Good afternoon. Thank you for waiting. Welcome to Dasa’s earnings conference call for the first quarter of 2023. We would like to inform you that this event is being recorded. After the presentation, we will have a Q&A session for analysts and investors. If you need assistance during this call, please press star zero to speak to the operator. The link to access the webcast transmission with audio and slides is available on the Dasa's investor relations website at www.dasa3.com.br. The presentation is also available for download from the website. We would like to highlight that information contained in this presentation and statements that may be made during this conference call regarding the business prospects, projections, operating and financial goals of Dasa constitute beliefs and assumptions of the company's management, as well as information currently available. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties, and assumptions as they refer to future events, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect Dasa’s future performance. Now I pass the floor to Mr. Glauco Desidério, who will start the presentation.
Good afternoon, everyone. Thank you for attending our call. We will start with the presentation with the remarks of Pedro Bueno, CEO of Dasa, followed by Felipe Guimarães, CFO. Also here with us, we have Emerson Gasparetto, Chief Officer of Hospitals and Oncology, Rafael Lucchesi, General Officer for Diagnostics, and Nelcina Tropardi , Chief Legal Officer. All of us will be available for the Q&A session. Now I turn the floor to Pedro Bueno to start the presentation.
Thank you, Glauco. Good afternoon, everyone. It's a pleasure to be with you today.
Let's have the first slide. This was a quarter where we were very satisfied with the operating result of the company, show an important step towards the right direction. Of course, there's still a lot to be done. We are really focused on doing our things here at our company. But we saw a quarterly record of revenue and EBITDA, and the first quarter is usually one of the quarters with the worst seasonal results. But we started with a very positive note. When we look hospitals and oncology, 16% growth year- over- year, 14% organic growth. Here the difference is basically the Hospital Paraná, which ended the first quarter last year, meaning that starting now in the second quarter onwards, we will have a 100% organic growth in hospitals and oncology.
Oncology also with a very significant growth, 47% year- over- year, also organic growth, meaning we have been gaining share in an accelerated manner in oncology, particularly using the power of our ecosystem of our diagnostics and hospitals in order to capture patients and direct them to our oncology. Turning to our other big business units, diagnostics and care coordination. 9% growth year- over- year. The first quarter last year, we had the Omicron subvariant. When we look at ex-COVID-19 gains, we had a growth of 19% year- over- year. An extraordinary growth, really. I'd like to congratulate the whole diagnostic teams who have been doing outstanding job, particularly with progress in our main locations. And at the same time, concurrently with this growth, our gross margin is resuming historical levels, reaching almost 37%.
When we compare gross margin of this business with the fourth quarter last year, we had an 8 percentage points gain quarter-over-quarter, a very important leap. Also with outstanding results in diagnostics and care coordination. We are still diluting our G&A. As we have been saying, we, in the first quarter, will accelerate, particularly February, March, and April, with relevant reduction in cost in our G&A structure. We finished the first quarter with 13.4% of net revenue compared to the first quarter last year's, considering that in the first quarter last year, we had a reversal, which was positive in the first quarter, which benefited G&A. But if we do not consider that, our recurrent G&A last year was 14.4%. We are gaining 1 point in EBITDA margin with this dilution of G&A year-over-year.
We expect that this will be accelerated over the course of this year because many of the reductions we had were in February, March, and April. Here too, great news. Finally, a platform that has been having excellent results. We have over seven million patients registered, over 40,000 physicians registered in our platform. As we will see later, we also see an increase in the recurrent use of these patients and physicians in our platform. We also made important progress in our capital structure, finishing our follow-on, which raised almost BRL 1.7 billion. We finished the leverage of the first quarter already with the pro forma of the follow-on, 3.61x, compared to the fourth quarter, which was around 3.9 x.
Already indicating this trend and with the other strategies we have been implementing, which I will be commenting at the end of my presentation, we expect to go on with this trend and accelerate it over the year. Now I will give the floor to Felipe, who will give you more details regarding our figures.
