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

Good morning, ladies and gentlemen. Welcome to the earnings call of Pague Menos to announce the results of quarter 3 2025. This call is being recorded, and the replay will be available on the company's website, ri.paguemenos.com.br, where the slide presentation is also available for download. [Operator Instructions] We would also like to inform that this call is being conducted in Portuguese by the company's management and that we have simultaneous translation into English by clicking on the button interpretation. For those listening in English, you can also mute the original audio if you like by clicking on mute original audio. The presentation will be projected in Portuguese and English version and is also available for download at ri.paguemenos.com.br. Before proceeding, let me mention that any forward-looking statements made during this call are based on the beliefs and assumptions of the company's management as well as the 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 consider that any events related 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 Investor Relations Officer of the company. Now I'd like to turn the floor to Mr. Jonas Marques to start his presentation. Mr. Marques, you may proceed.

Good morning, and welcome to this quarterly earnings call. And I miss you because living in retail, we know that time flies in retail. Every quarter, feels like one entire year. And we are here. And to start, I would like to greet our 27,000 giants, the 27,000 employees that are now working in our stores, in our DCs, in our phone sales and also their families because without our families, we are nothing. Our families bring the best in us. So welcome all of you. I'd also like to welcome our new shareholders, our new partners. We had more than 80 meetings to -- and we're going to discuss with you today everything that we discussed in these meetings and the year that we've been having. So welcome to our new partners, to our new shareholders. Also, I'd like to greet our team and also Patriciana Rodrigues, the Chairwoman of our Board and our founder, Deusmar. Deusmar is a shark because he will never let us get into our comfort zones because the dream that he started in 1981 keeps moving us towards the company that we want in the future. So for this earnings call, I know that this was greatly awaited by all of you. And I know that you're like, oh, here comes the CEO, full of energy. And this call, the only thing that we will say yes to you is, first, Pague Menos is a wonderful brand. We have lower expenses because these are the only things that we want to be lower, right? And for everything else, we want more, more dedication, more hard work. So please forgive us if we are bringing too much energy to this call. But before I go into the numbers, and I know that you're already aware of the numbers, but before going to the numbers, I want to talk about what moves us and what moves us is our people. We started doing work of awakening and unlocking of the true potential of each of us. I even shared with you in previous meetings that after leading companies in 3 different continents, I can say something that is cross applicable to all continents, which is those of team. So there's something that's really powerful. We are simple people with extraordinary missions. And as leaders, we need to create the right environment for people to flourish, to thrive. And one of our values here is meritocracy. So I don't want to just talk about people, but -- and also keeping meritocracy in mind, I want to share with you a new member of our -- that we have a new member of our team, [ Azevedo ]. [ Azevedo ] is our Regional Operations Director for Ceará and Piauí. And why is he here? Because his same-store sales is at least 22%. So welcome, [ Azevedo ].

Thank you, Jonas. Thank you for the opportunity to be here representing the operations team, retail operations. My name is Antonio Carlos Azevedo. I've been with the company for 1 year. And based on the intensity of our everyday work, it feels like I've been with the company for 10 years. I'm very happy to have joined this company to be a part of this environment of this team of giants that I met here. And here, it's not about vanity. It's about teamwork. It's about working towards the best for the company, working towards our purpose. And this is just great. This is very positive. I am responsible for the stores in Ceará and Piauí. And both in Ceará and Piauí, I have an exceptional team that's been doing exceptional work. And like you heard from Jonas has been providing great sales increase of about 22% in the last year. In addition to the growth in our sales, we also have exponential growth in our customer base, a great increase in our customer satisfaction. So our stores are reaching at least 90% customer satisfaction. And we also have hidden customers -- for our hidden customers, some of our stores have reached 100% satisfaction. And this is just possible because we take good care of our people. We pay special attention and work in close proximity with our people. We also train and qualify our staff so that they can conquer new spaces within the company. So this is something I've been seeing in my area. This year, we already promoted 4 managers to regional managers and also many other employees were promoted to store managers. This means that we are giving people the opportunity to grow in our company, and this makes all the difference in my opinion. In our stores, the first attribute that will bring consumers to our stores are our products. So we have the right mix and the right quantity of the products. Our prices are competitive. Our customer service, we have been investing greatly in improving our customer service, training our team so that they can truly enchant our customers. Also, our stores are very well structured and the work is very well executed. And this is what we want for our everyday work. We keep working so that this company can become the best and the greatest in all areas, in all directions. I am very confident in this current moment we're going through and also in the future of the company.

