Raia Drogasil S.A. (RADL3) Earnings Call Transcript & Summary

[Audio Gap] presentation will be available on our Investor Relations website at ir.rdsaude.com.br, where the replay of this conference will also be made available later. [Operator Instructions]. Before proceeding, I'd like to mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of RD Saude's management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Our investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of RD Saude's and could cause results to differ materially from those expressed in such forward-looking statements. Today, joining us from RD Saude Studio are Renato Raduan, CEO; and Flavio Correia, Chief Investor Relations and Corporate Affairs Officer. I would like to turn the conference over now to Mr. Renato Raduan. Please go ahead, sir.

Good morning, everybody, and welcome to the 1Q '25 earnings conference call. It is a great pleasure to have you all joining us this morning, giving us the chance of telling you -- giving you some more color about the first quarter of 2025 and also the future perspectives, what we expect going forward because we want to give you our perspective on things in a transparent way, which has been a solid characteristic of our company. Okay. So let's go straight ahead. But before I delve deeper into the numbers, I would like to tell you that for us, the management of the company, the first quarter 2025 fell short of our expectations. I tell you this as the new CEO, of course, but also on behalf of the entire [ C ] level, the company. I'm going to go deeper into the details later, but we were a little bit short of our expectations in terms of sales. We did not achieve the level that we believe to be healthy and sustainable and also in terms of gross margin. And I'm going to tell you the detail of the specific factors behind this scenario. And because of that, EBITDA and net income also came short of our expectations as a result. Now I'd like to give you an overview of our performance this quarter, and then I'm going to give you more color on the operating highlights. We always like to start with this overview with one pager with the main highlights. We finished the quarter with 3,300 units in operation. We opened 75 pharmacy and shut down 4. We reached almost 103 million tickets in the year, and our NPS is at 90, which has been the same level for the past 2 years. And we finished the quarter with almost 50 million active customers in the last 12 months. And of course, you saw that on our release, we finished the quarter with a gross revenue of BRL 10.8 billion, 10.8% higher but it is below the level that we expect and that we want to achieve going forward. I'm going to give you the details. We have a calendar effect that had a substantial effect on this number because last year was a leap year. And it is below the 14% that we expected. But still, we were able to gain market share. It shows that the market grew less than this. But even with this growth, we gained 4 bps of market share. And I'm going to give you more details later. Now digital channels, it increased significantly. We grew by 40%, reaching [indiscernible] players are losing market share and consolidation is moving faster. Another way of looking at this is looking at mature store sales [indiscernible]. If we were to adjust this for the calendar effect, we would have grown in line with inflation despite the one-off effects, for example, repellance. And we want to work on speeding up our growth pace, but it doesn't mean that our base is desperating because we are growing just as much as inflation. But it's not the 2% that we had until the third quarter last year. So this is the landscape for sales. And besides that, we had a decrease of 60 bps in our gross margin. Of course, it is a trough. If we look at our track record, very few times did we have net income below the number that we have right now. And specifically, when we look at the quarter-on-quarter numbers, we can see that there was a pressure from losses and losses happen when someone goes into a pharmacy and steals something shop lifting, and it also happens with rubbery, for example. And I'm sure that you know what the situation has been with Semaglutide and Ozempic and Wegovy. And we know that we have been having those problems, and that causes an impact on losses. And also when we have damaged products, or expired products. And we know that those crimes have been increasing in the country and specifically in the state of Sao Paulo. Since we have pharmacies all around Brazil, we know exactly where we have more of those cases and where most losses are coming from. In the North, Northeast and South regions, we don't have that many losses. But in the state of Sao Paulo and in Southeast as a whole, that's where we have an increase in those losses. Those losses increased gradually over 2024. We made up for that with other actions, but now the gap was 0.3% quarter-on-quarter. It stopped growing. If we look at the past quarters, and I'm going to give you more details on that later because we have many action plans geared towards that. We cannot assume that we are going to live with 30 bps in losses and believing that, that is just part of business as usual. Of course, we are trying to drive down the losses to the historical levels that we have always had. In addition to those 30 bps, we had another 30 bps that was part of the mix effect. As I said, HPC was lower in its representation and Rx represented a little bit more with the branded. But there was part of the investments that were made for competitiveness, pricing and promotion to start rescuing that sales level. Well, we have a history on promotions, but of course, we don't get results the next day. You start making investments now and you start to attract sales as time goes by. So with that, I would like to give the floor to Flavio, and then I'll come back to cover some other highlights.

Thank you, Raduan. Good morning, everybody. So just moving forward with the next slide. Now we're closing the flow with 0.7 days. We have a small growth of 2 days. That is due to an increase in inventory. That increase in inventory is related to lower sales than what we had hoped for. But basically speaking, this is very stable in time. Cost of sold goods are closing at 17.9%, which is a pressure of 70 bps against last year. It's bringing a structural dilution of some lines like marketing, overhead, et cetera. But this is being offset by that calendar effect that he talked about in about 0.20, 0.30 bps. It's just about the cost of sold goods. This was something that we talked about for the whole market. It's about reviewing everything we have at stores, and this is something that is burdening that expense in about 50 bps, but it's improvement, and it also has a great maintenance of our NPS and LTV. This pressure, which is what we talked about, happened at the end of the fourth quarter last year. So this is a pressure that should continue for a few quarters to come. Now here's an important point. When we talk about the selling expenses, that's about 18% is the lowest structural expenses of the industry in Brazil. Now looking at G&A, we are still evolving, and that's in line with what we've been signaling to the market. It's closing the quarter at 2.8%, which is a very good number. It has a structural context that is very strong, and that is due to the contention of our portfolio in our matrix. And we are starting this year in a different way. We have an effect of vacations and bonuses for the quarter. So we are coming from a level of 3.5% of G&A in '22 and '23 due to a transformation of the company. But now we've reached a level that is under the 3%, which is very positive. In this quarter, we're looking at an EBITDA of BRL 644 million with a 6% margin with 1 percentage point below quarter-on-quarter. So it's an impact of 60 bps coming from the gross margin and 40 coming from expenses. As he said, the 7% of last year was a peak that we had. The normal level would be 6.8%, 6.9% due to contingencies. And the 6% that we're looking at this year has a strong factor of that calendar effect of about 20 or 30 bps. Having said that, we are not exactly comfortable with the performance that we had. We are going after the numbers that we want. We have gross margin, and we have expenses that are not diluted yet from the portfolio that was redone last year. So we hope to revert the situation in the next quarters. So we're looking at an EBITDA that is valid, and it should be performing well, meaning that we can leave this year in a better situation than how we started considering the positive inertia that we will have. Now looking at net profit now. We have an effect of stabilization, depreciation and financial expenses of year-on-year. Depreciation is stable. Financial expenses are stable as well, but there is a situation of 30 bps for financial expenses that is going up, and that is due to interest rates that are going up, but this is an effect that is offset due to reassessment of 4 bill that we had done last year. So we're closing this line of income taxes that represents 0.4% on gross sales, and that is due to an IOE of BRL 18 million this semester, and that's related to the payout that we have for our shareholders. It's a payout about 50% of our net profits. So this is the component that we were missing to reach that level. The IOE specific for this quarter comes with a strong tax shield. We have a rate this semester of 19% of taxes, but the structural rate throughout the year should be higher than that. So we're looking at about 22%, 23%. All of these results will lead us to a net profit of 1.6% this quarter, which is 60 bps related to last year. So the total cash flow, just before I give the floor back to Raduan, the total cash flow is closing here with a burn of BRL 162 million, which is in line with the burn that we saw year-on-year. Talking about last year, we have a net debt that is reaching BRL 3.5 billion, completely under control and generating a leverage of 1.2%, which is the average that we have seen in the last quarters. So this is completely under control.

