Good morning, and thank you for holding. Welcome to Viveo's conference call to discuss the results of Q2 2022, and the first half of 2022. We have here today with us Mr. Leonardo Byrro, CEO, André Pacheco, VP for Strategy and New Business, Guilherme Goulart, CFO, Flávia Carvalho, IRO and M&A Director, Thiago Liska, Diagnostics and Vaccines Director, Wilson Schwarzmann, Commercial VP for Distribution and Logistic Operations, Renan Herédia, Commercial Director, and Flavio Leão, B2B Services Director. We inform you that this conference call is being recorded, and all participants will be in a listen-only mode during Viveo's remarks. After which, we will start a question and answer session, and at that time, further instructions will be given. Should any of you need assistance during the conference call, please press star zero to reach the operator.
This call is also being broadcast simultaneously over the internet via webcast and can be accessed at ri.viveo.com.br, where you can also find the slide presentation. You can flip through the slides during the company's remarks. The replay for this conference call will be available right after it ends. We kindly remind you that if you're listening to the conference on the webcast platform, you can send your questions to Viveo, and they will be answered during or after the call by the IR team. Before proceeding, let me mention that any forward-looking statements that may be made during this call relative to the company's business perspectives, projections, operational, and financial targets are based on beliefs and premises of the company's management, as well as information currently available to Viveo.
These forward-looking statements are no guarantee of performance, and they involve risks, uncertainties, and assumptions, and they refer to future events, and therefore, depend on circumstances that may or may not occur. Investors and analysts must understand that general conditions, industry conditions, and other operational factors may affect Viveo's future results and may lead to results that differ materially from those expressed in said forward-looking statements. Now, I would like to hand the conference over to Mr. Leonardo Byrro, the CEO of the company, to start his presentation. Mr. Byrro, you may proceed.
Good morning, everyone. Thank you for attending our conference call to announce the results of Q2 2022. I'm going to go briefly over my presentation, and then we can open for questions. Let's start on slide number three. Here, I have some important achievements of the quarter. First, our net revenue. There was a nearly 33% increase year-over-year, reaching nearly BRL 2 billion, and BRL 3.8 billion for the first half of the year, maintaining our 30% growth rate in total, and our target to grow nearly 15%. We closed the first half of the year at 14.1%, in line with the previous years.
Our gross profit also was up nearly 48%, reaching BRL 324 million, and BRL 622 million for the first half, with an accumulated margin of 16.2% in the last six months. Moving forward, we're going to see that the growth of this margin is much due to our new acquisitions and the changes in our business mix and Viveo's ecosystem. Our adjusted EBITDA was up 52.2% year-over-year at BRL 176 million for the quarter with a 9% margin, and 8.9% for the first half, reaching BRL 343.4 million in the first six months of the year.
Our net income was BRL 54.3 million. It was a 30% decrease year-over-year, particularly impacted by financial expenses and some cash effects that we are going to describe later. For the first half, we reached 22% growth, reaching nearly BRL 154 million in net income. Our cash cycle is still superior to that of last year, particularly driven by stocks, as we are going to see. We are still 11 days over the levels that we want to be. In quarter three and four this year, we will be working to recover our cash cycle in line to what we had in the past. We have several initiatives that will help us evolve in our stock management in the coming quarters.
With all these results, despite this, we still reached an ROIC of 22.4% when we look at quarter two, which is higher than our ROIC for 2022. We are still executing with a lot of discipline, and we are going to see improvements in these numbers in the coming quarters. On slide number four, here we have the acquisition of the handlers for the quarter. Of course, we will start to see this throughout quarter three. We still have not seen any effects, but in quarter four, we expect to have all of them 100% incorporated to our results. This is another services vertical that we are adding to our business with a combined revenue of nearly BRL 450 million and a pre-synergy EBITDA of BRL 90 million.
That is another very important service that we are providing to our customers, a critical activity of handling of sterile items, reinforcing our strategy to become a provider of solutions and services and not just products. On slide number five , we have the quarter highlights. We announced the acquisition of Boxifarma and PHD. Just to recap, Boxifarma reinforces our strategy of direct sales to patients, together with Far.me, with the important presence, not just in the south of the country, but also with equipment and machines and technology that places us in an even more distinguished position to be able to serve our patients. PHD is here to reinforce our strategy to grow in materials, high value-added materials, and I am going to tell you more about how important this has been to improving our gross margin over time.
