Good morning, and thank you for waiting. Welcome to our call for the results of the Q4 of 2023 from Petz. I would like to highlight for those who need simultaneous translation, the functionality is available in this platform. All you have to do is to click on the interpretation icon on the bottom of your screen, and then select your preferred language, Portuguese or English. For those listening in English, you can mute the original audio by clicking on Mute Original Audio. I'd like to inform you that this call is being recorded, and it will be made available at the company's website, ri.petz.com.br, where the whole material will be available. You can download the presentation as well by clicking on the icon sent on the chat. During the presentation, all participants will not be able to unmute themselves. When we start the Q&A session, you'll be able to click on the Q&A icon and type your questions in order to get in line. When your name is called, we will receive a request to unmute your mic. Just do so, and ask the question. I'd like to highlight that all the information in this document related to prospects of the business, projections on operational and financial results, and those related to growth prospects for Petz are projections, and as such, are exclusively based on the expectations of the board on the future of the business. These expectations depend essentially on market conditions, on the performance of Brazilian economy and international markets, and so are subject to change with no previous announcement. All the figures presented are calculated in thousands of reals, as well as rounded. This performance results include accounting results and non-accounting results based on the expectation of the company board. Non-accounting data were not reviewed by the independent auditors in the company. Today, we have the executives of the company with us, Mr. Sergio Zimerman, CEO, and Aline Penna, VP, CFO, Investor Relations and New Business. Now, I'll hand the floor to Mr. Sergio Zimerman. Hello, and good morning. This is our first results call. Thank you for your time. I would like to start this call by talking about last year, the year of 2023, as a very interesting year for us because we had victories that were first for us. We were able to overcome obstacles that certainly will affect our future, and it was also a year of a more significant competitive landscape, which made us reflect a lot. On the following years, starting now on 2024, we could use the lessons learned in 2023 to continue as leaders in the market. When we look back, I would like to highlight the main points to consider. You will realize that we have major accomplishments, as well as important points to be addressed. Starting with our main accomplishments in 2023, we delivered what we promised in the beginning of the year. We opened 30 new stores. We concluded our new app. The new app brings several technical indicators that show a significant improvement in performance in comparison to the previous app, which shows that despite the time it took for us to conduct a migration, the process was very assertive. Now we have a platform, so we can add new functionalities, which are coming soon. Last year was also a year for that when we did our brand refresh, especially for our private label products, it was a huge success. This brand refresh in the products meant more sales for all the brands that were affected by the new brand. Consumers welcomed the update in the brand really well. On those same lines, we had a significant advancement on our private label products. Even with more pressure in the growth, our private label performed exceptionally in the year of 2023, already representing 8.5% of our revenue in products. Another accomplishment that I will bring more color to you in a few moments was the process of integration. In the year of 2022, this process didn't bring the numbers that the market or us were expecting. In 2023, I would say that now we are back on track. The integration started in the beginning of 2023, and we are about 70%-80% finished with it. It's going to be concluded in the Q1 of 2024, or... But with everything that was done in 2023, we can clearly see results coming, and in a few minutes, I'll give you more color on that. 2023 was also the year when we published our first ESG report, and we have been reinforcing this message. The company has always had different ESG initiatives, but that they were scattered... and we were not effectively communicating all the different efforts we had, and the new ones we introduced more recently. And now, the ESG reports does exactly that. It organizes all this information, providing more visibility to the market on everything that we already did, and other actions that we are still adding on the top. Still on our major accomplishments for last year, we had BRL 3.8 billion of total gross revenue, which represents a 12% growth over the previous year. And it's important to remember that when we did the IPO in 2020, our benchmark was BRL 1.7 billion. So since 2020, the company is more than twice as big in terms of revenue. When we talk about the digital gross revenue, we had BRL 1.3 billion, which represents a 24% growth over the previous year. Remember that the comparison base was already quite high, because we had already grown 41% looking at 2022 versus 2023, and that shows how assertive our omni-channel strategy is, and then our digital penetration. Again, another piece of data that's very relevant for us is that we not only confirm our leadership in the pet segment as a whole, but especially our leadership in the digital sphere. Now, we have 37.7% of digital footprint, and this number continues to grow. You will be able to see that throughout the year, this footprint only grew precisely because of the operational excellence that we have. Again, because of the fact that we have a digital platform and an omni-channel strategy, the Q4, it was an absolute record number, more than 98% of omni-channel. So which means that we are on the right track in the integration process between the physical and the digital worlds. Cash generation was also a one-of-a-time event. In more than 20 years of this company, for the first time, we were able to generate enough cash to... for all our investment needs. I'll give you more details on that shortly. And finally, because of the more competitive landscape and a number of other reasons, in 2023, we had a very significant focus on expenses, and several initiatives were highly successful to increase our productivity. Now, just to give you more details, in the year of 2023, we generated BRL 240 million of operational cash flow, and we spent BRL 237 million, out of which pretty much half were directed to new stores, and the remaining with a focus on technology and renovations and maintenance. Here, we see a one-of-a-kind event in the history of this company. More than being something exclusive to 2023, we expect that now, as of 2024, we will continue to see happening, always with this mindset of investing our ability to generate cash flow. This is perfectly possible, so we can have a sustainable growth history. And like I said before, when I mentioned acquisitions, let's remember that in the year of 2022, we had -BRL 12.1 million of EBITDA because of the acquisitions, bringing frustration to the market and to our expectations. But then, with the initiatives that we started applying since the beginning of 2023, it's clear to see that we have reversed this to a positive figure, BRL 2.2 million in the year. But more important than that, is to look at the trajectory of this change. 