Congratulations, Azevedo. You nearly announced the numbers of the month, but it's too early. So let's go back to the quarter. We take care of people. And in this everyday work with the capital market investors and all of you, you have all our respect and all our commitment towards delivering results. And we are bringing to the table a topic that in some companies, it is on the cover of the magazines and newspapers. But here, you see this in practice. One of the interesting things that Azevedo said, in addition to the gross sales and margins growth, it's the number of people. And so they created the environment for people to feel confident to feel safe so that they can bring out the best version and be promoted. Everybody was born to succeed. Everybody was born to succeed. I've never seen a parent telling their kid, you're going to grow up and you're going to be a failure, you're going to be unemployed, you'll never be able to learn anything. No. Everyone wishes the family to progress and people to progress. So let's look at our numbers. These are the highlights for quarter 3, and I have some examples to share with you. The first is our same-store sales. We have here our growth curve reaching 17.6%. So 4 consecutive quarters above 17%. This result is truly consistent. And how do you do this? A lot of people ask us because we take care of our people. We improve our customer service, and this is our answer to our CCCs, our continuous care customers. A lot of companies call them chronic customers. But chronic here, the only thing chronic here is joy. We have chronic joy, but we call them continuous care customers. We're really focusing on them, and we are growing in drugs. You're going to see the numbers for drugs and also in other categories, but drugs are, of course, 70% of our business. So we have, as example, execution, consistent execution. So we are truly working towards treating these customers holistically and in a differentiated way. So now moving away from growth, looking at our EBITDA. Our EBITDA reached 5.3% in the quarter, and our LTM is at 6.3% and here, we have a 36.4% increase versus last year. So our EBITDA is really strong. And this is due to market share. Our market share is 6.7%. This is 40 basis points more than third quarter last year and also a record-breaking number. Let me give you more granularity about our market share. In August, our market share was 6.95%. And this is proof that we are advancing and we are advancing fast. Now look at our number of clients, number of active customers, we reached 22.2 million customers, which is a 5% increase in our customer base. So we grew in clients, we grew in average ticket, and we grew in the frequency of our customers. And this is directly linked with the CCCs, and Novais is going to give you more color about this number. It's very important to focus on this point. And last but not least, our net income reached BRL 231 million. We had an increase in LTM. We had record-breaking income, which already represents 1.9%. So we always say, for example, in 2023, we had losses. And now in 2025, we have an excellent delivery, and we keep growing. So as I said, Menos here or less here only our name, Pague Menos because we want more, and we are generating consistent results. So quarter 3 has very high consistency. And now Luiz Novais is going to share with you more data. And I was very happy to hear BRL 131,000 average sales per store per month, a 17.3% increase. Now I turn the floor to Novais.