The other important achievement was the completion of the acquisition of Profarma, our largest acquisition of 2021, which was announced in August, and the closing was on June 1st. This was one of the best movements that we took on, the closing of the operation. Today, we have all the teams and the main leaders since June 1st, 100% integrated into Viveo. Actually, some of you had the opportunity to interact with the management in Viveo Day. We have Wilson here today with us. He used to be the CEO of Profarma Specialty, and today is our VP for hospitals and clinics. All the rest of the company's team is 100% integrated since day one. Systems and processes is something that will happen over time, but the team was integrated right away.
The completion of the acquisition of Azimute Med, reinforcing our strength in patient support led by Flávio Leão. Also here, an important achievement when we compare our IPO one year ago yesterday. We have a very relevant proposal to advance in our services agenda. If you remember well, up until that moment, we only had logistics services through Healthl og. Today, we have two other very important services vertical. We have patient support, whose customers are mostly the pharma industry and health plans, and we provide support, monitoring services, data and insight management by monitoring patients. Now starting in quarter three and quarter four , all infusion and handling services. Logistics, technology, patient support programs, handling, and infusion are very important services within Viveo. Of our pro farma net revenue for quarter three, this will account for 8.5%.
I always said that we wanted to reach 10% in services, so in quarter three, we are expecting 8.5%. This is a very important achievement for the quarter. Another important highlight is the launch of the Prevena brand. As we are adding new businesses, new companies, new brands, we are also very focused on integrating this into our ecosystem and simplifying our customer offer, simplifying the way we present our offer to the customers. We took on an important movement. All these brands that you see on the screen on slide six, seven brands plus Tecnocold Vacinas, our vaccine brand, they now become one brand, which is Prevena, that we recently launched in quarter two. Prevena will have a very relevant role to work in this ecosystem.
Vaccines will be added to this channel, not just because of the similarities, customer service, and the needs of our customers, but because it is going to be the brand that includes everything related to prevention and Viveo. Vaccines have everything to do with prevention. Over time, we will be seeing other movements in terms of simplifying our brand architecture so that we can have very clear-cut solutions and brands with better and better performance. We will also have other news to announce, our relationship and loyalty program, the Prevantage, and we have many initiatives that we will implement in the coming quarters. On the next slide, we have the synergies, something that we communicated in quarter two. Our target in terms of synergies is BRL 111 million between 2022 and 2024, and we are going to be reporting the capturing of these synergies.
Of the BRL 12 million estimated for 2022, we have already captured 34% in costs and expenses over the course of the quarter. We are in line with the expected. On the next slide, we have two important highlights of subsequent events that we are expecting after the closing of the quarter. We achieved an AA rating from Moody's, so we had an increase in our rating. This is very important for us today in Viveo. We had our fifth issue of Debentures. Aiming to reduce the cost of our debt, we were able to issue BRL 1 billion at CDI + 1.60%, comparing to a rate of CDI + 2.1%, which we ran in the quarter. We will keep pursuing the best balancing of our debt in the next coming quarters. Finally, in sustainability, we have many advancements that make us really proud.
Here we have some highlights. For example, we have our anti-bribery systems plus our governance pillars. This is an important certification. ISO 37001 is gaining force globally, and it certifies all our anti-bribery practices and management practices in the company. To reduce greenhouse gas emissions, we had the purchase of our thermal fluid heater. We are replacing fossil fuel with plant-based fuels and our biomass-powered boiler in Blumenau. This will bring us not just sustainability and eco-efficiency gains, but also in cost reduction. Only with reductions in gas consumption, it is about BRL 300,000 per month. Also our diversity and inclusion indicators. This is another very important front for us. Here we have some highlights, particularly the increase in the number of women in leadership positions in the company in the past two years.