So now just going back here, Flavio, I think it's important to remember that all quarters and hours of the day, we are working to deliver the best that we can. But we're thinking about building results for next day, next quarter for the future. We're always trying to balance our efforts to maximize what we can deliver. We talked about the performance of the quarter, but we are also working on other operational things in this first quarter, which is part of the pillars that will ensure our future growth. And it's very important to highlight those actions. Some are known to everybody and some we need to highlight. We need to reinforce expansion, which is our IRR, which we're looking at a tier of 20%. We had 75 openings in the first quarter. That's 20% above what we did in the first quarter of last year. Again, we had a very good performance, great accuracy. And we are only now looking at 75% of our pharmacies at a mature stage. Of course, if we reduce this rhythm of openings, we would maximize results, the total results, especially the growth of existing stores. When we accelerate our expansion rate, we have to reaccommodate sales. We're cannibalizing from store to store. At the beginning, they still don't have that healthy performance. They need to wait for maturity. So if we were to slow down expansion, we would look at the same-store sales results of today, but we would be hurting our growth in the future. So we are keeping our guidance of between [ 330 and 350 ] and the year will tell us which one will happen, but we are going to keep that guidance of opening -- of gross openings for 2025. And I think this is part of the leverage that we will have for future growth that may bring some pressure right now, but that ensure our growth for tomorrow. Digital is also continuing on very strong, and we believe that it will be one of our growth leverages for the future. We got to practically 22% of share in multichannels in our participation of sales as a whole. If you take digitalized clients, more than 40% of sales from the company are coming from digitalized clients that are buying offline, they're buying some online. And again, that's 22% and especially with our proprietary channels, which is our app, which is 80% of our sales. And that's anchored on our pharmacies and 98% of everything that we do is supported by the granularity that we have built. So with digital and expansion are 2 assets and leverages that are growing and getting stronger. In addition to those things that you've heard about, we have an action plan that is very robust. And that could be for us to start to climb that level of demand that we mentioned. We want to recompose our margins or to work on our structure of expenses and costs. We have a lot of actions that are not starting now that from the beginning of the year have been accelerating even before then as well. So we are reinvesting part of what I'm going to talk about the savings that I will mention in expenses and G&A to be reinvested in competitiveness. And that could be surgically speaking, local, bi-local SKUs, depending on where we understand, we need competition to be stronger, and we have to be very surgical to not burn our margins for nothing. So we are investing more resources to invest in competitiveness and we are strengthening a promotional calendar, as we talked about last quarter. We learned from Black Friday. We saw how much having a promotional calendar that is good and strong and attractive can make a huge difference, especially for categories of high services as a whole, not only for medications, but for services. We have a more robust calendar for this year with the participation of vendors as well to help recompose part of this investment that we have to make. As you know, most of our clients identify our loyalty programs. We know who is reducing their visits to the stores, who is no longer coming so that we can create very specific CRM actions. We are working hard on that. As Flavio mentioned, the world doesn't come down to price. Price is just one factor. It's important, but it's just one component within a whole experience within a whole value proposition. This is a very important theme to talk about, and we adjusted personnel last year to make sure that our staff is friendly and the stores are staffed enough to offer the best experience. So this was something we wanted to do. We have a lot of progress coming for our digital channels despite all the progress that we have made, we want to increase that, especially for HPC for scheduled deliveries. And we really believe that every 4 points that we improve in SS online, we increase in 1 point the conversion of that channel. So the more we invest in improvement of that journey, we can convert that into clients, and we have a lot of releases to be done this year that will further improve that experience. The companies that are investing in the digital will be more prepared to face their competitors in the future. We started to sell Mounjaro. We are effectively the first ones to make that available and give real access to it. We had a presales with anticipated online reserves. But starting Monday, we are now with the product at our stores. We have delivered presales that we had made and clients again can go online and have access to this product. It's not so much about preselling or 1 week or 2 weeks, but we have to look forward, and we know that Mounjaro is very much in vogue. GLP-1 and semaglutides are very important, and we have a good share in these high-value products because we do have an over share for the high-income class, the points that we have. We have 95% of high income and high middle class income that are 5 minutes from a store. So looking forward now, we do have an over share of high-income clients, and we will have an overshare of the arrival of Mounjaro, just like we had with Wegovy and Ozempic. Besides the actions to boost sales, we have some other actions aimed at minimizing the impact on our gross margin. Our role as leaders is not to say that this is the new gross margin level that we are going to have from now on. No. Our role is to find ways of offsetting those effects so that we can rebalance the costs and find the points where we can offset those negative effects. We have partnerships with suppliers to help us subsidize part of the investments. We have an action plan geared towards losses. We are not going to badge peacefully thinking that it is normal to have 30 bps in losses because that's money that we are leaving on the table. So we have an action plan to address that problem more strongly. For example, providing some products at the stores, the Drogasil and Raia stores. And if people find those products elsewhere, it means that it is illegal. And we are now bringing back some practices that used to work in the past, for example, using the acrylic panels for HPC products because shop lifting is a problem with HPC problems. Usually, that helps retain those losses and prevent those losses. And now we are reducing the inventory level as well to offset that problem. And -- of course, here at an earnings call, I'm not going to give you details of the tactical plan, but I just want you to know that we are not accepting this level with 30 bps in losses. We are putting in place actions to address that. And we are also adjusting our expansion, keeping our guidance of 330 stores, but we want to be accurate. We don't want to take that much risk, and we want to move to places and regions where we have clear returns. So there's a number of effective actions being taken right now so that we can boost our sales and lift off the pressure of our gross margin. Another point that I'd like to mention is our cost and expenses structure. I told you in the last quarter, that I work in the system -- in the company. I've been working here for a long time. Therefore, I know the ins and outs of our operation, which allows me to see some opportunities more clearly. And of course, I want to hear what the stakeholders and executives have to say. And by doing so, as I said before, I believe that there are some adjustments that we can make to boost our performance. And indeed, we were able to speed up that agenda. In 1Q '25, we restructured the company, which was very important for us because we