5.1 negative in the Q1, 1.3 negative in the Q2. We turned positive in the Q3, and finally, BRL 7 million in the Q4, which was the best quarter since the acquisitions, and with a very clear trend of growth in this number. Because of the effect of different initiatives that were made, is still not completely embedded in the gains of synergy. For example, we demobilized our Zee.Dog Kitchen plant. The product was a success, but we saw that there was an opportunity to outsource the production, which is much smarter, since our core business is not really manufacturing food products, but just doing the brand management. And this is evolving quite well, and this disinvestment took place in December, so the effects of this initiative are still not perceived in the 2023 results, and probably will be felt in 2024. In Zee.Dog International, many initiatives were taken in order to make it more asset-light. For example, our Europe operation was demobilized in the middle of the year, so we only felt a partial effect of that in 2023. In the United States, we did that in the end of the year, making this operation absolutely asset-light from the global perspective. So now we have a distributor network globally, with no significant pressure on cost, so only bringing marginal results as we grow with our distributors. Speaking of Zee.Now, many aspects that were already felt in 2023, but one of the most important ones still didn't appear in 2023, which is the integration of Zee.Now with expedition from the stores and the closing of our hubs. This is taking place right now in the Q1 of 2024. Out of the 15 hubs, 12 will be deactivated. Out of the 12, eight have already been closed, so we only have four more hubs to deactivate that will be completely closed by this quarter. I think we can go to the next. Here, like I mentioned before, this year was a year of many victories and accomplishments, like I mentioned, but we also had challenges in the short term. Here, I would like to mention the more moderate or milder growth that the market had and that we had. Just to give a more macro perspective on the matter, going back to the pandemic back in 2020, 2021, these were years with a boom in demand, and obviously, all the industry, and especially we, benefited from this growth. When you have such a growth, intensive growth in demand, it's natural for all the players to accelerate their offers, so to try to balance the peak in demand. We and the competitors evolved to expand our offers in a very robust way starting in 2022. But that expansion in offer came exactly at the same time where the demand was retracting or cooling down. When that happens, of course, it's a combination of pressure that time balances out, because then you can control the level of your offer in the face of this cooler demand. And in our perception, or the period for this adjustment, is going to reach a plateau between the Q2 of 2023 and the Q1 of 2024. We understand that this period, we're gonna move sideways, and we have very strong conviction that we will start to see an acceleration starting in the Q2 of 2024 because of this better balance between offer and demand and other macroeconomic factors. It is also important to highlight that because of the deceleration, Petz saw an increase, a small increase in market share, but especially between the first and Q2s. But this is actually bad news. We didn't like that news when we saw it. We are not... We are not leaders because we are at the market average. If we had always been at the market average, we had never gotten anywhere. If we were born in 2002, in 2020 we became leaders, even though we were a younger company than the previous leader, who had been in the market 17 years more than us, was because we always had the necessary competence to operate way above the market average and above the previous leader. And when we go down to the average of the market, this is not acceptable. Petz is not a company that was founded to operate at the market average. Petz should fly above that level, like I mentioned before. Considering that, and that's why we became extremely confident that after the Q2 of 2024, we believe that externally, we'll see improvements in the market, but especially internally, those improvements will come. After doing many analysis on the 2023 data, we saw that, yes, there is an external pressure, but most of our performance is connected to our internal matters. Internal matters that are being corrected and analyzed intensively, so in 2024, we can recover Petz's position, the position we have always had in our history. A company that grows 40% if the market grows 20. If the market started to grow 10, we would grow 20 or 30. This is our vocation. We always grow above market average, making the right decisions, and being connected with our consumers and empowering them, something that over the years, it's too easy to get lost off track. Remember that this holding is a holding that serves the stores, and the company need to be simplified, and especially more agile, because it's not about the big one eating the small one, it's about the fast one getting the slow ones. As we identify processes that makes us slower, we are focusing on them on a one-by-one, case basis, so we can become more agile and become a benchmark, not only in terms of the quality of the services that we offer to our consumers, but also in terms of the partnerships that we have with our suppliers and our ability to act fast according to the movements coming from the market. I also would like to remind you that the growth or the tougher competition happened in a very unequal way, because, of course, we always look at the average. But when we look at specific segments, we have a very robust growth when it comes to, for example, the medication or hygiene products that are growing quite well. Other segments are more pressured, like accessories, because that's when we feel the biggest pressure, especially from marketplaces and cross-borders. But when it comes to other segments, this effect is much more moderate. I will go back to questions at the end. I would like to remind you all that the questions will be asked with an open mic. Now, I'll hand the floor to Aline, our VP from Finance. Good morning, everyone. I'll go over quickly on our major initiatives for 2024 before discussing the results. Pretty much, we have eight major themes that will be the focus of this year. Many of them were already started to be developed last year, like Sergio mentioned. The first item has to do with the growth of our revenue. We need to grow revenue in order to dilute our fixed expenses, rent, and labor costs, so we're gonna work hard to recover the number of items per ticket, whether in the physical stores or in the digital channel, and we are using a lot of CRM data to do that. Like Sergio said, today, we have only one category that is moving sideways, which is accessories. The good news is that it represents a very small share of our sales. It's below 10%, but obviously, the margins there are very good. So we want to recover the category, making customers buy new accessories, beds, and snacks, which are all products that belong in this category. And one way to build that is by changing many times the location of these products in the store. Many times they are located in the back of the store, and many times this is an impulse purchase, so that is one initiative that we're taking. The second initiative has to do with the evolution of our assortment. I've been discussing with investors that for a long time, we were really proud to have similar stores in all the cities where we're present, and the store in the outskirts of São Paulo had a very close assortment from a store in an upscale neighborhood. But how can we adapt stores so we can have the right product at the right store with the right pricing strategy? So now we are using a renowned international consulting company supporting us in this project. The project has already started. We have reached very good conclusions already, and the consulting will be working with us for the next 4-6 months on this project. Just to give you an example, that increases the addressable market in some stores. For example, in stores located in poorer neighborhoods, we can offer a larger entry price products that are mostly sold in supermarkets today. So the idea is not to sell more and sell right, but also to have fewer losses and increase our addressable market in some cities or locations. Store expansion. We will continue to open stores, probably at a smaller number than we did in 2023, when we opened 30 stores. 