Raia Drogasil (B3:RADL3) Q3 2026 Earnings Call

0:00 Forward-looking statements do not guarantee performance. They involve risks, uncertainties, and assumptions, as they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that overall economic conditions, the industry's conditions, and other operating factors may affect the company's future results. and lead to results that differ materially from those expressed in such forward-looking statements. Today with us are Mr. Renato Raduan, CEO, and Mr. Flavio Correa, Head of Investor Relations and Corporate Affairs.

0:46 I'd like to turn the conference over now to Mr. Raduan. Please go ahead, sir. Hello, good morning, everybody. It is a pleasure to join you this morning to talk about RD Saud's third quarter 2026 earnings. It is a pleasure for us to be here, talk about our numbers, and answer your questions. Good morning, Flavio. We will go over the results very briefly. We are happy because yesterday we released the press release, the results released earlier. I'm sure that you had time to take a look at the results and interpret them, but now we have the chance to talk about them directly. I'll try to be brief in the presentation to leave more time for Q&A, but before I start, I'd like to thank all of you in the Excel ranking voting about the market professionals.

1:44 You recognized us. and our investor relations team and the whole company. So thank you very much for that. It was an honor for us to be voted by you in such significant numbers. And I'd like to underscore our commitment to bringing results and facts with maximum transparency and honesty to help you see reality in the best way possible, trying to clear up the fog So I'd like to confirm our commitment to transparency and honesty in our company. That's how we deal with you and also our board, our controlling shareholders, executives, and everyone, really.

2:32 We want trust and credibility in everything that we say. And again, thank you very much. I didn't even know that award existed, to be honest. Thank you so much for that incredible recognition. Now, let me give you an overview of the results. This quarter was very strong. It was a very strong quarter, as you usually put it. Let me show you the operational results and also some financial highlights. We finished the period with 3,770 stores in operation. We are about to reach the 4,000 stores. We'll do it in less than 12 months. We opened 92 stores and closed 9.

3:19 We opened 333 stores in the last 12 months, getting near to the guidance of 330 to 350 openings. And I can tell you that... We are going to be closer to the upper range of the guidance, closer to 350 than 330. So it was a very healthy year in terms of expansion. We are aiming at the upper range of the guidance that we informed you about a few months ago. We had 53 million active customers in the last 12 months, about 25% of the Brazilian population. We are very proud of that. and we had almost 120 million transactions in the quarter with an NPS of 91. The customers are telling us that our performance is top notch. So we need to be proud of the number of transactions but also the quality of those tickets.

4:23 As you can see, the revenue was very solid. The base from last year was already very high, so we can see that GLP-1 drugs will start slowing down, but still the growth was at about 16%, and a nominal increase of 1.8 billion quarter-on-quarter. In mature stores, we had an increase of 8.4%, with 5.6 points above the C-MEDs, Price Inflation Adjustment Index. We grew by 110 bps in market share. In the last quarter, it was 18% market share. Now it's 19.1.

5:13 As I told you in the previous call, we had grown by 170 bps, and that was very much related to GLP-1 drugs. and here we are still growing our market share on GLP-1 but that gain will be diluted as the growth in that segment decreases but this is very much in line with what I told you in our last call. On digital, 3.8 billion with a retail penetration increase of over 200 bps. There is a quarterly effect that Marcello De Zagottis Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho with a very strong growth of 31% and a margin of 4.2%

6:44 in line with last quarter and our adjusted net income for $139 million with a margin of 3.3% and a growth of 9.2%. If we exclude 4Bio from last year and this year in relation to the financial revenues coming from the disposal of 4Bio, The growth would have been about 20% in net income, excluding for bio. So it's a very strong number. And cash generation and leverage came to $160 million in free cash flow. Fabio will give you more color on that later. And our leverage is getting more stable with a net debt over a beta ratio of 0.8 times.

7:33 As I told you, we grew by 16%. There's a double effect here. We had the Stakes Loyalty Program effect that is now consolidated. So we have that positive effect of 0.4 percentage points, but we also have a calendar effect of minus 0.3. So one really upset the other. And if we exclude that, we can see that we grew by 16%. It could have been better if seasonality had been more favorable. You can see that most of the growth comes from our branded medications, and then you can see that in the previous quarter it was about 9 to 10, and starting in the last quarter, last year, the base came to 12% in generics, and that's where we are right now, 12.5%.

8:31 Most of the growth comes from the branded Rx medications and HPC grew by 13.4% and OTC grew less because we had a winter seasonality that was not so strong as last year. So anti-flu, anti-cold medications related to the flu season, they were not so strong. And even generics, Excluding antibiotics, they underperformed our expectations. If it weren't for the seasonality effect, OTC and generics would have been in line with the growth that we had in HPC. And even HPC could have been better. September was an exceptionally rainy month for us, so we didn't have the winter season that we expected, and also, The summer season, the beginning of summer season, was weak in terms of the sales of sunscreens and the like because it was very rainy.