want our company to be leaner and more agile. We eliminated some overlapping roles because we want to boost autonomy. And we are also cutting down red tape in decision-making procedures. So we restructured the entire organization to make it more agile. And that brought also a reduction in our personnel, which is going to yield gains in -- of about 20, 25 bps starting in the next quarter, which is significant when it comes to containing expenses. We also changed the way we do things here. For example, in the digital product development area, we decided to reorganize things. We now have decentralized squads working with the business areas. We are bringing technology closer to the business areas, removing some bureaucracy, and that is critical for us because it created a different dynamic in the company, allowing us to be even stronger. We also made the decision -- some decisions actually about invested companies that we thought would yield value in the future. And we decided to restructure the cost structure in some of our invested companies. We actually internalized some of them. They are not third-party companies anymore. And we thought that, that would be a critical move for us to change our cost structure. And I don't want you to see this as a one-off adjustment, the structure of the organization because we wanted to gain 20 bps and all that. And then on the next day, things would go back to the way they were. No. This is just one of the actions that we are taking. This is not a one-off movement. As leaders, it is clear to us that we need to strengthen our focus on gaining productivity and efficiency. We cannot afford to waste resources because those resources could have been used to improve the value proposition for the customers and also the employees or to give back returns to our shareholders. So our focus of building a strong future has also this factor of not wasting resources that could be used elsewhere. That is more important than the one-off actions that we had to take earlier this month, actually in April. We planned to execute in April. And more than just a one-off action, what is important for you to understand is that we are changing our mindset because we want to invest resources where they are going to yield the best results. And by doing so, we are not just addressing accelerating those sales and improving our margins, but also we are adapting the cost and expenses structure across the board in the organization. Now on this slide, I would like to recap some points that we mentioned in the previous quarter. Eugênio, Marcello and Flavio were very accurate in the way they build transparency and a trust relationship with all of you. Bringing the issues here to you, but not making them look bigger than they are. And this is my commitment to you as well. And in the previous quarter, I mentioned a number of things about the way we saw different factors and how they would evolve. And now I'm showing you that we did evolve. I told you that it would have been -- it would be difficult to dilute sales expenses. And indeed, you can see we did not dilute those expenses. And I also told you that we had room to reduce G&A way beyond the dilution and the decreases that I have mentioned before, and we did that. I told you that we wanted to restructure the invested companies, and we have already taken a step towards that direction, reducing the structure of the invested companies and bringing more profitability to 4Bio. And I also told you that we would have headwinds in the first quarter, but also challenges because 1Q is usually more challenging and the second quarter would be more stable because of the calendar effect. And you can see that in our results. 1Q was indeed more challenging. And there is one part of the presentation that is different from what we said earlier. We told you in the last quarter that we would have a flat EBITDA year-on-year at the end of the year. Of course, now that we have 100 bps below and we know that we are going to have headwinds in the second quarter. But at that moment, we believed that we would finish the year with the same EBITDA level as 2024. But today, we don't think that is the most likely scenario. It is possible for sure, but it is not likely considering what happened. And it is not something that we are going to pursue no matter what because we need to keep our focus on the long term as well. We are investing to reach the end of the year with normal numbers and operations, creating a good ground for us to work on in the next year. We want to reach the profitability levels that we want to sustain, but those actions might not be sufficient to offset these results throughout the rest of the year. So I want to be clear and transparent here. And of course, if our perspective changes in the second quarter, again, we are going to be as transparent as possible in our updates. Now lastly, Flavio, before we start the Q&A session, more than just showing the results of the first quarter, I think we should recap our beliefs about our assets and our ability to be the leader in this market because the population will continue to age, as you know. And we have 3,000 stores, I'm sorry, and that is almost twice as many as the second player. And our average is 40% higher than the second and third players. And I'm just talking about the average sales per store, considering that some stores are still maturing. If you compare just mature sales, the gap is even bigger. So we are focusing on the present for sure, but also we are building the future, opening 350 stores. So we have assets, and we have a good market position that gives us a major advantage, especially considering what we want to build in the future. We also have a huge track record in the care industry. We are not people who just found out that taking good care of people makes a difference in retail. No, we've done that for over 100 years. And the critical success factor for pharmacies is taking good care of people because they are the ones that make the difference. So we have a century-old culture with 13,000 pharmacists that were educated with that culture, trained internally. We have 8 region directors that started as pharmacists or salespeople, and they do nurture that culture. We have strong brands that are present all around the country. In mature stores, we sell 1.1 million, but if you look at the different regions, it is even higher than that. So we have avenues for growth all around the country. If you look at our regional competitors, and we respect them, of course, and the fact that we respect them allows us to want to improve. And those are regional competitors. And once they do their homework to maximize their presence in their own regions. And that, of course, is going to open some room for growth. But once they extend beyond that phase of the quick wins and the low-hanging fruits, they will want to grow, but I'm sure that we have a better position than they have. We have 7 million loyal customers with an NPS of over 90. We are 5 minutes away from 70 million Brazilians, and that is a determining factor. We have an NPS of 90%, as I said, we are very close to 70 million Brazilians, and that took years for us to build, and we need to be competitive as for prices. We have a proprietary digital journey, which is critical for us to be able to face and beat the competitors. But of course, that, together with the pharmacies and the omnichannel service will help us win this game. And beyond the quarterly numbers, I'd like to tell you that we have the assets to continue growing and consolidating this market. And again, the shareholders have my back here in my effort to create a company that is sustainable in the long term. Of course, we keep an eye on the short term. Otherwise, we wouldn't have adjusted our G&A because that's not popular, adjusting things the way I did right after 3 months in my term in office. So of course, I want to maximize the results for the present, but also without losing sight of the future because we know that usually, that takes investments and taking actions that are done now to yield the benefits in the future. So that's the overview for you. And now we are available to take your questions as many as possible to continue sharing our perspective on things Thank you.