Now it is over 20%, and we also have other initiatives led by our people and the organization, which also make us very proud. Finally, we have our growth initiatives. We are always aiming to be aligned with the growth levers that we have in Viveo. Hospitals and clinics, we keep developing new suppliers for high value-added materials. Suppliers that today do not have a national presence, for example, Bedal, which is a product that was co-branded with the Cremer brand. Also new business models and partnerships with the pharma industry in immunoglobulin, Clexane, dipirona, and other business models that we are using to differentiate ourselves. Not just working differently, but also adding new suppliers that we did not have in our ecosystem. In retail, we are launching a new brand, our Tops brand, with the contribution of the PAW Patrol franchise, one of the most popular in the world.
In oncology, for one year now, we have dedicated teams for these channels. In oncology, we grew 47% quarter-over-quarter. This is organic growth, mostly in small and medium oncology clinics. In the public market, we also had a 17% increase in the contracts in our portfolio, always maintaining our discipline in terms of cash cycle and executing our organic growth strategy. Now I will go over the main financial results, and then we can open for questions. Let us start with our net revenue. In hospitals and clinics, we had an organic growth of 13% and 31% in total. Here the highlights are the acquisitions, the growth in oncology, and in the public market contracts, and also products as we are reducing our base of EPI products, which were related to the pandemic. We have an increase in the demand for non-COVID products.
In materials, I want to highlight that when we exclude PPE, in our materials line, we had a 30% growth in the quarter, total growth, and 19% organic. This shows that we are seeing a resumption of the sales of other items, non-COVID items, particularly driven by acquisitions. We are having higher margins, which also helps us working with a different mix of products and a broader offer to our customers. In laboratories, we had 9.3% total growth and -2.5% inorganic. Here we have a higher effect quarter-over-quarter for the COVID products, particularly tests, but also the prices of some items are related to the pandemic. When we normalize, we had 7.1% organic growth and a 22% increase in our customer base. Quarter after quarter, we are seeing an increase in our customer base.
We are at about 3,000 customers that we are servicing every quarter, and this is an important achievement for us. In vaccines, Tecnocold grew 10.5% with a higher volume of flu vaccines compared with last year, and the launch of new vaccines such as herpes zoster that we launched in quarter two, and we see a very relevant growth potential for the coming quarters. In retail, we grew 55.5% in total and 4.6% organic. Here we have the effect of gloves, which was a category that had an increase in sales last year as well as masks. When we exclude this effect of gloves and masks, we grew 13.9%. In tissues and wipes, we grew 14% in the quarter. We still have a very positive outlook for these channels.
Despite the more difficult quarter in quarter two, we are still very excited, and we are going for two-digit growth in the coming quarters. In services, I talked about the focus for services. We grew 183% quarter-over-quarter total, and 40% organic. We are still waiting for the inclusion of the handling businesses starting quarter three and the PSP, our patient support program. We only have June of the business coming from Profarma, and Azimute will start seeing the results in July. We will start seeing the results in quarter three. Now some brief comments about our gross profit. Our organic growth was 18.7% quarter-over-quarter. The companies with margins above the average of the portfolio and consolidating in our portfolio. We had growth in sales in OL. We had an improvement in the margins of manufactured products.
We are trying to pass on the prices to recompose our cost increases. We still have a gap. We are not yet where we want to be, but quarter after quarter, we are being able to reduce this effect. The growth in the service channel with superior margins in the company. The last highlight is for materials. As I said, we had an important growth from the new companies that now are in a materials portfolio. We had a superior margin for these products. They are higher value-added products that we didn't use to have in our portfolio. When comparing with more commoditized products or less technically sophisticated products, we can have superior margins as we grow the revenue from these items. This is also helping our margin in this quarter. Our adjusted EBITDA, I already talked about it.
We had an organic growth of 30%, reaching a margin of 9%, 1.1 percentage point above quarter two last year, and 1.3% more than what we see for the first half. Here we have not just the effects I talked about previously, but also the advance of synergies, particularly in internal expenses and the synergies coming from our acquisitions which allow us to improve our EBITDA margin over time. Our net income, which had a 30% decrease in quarter two and 22% increase in the first half of the year. The impact here was of net financial expenses amounting to BRL 69 million in the quarter. We also have some IOF effects that we had to pay for some payments to foreign countries. Maybe we can talk more about this during the Q&A session.
