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Bom dia a todos. Obrigada por aguardarem. Sejam bem-vindos a... We inform that this event is being recorded and will be available on the company's IR website at ri.magaziniluisa.com.br, where you can find the earnings release and the presentation in both Portuguese and English. The link to the presentation in English is also available in the chat. During the presentation, all participants will be in listen-only mode. Later, we will hold a Q&A session. To ask questions, click on the Q&A icon at the bottom of your screen and type your name, company, and the language you speak. When you're announced, a prompt to activate your microphone will appear on the screen, and then you must enable your microphone to proceed with your question. Questions received in writing will be answered later by the investor relations team. Now I would like to turn the floor over to Fredy Trajano, CEO of the company. Please, Mr. Trajano. Good morning to all. Thank you for joining us in this conference call to discuss third quarter 2023 earnings. I'm here with the whole top management of the company. We will be available to answer your questions at the end of the presentation. Roberto Bellissimo and myself will present the company's results and then we'll be here for the Q&A. Well, this quarter, I believe, perfectly reflects a very clear direction that we gave to the Magalu teams over the year. From the strategic standpoint, we needed to grow the marketplace, with a respective increase in profitability. And from the technical standpoint, particularly for the 1B team stores and online, 100% focus on increasing the gross margin to offset increases of the file taxes that we observed this year. if possibly increasing market share but not necessarily and when we look at the numbers of this quarter we see that we delivered exactly that it consolidates in numbers this direction that was conveyed to the teams along the year we had a historical gross margin of 30.4 percent historical high the highest in the last six years and we were able to grow gmv five percent in a market context where a part of our results and the volume, which is the part of durable goods, remains challenging. So I consider that achieving this gross margin and still post a 5% GMV growth means that the work was very well done by the teams. When we break down the 5%, looking at the different channels, we see that in physical stores, we grew 2% in the quarter. For physical stores, the scenario started more challenging in the quarter in July and August, and it ended really well in September. We have observed now in October, and particularly in November, very positive physical store sales. So we have 15 days of November. In the last Saturday, we had the best sale for Saturday in the year, with the exception of the fantastic sale that we normally hold in the beginning of January. So we see that the physical stores are picking up again. Of course, we have a comparison base of the World Cup last year, which makes comparison a little harder. But in absolute terms, we are achieving record marks. Last Monday was also great yesterday. And we're very excited with what we observed in both October and in the beginning of November. From the online standpoint, we have two different stories. The 1B story is, like I said, the tactical point was passing through default. We did that in Magalu and a good part of the companies of the group in this quarter. We had less pressure on the teams in terms of market share gain so that they could achieve the ideal margin profitability so that from now on we can grow. So still with a focus on consolidating this in the fourth quarter, but looking at the horizon, we believe that this will continue to grow. Magalu is also concentrated in durable goods. We have a diversification in the long tail of 3P. I'll speak more about that. As durable goods returns with a declining interest rate, the sector is highly cyclical, highly cyclical category. So 1P and stores will be definitely sailing this and will have a tailwind pushing us forward. In November, the perspective of 1P is looking better. but still with the perspective of consolidating our gross margin that we achieved in Q3 and having a full pass-through of default. From the strategic standpoint, speaking about European, I'll spend more time speaking about this channel, which was the big highlight of the quarter. We grew 25%. In Q3, accelerating growth. And if we look at average annual growth for the last four years, for your average annual growth, 51%. So it's solid, but more important than the 25% growth. of marketplace sales gmv and 3p is the increase in marketplace take rate we grew 44 percent our marketplace derived revenues and roberto will explain this better a good part of this growth of gross margin came from 3p and from increased revenues that have been included in our results We're seeing this along the quarters, but in Q3, there was a big highlight for GMV and revenue increase. In 3B, today, the more it grows, the more share gets in the company, the higher our profitability and our operating margin. Next, 