[Operator Instructions] The first question comes from Joseph Giordano with JPMorgan.

I have a few questions, starting with top line. I apologize, the audio was too low. Well, starting with my first question about the top line in the short term, I'd like to know, looking forward, how will things change this year? And if you think about the second quarter, maybe the calendar will be even more challenging than the first quarter. We have the leap year and also the Easter holiday that was a little bit longer. So I'd like to know from you, what do you think about the headwinds that will come in the second quarter, specifically about the calendar effects. And I believe that some effects were not so relevant for OTC, for example, in the first quarter and also HPC. Now my second question is about G&A. You took some important actions and those actions were taken in April. And we had some movements there that helped you, but I would like to understand the new structural level from now on because I think that was the main highlight. And I have one third question as well. I believe that part of that is going to be used to improve your competitiveness. So when it comes to gross margin, I'd like to know your perspective on that. And are you going to make any other investments in prices? We know that in the Northeast, you had promotional campaigns. So how are you dealing with a lower CMED rate, especially in terms of gross margin? And how friendly are the suppliers to help you, especially with the online channel? And that's it on my side. I have more questions, but I know that there are many other people that want to ask questions.

Okay. Those were great questions. I will start answering. And yes, you are correct. The second quarter has a negative calendar effect, and that is due to the amount of long weekends that we had. We were anticipating a first quarter that was going to be more challenging because of the leap year, the calendar effect that hurts the decrease of expenses. And then we had the CMED that was lower than before. And we see this effect the same way. It's a negative calendar effect that is relevant. And that's why we have other actions as well that can help us compensate a little bit. And that could be some that we took in the first quarter to reactivate some sales with promotions, investing in pricing surgically and in one-off manners, like you said, and in medication in the Northeast in the past month, but we did make some specific investments. In the Northeast, we made investments that we didn't make in other regions. We were positively surprised by Mounjaro, for example. We're the only ones that have it, and it has been surprising us at this beginning. It's not cannibalizing for now, the other competitors with GLP-1. It's just adding to the sales. So the calendar effect is true. It will happen. And knowing about it, we are trying to offset that by building sales to minimize the impact of that calendar. But yes, you are correct. Number two is regarding G&A. Of the 2.83 personnel expense with PPR is about 55% of the G&A. So effectively, in this -- along the personnel lines with the structural adjustments that we just made, we expect that portion becomes 0.20, 0.23 below what it was in the last few weeks. We also have the other portion of the G&A that can waiver. It is true what you said. The first quarter had a positive effect when it comes to the collective vacation. But on the other hand, the provision of labor suits that were coming from last year. But now that's been normalized. So every month, we'll have different types of effects. But what I can tell you is that when it comes to personnel, starting this quarter, we will have a decrease of about 0.20, and we need to make sure that about the rest of the G&A, we can be efficient as well. We can have positive or negative factors. What was the third question?

I just wanted to add to what you said, and he was talking about CMED and the influence in gross margin.

So since we had told the market before about that, CMED had a readjustment this year that is lower than previous years, and we knew that due to historic effects that when the CMED passes under the inflation, there is a natural decrease in the amount of discounts given to prices. We had the change of CMED on April 1. It is now 3.2%, 3.3% of readjustment. And now 1 month in, we see the price of places growing above that level because of a decrease of this discount that is given to medication.

I would like to now invite Mauricio Cepeda from Morgan Stanley to ask a question.

Raduan and Flavio. I have 2 questions. The first one is more about structure and demand. I understand that releases are being made year-on-year. So sometimes you have a confusion of comparison of COVID tests, repellents, et cetera. But if we take historic sequences, IQVIA data when we talk quarter-to-quarter, there seems to be a deceleration tendency when it comes to HPC and OTC. These are products that have very good margins. On the other hand, we have generic medications, and they are still very strong. I think that's something that does bring a good margin, but it has lower single profit. And we have brands that are growing strongly. But looking ahead, thinking about GLP-1, for example, now that pharmacies need to keep the prescriptions and can't refill them, structurally, what do you see in terms of demand? There seems to be a change in profile when it comes to the pharmaceutical industry and everything that comes with it. And now tied to this first question, I have another one, talking about commercial expenses. You had this pool selling expenses. But if you had pressures that were more structural, you wouldn't need to rethink them again, right? From the results that you published, I can see that health services and clients per store are decreasing. even though we have more staff. So perhaps it's about rethinking selling expenses.

