Empreendimentos Pague Menos S.A. (PGMN3) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Pague Menos conference call to announce the results for quarter 4 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 is also available for download. [Operator Instructions]. This conference call will be conducted in Portuguese by the company's management, and we have simultaneous translation into English by clicking on the button interpretation. For those listening to the English call, you can mute the original audio by clicking on 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 stress that any forward-looking statements made during this call are based on the beliefs and assumptions of Pague Menos management and information currently available to the company. These 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 events relative to the macro environment to the segment and the industry and 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. Now I'd like to turn the conference over to Mr. Marques to start his presentation. Mr. Marques, you may proceed.

Good morning. Today, it's March 2, 2026, 10 a.m. I am very happy to share with you our results for 2025. But before I start, I can't go without mentioning that we are a company that really appreciates human life and are people. We work in health care. The recent events around the world are making me pretty upset. I worked once with patients that had been treated for cancer for 6 years and what they wanted the most is to live another day. So we really want these events to come to a closure. And also today is a joyful day. We are octa after a lot of hard work, and we have very good results to show to you. I'd also like to greet the 27,000 employees of Pague Menos as well as their families. I'd like to send a big hug to Mateus, Mariana, Margareth, my family, our family who are always supporting us in our mission. Also, I'd like to greet our more than 22 million customers, also our investors and all the people who believe in the work that we do and very hard work. These were 12 months of record-breaking numbers. So let's go straight to the results so that I can share with you how we closed last year.

Good morning. As you heard from Jonas, we closed the year 2025 on a very good note, quarter 4 was the apex of all the hard work done by our team. So we're very happy to count on you and also we are happy to have the trust of our investors and the market. So let us start on Page 8. Yes, Page #8 Yes, let's go back to the initial indicators. Okay, let's go to Page 1. Yes, this is what I wanted to share with you, acceleration of our results. So on this first chart, I'd like to show you that we had very high same-store sales 18.6%. Novais, it's first time we are in the same room. You thought I was giving you the floor, right? But no, same-store sales, we closed quarter 4 at 18.6%. For those who are asking, since the previous quarter 4, if we were going to be able to maintain the same levels, we already have 5 consecutive quarters delivering over 17%. In quarter 4 2025, it was 18.6%. And to give you more color, we were able to greatly improve our execution, the look and feel of our stores, we're training our staff, we're receiving our customers with a lot of energy. The same energy that you feel in this conference call is the energy that is conveyed by employees to our customers inside our stores every day. And since we didn't have that many new openings since we started -- since we decided to take on this challenge, we decided to improve the return on the assets that we already had. So this has been delivered. We are the market share. We are close to 7%. And our numbers show like you're going to hear from Novais that we are growing in all regions. And we are absolute leaders in the North and Northeast which are the states that are our home. In number of active customers, I'd like to call your attention to the fact that in quarter 1, 2024, when we started this ramp-up, we were at 20.9 million customers. We closed quarter 4 '25 at 22.2 million customers. And we are very thankful to every one of these customers for their trust. Our EBITDA margin was 5.6%. So the LTM has been growing consistently and we are delivering on our promises. Now when we look at our numbers BRL 905 million. Don't forget this number. You're going to see it in our next chart because we practically doubled our EBITDA in the past 2 years. And our net income in the last 12 months, BRL 287 million. Hadn't we had the acceleration of our financial expenses, we would have already been delivering more than BRL 500 million in net income, more than BRL 400 million, sorry, in 2025. Now next chart. Now let's go a little deeper into the topic of quality of these indicators. When we look at our operational KPIs, average monthly sales per store, quarter after quarter, we are accelerating our average sales per store. Now we have reached BRL 855,000 per store per month and we have already exceeded the comparison of Abrafarma. So we are already selling more than the numbers of Abrafarma and we want to further close this gap with the market leader. Omnichannel sales already accounts for 21% of our sales. We are growing the past 4 quarters or in the last year, we had an increase of 55% of our digital sales and we are not losing margin. The margin loss that we had compared with our brick-and-mortar stores is now cut in half. So these are sales that are also profitable. Stock losses, inventory losses, you're not going to see this in other players in the market. We had a 27% decrease in our losses. So people will ask us, how can you grow and still maintain your margin or even expand your margin because we understand the losses need to be combated. And we are reducing our unproductive stocks. So these are very good operational KPIs. Now let's look at our financial KPIs. We grew 1.9x the EBITDA reaching BRL 905 million. I really like #9. It's my lucky number. Of course, it will change in the next year. This is not guidance, but we delivered BRL 905 million. With increasing free cash flow, BRL 323 million plus versus '23 and the ROIC will reduce -- sorry, the indebtedness of the company, the net debt over EBITDA ratio, we reduced to 2x. And this is the opinion of our main stakeholders. When we look at our Mystery Shopper score, we see an increase in our scores. So this means our customer service is even better. We visit our stores as mystery shoppers in all our universe of 700,000 stores. And some of them, we visit more than once per quarter. Now in terms of our employees, today, we learned very good news that I can't share with you fully today about our GPTW that we were qualified in the end of the year. In terms of our suppliers, the advantage survey that we conduct with our suppliers. In 2023, we were #19. And today, we're #3. And stay tuned because in 2026, I'm sure our score is going to be even better. And our investors, the IR program evaluation reached 9.1, our score also increasing in the past 2 years, and this makes us very proud, right, Novais. So let's continue with our presentation. And now you're going to hear from Novais. Are you going to stand up? Or sit down? Okay, so that's it, because I want to hear the beautiful numbers that you're going to share with us now.