2022, we opened 50. The idea is to decrease that quantity, focusing more on spreading our presence, so we're gonna open stores where we have a very small presence or footprint, and as a consequence, have less competition. The stores are getting smaller. Now, they are between 400-500 square meter. Just to give you an idea, one year ago, stores were close to 600, 700 square meters. But even though we are opening fewer pet stores, we are gonna open a lot of Zee.Dog franchises. We are increasing this footprint in 2024. Stores that were recently opened in shopping malls in São Paulo are doing really well, and we'll also start the pilot for our Zee.Now stores. These are proximity stores, because today our stores are big, located in major avenues, and we want to run a pilot with small neighborhood stores to compete with those mom-and-pop shops that are present in the neighborhoods, and the idea is to offer services at the Zee.Now stores as well. We are restructuring our service offer. In our results, we had some non-recurrent expenses coming from this restructuring process because it, it didn't take place only in services, but it was definitely more intense in services. We are reviewing the quality of the service, the focus on the customer, not only on the technical side, but also on the scheduling of the services and the reception area. For example, we saw, you probably saw that there is a drop year-over-year when it comes to services, and that basically has to do with the fact that we closed some services units temporarily, but we are also adjusting our prices. We're becoming more competitive, and sales do not necessarily come at the same moment you reduce the price. Another great project, considering services, has, we are studying with a specialized consulting company, the possibility of doing micro-franchisees. So the idea is to have partners who do the grooming services and also having the vets who operate our stores doing that. So probably in our next call, we'll bring more updates on that initiative. As Sergio mentioned before, we have advanced on our private label, creating a lot of differentiation for us. So our private brands have their own website, a-... They are sold in other pet shops as well, with the exception of SuperSecão. These brands, selection, are not sold in any other pet store. So this differentiates us from the specialized competition versus marketplace and cross-border players. So this is a very strong focus. We're gonna launch our dry food option in the middle of the year, a great bet we're making, and we're gonna follow these results and disclose them to you as this grows. Another topic that we want to work on in 2024 is the improvement of the experience in our stores. The experience on the website, our UX, is very strong, and we also need to make the store a very pleasant place to shop, where consumers want to go, because the shop assistants are very nice in their service they provide. The idea is that now, after the pandemic, is to do many more campaigns and events inside the stores in order to generate more traffic. Finally, two topics that Sergio already mentioned, has to do with cash generation first. We will continue to want to have a net debt close to zero by the end of the year, so we need to keep our low leverage level and use our operational cash generation in order to pay for our investments. Finally, the synergy with our acquired companies. We have seen a very significant improvement from -12 last year to +2 this year, and the idea is for the acquired companies to have an EBITDA percentage margin that's very close to the Petz standalone business. It's gonna be much closer to the 7%-8% that we have today for the Petz business. A little bit of what we want to do in our brick-and-mortar stores, we want to bring more autonomy and bring a more unique experiences in 50 stores that we are selecting to be experience stores. There will be tasting, a bigger focus on our private labels, a unique assortment. So we did in two experience stores. We created a store-in-store for Zee.Dog. We did that in the Itaim neighborhood in São Paulo, in our first store in the north region of São Paulo. And the Zee.Dog sales in these stores more than doubled. So when we focus on the right customer at the right store, we also see an increase in sale for those products. So now, so we don't spend much time on this, we grew in the year around 12.5%. As Sergio mentioned, that was enough for us to see an increase in market share, even though a very discreet one. We didn't grow 50% above the market like in previous times, but nevertheless. Talking about the quarter specifically, we had a more challenging situation when it comes to same-store sales growth of revenue. In the Q3, we grew 10%. We had already informed the market that the growth for the Q4, especially because we also adjusted how aggressive we were going to be, we would grow less, so we grew 5.2%, and that generated a negative same-store sales of 1.6%. Remember that this negative 1.6% of same-store sales is not adjusted. We have a different metric to look at stores that were open very close to each other, that in the extreme short term will be normalized, especially when it comes to the digital sale in older stores. We redirect sales ourselves. It's important to say that this weaker same-store sales percentage also considers a significant deceleration on the pet inflation. This is not bad for us, because in the end, consumers now can buy more categories. In the end, because it's not 20-25% the year like it was before, also brings more pressure on the same-store sales. In this figure, we also have the drop in prices and services, and the accelerated rhythm of new stores that generate this normalization in sales. Now, on our digital footprint, we ended the year of 2023 with 3.5 percentage points above or higher than the previous year. So we got to the end of the year with 39.6%. In the beginning of 2024, this number has already surpassed the 40% mark. But if you look between the third and Q4, we pretty much moved sideways, and that has to do with the adjustment in our commercial conditions. We often say that in the end, digital grows as much as we want, as much as we are willing to invest in performance or fund free delivery, or change service fees. So this is an adjustment that we make on a weekly basis on every different city, so we can align this growth considering our margin. And we grew 15 over a base of 43%, from the previous quarter. Here on gross margin, it's important to show that the gross margin for the Petz group suffered a pressure on the standalone of 70 base points, and this is a clear reflection on our performance in digital and our footprint year-over-year, but also on some tax changes, especially on the PIS/Cofins taxes that were not part of the comparison base. But when we compare that to the Q3, which was almost our historical bottom of margin, we had 38.2% gross margin in the Q3, when we chose to be much more competitive and aggressive in pricing.... basically, we have already recovered 60 base points since then. When we talk about the Q1, we are around 39%, much closer to 39% than 38%. It's important to highlight that as a message to you as well. Last but not least, on our operational expenses, and we have a very good message here when we look at the Q4 of 2023 versus the Q4 of 2022. On the blue bars, we removed pretty much one point of G&A year-over-year, and that has to do with synergy, reduction of corporate expenses. Why does the dark blue, which represents expenses in sales, this dilution didn't happen? It's a very one-of-a-kind effect. It's non-recurrent, but pretty much we had something like BRL 6 million-BRL 8 million that were invested in our brand refresh campaign, and that generated a short-term pressure. It's present in the Q4, but it will not be repeated in the coming quarters. Last but not least, now our EBITDA, Adjusted EBITDA, there was a pressure of 200 basis points on Petz standalone on the quarter, but this pressure was much smaller, only six basis points in our consolidated results, once the acquisitions generated a very positive carryover of BRL 7 million. It's important to say that this carryover will continue in the coming quarters, so we continue to see Zee.Dog and Petix operating on the positive right from the beginning of 2024. On