3B. In the past call, we said that 3P had become the second most representative channel of the company, surpassing the physical stars and have been operating for more than 65 years. Now 3P has a 30% share of 3P sales as a percentage of total sales. That's the channel we are betting on the most in terms of growth. And like I said, it's been contributing a lot to our profitability ratios. Now, to explain this growth, I would like to speak about increase in the number of sellers. We achieved 323,000 sellers on the marketplace platform in Q3. So we grew quarter on quarter and in number of offers, 114 million offers available on our platform. We don't speak a lot about that, but we have evolved a lot of seller platform. We included this in our earnings release and it's in our presentation as well. We had some very positive changes. Today, our sellers are complementing our platform a lot. Today, they can manage all their stores through the Magalu super app. With the same customer app, the sellers can use to manage the store. They used to have to access a different app. Now they can access the Magalu Super app, make suggestions about the store, look at their reputation, post their offers. So it's a big change that makes life easier for sellers, makes the process a lot more fluid. We also created Magalu Indica, which is a seal, an offer program for our customers so that we can present the best offers from our sellers. So the fulfillment is in Magalu Indica, the ranking of the best reputable sellers, everything is in Magalu Indica, as well as some 1P items. And the items of the company's group that sell through Magalu, Kaboom, Netshoes, etc. are in Magalu Indica. So Magalu Indica is like a seal of quality. It ensures that our customers will have access to the best offers. 114 million offers on your platform, you have to have some kind of curatorship to facilitate the search and the choice of our customers. It helps offering what's best for our customers on our platform. We also launched an alternative to drive interactivity with the customers, which is seller chat, where sellers can interact with customers, offer coupons during this interaction it is chat it's not a q a it's a chat another way to interact on the platform and other platform improvements are being developed and deployed every month Regarding 3P, I would also like to highlight that we have been growing a lot the base of sellers in new categories. The diversification movement at Magalu happens particularly through 3P. We see this in the charts presented by the company. A good part of the new sellers come in new categories. When we look at units sold, 86% of products sold on 3P are new categories that complement our 1P. When we look at GMV, I'm talking about 52% of the total of the group. including 1P. So more than half of our online comes from new categories. The new categories will drive growth and profitability looking forward. To give you an example of these categories, I will mention some families of products more than categories. Families of products that have grown this quarter. In running shoes, we grew 69%. In fitness and bikes, 84% growth. In tires, auto parts, we grew 84%. Vacuum cleaners, we grew 63%. Lawn mowers, 85%. You see, these families of products that we are prioritizing, families that we believe have a positive unit economics, tickets normally above 100, 200 bureaus, And we have the recognition of customers that will sell high quality products, not counterfeit products. We sell brand products and we have the right conditions to sell all of these products. And we are always making improvements for these growing families of products. We want to improve navigation. marketing, and how we publicize these categories to our customers. I want to speak a little about logistics. Another quarter where we improved our fast delivery indicators. 80% of all marketplace offers passed through Magalu entregas or Magalu delivery. If you look at 3P, actually 1P, we are a benchmark. A delivery in up to one day, we increased to 81%. And from the standpoint of 3P, there was a 51% leap from 41% in the prior quarter to 51% this quarter, plus 10 percentage points in a one-day delivery. It has helped 3P, it has helped conversion, and it has improved the NPS of this category. One highlight is the fulfillment. Fulfillment has evolved really well. 14% of 3P orders go through our fulfillment. 2,400 sellers are using this mode. More than eight distribution centers enabled for that. Some in the Northeast, where we did not have that option. I'm sure that sales will increase a lot in that region, which is already important for 1P. 70% of light products are shipped from the Lovato DC, and sellers who join the fulfillment have a 25% reduction of costs. Their conversion rates increase in 25%. What's interesting about our fulfillment is that this is truly a multi-channel operation. Our fulfillment in DC is the same DC of the physical store and of 1P, and we have great benefits in multi-channel, in store pickup. Our costs are lower because our operation shares the 1P infrastructure, and with that, the cost is marginal.