9:42 Our inventory was robust, but it didn't sell that well as we expected. But you can see that HPC still grew by 13.4%, although we had those seasonality negative effects. and excluding those one-off effects, the other categories are performing well too. We grew by 16%, as I said, and in mature stores we grew by 8.4%. The growth is comfortably above the inflation index and also the CMAT index. And for the fourth quarter in a row, we grew by over 100 bits.

10:28 and we grew across the board, across all regions to 110 bibs in Sao Paulo and the Southeast 110 bibs in the Midwest and the South by 50 bibs and the South did not expand so much in terms of new stores so we should bear that in mind and the Southeast and the Northeast, the North are growing as well. and the Northeast will probably be the third largest region for us in terms of market share. We expect that to happen soon. So you can see that the results, the top line results were very solid. Now I'll turn it over to Flavio and I'll be back for Q&A.

11:17 Hello, good morning again. Now let's take a look. Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho Starting in the third quarter, we are bringing those efforts to our brick and mortar stores, the same type of offer. So the customers that go to the stores, they can buy the medications there, and that makes a huge difference. We are removing part of that overhang that we had on digital channels for GLP-1 drugs, and we are bringing that to our stores.

12:17 If we exclude that effect, This quarter and the previous quarter as well, we can see that the digital performance was very good. The quality of the digital sales is still very high, best in class, with 83% of digital sales taking place on our app. And then we have the other channels. 9% our website, 3% other websites or apps. So the quality proposition is great with an NPS of 80, which is great. And if we look back, we can see that the digital sales over the last 12 months reached almost 15 billion.

13:13 That number, in and of itself, is at the same level as other major chains that we have here in Brazil. So it's an incredible number, really. Now, let's talk about our gross profit. Our margin came to 28.8%, 10 bps of growth year on year. And those 10 bps come from the integration of the sticks and that number will add to our gross profit. If we exclude that effect, our gross profit is very much in line with last year.

14:00 It's very healthy, with a nominal growth of 16.5% year-on-year, reaching $3.8 billion. in comparison with $3,260,000,000. And the net present value had an effect that put pressure on our gross profit, but we also had the growth of GLP-1 growing year on year and quarter on quarter. So we were able to offset those one-off situations that were putting pressure on our gross margin. Now, selling expenses.

14:48 Selling expenses came to 18.5% as a percentage of the gross revenue. We also had the employee value proposition investments made in the fourth quarter of 2025, and those investments put a lot of pressure on our results at that time, a pressure of 50 bits. That's why there's such a big difference between the different quarters. We still can see some of that effect in the third quarter of 2026, but they were absorbed by the operational leverage, the fact that our mature stores are growing by 8.4% per year. That incredible growth Offset those expenses, although the effect was still a little bit negative in the last mile logistics costs and also security.

15:54 Now our G&A expenses, they came to 2.6% as a percentage of our gross revenues. It's the same number that we had in 3Q25, and we have the STIX loyalty program effect here as well. It accounts for about 20 BIPs in this number. We can see that operational deleveraging movement here, going from 2.6 to 2.4%, but now because of STIX, that number went up to 2.6%. With that, our EBITDA margin came to 7.8% in comparison with 7.9% year-on-year.

16:47 And that can be explained by all of the points that I already mentioned. And still, our EBITDA came to over $1 billion this quarter, which is an extremely solid result. Now, our cash cycle... We can see that the cycle is at 54.2 days, 2.4 days better than last year, and that comes from basically two effects. First, the supplier's term of delivery, and also the inventory's. Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho and the inventories that we accumulated during the winter season, they sell very fast, so we will be able to sell those products over the coming months.

18:09 And now we see the financial expenses. It drops dramatically from 1.9 Erika Petri Erika Petri Erika Petri This is the financial result. And now let's look at the EBT.

18:55 We get almost 150 million in this quarter. It's growing strong, 50 bits year on year. It's a 31% nominal growth. This is a solid recurring result that we deliver to the market. When we look at the income tax, He grows slightly and is now at 8% of sales, 8% of revenue. It's basically because the IOE, the interest on equity, had a lower impact, but it's natural to the business. So we get to the end of the quarter with a 19.8% share, slightly higher than what we had last year.

19:47 I think that's it. The net income is $239 million in the quarter, with a 3.3% share of our gross revenue. Our comparison base was 3.5% in the third quarter of 2025. That had the full bio impact as well. There was a particularly favorable impact. Thank you for joining us. We have a 10-bit increase year-on-year, excluding the poor buyer effect.