Thank you, Pedro. Starting on slide six, looking at the hospitals and oncology business, where in this quarter we had a significant growth of 16%, with 14% organic growth, resulting in a gross revenue of BRL 1.9 billion in the quarter, a new record for the company. A robust growth in this quarter can be attributed to an increase in the number of active beds, which is mainly due to the acquisition of the Paraná Hospital.
The maintenance of an occupancy rate and increase of the average ticket due to the greater complexity and price increases in the past 12 months. Additionally, the oncology business continues to show significant progress with a growth of 47% in the first quarter. We are optimistic with the results of this business going forward, result of the progress in the management of hospital assets and the main growth levers for this year, which are occupation of ORs, conversion of outpatient clinics, oncology, and navigation of patients from labs to hospitals. Moving to the right side of the slide, we can see the gross margin for this business, which had a slight decrease when compared to the first quarter 2022.
Which was basically the result of the incorporation of the Paraná Hospital in late March 2022, an asset that has a lower margin than the rest, and the seasonality of the operating schedule for the first quarter. Consider the concentration of price increases in the second quarter. We should mention that the company has been making progress in synergy and efficiency projects, particularly focusing on the management of physicians' compensations and materials and medications. We expect to see incremental results over the next quarters as a result of this effort. Moving on to the diagnostics and care coordination business on slide number seven. We see that the revenue this quarter was also record for Dasa, totaling BRL 1.9 billion, with an increase of 9% in comparison between the periods, with a 19% organic ex-COVID growth above the main publicly traded competitors.
A growth of 6 percentage points compared to the fourth quarter 2022, when we had a growth of 13% ex-COVID. This shows a continuous acceleration of growth in this business and organic share gain, result of the growth levers for 2023 that have been giving us results, which are new commercial contracts, management of offering of exams, digital experience, and high growth initiatives that include, but are not limited to, the expansion of our premium brand, Alta Diagnostics. Moving on to the gross margin. We kept the normalization of the margin level this quarter with an increase of over 8 percentage points when compared to the previous quarter. Comparing with the first quarter 2022, the margin dropped 1.3%, particularly due to the mix effect that brings a drop in the representativeness of COVID-19 tests.
COVID-19 tests, which accounted for 9.4% of the gross revenue in first quarter 2022 due to the Omicron subvariant. This quarter, it accounts only for 1.3%. Moving on to slide number eight now. We show the progress of our digital strategy and the monetization funnel of the Nav platform. Today, the main purpose of our integrated healthcare platform is to explore the full capacity of our ecosystem, looking for the navigation between the different Dasa business units and the efficient monetization.
In order for this to happen, we work on four, five growth levers, which you can see on the left side of the slide, and they are navigation from diagnostics to hospitals, outpatient conversion, Dasa Empresas or Dasa Companies, care coordination, and Nav. Moving on to the right side of the slide, we can see that we are still very effective in increasing our user base, both patients and physicians.
At the end of the first quarter 2023, we had around 7.2 million patients and 41,000 physicians registered in our platform. A very significant growth when compared to the previous year. From the registered users, we see an increase in the recurrent use of our platform, showing a greater engagement with progress in both indicators. Regarding physicians, the number of active weekly physicians increased by 1.5 x. Finally, we also see a robust progress in the reach of our services, measured by the number of patients accessing the products and the platform. That grew also 50%, further generating opportunities for navigation. Now moving on to slide nine. You can see the progress of our expenditures and adjusted EBITDA in this quarter with two good pieces of news. On the left side, we see expenditures.
This was the third quarter in a row that we had dilution in line with our efficiency and productivity plan. In comparison with the fourth quarter 2022, total expenditures as a percentage of net revenue reduced 0.6 percentage points when compared to the first quarter. The adjusted number by provision reversal, the dilution was 1 percentage point. On the right side, we see the progress of adjusted EBITDA, which grew 12% when compared to first quarter 2022. Also considering reversal adjustment last year, the growth compared to the fourth quarter 2022 was 34%. The growth of EBITDA in this period reflects a robust increase in revenues in both business units. Now on slide 10. We finished the quarter with a pro forma leverage for covenant effects of 3.6 x the value of net debt over the adjusted EBITDA in the past 12 months.