I would also like to talk about Magalu Ads. But before we talk about Magalu Ads, let's talk about the physical stores and their important role in multi-channel operations. We have this slide to show before and after physical points. Many people ask me about physical stores. It's important to understand physical stores not only as a sales channel purely, but also with a competitive edge toward 1P and 3P operations. If we consider physical stores, a couple of years ago, 100% of the orders were sold by the physical store. Today, when you consider physical store at Magalu, 70% of the orders are not sold in the physical store. Take, for instance, orders that go from a natural sellers and drop the product with a drop of agency at the store or Caboon order that was bought on the side and is going to be store pickup or 3P at the store. So it is a point of support, a local point of support to our ecosystem and a competitive edge that helps us with delivery times and level of service for sellers in other times. So it is part of a greater component. of our strategic positioning and our competitive differential on a sustainable matter. Magalu adds a couple of details on monetization. When it comes to take rate, we achieve a maximum pass-through level for sellers. Monetization should come now from other means, and they will come, for instance, from Magalu ads. Here we tripled our revenue at Magalu once we introduced the sponsored Search in the previous quarter, like I said, and now we're also expanding Magalu Ads to all the companies in our ecosystem. This quarter, we had Instalu Magalu Ads in Netshoes, the same platform for all channels of the company and also content channels. The first step to expand to all company channels. Another way to monetize involves our FinTech. Mawad is here. He can tell us more about it. despite the moment scenario we increased by 20 percent tpv at fintech more than 10 billion now 58 entrepreneurs that are in the digital account sellers who are getting their sales via digital account for Magalu Pay, an account that we created for them by 100 million TVP. And we also work on PIX operations for Magalu and other group companies via the FinTech engine, more than 8 million transaction, PIX transactions in Q3, also showing the importance, our importance, bringing us confidence, lower costs. and also showing the importance of Magalu Payments for the whole ecosystem. We also launched a partnership with Bitcoin so customers based on our wallet could also buy Bitcoin. We have a Cyber, a Crypto Friday now actually with discounts if you want to buy currency or coins. cryptocurrency via Magalu ads, you have the cash back. So it's another way to drive this issue. Now, before I turn it over to Bechtel, I would like to highlight our subsidiaries. They also were very challenged with default pass through this year. Epoca between 8 and 10 default downwards and pass through Netshoes 7, Kabul 5, And operations were also fine this quarter, particularly when it comes to net income. Think about net shoes increasing 25% marketplace vis-a-vis last year, 21 million net income leader in the category. Very positive job, better than second quarter. Epoca Cosmeticus has been through a change in the ERP, financially, commercially. The process is always very complex and very intricate. Despite of that, it managed to close net income this quarter and Q4 is very positive as well. very or great efforts by the team and they managed to have a successful pass through and kabum sold 1 billion amazing 30 million net income despite all the default that got in and for the first time in a reclamiaki ra 1000 and also positive results our subsidiaries like i said have met our expectations finally Let's move on to the financial highlights. And very briefly, I would like to share with you the conclusion of the company deployment this year after the board of directors on this anonymous complaint. And this was very stringent, transparent and independent. Nine months of work. led by PwC and Tosini Freire, which is the leading lawyer firm, analysis concluded that the anonymous complaint is unfounded. And they also found and reported failures in the accounting process of some bonuses, and the performance requirements were not fully complied with, with the right competence. So these things were already corrected. So the company checked, confirmed, acted, and let's move on. So now I turn it over to Beto, our CFO, to give you more detail on the conclusion of the process and also the measures made by the company to mitigate the failures that were found. So we're going to dive into this, and we'll also be here for your questions in the Q&A section. Thank you. Good morning, everyone. Thank you for joining our earnings conference call. When it comes to the adjustments mentioned by Fredy, in practice, they led to some advanced bonuses. They were resubmitted, so we revised and we corrected the results for 2022 and first quarter 2023. These results, are now already on the right accounting system on an accurate basis considering all the bonuses that were posted according to the right compliance and the values they refer only to these postings these entries so they refer only to this adjustment in bonus. And the net impact stemming from this adjustment is about 830 million reals on June 30 shareholders' stake. It's worth mentioning that there was no change in the company's cash flow, operating cash flow. and no difference in cash positions, in debtness, no change whatsoever. The adjustment was specifically in the bonus account. On the next slide, we talk about the measures that we've been adopting in order to mitigate and try to eliminate risks. Firstly, considering the implementation of the system that we are deploying and already involves most of our suppliers, We have our own system that works with management of the funds. And just to give you an idea, in 2022, we issued 16,000 debit notes involving 50,000 campaigns of products over the whole year, full year. So we needed to invest in the system because this system validates each and every campaign checked and approved by suppliers and also validating the campaign performance and also checking total sales, for instance, generating the debit note electronically with a digital signature, etc. So the system is very robust. allows us to improve a lot in the management process of our funds and make sure that we are posting as we did already in Q3 with all the bonuses and funds in the right manner on an accurate basis. In addition to systems, We also talked about mechanisms of governance that we deployed in order to segregate different functions. And we also implemented a new process, a new policy, actually, of the commercial purchasing process. And we also revealed the risk and the routine of our negotiations. So a number of measures in order to improve governance and controls. Additionally, there is another launch, another independent action. Apart from the bonus, this quarter we recognize tax credits related to peace coffins on bonus that were received by suppliers in previous quarters up to 2022. This bonus, they were taxed So here we are posting these taxes based on a recent decision by the Supreme Court of Justice with the opinion of legal advisors. So we had a positive impact of 507 million Reals in the company's net equity and also the earnings for Q3. On the next slide, we show a little bit of the effects over time. Bonus adjustments, therefore, in total accounted for R$ 830 million, like I said, in net equity. They lowered results prior to 2022 and results for 2022, but it's important to say that they improved recent results in the first quarter with bonus posted over year 2022. taking into account 2021, so improving the results in the first half of the year. And when we mention the effect of tax credits and also the accrued basis prior to 2022, then we see an impact on net equity prior to 2022 of 189 million, over 2022, 226 million, and in the first half positive at 923, totally 322 million. This adjustment, once again, no cash effect, accounts for 1% of the company's assets and 3% of the shareholders' equity of the company. What about the highlights? Fred already mentioned a lot about our growth in sales, highlighting marketplace operations, an increase in gross margin, Just bear with me for a moment.

