Good morning, and welcome to the audio conference for Oncoclínicas. At this moment, all participants are connected as listeners. Later, we will begin the questions and answers session when the instructions for your participation will be supplied. If you need any assistance during the audio conference, please request the support of an operator by typing in asterisk 0. It is important to remember that this audio conference is being recorded. I will now pass the floor to Dr. Bruno Ferrari, Founder and CEO of the Oncoclínicas group. You have the floor, Mr. Bruno.
Good morning, everyone. Thank you so much for your presence at our second earnings results teleconference. It is a privilege and a pleasure to speak to you as the CEO of the company on our results and our operational performance.
Our public offering, our IPO, which was concluded on August 10th, 2021, was a landmark for the company, which made us the largest provider of oncological treatment in the private sector in Brazil. Oncoclínicas' IPO was a process that was carefully thought of according to our strategic agenda and allowed us to capture around BRL 1.7 billion, resources that have been fundamental to accelerate even more our growth. This captation is already making it possible for us to accelerate our inorganic growth plan at a rhythm that was much faster than we had previously expected. Ever since our last earnings call, we announced four new strategic operations, which Cristiano and other Directors will detail following me. Ever since we listed our company in August, we have observed an environment that was more challenging.
The increase of inflation, and consequentially the increase of the interest curve in the country, increasing the cost of capital. Oncoclínicas was the last offering from CVM Instruction 400, and after that, things have cooled down. Given this context, we believe we are extremely well-positioned. We are well-capitalized, and we have very solid positioning in this segment of high cost of capital. We are inserted in a very resilient segment. It is in the sector which is already decisive in itself, the sector of health in Brazil. Cancer is the second most prevalent disease in the world, and it will become the first one in the next few years. Cancer treatment cannot wait. It is not something you can choose. Our results of the third quarter are proof of the resilience of the market in oncological treatments in which we operate.
The net revenue of the company increased 29% in comparison to the third quarter of 2021 against the third quarter of 2020, and we grew 32% in comparison to the accumulated of nine months over years. At the same time, our adjusted EBITDA grew 69% if compared to the accumulated amounts from nine months between years. It is important to highlight that these rates of growth are happening on top of a base of comparison that is very strong of the previous year, since our revenues grew 20% in the year of 2020 compared to 2019. We hope that this trend of growth will intensify itself even more at the rate in which our lives go back to normal after the pandemic and people go back to their normal routines, which includes more frequent returns to exams and checkups, which have been left behind ever since the beginning of 2020.
Finally, we continue strongly in the direction of our mission to expand oncological care with the highest quality for the entire country of Brazil, expanding our footprints in an accelerated rhythm. Our journey is just getting started, and since we operate in a highly fragmented market, we are sure that we will still be able to transform many other lives. I will now pass the floor to Cristiano Camargo, who is going to present himself and talk about strategic movements which we have announced in the last few months. Cris.
Thank you, Bruno. Good morning, everyone. Before talking about the strategic movements announced ever since the IPO, I would like to present myself to our shareholders, investors, and all of the other participants in this earnings teleconference. I was announced as strategic director for investor relations on November 8th.
I have a deep relationship with the company that starts in 2015, when I had the opportunity of bringing Goldman Sachs to its first investment at Oncoclínicas. Ever since, I have always been very close to all of the strategic initiatives of new businesses and of creating more value for the company, always supporting through the board, which I left recently so I could dedicate myself fully to my new function. For me, it is an honor to accept this invitation, and I make myself available to all of our investors for any contacts. Carrying on, ever since the IPO, a little bit more than three months ago, we announced several strategic transactions. The acquisition of Unity, the acquisition of Participation shareholder participation, which we didn't have before at Oncobio, which is our cancer center in Belo Horizonte.
A partnership with Unimed-BH, involving Hospital Vila da Serra, also in Belo Horizonte, and more recently, the creation of a cancer center and a partnership with Unimed Rio de Janeiro. About Unity, we announced the acquisition of 100% of the social capital of the company, or the company's equity, which is the second-largest company exclusively dedicated to the treatment of cancer in Brazil, only behind Oncoclínicas. This acquisition represents the largest movement of expansion for the Oncoclínicas group ever since its foundation. Unity has 24 units in 10 cities of Brazil, and this will allow us to enter the region of the North of Brazil, and a greater expansion into the countryside of the state of São Paulo. This operation, if it is approved, will add around 350 new physicians to our clinical body.