Okay. So now it is my turn to speak. Yes, there are so many companies. I didn't even want to mention this. There are companies that people have a script. Here, we don't have scripts. We put our hearts into it and all our energy for people listening to us. Okay. So on Page #8. We have more details about our revenue. We closed the quarter with nearly 20% increase year-over-year. This is an acceleration compared with the 3 first quarters of the year, that already showed very high growth levels. So in the end of the year, we delivered nearly 20% growth. We finished at 18.3%, compared with 2024 with a same-store sales of 18.3%, 5x inflation rate and average monthly sales per store of BRL 855,000. So a nearly 40% increase in our average monthly sales per store in the past 2 years. So this with a focus on the core categories so generics -- these are the ones that are driving growth of the company and focusing on our continuous care customers, which is something we have been communicating 2024. We're also improving our store execution, commercial activities and digital channels. So just to give you an example, last year, we expanded 24% of Black Friday sales. On the next page, as a consequence of all this, we have our market share. We are up to know now it's -- no, we're 9x. Yes. And I don't know how to say that either, but let's look at -- so for 9 consecutive quarters, we are expanding our market share. We've reached nearly 6.9%. It's a record number for us with a 49 bps increase in Brazil with highlight to the Northeast with under 159 bps and the North region 133 bps. Considering that Pague Menos is not having a large number of new openings, this is purely an increase in our same-store sales. And on the right, we see our evolutions over 9 consecutive quarters, we've been expanding our market share. On the next chart, we give more details about the levers that are helping us grow our market share. In the first column, we have the market growth. So the market grew at 11.3%. And this is broken down in 5.1% of new openings and 6.7% of average price and 1.2% from volume. Now on the second column, we have Pague Menos plus Extrafarma. We're growing at 18.8%, so well above the market as a whole and broken down in 1.3% from new openings, 6.7% in price, exactly the same as the market, but 11.3% from volume increase. So we're growing 10x more than the market in volume. And no other player is growing in volume. So this means we're gaining share in volume compared with the other players in the market. And here, [ Novais ] I have a comment. If you're thinking, well, GLP-1 is important. Yes, it is. Remember that GLP-1 is low volume, high price. Now when we exclude GLP-1 here, we continue to have an 11x higher growth than the other drugstore chains comparatively in the market. This means that our growth in volume is very strong, very robust, and it's not something recent. We've been growing for 5 consecutive quarters with 11% or 12% growth in volume alone. Okay. So this is a very good momentum for Pague Menos. We're growing well above our competitors. So we are very happy with our performance. On Page 11. Now looking at our gross profit and gross margin. We finished quarter 4 at 29.4%, a slight reduction year-over-year, particularly due to a noncash effect, present value adjustment that had a negative pressure in the quarter, and we finished the year at the same level of margin that we had in 2024, which is very positive because we're growing at nearly 20% without losing margin, maintaining the same margin level that we had in 2024. So in our margin composition, we have pressure, for example, from branded drugs and GLP-1, they have smaller margins. So they put some pressure on the company's overall margin, but we can offset this with better commercial conditions and also some tax efficiencies and better trading conditions. So we are reaching excellency in our effort to maintain the margin with a nearly 20% increase in our sales. On the next page, our operational expenses, we have a very strong expense dilution trajectory. We're investing more in CRM actions with structuring investment, but we have a very strong dilution. We are diluting 160 bps in quarter 4 compared with quarter 4 '24 and 100 bps compared with the full year '24 when we compare with the full year '25. So here, as for investments, we are investing, for example, in store staff to provide our customer care -- continuous care customers with more adequate sales services. We also have investments in Popular Pharmacy, which requires some dedication of our staff. So even with these -- all these investments, we've been able to efficiently dilute our expenses as a whole. As a consequence on the next page, we see our EBITDA resulting from an increase in our sales, very robust increase in our sales, maintenance of our gross margin and a very strong expense dilution. This is a beautiful number. We fought for this number until the end of the year. I really like the rounded number there that shows BRL 905 million in the first page, right? Go over the EBITDA, again, we had a 52.6% in our EBITDA in quarter 3 versus quarter 3 '24, which went from BRL 164 million to BRL 250 million. And in the full year, we grew 44% year-over-year. So we went from BRL 628 million or practically BRL 904.5 million or practically BRL 905 million. Yes, we can't give guidance. We can't talk about the future, right? So I'll just stay quiet. Okay. On the right, we have our EBITDA margin evolution. We went from 4% when we were integrating Extrafarma to 5.6% growth, which is a record-breaking number for us for our EBITDA margin. On the next page, we have our net income and other excellent news where we had an increase of 70% compared with quarter 4 '24. The margin was 3%, and we closed the year with BRL 285 million in net income even despite the financial expense is close to BRL 30 million in 2025, slightly higher than '24, we had a good expansion of our net income. If we hadn't had an increase in our base interest rate in 2025, we would have delivered net income close to BRL 400 million. And have you heard that Copom is now going to reduce the Selic rate. Well, I better stay quiet. Yes, and this reinforces our possibility to further deliver better net income next year. And since we have this trajectory of operational growth and a prospect of lower interest rates and good leverage, we have very good prospects for our net income in the upcoming quarters. And our discipline, we can ensure that since January 1 this year, we can't really go to our numbers, but our obsession and our dedication to -- with decreasing our losses and decreasing our expenses, we created a culture and we are holding ourselves accountable to deliver a better and better -- ever better net income. Next page, we have a cash cycle. Here, we have our cash cycle normalized without the effect of anticipations to show you that the increase in GLP-1 or reference drugs in our sales mix put some pressure on our average receivables. The term went from 28 days to 32 days. The average payment term, we reduced by 4 days. This is also impacted by the category, semaglutide and Rx have a shorter payment term but our greatest advance was in average stock time. We went from 112 days in '24 to 103 days. So we were able to reduce by 9 days and each day represent nearly BRL 40 million. So this is a significant reduction in the capital allocation for stocks, nearly BRL 400 million. There was a lot of work here to reduce low turnover items in our stock in our stores and we also improved our logistics and reverse logistics among other elements. I got calls from our competition to understand how we are reducing our unproductive stock. So this means we are standing out, right. And that's great to hear. Yes, on the next page, we have the company's indebtedness. We are very proud to show the numbers. We went from 4.3x the net debt-to-EBITDA ratio to 2x. So it's a more than 50% decrease. On the right is the main lever to improve our net debt, we improved our operational cash flow. So in 2025, we delivered BRL 474 million in operational cash flow with a 52% conversion of our EBITDA. So this is the second consecutive year of very strong generation of operational cash flow, which is helping us maintain our indebtedness levels or even slightly reduce it and also operational improvements improving the net debt-to-EBITDA ratio.