the right-hand side of the slide, we see our four-wall EBITDA, so our mature stores, considering all the pressure in the margin in the year, are around 17% of EBITDA four-wall, and the new stores and intermediate stores are following that pattern that we often highlight to you when it comes to store maturation. Now, this is a new way to present this information, to explain our net profit from what the adjustments that we make also migrating that to the accounted profit. Between those EBITDA and adjusted profit, there's a depreciation, whether because of the number of stores we opened or the investments in technology that we made. We also have, in our comparison base, a very strong carryover of financial revenue. I'm sure you remember that in 2022, there was a large amount of cash from the follow-on that were not being used necessarily throughout the year, and that revenue became more expenses this year because we raised BRL 400 million at the beginning of last year. So I pretty much changed this financial result structure, and it's important to say that out of the BRL 19 million of adjusted net profit to the accountable net profit, there are some non-recurrent effect, effects. We have stock options, and so it's interesting, if you look at this, to understand what's more correct or not in your perspective to make the adjustments. And I think Sergio already talked about the cash flow. We were able to get a surplus over the year of BRL 3 million, so between what we generated and invested, our year-over-year CapEx, if you look at the Q4, have dropped around 40%, so a significant shift in our investment level and something that will generate a ROIC most likely above our cost of capital if you annualize the Q4 of this year. So I think pretty much these are my main messages. We are going to remain this neutral leverage level throughout 2024, and now I will open our Q&A session. We are going to start our Q&A session now. I would like to remind you that in order to ask a question, you have to click on the Q&A icon on the bottom of your screen and just type your name in order to get in line. When your name is called, you will receive a request to unmute your mic. Open your mic and ask the question. Let's go to our first question from Luiz Felipe Guanais from BTG Pactual. Luiz, we are going to open your mic so you can ask your question. Go ahead. Good morning, Aline. Good morning, Sergio. I would like to explore a little bit on what you said about the drivers related to the improvement of profitability and the initiatives you have taken to increase the number of items per ticket or the frequency that consumers come to the stores. I'd like to hear more on that. What can we expect in terms of drivers to improve profitability, both when we look at Petz standalone, as well as to the acquired companies? Thank you. Good morning, Guanais. How are you? Thank you for your question. I think when we talk about initiatives, retail never has its characteristics. We never have a silver bullet. There are micro initiatives that all together can produce these differences, and this is a great question because it gives me the opportunity to look back and go back to a group of executives that we came, that we brought to go to the trade show in the United States, NRF, and remember that things change at a very significant pace. Because look at this, it's very interesting. If you were to look 10 years ago, 15 years ago, looking at the Brazilian pet industry. If you owned a pet, if you had a pet, and you wanted to buy a product for the pet, you could go to Petz, to one of our competitors, to a mom-and-pop stores, but you would need to go to the store. Today, you can buy whatever you want to your pet without ever leaving your house, at your fingertips, and that brings a challenge. So stores are no longer a place where you have to go. It's a destination that you will only go to if you feel the need or the desire to go, and that generates a great challenge for us. How can we attract consumers? So in that sense, services, lives, adoption, they play an essential role in generating more loyalty from these consumers. And one of the things that is quite clear, and that will bring a positive effect in the margin in time, has to do with the way we are reorganizing all these initiatives. Because, again, when we had an accelerated growth, perhaps we focused excessively on our products, and the results highlight that there was a more significant deceleration in services. We have plans to reorganize our service offer and to place them as a significant differentiator for this company. Within products, there are initiatives that include our private label products that are clearly gaining share, despite the fact the growth might have moved sideways. When we look at our private label, if private label were a supplier, it would be the fastest growing supplier for Petz. So we have had an exceptional growth in our private label products, and that not necessarily brings us immediate benefits in terms of margin. Because, of course, in our private label, we gain more as we grow in volume. Because we are generating this volume, we are on the right track of doing that. In the coming quarters, we are going to see the contributions that private label products are going to bring to us in that sense. Other ways to understand what this improvement in results mean has to do with this equation between not letting our gross margin... Because, again, when you have fixed expenses in stores, when you start to have a same-store sales that is zero or negative, of course, that any retention that you have in the gross margin is going to be lost in your expenses. So you can protect your gross margin in isolation, and all that becomes operational expenses later on. So what we are doing with more assertiveness now is finding that optimal level between the competitiveness and the attractiveness that our stores have, and the level of competitiveness that exists in the digital platforms. The combination of all those factors and the combination of all those initiatives, in our understanding, will first not produce a short-term effect, because, like I said, retail works much more on trends. But in our understanding, starting on the second or Q3 of this year, we'll start to reap the results of all these micro initiatives that are being taken. Perfect, Sergio. Thank you very much, and thank you, Aline. Our next question comes from Ruben Couto, from Santander. Ruben, we will unmute you, so you can ask your question. Please, go ahead. Good morning, everyone. How are you? Well, I want to learn a little bit more about your EBITDA four-wall evolution. I would like to see that number that you showed per group of stores that are open. And in the 2023 number, we saw an erosion in that number with this level of 17% up to 2018. Aline mentioned that the evolution is going as expected, but what should we anticipate to how far they can go? Are they going to be closer to that 16-17 level, perhaps because of the growth of e-commerce, or if that 18-19 level is what you imagine to make sense for the midterm? I can take that. Well, Ruben, the EBITDA four-wall from stores has a very strong correlation with the standalone EBITDA from the company. Because you have the corporate expenses in the middle, you have the DC expenses in the middle, so pretty much those are the lines that are between those two figures. Because we had a year with more pressure on our gross margin, especially in the Q3, when it had that 38% level, that generated a four-wall margin that was a little bit lower. Now, in 2024, we are looking for a margin that will be much closer to 39%, even a little bit higher than 39%. Of course, that depends on market conditions. But much more connected to that than margin that would be at a 38%-38.5% level. And that would make the older stores' margins to become closer to the 18% level than the 17% level that we shared on the slide. So that's the mindset. This year, we have chosen to do a budget and plan. So eventually we have perhaps a smaller growth than the previous year or something in line, around 10%-12%, but with a more, a healthier expense structure and a more, a healthier margin