We also signed the acquisition for the participation of 40%, which we didn't have yet at Oncobio, which will allow us to integrate all of our activities of cancer centers in Belo Horizonte. Following the lines of the previous announcement, we also made a strategic partnership with Unimed Belo Horizonte to strengthen our relationship in the treatment of cancer for more than 1,300,000 lives covered by the largest health plan in the large city of Belo Horizonte. Both of these operations will give us more opportunities for integration and synergies in our platform in Belo Horizonte, which will cover Oncobio and Hospital Vila da Serra. Finally, we announced that on November 9th, we created a new cancer center within the structure of the hospital of Unimed Rio, located in Barra da Tijuca.
This cancer center will help us to concentrate the entire ecosystem of our oncological patients in that region. I pass the floor to Rodrigo Medeiros, who will give us an update on the integration of these units, which we are adding to our platform. He will also share a few important operational metrics. Thank you so much to all.
Thank you, Cristiano. Welcome once again to the team. Good morning, everyone. Along the lines of which Cristiano and Bruno commented on, the next few months of Oncoclínicas will involve a lot of work for the integration of the concluded acquisitions, such as Hebron in Goiânia, and UMC in Uberlândia. Mainly, the units which we expect will be incorporated once the acquisitions are closed in Grupo CAM, Salvador, Unity, and other places of Brazil.
It's important to highlight these acquisitions are depending on the satisfaction of precedent conditions, which includes the approval of competent authorities, including CADE. We have an extremely well-capacitated team that is used to this accelerated rhythm of integrations in the company, and my arrival has the objective of optimizing these processes even more, disseminating best practices between operations, and shortening the cycle for the captures of synergies. Going through the highlights of the quarter on slide five, we have the consistent growth in the volume of procedures in the third quarter of this year when compared to the same period of the previous year, a growth of 23%. In terms of net revenue, growth continues very solid, with a growth of 29.4% when compared to the same quarter of the previous year, and 6.1% of growth versus the second quarter of this year.
This reinforces our conviction that the oncological market is the most resilient, focusing on full care for patients, especially through the outpatient model. Complemented by our cancer centers is the most resilient, which allows us to capture this growth, and it is the most resilient within the health sector. I would also like to highlight the growth of our adjusted EBITDA, 33.9% against the third quarter of 2020, reaching BRL 117.6 million during the period. In the year's accumulate, the growth of the margin was 380 basis points, leaving 13.8% in the nine months accumulated of 2020 to 17.6% in the nine months accumulated for 2021. This is a function of our gains of efficiency of our operational efficiency, which should intensify even more at the rate in which our platform continues to grow, and we will be capturing more synergies and more integrations.
To finalize, I would like to show on the next slide with more details the growth of the numbers of procedures and average tickets during the period. On the graph to the left, you can observe the consistent growth during all the semesters besides growth of the average ticket throughout the year of 2021. On the right side, the graph shows a historical comparison of the number of procedures and average ticket. In the accumulated of 2021, we grew in 21% our procedures against the nine months of 2020, and the average ticket grew 8.6% during the period, reaching BRL 7,000,498. I pass the floor to Eric Alencar, our CFO, who will comment on the results of the third quarter and the accumulated period of nine months of 2021. Go ahead, Eric.
Thank you so much, Rodrigo. Good morning, everyone. Starting on slide number seven, we will present our financial results for the third quarter of 2021 and the accumulated of the nine months of 2020. The graph on the left presents the growth of net revenue. In the third quarter of 2021, it reached BRL 679 million, a growth of 29% against the same period of the previous year. And the accumulated of nine months net revenue added up BRL 1,9 34 million, 32% higher than the same period in 2020. Remembering that this growth in 2021 happened always over a base of comparison that was already robust that we had in 2020 against 2019, pointing towards the resilience of the market of oncology even during periods of pandemic. On slide number eight, we like to highlight the gross margin and the costs and expenses adjusted in the period.
On the graph to the left, we see an expansion of the gross margin in the mentioned periods, especially because of the better commercial conditions and the acquisition of inputs and gains of efficiency and synergies resulting from the maturing of greenfields, brownfields and acquisitions. On the graph to the right, we show the costs and expenses, excluding the effects of the extraordinary items during the periods. We can observe that the relationship with net revenue went down 4 percentage points, reaching 82% in the first nine months of 2021, reflection of our continuous efforts to reduce costs and to gain operational leverages at the rate in which our growth leads us to a dilution of our structure of general and administrative expenses.