I'm going to change my microphone. Is it better now? Moving on to the highlights. Is it still low? Is it better now?

Moving on to the highlights again. We talked about growth in marketplace and gross margin as major highlights. Adjusted EBITDA, 5.7%, also growing vis-à-vis last year. Adjusted net income was still negative in 1.7%, but it's important to highlight again that this result already reflects lower financial expenses going down and also improved compared to previous quarter and better than last year and even better than the first half of the year. Total net income was positive at 331 million and this includes tax credits. And we also highlight that this quarter we greatly reduced our non-recurring expenses. You may recall that in the first half of the year, we had non-recurring expenses over 100 million by quarter. And this quarter, it was approximately 40 million only. So the total result is also a lot better than in previous quarters. On the next slide, we give you a breakdown of the EBITDA margin. increasing 5.6 to 5.7, and also the very important effect of the increased gross margin. Merchandise margin increased by 1%. Like Fred mentioned, ended the default pass-through and the merchandise margin better reflects the balance, particularly in EP between sales and margins. In addition to the merchandise margin, all the growth in revenue growth or service revenue, which exceeded this quarter, 1 billion reals, total revenue increased by 35%, Service at Marketplace 44% and the service revenue drove our EBITDA or gross margin in 1.9 percentage point. That's a trend that we've been mentioning in the previous quarters that Marketplace is expected to increase our level of gross margin. because it is the fastest-growing channel in the company, and also the potential to continue with this gross margin in the future as well. If we consider expenses, this quarter we didn't have a significant drop partly owing to the dynamics in marketplace. It tends to increase gross margin but put pressure on expenses over net revenue. It's important also to consider GMP and GMV. Marketplace tends to dilute expenses for the future, so this quarter, we had the impact of very growth rates in marketplace and also a little bit more investment in marketing, also combined to marketplace, which increased a lot. Over the coming quarters, the impact of marketplace on gross margin is expected to be greater than the impact on expenses vis-à-vis net revenue. In October, for instance, We saw this trend and we have this advisory that October had an EBITDA margin level higher between 6% and 7%. So that's an important trend driven by marketplace again. On the next slide, we show that our working capital keeps on improving. Vis-a-vis last year, we reduced more than 500 million reals in our inventories. And on the right hand side, we highlight an important reduction in financial expenses. The first quarter used to be higher and then there was a downward trend. This quarter, it went down 100 million vis-à-vis last year and seven percent dropped to six percent and five and now it tends to go down in q4 and also in the future so this reduction is a result of working capital and also an increase in fixed transactions and also a reduction with expenses with advanced receivables on the next slide we showed total cash flow for the quarter another quarter of operating cash generation, very significant, of 300 million reals, paying investments and expenses with leasing and interest. So this quarter we maintain our total cash position of 8.1 billion BRLs. We also highlight an increase in the share in cash and investments, increasing from 2.5 to 3.3 billion. and also the fact that we concluded LuisaSag's sale the current quarter, and we had the remaining share, according to Cardiff, of another 60 million reals.

On the next slide, we show... We continue to be a net cash company. We can see our gross debt. We have our cash and investments comparing to a short-term debt of 3 billion. So we have more cash invested than short-term debt. And total cash considering receivables practically three times the short-term debt. And the long-term debt is well distributed towards the end of 2025, 2026. Lastly, speaking a little about LuisaCred. We had another quarter of growth with a 6% growth in credit card TPV reaching more than 14 billion BRLs, 6.8 million active credit cards growing both inside and outside Magalu. And here on the next slide, we highlight in the last two slides, we highlight the performance of portfolio overdue, which has been very positive. In June, we said that we had reached an inflection point in our indicators of overdue payments, and we had a relevant reduction in both short and long NPL, with a positive reflection on LuisaCred, which practically broke even in this quarter, with the trend of increasing income in the short term already in the next quarters. And lastly, We showed default rates for CDC and LouisaCred dropping a lot, being reduced, with improvement of the quality indicators of the portfolio. These were the highlights, and now we would like to start the Q&A session. Thank you very much. We will now begin the Q&A session. To ask questions, click on the Q&A icon at the bottom of your screen and type your name, company and the language you speak in. You will get in line. When you are announced, the prompt to activate your microphone will appear on the screen and you must enable your microphone to proceed with your question. If you have more than one question, we ask that you ask all of your questions at once. First question from UBS, Vinicius.

Please hold.

