Good morning, and welcome to the audio conference of Oncoclínicas. At this moment, all of the participants are connected as listeners, and later, we will begin the session of questions and answers when the instructions for all you to participate will be supplied. If you need any assistance during the audio conference, please request the support of an operator by typing asterisk zero. I would like to remind you that this audio conference is being recorded. Now, we would like to pass the floor to Dr. Bruno Ferrari, the founder and CEO of the Oncoclínicas group. Bruno Ferrari, you may begin.
Good morning to all and thank you for your presence in our audio conference earnings call. Once again, we present a quarter with assistance, operational, and financial results that are very strong. I would like to begin by highlighting the sequential growth of revenue that the company has attained.
In other words, compared to the first quarter of 2023 with the fourth quarter of the previous year, we had an advance of 6%. This growth is notable for two reasons. First of all, because most of the growth was organic. Secondly, because usually the first quarter of the year is usually less active than the fourth quarter of the previous year, given the lower number of working days. But that is not what happened this time. Still in relation to growth, I would like to highlight the advance in the number of treatments. In the first quarter, we carried out more than 151,000 procedures, a number that is 47% higher than the volume of the first quarter of 2022, and that grew around 5% in comparison to the previous quarter. A very robust volume that reflects a series of initiatives that the company has been putting into place.
Our strong action in medical relationships, attraction and retention of medical talents in an organic way, and more participation in the journey of our clients, and coming together more and more, coming closer to the health plans of offering solutions that are connected to integrated management of oncological care with cost-effectiveness, with more and more perceived value. Now, I would like to highlight the first quarter of 2023. Our EBITDA in the quarter totaled BRL 277 million, with a margin of 21.4%, more than 7 percentage points above what we observed in the same quarter of 2022. This has been the fruit not only of the company's growth, which brings operational leverage, but also of a very successful operation of the integrations, giving us more efficiency in costs and expenses. This represents a growth of 145% over the first quarter of 2022.
It is important to remember that EBITDA does not include adjustments and add-backs, but of around BRL 8 million of a non-cash collection that is only accountable of the long-term plan of incentive for the company. For reasons of comparison, the adjusted EBITDA would be BRL 292 million in the quarter. When we analyze the EBITDA of the first quarter of this year, we already have passed the mark of BRL 1 billion. Another important fact to highlight is the expansion of 2.8 percentage points in our gross margin compared to the same period of the last year, reaching a level of 36.4%, which reflects not only our continued gains in scale, but above all, larger participation in treatments of high complexity at the measure in which our cancer centers continue to be ramping up and represent a larger volume of our mix in revenue.
I would also like to quickly mention our impressive advance in reduction of expenses of the company, reaching around 15% of operational costs in cash over net revenue, resulting in efficiencies of the company and of the team of operations and finances that capture the synergies from various acquisitions that Oncoclínicas concluded and integrated throughout the last year. In other words, our gains in margins come from the growth in volume, scale, and more operational efficiency in-house. Besides that, we have net profit of BRL 41 million in the first quarter of 2022. This is our third consecutive quarter with net profit.
When we exclude the effect of the collection of the just value from the incentive plan, which is an accounting effect and not a cash effect, we reached a net profit in the first quarter, BRL 49 million, configuring the third consecutive quarter of profit and demonstrating that the company follows advancing in a combination of growth and profitability. In the last 12 months, the net profit, also excluding the effect of the just value of the plan of incentive of long term, was BRL 200 million. Finally, but not least important, we could not forget to mention in a strategic movement, which although has been a subsequent event to the first quarter, it will have a transformational impact for the company in our third largest market, which is Brasília.
We announced in the beginning of May, a strategic partnership between Oncoclínicas and the Grupo Santa Lúcia for the joint operation of all activities of oncology of both companies in the Federal District. Grupo Santa is the largest and best hospital network in the whole Midwest region of Brazil, with four high complexity hospitals in the Federal District, totaling more than 850 beds. This strategic partnership will allow the company, once approved and concluded, the immediate establishment of a network of four cancer centers in the Federal District, which will be added to our already existing 26 inpatient units. Our patients will start counting with an experience that is even more complete for services, and in any phase of treatment, supplying more agility, comfort for patients, and cost effectiveness for health plans and health insurance companies. It's important to highlight that the partnership is subject to the approval of CADE.
