Empreendimentos Pague Menos (PGMN3) Q3 2024 earnings summary

Executive summary

• Achieved record gross revenue of BRL 3.5 billion in Q3 2024, up 13.9% year-over-year, with same-store sales growth of 13.6% and national market share reaching 6.3%.

• Adjusted EBITDA reached BRL 190.7 million, a 32.6% increase versus Q3 2023, with a 5.4% margin, and adjusted net income was BRL 53.9 million, reversing a loss from Q3 2023.

• Free cash flow totaled BRL 352 million, up 112% year-over-year (excluding Extrafarma payment), reflecting improved working capital and inventory reductions.

• Captured BRL 234 million in annualized Extrafarma synergies, reaching 90% of the top guidance range and supporting operational improvements.

• Net debt/EBITDA improved to 2.2x, with a target of below 2x by year-end.

Financial highlights

• Gross margin improved to 29.4% in Q3 2024, aided by inventory normalization and better digital channel profitability.

• Selling expenses declined to 21.5% of gross revenue, reflecting strong operating leverage and Extrafarma synergies.

• G&A expenses diluted to 2.4% of gross revenue, aided by operating leverage and personnel normalization.

• Net financial expenses dropped 31.4% to BRL 82.7 million, supporting bottom-line improvement.

• Operating cash cycle improved by 9 days year-over-year, even with normalization of receivables.

Outlook and guidance

• Confident in maintaining strong growth and further margin improvements, with plans to open more stores in 2025 than in 2023 and 2024 combined.

• Projected Extrafarma synergies achieved six months ahead of schedule, supporting further profitability improvements.

• Focus remains on operational efficiency, integration of Extrafarma, and financial deleveraging.

• Management projects net debt/EBITDA below 2.0x by year-end.

• No new store openings planned for the remainder of 2024; gradual organic expansion expected to resume in 2025.