But we still have many initiatives in place, not just to improve our cash cycle and cash generation, but also to improve our capacity to generate net income, either by reducing the cost of our debt with the new issue of Debentures, also with our agenda of incorporation. Today we have about BRL 1.2 million in our balance sheet, and we have a schedule to incorporate the companies in order to make the best use, which will also improve our net income in the coming months, and many other initiatives here in our business for the coming quarters. The next slide. I talked about our cash cycle. We had an increase in our cycle, the total cycle, particularly driven by stocks, but funded by our payable cycle. They walk hand in hand. As we have more inventory, we can also establish partnership with our suppliers to finance these stocks.
What we want to do in quarter three and four is to adjust our stocks, bringing them to levels comparable to those of 2021, and bringing our cash cycle to the level of 40 days and not 50 as we are today. Despite this increase, although we are running with higher stocks, we are monitoring very closely our ROIC. So despite this, we have a ROIC of 22.4% annualized, which is higher than that of 2021. Indebtedness. We closed with a net debt of BRL 1.267 billion. We were still cash positive in quarter 1. Then due to the payment of M&As and the largest one, Profarma Specialty happened this quarter, and also the payment of some debts. We continue with our work to reduce our debt.
We had an average cost of CDI + 2.05% in quarter two versus CDI + 2.19% in quarter four last year, and now the rate is CDI + 1.6%, and we will further reduce the cost of our debt looking forward. Our leverage, when we look at the pro forma view with all the M&As in-house and, of course, all the transactions closed so far, we closed at 1.84 times our net debt EBITDA ratio, which is aligned with our management parameters. We want to stay between 1.5 or 2 in terms of leverage. So we are meeting this goal when we are in a very comfortable position, and we will keep working to maintain these levels in the coming quarters. I stop here.
This is the end of this presentation, and now we can open for questions. I have the rest of the team here to help me answer your questions.
Ladies and gentlemen, we will now start the question and answer session. To ask a question, please press star one. To remove yourself from the queue, press star two. Please wait while we poll for questions. The first question is from Gustavo Miele, Goldman Sachs.
Hello, good morning. Thank you for the presentation. I have two questions. My first question is a sectorial question. I want to understand how you see changes in the competitive environment of distribution, considering the shortage of some drugs in the industry. We are under the impression that in a more challenging scenario, the reliability of delivery becomes a more important factor for distributors.
Do you still see room for a relevant organic share gain as the smaller hospitals and more regional hospitals will need more and more efficient delivery considering the industry challenges that we see in your industry? My second question is a more straightforward question. Can you please give us some expectations in terms of your ROIC for the end of the year? Will you maintain your ROIC over 20%, like in quarter two? We understand that that is an expansion of the contracted margin as some M&As start to mature within the company's structure. Do you also expect a normalization of your cash cycle, as you said in the end of your presentation? What is your expectation for your ROIC by the end of the year? Can you share with us? Thank you.
Hello, Miele. Good morning. Thank you for your question. I will answer it, and the team can add if they want. Reliability is becoming more and more important in our industry. I think there's an important piece of data, which is that the share of deliveries, particularly of drugs in distribution, is increasing over time. The team just published some data showing another increase of the share of distributors to be able to supply and to perform. We know that this logistics is very critical to be able to supply to all hospitals and all customers.
Not just the share of distributors is increasing, they are also looking for more reliability contracts and a more long-term view. There's a growth in OL and agreements that come from a strong negotiation or a strong delivery, and now they want reliability and a longer-term partnership. Yes, this should be an opportunity for organic share gain.
Today, including Profarma, we have a little over 22% market share in drug distribution, and we do see room to grow organically in the next quarters. Regarding the ROIC, I can't really give you any guidance. We don't have a target that we want to reach for our ROIC. We want to improve and improve our execution discipline and monitor closely every month. What I can tell you is that, yes, we still see room for the businesses that have been incorporated for us to extract an even better return. For the ones that we will incorporate looking forward, they'll also have a positive ROIC dynamic for us versus the average ROIC of the company.
The combination of the businesses, so our negotiation capacity, supplier relationship, and customer relationship, and the optimization of all these companies together can still generate an opportunity for even higher return over time. These are top priorities for us in the next 12 months. Not just working on the hard synergies, as we call them, costs and expenses and our SG&A, but also the leverage between businesses. How can they generate different business models? How can they help each other? This also will give us the possibility of improving our ROIC over time.