Our net debt was BRL 9.6 billion or BRL 8 billion considering the resources coming from the offer finished in April. The increased net debt versus the past quarter is due to greater cash function, mainly related to the payment this quarter of the CapEx from the fourth quarter 2022, which had a volume of about 50% of last year's total expenditures. And worsening in accounts receivable on the one hand, and also a worsening in date of receipt. But we have already a plan in place in order to normalize accounts receivable, and a reversal will start in the second quarter. It is important to highlight that in line with our liability management strategy, we continue to work towards optimizing our future amortization schedule. And out of the total in 2024, BRL 2 billion refer to a commercial paper.
Now I'll give the floor to Pedro, who will be talking about our capital structure optimization strategy.
Thank you, Felipe. Next slide. As we have been talking about, we have five main fronts for our capital strategy. First one, we've just finished increasing capital by almost BRL 1.7 billion in our company. The second strategy, which we are focusing a lot right now for the second quarter, which is the possibility to sell hospital real estates, in particular two with a relevant value, and we are prioritizing them. The third is CapEx, which as Felipe said, we had an atypically high CapEx under the fourth semester, 2022. In the first quarter of this year, we had almost 80% reduction when compared to the past quarter. Already indicating a trend for this year.
We are really optimistic that our cash flow will be significantly better this year in terms of investments. The fourth front, here it says G&A efficiency. Actually, it goes beyond that. It goes through improving the profitability of our company, which will come by improving gross margin, particularly in hospitals, which where we are still executing our profitability turnaround. Also with a reduction in G&A, and we hope that this will be accelerated over the year. Finally, optimizing our working capital, which historically, we cannot see the first quarter comparing Dasa with all our competitors. But anyway, historically, we have a payment term for receiving and paying, which is benchmark in our industry. This first quarter was worse than we expected, but I'm very optimistic. We are engaged, our financials, everyone here is really focused on a strong recovery of our accounts receivable.
As Felipe said, we still have an opportunity to have a few more days in our payment terms. We also expect over the next quarters to optimize to have a significant improvement in our working capital. The combination of all these factors make us believe in the next months to have a very healthy leverage level. Bearing in mind that we have many opportunities in our company. We are operating with an 18% EBITDA margin, so there is many opportunities with gross margin from hospitals. We decrease in G&A. Also, as a result of our thesis, which is integrate the journey of care of navigating our patients, and this is one of the main levers that has been driving our growth. Before I close, just another piece of information. We announced a significant change in our team.
We will have now in the next week, by the way, Helisson Lemos, who will join us. He will be leading or running our platform business. He has 17 experience at Free Market , which is one of the main platform companies in the world. He was plant manager in Brazil. We are really excited with Helisson joining our team. I would like to thank Andrea, who is leaving the company. In addition to being a friend, she was extremely important in building what Dasa is today. She has led our platform, starting 2020, and she is delivering us a platform with over seven million users registered. Thank you so much, Andrea, and I wish you luck in your new cycle.
I would like to reinforce the fact that we are very focused on the execution in the next quarters of sustaining growth rates, healthy growth rates, trying to improve our profitability. We will also be focusing on put together the capital structure plan, particularly accounts receivable, and we hope to have good news in coming quarters. I think now we can open the Q&A session. That is it. Thank you so much.
Ladies and gentlemen, we will now open the Q&A session. To ask a question, please press star one. You can also send your questions through the webcast platform. Our first question is by Maurício Cepeda, Credit Suisse.
Good afternoon, Pedro, Felipe. Thank you for the opportunity. I have three questions. The first one has to do with gains in efficiency, something you have been working on.