Let's move to the next question. Next question from Clara Lustosa with Itaú PBA. Clara, you may proceed. Hello, everyone. Good morning. Thank you for taking my question. I would like to speak a little about the outlook for Q4. I'd like to understand your view on inventories to face end of year events. You mentioned that sales were strong in October, in November at the physical stores, and we also followed the logistics issues that the drought in Manaus caused. I'd like to understand volume and quality of inventories to face the Black Friday and Christmas sales. Good morning, Claudio. Thank you for the question. I'll start answering and then I'll turn the floor to Fabrizio Garcia to compliment. As we said, we started the year really well. I'd like to remind you that our focus continues to be the consolidation in Q3, taking in the case of 1P, we see a very favorable situation here. We ended the quarter with a very positive inventory level, already anticipating problems that we knew were coming, given the drought, in the Amazonas River that has made logistics of suppliers more difficult. We worked with an inventory and ended the quarter with a slightly higher inventory than initially planned because the suppliers warned us that we needed to have a buffer. So our inventory is normalized and positive. We started October really well and November really well. I gave you some ideas, a little insight of the first 15 days of November. So we're excited. We are positive. And I have to remind you, we remain super focused on working with high gross margins. And last year, we had the World Cup effect, which, from the specific point of the category of TVs, makes the comparison a little harder. Fabricio. Good morning, Glada. Thank you for the question. As Fred mentioned, we are well prepared. We made an adjustment in our inventories in the beginning of last year, so the quality of our inventory is really good. As Fred mentioned, we brought forward some payments of TV sets and air conditioners given to the drought in the Amazonas River, which is the highest The worst drought in the last 125 years. October sales show that we are okay. November shows that we are very well prepared. We are confident in a good Black Friday and a great holiday season sales. The inventory has high quality and high availability, which is very important for our business. Thank you, Claude. Our next question comes from Vinicius Estrano with UBS. Vinicius, go ahead. Hello, good morning. Thank you for taking my question. Could you elaborate on what would be the current profitability level of 1P categories, both in physical stores and on e-commerce, and how this has been evolving? And how are you thinking about investments to grow your 3P business? The second question has to do with the term of suppliers. In prior quarters, you talked about this. I'd like to think about working capital. What do you think would be the payment terms for suppliers looking forward? Thank you for the question. I'll speak a little about 1B, and Fabricio might want to add, and Roberto, regarding the terms and conditions. Like I said, for our 1P, the focus for the year has been to pass through the taxes, particularly in 1P, although default also touches the physical stores, not just exclusively online. There was also an impact on the margins of physical stores. So we handled that pass-through. This quarter consolidated the pass-through. It was the best quarter in the year in terms of profitability of 1P operation and physical brick-and-mortar stores. Again, prioritizing more gross margin than growth. And now that this level is stabilized, it's easier for us to go back to working to grow and gain operating leverage. We have the best quarter of the year. In October, the operating margin was even better. than in the first half of the year and we think they will continue to see this looking forward but once we decide to pass through this order of magnitude of taxes you have to make decisions and our decision was to first pass through a price increase and then go back to growing this is something we're going to start looking at from now on now that we have a consolidated margin we believe that we have room to gain market share particularly in stores but not exclusively In 1P as well, we have room to gain market share, but always preserving this level of gross margin that we achieved in this Q3. We have to make a decision, execute a plan, and then resume growth in healthier levels. In terms of 3P, we intend to continue to grow. We achieved a very positive profitability level. The more it grows, the more it adds to EBITDA. We want to grow without having the crazy subsidies that the marketplace had three years ago. The market is a lot more rational. We still have lower rates. than our main competitors. So I see room for us to positively grow our 3P. Thank you, Vinicius, for the question. Regarding the working capital, make a comment about working capital as a whole. What we saw in this quarter, we reduced inventories over last year by more than $500 million. In that sense, compared to last year, we also reduced the supplier's account. But we continue, and this is something we are always looking for in achieving a balance in this relationship, a balance of suppliers that will fund our investment in inventory. In other words, we finance our customer, With the consumer finance, we work with our suppliers so that we can achieve this balance, so that our suppliers will be financing their inventories in our distribution centers. We're achieving that. And this year, we also achieved an increase in the average term of purchases compared to last year. And now, I'm looking forward We have an expectation to increase the turnover of our inventories. We've been reducing the inventories, but we haven't improved the inventory turnover yet, given this strategy of better balancing growth versus margin, as Fred mentioned. But now, from now on, with greater growth, In Q4, sales are already improving. So the turnover of the inventory is already improving significantly. And with the expectation of growth in the coming years, we should see an improvement in inventory turnover and maintaining an average term that is healthy. Always trying to have the suppliers to fund our inventory at the same level that we currently have.

Next question, João Soares with Citi.

João, please go ahead. Thank you. Good morning, Fred. Good morning, Beto. Two questions. My first question, I would like to dive deeper into this opportunity in terms of EBITDA margin or EBITDA as you better monetize the marketplace platform. So I'd like to hear from you, Fred, what about this trajectory into the future, reflecting this monetization in EBITDA? The second question, I understand you had a good review of controls. And for the future, the operation seems to be well balanced for this type of control or debts with suppliers. But I'd just like to understand, just to make it clear, if this investigation is already concluded and if there is any risk of having a restatement going back. 2022 was restated, but if we consider previous balance sheets prior to 2022, any risk in this regard? Thank you for the question. About 3P more specifically, and actually about IBIGDA, we already noticed improvement in October vis-à-vis the third quarter. I would say a significant improvement. We can see that's a trend for the future as well. From the moment our projects and our actions evolve in 1P and in 3P as well, like I said in the previous question, we see sales expenses in the last quarter something more temporary owing to investments. I believe chances are that we improve margins to go back to our historical levels before the pandemic levels. So this is the contribution for 3P for the EBITDA margin. And in the management report, we talked about October. And this is what we notice. And we want in the short term, what I mean by short term, is already in Q4. But in Q4, we also have Black Friday and margins tend to be balanced or go down. We want to keep on posting growth, showing to the market how we evolve in our actions, as we already showed in Q3, but more significantly in the future. About the second point, we've been extensively working so that the numbers reflect exactly the facts. avoiding restatements that we had in market circumstances in the past, I think it brings a lot of stress unnecessarily. So it's important to show the right figures, 100% reliable figures. And I'll give the floor to Beto to tell you more about it. Thank you, João. Actually, the numbers were exhaustively revisited since early 2022 up to September 23. All the numbers and figures, the balance sheet, financial statements, income statements, the capital structure, accounts receivable, all these figures were extremely tested and revised. So we are very convinced that they will not be changed. Auditing processes this quarter were normal. the numbers of the third quarter were extensively reviewed. So as you know, we have an annual audit and now in Q4, we'll conclude the annual audit for full year 2023 compared to full year 2022, considering early 2022, just as we showed the effect in net adjustment on that chart starting the first balance sheet in 2022 up to now. There is no obligation or need to go back to previous periods or prior than 2022. But certainly the audit committee is already working on this and will be auditing on a quarterly basis all results for 2022 and 2023. So we always have two years of data as required by CEC with comparable auditing actions. So we can be convinced these are the final numbers.