Great question, Cepeda. Thank you very much. Now let me address the first one. Yes, if we take the last 2 quarters, the market data that we have, we see a demand and a burn that is decreasing -- I'm sorry, it's not decreasing. It is growing less than it was before. So if we take accrued data from IQVIA from [indiscernible] pharma, we see that the level of growth that is structural in the market of these 2 quarters were smaller than it was up till the third quarter last year. And this smaller growth is more concentrated in HPC and OTC. We can see that medications are going strong. So we don't want to be using this as a justification for a growth that is below what we expected. We didn't mention that a lot because sure, the market is growing. The market is still there. And if we accelerate our competitive differences, then we can recover the growth that we want to have at a level of 14%, as you mentioned. So yes, we are seeing that. I don't know if that is going to last for too long. I don't think that, that's going to happen because they are categories that are relatively basic. OTC and HPC are still basic need products like shampoos, soap, diapers. Those are day-to-day products and not luxury products. So we do expect that to normalize. When it comes to selling expenses, we're talking about the short-term care that we're taking. We've been very responsible in the short term to be the most efficient we can, but we have to be careful that the short-term pressure doesn't generate a problem for the future. We did adjust personnel, which was important to improve the experience to unburden our staff at some locations that were overloaded. And we understand that part of the losses have a small part that could be related to a leaner personnel in general, where our floors are less assisted because everyone is working at the counter. And that can sometimes facilitate robberies and shop lifting. We don't expect to go back when it comes to the personnel adjustments that we made. We made an investment, and we know that this investment is going to help us build the growth that we need to have for the next few months. And I just want to piggyback on that, talking about rebalancing now. You talked about generic medication. You used a very long word that I can't even reproduce, but it was about generic medication. So we need to remember that generic medication is something that if we replace a brand medicine for a generic, that adds pressure to the sale because the price point of generics are lower than brand. But in cash margins, we are making more money when we sell the same unit of generic that we do when we sell a brand medication. So there's no pressure in profitability when we go for the generic. So even though there is a balancing that might need to take place, it would still work in our favor. There is an important point here when it comes to HPC and OTC, like you mentioned and that Raduan said, which is that relative idea of it. When we think about our direct competition from the pharmaceutical market, but we also think about our small competitors that are still competitors, they depend on HPC and OTC more. We are competitive in that area, but our strength is in branded medication with over 50% of our sales. Raduan mentioned the IQVIA indicators are showing that, that market is growing at a slower pace than it used to and at a slower pace than medication. That means it added pressure to these players that have a more compromised profitability and then that closes doors more quickly. So their tenure is decreased for those pharmacies and those smaller players. So if that happens, we are the natural place where that demand is going to go to. We are the consolidation player that happens naturally. And about the last point you mentioned about the prescription retention for GLP-1. This is a law that is coming into effect at the beginning of June or July. So that could add pressure as well because when you buy something using a prescription, that complicates the process. But we understand that the product is in such high demand that the situation tends to balance itself out. We understand that there might be an anticipation of purchases because people want to buy it before this law comes into effect. So this anticipated sales volume can be a little bit swollen, but then at the second semester, this tends to flatten. And we understand as well that launching new products, as we mentioned with Mounjaro could maybe offset a pressure that might be there due to the necessity for a prescription. We don't see this as a huge headwind because other points will be kind of balancing out throughout the equation.

I would like to now give the floor to Luiz Guanais from BTG Pactual.

I have 2 questions. Number one, could you please talk about the discount dynamic of pharmaceutical retail? I know this was a driver we were talking about since last year with the anticipating of a lower CMED for this year, and it could be used to partially offset the lower increase of medications. So I wanted to know about this discount dynamic within retail. And then number two, talking about HPC, if you could please talk about the competitiveness of prices in some regions. As Flavio mentioned, we know that we have medium or independent players that depend more on that category could be a little bit more aggressive in certain regions. So could you just speak on that? What is this pricing dynamic looking like? And do you see a need for us to be more aggressive and try to leverage that?

Thank you for your questions, Guanais. I'm going to answer the first one. As Flavio mentioned, historically, in years where the CMED rate is lower than inflation, the competitors tend to give less discounts due to obvious reasons. They have to pay rental and wages at a certain rate. And if medications have a lower rate of increase since everybody has to pay the same costs, the reduction in discounts happens. One month after the CMED adjustment, we are still putting in place some one-off actions and keeping the old prices. But the indicators in the second round of survey about medications that we have now, we can see that the average price is above the 3.3%, 3.5% of CMED. It's closer to 4.5%. So in our latest survey, we can see that the competitors are now decreasing the discounts and bringing the prices closer to the inflation level. And now we just need to wait for the last 50 days or 60 days to end so that we can have a full picture. But things are now closer to the track record. We can see that on the numbers that we got from our survey. Now your second question about HPC. I mentioned this on other occasions. HPC's performance depends less on prices and discounts and much more on the promotions. Almost 50% of HPC sales comes from some sort of promotional campaign. We were just watching a video this weekend because we did a shop along tour with the customers to understand what they do when they are at the stores. And it's amazing to see the different profiles of customers. Some customers, when they go to a pharmacy, they start looking for the promotions before even looking for the products that they use regularly. So promotions have a major role in the HPC dynamic sales and we are now intensifying our promotional campaigns, but in a very accurate way. We are not using the same campaign across the board all around Brazil. We have very specific campaigns with a number of different tools, for example, massive campaigns for diapers, but we also have some customized tailor-made campaigns through specific coupons that we send to certain categories of customers. So there's a number of different things that we can do, and we are now taking one step further on this to be more competitive. We are ready to roll out a project specifically to analyze the return of promotional campaigns with advanced analytics to make sure that we are allocating the resources as best as possible to get the best results, managing the prices and personalizing the campaigns. So we are investing more on that and being more granular, trying to be as effective and accurate as possible to get the best result out of smaller investments.

The next question comes from Vinicius Strano with UBS.

I would like to talk a little bit more about HPC. If you could mention the main levers to boost your investments, especially when it comes to your own brands? And also, what do you think about the progress of e-commerce in HPC? And now I would like to know more about your stores. I believe that IRR is still high, but I would like to know more about the new stores.