as well. And I think the EBITDA four-wall is gonna follow that. Quite clear. Thank you for your answer. Our next question comes from Larissa Perez from XP. Larissa, we will unmute you so you can ask the question. Go ahead. Good morning, everyone. Aline, Sergio, thank you for taking our questions. Well, from my side, I just would like to follow up on Guanais question, the first question on the initiatives to improve profitability. Focusing now on the digital channel, could you give us more color on the initiatives that you are doing and how you plan to decrease the gap of profitability that exists between both channels? And a second question, we found that on your release, you talk about a recovery in sales for the second half of the year, and I wanted to understand how you see this dynamic now in the first months of 2024. Thank you. Larissa, good morning, and thank you for your both of your questions. Well, starting with the digital channel question, competition is tough, naturally, and many times price is pretty much determined by the market, especially when we think about those items that are more observed by consumers, so to speak. And our attitude is to be completely aligned with the consumer's mindset so we can keep them in our system. And in order to gain profitability, then it includes a number of initiatives, commercial efforts, and the agreements that we have with our suppliers, up until, and definitely not less important, looking at our productivity metrics. We need to make our performance marketing more assertive. Our website conversion should be more interesting, so the user experience brings more possibilities. Our benefit club should be a loyalty plan that has a higher footprint and is more used. Our app needs to become more relevant, so people don't download it and then delete it. So there are a number of measures and initiatives that we need to take care of because the whole mix needs to be more assertive. The assortment, the store mix. With market, a more active market, if you offer a more standardized mix, it's fine because the market is really warmed up. But when the market is more retracted, we started to see, and we hired international consulting company to help us in that, so we could define the assortment to sometimes reposition some stores. Because like I said before, this is a game that you win when you combine all those small details. So today, we are working at different fronts, like I mentioned before. One that I often like to give as an example is the following: when you think about our digital sales, 97% of them happen with no issue. Customers buy, and they get their product as expected, which is a good level. But in 3% of the cases, there's an issue. And we realized, understanding the journey that consumers go through, that the treatment that those 3% were getting was highly bureaucratic, with many steps, a lot of red tape, focusing a lot of... on governance, but with forgetting a little bit about the customer mindset. You know, because customers, they wanna solve problems fast and with more empathy as well. So this is a concrete action that we are taking to correct. We want to put ourselves in the shoes of those consumers who do have an issue, and I've posed a challenge to my team. We want for consumers to want to have a problem with Petz, because that will give us an opportunity to really differentiate us from the competition and show them it's different to shop at Petz than it is to shop at a different company. So our mindset is really focused on details right now, because we are certain about one thing: we are not gonna win this game because we have that 97% rate. Because our competitors, the marketplace, I'm sure they also have a level that's above the 90%. So it's natural if you are a good company that are playing this game, it's natural for you to have 90% of your purchases with no incidents, but we can win when an issue does happen, how you service your customer when there is a problem. So with this fresh and more connected mindset to the origins of this company, it this is what brings us confidence about the future of the company. Because like I said before, these changes that we see, the shifts of paradigm that we bring when customers become more important than some internal processes, all these initiatives, they take some time until they generate results because little by little, consumers start to realize how unique and how different it is to shop at Petz, especially when they do have an issue, whatever it is. If it's a delay in the delivery, or if they receive the wrong product, or if the product's delivered damaged, whatever the issue is. So within our approach to productivity, we're using AI. We have a work group inside the company that is constantly focusing on how to use generative AI in order to analyze everything that's taking place in our customer service channels, and how we can be more assertive on how we provide services with customers when they contact us. So we are getting to a level of detail that is compatible to what you should do if you are a leader, and especially if you want to remain as leaders in the market. And if I may add, the second question that Larissa asked had to do about the beginning of the year, how the year started, because we were thinking about a recovery in the second half of the year, like we said in the release. So the first two months of the year gave us relatively low to single-digit growth to Petz standalone. The acquired companies are growing at a slightly higher level, with pretty much no damage to the margins in comparison to what we had in the Q4. So we are having sales that are still growing a little bit slowly, but at a healthier margin. So that's pretty much the look we have for the first two months of the year. But with February having been better than January, so a positive trend. I think we can go to the next. The next question is by Felipe Rebello from Citi. Felipe, we will unmute you. Go ahead, please. Good morning. Good morning, Sergio, Aline. Thank you for allowing us to ask question. I think most of the questions have already been answered, but on our side, we would like to understand a little bit more about the sales dynamics in the quarter. There was this deceleration, this big deceleration that you highlighted because of some initiatives, but I wanted to understand how that played out over the months, and of how that is being reflected in the beginning of 2024. And a second question, based on what Sergio mentioned about services, and I think that's pretty much in line with what we believe and think, but historically, we had the perspective that service was a tougher business to operate on, that brought lower margins than the rest of the company. So I'd like to understand how you're going to grow services and at the same time grow your margin. Thank you. Felipe, good morning. Thank you for your questions. Okay, so this deceleration in growth, like I said before, mainly became more significant starting in the Q3 of 2023, and somehow, it will last and vary. But when we look, if we were to count from the Q3 until February, which is the data that we have, we see more clearly this creation of a fund. Because, again, we don't have short-term perspectives. We believe that this will remain for the coming months. And why do we understand that starting in the second half of the year, we are going to see a stronger recovery? Due to external and internal reasons. When I say external reasons, [it's] that when you see the market more horizontal, as it started to become in 2022, this is not a uniform process. What happens is you have some segments that continue to grow, some product categories continue to grow, and others that decrease, especially those that had a boom during the pandemic. So the market is moving sideways, but within the market dynamics, there are very different situations happening internally. But however, the time it takes to digest or accommodate the boom of these categories that are pressuring our growth down is in the past. The pandemic is two years behind us, and when that happens, the positive effects from the categories that are doing well remain, and the categories that continue