20:56 The cash flow. We have $56.8 million in the quarter. I think the result that most caught the eye of the sales side has to do with our cash flow. The explanation was already given around the inventory, so the ready-to-sell inventory in a winter that was less cold and also the ready-to-sell inventory to be sold in summer. So this is part of our normal flow. This is not structurally different. It's just a point where we're Taking the measures in the half of the year, in the second half of the year.

21:51 We go from 1.1 to 0.8 times EBITDA, quarter on quarter, pardon me, year on year. And we also have the impacts of the four-bile sales. This is something that we can take into account and see as a very healthy result of the company. And just one last point to wrap up. I will talk a little bit about this slide and Raduan will also say a few words about it. Considering the level of uncertainty there is in the market, considering the political picture, I think we should step away from this fire and take a look at it from a broader perspective. So RD is a company that navigates A structurally strong market, the pharmaceutical market in Brazil.

22:47 The CAGR of the market has been 13% of the year, not mentioning R&D, but it's been growing this level from the start of this century. We are a thriving company and a thriving market. We're a solid company and a thriving market. We've been growing here at 0.1%, 1.1 points in market share year on year. It's 50 bits that we have had since we had the merger. And with the NPS, with our solidity, with our expansion number of factors, also having more digital client experience or customer experience. So all of that has had a positive impact for us.

23:35 And this has caused us to have an organic growth that is very solid, 16% growth year on year. An important point to mention is that if we look at the last 12 months sales, we surpassed the 50 billion in sales for the very first time. That's a very relevant number, a very satisfactory number. Very satisfying. and growing the profitability even faster than we're growing our revenue. So our EBITDA is growing about 20% a year and when we look at all of the new seeds that we're laying all over the country with our expansion, this expansion can grow or contribute in 25% IRR in all those years. So whenever we So when you seed, there is a profitability that is growing.

24:36 So that's very positive. We do not depend on one single channel, one single category. We have a lot of diversity in our portfolio. We have a best-in-class execution. And this gives the Base for a number of situations in the pharmaceutical market, so being more digital, and the GLP-1, the vaccine initiative. Any new trend in the market is something that we are able to capture almost twice as much the market share we normally have. So normally we have 20% market share and we have 30% to 40%. Whenever we see a new market, an innovative market opening up.

25:34 And to wrap up, we still have a company that is reducing its leverage, reducing the weight of our debt and the cash contribution we can have. In the course of time. Would you like to make any other comments? I'll make my last comments in the final remarks. Let's open up for the Q&A. Thank you, Flavio. Thank you, Raduan. Let's now start our Q&A session. The first question comes from Luis Guanais from BTG Paxual. Good morning, Raduan and Flavio. I've got two questions, actually. Can you talk a little bit more about the GLP-1?

26:23 There is some stabilization here in terms of sales penetration. How has the generic been behaving? What is the difference in terms of consumers? Is there any overlap considering semaglutide and any of the non-generic and the generic products? Did you hear my question? Yeah, please go ahead. So the capital structure, my second question has to do with that and capital allocation. In the third quarter, we see a greater consumption of working capital, still generating cash, still reducing leverage.

27:15 What can we expect in terms of capital allocation in the next 12 to 24 months? Thank you very much for your questions. I'll detail out the first answer a bit more because I think other analysts will have their questions. So gel purine has been at about 12% and let's break it down into two worlds. We have semaglutide and that world, that scenario is very stable. 3.4 for two-thirds manjaro. There has been an increasing volume in semaglutide that has been offsetting the impact. We did not have unlimited access for all of the pharmacies.

28:14 We expect Now to have more product availability in the next quarter. We understand that maybe the average price may be lower than the volume uplift. We did the recent analysis for generic and similar products and almost two-thirds are new customers. They had never bought this type of product with us so these are new customers in the market. Maybe they were our customers already, but they were not buying GALP1, or they were not our customers at all. So that third of the customers is migration, also semaglutide, to similar products. That was a very small migration from trisepatite and Monjaro.

29:08 For now, we see stability there, 3.4%. Thank you very much. So there was a peak, and then it went back down. So combining all of that, we continue on the 12% level.

29:59 We believe that next year there should be an increase in penetration, be it due to more availability, more competition in semaglutide, With unlimited inventory levels, be it because of some oral medications that should be available at the end of the first half of next year. So we have an optimistic perspective when it comes to the increase in penetration next year. So I try to flesh out the answer as much as possible. Because many of the analysts here probably have questions around the summary diet. As for the second question. In the last quarter, we normally improve the cash cycle even further. There was some spot-on impact, but we should be able to reduce leverage even further. We're revisiting our guidance around how fast our expansion or how much faster expansion can get.