Thank you for the question, João.

The next question comes from Eric with Santander. Eric, please go ahead. Good morning. Thank you for taking our questions. One of our question is, we wonder if you could tell us more about the competitive environment, particularly in core segments like home appliances, electronics, and also understand the relationship with the industry You talked about working capital, but maybe you could give us more color and also the entry or some marketplace company that are more marketplace now getting to 1P. And maybe if you could tell us more in the second question about ads, revenue, service or fee revenue is going up. So what about the contribution? What are the gains of gross margin this quarter, maybe more specifically coming from ads? It seems to be an interesting opportunity into the future. Thank you. Thank you very much for the question. I believe the competitive environment is favorable. Our main competitor were taxes and interest rates in the coming quarters, in the past quarters. So there's not a different rationale with the market or marketplaces selling or doing GMV with zero take rates or subsidizing price. and shipping so in 1p everybody has to pay taxes default it's the same tax for everybody that's the same reality both for sellers and big operators and the physical store we still have a lot of room for growth our share in physical stores is smaller than 1p and there is plenty of room to improve our share in physical stores even if the physical store market goes down we have a lot of room for growth gaining share But I think it will keep on growing because actually we are moving, you know, we hit rock bottom and now we have a recovery in interest and also an increase in credit, certainly in the coming quarters. I'm very confident. And as now we have better income conditions for low income households, We believe we have a very comfortable position in physical stores, and our 1P has a competitive edge, which has been multi-channel. No other operator has the same. Delivering 85% of our 1P category within two days, nobody else can do it. We use our stores for store pickup. So our 1P model is highly competitive. What happened to 1P has nothing to do with competition, but with macroeconomics, high interest rates, high taxes. And now the tax was given, passed through and interest rates have to go down. So once the macroeconomics improve, 1P operation will improve into the future. Fabricio, anything about suppliers and also the impact on ads? Good morning. Thank you for the question. Fabricio speaking. I think Magalu has a historical relationship with the industry. We are the second greatest player among the big suppliers in our core business. Our relationship with them is the best possible. We've been doing a great year on a monthly basis, so we have great plans for the end of the year. The environment is more rational, and stores are very strong, and this is very favorable, and we feel confident that we'll be selling with profitability, which is important. So our relationship is fine, and the outlook is the best possible. hi eric eduardo speaking just giving more color about ads for services yes there is an impact from ads revenue in-house we're not disclosing the numbers yet but we understand there is plenty of room to grow the share this year was a very important year when it comes to expanding the platform we increase our sponsor product platform over the year for several areas like surge our recommendation system at magalu a fully integrated system over the last quarter we had a big step which was allocation to other stores in the group deploying it at net shows given advertisers the chance to offer this not only at magalu but also at net shoes and next quarter in all companies in the group. So we're also going to change our display in the platform after Black Friday, bringing other possibilities. So this is only the beginning and there may be an impact on service or fee income, but the best is yet to come.

Next question from Vinicius Preto with Bank of America. Vinicius, go ahead.

Good morning.

Thank you for taking my question. I'd like to understand how you're seeing your capital structure. There is a significant part of the debt maturing in the short term. And last night, there was news that the controllers were considering a capital increase. I would like to understand what you're thinking about this. And the second question, you mentioned a number of progress in monetization of 3P. And this seems to have contributed a lot for the increase in gross margin. But this was not totally translated into a higher EBITDA margin. I'd like to understand what components of expenses limited this and how the 3P margin compares with 1P and physical stores and how you see this evolving looking forward.

Thank you.