Very clear, Leo. Thank you.
The next question is from Beatriz Shinye, UBS.
Hello, good morning. Thank you for answering our question. We have two questions. For the hospitals channel, hospitals and clinics, we saw an increase in the quarter due to the resumption of diagnostics and cancer treatments post-COVID. What can we expect in this segment looking forward? Should we see more growth because of the backlog of procedures, or is this normalized already? The next question is about the cash cycle. We saw in your results a higher level after quarter one, and you explained about the stocks in your release, but we want to understand about your receivables. Was there any worsening of the negotiations or the M&As?
Thank you, Beatriz. Thank you for your question. For your first question, in quarter two, we think this is more normalized in terms of the demands of hospitals and clinics. With the resumption of elective surgeries and the occupancy of hospitals. Our view for the second half is more stability. I think the backlog problem is already past us. It is already normalized, and we think that we will see some stability in the second half.
Regarding the cash cycle, I think our receivables, we do not see any relevant aggravation in any relevant business. Maybe there is an effect of a mix between our businesses now and a higher growth of some business units that have a better receivables dynamics. Our bad debt is totally under control. We are improving our bad debt levels over the quarter. It is much more a mix effect than an aggravation in receivables in some specific channel of ours.
Okay, thank you.
The next question is from Samuel Alves, BTG Pactual.
Good morning, Leo, André, Guilherme, and all the other directors. I have two questions. My questions are about the numbers of quarter two. My first question is about one of the EBITDA adjustments that you showed in your results. You mentioned that there was a reversion of payable taxes regarding the default collection. This adjustment is positive and not negative. I just want to understand the nature of this adjustment. This is my first question. The second question is about the CapEx amount. When we calculate your immobilized or intangible investments in quarter two, it is nearly BRL 40 million. This amount, should it be recurring? I do not know if you have the number of immobilized and intangible investments for the year for your budget, your annual budget that you could share with us.
Hello, Samuel. Thank you for your attending and your question. Hi, Samuel. Your first question, actually, that amount are honoraries referring to the default process. We actually had to litigate in the States to ensure the non-collection of the default. This amount refers to the honoraries paid for this process. Regarding the CapEx, the BRL 40 million base is very close to our annual rate. We still have a prospect of 1.5. BRL 150 million in CapEx for the year is about the 40 that you mentioned. That is where we are running at today.
Thank you.
The next question is from Gustavo Tiseo, Bank of America.
Good morning, Leo and team. Thank you. I have two questions. I want to know about your margin per segment. I think we had in mind some values from the past, and I want to understand if they remain stable or if there was any reclassification. What is the distribution like? Are you having any difficulty with the competition? Are you being able to meet your margin expectations, and is it aligned with the margins that we used to see in the past? Also for M&As, is there any update? We see that the interest rates are increasing a lot. Are you having difficulty negotiating, or is this actually speeding up with more interesting prices? Are you planning other acquisitions for this year? Also a little bit about your pipeline.
Hello, Gustavo. Thank you for your questions. Regarding your question about the margin, we still have the same basis. That view of the margins per segment, that hasn't changed. We look at our year to date, the margin growth comes from all channels. We saw an expansion in the gross margin for all channels. We had the acquisitions and movements for all our channels. This is all helping improve the margin over time. It's a mix of factors between businesses. By growing the businesses, we have higher margins and also no significant change in the margin levels in any of these businesses.
Where we have the highest cost pressure is in one of our business units. We will have successive price increases to try to recompose our margin. That's where we have our highest impact. Of course, for each individual item, we will also have negotiations at the inflation rate that we have today. This will be difficult negotiations regarding the margin, but our mix will help protect us and protect all our channels. We are positive for all of them. Regarding M&As, we didn't see any significant changes in the levels. We have always had a lot of discipline regarding the multiples that we apply pre and post synergies. We haven't seen any sudden change or any considerable change. We do see a less competitive scenario. We see fewer people looking at the assets that we're looking at.