Novais, I have a question. Is it true that the cash conversion into EBITDA over 52% is rare in our market?

Yes, for retail, it is the average. So despite all the investments that we're making in operational topics, we have been able to maintain and even exceed the average of the retail industry. So this is very positive to us. And then on the next page, this is my last slide, and then I'll turn it over to Jonas. We have our ROIC, which is also a consequence of everything that I presented so far. So operational results, improving our sales, particularly in expense dilution, improving operational margin, optimizing our working capital, which I just mentioned. So we finished the year with an ROIC of 21%, 9.3 percentage points higher than '23, 2 years ago in quarter 4 '23. So this is a very positive evolution in the return over employed capital.

So, very clear, Novais. Thank you very much. Now I'd like to show you -- I'd like to give you more color. This is what we have been saying to you since the beginning. This is about people. [ Redoxon, Tamiflu ] all the products that we sell are commodities. They can buy at our stores or our competitor stores. So this is about our people. And we must -- this is about our people. And our people includes our customer. Actually, they are the main actors in this. And our strategy is focused on continuous care customers and continuous care customers, they're not just about productivity because they visit our stores more often and they buy more. It's about humanity. It's about -- we're talking about plurimetabolic syndrome, hypertension, diabetes, obesity patients in our more than 1,200 stores. We have 1,700 stores and 1,200 stores, we have our clinic pharma, where we welcome these customers. And we have a good intake work with them. So let's look at this triennium of transformation. And I've been saying this since January 4, 2024. The first step was doing the basics well done. That was the stage when we were building our team and really changing our look and feel in our stores, training people, hiring the right people at the right places. And one very important point that I would really like to make clear in 2024 is how important it is to listen. Listening is therapeutic. It's not by [ hazard ] that we, psychologists, are making a lot of money and seeing a lot of patients. Listening is therapeutic. It's very important to listen to people. And when you listen with certainty, and when people are telling you something and that something changes, this is very important. We need to listen. So this engagement work was done in 2025. Then in 2025 -- we call 2025 a year of consistency. So in the end of 2024, we had already reviewed our strategic plan. So in 2025, the first day of 2025, we implemented our CCC customer strategy. And we showed you that of every 200,000 continuous care customers we bring to our stores, they bring a very important increment to our revenue. If we look at our basic case of 2025, we gained customers. These customers have a higher average ticket. We increased the units sold per basket -- the units sold per shopping cart. So we really work with these customers so that they feel welcome and well in our stores. And it was very important to create our transformation office because so many strategies we have seen failing in companies because this involves people, communication, soft skills, listening, engagement. It's not about what we want. It's about what they practice every day in our stores, so consistency. So here are our results. You can -- based on our results, you see that the work was very positive. We exceeded all consensus, and we are exceeding our targets 365 days per year. Only those work in retail will understand. 2026 is -- we're going to call it the year of scale. We have some very strong initiatives unparalleled that you're not going to find in other retail companies. For example, telemetry, telemetry of people, telemetry of our operations. So with our KPIs on the screen, online and with a group of people that came from the stores to the headquarters for a simple implementation plan. So a lot of those targets that we were able to exceed in 2025 resulted from this work. And now we have to gain scale. So this part is very important. Another important point is our logistics system. I'm sure you can imagine that after 5 consecutive quarters growing above 17% in our same-store sales, this required and we're going to inaugurate a new DC in Paraiba to further strengthen our product distribution and make us even more efficient. And we are also focusing on the future. We will now close the design of our 4.0 store and very soon in the future, we will start to find these stores in capital cities throughout Brazil. you're going to experience what we imagine for the future of retail. We also have a very strong plan for our private brands. And I'm not going to give you guidance, but it's a very ambitious plan. You'll see that it's a great plan that we are implementing. We've been traveling around the world to bring novelties to our customers. And another important point about our project is the beauty this brings -- that the GLP-1 drugs bring to humanity. I always say that GLP-1 is comparable to the invention of penicillin in 1928 by Alexander Fleming. It changed the reality of humankind. We had an average life expectancy in 1928 of 32 years, and you see what happened in 100 years. Now with the GLP-1 drugs, this is even stronger because we have preliminary studies showing reduction of drug addictions or alcohol addiction because it is a dopaminergic product, and it acts on the limbic system, reducing compulsion for sugar, for food. So stay tuned, and we're going to see some major changes in 2026. So thinking of all the power that GLP-1s have and this is something proven, we are the chain that's providing people with access because people in classes -- higher socioeconomic classes are already taking GLP-1 agonist and we are Pague Menos and this is our turn. We are leaders in the North and Northeast, and that's where we have not just in the Northeast, but in also other regions where we operate, where we have seen like a store for the extended middle class. So we're going to be the first people will seek to look for generics and similar for semaglutide. And we will welcome these patients because this truly changes people's lives. People lose weight, they improve their numbers, improve their health, diabetes, their glucose levels. They decrease their compulsion. You prove your self-esteem. You work better. You work more. So this is very potent. This is great. This is very powerful. And I'd like to take this chance to say that we're going to have a great event, an unprecedented event on June 9. So stay tuned because we have limited spots, and we're going to present to you about this new world that we can expect now with GLP-1s and with the expansion of the different clinical trials that we're seeing ongoing. So 2026 is the year of scale, and we will continue to consistently work nonstop to honor the trust that you put in us. I also expect that you appreciate our authentic way of working and our vulnerability. We always put ourselves very vulnerable when we are talking with you. We talk about what's working, what's not working, everything that we are doing. And quarter after quarter, we're coming here to deliver these brilliant results to you on behalf of 27,000 employees that are working hard towards these results. And now we have more than half of our call for questions. So please interact with us. We want this to be interactive.