Hello. Good morning, everyone. So I would like to say hello to our new shareholders. We have 32 new institutional shareholders that adhered in the follow-on that we had in October. I'd also like to say hello to all the shareholders that have been with us since our IPO and some of them increased their stake now after our follow-on. So we're very happy. As you heard from Jonas, we're very happy to share our results for the -- for quarter 3 2025, very positive results showing the consistency of our deliveries. Now on Page 6, you see that we grew 18%. We are in our seventh consecutive quarter of relevant double-digit growth. This was driven by prescription drugs, generics and Rx connected with our continuous care customer strategy. We increased not just the number of these customers, but also the frequency and the size of the shopping cart. This evolution was driven by all the actions that we have been executing in our stores, marketing, CRM and store operation itself, which is at a much better standard than ever today. So all these components are evolving really well. So we reached a same-store sales of 5x inflation rate. Now on Page 7, we see more details about the growth of our sales. Here, we have different views of our revenue growth. And it is a very structural growth. We don't have any region that is outstanding or very different from other regions in Brazil. So the first chart, we see that in other regions of Brazil, the dispersion is very low. All of them are growing above 14%. In categories, we give highlight to prescription drugs, like we already said, so branded drugs and generic drugs branded, 23% generics, nearly 25% growth. Between the months in the quarter, they all have relevant growth between different socioeconomic classes and also the different cities. So based on all the metrics, every metric here, we have relevant growth. So this is a structural growth according to our strategy. Next page, we see our average monthly sales per store. This metric is very relevant to us. We reached in the quarter BRL 831,000 average sales per store per month. It is a 32.4% increase year-over-year. If we consider the inflation rate, we grew about 5x inflation rate in our average monthly sales per store. So today, we have more than 26% of our stores with revenue over BRL 1 million with sales over BRL 1 million. Dispersion also dropped 7.4% dispersion between regions when we consider the average monthly sales per store. Next page, we have our market share. So as a result of this growth in revenue, we are in our eighth consecutive quarter expanding our share, a 40 bps increase. We are growing in all regions in Brazil with a highlight to the Northeast, where we grew 81 bps. And this considering that we had a few new openings in the quarter. So even with a few new openings, we grew nearly 1 percentage point in market share. And if we compare with Extrafarma and the general market, our performance is way above the performance of these other elements. Now on the next page, we see the composition of our growth comparing to the competition. So the first column shows the market growth, 9.9%. About half of this growth is captured by new stores. The other 6.8 percentage points are captured by an increment in our average price and 1.2% are negative due to shutdowns and a reduction in volume, 0.2% compared to the same period last year. In the second column for Pague Menos, we grew nearly 17% according to IQVIA. It's well above the market average and the other competitors, and this was composed by 1.2% new openings, 5.4% price and nearly 11% in volume, 10.6% growth coming from volume, which is a marked difference when we compare with our competitors. So volume is what has been really driving and helping the company grow. We haven't seen any relevant volume increase in the other peers. So the third chains and associations growing in line with the market and independents lost a lot of space. They're losing volume nearly 3 points, and they also had a lot of shutdowns, 4.3% decrease in their share due to shutdowns. Now on the next page, we have another indicator comparing us to our peers. Average sales per store growth by region. I think the chart speaks for itself. Depending on the region, we have 2x to 3x higher growth than the other players in the region. So it is undeniable that we're having great performance in all regions of the country. On Page 12, gross profit and gross margin, another excellent news for the quarter. We had an increase of 0.5% in our percentage margin year-over-year. This is an impressive combination of increased revenue and increased margin, a 50 bps increase in our margin. So it's very unusual to see these 2 indicators growing at a fast pace and the items that have driven the increase in the quarter. All the commercial conditions improved greatly and helped us improve the company's margin. In quarter 3, our AVP had a negative effect compared to the other quarters. Actually, in the first half of 2025, it had a positive impact on our margin. And this quarter, we had a negative impact on our margin of about 20 bps and in our earnings release and Attachment 5, we included a demonstration with the AVP components, if you want to know more about the details of the AVP components. And the mix in this quarter had positive impacts and also negative impacts. Generics was a category that grew the most in the quarter, nearly 25%, which really helps our margin. On the other hand, branded also grew relevantly, and this puts some pressure on the margin because branded drugs have a slightly lower proportional margin than the total margin of the company. So the mix among the different categories, there was a neutral effect. Now we have our SG&A expenses. We continue to dilute our expenses. And at the same time, the company continues to invest in structuring themes. For example, we are investing more in marketing, investing more in people, and we're investing more in other elements of the company but still, we were able to dilute 40 bps, which is a lot year-over-year. So variable expenses also see important pressure because our revenue is growing 18% variable expenses tend to increase. And investments in people, we are investing a lot to be able to improve customer service for continuous care customers, among other elements here. Administrative, also, we are reinforcing our corporate team so that we can increasingly boost the company's growth. As a consequence, on Page 14, we see our EBITDA. So we grew our sales relevantly. We grew our margin, and we diluted our expenses. So the company's EBITDA increased by 36.4%, as you heard in the initial highlights. We go from BRL 190 million to BRL 260 million in EBITDA. In quarter 3, we had record-breaking EBITDA margin, 6.3%, which is very unusual in quarter 3, having a quarter 3 margin higher than that of quarter 2 because we know that in our industry, quarter 2, we have better margins due to the pre-price increase. But this year, we had in quarter 3, a higher margin than in quarter 2, which shows that we are in a very intensive growth trajectory to grow our profitability. On Page 15, our net income, we also had a relevant increase. We went from BRL 54 million to BRL 81 million in net income, a 50% increase if we compare the first 9 months 2025 with the same period last year, we doubled the company's net income from BRL 75 million to BRL 154 million. And when we look at the LTM on the right side, we also have a record level of BRL 231 million. And that is even with the pressure on our financial results. This year, we have a higher average interest rate than last year. And in this quarter, only we had financial expenses of about BRL 45 million higher than the same period last year. If not for this effect on the financial result, we would have doubled the net income this quarter versus last year. On Page 16, on working capital, we had an increase of 7 days in our working capital, an increase of 5 days in our average payment term. Here, we have an important point, which is we are recomposing our receivables portfolio, which increased the average payment term in 3 days. And despite the negative impact on the cash cycle, this is a positive movement for the company. So to date, we are much less dependent on the anticipation of receivables than in the past. Also about the average payment terms, we see great evolution in prescription drugs like we saw in the beginning in semaglutide. These drugs tend to have a higher level of installment payments in our stores. We also had relevant increase in the popular pharmacy products. This contributed with an increment of 2 days in the average payment term and the average customer payment term. As I said, we had an increase in prescription drugs and semaglutide. And this also affects our average payment term. We reduced in nearly 4 days the average payment term compared to quarter 3 last year. And the average stock time, we are also evolving well. We had another 2-day reduction in our average stock time compared to quarter 3 last year. So the company is very focused on reducing low turnover items, revisiting our launch policy, improving reverse logistics, and this all is contributing for us to reduce the average stock time of the company. Then on Page 17, we see the company's indebtedness and deleverage. We continue on a very intense deleverage trajectory going from 3.9x in the beginning of last year to 2.5x, reduction of 1.5x the EBITDA. And the follow-on resources in October, it started on October 3. So consequently, we don't see yet the impact on the company's leverage. So in quarter 4, we will probably show a relevant reduction in the leverage indicator due to the resources from the follow-on. And not just because of that, but the company has been organically reducing its leverage, generating operating cash, controlling capital allocation and reducing the company's leverage. On the right, we see the average spread of the gross debt and the amortization schedule. We have a very prolonged amortization schedule and the spread is reducing consequently. So a very good evolution in our debt profile. And on my last page, and then I will turn back to Jonas. We would like to show this very important chart showing that quarter 3 is a tipping point in our presence in the capital market. So the company had its third Investor Day since the IPO. It had been 3 days since our last Investor Day. We had our Investor Day in Sao Paulo with a very good adherence from our investors, a lot of people interested and wanting to learn the recent history of the company with a very high NPS of these investors, which also culminated in our follow-on with demand that was 3x the supply of shares, 32 new high-quality investors, improving the free float, improving the liquidity and this aligned with our deliveries makes us very optimistic about the evolution of the company in the capital market as a whole. I stop here, and I turn it back to Jonas and he's going to talk a little bit more about our strategy. Thank you, Jonas.