to pressure us will fade away. So that's why we believe that the market in the second half of the year, combined with a drop in interest rates and the available income to consumers, all those factors together will put us at a more interesting levels. But we don't believe, and, and more than not believing, we are not happy at all in going back to the same pace of the market. Because like I said in my opening remarks, and I'll say it again, Petz did not become a leader by being at the market average, and we will not accept that. We are working internally so we can resume our strong growth, growth that happens above the market average. And for that, we need to see a recovery in the market, but at the same time, we need to make the internal adjustments. These internal adjustments, since the beginning of the year, have been happening quite intensively. Like I mentioned before, different initiatives on that take. You ask a very good question on services, by the way, because it might sound contradictory. Now, if services are not profitable, how can we work more on further improve profitability? That is a great question, and I'll tell you why. We have already started a micro-franchise product for services. We have understood that in services, even though we have worked really hard for the grooming services or the vet offices, we would have everyone as our own employees. We came to the conclusion that this is a highly complex market, especially when we think about the level of informal businesses that exist. The more assertive way to work on services, to create value for consumers in the first place, to create value for us and to the professionals operating those services, would be much more healthier if we were to approach this in a micro-franchisee perspective. Because on one hand, you ensure quality by providing standardized processes, and on the other hand, you ensure that the professionals who are providing the services are also satisfied because they will own their own business. They'll be the owner of their businesses. They will have a different tax regime than we do. They will be able to use a differentiated tax regime using the, a lower tax rate. Because they will be business owners, they won't have all the issues related to labor costs. From the consumer perspective, now you will have a professional that doesn't have a turnover because, you know, services are highly connected with knowing who is providing the services or who is your vet. When you deliver these operations for the owners to operate, naturally the turnover rates will be significantly lower. By doing that, you create a solution for the professionals providing the services, you bring profitability, and at the same time, you generate more traffic to stores because now you have a service offer that attracts more consumers. I think it's going to take a few months until this is really... We do the pilot and roll this out, but that is. We're confident that we will see a huge shift in services. We will focus on the more complex side when it comes to services. Let's think about the tripod: hospitals, labs, and health plan. That's when we will come in. The veterinary offices, the clinics, and the grooming services will be operated by our network of partners. Very clear. Thank you very much. Our next question is from Maria Clara. We will open your mic. Maria Clara, please go ahead. Good morning, Aline, Sergio. Thank you for the opportunity. I would like to learn a little bit more on your growth perspectives for the company, especially when it comes to the digital channel, because now you are getting a more normalized base for the coming quarters. So I wanted to understand from you if you anticipate the growth of this channel will remain in the coming quarters, and understand a little bit more on the long term. In your opinion, which would be a good level for growth in the digital channel? And also, if you could comment a little bit on the competitive landscape in the digital world and Petz. Good morning, Maria Clara. Thank you for your question. Well, when we look at pre-pandemic levels, 7%, in the pandemic it reached 25, and many industries that had a boom in the pandemic decreased. And the pet segment not only did not decrease, but continues to grow significantly. It might sound weird to say that digital today represents something around 40%, and in the pandemic it was 25, because it was the pandemic that caused the boom of the digital share. But that only shows how much... Actually, it shows the two types of challenges that we have. First, we need to be more assertive in our UX in our digital experience, so the differences that exist between our bricks and mortars and the digital channel would put less pressure on our total margin. This is a micromanagement work, like I mentioned before, including different fronts to be worked on in the digital channel. But that also highlights to us the importance of reorganizing our group of experience stores. And in that sense, about 20% of the stores or 50 stores spread all over Brazil will go through an exceptional renovation. They will follow their vocation of being experience stores, but in a much deeper way, considering the whole consumer journey, so they actually have this desire to go to stores. We know that that is part of our omni-channel strategy, and as an essential part, because it's finding the right balance of customers wanting to go to our experience store, plus the convenience of buying through our digital channel that makes our business model work so well. Regarding our share, digital share, if we have a target or not, we don't worry as much as of keeping a target for that, and we focus much more on the structural issues. Because then we would be ready to go in which direction the market is going and keep our healthy growth. Because in the end of the day, the person who decides if they're gonna buy in the store, in the digital, or do both, are consumers. Once you start to define a target for that, we might limit the journey or the investment initiatives we might have, and that's not what we want. What we want is to be 100% connected to what consumers are looking for. Of course, we will always be working, so consumers also want to go to our stores. Perfect. Thank you very much. Thank you. Our next question comes from Vinicius Strano from UBS. We'll open your mic. Go ahead, please, Vinicius. Good morning, everyone. Good morning, Sergio, Aline. Thank you for taking my question. Speaking a little bit on new stores, if you could give us some color on the return that you expect to see on the newer stores. In thinking about the smaller store strategy, you mentioned franchise micro-franchises for services. I would like to understand your thoughts on the franchisee model as a whole. Would you consider doing franchises for the Petz brand, or doesn't that make sense? Those are my questions. Thank you. Thank you, Vinicius. You asked about new stores and franchises, the performance of new stores. All right, so starting on the new stores. Well, new stores, looking back at our history of opening of stores or store expansion, if you look at what happened in the newer stores that were opened in 2022, 2023, I have to say that they are not at the same level that our history shows. But that is justified if you consider the bigger context that I highlighted in my opening remarks, which include this shock of offer with a cooling down of the demand side. So when the demand is cooler, not only because of us, but because of the market dynamics as a whole, when you start to see a growth in the offer side, every new business is going to suffer more. I remember that, for example, stores that were opened during the pandemic, the opposite actually happened. We would open a store, and the store would perform much more than the pre-pandemic levels. Now, we are seeing the opposite effect because of what I just said. And we understand that as being natural, because these huge movements that we see in demand and offer are part of the economy, and the good side is that we tend to reach a balance here. It's almost like we're going through a lot of pressure on the demand side, with, on offers, offers that are, you