Good afternoon, and thank you for waiting. Welcome to Dasa's Second Quarter 2023 Earning Results Video Conference. We would like to inform you that this event is being recorded. Following the company's presentation, there will be a Q&A session for analysts and investors. Should you need assistance during the conference, please press star zero to speak to the operator. The link to access the webcast with audio and slides is available on Dasa's investors relations website at www.dasa3.com.br. The presentation is also available for download on the website. We emphasize that the information contained in the presentation and any statements that may be made during this event regarding Dasa's business outlook, projections and operating and financial goals constitute beliefs and assumptions of the company's management, as well as currently available information. Future statements are not guarantees of performance.
They involve risks, uncertainties, and assumptions because they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that the general economic conditions, market conditions and other operational factors may affect Dasa's future performance. I now turn the floor over to Mr. Glauco Desidério, who will begin his presentation.
Good afternoon, and thank you very much for the audience. We will start with the presentation with remarks from Pedro Bueno, Dasa CEO, followed by Felipe Guimarães, Financial VP. We have also here with us the Chief Operating Officer, Emerson Gasparetto, Chief Executive Officer of Hospitals and Oncology, and Rafael Lucchesi, Chief Executive Officer of Diagnostics. I will hand over to Pedro Bueno to begin the presentation.
Welcome. We had important advancements. We are living some challenges in the health sector, despite we have significant growth at both BUs.
Not just as a consequence of growth that we are working in both BUs, but also due to the revenue and to the journey connection and cross-selling among our core business that is leveraging our revenue. Despite a challenging setting, we are very careful to keep on growing on the second half. Another significant advancement was the G&A. This is a focus point where we have captured some important efficiency in the second quarter, which were captured throughout the quarter. Some of the implementations in the G&A have collaborated for profitability gain to the company. Conversely, we had a BU2 in the Q2 margin, partially due to some specific reasons that Felipe will go into details. We also have seen some opportunity on fixed costs of the business unit. Our main focus is July, August and September, where we hope to get some additional benefits.
As to BU2, the normal growth margin is much closer to the semester margin. Last but not least, we have the cash inflow deleverage, which has advanced comparing second quarter to the first quarter, especially as to the working capital and the reduction of the CapEx by 35% year-over-year. We are still within the middle of the journey. We are being very careful for the reduction of leverage for the second half. May we proceed now to our highlights, please. I will try to speed up a little bit here because you have seen the release. We have grown 11%. That was one of the highlights of the half. 4% growth for gross margin and adjusted EBITDA. In oncology, we had 16%, and also we had a slightly growth margin reaching year-over-year and 36% growth in immuno-oncology. This is organic growth in BU2.
A strong growth in BU2 in diagnostic, 13% year-over-year, but with a gross margin around 3-4 percentage points that I will address later. G&A reaching 13%. Some quarters we were closer to 15, so we are following an important efficiency trajectory in G&A. Our CapEx is being reduced by 35% year-over-year. [Non-English content]
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[Non-English content] We close at the close of the second quarter, the average debt maturity is 3.4 years, and average cost of CDI + 1.5%. It's important to highlight that in line with our liability management strategy and bringing comfort to the payment schedule on July 17, 2023, the settlement of Dasa's 19th debenture issuance in the amount of BRL 2 billion was carried out directly in its entirety to early redemption of the company's first issue of book entry commercial notes, also in the amount of BRL 2 billion, and which should mature on January 15, 2024. Now the company's debt has an average maturity of four years and an average cost of CDI + 1.9%.
It's worth mentioning that the new issue has a prepayment condition on the curve and without penalties. Thank you. Now I'll pass it on to Pedro so that he can comment on our trading strategy.
Well, the first item that is the follow on, which is the public offering of shares concluded in April, amounting BRL 1.7 billion. This movement was important for strengthening the balance sheet. Secondly, selling hospital real estate. Our negotiations are progressing, and we will notify the market and shareholders promptly and within the regulations, but we are very optimistic. Third, we had the second consecutive quarter of CapEx reduction, mainly as a result of the completion of hospital integration projects, prioritization of expansion and maintenance projects at BU2 and efficiency in technology-related operations, which includes the reorganization of teams focused on operations. G&A, we haven't seen a total benefit in terms of efficiencies for second quarter.
Finally, the main opportunities for working capital optimization this quarter. We see an increase, I am sorry, in the extension of payment terms and inventory reduction. As previously aligned, it is important to highlight that we still see room for improvement on this front throughout the year. We have a number of projects and plans so we can reach higher efficiency in the second half. The health scenario is very challenging, but this is a company's focus as I said. We are going to improve company's cash inflow. Before I close, Lício has joined the company, as you are aware of. He is here with us today. He is just participating as a listener because he is concluding just his second week with the company, but we are so glad to have Lício with us because he is highly skilled. He is an expert in the field.