Okay. Addressing your first question about HPC. Of course, one of our focuses is promotions, but I've already addressed that. But it's not just that. There are many other levers. We are reviewing the assortment that we need to have in the pharmacies. We do that continuously, of course, but now that we understand that HPC is not growing as much as it did before, we need to revisit our strategy with products and prices, but we are also reviewing the assortment in the brick-and-mortar stores on the digital channel and marketplaces as well. And even though we have limited space in the brick-and-mortar stores, we can adjust the assortment. And I just told you about how much I believe in the fact that changing the number of personnel and staff in the stores aimed at improving service at the stores. And when we have someone supporting the customer when they start the journey to help them find the right product and to show the most attractive prices, that increases conversion in HPC. So we have been investing on that. Obviously, we always try to keep the best stock for HPC products, especially when we have promotional campaigns. We want to make sure that our promotional investments won't be limited because of stock outs. So there are many things that we can do. And of course, on the digital channel, we are going to implement some improvements to improve the customers' journey for beauty products specifically. To buy diapers, you don't need that journey that is so advanced. But for other products, you need to know more details about the products and see the specs, the different features, for example, for skin care products, you need to provide more content to the customers on online channels. So we are focusing for sure on promotional campaigns, but it's not just that. There are many other actions and levers that we are addressing to make progress on HPC. And as you saw, our HPC performance is now getting closer to our prescription medication performance. And the financial performance at the stores is good. The IRR is above [ 20% ] and the sales in new stores are smaller than mature stores because, of course, we have already occupied the best spaces. And when we go to smaller towns or disadvantaged regions in larger cities with smaller demand, the average sales may go down. However, there's less cannibalization, rental is lower as well. So when you look the pharmacies, IRR and EBITDA, they are as healthy as the mature stores. But of course, sales are lower. But yes, they are healthy. And that is the reason why although I've been questioned about the interest rates and the cost of capital, we are still keeping the same pace of expansion because the return has been higher than the cost of capital. And we have the commitment of building our future. That's why we are keeping our guidance of opening 330 to 250 stores. [indiscernible], we are in a country that is growing in terms of medication demand by 7% or 6% or 7% in real terms, and that happens because the population is aging. That is not going to change no matter what happens in Brazil or the world with the economic scenario, that is not going to change. So we are not pursuing a quarterly target only. We are pursuing a moving target that will change for the next 30 years. So not expanding doesn't make sense, not investing on digital channel doesn't make sense. You specifically asked about e-commerce, right, and how that affects our result or the ramp-up of the new stores. E-commerce has been making the ramp-up of the new stores easier. E-commerce now accounts for 22% of our overall sales. But in some regions, e-commerce is getting closer to 30%. Of course, it really depends on how much the population uses digital channels. But we should remember that bringing customers to the digital channel means that we are bringing our own existing customers to the digital channels. And through the relationship that we create in the brick-and-mortar stores, we can bring those customers to the digital channels. And the engagement point is the physical world. That's where the customer will get to know the brand and then go digital. For HPC, thinking about HPC specifically, I believe that we have very clear strengths here. For example, trying on the products in the brick-and-mortar stores and also the partnership that we have with the suppliers. For example, anyone that works for L'Oreal around the world knows the success case that we have in our partnership between RD and L'Oréal. So that's the type of partnership that we want to create, especially when it comes to allowing customers to try on products in the brick-and-mortar stores. And of course, the digital channels are just as important. We can absorb 100% of our online demand, delivering the products in 1 hour. So I believe that we have a very good blend of physical and digital skills to keep on consolidating this market.

Now I'd like to turn it over to Danniela Eiger with XP.

I have 2 questions that are rolled into one, and they are about gross margin. When we look at the main offenders, the main detractors that you mentioned in your release, I believe many of them will continue hurting your results year-on-year. For example, the mix, although you said that the categories will normalize eventually, but HPC should underperform RX. So the mix will play against you continuously and the investments in promotional campaigns should continue considering your strategy of boosting sales and losses, of course, I believe that this is not going to go away overnight. And also the pre-high season periods that would also play against you when it comes to comparison between the different years. So how are you going to offset those effects? Is there any other action that you have not mentioned? And also, I would like to know what the margin for semaglutide is in comparison with the other Rx prescription medications. I imagine that the gross profit is lower considering how pricey it is. And connected to that, I can see that your digital growth is very strong and the penetration is at 22%. So I would like to know more about the channel mix. Is it contributing to the gross margin or not? So I would like to know your perspective about a target penetration level. I understand that there is a productivity issue, but I know that digital prices are usually more attractive. So it could be one of the levers that you can address especially when it comes to gross margin. So I would like to know your thoughts on that. Maybe you have to trade gross margin off if you are to bring higher EBITDA. So I would like to understand that dynamic a little bit more.

Thank you, Danniela. Well, I think your question brings most of the answers. Your view on this is pretty spot on. Yes, there is a mix effect in the short term. We can speed up HPC as much as we can, but there is a new mix situation. We know that the prescription medication share in the mix will grow even more. And we know that when it comes to margins, those margins are below the other medications because the cost or the price is usually BRL 1,600. So yes, there is some pressure that will continue to happen because of the mix effect. But on the other hand, it can help us dilute expenses. And as you said, and we mentioned before, with HPC, we will probably have more promotions in place, and we will have to offset that by being as surgical as possible when it comes to that pricing that we have to make. Think about where we can reduce discounts so that we can invest in other places without generating an impact. What's been standing out to us is that the digital is growing a lot going to 22%, even though we are approximating the level of discount between brick-and-mortar and online. We are reducing the discount level of online because we want to reduce that margin pressure because the value proposition as a whole for the digital improves so much, we think that we can reduce discounts and still see demand happening. So that suggests that we should follow on with reducing discounts. That's harder to do with medication. We see that with medication, we have the space to reduce the discounts. But if with HPC, it's a little bit different. As managers and leaders, we have to find those margin offsets knowing the effects that might be in place. So there are several internal compensations that we could do. We don't -- I don't want to go into them because they are very specific. I talked about going into advanced analytics for that, we have a distribution center that we are opening to increase the quality of our delivery services, and we have 14 distribution centers, right? It's not a simple thing for us vendors -- for our vendors to make deliveries to those distribution centers that are not all in Sao Paulo. We want to help our vendors to serve everything, and then we can wait for cargoes to become bigger and then we distribute everything. That gives us a logistical gain. But this is being opened now in the city. We opened one in Goiânia, but we have another one coming. We have a tax break that also is helping. We have other actions that are helping with our margin. But here, I just wanted to give you the assurance that we do recognize these pressures. And as leadership, we have to be better and go after the places where we can offset everything. I don't want to delve into each one of them because those are internal topics, and I know that our competitors are looking at the information we're giving here and now. So there are some things I would rather not talk about. And I just wanted to add something as well. When we talk about that margin pressure because of digital, this is there. It's always been there. Our digital 5 years ago represented 1% of sales, and now it's 22% of sales. If we were to get rid of that, our gross margin would be 1.5 points above what it is today, but margins would be different. Customers wouldn't be engaged. Clients want to have digital and brick-and-mortar and customers are king. So we have to have that for them. Looking forward, the relative pressure should be smaller than the absolute pressure we have felt while we were putting this activity together.

I give now the floor to Leandro Bastos from Citi.

I have 2 questions. The first one is about this strategy of price -- investment in pricing. How much is this fully translated into our first quarter? Or should this be a leverage that is going to accelerate in the future to bring in sales and the gains in G&A? I wanted to understand where we are in this cycle. So this is my first question. And a second theme now, could you talk about 4Bio? I know they had a deceleration year of revenue in this quarter. You had mentioned this in the previous quarter. So what do you see in terms of the market when it comes to the strategy of this part of the business?

