Good morning and welcome to the audio conference of Oncoclínicas. At this moment, all participants are connected only as listeners. Later on, we will start the session of questions and answers when this instruction will be supplied. You should remember that this audio conference is being recorded. I would now like to pass the microphone to Bruno Ferrari, Founder and CEO of the Oncoclínicas Group. Dr. Bruno, please go ahead.
Good morning to everyone and welcome to one more teleconference of results of Oncoclínicas. As you know, we continue in a period of transition and internal adjustments. These adjustments, which will allow the company to become stronger and stronger as we go forward and more sustainable with cost-efficient solutions for all the participants in the health sector. I have conviction that we're on the right road, even though there's a certain price to pay in the short term.
Above all, in the deceleration of the growth of our revenue and what this implicates in margins. These are impacts that we believe are temporary within a strategy designed for prioritizing the preservation of the generation of cash so that we can therefore later go forward to grow at a second moment. Looking at slide number three, we see that in the first quarter of 2025, there was an expressive improvement in the profile of the generation of cash of the company. The first quarter of each year is seasonally a weak quarter in the generation of operating cash due to the lower volume of receipts and the higher pressure for payments. Even so, due to the initiatives that we have adopted in the company in revenue, costs, expenses, and discipline in CapEx, we have evolved in an organic consumption of BRL 284 million in 2024 for BRL 152 million in 2025.
On the next slide, as a result of this strategy of prioritizing cash flow, we have continued to reduce our exposure to payers with a lower rate of conversion of revenue in cash, which has brought us to a lowering of growth year on year. In fact, a falloff in the sequential comparison. This growth of 2.3% annually is quite a bit below the amount that we could grow. Again, what is happening is that due to a design and strategy of our own until we finished the cycle of adjustment, which we started in the third quarter of last year. We also continue deepening the wide-ranging program of cost reductions and expenses. It started in the third quarter of 2024, which has already resulted in more than BRL 34 million in savings in the first quarter of 2025, as we can see on slide five.
In spite of this effort in costs and expenses, the lower growth in revenue growth of the company year on year, with in fact a falloff in the sequential comparison, has pressured our margins in this quarter, as we see on the following slide, slide number six. Some effects, non-recurring effects in expenses have also contributed to this slow, weak performance in the quarter. We are looking at a reversion of this dynamic in the next quarters as we continue to substitute revenue that we have let go of and changing it for new revenue with a dynamic of working capital, which is more favorable. Also, as a measure of these adjustments in costs and expenses end. In slide seven, we see that the strategy adopted by the company has been efficient in maintaining the trajectory of stabilization of our net debt while the transition of revenue occurs.
There has been a clear change in the cycle from the third quarter of last year. Even though the transition is still impacting our P&L, above all in margins, the dynamic of generation of cash and organic variation of the net debt has changed in an abrupt way and for the better. Finally, and no less important, we should mention the diversification of our revenue, which is evidenced in slide number eight. See that the company has been improving its profile of revenue through a strong diversification. Prior to passing the word to Cristiano, who will cover the rest of the presentation, I would like to once again thank you all for your, for all our patients, our doctors, our collaborators, partners, and investors who have supported us permanently in our mission, our daily mission of winning the war against cancer. Thank you all very much.
Thank you, Bruno.
Good morning to all. Following along on slide nine, I would like to point out one of the principal results of our commercial policy, which is more selective and we have adopted during last year and which continues in effect. We see a large and consistent evolution in the volume of receipts in cash in each quarter. As these receipts have increased as a proportion of net revenue, this is reflected daily in a dynamic working capital dynamic, more healthy for the company with a better cash flow. Looking at slide 10, we can see the evolution of our procedures and average ticket. Volume of procedures in the first quarter of 2025 grew by 3.3% year on year. A deceleration in relation to previous periods principally due to our strategy of the reduction of exposure to payers who are more intensive in working capital.