Hello. I must admit that this is not a continuity error and the movies that you would say, well, I was wearing a white shirt, now I have a black shirt because this is Black Friday. So I want to present to you our strategy. And if you blink, you will miss our promotions. So let me give you a strategic update now. Like I said, our strategy that was developed in late 2024, which was rolled out in the first year of this -- first day of this year is our continuous care client, who is in the center of our strategy with all the enablers. So we know where to play and how to win. And what makes us really happy is to see the growth in our average sales per store per month, particularly driven by drugs -- prescription drugs and OTC, which makes us close this gap. Because when I joined the company 2 years ago, this was the question, when are we going to close the gap for average sales per store, and we are now delivering this and with profitability. So our numbers are really strong, and they stress that we are on the right track because growing is easy, but growing -- growing by burning your margins or convincing your customers to download the app inside your store. This is not what we do. Our digital strategy is an omnichannel strategy. We want to offer customers the opportunity to buy in the most convenient way to them, the way they want, the way they feel comfortable buying without burning our margin. So growing by delivering good margins, expanding your gross margin, expanding your EBITDA, like we have been doing for 2 years and expanding your net income. This is the game that we want to play in, of course, always diluting our expenses, which was one of the highlights of our work this quarter. So this is our strategic focus. It continues to be our CCC customers. And the winners of the game are the noes and not the yeses. So a company that is worth BRL 16 billion every day here, we have people knocking on our door with new ideas. We have our team. Our team is extremely creative, and we have been really disciplined because the name of this year is consistency. It's discipline, it's focus on operation and execution. So we will continue with this strategic focus. Now next page. This is exactly what I was talking about since the beginning, the results for our continuous care customers, CCCs. So a good execution of our strategic plan is what has been bringing these numbers. The number of active customers, continuous care customers is growing. It's 14.1% increase versus first quarter 2024 and an acceleration starting in quarter 1 this year. And this is how retail works. Retail is live. There's no tomorrow. If you perform a test, you start -- you implement, you start to see growth. And on the right side, we see our average ticket for the CCCs, which is also expanding and increasing very strongly, particularly in quarter 3 2025. When we compare quarter 3 2025 with the start of 2024, the increase is practically 16%. So this is super solid, super consistent. And this is the confidence that we want to convey to you that we are working nonstop with a lot of focus, a lot of discipline and a lot of love, a lot of passion for our mission of making the life of CCC customers better, giving them more quality of life because these are the customers that really need a drug store. Value capture. This is our promise, and we are delivering on it. Since the beginning, we have been stressing the same thing. Since our first 90-day plan, I have been conveying to you that this is exactly what you see here. 2024, the basics were very well done. We focused on hygienic missions and awakening people's energy. If you go to our stores, you see that the energy has changed. How can you move masses, the 25,000 people in our points of sales. In addition to giving them energy, you have to take care of these people. These people with basic needs. You have to improve the processes. You have to improve execution. You have to remove friction. Sometimes we lose a customer because we don't give our staff the right tools to really service these customers. So this is what we have been focusing on, and this is what has changed the lives of our employees. So the basics were well done. Then in 2025, we resumed our investments, and it was a year of consistency. We are in quarter 3 now. I can't tell you anything about the quarter 4 right now. But what I can tell you is that we're doing really well because Okta is not about if, it's about when, and we are working towards delivering this to you. This is not guidance. You cannot say this is guidance. So 2025 is a year of implementation of our structuration and consistency. In 2026, we want to increase scale. We want to consolidate our value proposition, and this is what we're working towards. Remember that our new shareholders, we presented this in our Investor Day. The presentation is available to you. The strength of telemetry. Telemetry is expanding in our operations and in our step. This is our proprietary system that we are implementing to increase our results and increase our efficiency. And our transformation office, which permeates this pace that we're working and to capture all the levers and to deliver as planned. So this is what I wanted to share with you today, Rena. We will now open for questions. We know that this question-and-answer session, we have 4 banks that were in our follow-on present with us. They cannot ask questions, but we are very welcome here today. And the rest of you, you can send your questions because this is how you give us the opportunity to explain more about our numbers. Thank you.