31:06 Our concept pharmacy has surpassed our initial expectations. Of course we had high expectations but it still surpassed them. And we are going to accelerate and convert some pharmacies. This also consumes some of the cash. We have to continue to invest in logistics and infrastructure so that we continue to have the lowest rupture levels that we have ever had. So part of the cash is Thank you very much. Thank you. As retail has been in Brazil, we have a very solid company that has been generating more and more cash. So it's good to know that we can really count on more cash to invest in what we want. We will probably give you more color around that on our investor day at the start of December.

32:23 As for GLP-1, and we have been talking about this for a while, the new These new players in the market will encourage competition and this competition will increase our profitability in this category. So we see some light being shed there. So these are eminent proposals. We are probably going to see this growth in the course of time as these new players come in. as business products come into the system. Thank you very much.

33:12 Vinicius Strano from UBS. You may ask your question. Hello, Raduan and Flavio. I'd like to ask a question around your gains in the commercial settings and how you've been seeing The commercial relationship with GLP-1 customers. And you talked about the inventory effect, the impact in the third quarter regarding the weather, but as you prepare for Friday, what do you expect here for the end of the year as well?

34:01 Thank you for your question. The gross margin is very robust and it doesn't only come from negotiations with the customer. It has to do with very accurate pricing analysis and negotiations. It also has to do with having a strong partnership with the industry. We have almost 20% of the market share, but in some specific products we have up to 40% of the market share. So we need to use this bargaining power. to negotiate terms that are favorable within this chain. Other factors have to do with managing losses.

34:46 We've been managing our inventories better. We have the lowest inventory waste in our history. So this Robust and stable gross margin doesn't only arise from good negotiations with the customer but from these other side elements that combine to a very substantial impact. As I already said, we have worked on a project with a consultant. They've been doing a fantastic job with the commercial team. We're revisiting our practices and methodologies A category, Bryce saying, negotiation management.

35:36 We've been using AI and data trying and being as scientific as possible. So we're very optimistic, looking forward with Bryce's competitiveness on the one side and margin protection on the other. There are several initiatives that make us comfortable and confident that we'll have good news in the future. And so the inventory, we're also optimistic about Black Friday. Black Friday was strong last year. It was the best Black Friday we've ever had. And we learned a lot from the Black Friday previous experiences, what has worked and what hasn't. So we're making substantial investment in inventory and commercial investments as well.

36:29 And on the other side, we're also managing inventory as accurately and scientifically as we can. The snapshot shows the cash cycle as slightly less favorable. That is not keeping us awake at night. We are really comfortable when it comes to the inventory management. We have one leader for inventory and commercial departments we have a new executive there also helping us see new opportunities and helping us make progress there so structurally speaking we're very comfortable with these improvements on inventory and with the cash cycle Well, Raduan already mentioned the inventory, but about the cash cycle, there's one specific point that we mentioned, and that was a very important factor to our results, the COGS return, right, the COGS rebate.

37:46 This will continue to happen for a few months. There are some payments that will be recovered Next year still. And this is about the state of Sao Paulo. There are other states that are analyzing this proposal, so we may have good news coming from the other states in the categories that we sell in. But for now, it's just an expectation. It's not something that we are accounting for in the business yet. Thank you. Maurizio Cepeda from Morgan Stanley is up next. Please go ahead. Hello, Raduan and Flavio. Good morning. Thank you for taking my questions.

38:32 I have two. The first one is about the digital value proposition. You said that you brought GLP-1 to the brick-and-mortar stores with the same strategy that you had on digital value. and the customers preferred to go to the stores and buy there. Does that make you rethink the digital value proposition in terms of everything that you build on the digital channels? Have you reconsidered the implications of bringing the customers back to the brick-and-mortar stores? Doesn't that have an impact on security expenses, for example?

39:20 But maybe that can also offset the less mile logistics costs that have gone up. If you can talk more about the digital strategy, that would be great. And the second question is about your working capital. Now with uncertainty around interest rates, how are you going to negotiate with suppliers? It seems that the suppliers are a very important part of the working capital because of supplier financing. What should we expect going forward? Is it going to be sustainable? And I imagine JLP1 drugs have an influence on that because the inventory turn is better and you have to sell.

40:05 Maybe you can pay installments. What is sustainable in terms of working capital financing right now? Thank you, Supeta. I'm going to address your first question. That's a very good thinking process, but it's very hard to extrapolate the GLP-1 situation to other categories. The price difference between brick-and-mortar prices and digital prices was 100 Brazilian reals. It's a lot. That's why the GLP-1 penetration in digital channels Thank you very much. and talk to the pharmacist and the pharmacist would tell them that it would be cheaper for them to buy on the app. So many of them would go to the store anyway. It's a very specific situation. I don't think we can extrapolate that experience to the entire digital channel value proposition, which is still very strong.