I'll start speaking about the capital structure. Thank you for the question. Well, you see, Vinicius, we don't comment on rumors in the market. These rumors have happened several times along the year. It's just rumors. They have no relationship with the company whatsoever. But I'll take your question to reinforce, like I said, that from the standpoint of capital structure, well, you can analyze it in several ways. From the standpoint of liquidity, we have 8 billion barrels in cash, cash equivalents, and receivables with daily liquidity. I think that this is super important. And in that regard, our liquidity is much higher than our gross debt, even greater than our net debt. if we consider just the cash and the investments, they amount to more than the short-term debt of the company. And we are now starting a period of a growing cash flow from the operations. We spoke about the growth of the marketplace, about the expansion of the operating margins. You saw financial expenses dropping markedly. That is a trend that should become even more pronounced in 2024. So, we have an opportunity to continue to improve inventory turnover and even our working capital as a whole. So the outlook is that we'll increase and accelerate the increase in operating cash and reducing even further our financial expenses and the cash flow of financing, significantly improving our leverage. over other metrics as well in the coming quarters and years. So our capital structure today is considered by us to be very solid, very liquid, and there is no need, there's nothing being discussed at the board of directors to increase capital. Again, I'd like to stress that these are rumors in the market. And now, speaking about the margins, I think I answered this before, but I will stress, our expectation is that the margins will continue to increase as the marketplace gains share. The margin tends to increase. And as we transform this new level of gross margin, if we translate that into one big growth, given the market dynamics we're observing and declining interest rates, They will drive the top line of this category with more credit at the stores, more growth in the category of durable goods, which are important for 1B. And also with the dilution of expenses, EBITDA should be improving in the future. Like I said, we have already a very positive sign from October. We are running above the level of Q3, and we imagine that this will be the trend to be observed looking forward. Thank you for the question, Vinicius. Next question from Daniela Hagrid of XP. Danny, go ahead. Good morning. Thank you for taking my question. I have just one question. It's actually a more mid-term strategy question. You were always very vocal about the three-piece strategy. And this has been the main growth driver of the company. But how do you see yourselves positioned in the market, also relative to other platforms? Do you want to have this 3P strong, but in more of a complementary positioning or synergistic with 1P categories? I just want to get a sense of how you see your main competitive differentials, considering a more aggressive competition, particularly of international platforms and international players. Thank you. Morning, Danny. Thank you for the question. I'll be very objective in my answer. I see two big differentials of our value proposition. Number one, the multi-channel approach. When we built R3P, we built it driving our existing or based on our existing structure, the physical stores, the CDs, the pick-up, A high percentage of 3P sales are picked up at the stores and also the fulfillment, which will increase the share of store pickup. So with the stores and multi-channels, we have lower 3P costs and we don't have to charge so much from the seller relatively. We can charge even less from consumers. We can grow with profitability without these subsidies. So multi-channels, they were differential for us to become a leader in 1P. will be, in my opinion, what will make us be a relevant player in 3B as well. Second factor, Danny, we work, and I've been saying this over and over in the course, we tend to work with higher ticket products. Today, Magalu even 3B is a leading product, costing more than 1,000 BRLs. We have a high penetration there. Coincidentally, electronics and household appliances. But the general categories of electronics and household appliance above 1,000 BRLs are doing really well. But the new categories of car tires and lawn mowers, et cetera, we are doing really well. So at Magalu, you're going to buy a high-quality product with a reliable origin. When you're buying a product that you're going to pay 400, 500 BRLs, you want to be sure that this is an original product, a high-quality product, that you're not going to have problems. Because if you buy a product that costs 20 BRLs, that's fine. If it doesn't work, you can return it. It's not a problem. But in higher price products, we are focused on that to focus on products above 100 BRLs, good quality products with a proven origin. So we have a component of logistics and credit that will help us have a beautiful share and a good positioning in high quality products in a nutshell. high-quality products with a multi-channel approach. That's the differential of our value proposition for the marketplace. Just some of the advantages that will be coming.

Next question, Irma Skards with Goldman Sachs. Irma, please go ahead. Hello, good morning. Thank you for taking my question. I'd like to go back very briefly to selling expenses. There was a slight increase this quarter, investments in new customers. I wonder if you could tell us more about how you envisage the cost of acquisition of customers in the market and how should we consider the evolution of this line in the future? considering 3P still was an important investment area and also accelerating 1P again. I believe there was a slightly higher atypical investment this quarter, but what brings you confidence in the sense that this line will be more diluted in the future despite higher growth? Second question, just briefly going back to 1P. Fred, When you talk about the main drivers for growth, higher growth for 1P, I understand macro is one driver, but what about other levers that you intend to activate to speed the business again? Irma, thank you very much for the question. I'm going to highlight some points that Beto mentioned about expenses. Marketplace, when you check the balance sheet, you have to consider it with GMV, not revenue. It greatly contributes to margin, but effectively, marketing expenses increase once you increase its share. Because it's positive and tends to contribute to EBITDA, what you improve in margin is more than proportional to improvement in incremental sales revenue so we have this that increased a lot for the last two years and continue to contribute so in october for this quarter we are convinced that this expense will be diluted. The more marketplace increases the share of the company, the more the percentage EBITDA of the company will grow because the take rate more than offsets this increase in expenses down the road. There is a specific impact about selling expenses. We had a price pass through in 1p. in Q3, a significant pass-through for default pass-through. Whenever you have slightly higher prices, we are market leaders and we tend to be the first to do the pass-through and then the market follows suit and CPC goes up. So the cost per click is higher because your price is higher in the search and you have to pay more in the marketing auction. It's a temporary event because later on the market eventually get stable in that pricing and returns in ROE continue to increase. I believe this will happen in Q4 again. I already see this happening, conditions improving, so I'm convinced that we'll show an operational leverage and EBITDA margin in the coming quarters. That's a very important focus by the whole team and it's going to be clear in our results for the future. And the second question? Oh, 1p growth. Okay. I think the company was listed for 12 years now. And Magalu is in physical stores for 64 years. It's a cyclic category. That's a fact. Every seven years, you have two years with low categories. And then you believe this is going to come to an end. When I took over In 2015, all analysts asked me, are you going to close the physical stores, the category come to an end? But then you have a virtuous cycle as interest rates go down from 14 to 8, 7, and then the category started growing. The same in 2008. Challenges, high interest rates, no sales. You have high advance prices, Luisa Credit paying the cost, a high difference. So it's a cyclic sector. We've been working in 3P in order not to rely 100%. But that's a cyclic sector. Like I said, we've been on it for a while. The worst is over. Financial expenses went down 100 million year over year, 1% at point, less already. And certainly the demand for November is already reflecting that it's time for consumers to buy again. There was some advance during the pandemic. They bought a lot of durables. with high inventory rates, but now they'll have to exchange the fridge, the mobile phone, a new TV screen. So chances are we improve in the future. There is a macro impact. But now with this margin and profitability base, we cannot do both at the same time. So we believe we can gain share, particularly with physical stores, but also 1P. Our share in 1P is very high for traditional categories, but we still have room for growth. Thank you for the question, Zirma. The next question, Victor Pimi with Safra. Victor, please go ahead.