know, below the expected. But that doesn't last forever, because later offers go up and balance with the demand side. But now, if the movement is opposite to that. So we have investors from everywhere here, so once you start to realize, "Okay, here, the offer is growing faster than demand," we're gonna correct that. What we are doing is what the market is doing overall, and that's why we understand that the situation that took place in the pandemic was abnormal, on the positive side. What's happening two years after the pandemic is also not normal, but now on the negative side. And starting in the second half of 2024, and mainly in 2025, we will resume our pre-pandemic levels. We'll see a normalization, but a normalization in an industry that is thriving. The number of pets is growing, pets are being treated as more human. As an industry that has a number of drivers that we often talk about, and that's why we have a lot of confidence. And your question about the franchise model on services, the answer is yes. We consider that as a possibility. Aline mentioned that we'll do a pilot with some Zee.Now stores, smaller neighborhood stores. We'll understand more about them. We have a huge responsibility when it comes to open any franchise, because we know that sometimes that is the whole life of a person. We cannot open a franchisee just because someone is excited and opening new stores, if that's not sustainable in the long term. So we'll be very diligent. We will do tests. We understand the revenue profile. What are the differences in the tax regimes for the franchised stores? So once we validate all questions, we can create that avenue of expansion, if we understand that makes sense for all the parties involved. If we understand that it's good for the franchisee, but not good for us, we won't do it. If it's good for us, but not good for the franchisee, we also won't do it. So, this sense of responsibility to deal with cash from franchisee is very healthy for the market as a whole. And if I may add, when it comes to new stores, it's important to mention that, of course, we always look at the four-wall profitability, how it is evolving in time in the previous stores, but it's also important to highlight the internal return rate for these stores. Because as a sequence, we have been able to reduce our CapEx per store, not only because stores are smaller, but because the square meter is becoming more efficient, more efficient per square meter. So even though our four-wall margin is a little bit lower at the moment, our CapEx levels are also much lower, so one thing's more than offset the others when it come to the investments that are necessary for each stores. And just to add to that, Vinicius, it's important to remember that besides our Seres micro-franchisee model that is already planned to happen, we also have the Zee.Do g franchisee program, Zee.Dog stores only, and the store-in-store has been a huge success. When we talk about store-in-store inside pet stores, we are seeing an increase of pretty much double, but sometimes we triple the level of Zee.Dog sales when you do a store-in-store. And we also have the franchisee stores within significant shopping malls in São Paulo, and they are doing quite well. The one month in, into the operation, the franchisee already want to go to a different mall. So we know that there is another very interesting thing happening here, and at least for the moment, which is something that we're constantly monitoring, is the following: If sales that are happening in the franchise stores are additional to the Zee.Dog sales, or if it we're having a cannibalization. And up until now, what we have seen in the 11 stores that were opened is that despite the fact that they are doing quite well, there is no direct impact on the Zee.Dog sales outside these 11 stores. Thank you very much for your answers. Our next question comes from Nicolas, from JP Morgan. Nicolas, we will unmute you so you can ask your question. Please go ahead. Good morning. Thank you, Aline. Thank you, Sergio, for taking my question. I actually have two. The first one is actually a follow-up to Vinicius' questions, talking about the priorities for 2024. You talked about opening smaller stores. I want to understand if this is a new store model, or are we talking about the same 500, 400 square meter store, this model that you're using now? And the second question is, I wanted to understand a little bit on the same-store sales trend in mature stores, with or without digital, so we can understand how older stores are performing. Thank you very much. I think I can start with the second question. Well, basically, we don't usually look at the same-store sales from the digital channel or from physical stores, because 92% of everything we sell online is delivered or picked up at stores, delivered through stores or picked up at stores, so there's a very strong interdependency between them. Yeah, including internally. So we tend, even internally, for management purposes, we don't separate them. Having said that, from looking at older stores, including digital, and looking at newer stores, indeed, there is a trend of drop in older stores. And a lot of what Sergio mentioned about bringing back the experience element to stores is about improving the performance of these older stores, which most of the times are experienced stores. They are the first stores that we ever opened, and as a coincidence, these are the larger stores as well. So I would say that, yes, this is our biggest challenge today, so we can have operational leverage. Because, again, in mature stores, in the Q4, we actually dropped our revenue in comparison to the growth of the inflation. We believe that in terms of staff, we have salary adjustments that are connected to inflation. We have rent adjustments that are following the official indexes. But yes, we do need to reverse this drop trend for same-store sales in mature stores. So the focus to empower the stores and provide more training to a store so we can recover the experience aspect of the stores, it has that focus of improving the same-store sales for mature stores. This is not a new format, addressing your other question. We're pretty much gonna continue to open new stores, fewer than 30 this year, and we don't have any big store planned. On average, they have between 400-500 square meters, but they follow a very similar standard to the stores we opened last year. I would say that most of them still won't have services, because we're still adjusting that in existing stores, and with a more assertive assortment, depending on the location and the stores that are nearby, which is connected with that project we mentioned, that we're doing with the international consulting company. For new formats, we have the Zee.Dog franchise stores with our shopping malls, and we have the Zee.Now stores that will have between 100-150 square meters. In the beginning, the Zee.Now stores are our own stores. We're still studying the tax regime to consider franchising models, because after this analysis, we'll decide what's the best model to give scale to this. Thank you very much, Aline and Sergio. Very clear. The next question comes from Gustavo Fratini from Goldman Sachs. We'll unmute you. Go ahead, Gustavo. Good morning, everyone. I wanted to understand a little bit more about the competitive landscape in the beginning of the year, and how much that affects your growth, perhaps not a growth that was not so intense in the beginning of the year. Do you believe the competitors are still being very aggressive in pricing, especially on the online channel? And considering that digital continues to gain footprint, does it make sense to think that stores are underperforming with a drop in productivity? Good morning, Gustavo. Thank you for your question. Well, the competitive landscape, we consider it to be relatively stable. And stable doesn't mean calm, by the way. It had a level of intensity in the second half of the year, but what I want- I'm trying to say is that in the first two months of the year, we haven't seen any major news in the competitive landscape. I think the most significant thing to highlight is related to fine-tuning that we are doing in our own competitiveness. Those situations that maybe are... could bring opportunities, so we can better position ourselves in certain SKUs, just like we have opportunities to improve margins in other SKUs. So a lot of work is being done in order to identify the best way to capture or acquire new customers and retain our current customer base. We have an expense in technology, certainly the highest investment in the segment. We really invest a lot in technology, but for a reason. We know that technology certainly was the factor that put us in the leadership of the market. Many times, when you look in isolation at that investment, it seems that, wow, you're spending so much in IT. Yes, we do. We invest a lot in IT, but it was due to the IT investments that first we were able to become leaders in 2020, and it was because of that that we went from the third position in 2019 to become leaders in 2021 and keep that position. But we created an omni-channel strategy that's a benchmark, not only in Brazil, but the world. 