41:29 If you exclude that, the digital penetration is still about 25%. The price difference is Thank you very much. Bringing the prices at the stores closer to the digital prices, and still the penetration has not dropped on the digital channels, with the exception of JLP1.

42:15 So we still believe that the value proposition is very strong for digital channels. And to have another STU with a 75% penetration in digital channels, that was a one-off situation there. So we will continue to strengthen the digital channels. Still about the digital strategy, we should remember that we have 53 million customers. It's one-fourth of the Brazilian population, and we are adding 2.5 million customers every year. But only a fraction of that customer base buy online. Those are digital people.

43:00 But many of them are not buying online. They are happy with their brick-and-mortar experience, and we are creating a differentiated experience on the digital side as well to bring more and more customers. The digital customers, the regulars, usually spend 30% more per year than those customers that are not Thank you very much. have been a focus of ours. João and his team have been working on a number of initiatives to make sure that we are going to get better and better results with more quality. Today, the inventory is structurally smaller than last year, but there was an inventory disruption that was a lot better than last year, so that shows that we are more efficient than we used to be.

44:27 and suppliers is one area where we still have to capture more opportunities and things tend to improve. We don't intend to go back on that line. And when it comes to payment terms, payment conditions, you know, that line is... Thank you. Now, Joseph Giordano is up next with JP Morgan. Over to you. Thank you. Hello, thank you very much for taking my questions.

45:22 I still would like to talk about working capital. When we look at your past credit liabilities, we can see that the company is really a safe haven for many of your suppliers. If we think about the long tail, What's your perspective about opportunistic buying opportunities since we are probably going to have more uncertainties around credit? And also, related to that, do you think that competition, regional competition, is slowing down? For example, if the local players need...

46:09 Better Payment Terms from Suppliers. Maybe that can hurt the competition and not you. Another question is about the labor reform. If you could share with us some more details about that, if there's any estimate about any impact that we might have and that we have to reflect on our analysis, that would be great. And also the tax reform. The PIS co-fins tax credits that used to exist in the past don't anymore. Is any impact to be expected for 2027? Thank you very much, Joe. I'm going to answer the first two questions. Well, first, it's hard to say. Of course, the interest rates are at 13.75, so...

47:02 It is an advantage for us to buy more at once, but it all depends on the numbers and the conditions. We have to do the math and see if it's worth anticipating our buys. And we are trying to be as scientific as possible in our analyses. As I mentioned, we have a project with consultants. to analyze our profitability in each supplier. And we're including the costs related to losses, logistics, all those hidden costs. We are trying to bring them to light to have more clarity about our situations with each supplier. So, yeah, I think that we can have some favorable conditions that we can take advantage of and buy more and bring forward some of our purchases to avoid interest rate impact. Now as for the labor reform, we are ready for the necessary adjustments.

48:12 As you know, we already had a five-day work week. Now we have to go from 42 to 40 hours, 40 work hours per week and that should happen in the next month. We know that, well, let me talk about the pharmacies first. There's a number of pharmacies that work around the clock, almost 700, and we have pharmacist managers, and we won't have to change a thing in those stores. Now, the other stores that are not open 24-7, maybe what we have to do is to shorten the work hours by 20 minutes. So they would have to open later in the morning or close earlier and the impact wouldn't be that great because early in the morning and late at night the flow of customers is not that big and in some pharmacies we close on Sundays and now we will have to close on Saturdays as well or add more staff. It's a A scenario that deserves deep analysis and we are going to make the necessary adjustments.

49:34 And the work hours don't really have that much to do with the opening hours, but really the throughput. We will lose two hours of work every week and we need to adjust the processes so we don't have to add more people. and for the customer service department, I don't think we are going to need any adjustments. We are not going to have a one-size-fits-all solution. We have to analyze each category of pharmacy and minimize the impact on our operations and also on our customers. Now, Flavio, over to you to talk about the tax reform. Well, It's a weird situation, really. There's a theory, a world of theory, and a practical world.

50:27 In theory, the tax reform shouldn't impact our results. Although it is very difficult to implement, we shouldn't expect, theoretically, any impact. Our performance should remain the same despite those changes, but There are many things to be defined yet. And in practical terms, things can look a lot different. We signed two letters together with Abra Pharma and IDG in relation to an understanding that it would be healthy to delay the implementation of some new reform act. Today, we have a system plugged into the tax system of Brazil for banks, suppliers, ourselves, the entire tax operation.