You have been taking many initiatives, but we know that there is still a gap comparing with your competitors, both in hospitals and diagnostics. Could you please further elaborate on that? What do you think you can already do, and how close would you be able to get to your competitors? Specifically on hospital costs, issue of materials, which increase more than normal. Could you please talk more about that? Could you elaborate on that? The second question has to do with G&A. You have been working on it, but I understand that you probably had severance costs in the first Q. Could you please talk about that too? What do you think would be a sustainable G&A level? The third question, this agreement with Unimed, could you please give us more details?
How is it right now, and what would be the rationale behind this agreement with Unimed? Thank you very much.
Thank you for the questions, Maurício. I will start giving a general answer regarding your question on gains of efficiency. Taking care that we will not be giving you any guidance because this is part of our policy. When we look at the hospital assets of Dasa, comparing them with our peers, there is no structural difference that would make us believe that our margins, our optimized margins, should have important differences when compared to our peers. I would say the same thing regarding the diagnostics business. Just saying, look at that in diagnostics, with the gross margins we have had and with the dilution of G&A that will take place over the course of the next quarters.
We were talking here about an EBITDA margin that is pretty close or in line with our main peer or competitor. I think that the challenge is actually more in the turnaround of the hospital margins, and we are pretty confident that we are going the right direction. In terms of G&A dilution and connecting to your second question, we hope to have an acceleration of the G&A dilution vis-a-vis net revenue, because the implementation of our efficiency plan happened in February, March and April. Still a part will be implemented, but 80% has already been completed. We are not able to capture the full benefit of this plan yet in the first quarter. We should see this accelerating over the course of the next quarter. The remaining 20%, so that we have the whole plan implemented, will happen over the course of the year.
Because this depends on automation and process changes, but most of it has already been implemented. We are very comfortable that the risk of execution is very low. Finally, comment on Unimed agreement. Unimed-Rio historically has been an important partner of our company. We have had a long-standing relationship. Ever since I joined Dasa, they already had a very nice partnership that only grew over time. The rationale behind this agreement is that we managed to have a close partnership with the main players in Rio, which is an important city for us, and also with mechanisms in place that will make us feel really assured in terms of Accounts receivable and payment terms.
We think that this has been a good partner of our company in the past few years, and the details of the deal you probably have already seen, but that was the rationale. Being close to a relevant player in Rio with mechanisms in place that make the receiving process a pretty fluid one as we have this guaranteed account, as you probably saw in the minutes of the board meeting. Now I give the floor to Emerson to talk about the MatMed.
Cepeda. But before you do that, regarding the margin in hospitals, we have many lines in our P&L that have made a lot of progress in terms of efficiency. But we still have opportunities for further improvement, and we will see that over the course of the next quarters this year.
But there is another point, which is the heterogeneity among different hospitals, and we have to take them all to the same level. So these two initiatives will lead to increased margins with a growth of revenues diluted in our administrative costs. When you look at Materials and Medication, the cost of Materials and Medication or drugs in oncology is much higher than in hospitals. In hospitals, we work with 21%, 22%, and in oncology, it accounts for 50% of the revenue. Since oncology is growing more than hospitals, this leads to an increase in costs. But this is a good increase because the margin in oncology is pretty good. That is why we saw this percentage increase at MatMed considering the share of oncology in the business as a whole.
Thank you. The next question was Yan Cesquim with BTG Pactual.
Good afternoon, Pedro. Good afternoon, everyone.
I would like to ask two questions. The first question is related to working capital. I would like to understand if you expect that in spite of cash generation in the first quarter, the impact of these external factors, do you expect that this year will still be a break-even year with cash generation? The second question, which is also related to cash generation, is regarding working capital. I would like to understand more about the timing for normalization. Was that something isolated in the first quarter and that things will go back to normal in the second quarter? I would also like to understand a little bit more if this swing, this variation is coming from one single payer. So I would like to understand a little bit more about the size of this impact and when we should have that normalized. That is it. Thank you so much.