Before passing the floor, I would like to congratulate the entire team of Oncoclínicas, which have been delivering very strong execution of our strategy over the last quarters. Starting with our doctors and assistance teams, the pride of this company, the CSC team that supports our entire center of services, besides our operational and administrative team. Of course, to our patients, who more and more give us the confidence and the privilege to take care of their lives in the same way that we would take care of our own lives. Now I pass the floor to Rodrigo Medeiros, who will give us more details about the operations as well as the integrations of the units acquired and their status. Rodrigo, you have the floor.
Good morning, everyone. Thank you so much, Bruno, for that introduction.
Going on to the next slide on page four, we show some updates on the integrations that the company continues to execute and which we continue extracting synergies in a very satisfactory way. Most of the acquisitions are already into the final phase of extraction of synergies, except for Unity, because it is the most recent and largest acquisition with 35 units. The successful advance of integrations is very clear on the graph to the left, which shows the evolution of our operational cash expenses with the percentage of net revenue. In the first quarter of 2022 compared to the first quarter of 2023, we reduced the indicator in 460 basis points of around 19.6% - 15%. It is important to highlight two points here. First, that obviously this does not include the synergies of costs which appear in our gross margin.
Secondly, that this indicator of 15% is a level in which the company operated before all of the acquisitions carried out since 2021. A level which we said we would only reach in the fourth quarter of 2023. Therefore, we are very encouraged with the speed in which the integrations have been walking, result of the expertise that the company developed throughout these years in all the acquisitions and given our flexibility in mobilizing various internal teams at the same time. Now an update about our greenfields that are most recent. The cancer center in Barra da Tijuca in partnership with Unimed-Rio and the cancer center with Hospital Santa Isabel in Salvador, have already begun to cover patients and are in full acceleration of their operations.
On the next slide, in Belo Horizonte, in the Oncobio complex, Vila da Serra, we are very advanced in the modernization products and expansion of this cancer center to cover the growing demand. We inaugurated a new reception area that is bigger and more comfortable for our patients. We expanded the capacity and we added beds and surgical rooms, increasing and modernizing the productive areas in such a way to increase the complexity of the hospital. We also inaugurated a new space of prevention for women, and soon we will inaugurate a new center of image diagnosis. We were able to advance even more in the centralization of the purchase of hospital goods to continue to bring gains of efficiency to cancer centers. We are working very strongly in the standardization of assistance processes and corporate processes of all of them.
All of this while maintaining continuity and assistance to our patients with no disruptions. On the next slide, on page six, we will go to the financial highlights of the quarter. In the first quarter of 2023, the company grew 60.1% in net revenue compared to the same period of the previous year, reaching BRL 1.3 billion. From this growth, I highlight that more than half or 32.5% is organic. We highlight as well the strong expansion of 280 basis points in the gross margin of the quarter, reaching 36.4% compared to 33.6% of the first quarter of 2022. This expansion comes from gains in efficiency from the integrations, which we commented on previously, as well as a larger participation of cancer centers in the mix.
Still on this slide, we report an EBITDA excluding the effect of the calculation of the just value and the long-term incentive plan and the value of BRL 277 million in the quarter, with expansion of 740 basis points in the margin in relation to the first quarter of 2022. In the last 12 months, our EBITDA reached BRL 837 million, 112% higher than the previous year. Finally, in the quarter, we had a net profit of BRL 41 million in the first quarter of 2023. Given the strong growth of operations and the expansion of profitability which is potentialized by the gains of efficiency and incentives of optimization, tax optimization that company continues to execute. Moving on to the next side, slide seven, I highlight an increase of 47% in the total procedures, reaching 151,000 procedures in the first quarter of 2023.
Even in a quarter with less working days. In the last 12 months, we increased 39% the number of procedures and 11% in the average ticket, especially associated to the increase of complexity because the company has been covering larger portions of the journey, and this gives us more cost effectiveness. It's important to notice that our growth is very balanced, coming mainly from the increase in volume of procedures. I pass the floor now to Cristiano Camargo, our CFO, Director of Strategies and Investor Relations, who will present more details about the results of the quarter.
Thank you so much, Rodrigo. Good morning, everyone. Once again, we had a quarter that was very positive for Oncoclínicas, and this is evident through the numbers that I will start to detail over the next few slides.