Good morning. My questions were already answered. Thank you. Next question, Joseph Giordano with JP Morgan. Please go ahead, Joseph.

Good morning, everyone. Good morning, Beto, Fredy, Vanessa. Thank you for taking my questions. I'd like to go back to 3P. You are highlighting a lot. How far can you go when it comes to take rate? and new services. I would like to know the shipment impact. We can see this opportunity and how do you see that? And lastly, when we think about the commercial strategy for 2024, how do you see the targets in the industry considering this market, maybe do you believe bonus are going back to normal? Eduardo speaking. Answering your question about take rate, like Fred said, The bulk of this improvement of market share marketplace comes from adjustment intake rate and also a number of things related to incentives. We believe there is still a chart about elections when you consider what is charged and also the subsidies for shipping purposes this is still competitive we also understand that marketplace brings a number of options for profitability growth like ads logistics services financial services offer and credit services as well. So in this context, we had a significant progress, but we believe there's still room to improve our profitability and better use these options we have. When it comes to Remessa Conforma, we complied with the program. And once we have the legal framework that gives us confidence, we believe that's an opportunity for the company to add to our assortment and bring brands and products that are not available in Brazil. Our product portfolio is not only related to these products that come from abroad. So that's an opportunity for us. That's how we look at how we see this. option right now. About your second question, I believe the current level already reflects the market scenario. I don't expect to see any changes in this regard.

Next question from João Paulo Andrade with Bradesco. João Paulo, you may begin.

Good morning, everyone.

Thank you for taking my question. Can you hear me? Hello? Yes, we hear you. Can you hear me? Hello? Yes, yes, João, we can hear you. Go ahead. Oh, okay. Okay. All right. Good morning, Fred, Vanessa. I just want to see if you have any refresh in color regarding the expansion of physical stores. Given that you've gone through a purging period, you're now at a level of profitability of the gross margin, which is more adjusted, all the synergies with the other businesses, a lot of things flowing through the brick and mortar stores. So in the mid to long term, how would you see the potential of expanding physical stores? What would be the triggers to resume the expansion of physical stores in addition to interest rates? And the second one, what are you thinking about the expansion of financial products and services at Magalus Fintech? Thank you. Thank you, João Paulo. This is Fabrício speaking. Thank you for the question. Regarding the physical stores, our focus at this point is having profitability of the current stores. In the mid-run, we don't have any expansion plan, but we want to have a very profitable channel, as it has always been. We are getting gross margin. We are focusing on new regions where we open new stores, Mato Grosso, Rio de Janeiro. We have a lot of market share to gain in those regions. So in the midterm, our focus is to make our current set of stores more profitable. And this is Carlos Mawad, JP. Thank you for the question. Regarding the roadmap of our FinTech is to scale up and increase the profitability of our insurance product in credit at checkout of our digital channels, because today we have a well-developed product for the network of stores, but it does not reach the digital layer of our business. We have a number of fronts linked to monetizing this relationship with the seller, which is our growth frontier at 3P. So it's all geared to increase scale and profitability. The roadmap is pragmatic, solid, so that we can build a monetization which is adequate and in a short period of time. I hope I have answered your question. Thank you for the question, João. We are now ending the Q&A session. I would like to turn the floor to Frederico Trajano for his final remarks. Freddie, go ahead. Well, thank you for participating in this conference call with us. Have a great week. Magaluz conference call is ended. The investor relations team is available to answer any further questions you might have. We thank you for your participation and have a great day.