On the next slide, we have the adjusted EBITDA of BRL 118 million in the third quarter of 2021, 34% higher than the third quarter of 2021, with a margin of 17.3%. The accumulated monthly growth was even higher in comparison to the previous year. The increase was 69%, reaching BRL 341 million with a margin of 17.6% in relation to net revenue. Our net profit was BRL 151 million, mainly because of the effects of the mark-to-market and the long-term incentives. Remembering that this item is only for accounting and does not have any direct impacts on our cash flow. It is important to remember that this long-term incentive plan will affect the results of the company, but it can be paid through shares that Oncoclínicas already has in treasury and that were allocated by our original shareholders before the IPO.
Excluding the extraordinary items, the adjusted net profit was BRL 47.3 million during the quarter. Another important factor that needs to be mentioned was the reduction of the net profit attributed to the minority shareholders from BRL 8.3 million- BRL 5.6 million in the third quarter of 2021, mainly given to the purchases of the shareholders in various clinics in the first semester of this year, as we informed you in the prospect of the IPO. Going on to slide 10, we will talk about debt. First of all, we will talk about our amortization schedule, which has BRL 55 million in bank dividends to be settled in 2021. On the graph below, our financial leverage reached a level of minus one times EBITDA, adjusted according to the last 12 months, especially with the resources we were able to raise in the IPO.
On the last slide, over the cash flow, we have BRL 104.6 million in operational activities impacting mainly the highest level of profitability reported in the year because of the purchase of medications that we were able to do. We used the cash flow at BRL 210 million, mainly because of the payment of the acquisition of Cebrom. Finally, the cash flow of activities for financing reported a consumption of BRL 194.7 million. With this, I finalize my contribution to this presentation, and I am available to answer your questions.
Ladies and gentlemen, we will now begin the questions and answers session. In order to ask a question, please type asterisk one. To remove the question from the list, click asterisk two. Please wait while we collect the questions. Once again, in order to ask questions, please type asterisk one. Our first question is from Leandro Bastos, Citibank.
Hello, everyone. Good morning. I have two questions from our side. Most of them are connected to the point of normalization of the number of diagnoses and the number of new consultations. We want to know how you are seeing this curve of repressed patients. That's the first question. Then about the ticket. Given how the negotiations are running with the providers, and how are you capturing these gains in terms of the average ticket?
Hello, Leandro. Good morning, and thank you so much for that question. This is Bruno Ferrari speaking. I'm going to answer your first question in relation to the normalization of the first consultations. What we have seen is the growth that we already expected from our own base of patients, of new first consultations.
We do not see, and this is an effect not only in Brazil, but it's an effect that we have seen in all of the other countries as well, where we have relationships and partnerships. We see that the same number of lost diagnoses has not come back, which we expected to come back immediately, but it will come back gradually now as life goes back to normal, as the vaccinations are applied in everyone. This effect has not yet reached us in our clinics. We are expecting that, during the next few months, it will happen, and we are prepared for that.
Leandro, this is Eric speaking. Thank you so much for that question. In relation to the average ticket, if you look at the last nine months of this year in relation to the last nine months of last year, the growth was 8.6%, relatively in line with what we expected. But if you look at the third quarter of 2020, the growth was 6.4%, a little bit lower than what we expected. What's mainly behind this is the repressed demand and a repression of the adjustments.
Because of CMED, a few plans were delayed. Because of this, we are still optimistic in relation to the growth of the average ticket. A good thing that we can mention is that from the 30% top line that we had in terms of growth, most of it came from procedures, which is much more healthy for the growth of our revenue. So it's much more based on operational growth and higher charges on treatments.
Thank you, Bruno and Eric.
Our next question is from Vinicius Figueiredo, Itaú BBA.
Good morning, everyone. My question is connected to the previous question. I wanted to ask about the KPIs and new treatments. I understand that you have a CAGR to demonstrate the growth of the repressed demand that came during the pandemic. But if we also look at the growth that it represented under the third quarter, how does that align to the consolidated numbers of procedures? What is your expectation for the acceleration of the KPIs, translated into a higher volume of net revenue? And also what you have seen in terms of the new types of patients that are entering into the company. Do they have the same profile, or do they have diseases that are in more advanced stages? Maybe you could comment on that. That would be very interesting. Thank you.
Thank you, Vinicius. Well, first of all, once again, the growth that we were expecting within the base, we haven't yet seen it. We haven't seen the lost patients from last year arriving yet. This, of course, will be reflected in the same profile of patients. So, since we collect clinical structured data, in a short period of time, we will be able to demonstrate if there has been or not a change in the type of patients or in the stage of the disease of the patients that are arriving as their first consultations for the group. But the vision, without a deep analysis of the data, is that we have the same profile, the same kind of patients, and the same kind of diagnosis is happening.