Thank you very much, Leandro. It's a little bit hard to give you an exact answer. We did make an investment that is within that margin. There is a part of the incremental investment that has been done. And we know that any investment that we make in prices is not going to show results overnight. We have to be careful to not become desperate and then start to increase those investments because then we end up destroying the value. So we did come to a level we can see where response is happening. We can see where more investments would be necessary, places where we can offset that. And if we feel it's necessary in the next few months and then understand that we need to invest more, then we will do that to be able to recompose the growth level that we need. But I can't pinpoint an exact number and say that the guidance that we have is going to hold true for the whole year. How things are going to unfold in the next few months is what is going to give us those answers when it comes to the need for more investments. When we're trying to recompose the level at the -- things at the level that we want, we can then think about containing expenses. About 4Bio, this is something else that we talked about in the last meeting. We were asking the CEO of 4Bio not to seek growth at any cost and to, in fact, slowed down the pace of growth to prioritize margins, and it is what happened this quarter. So there is a growth that is approximate to the growth that we had for Corp. And there was this margin evolution versus the first quarter. So that's why during this quarter, you didn't even hear us talk about 4Bio because in the mix effect, it didn't have a huge impact. So they are very well aligned with what we asked with the guidelines that we gave, and they will move forward with the same guidelines and will not prioritize disproportionate growth. Just to complement this, I think thinking about data from the market, we're looking more at the impact of margin and price due to discounts and whatever else is needed, which is the pricing investments that Leandro talked about. But it's about the how. The how is harder to materialize. How this pricing is going to be made is about how we want to offer things to our clients. It's about marketing relationships, many other things. Nowadays, we have the experience at a store, at the pharmacies that is sophisticated. The way that we promote prices at pharmacies is also sophisticated. So having a pricing image that is more aggressive that is bringing this to our pharmacies is part of this equation. So it doesn't mean necessarily that it is a higher investment, but it is about a higher perception when it comes to prices that are there and are available to the customers. That's a part -- an important part of the equation.

I give the floor now to Rodrigo Gastim from Itaú BBA.

Flavio, I have 2 questions. Number one, going back to the gross margins, you talked about losses, et cetera. But I wanted to isolate 2 impacts and try to quantify them a little bit better. I think in the last call, you mentioned the impact of mix in the gross margin in the fourth quarter was about 15, 20 bps of the margin. I just wanted to understand if in this first quarter, you're seeing something similar based on our math, did we get to the same place? I wanted to quantify this mix impact and understand if in the next quarters, you're confident that, that's going to decrease given all the growth per category. And how much is coming from this famous pricing investment. That's something you mentioned on the release. But could you give us maybe a figure of how much of that gross margin was a pricing investment? And number two is a follow-up of what the G&A adjustment. I wanted to understand this a little bit better. That 20, 25 bps that you mentioned when it comes to efficiency gain in personnel, is that gross of the potential investment of pricing that you mentioned? I just wanted to make sure I understood you correctly. You have a buffer of savings of G&A and then part of that will be invested in gross margin, and that's going to reflect on the EBITDA. I want to make sure I understand everything.

Thank you very much, Gastim. I'm always hesitant to give answers that might be understood as guidance. So the first part of the mix, yes, you have the figures, the math that you did is not far off because it's something that -- it's math that we can do. Now when it comes to pricing investments, I can't tell you that because except for the 0.3 loss, the mix effect, what we have left is a mixture of prices, other factors that we have when it comes to gains, losses, taxes, reversions. There's this kind of mix of everything. What's important is for you to know that we have made an investment in pricing, which is part of what helped us recover one step-up of HPC, where we are making surgical investments as well and medication too. And we are going to keep monitoring to make sure that we're having the response we want. And if necessary, we will invest more to generate that dilution. Now about the second part, yes, the saving that we had in G&A that we project to have from now on is about 0.20, 0.25 gross. That doesn't mean we want to take that directly and translate that into the EBITDA. We understand that a part of that created value should be reinvested in as a value proposition for clients, for customers, for personnel. It doesn't mean that 100% of that will be redirected there, but we want to reinforce our value proposition experience proposition for the long term. And as well for the investments that we're making, the cash flow that we are seeking, it's more than an adjustment that was made in April. There is a very important agenda of how to seek efficiency wherever we can to use those resources to strengthen our core, our value proposition, our competitiveness and recognize that we have pharmaceutical competitors that are doing their homework. So that makes us want to be better. We recognize the digital players that are around us as well. So yes, it's gross. I just wanted to reinforce that idea of how surgical we want to be and how surgical we can be nowadays that wasn't true in the past. We can go through category, through product, by product, by customer, by region. This is a numerical sophistication that we have now. So offering good prices is good. And at the same time, we can save within our P&L.

And now I would like to invite Irma Sgarz from Goldman Sachs.

Okay. I know that we're almost out of time. So I just have one quick question. With the dermatological products that you mentioned in your presentation, that's behind the plexiglass and you needed to have a specific measurement. I don't know in how many stores that's happening, but I understand that losing inventory is a problem. In the United States, this is a topic that has been widely discussed, right? It might impact sales as well to have products you can't simply reach. Have you been able to read the effects that this has had and how we reach a balance between offsetting shop lifting and then making the products available. Of course, everything has to go into the calculations.

Excellent question. Of course, we have to be very careful. We can't make loss containment measurements hurt our sales when we need to be selling HPC. So we do have that very well mapped. Where we have the most losses. I know it's happening more in the Southeast and more specifically in some cities and more specifically at some stores. So there are many actions that we're taking to contain losses, and they are being stronger in places that require that, and we're not extrapolating that to places where this is not required. Even though we have many measurements, it is different than what happens in the U.S. where things are locked. We're just talking about a sheet of acrylic of plexiglass that they can move themselves. They don't need to ask anyone for the key. It doesn't look like much, but the simple fact that there is a physical barrier where they need to lift that up with one hand to pick up the product with another makes it harder for someone to simply kind of nudge a product into their bag or whatever. It's more visible. So -- this is different than what you see in the U.S. and we are being careful when it comes to offsetting losses without impacting sales themselves. These actions have been implemented recently starting at the end of last year. In these pharmacies that have these contention actions, we are looking at our inventory. And it's hard because some losses didn't really happen during that period. It could have happened before. But before we had -- because we hadn't taken inventory, we didn't know that, that product had been stolen. So to have the correct baseline, we would need to take inventory before actions, then you use the acrylic sheet and see the results of that. We can't really be accurate about those numbers, but we have confidence in the actions that we're taking. And part of what is going to subsidize the investments that we need to make on margins is thinking about losses. We can't have a company that has an execution historic like we do and go to sleep easily thinking we have a loss of 30 bps above what is historically acceptable. We need to use our resources for competitiveness and take every action that you can to normalize things.