[Operator Instructions] The first question is from Rodrigo Gastim from Itau BBA.

I have two questions. My first question has to do with your last point about gaining scale in 2026. My question is, when you look at all the structuring projects that you have in parallel, which of these projects are you most excited about and you see the most opportunities? Because time is a finite asset. So where are you spending a great part of your energy and time thinking about scaling up? What are the projects that make you most excited this year? This is my first question. And my second question, you talked a lot about GLP-1s, 9% of your revenue is coming from this class of drugs. So what is the demand -- what does the demand look like in the start of the year? Investors sometimes -- they are skeptical trying to map month after month, whether this is going to accelerate or decelerate. So can you share a little bit of the numbers for GLP-1 in the beginning of the year and the willingness of the industry of increasing supply in Brazil and when do you think generics will reach the market? So these are my questions.

Gastim, thank you for your questions. Novais will answer the first part of your first question about the levers. And then I will talk about your second question.

Thank you for your question. In our Investor Day last year, this is a very important question. We showed in our investor year the main drivers for 2026. We have 9 levers. I'm going to mention some of them. The most important is to continue to gain share in continuous care customers. So we reached 5.8 million customers with this characteristic at every 200,000 new customers, it's a BRL 0.5 billion increase in the company sales. And we still have opportunity to gain market share -- gain share among this group of customers. We are also working hard on the relaunch of our private brand. The internal team is very engaged in this new relaunch and we have good prospects for our private brand. We have a new distribution center being inaugurated in 2 months in Paraiba. And it will be really helpful. It will really help us improve our supply and capture some additional tax benefits. We also have a very strong project in our sales team with Simon to adjust our pricing. So we are starting to pilot in some micro regions, our new pricing methodology. And very soon, we will start to roll this out to the rest of Brazil, and we have excellent expectations for this project. Our digital channel, we also have been making a lot of improvement and seeing a lot of growth. We're very positive about our digital sales now in 2026. So these are some of the levers, but we have others. We have the brand conversion. We're still converting the brand from Extrafarma to Pague Menos. So I mentioned some of the levers, but we have 9.