Thank you, Yan . As I said, we see that as something that is isolated. It does not really change our vision for this year. The good side of it is that this extension of our accounts receivable was mainly with insurance companies with good credit risk, and we are pretty sure that we will receive these payments. Another positive note or information is that this is not concentrated in one single insurance company. We have actually a set of 10 insurance companies, which for different reasons, some had delinquency or delays in payments or different reasons. So we are very much focused on addressing this issue. I would expect that things would normalize over the course of this year, but with a pretty positive sign already in the second quarter, not receiving the whole, but the rest we will look for in the second half of this year.
I am personally involved in these conversations and talking strategically from CEO to CEO. As I said in the beginning of our call, I am quite optimistic that we will start having improvements in this line in the next quarters.
Perfect. Thank you, Pedro.
The next question was by Leandro Bastos, of Citibank.
Hi there. Good afternoon. I have two questions regarding hospital business. You mentioned a concentration of price increases starting in the second quarter. Could you share the magnitude, the size of these price increases? That is the first question. The second question is actually a follow-up of the MatMed question. You talked about oncology and the impact in oncology, but without including oncology, how do you see this issue of prices going forward without including oncology? Thank you very much.
Thank you. I will start answering regarding the commercial performance.
Well, actually, we think that this is one of the opportunities the company will have this year. Our commercial or sales area has an outstanding performance. Well, by the way, this is one of the areas where we made important adjustments, particularly in the turn from 2021 - 2022, and we have an extraordinary sales or commercial appeal. When we look at our performance regarding price rises, we are managing to get a premium in our hospitals. This shows how we have been managing to increase prices in a challenging scenario. This reflects our value proposition. We have been developing an operating model that focuses on efficiency, average length of stay, conversion from the ER. This gives us arguments to get price increases, even in the challenging scenarios.
In hospitals, we have been able to get a premium price, and this will start having a positive impact on figures in the next quarters. In diagnostics, we have a greater concentration of price increases in the late third quarter, but price increases that have been happening earlier this year in diagnostics, we have been doing it in line with what we had forecast. Historically, a small deflator in terms of PC, but we will try to get gains in efficiency and scale, getting even small margin increases. Adding to that, we have had an outstanding performance, not only in price rises, but also new accreditations that have been happening in the fourth quarter, in the first quarter. They have a ramp-up. When you accredit them, it doesn't mean the next day everybody's going to your unit, so it takes some time.
Anyway, we expect that these accreditations should continue to speed up our growth in the next few quarters. Emerson, would you like to make any comment on oncology?
The MatMed line isn't really a matter of concern for us looking forward, because if you go back in time two years ago, we doubled the number of beds, and for that reason, we have this bargain power based on volume. Part of that is related to volume, and part of it has to do with clinical efficiency and protocol. You cannot implement all the protocols in a very fast speed. We are still implementing protocol. We measured this in the standardization of our protocols, and we have a very high KPI this quarter. Around 90% standardization of clinical protocols, and this generates further power for negotiations as we standardize our protocols considering clinical efficiency and growth in volume.
We have made good growth in MatMed . All these actions I've mentioned for hospitals, they also apply to oncology. We double the size of our business, and it grows 50% year-over-year. This also leads to better bargaining power when we have to negotiate.
Thank you. Our next question is by Gustavo Miele, Goldman Sachs.
Good afternoon, Pedro, Felipe, Glauco, and the other directors. Thank you for the presentation. I would like to ask two questions. One about each one of the BUs. If we start with Business Units 2, what were the main drivers of this growth of 15% year-over-year? Is there any backlog that was addressed? Anything that you thought was like a backlog that now has been addressed? Did that contribute to this figure?
Could you please share with us at which level of this pyramid did it grow more in premium brand or intermediate brands? I think it would be interesting to understand that, because you have been talking a lot about high brands or premium brands. Could you share any KPI regarding the performance in this niche? That would be really nice. A second question, if you allow me, more related to business unit one. Could you please give us some direction? What has been the ticket performance if we excluded recent M&A and oncology? That would change significantly, wouldn't it? You've talked a little bit about the contribution of oncology. What about the ticket? What was the weight of the hospitals that joined the company more recently? These are my questions.