We found Jonas, that the banks that were in our IPO, they have some restrictions for the report, but they can't take part in our session today. So we have some bank analysts that also helped with our Q&A session. So welcome, BTG, Itaú, Bradesco and XP. [Operator Instructions] The first question is from Ruben Couto, Santander.

I would like to go back to the working capital, Novais. I think you explained really well what led to this increase in your cash cycle in quarter 3. But looking forward, the GLP-1 trend or even popular pharmacy could continue gaining space. So I'd like to understand what is -- what are the prospects, your expectations for the main lines of the working capital, not just in quarter 4, but also for 2026. And can you give us an idea of the percentage today that is for GLP-1 and popular pharmacy?

We see very good prospects even with the expansion of the share of semaglutide in the total sales of the company. Popular pharmacy is also growing. And we are working with our entire structure, our sales team, operations, implementing actions to improve the company's cash cycle. Semaglutide themselves, they are a category of products that we offered installment payments up to 10 installments for our customers until recently until a few months ago, but we reduced the maximum to 6 installments in 10 states of the country where we used to offer 5 installment payments of their shopping card, we reduced to just 1 payment. And in these 10 states, we have a ceiling of 4 installments for installment payments. We are also working strongly to improve our stocks to improve the cash cycle. Our sales team is also helping us revisit the commercial conditions of our suppliers. So our expectation for quarter 4 this year and next year is a relevant improvement in the company's cash cycle. And the second part of your question, semaglutide are still growing. Compared to last year, it practically doubled in the share of our sales. And last year, it represented about 3 points. Now it represents close to 7% of the total sales of the company, and this continues to evolve. I hope I answered your questions, Ruben.

Yes, very clear. And Popular pharmacy, can you give us an idea of the percentage -- potential share in generics or total sales?

Well, popular pharmacy in the total sales of the company is close to 4% for Popular pharmacy.

Our next question is from Danni Eiger, XP.

I was worried because I was in the waiting line and I couldn't ask question, but now I said I can. So I have 2 questions. My first question is about -- still about GLP-1s. How do you see the future supply, supply/demand? Because we know there's some scarcity. We know that there are some new versions with higher doses of Mounjaro that came to the market in the end of last -- of this quarter. So did you -- can you give us an idea of the sales in October? And if a share of your stock in your working capital dynamics was already accounting for the stock in the picture for the end of the quarter. I don't know how much this could have impacted your results and if we can see some positive carryover in stock turnover considering that these products have a very high turnover, very high demand. So this is my first question. And my second question is thinking of other levers, not just GLP-1, you said you have multiple levers. You talked about this in your Investor Day. Now looking forward to next quarters, where do you still see space for growth in your gross margin, which has been mitigating the headwinds in your mix because of the prescription drugs and GLP-1. Do you see space for this improving in the future? Can you give us an overview about the main levers that you see growing in the future, particularly in the next coming quarters and also an update for your private label. When should we see more launches and your private label gaining more traction?

Would you like to go first, Novais?

No, you can go first, Jonas.

So Danni, thank you for your presence and for your question. First, GLP-1s. I'd like to call your attention that if you go back 3 years ago, 2 years ago, when we only had Ozempic, we didn't even have Wegovy. The Pague Menos' market share for GLP-1s for Ozempic was according to its fair share or even slightly lower. Now with Mounjaro is completely different. We have Wallace heading our sales team. He has an excellent relationship. And I was also 30 years in the industry, working with our partners. And I would also like to take the chance to thank them because since the beginning, we were in contact with Lilly, and we are the first chain of drugstores in Brazil on the 1st of May at 0 -- at midnight, we started offering the product to our customers and delivering the product. So this gave us the opportunity to reach double our fair share. We have about a little over 15% in the sales of Mounjaro, and this is really good because this shows how fast we were to service our continuous care customers because these are the patients, these are the consumers that use GLP-1 the most. Now I turn it to Novais.