And about GLP-1, so Gastim, this is a rational and very deep aspect of our work. So I'm going to talk about the emotional and people-related part of our work. When we see in a company a compressed growth, and let me explain what I mean by compressed growth, and this is in our letter to investors. So when we have such strong results for 2 consecutive years, and we culminate in a year like 2025 with 18.6% of same-store sales, we have to look at our team. We need to change the perceptual constants of our team because everything went by so fast and the most important part is to make people aware that we are now in the Champions League. So the game has changed. So we will keep paying attention to execution to have prepared stores, the right assortment, the right price. Retail is a conjunction of particularities and you need to work on them live in real time. So today, we're very focused on our team. So to continue to have a high-performance team, the right staff at the right place and always open to new hires, bringing people that will bring the skills and competencies that we need because we're not just working for the year 2026. We are already in 2030. 2031, the company will have its 50th anniversary. This year is our 45th anniversary. So our focus is to continue to deliver with consistency. Of course, we will not change these levers. These levers were defined in our strategic plan and they have been working really well. So now let's look at the industry. So what's happening in the industry? Today, we know there are more than 300 molecules being researched related with GLP-1. I've worked in other countries, so I contacted some of my colleagues, researchers and there is a growth in the number of research sites and investigators because these are Phase II and Phase III trials before the product is commercialized. And what we are seeing is that the industry, although it is already focusing on the new generation of these drugs, it is bringing much more stock to Brazil right now because Brazil today is the second largest market for GLP-1 drugs in the world. And it also has room to become just as important as the first place, which is the U.S. because it will be the first country in the world where the patent will be broken for semaglutide. The information that we have, Gastim, is that these products will come to the market -- will arrive in the market in July. First, we have the similar, then we have the generic. And we're working closely with the industry to talk about the importance of price and I'll go straight to the point here to the heart of your question because I know this has to do with your question, GLP-1 had a drop in January. It's not a drop in January. No, it's not a drop in January, but one way of selling less is just stopping advancing like you had been. So January for the entire market is not that it was a weak month but it was slightly lower in terms of growth than in previous years. And one thing that you don't see is Mounjaro, for example, Mounjaro, they launched the 7.5 and 10-milligram unit and some physicians who were very happy with the 2.5 and the 5 milligram, increasing the dose to have a marginal gain in the weight loss is not a good deal. So you see the industry with this cognitive dissonance between focusing on sell-in or focusing on sell-out. And since this is not our choice because we're retail stores, we have to have the best offer for the best price at the right place for the patient to be able to meet this demand. And one thing you can be sure the demand is -- growing demand is ever increasing and like my analogy with penicillin. This will change humanities, the story of humanity. So GLP-1 will become chronic. In the end of 2026, the forecast is that we will have Wegovy in pills. Is it going to be for weight loss? No, for maintenance. So after you get the treatment and you reach your ideal weight, you continue taking the drug orally, semaglutide orally to maintain your weight. So we will have a lot of news in the future. We hope to bring the novelties on June 9. We already gave you a teaser of our event. And this is the current situation.

The next question is from Danni Eiger, XP.

Congratulations on yet another very good quarter. I have two questions. The first question is about store productivity. It's very impressive to see the evolution and the consistency in this evolution. So my question, you've even mentioned this in your release that you see space to continue closing your gap towards the leader. So to what extent do you think you can further close this gap? And how long will it take? You had already given us a time line, but you already reached that target. So what can we expect in terms of a normalized, mature store within the regional context considering your mix profile for us to understand what the next steps will be. And my second question is about the working capital dynamics. Very positive to see the reduction in stock sold. What can we expect looking forward, both in terms of inventory, you have GLP-1s that help with turnover. You also mentioned other internal initiatives, things that you're doing in-house to improve your stock turnover and also other things. For example, of course, there's the GLP-1 dynamics, you're controlling solid payments, Popular Pharmacy, how far can it go? So can you give us an overview of all these lines so that we can have an idea of what will happen looking forward?

Let me answer your first question. And rest assured, I won't promise anything because I know I can't. Danni, thank you for your question. The first thing is this mental block that people have about the average sales per store. This was also something that we were affected by it. Because you heard from us in the past that we were closing the gap, we want to exceed Abrafarma's numbers, but it's difficult to focus on the leader because the leaders for socioeconomic classes. No, we no longer have this syndrome because what we saw is the power of telemetry. We saw the power of behaving as a retail brand as a retail store. If you think you can't go over BRL 1 million, I'm not giving guidance, but maybe you're wrong because we have doubled. We have doubled the number of stores over BRL 1 million in sales in 2025. So the stores that we're selling over BRL 1 million or BRL 1 million per month has doubled. We worked on the [ buy ] millionaire stores or those who sell BRL 2 million or more per month and the most powerful number is that we have reduced by 4x the number of stores that were selling under BRL 500,000. So for us, this is a top priority. We have different strategies, and I can't really give you details, but strategies to better activate the region where we're at, whether in downtown in a big city or in a shopping mall or in district stores. So we have micro strategies. Today, we don't talk about guerrilla marketing because -- but it's how it is. We visit our stakeholders. We have several strategies in order to improve these numbers. I recommend that you take a look at our earnings calls in the last 4 quarters, we will be able to pursue and close this gap. We can do it. And the key is working at the micro level. Each brick is a different story. Each store is a different story. That's why it's so important to go back and have the best store managers, the best regional managers and remove the hurdles and really help them because we know the customers are there. We already proved that we can grow in the number of customers and average ticket. So if we offer the right thing, we will grow. And look at all our competitors, their promotional activity. Our promotional activity is unprecedented. We have Wallace in our commercial team. We created a promotion, If You Blink, You Lose. So we have a very good way of identifying the slow movers in the market and proposing partnerships to the industry without losing margin. So this speed that we have when we create, implement, we track and then we make changes, make adjustments, this is very hard to copy. And we will continue to close this gap. I can't give you numbers, but I want to be here in the quarter 1 earnings call to show you how we continue to evolve in this aspect.

Working capital. Thank you for your question, Danni. We have been intensively working on this element. We know this is a very important element for us to continue to deleverage the company. So the operational cash flow is one of our main objectives. And as I heard in your question, we are working towards revisiting the financing rules for our customers. So since last year, we have been making adjustments to the mechanics that we have today in terms of installment payments. And this has helped us generate more cash without harming our sales. We're also working towards monetizing tax credit. This was one of the greatest levers last year in our cash flow, particularly in quarter 4 and the end of the year, we had a higher volume of monetization, and this also helps us in our working capital. We also have further opportunities to continue improving our stock efficiency. We are already at a very good level with an average stock time that is very good. But we also -- we still have opportunities to improve. We will have oscillations because we're inaugurating a new distribution center and that can cause fluctuations in our average stock time. But we have the mechanisms, and we're working on the drivers to further improve. And in the third -- the average payment term, we're also working on that point. So we want to maintain operational cash flow levels generation levels or conversion of EBITDA into cash at similar levels than what we have seen in the past 2 years, very strong numbers.