Thank you for your question, Gustavo. Drivers of our growth.
We started in the middle of last year with this acceleration project, which is a multidisciplinary process. We saw that after the fourth quarter, we could once again start accelerating growth. We executed it, and we are still executing it, executing this plan with a lot of discipline. The first point, which Pedro clearly showed you, the commercial or a more active and well-structured sales area close to the business, seeing where important opportunities are, which are the opportunities which in addition to increasing volume, we can also increase our margin. With that, we have a greater revenue per square meter, better using our assets. So this is a very positive growth that brings profitability, and that's why we are able to preserve and recover our gross margin vis-à-vis the last quarter. We have a second front or efforts which are more related to operations.
Managing service offers, creating service offers, converting schedules, also using the digital now with this platform now that is increasingly connected or integrated in scheduling. We have a growth in some high growth levers as mobile care, vaccines. So there's a number of activities in terms of managing conversion and so on, which will also bring revenue and most of them in already existing assets, thus with a lot of profitability. So bringing together the sales front or commercial front with optimization of the use of asset and conversion of consultations, we will grow in profitability. Talking a little bit about different segments. We are still growing stronger in the premium segment, so this is still an important growth lever above our average lever. In addition to Alta, that has this outstanding growth.
In other segments, we have a very similar growth between executive and standard as we break them down here. No one is really standing out. We have been able to grow in all of them, and we are really trying to meet the needs of the insurance companies so that we grow where they need it. I think that's it. Thank you.
Just to make it clear, Alta still represents a small share of Diagnostics. So in order to have this 19% growth, this means that all brands have been growing very significantly. So we grew in standard and executive brands and premium is higher than the other ones. But the other ones also grew a lot in the first quarter as a result of these levers and also denavigation, which we have been working on in our company. So it was not a backlog, it wasn't something isolated.
We expect to grow at good rates in the next quarters.
Regarding the average ticket, Gustavo, when we remove the effect from oncology, when we remove the effect of the operations that joined our business more recently, looking at the mature segments where we have complexity and mix already, the main action here is commercial sales, and we have a ticket that is slightly above inflation rates when we look at those operations.
That was very clear. Thank you so much.
Ladies and gentlemen, just remind you, if you want to ask a question, just press star one. Our next question is by Ricardo Boiati, Safra Bank.
Hello, good afternoon. Thank you for having me. My question, I have a follow-up regarding costs. That MatMed point was very clear, but in Business Unit 2, there was a growth in expenditures with staff.
I know you have less revenue because of COVID, but is there any other factor that explains this cost pressure regarding personnel with staff or over and also general expenditures for both business units? Could you please give us more details? The second question is related to oncology. You mentioned in your release and your presentation some services that have been implemented. Could you please give us more details? What exactly is being done, and how much room do you still have for the implementation of new services and internalization of services that so far were outsourced to other players?
Ricardo, regarding cost with staff in BU2, the main thing is negotiation with the union. We have a curve. We have some peaks of inflation rates last year. The impact of negotiation with unions in important cities is way above current inflation rates.
We carry that cost in our P&L, and we are trying to offset that with all the productivity actions, keeping a positive margin forward. Regarding oncology, some hospitals that joined our system still had outsourced oncology services, and now we have in-house services. It is not really relevant for oncology as a whole. That is what we meant with that point.
Okay. Thank you.
The floor is yours, Mr. Bueno.
Thank you everyone. As I said, we are really happy with the records we broke in this quarter and really aware of the work still to be done. We will go deeper in our growth levers, sustaining the growth rates we have had, gaining more share, trying to improve the gross margin in hospitals, accelerating the dilution of G&A with a big focus on capital structure, particularly improving our working capital and accounts receivable.
We are very much focused on having improvements in these areas in the next quarters. Thank you very much and I wish you all a great weekend.
Dasa's earning conference call for the first quarter 2023 has ended. The investor relations area is available to answer any other questions you may have. Thank you all for attending and have a good afternoon.