chronic customers, chronic patients. So the strategy that we are implementing since January 1 this year, with the help of telemetry, knowing exactly where we needed to improve our assortment, that's how we started to fix that iron bar of the average sales per store because 70% of the sales comes from prescription drugs. And you will see that we grew even with weight loss drugs, but that was not the only one that grew. Can you talk about the micro numbers, Novais?

So Jonas already mentioned this, but I think the highlight for us in weight loss drugs is the execution and the approximation that we have. We're working in close proximity with the industry. Until recently, we had an under share in these categories, but now with better supply, today we have a share that is consistent with the size of the company. Another thing where we saw a relevant advancement was the execution of the Mounjaro launch. The execution was flawless. We were the first company offering this type of product for consumers in Brazil. And the sales volume was very relevant and the supply really supported the company's growth in the second quarter specifically. And as you saw from the market, the need for prescription started in June for this type of medication. We were afraid this would decelerate sales, but we didn't see that. In June and July, sales were equivalent to the previous months. So we're very happy with our execution and how much this category is contributing to our overall growth, not just us, but the market as a whole. But we are much better at the execution in weight loss drugs. And we are also betting on these evolutions that the market is expecting for this category as a whole.

The next question is from Rodrigo Gastim, Itau BBA.

I have 2 questions. My first question is about your gross margin, one of the things that were most striking in this quarter. And for the gross margin, what I want to know is can you isolate what comes from the headwind effect of the industry, so the slightly lower pre-price increase or semaglutide? So when I look at the 30 bp increase, and if I remove, the margin was flat year-on-year. So how much pressure comes from the headwinds in the industry so that we can understand how much you're delivering with improvements in operational and commercial efficiency? So this is my first question about the bridge in your gross margin. And my second question, Jonas, in your initial comments, you talked about closing the gap, productivity gap compared to Abrafarma and other peers. So if you were to list the 3 main levers to maintain the closing of this gap, looking forward, what would be these levers? These are my 2 questions.

Yes, I can start, Jonas. I will talk about the gross margin. Well, fortunately, we're seeing a lot of evolution in our gross margin. We are improving our stock loss rates, as we already had mentioned in previous calls. We're still working on stabilizing the contributions from Extrafarma. Also, the -- working closer proximity with the industry and the industry financing commercial campaigns that we executed, for example, the anniversary campaign, and all the other commercial campaigns with the support of the industry. And all these operational improvements have been more than enough to offset the higher proportion of branded drugs and semaglutide and weight loss drugs that have proportionally lower margin and have put some pressure. And this quarter, we also had the effect of a lower inflation rate. However, an inflation rate of 3.7% this year compared with 4.5% last year, yes, it did put some pressure, but it wasn't that much of a pressure. And prescription drugs and weight loss drugs like semaglutides put more pressure, about 20 bps. But all the other operational improvements, for example, improving our stock losses and improvement in our commercial conditions were sufficient to neutralize this effect, and consequently, we were able to improve our margin in the quarter. And about the productivity gap, would you like me to start? Or you start, Jonas.

No, go ahead. You can start.

Okay. We achieved a very important milestone with average monthly sales of BRL 800,000 per store. There is still a very relevant opportunity to improve this further in Extrafarma stores. The same-store sales of Extrafarma in this quarter was close to 19.3% or 19.4%, whereas Pague Menos 17.8%, 17.9%. So the Extrafarma stores are growing at a faster pace than Pague Menos, but the 2 banners are very well balanced in terms of their growth level. But the Extrafarma stores still have a much lower average sales per store than the BRL 800,000. It is closer to BRL 600,000. So there's a lot of room for bringing Extrafarma stores to the same level as Pague Menos stores. As you heard from Jonas, more than 400 of our stores are selling more than BRL 1 million. And also, there's a lot to expect from the future in terms of store operation, our entire operating team, telemetry. So the operational and the technology teams are really supporting us in the clusterization of our stores by productivity indicator in order to improve productivity indicators. So there is a sea of opportunities for improvement here. A lot of nice things being done. We will now convert other 42 stores -- another 42 stores from Extrafarma to Pague Menos. Digital is soaring. So we have many other levers that we're working on to further decrease this gap. Pricing assortment, we will tell more on our Investor Day, like you heard from Jonas. But we still have a lot of room and a lot of work to do and room to grow. But since my name is vulnerability, I'm glad Gastim asked the question and you went first because I had time to think, because having his honorable presence in our call makes me nervous. Gastim, we are servicing our customers with resolutiveness and with our hearts. Everybody wants to be well-served and listened to and embraced. But in the end, everybody wants to come out of the drugstore with their product in their hands or with their question answered or with the best counseling. And my second point is assortment. We were able to improve our assortment, and you could see this. When we focused on continuous care customers or continuous care patients, these customers go to the drugstore much more often and they buy different multiples of the drug. So if I had 2 boxes and they needed 3, they would probably go to another store and bring their prescription to the other store because they need 3. Another thing that we created a while ago is the infinite aisle. If you go to our store, and even if -- as we strive to have everything in stock in the stores, if we don't have what you need, it will have it delivered to your house. An execution without compliance. As I said, there's no comfort zone here. And feedback is never taken personally. As I said, there's no magic bullet. We have to pay attention to all the relevant things. And how do you we measure execution? We have telemetry that we plug in into our stores, and from those KPIs, we can understand which ones are generating more results and where we still need further alignment. For example, store openings, we can know when a store is open. In the first 30 minutes, we know -- for example, punctuality opening our stores. In the first 30 minutes, we know which stores are late to open. So I think retail is life. Retail is very dynamic. And when we treat people with respect and we show them that mistakes are tolerated -- because mistakes here are tolerated. Like we heard from Fernando Alonso, you have to pay attention to all these details. So creating psychological safety in our team so that they can say where they need help, where we can help them improve. And we need to have a very good two-way communication, very dynamic. So these are the 3 things that have truly allowed us to capture these levels of same-store sales. And we will not stop here, because the model that we came up with is so solid and it really, really -- numbers will follow behaviors. And I see the behaviors are still there. So servicing our customers with assertiveness, with good assortment and perfect execution, like you heard from Novais.