The next question is from [ Ian Seskin ], BTG.

I have two questions. The first question is about generics. This is still -- this continues to be one of the main growth factors of the company. So looking retrospectively, what do you think has been driving these sales? And what was the driver of these sales in 2025? Was it patent? Was it advancing continuous care customers? What is your expectation for 2026? And my second question is about your structuring extension projects. But looking at the CapEx specifically. So what do you see in terms of investments to make these structuring projects viable throughout the year?

Let me talk first about generics. Thanks for your question. The most important thing that we see and talk about every day is how can we manage the complex business with simplicity that is required, and that's what happened with generics. We looked a few years ago and so we were under-indexed with generics, and we were selling less than our competitors, and we are trying to find out why. And when we reviewed our strategy, it became very clear that focusing on continuous care clients was based on looking at 300 categories of products, and these were the products that we couldn't have stock out, should always be available for these special patients and also understand the numbers that they were buying. There are some clients that will buy 5, 6 units to have a better discount. So we see this was the adjustment that we made in our price, in our assortment, in the training qualification of our team, having the right number of products in our stores. And that's what led us to this more expensive growth compared with the market for generics. So retail is on the detail. And we are paying attention to all these details because for us, it's very important. And if you look at the different categories, you see that we're growing in all categories. We gained share in all categories. And for this to happen, generics is very important. So once again, I stress that we are an access chain and that's why we're so happy with the prospects for the future because we are expecting a transformation when we have the launch of the similars and generics for GLP-1 drugs. So the same strength that we have been showing for generics in the category as a whole, we will show when we have these similar and generic drugs available in the market. So stay tuned and be prepared because this is what we're going to see.

I'd just like to add something about generics. Thank you for your question, Ian. We had very robust growth in the Popular Pharmacy program in 2025. We went from a level of about 2% of our total sales to 4% of our total sales. So numbers doubled and the generic category was also -- the increase in generics was also driven by this increase in Popular Pharmacy. As Jonas said, we are an access chain, so Popular Pharmacy will make this improvement possible and also boosted growth for the entire company in addition to the continuous care customers with whom we have been working for 2 years now. Now your question about expansion or investment. We have a lot of discipline in our capital allocation. We are allocating to what really fits the company's plan. So company had a good operational cash increase in 2025. And we are investing what can be invested considering this operational cash generation volume and also the payment of our debt. So the objective is to neutralize the three lines in our cash flow. Cash generation needs to be sufficient to finance the company's investments and pay the debt. And we are putting a lot of discipline into this work, and that's why we were able to reduce the leverage of company from 4.3x to 2x in 2 years. So we will continue to have the same level of discipline. The good news is that -- well, this is linked to your previous question. The good news is that we still have a lot of room to gain productivity in the 1,700 stores that we have today. So we continue to gain share, regaining productivity in our same stores. We are still inaugurating some new stores, but very soon in the future, we will resume a more intense expansion cycle because our cash generation will allow for that. Perhaps this will only happen in 2027 but we are expecting higher investments for new openings in the future.

Our next question is from Guilherme Vilela, JPMorgan.

My question is about your working capital. It's about receivables. When you see the growth numbers, added to the discount, it is about 35 days, which is comparable to 30 days of a traditional -- traditionally speaking. So over time, how is your payment terms evolving at the store, so payment terms for clients, and how is this contributing to your top line over time? And what can we expect looking forward? And my second question is about the look and feel. I'm sure you have renovation agenda for your stores. So I want to understand how much you're planning to invest looking forward.

Thank you, Guilherme, for your question. About the working capital, this 35 days that you talked about, there was an increase due to Ian's previous question when I talked about the Popular Pharmacy program since we doubled our share in Popular Pharmacy. And the government has a longer payment time for the chains that are participating in this program. This put a lot of pressure on our average receivables term. But -- so in addition to the increase in our share in Popular Pharmacy, we're also growing with continuous care customers. So for GLP-1, customers have come to us to buy GLP-1s. Since our customers are at a lower sociocomic level, they want to pay installments. So today, we offer installment, payment in 6 installments for GLP-1s. And since the category is growing, this also puts pressure on our accounts receivables. Now with the similars and generics coming to the market, we will have a relevant increase in volume and since the ticket will be much lower, we tend to see a lower pressure on our average receivables when we have the generics and similars, but Popular Pharmacy should remain at the current levels. But except for these 2 groups in Brazil, we have been tracking and monitoring the installment payment levels of our competitors in the different regions, and we see further opportunities to decrease. So we will try to neutralize the effect or even decrease the average receivables term in the near future. We already saw a significant decrease with a good effect at the end of last year. Now we have good expectations for 2026. About the look and feel, we still have a base of stores that require investments. We have done a lot -- we did a lot in 2024, '25 with the basic points, air conditioning and facade, but we still have a relevant number of stores that require investments to improve the look and feel. And we will invest a relevant amount of money in 2026 for these renovations and '26 will also be a year where we will invest in logistics. So we will not have that much money to invest in the look and feel this year. Maybe in 2027, we will have more funds available for that purpose, and this has been bringing a lot of new customers to our stores. When we improve our look and feel, this has a relevant return on investment. I hope I answered your question.