Again, as a consequence of this strategy, the average ticket for treatment has fallen sequentially, but has maintained a tendency of growth when compared to the periods of the last 12 months. On slide 11, the gross revenue of the company reached approximately BRL 1.7 billion in the first quarter of the year, growth of 2.3% in relation to the same period of the prior year. In the period of the last 12 months, the growth has been 10%, lower than the average growth, historical average growth of recent years. It is worth remembering that in previous years, we worked out with growth, inorganic growth coming from acquisitions, as well as organic growth, which is more accelerated than that observed starting in the third quarter of 2024. Similarly, on slide 12, we have growth in the revenue, net revenue in the same levels as gross revenue.
We analyzed the period of last 12 months ending in this first quarter. This indicator also remains in line with the historic levels of the company. In relation to the PCLD, slide 13, we see a stabilization of the average on the level of 2.6%. Due to the dynamic of events, quarterly events and quarter by quarter, which could affect this indicator at times, either up or down, we believe that the average of the last 12 months is the best way to read PCLD. On slide 14, the gross margin reached 32% over the last 12 months, as we see on the graph on the right-hand side of this slide. This level, this lower level to the levels observed in previous years, is due principally to the commercial policy, more selective commercial policy adopted by the company, as we mentioned previously.
On slide 15, we see the operational expenses still impacted by items which are non-recurring related to the adjustments being made by the company. The loss of leverage, operating leverage due to the deceleration of our revenue has also negatively affected our relationship between expenses and gross revenue. We believe that we have arrived now at the final period of these adjustments. Looking at EBITDA on the next slide, on slide 16, we can see that there has been a significant margin compression in the first quarter of 2025 with BRL 134.3 million of EBITDA XPILP and margin of 9%. The combination of lower revenue bringing us to a lower operational leverage with the expenses that were higher as the major factor behind the falloff of EBITDA.
Again, we believe that the adjustments performed in revenue were necessary, and the impact on the P&L is a temporary price to pay for the dynamic of generation of cash of the company to be corrected in a sustainable way. On slide 17, the loss of BRL 128 million in the performance in that quarter reflects this operational performance with margins that were compressed in the quarter. On slide 18, the working capital remained practically stable sequentially in 41 days with 41 days of working capital, net working capital in the first quarter of the year. When we compared this to the first quarter of 2025 with the same period of the previous year, we see an evolution of 18 days in net days of working capital and of 10 days in receivables.
Here, we start to see the benefits of this transition of receipt of revenue, which has been implemented, which was being implemented by the company. On slide 19, we demonstrate the cash flow, operational cash flow of BRL 10.7 million in a positive generation in a quarter typically impacted by seasonality, weak seasonality of receivables. As a result, the cash flow, free cash flow prior to amortization of debts had an improvement of BRL 123 million when compared to the same period of the previous year. On slide 20, we see the leverage impacted momentarily by the margin compression caused, which was caused by the reduction of revenue. Finally, on slide 21, we see a chronogram of amortization of the debt of the financial debt and of the end of acquisitions to pay. We see that we have a cushion of liquidity in face of the chronogram of payments by the company.
With that, we close here the positive part of our presentation, and we open up for the session of questions and answers.
Thank you. Ladies and gentlemen, we will now start the question and answer session. To make a question, please raise your hand through the button on the screen in our video conference. Our first question comes from Felipe Amancio from Itaú BBA.
Felipe, please go ahead.
Good morning, everybody. Two questions from my side. First is about the payers. You said that during the presentation how this policy for diminish your exposure to certain payers that impact your results. I want to understand how representative these payers are still for the company and if you see any space for a reduction even higher of this exposure. The second question is about the average ticket. We see that the average ticket fell in the sequential numbers.
If you could explain a little bit what's behind that fall in ticket. Thank you.
Thanks, Felipe. I'm going to start by addressing your questions. First, about the importance of these payers, specific payers. It's approximately 20% of our revenue, total revenue in our evaluation. In our evaluation, we have already made almost the total process of adjustments of reduction of exposure to this group of payers. There are a few small amount still in the second quarter, but nothing that will be expressive. It shouldn't be anything expressive or anything representative. The tendency is in the short term that this group of payers will continue to represent approximately 20% of our revenue.