Next question comes from Ruben Couto with Santander.

I would like to know more about your loyal customers and the performance with loyal customers over the past quarters. Usually, they account for 70% of the retail sales. And in your release, you told us a little bit about the initiatives to reactivate those customers. So I would like to know more about their habits, their shopping habits. Are they keeping the same frequency, the same basket mix than the other customers that account for the other 30% of your sales. I would just like to have some more color on this to see if something different happened over the past 2 quarters.

That's a great question. We are making progress on loyal customers, about 7 million of them, which accounts for 70% of the sales. They have their -- the same average spending. The behavior is changing because the frequency is increasing, but the ticket goes down. And as they go digital, as they find out about the convenience of getting the product delivered to them in less than 1 hour with a cheap shipping cost, we can see that the customers are coming back more frequently but with a lower ticket. But the average spending is growing in line with the growth of the company as a whole. Now there's a very small signal that's very specific, and this is not news to you. We can see smaller spending with HPC than in medications. This is not new to you. These customers account for 70% of our sales. And if medication is growing more than HPC, then it means that the loyal customers are spending on average more on medication than HPC products. That's an obvious result of that. So you can get that from the numbers. And we know which categories are slowing down, and we have the CRM actions in place to address those customers more specifically to bring the share of wallet of those customers to us, providing the right incentives for that. So this is the only yellow light, if you will. We need to make sure that the loyal customers will keep their HPC spending at the same level as the medication spending. And more importantly, we are increasing our customer base. We are growing by 3% year-on-year. So although we have about 50 million customers, we are still increasing that customer base. And going back to a question that was asked earlier about the number of services. Indeed, we have a decrease in the number of services or tickets, but this is just the effect of the calendar effect since we had fewer days in the year, that will lead, of course, to a smaller number of tickets.

And now the last question from Robert Ford from Bank of America.

What's your perspective about the growth in ads and publicity for your stores? And about services, do you have any actions geared towards specifically services?

I'm going to address your question about services first, and then Flavio will talk about publicity and advertising. Well, services, some of them give us some profitability. Those specific services create value, for example, with vaccines, not only flu shots, but HPV as well. Those services are growing in demand year-on-year, and that creates profitability in and of itself. The other services, well, before that, the tests, dengue fever tests and COVID tests, they are profitable as well. Now for other more simple tests or services, they are not that profitable. But indeed, they create a stronger bond between the customers and the pharmacies. After they use those services, they start coming back to the stores more frequently. Although they are not that profitable, we can see some opportunities here because the experience is high quality and because we can provide a lot of value with those services. And we can gradually increase prices. The prices were very low. And this year, we adjusted the prices, and we know that it is a good value for money for customers when they pay for those services, considering the guidance that they receive from our personnel. And part of those services will give us profitability and other services will just improve the lifetime value. And considering our 3,300 pharmacies, about 2,500 of them have their health hubs, the clinics that are there to provide those health services. And we have about 400 vaccination hubs in our base. So those services are not provided just because we want to invest in marketing. No, we are also investing in our relationship with the customers. When we send them WhatsApp messages and we have vaccination campaigns, we had great campaigns as of late because of the flu. So that is more related to improving our engagement with customers than just spending with marketing actions. And in this specific quarter, we provided over 2 million services over the course of the 90 days. It is not sufficient to move the needle in terms of EBITDA and total sales, but it is a thriving business.

And as a follow-up question, what's your current perspective about having a marketplace and having a more aggressive value proposition?

Well, the marketplace in our strategy, Bob, we have about 300,000 products listed on marketplace and about 2,000 suppliers. Of course, we are not just a marketplace platform. We are a brick-and-mortar player, and we complement our assortment with those third-party products. That's how we use the marketplace. We have a stable platform, and now we are working on developing our relationship with suppliers further and system functionalities as well. But it is not sufficient to move the needle in terms of overall sales, but we are working on the things that are behind that so that we can continue increasing this part of our business.

That concludes the Q&A session for today. And now I would like to turn it over to the management of the company for their closing remarks.

Well, first of all, thank you very much for your questions. This earnings call was incredible with a wealth of information about our perspectives on our business. And again, although we had one-off effects, we are still below the expected levels. And we believe that we have the right to be on a superior level in terms of growth and gross margin so that we can get the profitability that we want. We need to continue working hard with responsibility and discipline. We can't be too anxious and focus only on the short-term results. And of course, the opposite holds true as well. We need to take care of our future, but also keep an eye on our present. We have strong assets. We have strong action plans that are very specific and solid. They are being implemented right now so that we can offset the pressures on margins and so that we can bring our EBITDA margin to normal levels and build a stronger company that can serve our customers and employees. And I want -- just like my predecessors, I want to keep the reputation of being as clear and transparent as possible, give you as much information as possible. And you should have clarity on this. We always talk about the past, and we always talk about the assets that we have built, not because we want to dwell in the past. No, that's not what we are trying to do here. And of course, we don't want to be comfortable either. If I wanted to be comfortable, I wouldn't have made the adjustments that I did 90 days after taking office. So I don't want you to believe that I want to keep things as they are in a comfortable situation. No, I just want to remind you that we have solid assets that we can build on. We respect our competitors. We try to beat them. We have to be better every single day. And of course, we need to respect our own people and our customers. We need to deliver an organization that is better and better every single day. And we need to do that for our employees, our customers and shareholders. Even if we didn't have any competitors, we would still try and be better every single day. This is my commitment to you. This is the commitment of the people who work with me. We don't want to dwell in the past. Of course, we need to look at the past to remind ourselves of our essence and what brought us here. But of course, we need to be humble and build a better company for the future with the same philosophy of the very first day. Regardless of what we did in the past, we need to be here with the commitment of doing better for the future. And in the next quarter, I hope to see you again speaking as transparently as I did today. And I want to bring numbers that are more normal. And I want, of course, to come back here proud of what we did. Thank you so much. See you next time.

Thank you very much for joining us today. RD Saude's conference call is now over. Thank you very much, and have a good one. [Statements in English on this transcript were spoken by an interpreter present on the live call.]