Well, Danni, GLP-1 has a negative cash cycle for us, right? So it puts pressure on our cash cycle. However, it really boosts our sales and the company's operations as a whole. Like you heard from Jonas, demand is higher than supply today. So if we had more stock, we would certainly have even better numbers, not just us, but the entire industry. So there's a lot of room to grow in this category. And about the levers, I think this is the greatest advantage of our business at Pague Menos. We have different levers. We show in our Investor Day our 9 levers. So in addition to our private label, and I'm going to give you more details about it, but we also have the brand conversions, which are still growing at a much higher level than other stores. We are close to -- we have close to 70 stores with an Extrafarma banner that we have the opportunity to convert. We're also working on a product to review the store clusterization and product pricing. So we are closely connected to Simon, the consulting firm that is supporting us in this project, and we're very happy with the upsides that this project could bring to us. We're inaugurating a new DC between -- in the start of next year, which is the DC in Paraíba, which will improve the company's tax condition, the supply conditions and consequently, it will improve all lines in our P&L. Digital channel is evolving exponentially. So I'd like to give kudos to our digital team. Here in the North and Northeast, we have a somewhat lower maturity than in the rest of the country, particularly compared to the Southeast for digital channels, but still, it has a nearly 20% share of the digital channel and also all the improvements made by the operations team and the training team improving the quality of customer service. We have been greatly improving our customer service. So continuous care clients are satisfied, they increase their ticket and they contribute even more to the company's growth. And going back to our private label, our team is completely focusing on this front. We have a very nice project to reinforce and relaunch the brands that we have today. And also, we have a pipeline of new launches very interesting for 2026. So these are some of the levers, Danni, but we also have others that we're working on. These are the major.

I'd also like to say, Novais, that we are always asked since 1 year ago when we had a first same-store sales of 17% the questions we heard were, do you expect the same level of growth for the next quarter?

And we couldn't really answer that question at the time, but this is what we delivered. And 3 quarters ago, we answered the same question, and we delivered again and now we delivered again. So we hope this question doesn't show up today, but I will explain how we're working connected to what you said. Promotional activity is about intensity. It's about energy. It's about not being compliant. So in the end, we're going to tell you about Black Friday, a Black Friday campaign. It's the greatest of all times. It is a real Black Friday. So since we're changing greatly and fastly the perception of our customers, this also generates frequency in addition to an increase in the average ticket. And this is what really scares our competition. And we're very happy when we find the CEOs and VPs of the competition in our stores. But if they go the next week, they'll also find a different situation. So it is about the intensity of our work. And about GLP-1s, I'm sorry for going back, but we still have a lot of share in the compounding pharmacy. So there's a lot of room to expand. We also have the generics coming. So we are preparing. And we are ahead of this time to understand how these changes will affect the market and preparing ourselves to service to meet the needs of this access expansion. I used to work in the industry. We don't want to have private labels to compete with our partner. The industry is our partner. We want private label for access. So why do we have an over share of our private label versus our competitors? Because this is the identity of Pague Menos. Pague Menos is a company that promotes access because our main customers are in the expanded middle class, particularly the CMD classes. So you can await some novelty in the future and the expectation for private labels will exceed all expectations, all expectations you may have.

The next question is from [indiscernible].

I have a question first about the increase in your investments. What generated this increase? And is this a recurring effect? And about your working capital, these initiatives to improve the receivables term, should we expect them in quarter 4 and also the installment payment changes? Can it harm you in any way?

I can answer your question. So about the increase in the share of investments, our DC that we inherited from Extrafarma until recently, it was already being used to supply Pague Menos store and more and more, the demand from this DC is increasing. And the share of use of the some from this distribution center in the past is lower than today. So this is contributing to increase the volume for the entire company. And it should stay at higher levels because these DCs since the entire company is growing at 18%, the level of distribution from these DCs to the stores is increasing relevantly. And these actions to improve our cash cycle will certainly have a positive impact -- relevant positive impact and will also have a carryover effect to the next quarter. And we are being very careful in measuring how much we are reducing installment payments. We only put this into production after we implemented some stores and we compare with a control group in the same city or in surrounding regions, and they are not affecting the sales of the company at all. And we're also monitoring the competition in each region in Brazil. And we -- our installment payment conditions are not so different than the other competitors in the same region. So we're very confident about this movement, and we really need to keep advancing it because like you saw, the cash cycle in the past few quarters had suffered with some pressure by the increase in prescription drugs and semaglutides that have a negative cash cycle for us. But we will certainly improve the conditions in quarter 4 and for the year 2026.

Next question is from Rodrigo Gastim, Itau BBA.

I have two questions. The first question, Jonas, it is one of the main questions that we have been hearing throughout the investor process. What are you doing to improve your sales per store, BRL 830,000, 17% increase year-over-year. Jonas, I want to hear from you some empirical or anecdotal examples of what you have done so far. I know you have -- you did a lot of things, but to improve your sales your sales per store. But in the next 12 months, I believe this will be an important lever. So what are other practical examples of how you're improving the store productivity? This is my first question. And my second question, going back to the working capital, you talked a lot about accounts receivable, and I want to ask about suppliers. You talked about suppliers in your earnings release, but when you add to this calculation [indiscernible]?