The next question is from Lucas Esteves, Santander.

Congratulations on your productivity gains. These are very impressive results. I have a few follow-up questions. First about logistics and how this affects your working capital? Novais, you mentioned a few times the new DC and that, that should affect your working capital in the short term. I understand that this DC will be open before the pre-price increase sales, so there's a duplicated effect of the pre-price increase sales. But in the midterm, do you think this will improve the efficiency in your stock management and you'll be able to further reduce your stock time with the new DC? And also, can you tell us more about other logistic initiatives that you're planning? And another point is about digital channels. This has been one of the main growth pillars for you in terms of gains of operational efficiency, 21% of your gross revenues coming from digital channels. So what do you see -- in terms of drivers to continue increasing penetration and the frequency of customers -- continuous care customers using digital channels. So how should we expect the evolution of your digital channels in 2026?

Excellent question, Lucas. So let's start with logistics. You mentioned something true, which is that in the next 12 -- 2, 3, 4 months, we will see pressure in our stock investments due to the new DC being inaugurated. But still this year until the start of the second half should stabilize. And even after or during the inauguration of our distribution center, we have opportunity to improve our efficiency. We already have an algorithm for replenishment of products in our stores, which is very robust, and this has helped us improve our efficiency. Jonas and the commercial team has a very strong focus on low turnover items in our stores and product launches. So we saw a lot of improvement in the past 2 years, but there's still room to improve further. There's a lot of opportunities here, considering that we already have a robust algorithm, but we also have more opportunities connected with artificial intelligence in order to improve the quality of the replenishment of our stocks of products in stores. And since this is one of the greatest, if not the greatest investment in working capital for us any day or half a day that we can decrease in our average stock time represents a lot of money for us. And this is what we're working towards with our drivers. In digital channels, we also have excellent news. Our digital team is working on improving the usability of our app. The frequency of our customers in the app grew 29% in the end of quarter 4 '25 versus quarter 4 '24. We are also increasing the share of our super app partners in our sales. These are clients that are -- our clients are increasingly looking for this type of channel, and this has been helping us penetrate better and it's a very profitable type of client for the company. So there are many improvements in the delivery time of the orders that are collected via the digital channel and sent to our customers. So our digital team has been working hard to improve our operation and with the opening of some new stores last year, we will increase our radius of operation in places that we can service through our brick-and-mortar stores with a less than 2-hour delivery time. So there are a lot of good initiatives in digital and this should continue to grow relevantly in the future.

Thank you, Lucas, for your question. Our strategy is very clear from the start, this has never changed. We have an omnichannel strategy. We want to service our customer when they want to be serviced. So it's not like we've seen the market with a high CAC and then wanting to attract customers to the store. No, we want to grow with profitability. And this is what you're seeing in the 100% increase in our EBITDA. We are focusing on growing with profitability. And this is a type of discipline that we will continue to have in the future.

Next question is from Raphael Elage, Bradesco.

Congratulations on your results. I have two questions. My first question is about your performance in HPC. There was an interesting acceleration in the quarter even with a strong comparison basis. So how do you see, first, the competitive dynamics in this segment? And also, where is this acceleration coming from trying to exclude the effect of Black Friday promotions to try to understand the strategies of the company and also thinking about the recurrence of this type of growth in the upcoming quarters? And my second question is about the reduction in losses. Jonas explained really well, which were the improvements that the company implemented. And I want to better understand from 2 components, operational efficiency. Can you please give us more color.

Can you answer the first question?

Yes. So in HPC -- thank you, Raphael, for your questions. So in HPC, our growth in HPC is thanks to our commercial team because accepting the Black Friday effect, we had a lot of commercial activity in our stores and some killer campaigns that were promoted by our team. This is attracting new customers and is helping our customers visit our stores more frequently. So the commercial activity for HPC is vital. We saw a lot of growth in the end of the year at better levels than we had been growing. We were growing at double digit. And in the end of the year, this growth was even stronger. Of course, there's an effect of the Black Friday promotions. But even if we exclude that, we are growing at very good levels, even with a tighter competition, like you mentioned, with other players, especially on digital, we are -- we have been able to expand and grow more than our competitors and about the average of all of them. So we're very happy with our performance in HPC. And about the losses, would you like me to answer that one?

I want to say, Raphael, that's a very good question. When we talk about losses. Everything that we set to do and to change, we do change. So this is the good news. And this all has a causal relationship. For example, you asked us to give more color. There are no losses due to expiration was 70%, 30% was due to theft. When I came to retail, I thought it was the opposite. But no, if you have a better stock management, if you control your slow-moving products very well, if you have a good agreement with the industry, you can better work on your assortment so that you don't have any compliance and you avoid those losses. The other 30%, we were really focusing since 2024, and particularly in 2025. If you have a problem with losses in drugs from the counter in, you need to register that with the police. If you don't have police records, there's something wrong in the stores. So we are working with data. And we are incorporating a lot of IA agents so that we can map out, have a heat map and work on this issue more assertively. And my agenda, I have a meeting with the regional managers every month, once a month to look at the 10 worst losses, levels of losses. And my role there is to be empathetic because I wouldn't like to trade places with them. So how can I help them? And it's very interesting, and I really like to study human behavior. So one of those managers when they -- in the second consecutive meeting that they have bad numbers, they start by apologizing and then we say, what's your plan? How can we help you? So the entire company is focusing on KPIs that are very important and losses is one that will always be my agenda. Losses and expenses, these 2 components we can really dig deep and help the team focus on these 2 aspects. Because everything that we measure, we can improve with training, with monitoring, with data and with all this energy that we're putting into it. This year, we'll also reduce our losses and this will have a positive effect on our gross margin and our EBITDA. Hope I answered your question, Raphael.