40% of digital sales, we have more than 90% of omni-channel rate. So again, when we look at all these different aspects, we know that there are many fine-tuning that still needs to take place. We know that this fine-tuning includes everything from looking at the category level and looking at specific brands that eventually can be generating more difficult relationships with suppliers. But then you can reconnect to consumers and say, "I will not be poorly positioned," because there's a consumer behind that, and we want to be connected to them. So we are doing, again, micro corrections, you know, in the course. And I've said this many times, but I'm gonna say it again, 'cause I can't help myself. It's not that there's a major shift happening, but there are micro changes taking place, and in the combination of them all, we believe that in the next few months, we will be able to produce very significant effects when it comes to our ability to compete in the market. So we can position this company as it has always been positioned, a company that is not only a leader, but a company that also operates above market average. And last year, we made adjustments based on the region level. Depending on the region, we would adjust minimal purchase for free delivery and service fees, so we did that in a very tailor-made approach. Now, starting in the Q4, we're not just, focusing on each city, but also on each product. Some products are more sensible in that sense, especially to consumers, and we're following the rules of the game. In other products, consumers are more elastic or they don't research so much, so we are choosing a higher margin. So we are doing that. We're cherry-picking that, not only at the region level, but at the product or at the brand level as well, so we're bringing more granularity to the strategy. Very clear. Thank you, guys. Vinicius Pena from Bank of America sent us a question, and I will read it: "We have seen great evolution in the share of private labels in 2023. How do you consider to expand your portfolio in 2024? Which categories do you identify the biggest opportunity on, and how should we consider in terms of share for the gross margin coming from your private label products?" Hi, Vinicius. Thank you for your question. I've said this before, if you were our private label, if you were a supplier, again, it would be the biggest or the, the fastest growing supplier inside Petz. So we have done a work, and again, with integration that we did with Zee.Dog. We have Felipe taking care of all the brands in the group. We have been doing a work in marketing. We see the results of integration in the numbers and the figures, but we also have that happening with people and in the relationship that exists between people and our teams. So our growth in private label is a consequence of having this unified position, where Zee.Dog is one of our private labels, but the ones who created Zee.Dog are also the ones who are behind the creation of the other brands that the group owns and the management of this portfolio. So we do have a launch plan for different categories, the most significant one being pet food still. And of course, we are very careful with these launches. We have great partners when it comes to pet food in the market, and we are being very cautious in this launch, especially to preserve the partnerships that we have with our main suppliers. But there is room, and a healthy room, in our opinion, that won't damage these partnerships and will give us the opportunity to expand our share of private label products as a whole. Regarding the contribution that would mean, once our private label becomes mature, we see that it, depending on the category, it's going to be between 5 or 10 percentage points, depending on the category we're talking about. The more the commoditized that category is, the closer it is to 5%, which is the kind of cat sand and pet food. Now, when you go to pet toys or accessories, we are closer to that 10% level. But of course, we will only see that in full when we once consolidate these launches and have the right volume to deal with these contributions. So when you look at the extreme short term, you cannot perceive the effects in the margin that are coming just from our private labels. The effects are still too small in the extreme short term, but we are planting seeds that structurally will be very beneficial in the coming quarters. The Q&A session has come to an end. Now, we would like to hand the floor back to the executives for the final remarks. I would like to end this call by, first of all, thanking you for your questions. All great questions, and that gave them the opportunities to make more clarity on a few points. I would like to once again reinforce my confidence in this company, because, again, like I said before, I understand that we need to have this ability to first understand what's happening on the external scenarios that could be more challenging or more unfavorable, and we have gone through the years of the pandemic that were extremely favorable for the pet industry. Now, we are facing more challenging times after the pandemic, but it's important to highlight our internal management ability of not... and especially the fact that we don't stand still when we are facing a more challenging external scenario. We don't stand still believing that there's nothing to be corrected or nothing that can be done, and our operations are perfect, and it's only a matter of seeing improvements in the market that we will also improve. That's not the mindset here, and I would like to highlight that once again. The fact that we have grown very little or, a very little above market average in 2023, perhaps that was okay for the market, but not okay for us. Internally, we are not used to seeing and receiving that type of news. Since this company was founded, we have always grown, grown substantially above market levels. So when we grow at the market average, especially in a moment where the market is cooler, the effect for us is potentialized because you have the drop in the market and the relative drop that we had. That's not where we want to be. And what I often highlight internally, and we have full alignment on that, is that we have variables that we can control and variables we cannot control. We don't control the market, we don't control the competition, we don't control what marketplaces are going to do, we don't control what our competitors or specialized channels are going to do. But we do control what we do. We control the way we treat our customers and service them, we control the way we train our staff, and we control the way we invest on technology. We control our priorities and our strategy. And that is what we are going to do tirelessly until we resume the position we have always had, which is to fly many meters above the market average. Thank you very much, and I'll see you in the next call. This call for the Q4 results in 2023 is now closed. The Investor Relations department is available to take any further questions you might have. Thank you for your presence, and we wish you all a great day.