Thank you for your question. But Scarcity is what's most important in our personal life and in corporate life as well. What moved us to increase the average sales per store was understanding that we didn't have the capacity to understand -- to expand. And I'm talking about early 2024 that we had to invest in the assets that we already had. So remember, we put our entire budget and we resteered it to the retrofit of 500 stores to invest in people, the basics done well, and we could only increase the return on the debt that we already had. And we were obsessed with the front line. Think about obsession about the front line. We went to the stores to understand what were the frictions that we had. This was part of our mission. And what we found was that, for example, the printer was not working. And why? Because they needed the scissors to buy the price -- to cut the price tag. So our employees were not available to talk to customers because of all these frictions at the point of sale. This is an empirical example. Also assortment review. If we want to really service our customers, we cannot have stockouts. And if you look at our stock-outs, it is dropping greatly sharply. We have reduced our stockouts and reduced our losses. The last number I have for reduction in losses, 30% also store clusterization, we have premium stores in POP areas and POP stores in premium areas. If you fix this, if you fix your layout, you fix your assortment, you remove friction, you train people, you recognize people. People are permeating everything. So this is how we did it. And together with telemetry, this is what caused us to achieve these growth numbers. And this is increasing in speed. And how are we accelerating this even further with telemetry. Telemetry, you came to our office in Fortaleza and you saw how it works. People telemetry gives us the right data so that we can apply meritocracy so that we can make decisions and correct our course. And the same thing for operations. So this is our obsession now, as I said, this absurd growth that we had in the number of stores over BRL 1 million. This explains also the increase in the average monthly sales per store. And also in telemetry, we had 50 stores, so 50 stores with a negative EBITDA. And when we plugged them in telemetry and we built a simple plan to them, we talk to the people, we were able to reverse the situation in only 3 months to a positive EBITDA. So there's no magic bullet here. There's no silver bullet. This is what I said in our Investor Day. You need to have this -- the right mission and be obsessed with the front line and have a sense of ownership. So what you find here is a spirit. You can't really touch it. And this is how we change the spirit of this mass of people. We have 25,000 people in our points of sales and everybody wants to win. So bad, I cannot add it to our WhatsApp group for you to see what we have been doing, what we are generating in our points of sales. And if your next question is, are you going to continue to grow? Yes, of course, because what will not change is our intensity. And this intensity, this holistic way we work, work on details and work at every minute is what really makes us the company that is growing the most in same-store sales today. Thank you for your question.

And the second question -- the second part of your question about the average payment term. Thank you, Gastim for your question. Well, in the 2 last quarters, our PMP was close to 67, 68 days. If you look at our further past, we had 70, 71 days. So today, we're close to 2 to 3 days less than in previous periods, except for quarter 4, which is when we build our stocks for the vacation period. So we can reach about 78 days, but this follows the PME. So these 2 or 3 days that we were able to decrease today compared to the past gives us the opportunity to further decrease this -- shorten this interval. But what we're really focusing on is on the PME to compensate for this reduction in PMP. Our sales team is always working discussing with the industry, but you're right, the prescription drug category and semaglutide have a worse payment condition regarding other suppliers, and this puts pressure on our PMP. So we're working on these 2 fronts, but majorly -- primarily, we are compensating the PME of the company. And also, we have actions in PMR to compensate for this reduction.

Our next question is from Yan Cesquim, BTG.

I have 2 questions. My first question is still about GLP-1s. What do you expect now with the generics coming -- generic semaglutide coming to the market next year? Could this open an opportunity to accelerate your share gain in the category, considering that it will improve the supply? And my second question will explore growth. I know that you cannot give any guidance, but I want to understand if you could give us any qualitative details about the growth dynamics expected for the start of quarter 4, your expectations? And if you can't give us any information. What is the cause of this growth in generics? Because in addition to the higher continuous care customer penetration, can you give us an idea of the therapeutical class that have been performing better and the share of your digital channels, this would help us understand the mix. Thank you.