Our next question from [indiscernible].

I have two questions. My first question is to what extent your corporate structure today thinking of your expense line is supporting this very strong growth in your average monthly sales per store which should continue this year and maybe next year. So does this require any investment? The G&A line is really striking at 2.5% this quarter. So does this require any investment? And my next question is about tax over expenses -- sorry, tax over gross revenue, it was a little stronger than what we had here what we were expecting. So was there anything different about this line?

Well, about the corporate structure, like you heard from -- always hear from Jonas, the team, our people, our team makes all the difference. And in 2026, our work will also be led by our human resources team, and we will focus on increasing the robustness of our corporate structure, not just in our headquarters but also our DCs and our stores. We are creating training hubs all over the country, 6 regional training hubs which will continue -- will help us continue improving the customer care in our stores. And we have some very important structuring investments being made in people. However, this should be offset by a reduction in the other lines that compose the company's expenses until 2025 and still in the start of 2026, we're investing more in store maintenance, in marketing and CRM activities. So we will compensate this additional investment in people by reducing investments in other lines. So the total level of expense of the company will not change. We will maintain total expenses at the same level, and we will probably see some dilution of our G&A expenses compared to the total growth of the company as a whole. I hope I answered the first part of your question.

And if you allow me, Novais, [ Thales ], sometimes we talk about reinforcing and some people interpret this as increasing cost, increasing headcount, but this is not the plan. Since the start, we have been obsessed with our number of headcount, trying to look for new ways to do things and make the company more senior -- make our team more senior. Since 2024, we have been implementing recognition tools with [ line box ], with feedback, with a culture of performance to have a high-performance team. So these are movements that we are undertaking to increase our productivity. So I won't make promises, but you should expect to see more productivity looking forward. It's not about the number of people and how much we're investing in people. Our investment in people has to be in our stores and servicing our customers and decreasing our lines. The headquarters are for you to find the best way to organize your store. We have AI tools, and we have some exclusive applications. It's not about the AI hike. We have exclusive applications in HR, in marketing, in finance. So this is what we're looking for and always trying to understand whether we can eliminate some processes. We're doing work now. It's not just about building processes. We're trying to find processes that we could eliminate things that we could simplify. So we have some news. I can't tell you now, but we will have positive news in our ways of working this year.

And about the taxes, [ Thales ], as we advance our product categories, we have different growth levels by category. So the tax mechanics is different between categories, and this can affect our tax over sales line. But most times, this is offset by the cost components and the cost of goods sold. So the gross margin, the total gross margin of the company is at the same level as that of 2024. Let me give you an example that we had in 2026. It didn't really affect '25, but an example is that here in Sao Paulo, we moved away from the tax substitution mechanics, and that will have an effect on the tax over sales line, but we also have credit over the goods sold. So in 2025, we had some similar movements and the movement between the categories also justify the slight increase in the tax over sales line, but this was offset by the tax over cost of goods sold line. So in the gross margin, you see a neutral effect. I hope I answered your question, [ Thales ].

This question-and-answer session is closed. Now I would to hand the conference over to Mr. Jonas Marques for his final remarks.

Well, I would like to thank you for your time and your engagement with our thesis. Our thesis is about people. It's a consistent thesis. Despite the external environment, and despite us seeing that we have a lot of energy focusing -- being focused, we are very positive about the future. And the future is now. The future is 2026. We want to continue delivering on our targets, follow our strategic plan. And one thing that's really important is to have this transparent relationship with no scare, no surprises, without moving away from the expectation that we always align with you with equity, bringing transparency to the classic examples of our daily work, where we're focusing how we're working. And quarter after quarter, we want to deliver and show you what we are delivering and what we are expecting looking forward for the future. We want to have recognized the responsibility of our society to increase in 1.3 million the number of consumers and customers in 2 years. This only increases our accountability to really service these customers well with assertiveness, focusing on continuous care customers, and we will always follow our mission to be an access chain. When you look at the size of Brazil, a country of nearly 220 million people, any way you think of access, we want you to think of Pague Menos and when we look at the market, what is the largest chain in access. It is us. There's a revolution about to happen, the GLP-1 revolution, and we will be ready to capture and to keep treating these patients in the best way possible, improving their quality of life and longevity. It is a very resilient segment and we want more and more to become a benchmark in our industry. Because leaders are not just those who sell the most, but those who behave like a leader. Those who share knowledge, those who bring transparency, those who know that they have a role in society. We are a [indiscernible] company that was born in 1945. We will be celebrating 45 years now, and in the future, 50 years, and you can continue to rely on us. We are working nonstop. I want to send you all a big hug and to our team of 27,000 people makes us proud every day because we have a mission. Our mission is to provide the population with health care. So a big hug to all of you, and we'll see you soon in the future to deliver the results of quarter 1 this year. A big hug, take care and a blessed week to all of you.

Pague Menos' conference call is now closed. Thank you all for attending, and have a great day.