We always have a pipeline, and what I can tell you is that today we have less competition for acquisitions that we had in the past, but with no significant change in the price level expected.
Thank you, Leo, and congratulations on your results.
Thank you.
To ask a question, please press star one. The next question is from Vinicius Figueiredo, Itaú. Mr. Figueiredo, you may proceed.
Good morning. One question that I have is, you said this improvement in your gross margin was also in your organic operations. Even after excluding acquisitions, you still had a 1.1 percentage point gain, if I'm not mistaken. What type of initiative do you have in place? You said that you are prioritizing profitability, so what type of contract do you leave aside in the search for a higher margin?
Thank you, Vinicius, for your question and your participation. I have some points that I want to explain that are helping evolve our organic margin. First, our materials agenda. As I said, growth in materials, single-use materials, disposables have a higher margin and a higher added value. There was a 30% growth total and 19% organic for disposables. This is above the channel average, which helps pull our margin up. Public market is also a channel where we have superior gross margin levels in the auctions that we participate, and this also is helpful. We also have a very important ROIC execution discipline because we only sell to bodies and agencies where we have a high reliability and a positive receipt timeframe, a positive payment timeframe, and also the growth in logistic operations and services within hospitals and clinics, which has to do with your question.
This also helps us have more recurring businesses with better predictability, and we can operate better and have a better execution margin in this channel. The passing on of the prices of manufactured products, this is homework that we already did, and we were able to recompose the cost increase and the pressure that we were suffering. This also helps improve our margin in hospitals and clinics, because a good part of what we manufacture goes to hospitals and clinics and not just to retail.
Thank you, Leo. Good morning to all.
To ask a question, please press star one. The next question is from Caio Rocha, Bradesco.
Good morning. Thank you for answering my question or my questions. I have two. My first question is about oncology. In your release, you talk about a BRL 6.7 billion market in the first half. Can you explain the distribution of this market between hospitals and clinics, and what is Viveo's share in each of these segments, hospitals and clinics? A second point that I want to explore is how much these new products are contributing to your revenues, and if the revenue from immunoglobulins in this quarter, if we can consider it recurring.
Thank you, Caio, for your questions. André will help me answer them. I am going to start with the question about oncology, a market of a little bit over BRL 6 billion. What is the split between hospitals and clinics, and what is our share in each of them? The split between the two is equivalent in terms of market value.
What we notice is that despite being lower, the health plan channel has a more accelerated growth than the others, and we are positioning ourselves to be able to also meet the needs of health plans and HMOs. What was the second question? About immunoglobulins, of course. We have a partnership with the main pharma companies. We have a quite new model to work with the manufacturers to be able to bring immunoglobulins into the market through the RDC. This helped increase our sales. The main aspect that we are going to see in the second half is that actually starting next year, we are establishing partnerships to maintain our volumes.
Yes, this share of the market will be recurring, and we even expect to increase our share in this business, as we have been doing with other products. For example, dipyrone, for which, through our JBP models and partnerships with the industry, we are gaining a lot of agility to bring these products to the market more effectively, and we see an increase in our share.
Thank you. Just one follow-up, one point that was not so clear. You talked about the split between hospitals and clinics, and what is Viveo's share in each of them?
We have a relative participation which is higher in hospitals than clinics. One of our focuses here is to accelerate our growth in clinics, but we have a higher share in hospitals than clinics. Actually, the highest growth is coming from clinics in the past six months, but the market that has been growing the most is health plans. We have a higher share in hospitals, and what we want is to increase our share in clinics.
Okay, thank you.
To ask a question, please press star one. Please wait while we poll for questions. Since we have no more questions, we are closing this question and answer session. Now I hand the conference back over to Mr. Leonardo for his final remarks. Mr. Leonardo, you may proceed.
Once again, I would like to thank you all for attending this conference call. We continue very optimistic for the second half of the year. We will execute our strategy to simplify the entire healthcare market in partnership with our customers, our suppliers, developing new business models, and leveraging all these new businesses that we have today within our ecosystem. Not just the ones we have already incorporated, but the ones we will incorporate in quarter three now, aiming at executing our strategy, improving our ROIC discipline, organic growth, and capturing all these synergies. Once again, thank you all for attending and have a great day.
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