In general, what we saw was a combination of accelerated top-line growth with the expansion of profitability, given the operational leverage and the internal work that we continue to execute in gains of efficiency. With this, we were able to grow the gross profit and EBITDA at rates even greater than the growth of the revenue, which implied in the expansion of these margins. For us, the most gratification of all of this is that the gains in profitability come above all from the execution of initiatives that are in-house and that we have communicated for several quarters that we would deliver to you all. The deliveries have been made even before the deadlines.
Starting on slide eight, we can start by highlighting the growth of 60.1% of net revenue in the first quarter of 2023 compared to the same period in the previous year, reaching a record of BRL 1.3 billion. In other words, versus the fourth quarter of 2022, we had an expansion of more than 6%, which is not normal for a first quarter, which is seasonally weaker because there are less working days. On the graph to the right, in the comparison of the last 12 months, we see the expansion of 58.0% in net revenue. This growth is given due to a combination of organic growth, which we will detail on the next slide, with a contribution of inorganic growth because of the incorporation of Unity and the other operations in our results over the year 2022.
Slide number nine shows that from the growth of more than 60%, which we had in net revenue in the first quarter of 2023, 32.5% were organic. In other words, at the base of our same units. This organic growth is at the timeline of already solid 26%, which we already delivered in the previous quarter. It is important to mention that we started considering the CAM and CLION, our network of specialty clinics of oncology in Salvador, and Cemise, our network of diagnosis, image diagnosis, and specialties in the state of Sergipe as part of the base of the same units since they were added to the platform of Oncoclínicas during the first quarter of 2022. Finally, we must highlight that the organic expansion happens as a result both of the increase in volume as well as the average ticket.
On slide number 10, I highlight the expansion of 280 basis points of the gross margin, reaching 36.4% for the period. This is due to three main pillars. First of all, the increase of efficiency and supplies with the work of constant execution, which continued throughout this last quarter. Secondly, the delivery of gains and synergy and of the costs of integrations. And thirdly, growth of the operations and cancer centers in the mix of revenue of the company. Remembering that the cancer centers operate with margins that are higher than the clinics. Because of this, the growth of our gross profit was much higher than the growth of the net revenue, 73.4% in the year-over-year, reaching BRL 470.5 million in the first quarter. To the right, we can observe the base of the last 12 months.
We also have a very solid expansion of the gross margin at around 250 basis points, indicating that this expansion is structural, as we have spoken about for some time now. In other words, our business is growing in complexity and in the most part because it is serving a base of clients that already are with us. On the slide number 11, our EBITDA with no adjustments or add-backs limiting us to the only accounting care and not cash care with a plan of long-term incentives, we were able to reach BRL 277 million in the first quarter of 2023 with a margin of 21.4%. For reasons of historical comparisons, for those who are already accompanied the adjusted EBITDA numbers, it was BRL 292 million in the quarter, with a margin of 22.6%.
It is important to notice that on the next slide, number 12, that the adjustments gave us around 5% of the total adjusted number. That has already been 26% in the past. On the next slide, number 13, our EBITDA, once again, excluding the long-term incentive plan, we reached BRL 277 million in the quarter with a margin of 21.4%, when compared to the EBITDA of BRL 113 million from the previous year, with a margin of 14%. Therefore, an expansion of 740 basis points in an interval of only four quarters. That growth was more than 145%, which leads us to a run rate in the first quarter of 2023 to more than BRL 1.1 billion.
On the graph to the right, we can observe the EBITDA from the last 12 months of BRL 837 million, a record for the company, with a margin of 18.3%, 477 basis points above the same period of the previous year. On the next slide, number 14, we reported a net profit of BRL 140 million compared to the last year, which is fruit of the growth of the operations, increase of profitability of the company, and of the initiatives which we implemented to reduce tax inefficiencies. We started to implement this ever since April of last year, and it started having effects in the third quarter of 2022. These actions should continue being executed throughout the year of 2023, since they are a wide scope project which involves a series of reorganizations in the capital structure and shareholders of the company.
In the next slide, we show the behavior of the cash flow of the company in the first quarter of 2023. As happens every year, there is a seasonal consumption of the operational cash in the first quarter, which this year was BRL 341.8 million, which we will detail on the next slide. In terms of cash flow for financing, we continue executing our liability management in this quarter that passed, even during a more restrictive scenario in the credit market, where we were able to capture BRL 366 million with a long-term debt and the same average spread of the company, which will be used to refinance the rest of the debts that will expire in 2023. We also executed BRL 14 million more in repurchasing shares during the period, BRL 133.6 million in payments for acquisitions, and approximately BRL 80 million in CapEx.