This quarter, the third quarter, his focus will be to learn more about the company, to know all the people, and to help us to work directly with the operators. We are going to benefit from his operator's experience, and this will be our strategy. We hope that with Lício's experience, we will be able to expand our partnership to gain market share, to have innovative partnerships. That will be a priority to collaborate to reach better results in our third quarter. Now we can proceed to the Q&A.
Thank you. We will now open the question-and-answer section. To ask a question, please press star one. If your question has been answered, please press star two to be removed from the line. Questions and answers will be answered according to the queue. Please just wait while the questions are being collected.
The first question is from Artur Alves from Morgan Stanley. You may proceed.
Good morning to all of you. Good afternoon. We have a question regarding the timeline of the maturation of cost reduction regarding diagnostic costs. How much are you expecting in terms of improvement, and what is your timeline? Second, you have a forecast for market share improvement in the diagnostic setting. Are you expecting to keep that in the CapEx levels? Thank you.
Hi there. Thank you for your question, Artur. This is Rafael speaking. As Pedro said, several of the aspects that have impacted our margin in the quarter are quite specific, and we believe they will not be replicated. I will not repeat all of them, but they are very specific. There is one regarding fixed cost I had addressed digitalization and productivity gain at business unit and call centers.
We are speeding that up in the next quarters. We have seen by the last quarter and beginning of the third quarter, some significant gains that we hope to pursue in the coming months. I may tell you that our digital share for scheduling and pre-checking, that has been increasing significantly, and we believe that in the next semester, we can decrease our fixed costs. We hope we can increase our cost backbone in a more efficient way to become more competitive in the diagnostic segment. As to margin, this is our main forefront, and we hope to recover gains. Now let us talk about market share. We see a very positive growth and there is an additional positive aspect. We do have a higher impact in terms of COVID losses, as last year's COVID was much lower, 2.7% to us.
Now we have a base with lower losses than last year. With that, we are able to grow a bit more. Your question addressing assets, liabilities and assets. We have enough assets to keep growing in a sustainable way, even with a reduction of our CapEx. We have a better machine operation, machine yield, and we are prioritizing our CapEx throughout some initiatives such as expanding our plants, our parks, and we have invested on two Alphaville units that will allow us to invest in a very sustainable and health way where we might get more market share into the premium segment. So we feel very comfortable to keep on growing even with the CapEx reduction. There are some other front lines, even with the CapEx reduction, such as the home care that is still there growing even though there is a reduction in the CapEx.
Some other units where we see lots of room to keep growing.
Oh, yes. Thank you.
Next question is from Gustavo Tiseo, Bank of America. You may proceed.
Hi there. Good afternoon. We have two questions from our side. Could you elaborate a little bit more about the second half break-even plan? We see a certain trend for drop in the second quarter. Is that due to a margin expansion? Should we wait for the third and fourth quarter, something closer to zero or positive in terms of cash? When we look at BU2, there was a certain drop quarter after quarter in terms of volume. Do you see any reduction in terms of diagnosis or is that anything seasonal that happened just for now? Thank you.
Hi, Gustavo. How are you? As to cash leverage, we expect indeed to get into a positive cash inflow generation.
Actually, it is a combination of factors. Margin expansion, rentability, especially during the third quarter, which usually is the strongest income quarter. We hope or we expect to have gains in suppliers account and inventories where we are growing quarter- over- quarter. There is a benefit in the reduction of interest is what we have already seen. With that, we might see some inorganic growth in the hospital asset sales feedback. Therefore, those four factors make us believe that we are going to have a positive cash inflow. Your second question has to do with the BU2 volume. There is no backbone impact. We don't see any structural change. What we see though is more a punctual or a seasonal issue, not structural in the sector.
Okay. Thank you. Very clear answers.
Our next question is from Mauricio from Credit Suisse. You may ask your question.
Hi. Hello, everyone.
Thank you for the opportunity. I have two questions. One addresses the operators. Now that operators, they have higher tickets, does that change their relationship? Or denials, is that relationship any better? Now that we see some sort of verticalization in the system, sort of speaking, does that open other pathways to entitle some sort of partnerships with operators to increase hospital flows? My second question has to do with diagnosis. I have asked that priorly, in addition to new contracts with operators, do you see any other way to attract flow in the B2C diagnostic units? Thank you.
Hello, Cepeda. Thank you for your question. I will start by answering your question regarding the operators. Well, we see very optimistic the clients' readjustment, but the scenario is quite challenging.
Having said that, we believe that Dasa is the best option to operators, and we prove that throughout indicators, average length of staying, ER's conversion, clinical allowance. We are having very detailed and technical discussion with them to tell them that we have the best efficient choice. We are trying to get market share throughout partnerships. As you said, those verticalized movements, they allow us to seek for a window of opportunities, and we will be highly focused on that verticalization window of opportunities. But we cannot pretend that we are not facing a challenging scenario. Now I will hand over to Lucchesi to answer your second question.