As far as the average ticket falling in a sequential comparison, this is a movement which is intimately connected with the reduction of exposure because in the combined of the average ticket, these payment sources, these payers represent an average ticket a little bit higher than the overall average of the company.
Thank you. That's very clear. Thank you for your answers.
Great.
Thank you. Our next question comes from Gustavo Miele from Goldman Sachs. Gustavo, please go ahead.
Hi, Bruno, Chris, Izaki, and other participants. Thank you for the presentation. I have two more questions, please. The first question, as far as working capital, there's been an improvement year on year in the days of stock, similar to close to something like seven days.
I would like you to help us separate what is an improvement coming from the lack of existence of pre-increased price increases and what is related to efficiency so that we can basically base our model looking forward what this effect will be lower. That is my first question. The second question, we showed an interesting graph of the evolution of conversion of revenue in cash at the beginning of the presentation. I would like you to give us an update for April and May, how this has been going, days of receivables, and this conversion of cash so that it is cash conversion so we can do this, how this rationalization is happening at the end of the line.
Thank you, Miele. This is Izaki speaking. Thank you for the question. I am going to talk first with the question of stocks.
Basically, all of this improvement, which we see in the days of inventory of 23 days in the first quarter from the 17 days, is basically your first point. The moment, a scenario in which this is lower and interest rates are very high, which is basically a financial decision to not make a large pre-increase purchase, pre-price increase purchase. That is basically it. As far as the conversion of revenue in cash, Miele, as the graph shows very clearly, the evolution has been consistent since the beginning of the year, at the beginning of last year, when we started to implement these initiatives aimed at prioritizing cash flow and the tendency that this continues to go forward at these levels, at these more recent levels that we have seen principally in this most recent quarter. This has been our the tonic within the company.
We know that, as was said previously in the presentation, we have a price that's being paid in the short term. This is reflected in the impact on our P&L with the margin compression. When we see, for example, what was the falloff of EBITDA on a sequential basis, and we compare the fourth quarter to the first quarter of 2025, the EBITDA has been reduced by BRL 90 million. If we make a bridge of what were the variables that caused that, of these BRL 92 million in reduction of EBITDA on a sequential basis, 73% came from the reduction of net revenue. We can see clearly that the reduction in revenue explains 80% of this variation of EBITDA in the fourth quarter compared to the first quarter.
This is a conscious decision on the part of the company, a strategy to be more selective in the exposition with these certain payers. At some point in time, we will retake the dynamic of growth, which has been happening with other payers, and to seek to accelerate our growth. This will be reflected in the EBITDA in the short term, in the medium term, however, without still having the principal variable, the conversion of revenue in cash. What we see here is this level that we recently hit of conversion of receivables into cash over net revenue maintaining itself at these levels.
Very well. That is clear. Thank you, Chris. Thank you, Izaki.
Thank you. Have a good day.
Thank you. Our next question comes from Eduardo Hezengi from UBS. Eduardo, please go ahead.
Good morning, everyone. I have two questions from my side.
The first one is about the volumes in the second quarter. If you already see this partnership with APIVIDA bringing results, and if that will recover to the recovery in the number of treatments in the second quarter in the second half of the year, and if you have any internal study about what we should expect of this partnership going forward. The second part is about the non-payments. We see that also there's been an increase as a percentage of revenue. Is there any condition about what happened? Does this have any effect of any specific payer? We'd be interested in knowing that.
Thank you, Eduardo.
As far as the volumes of partnerships of the credentials with APIVIDA, the partnership with APIVIDA, we have seen an increase, a continuous increase, both in the flow of new patients for first visits, and also, obviously, this takes time between the first visit and for that to convert into the beginning of a treatment. However, we accompany also this indicator, and this phase of ramp-up is happening. It's early for us to have an assessment, analytic assessment of this. We don't have an estimate to give you. However, what we can say is that the entrance of new patients into our units for their first visits and the conversion that normally happens in those cases at the beginning of treatments is happening.
