Empreendimentos Pague Menos (PGMN3) Q2 2024 earnings summary

Executive summary

• Gross revenue grew 12.2% year-over-year to R$3.4 billion, with same-store sales up 11.4% and market share gains in all regions.

• Adjusted EBITDA rose 15.7% to R$176.9 million, with margin expansion and strong operational improvements.

• Net income reached R$44.2 million, reversing losses from the same quarter last year.

• Extrafarma integration delivered R$203 million in annualized synergies, six months ahead of schedule.

• Free cash flow was R$74.1 million, up R$114.3 million year-over-year, and the cash cycle improved to 56 days, the best since 2020.

Financial highlights

• Gross profit increased 9.9% to R$1,023.2 million, though gross margin declined 0.6 p.p. to 30.4% due to lower inflationary gains and inventory effects.

• Adjusted EBITDA margin was 5.3% (+0.2 p.p. year-over-year), and adjusted net margin reached 1.3% (+1.4 p.p.).

• Net debt/EBITDA reduced to 2.5x from 3.1x a year ago; net debt stable at R$1.35 billion.

• Free cash flow would have exceeded R$250 million excluding accounts receivable recomposition.

• Capex for 1H24 was R$41.7 million, down 38% year-over-year, reflecting focus on deleveraging.

Outlook and guidance

• Targeting net debt/EBITDA below 2.0x by year-end, with operating cash flow prioritized for balance sheet strengthening.

• Updated annual synergy capture guidance to R$195–260 million by end-2024, reflecting inflation and inventory loss adjustments.

• Expansion plans for 2025 include opening slightly more than 30 stores without increasing leverage.

• Focus on operational improvements and working capital optimization to support future growth.