Closing with BRL 780 million in cash, a position that we consider comfortable. On slide 16, we double-click the operational cash flow, FCO, from the first quarter of 2023. As we said previously, there are seasonal factors which every year will lead us to an operational cash flow consumption during the period. This year, added to the seasonal factors, there was another one-off effect, in other words, not recurrent. The combination of these items responded for 80% of the consumption of operational cash flow in the first quarter of 2023. They will be, first of all, seasonal cash exits in the quarter related to paying medical bonuses and the payment of adjustments in the tax demonstrations. This represented BRL 83.4 million in cash exits.
Secondly, we opted for the complete liquidation of the operation which was hired in the fourth quarter of 2022, with a total of BRL 180.8 million. Since the negotiation of larger deadlines and definitive ones with our suppliers with no additional cost to the company was closed in the end of February and will impact favorably our operational cash generation after the second quarter. This settlement was a one-off effect, and as well as the seasonal aspects, it will not repeat in the rest of the year.
It is important to highlight that there was, in the first quarter of 2023, a greater necessity for working capital given the growth of the company and also because of the longer deadline of our average receiving of payments from the health insurance plans of 94 days in the fourth quarter of last year to 105 days in the first quarter of 2023 because of the scenario of high claims which the insurance health plans still are going through. However, this component had an impact of BRL 67.6 million in the cash consumption observed, or around 20%, not having been determinant. In April, according to the managerial numbers that are not audited, we observed a strong reversal in the dynamic of FCO with BRL 72 million of positive operational generation only in the month of April according to our expectations.
On slide 17, our tower of amortization for our financial debt shows itself in a comfortable position with a higher concentration of expiry dates or maturity dates for 2025 and beyond. On the last slide, we comment on our debt. We are currently at 3 x our leverage, considering the net debt over the adjusted annualized EBITDA for the first quarter of 2023. What seems like a small back turn in relation to our index of 2.7 observed in the previous quarter was already expected because of the seasonal cash consumption, which happens in the first quarter of the year. With this, we finish the presentation of results and the earnings call of the fourth quarter, and we are open now for a session of questions and answers. Thank you.
Ladies and gentlemen, at this moment, we will begin the session of questions and answers.
In order to ask a question, please type asterisk one. To remove your question from the list, click asterisk two. Our first question is from Lucca Marquezini.
Good morning, everyone. I have two questions that I would like to ask in relation to the positive results. What of that is recurrent? The second question is about the tier. We had an increase in cost. This was because of a few operators, and also about the improvements in April that you commented. What were they? Is it more on the stocks from suppliers or more on accounts receivable? Could you just comment on where that growth came from?
Lucca, good morning. This is Rodrigo. I am going to answer your first question, and then I will pass over to Cristiano.
It is the number that we had before this take of acquisitions from 2021 until now. There is no non-recurrent effect. All of this is a fruit of all of the efforts of centralization, standardization of processes, and of the shared care services lowering costs. So more and more, our results are more robust, and our expectation perhaps is a bit conservative, which is to keep this level, and depending on other measures, to have more gradual gains that are more and more scalable in this process of standardization. But in the short term, we believe that this level will continue with a few changes from quarter- to- quarter, like the inflationary effects and other measures that sometimes we need to put specific teams to accelerate certain issues, which bring us more costs in the beginning, but then bring us more profit.
This is the level that we see for the next quarters.
Lucca, to address your other question about working capital, what we observed in the first quarter was an increase, a generalized increase of the average deadline of accounts receivable going from 94 - 105 days. That is not concentrated in one or another health plan. It is very homogeneous inside of the portfolio. We already noticed that in April, which will continue in the first half of May, this above all, has been coming from the receivables. In other words, there is not yet the effect which we expect will start entering around the second quarter of the deadlines that are contractually longer and definitive with suppliers. When this effect begins, that obviously should be beneficial for the operational cash generation.
We haven't started to capture these effects yet because the new deadlines with suppliers that are longer only started counting according to the requests that we made on the 1st of March and from then forward. We haven't yet seen the effects on the line, on the component of average deadline of the payers, but it should begin at some moment.
Thank you so much. That was very clear.
Our next question comes from Renan Prata, Citibank.
Good morning, everyone. Thank you for the presentation. Just a quick follow-up about cash generation and working capital, and maybe more about SG&A. I would like to understand when CADE will approve your requests that start in this quarter, and also about cash generation expected for the year. I think that's the question. Thank you so much.