What I would add, Vinicius, this is Luciana speaking, is that when we look at the evolution of the number of procedures quarter- over- quarter, in the sequential levels, we have seen an acceleration. So if we look at the evolution of the 1Q 2021 for the 2Q, and after the 2Q to the 3Q, we see a trend of acceleration in the sequential in quarter- over- quarter within the same year.
So that also indicates a trend of acceleration. We believe that it will obviously be gradual at the rate in which new people will be going back to their normal routines and will be making their exams, their checkups, their routine checkups, and they will start scheduling their consultations with the general clinicians, the specialists as well. So that's a movement of going back to normality, which we don't think that it will be. It will be a lighter movement that should happen over the next quarters. That is our vision.
Thank you.
Our next question, Vinicius Ribeiro, UBS.
Good morning, everyone. Thank you for the questions. Actually, I have two questions from our side. First of all, if we could discuss the gross margin mix. So there were some sequential improvements. Maybe we could explore what exactly would be the reasons behind this improvement, if it is an eventual increase in the mix of the number of procedures or if there are negotiations with the payers? And the second question, in relation to 2022 about the price of the procedures. You already said that the medications have a component of dollars and a series of factors that are not necessarily only associated to natural inflation. Could it be possible for us to imagine that the expectation that we had for the growth of procedures and other variations can be affected by different macroeconomic factors? Thank you.
Hello, Vinicius. This is Eric speaking. Thank you so much for those questions. The gross margin, as you yourself said, has consistently been improving at 32.2% for these percentages that we saw. If we were to break down these improvements, the news is good here because it's mostly because of operational efficiency, mainly along the lines of mat/med because of the commercial conditions that we have. We're not improving the gross margins because of the higher ticket. This makes the company more sustainable, especially during this semester, Vinicius. There was a higher growth in the clinics that had more profitability in its gross margins. This has been positive.
This main driver is a structural driver related to mat/med . In relation to your second question, I think it makes a lot of sense since Brazil, in the last six months of the year, changed its bench markers completely. What can I tell you about that? Although initially we look at the item medication very connected to the dollar, in Brazil, this is a very regular process, and the prices in itself are predefined by CMED. That protects us from the risk of any FX, which in any other scenario would exist.
So in that sense, we're protected. In relation to increases in the price of medications, this brings us to the next chapter, but of course, it will be a little bit different than what we imagined because the conditions in Brazil changed. We need to see how we're going to work with this, but we're going to keep you posted whenever we have new information on this.
Perfect, Eric. Thank you so much.
Our next question, Joseph Giordano from JP Morgan.
Good morning, everyone. Thank you so much for hearing my question. Two questions that I wanted to explore with you. I think the first thing is that you're expanding a lot of the cancer centers, and I wanted to understand how does that change the CapEx dynamic that the company has, and if we should think about other investments for the next few years. The second question, looking at M&As, do you have anything in relation to timing related to CADE and the percentage of volumes of procedures?
Hello, Joseph. This is Cris. Good morning. About the cancer centers, our strategy follows what we've been talking about, that it's selective.
We are always going to establish, or we're always going to try to establish the cancer centers in locations where we already have a minimal critical mass of patients that are treated by our outpatient system, which today we forward to outsourced services. That's how we do it, because that is how we are able to minimize the risks of demand of these ventures and shorten the ramp-up time of these operations. We always do the cancer centers where we already have observed that there is a repressed demand for treatments in the hospitalization regime, especially for the patients that we have.
On CapEx, I think it is important to remember that our model is very flexible and adaptable in the sense. We can make based on an operation that is a greenfield, it can be a brownfield, it can be a partnership with the hospital, according to the formats that we announced recently with Unimed Rio, so that we can build a cancer center unit within a hospital that is already operating. This makes sense for us, because we will leverage based on an infrastructure that already exists. It can be a brownfield. In this specific case, it can be a remodeling of one of the floors of the hospital, one of the Unimed hospitals. From our point of view, the CapEx is very optimized.
For the hospital, it makes a lot of sense because, of course, having oncology will increase the mix of complexity for hospital complexities and operations. It is a win-win situation for both parts. With this kind of partnership, the investment is not so asset heavy as it would be if we were to build a hospital unit from 0. That is how we see the strategy. It has to be case by case, depending on the demographics of the cities where we are operating, based on the critical mass of patients that demand this kind of assistance. We will analyze all of this based on CapEx, which will be made. Remembering that the strategy of cancer centers is not a strategy directed to capture more patients or to direct the flow of patients to Oncoclínicas. The path is the opposite of that.