51:33 We have also an environment that is not performing as much as it should considering our operation flow. So we can... to the functionality of many features but not all, especially at a large scale such as the case of our company. There are many things to be defined still in the tax reform. Many numbers will be validated on December 15th. December 15th is very late in the year for us to do a number of things that need to be done for the migration to happen in a structured way. For example, we need to take into account the cost or the price of all pharmacy items that are regulated according to CMED.

52:26 So it's not really just about looking at the cost in the market, but it's also a cost that has to be regulated by CMED. So we're shorting time. Juliana Lopes Paixao, Celso Pissi Filho With the system, the new system operating normally with all the different entries that are required by the Federal Revenue Service, but we still don't have that for some products that we do not resell. For example, leases.

53:14 So we are on the right way, on the right route. We expect to deliver everything on the deadlines. However, We think it would be healthy to look at the big picture, and we believe that it would be beneficial to delay that time. Now the next question comes from Bob Ford with Bank of America. Please go ahead. Hello. Good morning, Raduan and Fabio. Thank you very much for taking my question. How effective has Anvisa been in fighting illegal JLP1 products? And how much more semaglutide could you have sold if it weren't for the illegal products?

54:06 And what is your perspective in terms of price elasticity considering generic semaglutide? And now that you have STIX, the loyalty program, what changes? Well, it's hard to tell what the elasticity would have been. I believe that now with more inventory in the fourth quarter, we will be able to give you a better answer. And we should remember that Semaglutide accounts for 3.5% to 4% of our sales. We don't have a shortage of supply in the branded products we do have on generics, but Thank you very much.

55:06 Marcello De Zagottis We thought that the competition would bring more gross margin and those projections are materializing in our negotiations and our conversations with suppliers. So again, I expect for us to see a net positive elasticity effect with more supply and more competition and the volume will grow more than the price drop from now on and the balance will be a positive one with better gross margins on semaglutide.

56:05 Now, fighting the illegal product is indeed very hard. We are saddened to say that the public agencies have not been very effective, because it is indeed a very difficult effort. All pharmacies have been selling more syringes than they used to because of these new injectables, quote-unquote. and you can't stop selling syringes because many people need them for their regular treatments and their legal products so you can't simply cut that supply but the internal indicators show that the entities have not been effective in fighting the illegal market and this market seems to be still huge we believe that more and more as more and more people know other people that use those products coming from other countries and they do lose weight and they survive that sense of risk decreases and customers are not afraid anymore to try those drugs it is We believe that time will work its miracle and things will come to normality with

57:36 time And if the price of tazerpetide in the formal market becomes more affordable, then people will not turn to illegal solutions that much. But unfortunately, that market is still huge. We don't have official numbers, of course, because it is illegal, but we believe that with time things will come back to normal.

58:32 S46, that is a very good operation. We wouldn't have bought it if it weren't. So our customers really value that they understand it to be a good service there at the checkout. So they really see that as a loyalty increasing factor. Our perspective is to continue to develop the business. We want to have more partners into the ecosystem and want to increase the value perception by customers even further. We've been very transparent in our earnings calls, always talking about the sticks, results in our P&L.

59:19 And this was a positive impact, right? It will impact the bids in gross margin expenses, G&A, and we're talking about a company that is adding about $5 million in EBITDA in the quarter, so it's a small impact in the magnitude of our system. And even though the FIX invites the change in our P&L because of the FIX integration, we captured half of that Thank you. Thank you. Good morning. Most of my questions have already been answered.

1:00:43 The value proposition for employees that joined the company in the last quarter, how that is impacting the base There are other potential pressure sources. Could there be a dilution or a decrease in expenses in selling expenses in the fourth quarter now? Yes and no, Irma. We had investments around For the first time in history, we had 92% NPS with that high number of transactions, so the investments made sense and they were recognized by our customers. There are some minor pressures, some homework that we still need to do.

1:01:57 We have a little bit more turn around or turnover in the start positions so people leaving the jobs and we're needing to hire more people so there are adjustments we think we can make but everything that we do is always cautious and careful. We want to have changes that are smaller than the The ones we had in the employee proposition but there are other sources of expenses and general expenses and the gross margin will never do anything that will impact negatively the company's results. We'll try and find a path forward that will allow us to continue to increase the company's profitability and also make the adjustments and investments that we deem necessary and that the staff deserves.

1:02:55 So there should be some minor adjustments, but they will have offsets that we'll find internally. Sorry, I was looking at the wrong camera. Thank you, Irma. Pedro Caravina from XB Investments. Good morning, Raduan and Flavio. Thank you for taking my questions. Most of my questions have already been answered, to be honest. But if I can touch on two points, they'd be... Well, Anvisa... Have you had any information from other geographies? What do you expect when it compares to the generic medications?