The next question is from Joseph Giordano, JPMorgan.

I have 2 questions. First you talked about productivity and a relevant gap between Extrafarma and Pague Menos' stores. So today, when you are converting the banner, what is the uplift in your revenue that you expect in the first months after conversion? And my second question, you were talking about digital. What is the behavior that you're seeing in terms of margin? So how much are you driving sales in digital channels to gain customer loyalty? So what is the margin gap in this category? So these are my 2 questions.

I can start. About the productivity gap, when we convert an Extrafarma store to the Pague Menos banner, the growth in sales -- we have already converted 120 stores and we see that the growth in sales is very favorable. So the return on investment with these conversions is very positive. These stores, the first stores, are growing about 30% compared with the same quarter last year, whereas the average growth in the company is close to 18%. So they're growing at significantly higher rates than the company average. So we're looking at a group of stores -- we have states where the Extrafarma banner is more present and stronger. So perhaps in these states, we have a larger gap compared with the overall company average, but still the numbers are very favorable. So as I said, we will convert another batch of 42 stores in the second quarter this year -- in the second half of this year. And we also expect that these stores, these newly converted stores, will contribute to the company's growth. And in digital, the gross margin -- the company's total margin or the total margin from digital has improved greatly. Just to give you some reference, comparing year-on-year, there was a 4 percentage point improvement in our gross margin. And the EBITDA margin of digital channel is very close to the 4 wall margin of the entire company. So digital has been contributing a lot. And an important part of the customers that we are acquiring, customers that hadn't bought with us in the past 12 months or who increased their shopping basket or their frequency from digital channels, is very relevant. If I'm not mistaken, 15% of the newly acquired customers are coming from our digital channels. We're very happy with these results. We're very happy with digital. It's bringing incremental customers, incremental margin to the company. So what we are doing is improve usability, improve OTD or the product dispensation time until it is delivered to our consumers' residence. This has dramatically improved. It is a relevant –- a relevant part of our customers are being serviced less than 2 hours from the time they place the order. So the level of satisfaction of our customer base has been increasing greatly and the participation, the share of digital is increasing accordingly. So we're very positive about the future of digital. Joseph, it's an honor to have you here. Last time, it was Guilhermi. Send him my greetings. We're very honored with your question and your interest in our company, because we are improving to -- we're working to improve all these data. Just to add to what Novais said, there are some important marketplaces where we have an OTD of 65% and -- we had an OTD of 65% and now we are at 95%. So we are obsessed with improving every details. And digital sales cannot be a margin detractor. This is not what we want. We do not believe the strategy of offering to download the app inside the store and ask them to buy at lower prices. No, we believe omnichannel. And we are taking the main performance KPIs and improving every -- each and every one of them. Our last mile challenge continues to be on with the team that we have and with the humbleness we have to work on every detail. We really want to be an important player in these channels. For more than 6 months, we're growing more than 50%. So this is a very important slice of our sales. But we want to grow with quality.

Just one more follow-up question. You said something interesting about chronic patients, that you have been able to gain more share in sales. So for example, if they use 12 cartons per year, you're selling 3 or 4 at the same time due to stock availability. So I have a question. When we look at your chart, we have to think of affordability of higher volume. So what are you doing to be able to convince them to buy 4 cartons at once? Are you offering installment payments or more competitive price if they buy more? So what is the strategy to gain more share in chronic use drugs?