Thank you, Yan, for your question. In GLP-1, we have mixed feelings about a potential break in the patent. Of course, there is a huge demand for people that today cannot pay the current price for these products. With the generics, the addressable public will be much greater than what it is today. On the other hand, we see the risk of the generics industry starting to compete for price, and that would destroy the value of the category. So we have a huge volume to be explored, but there's a risk of the average price decreasing too much depending on how the companies that offer the generic will behave. Now in respect to how much can grow in the future in generics, particularly, this relevant to evolution in popular pharmacy has certainly boosted generic sales for us. The increase was nearly 25%. However, our operations team and our sales team has been intensively working in supply and operation and execution, not just for this category, but also prescription drugs, which are the ones that have the highest demand by customer -- continuous care customers. So yes, there's the impulse, there's the momentum of [indiscernible] but also there's all the work that we have been doing in this category. And we're very optimistic, Yan, we're very positive about quarter 4 and the year 2026 as a whole. We gave you more details in our Investor Day. We are now standing in the middle of the trajectory of value capture of all the levers that we explored in the question we answered to Danniela. For some of them, we haven't even started capturing the values like private label and also the pricing project than the capture will be more visible in the start of 2026. So we're very positive about our top line and bottom line. It's written in stone. Pague Menos can make miracles. You just heard our CFO saying that we are very positive. You stop me Novais or I'll start talking about the October sales, but I can't. So Yan, let me just give you one figure. Think about our positioning as a company. We are the largest drug store in access. So when we talk about GLP-1 and generics, we will have to work hard because we will be the first to be sought by this customer because everybody wants to improve their glucose levels and lose weight.

Now our last question. The next question is from Marcio Osako of Bradesco BBI.

I have 3 questions. My first question is about your revenue. Can you please talk about HPC competition and the growth in the category? I think it has sustained the same speed of last quarter, but on a basis that grew slightly less in quarter 3 last year. So if we look at these 2 years, there was a slight deceleration in the growth of HPC. Also for your gross margin, can you please give us some details about the gains that came from commercial conditions this quarter? Last quarter, you said it was from the campaigns, your anniversary campaign. So what generated this gain in commercial conditions in quarter 3? And finally, about ADP, I just want to understand why the net effect was negative. And if you think this 0.2% in your revenue will be maintained looking forward?

Can I start, Jonas?

Yes.

Thank you, Marcio, for your questions. About HPC, we're very happy with the category evolution. Of course, when the company grows at 18%, you see an 11% growth. It may give you the false impression that the category is not going well, but it is going very well. As you said, it was an 11% increase, which is equivalent to that of quarter 2. Now in quarter 3, it grew equivalently to OTC, which also grew about 11%. What's really driving the company's growth are prescription drugs, as we said, to address the demand of continuous care clients. So 11% growth in this category, which means 3x inflation rate. We're very happy with this level of growth. Of course, we are never satisfied. We're happy but never satisfied. There's still room to improve. And now in quarter 4 with Black Friday, we are seeing a lot of promotions, a lot of activity. We have very positive expectations for this category. But as you said really well, the bases are already very high. Last year, in Black Friday, we grew 42% compared with '23, but we are very positive. And Jonas is going to talk about our Black Friday campaign, which is making us very positive. Gross margin. Well, the commercial conditions are contributing very relevantly to -- as you saw in our composition, the AVP effect was negative this quarter, 0.2 point negative. And the sales team for all the campaigns that we roll out, the sales team is working to have support from the industry. This is helping us recompose our margin and even bringing it to higher levels than what we had in previous quarters. And this is really helping the company improve its performance. I don't have here the composition by category. But overall, the sales conditions -- the commercial conditions are evolving relevantly. And the AVP, Marcio, it's not just you, but other people also want to understand the components of the AVP with more clarity. So we included Attachment 5 in our earnings release with the compositions. This quarter, what puts some pressure and what made our AVP not have a positive effect on our margin like it had in previous quarters because we are demobilizing the anticipation of receivables, and this ends up decreasing the revenue from bringing it to present value, both because we are decreasing the installment payments from the semaglutide and prescription drug sales and also anticipation of receivables are also contributing to this effect. I think it should stabilize in quarter 4. And for next year, we believe that we will see a neutral effect, maybe slightly negative, about 10 bps, the AVP compared to '25. I hope I answered all your questions, Marcio.

This question-and-answer session is now closed. Now I'd like to turn the conference to Mr. Jonas Marques for his final remarks.

Thank you so much for attending. And in my final comments, I want to do something different. I'm extremely proud, but also extremely humble, and I am privileged to have such a wonderful team. So I'd like to call to the stage Rose, our HR VP, our People and Culture VP, Carlos Fernandes. He is a master of operations. He leads our operations team and also Wallace. Wallace heads our commercial team and also Renato Camargo in clients and marketing. And we want to tell you about our Black Friday campaign. You can't miss it. Don't miss it. As an investor and as a consumer, stay tuned and don't miss it. I want to invite all of you. We have the most incredible promotions we are preparing ourselves with the industry to ensure profitability because Okta, we are working on Okta. And I would like to invite all of you to visit our stores to see the best offers, the best customer service of a drugstore retail in Brazil. Our motto on Black Friday is we Pague Menos are really pay less. Thank you so much for your attention and time, keep cheering for us and keep giving us the opportunity to enchant all of you. Take care. See you next time.

Pague Menos' earnings call is now closed. Thank you all for attending, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]