When we go to cancer centers, we want to be able to accompany those patients along the journey, the entire journey of treatment. Instead of sending that patient to an outsourced party, keep them in-house and treat them in-house.
Actually, Cris, if I could complement, this is Bruno speaking. The cancer center strategy is to respond to a demand of our outpatient centers for our own patients. As you saw, although we finalize the entire journey of the patients, independent of them being part of our cancer center or not, it helps us to complement the level of services that we offer in our outpatient center within these units that are highly specific. Once again, specific to oncology care. They are complementary.
This is Eric once again, just to complement on your question. We ended up creating a very robust pipeline to sign deals to generate an expectation in relation to the whole. The item that we have the most is related to our M&As. It is related to the CADE regulated assets. Because it is regulated, we have to respect it. As a rule, it is a little bit faster for different processes. What can I really tell you? It is that, as you know, we closed our M&A, so we have Unimed Gerais de Minas , and CLION. CLION is on a more advanced stage, and CTC Médico is also starting its process now.
Our next question is from Beatriz [Abreu].
Good morning, everyone. Thank you so much for receiving my question. If you could clarify better how you see organic growth and inorganic growth for the next year and for the next quarter. I think that would help us a lot. How much did you grow in one quarter and year- over- year? Just to see if it is exactly what you expected for organic growth, and if there were any expectations for organic growth, especially with the new options. Just to complement, a second question, what do you expect, or do you expect any change in terms of the incentives to diminish the volatility of the bottom line? I guess there would be two questions.
Thank you, everyone. Beatriz, this is Eric. I am going to talk to you about the top-line growth, and then I am going to pass the floor to Cristiano, who can answer you better. The Oncoclínicas group, as I said, although it is based on the year 2020, where we grew a lot in relation to 2021, we were able to grow in the last nine months, 31% in revenue.
That shows the resilience of the market of oncology. Most of this growth was organic, especially because the entry of the M&As, it took a little bit longer than we imagined. For organic projection, for what we see, we are very optimistic because as Bruno said, he already alerted us that we did not go back fully to the diagnoses. That will affect us, of course. In relation to the organic, everything changes because, in fact, we internally overcame our first impressions. CTC, CLION, IOMC, Cebrom, and now Unity with 24 clinics. This made the group, the Oncoclínicas group, took us to a new level. We have excellent perspectives in relation to inorganic growth, and the pipeline continues. The good news is that even if we close some operations, we will be looking for new ones. We have very positive perspectives in this case.
Entering in the balance, as we mentioned, it still depends on us closing, and the closing depends on us fulfilling the regulatory aspects that every country needs to do.
Beatriz, this is Cris. About your second question related to volatility, in relation to the long-term incentives plan. How does it work today? How does it mechanically happen? The entire stock of what is already vested of these phantom shares, we have this mark-to-market process at every quarter, which is a function of the variation of the prices that the company has.
What we are doing now, we already started to address this issue, and it is that at the rate in which it is already vested, and remembering that the company has a stock of shares in treasury that were allocated by the original shareholders pre-IPO for that reason, the company has already begun to liquidate that vested share with the beneficiaries, paying according to what was initially foreseen. The company will clean out its base and its stock of phantom shares that are vested, and later, gradually, less and less will have these vested phantom shares. That will be subject to this variation in the mark-to-market. The trend is that over the next quarters, a phase-out will happen in relation to the stock.
Once the vested ones will be liquidated through shares, and everything that is vested as well, when it becomes vested, will also be liquidated in actions and shares. That will be, of course, be subject to lock-up rules, and then the balance will disappear over time. Once again, this is something that is related to accounting, but even then, the trend is that it will disappear over the next quarters.
Thank you, everyone. That was clear.
We will now close the questions and answer session. We would now like to pass the floor now to Dr. Bruno Ferrari for his final closing comments. Bruno Ferrari, you can go ahead.
Thank you once again. I would like to thank everyone for their presence in our teleconference and our earnings call, and for the questions that were asked. With this, we close our earnings call, and we are available for any questions at another time. Thank you so much, and it is a pleasure to be here with you all.
The Oncoclínicas audio conference is closed. Thank you everyone for your participation. We wish you a great day, and thank you for using Chorus Call.