We're not convincing. It's not push, it's pull. I can't really give you a lot of information because we know our competitors are watching. But we have hundreds of thousands of people that visit our stores 48 times per year. So even when they buy, our chronic care patients, they will come back. But why? What do you need to have in addition to a good assortment? We use AI tools for this. We need to understand how many times this person is going to come to our stores every year. We have identified sales. So when we put all the algorithms together, we understand what is the predictability and the frequency expected for each customer. And one thing that you mentioned, and you're right, it's not enough to have the product in stock. We also have to have the best price. But how can we be called Pague Menos or Pay Less and make our customers pay more? So we have our competitiveness index, which is measured every day, and we want to have the lowest price. So this is what makes our growth extremely consistent. And this makes our team very happy, because our growth is not about price, it is about volume, more than 12%, as you could see. And we are selling at prices where consumers really feel taken care of and respected because we know that the financial cost can be a problem. We have a high rate of families in debt in Brazil, so we have to treat them in a differentiated manner because we know that part of their income is committed to buying drugs. So they need to have as much benefit as they can. So if they buy more, they'll pay less.

The next question is from Yan Cesquim, BTG. The next question is from Danni Eiger, XP.

Congratulations on your results. Congratulations to you and your entire team because this is not the work of one man only. I have some questions. First, about productivity. We talked a lot about productivity, but I want to further explore how we should think looking forward. You said that 25% of your [ pharma ] is already selling over more than BRL 1 million and that would be the benchmark level. And do you think it is possible to achieve this level for your entire park of stores? Or are there regional characteristics of certain cities or states that could be structural limits in your effort to reach these levels in all your stores? And the productivity gain, is it the main lever to recover the productivity of these less profitable stores that you talked about in the start of your call? And then my second question is about competition. We are seeing a more intense competitive dynamic in the industry, both for your peers in drugstores and also other channels, for example, hygiene and beauty on digital specifically. So I want to hear your take on how you're seeing the dynamics from these 2 different angles, both on the side of drugstores and how much comes from other channels? And also a possible -- a potential new player that could come if the sales of drugs in grocery stores is approved in Brazil. Do you see this as a major risk for your industry?

It's great to have you here, Danniela. How can we break this down, Novais?

I can start talking about productivity and a little bit about the competition, and then you can continue. About productivity, productivity, as we already said, 25% of our stores are already over BRL 1 million in average sales per month. We haven't seen any structural difference between the other 75 stores with these 25 stores, the other 25%. We want to bring all our stores to sales close to BRL 1 million. There are some very nice things happening in the company, as you heard from Jonas, the team engagement, the telemetry work, which is allowing us to improve store productivity. We will tell you more during our Investor Day, but there are so many things taking place. For example, the banner conversions are evolving, still evolving. And there's no reason why Extrafarma stores will not reach the same-store sales level of the Pague Menos stores. We have 350 stores that we can bring from BRL 600,000 average sales to BRL 800,000. So the company sales will increase as a whole. We're also putting a lot of effort in improving digital sales, and dispensation happens at the store. We also have 2 major work fronts with our commercial and supply team, which is store supply algorithms and pricing rules. This will help us improve our price position and increase our sales volume. We have the new distribution center being inaugurated in Pernambuco. So we have several levers that we're working on to continue to improve the average sales per store. We are very positive. Within 2 years, we went from BRL 600,000 to BRL 800,000 average sales. It is a major growth, nearly 35%. And we still have a lot of good things to expect for the future. About the competition, what I can tell you is that our industry has always been very competitive, and I don't think it is different now compared with previous periods. Hygiene and beauty, as you said, yes, we see higher level of appetite from other non-traditional competitors such as marketplaces. But for us, we had an increase of 11% in this category. It is very relevant this increase in volume. And despite the additional competition, we're performing really well, which shows that we still have room to grow. We see weakening of independents and we are showing much better performance when compared with the other Abrafarma net chains. So this moment is very positive for us in the market. We opened 16 new stores in the past 12 months. We grew 19 bps our market share in the Northeast only. So there's a lot of room to grow, to continue to grow. And the sales of drugs in grocery stores is an old subject. It may evolve this time or not, but we need to keep focusing on improving our internal execution, becoming more proactive and better servicing our customers so that they will become loyal if we have additional competition. We're already competing with grocery stores in deodorants and diapers, and our performance is still very good. So if this happens in the future, we would like grocery stores to comply with the same regulatory rules and to be obliged to have the same storage conditions and having a pharmacist to answer questions so that this will not cause -- or worsen the problem of self-medication, which is a major problem in our population. Jonas, anything to add?