As far as this is Izaki. Good morning. Again, about non-payments, Hezengi, the idea is the following.
The provision for non-payment for doubtful payments is a photo, but it shouldn't be analyzed only in relation to the quarterly revenue. We always bring in our presentation the picture from the last 12 months. When we look at the last 12 months, this level of non-payments or doubtful payments is stable. It's been stable for quite some time. What we observe here in this first quarter is basically the compression of our gross revenue. Since we have a lower gross revenue, naturally, this ratio grows up when compared to the last quarter. When you look at the absolute number, it's not very different in terms of the previous quarters of recent years. Having said that, we don't see anything very specific from one specific payer.
When we look at the results of the last 12 months, it's relatively stable, but it is a dynamic which continues to be under control from our standpoint, from our point of view.
Very well. Thank you. That's very clear, Izaki. Thank you, Cristiano Izaki. Have a good day.
Next question comes from Gustavo Tiseo from Bank of America. Gustavo, please go ahead.
Thank you for the opportunity. Just to understand the tendency that you mentioned of APIVIDA and the mix of products, just to understand going forward if your average ticket is going to drop a little bit in the short term so that it will later grow at the end of the year. The second question is to understand the receivables. You had a were flat in the assets, but it had an increase.
Has there been a change in any fixed revenue from these increases that the management looked at when you look at the two numbers, when you look at 38 days compared to the 100, if I'm not mistaken, from the third quarter, from the fourth quarter of last year, to understand what happened there?
Hi, Tiseo. This is Izaki. About your first question, when we observe the tendency of tickets going forward, being very careful not to make this into our guidance, we have two points to be taken into consideration. One is that we understand that the cycle of adjustments is almost completely finalized from the standpoint of exposure to revenue. However, the second point is also important to take into consideration, which is the CMED. We just had the publication of CMED, and we just started these readjustments of prices to the final clients.
Directionally, we should not see any additional reductions of average tickets. The tendency that we see in the next quarters is the readjustments starting to come through in our results. The second point, as far as your second question, we had during the quarter, in fact, during the last quarters, we see at this moment of adjustments and of the arranging of our accounts, we look at accounts from the past from several payers, which we have been able to renegotiate with them to receive these accounts, which we would not receive in the short term. We made these renegotiations to receive these things over the long term. That is why we have this increase in the accounts receivables in the long term. These were accounts that were not even in our receivables, but have now are in our receivables as long term.
We will be receiving these bills over the next few years, these payments over the next few years.
Our next question comes from Renan Prata from Citi. Henan, please go ahead.
Good morning, everybody. Thank you for taking my call. Very quickly, I just wanted to ask, take advantage of what Izaki said, the adjustment of exposure to revenue. I wanted to understand if you see for the next year any growth in margins, if this should already happen already in the second quarter, or perhaps more in the second semester, what do you expect in the way of margins and also leverage for the end of the year? Also, if you can give me an update on the partnership with the Santa Group, if we're going to start seeing results from that in the next quarters. Thank you very much.
Okay, Henan, thank you for your question.
Y our questions.
We are looking very at the cash generation for the year and the stabilization of net debt, stabilization-reduction of net debt. This is our focus. We're going to continue monitoring and following very carefully. The P&L obviously is important, but it will be, in a certain way, a consequence of that. Having said that, as I mentioned previously, the adjustments in revenue, we have already practically concluded. This sequential falloff that we have seen was a subject which, in the first quarter, we wanted to address in a way that is as quickly as possible so there won't be any overhang in relation to that.
Okay, very good. From the group of Santa, is there any update on that?
At the moment, no, but we should start to show in our release and in our revenues and non-operating expenses start to show the opening of this partnership specifically from the others which we have.
Okay, that's very clear. Thank you.
We now close at this moment the session of questions and answers. I will pass the microphone back to Cristiano for his final comments. Cristiano, please go ahead.
Thank you all very much for your participation in our teleconference, our results call. Have a good day and a good weekend for everybody. Thank you.
The conference of Oncoclínicas is now closed. We thank you all for your participation and have a great day.