Hello, Renan, good morning.
Well, in April, since we entered the regime of operational cash flow, which we expected would start happening only in the second quarter forward, given our dynamic of cash generation that works in this way. What we have observed is that we are on track for our objective of having cash generation for the year that makes sense for that FCO conversion for an EBITDA of approximately 50%. That is the direction that we see the company moving towards. Of course, this is connected to the leverage, because as we said previously, we expect to close the year with a nominal net debt in Reais similar to the net debt which we had in the fourth quarter of 2022.
Of course, this, if we divide it with a higher EBITDA this year, should take our leverage to two lower points, something around 2.2 x of net debt over the annualized EBITDA in the fourth quarter.
Thank you. Just one more thing. The cash conversion is what?
The conversion, FCO, is pre-CapEx. It's pre-CapEx and pre-financial expenses.
Thank you. Thank you, Cristiano, and have a great morning.
Thank you, Renan.
Our next question is from Guilherme Gripp, Santander.
Good morning, everyone. Thank you for taking my question. I would like to understand a bit better what is being done to support the organic growth of the company. How much of the growth is coming from cancer centers, please? Thank you so much.
Thank you, Guilherme. This is Bruno Ferrari speaking. The organic growth comes from several lines. New patients, more incidents in the cancer centers.
There's no way to change that. So what's going to end up happening year-over-year is a higher recurrence in the chronic level of the patient. The patients that we're treating now, we will be treating for a longer period of time. This is something that won't change. More participation, and you brought up an important point, a higher participation in the journey of our patients. So we would be able to control and maintain patients in our assistance environment that we created with different lines of care that also end up attracting new physicians and more robust assistance equipment. All of these factors combined have led to our growth in a larger amount of patients.
Thank you. How much of this comes from cancer centers? If I could just confirm.
Guilherme, when we look at our participation today of cancer centers, it's around 14% of our consolidated revenue. Of course, the cancer centers have a profile, a ramp-up profile that is more accelerated than the more mature clinics. But today they have participation of around 14% in revenue.
Great. Thank you so much. That was very clear. Thank you for that answer.
Our next question is from Emerson Vieira, Goldman Sachs.
Good morning, Bruno, Rodrigo, and Cristiano, and other executives. Thank you for the space. I have three questions. The first is in relation to organic growth. I wanted to understand what is the contribution of the tax reforms that are already part of the comparison base. That's the first question. The second is in relation to the profit of a line that is a bit higher than what we expected.
Just to understand how much of this is recurrent or if it still will remain on this level for some time. That would be one question. The third is in relation to accounts receivable. If we could see the movement of expected costs, we would have a higher change in the quarter. Those are the three questions. Thank you.
Hello, Emerson. Good morning. First, about your first question, organic growth was 32.5%. If we had stayed at the base, it would have been 30%. So it's still a very robust organic growth with 2.5 percentage points of contributions in the number that we selected. Profit for minority shareholders we had during this quarter an effect of growth in the profitability through M&A, where we have a partner or a shareholder with 50%, and this impacts the division of profit attributed to the minority shareholders.
Also the recognition of a deferred tax, which was an effect from Unity where we have less units. This impacts the distribution. The value of balance and the percentage of balance in the long term. This number should be more stabilized than we imagined that anything between 15% and 20%. On the last question about the reconciliation of accounts receivable, we had in this quarter a reversal of PCLD related to Unity of around BRL 19 million, which positively impact the number. This is due to the fact that whenever we have a new integration, we apply it in a conservative way. We apply our rule of provisioning, which is very punitive, and then after one quarter is over, or at least two quarters, we finish the reconciliation process.
It is not common that we find upsides over the number that had been provisioned because we apply a very punitive provision on the initial date. That is why we have this result.
Thank you. That was very clear, Cristiano. Thank you.
Thank you, Emerson.
At this moment, we close the questions and answers section. I now pass the floor to Dr. Bruno Ferrari for his final considerations. Dr. Bruno, please.
Once again, I would like to congratulate and thank everyone for their participation in our results call and for the questions. With this, we close our presentation and results call, and we are available for any questions. Good afternoon, everyone. Thank you.
Thank you. The audio conference of Oncoclínicas is now closed. We thank everyone for their participation and have a great day. Thank you for using Chorus Call.