1:03:44 And I wanted to understand the rationale behind the GLP discounts and brick-and-mortar versus digital stores. There's the 100 real gap. Is it a defense, considering the increase in competition because of platforms? If it could add some color to these two points, I'd appreciate it. The second point, I think, has to do with the market, the consumer. The consumers who are already going to the pharmacies, most of them will buy it online or online, Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Our direct competitors also made it easier for the consumers to buy it in the brick-and-mortar store with the same price or at the same price they had online.

1:04:58 So this is not even a new decision. It's just a habit the consumer already had. And the competition was also doing the same. The competitors all did the same, so we just followed suit. What was the other question? Pardon me? But we got the oral version of the medication, the pills. Well, the data is very positive in the United States. It's helped spread the size of the micro, increase the size of the micro GLP-1. New consumers start using the product if they are afraid of needles. For example, they may now start the treatment with the pills. There are a substantial number of people who feel more comfortable with the oral medication. People also will migrate from the injectable to the oral medication.

1:05:53 But there is an increase in the market that is expected as we saw it in the United States. In the first half of the... In the first half of 2027, we should see an increase in the market for the whole pharmaceutical segment, not only for us. But we don't have a lot more information around it. We can delve deeper into the American market. Please come to the RDJ and we'll talk about it then. Lucas Tevis from Santander Good morning Raduan and Flavio, thank you for taking my questions.

1:06:45 I'd like to look at two points from a different perspective. Looking at the data from Anvisa, we see that the GLP sales in Raya grew mid-teens, 13-14%. That's lower than the market, that is in about 30%. We see that the Southeast is losing some of the national share. Do you expect the GLP share should converge to the 19% that you have in the pharmaceutical market as a whole, or is there any strategy to keep it above that average? And thinking about the margin in 2027, there are some important effects that are coming together. The historical effects are to be reduced with GLP contributing less to growth and the EVP will come into the base now and there are some shops that are still maturing when we combine all of these different effects what can we expect for the margin next year can the maturation of the stores offset that or should the margin be more stable So, our answer is no. We don't expect to have 19% share in GLP-1.

1:08:13 We expect the share to be higher with this molecule, with these products, because they also have a higher price. We lost no share in precipitide. We continue to have over 40% market share there and semaglutide is over 30%. Of course, we're closer to the lower 30 than higher 30 as it was before. That was expected because the prices were reduced and other doors were open as these new cheaper products came into the market. We expected the share to be reduced, but we're still comfortably higher than the 20%. I don't think we'll converge down to 20% or even 25%. It is a product with a price of 150 reals, and the average ticket at 110, the competition is even lower. And this price...

1:09:28 This product alone has a three-fold higher price than the average ticket. So we expect to have at least 30% of the market share, as we have other products that have a higher average than 20%. But we give no guidance around the margin. If I give any guidance, Agra is going to give me a scolding, but I'll give you some guidance. No one... Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho So, always growing step by step, slowly but surely, year on year.

1:10:32 That's crystal clear. Thank you very much. Have a good day. Leandro Bastos from Citi. Good morning, everyone. Going back to the digital business and the GLP, granted. The company... And we see the industry trying to catch up with apps and aggregators in the digital environment that has become so important for the sector. Can you tell us what you see in this competitive landscape and the strength of these aggregators?

1:11:24 Thank you. Well, our digital business is very strong. Our NPS is very good. We've been delivering 39 minutes, so the customer experience has been excellent. We have a very strong overshare in the digital channel. We're disproportionately high there at about 40%. Not only because of digital, but because we have 3,700 pharmacies that are within a five-minute distance from so many million Brazilians.

1:12:12 Well, the aggregators, right, there's actually only one aggregator that is relevant. I mean, excluding HPC, speaking about pharmacy, that's iFood. iFood is doing its job. They're one of our partners. They also help us on a certain level, especially with the 24-7 or night deliveries. iFood is the only meaningful aggregator. Their other new entrants, Kita 99, they will play the role there. And they are middlemen, right? So there will be customers buying from us through them.

1:13:03 And as they have to pay a take rate to them, then you have to have a higher margin, right? So if you have to pay a commission, you have to be more conservative and pricing. So these platforms are convenient, they give a good experience to customers, but they wouldn't be competitive from a pricing perspective. They wouldn't curb our growth, not ours and not our competitors. They even add value as a partner. Thank you.

1:13:53 Guilherme Domingues from HSBC Good morning, everyone. Good morning, Raduan. Thank you for taking my questions. The concept, the model pharmacy, how have you been seeing the ticket, the average ticket, the customer flow, the... The whole performance there. And as for GLP-1, the direct impact, what about the indirect impact with, say, vitamins or other related products?