Thank you. Let's now talk about an increase in diagnosis. What are the main lines that I see room for improvement?
First, we see an increase in existing units for services that has been highly consistent all throughout that is pushing ahead growth, and it works as a great leverage. We have such a level of loyalty by users at Outlab. Mobile home care services. We are increasing 30% our mobile-based services, which is much greater than before the pandemic, and it keeps on growing. Commercial agreements. We had closed some nice agreements, and during the quarter, those two hospital groups. We closed a deal with Santa Catarina Hospital . They have five renowned hospitals, not only in São Paulo, but all over the country. And also with A.C.Camargo , which is a Cancer Center , a reference oncological center in Brazil based in São Paulo, and we are acknowledged for medical techniques, quality, and innovation in A.C.Camargo Cancer Center and genomics.
That became an evidence thanks to those new contracts, and that is another way to capture new users. With all of that, we are offering more services to our users throughout our network, which is able to increment our sales. Nav, N-A-V, is helping us a lot. Now all digital appointments, they are within Nav. Users that also make use of other services, they can schedule their appointments or tests via Nav. We have a number of actions that will allow revenue increase within a record period of time. In the second quarter 2023, we reached a service record in our brand's average. We have reached a level of excellence much higher than the global excellent levels. In addition, any time we attract a user, we have a very loyalty and retention level.
We keep on investing in all these endeavors, and we will be able to retain and keep good rates with this.
Thank you. Next question from Emerson Vieira, Goldman Sachs.
Good afternoon, Pedro and all directors. I have two questions from our side. First, as cash inflow, you said that numbers are positive to the second half, but operators negotiations, they are still a bit hard. Once the company's priority is cash generation, do you believe you should be more aggressive in terms of discounts and deadlines, or that is a trade-off, we should wait for a readjustment continuity? This is my first question. My second question regarding G&A, you've mentioned that several initiatives were implemented throughout the quarter. However, they did not reflect to our results. So for fourth quarter 2023, what do you foresee for G&A results? Thank you.
Well, what do you expect from us in terms of guidance? I will do my best. Cash generation. I agree that is a challenging scenario. We see a unique window for opportunities at Dasa. I do not think the second half will be a semester for discounts. Exactly the opposite, because both the hospitals that we acquired are still lagging behind in terms of costs. At hospitals, we are after readjustments, adjustments even above the inflation, and that is our goal. So we can try to realign costs where we are working on high quality, high efficiency, with operational indicators that are not yet aligned to the correct price table. That is an offside. Receivables is the most challenging part, but in second quarter, we try to decrease it. So now we have to improve our performance from receivables standpoint.
We do see opportunities of growth for some operators to have closer partnerships and to gain volumes. Volumes which are not proportional right now, and we are willing to capture that in the next quarters. We cannot give you any guidance for the G&A, but you may expect that this dilution will keep on going quarter-over-quarter in a very positive trajectory. For the coming year, we are going to go after efficiency in the same line. We still see lots of opportunities, take into account all the acquisitions, all the process automations. I see too many opportunities that will contribute to profitability as of the end of 2024.
Thank you, Pedro. Very clear.
Next question, Leandro Bastos from Citibank. You may proceed.
Hi there. I have two questions. Going back to BU1, to gross margin. Can you quantify in numbers loss of material costs?
I would like to understand what would be the margin and the deleterious effects. How much would you expect that margin to converge to 34% or 35% as getting back to normal levels? Second, about the nurse salary floor, how are you dealing with that? How about the negotiations with their labor? Anything that you could share with us?
Hi, Leandro. Good afternoon. Talking about BU1 to margin, approximately 60% of the impact of the margin over the quarter, we believe it is a consequence of some specific items, and the other 40% is a consequence of a mix and fixed costs. So we may say that we have 60% more specific and 40% for fixed cost and mixed costs. Your question regarding the nurse salary floor to the union or to the trade union.
We are still under negotiation with the trade union, but I may anticipate that we had designed a number of mitigation plans to better negotiate that with the union, where that will include some phasings throughout time, as well as internal efficiency levels. By combining all of those factors, we do not expect any relevant impact to this year and to the coming one. We will go after some additional efficiency matters to mitigate these issues.
Okay. Thank you and good afternoon.
If you would like to ask a question, please press star one. We are now done closing the Q&A session, and I will hand over the floor to Mr. Pedro Bueno, the CEO, for his final remarks.
Thank you so much for your participation at the earning results call.
We are very optimistic in leverage cash flow as well as organic growth, and we do hope to keep pursuing health numbers and hope to see you soon in our next earning results video conference.
Dasa earning results call is concluded. Thank you so much for your participation, and wish you all a pleasant afternoon.