1:14:46 We have seen an increase in supplements and vitamins. We have been investing there in the online channels and in the brick and mortar channels. So they buy not only GLP-1, but there are adjacent products that are consumed more, and we're very attentive to this demand. The model pharmacy, the concept, well, it really did a lot better than we expected. The buzz there was in the first month was really something that impressed us. It's been performing really well on high income. It's been accounting for 65 or 70% of sales.

1:15:31 So almost every line we've put there, the Korean products, fragrances, the professional hair projects, everything we added there in terms of product portfolio really did well. So it was really, really good. There's a second one to open in November. It will be in Alfaville. It's my hometown. Not really my hometown. It's my wife's hometown. I was dragged into Alfaville. And then there should be a third one that could open this year. It's an important growth avenue.

1:16:16 We understand it to be so. It's an important opportunity for us to learn around the assortments that we have to have, the offers we have to have. We may not be able to apply the full model into other pharmacies, but we can pick and choose aspects that work. Sensory experience of customers, of them going there and actually seeing it, touching it. Friends that go together, parent and child, mother and daughter, father and son. The people going together. Well, this is something that the digital channel can't offer.

1:17:06 This physical experience. And of course, everything that we have there will also... Be able to sell online. And you're all invited to this new opening in Santana de Parna, Iba. Just to invite you to this, Model Farm allowed us to explore a number of initiatives in HPC. Follow us on Instagram, RayaOficial. Thank you. Now we're going to take one last question from Enrique Spavieri from Bodeco BPI.

1:18:19 Over to you. Morning, Raduan and Flavio. Thank you for taking my questions. I've got two. The first question is, after the relatively slow CMAT price increases, what are your expectations for 2027's price adjustments? And how can they create a more favorable environment for you to grow your revenue and your gross margin? The second question is, in the macro scenario that you described during the call, if we think about your operations excluding GLP-1, how resilient do you think the categories and the regions are Do you see any movement of sales slowing down anywhere? If you can give us any color at all, that would be great.

1:19:16 I'll start with a second question about resilience. Our results have been very resilient and solid, and you can see that in HPC performance in the third quarter. OTC and generics would have performed at the same level if we were to exclude seasonal effects. So the performance has been very solid and it's very sustainable as well even if we exclude GLP-1. Of course the tailwinds that we had in the past will now be neutral going forward from GLP-1 drugs. Now about C-MED price increases, we believe they will be more similar to the inflation index next year. A few questions ago, we talked about the headwinds in terms of margins that we will experience next year, but there will be some tailwinds as well.

1:20:23 For next year, the pre-high season period should be good if the CMAT price adjustments are closer to the inflation index. The gains should be much higher than this year before the peak season, so the tailwinds will offset the headwinds. At least that's our expectation, and we think the CMAT price increases will be more similar to the inflation index. Thank you, Enrique. That concludes the Q&A session for today, and now our executives will have the floor for their closing remarks. Well, first of all, thank you very much to the entire team. Once again, you delivered a very solid third quarter result.

1:21:12 Our people working at the pharmacies, the distribution centers here at the office, The market share has been increasing monthly and that is yet another recognition of your hard work so congratulations I'm very proud of our entire team and I am very optimistic about the future of our organization and I'm very optimistic based on the stock price on our stock price I'm very confident Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho

1:23:13 Our assets are extremely strong and we know that we can add improvements and value propositions to those assets. We know exactly what to do to continue evolving. And of course, we have reasons to be optimistic based on what we have done and what the customers believe that we can do from now on. Sometimes I think that we focus too much on the future and we miss things that are happening right now. As the main executive at this company, I have to think about the future and understand if there's any threat coming, if there's any new entrance and things that can detract from our growth. That's healthy. That should continue because we need to be diligent. We need to work harder and harder to strengthen our value proposition.

1:24:14 But we cannot afford to miss the movements that are taking place right now at our company. In the last 12 months, our revenue came to $50 billion. If we consider the last four quarters, our profit increased by $8 billion year on year. In 12 months, we grew by $8 billion year on year. We are reaching 4,000 pharmacies. We gained 110 BIPs in market share last year. Thank you very much. Erika Petri, Marcello De Zagottis, Juliana Lopes Marques Paixao, Celso Pissi Filho Thank you once again. Thank you to the entire team.

1:25:49 Thank you to the market players for recognizing our team. And please make sure to come to the RD Saúde Day because There, you are going to learn more about our brilliant future. Thank you very much. See you next time. Thank you very much for participating. This concludes RD Saud's earnings call for today. Have a good one. Bye-bye.