Good morning, and thank you for waiting. Welcome to Viveo's first quarter 2022 earnings conference call. Joining us today are Mr. Leonardo Byrro, CEO, André Pacheco , Strategy and New Businesses VP, Guilherme Goulart, CFO, Flavia Carvalho , IR and M&A Officer, Thiago Liska, Diagnostics and Vaccines Director, Renan Hervelha, Commercial Director, and Flavio Leal, B2B Services Director, and other executives. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After the company's remarks, there will be a question and answer session when further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being transmitted simultaneously through the internet via webcast and can be accessed at ri.viveo.com.br where the slide deck is also available.
Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may pose their questions on our website. They will be answered during the Q&A session or after the conference is completed by the IR team. Before proceeding, let me mention that any forward-looking statements that may be made during this conference relative to the company's business prospects, projections, operational and financial targets are based on the beliefs and assumptions of Viveo's management and on information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.
Investors and analysts should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Viveo and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'd like to turn the floor over to Mr. Leonardo Byrro, CEO, who will begin the presentation. You have the floor, sir.
Good morning, everyone, and thank you for joining us to our earnings conference call regarding the results of Q1 2022. I'll try and be brief so that we can have enough time for our Q&A session. Let's get started on slide two. We have reached the highest net revenue in the history of our company of BRL 1.9 billion , up 27.9% compared to Q1 2021. Gross profit, BRL 298 million , with margins of 15.7%, a significant growth compared to the first quarter of last year.
Adjusted EBITDA, a bit over BRL 167 million , the highest margin we've always had in our ecosystem of 8.8%. Adjusted net profit, also a record, an all-time record of BRL 99.2 million in Q1 2022, up 107.6% versus Q1 2021. Cash cycle, 49 days, 11 days more than the first quarter of 2021. And our ROIC, 21.7% in this annualized pro forma. That's our main metric in our company, as you know. Now, on slide number three, you can see our service schedule. One of the main agendas we have for the long term. We continue to evolve in the service to hospitals. We now provide general storage for 82 hospitals. We provide some type of services to them, and we also provide transportation services for 137 different industries. And we are expanding our platform to keep the service level throughout the whole country.
Now, on slide number four, you can see the highlights of each of the channels. In hospitals and clinics, we continue with a significant evolution, not only of our M&A agenda, but also our organic agenda, establishing partnerships and expanding our portfolio of higher added value materials. This has always been one of our major avenues of growth. We work with suppliers and hospitals to include higher added value products in our portfolio. Of course, this has a longer life cycle, but once we are able to introduce this into our portfolio, the returns are quite positive. So, like Medline, one of the major companies in the U.S. market, and we are establishing a partnership with them. In retail, we are adding PURELL to our portfolio, a global leader in hand sanitizer. You probably used one of their hand sanitizers during the pandemic.
Another two important growth verticals that have always been a priority for us, oncology and the public sector. In oncology, our revenue grew by 48% versus Q1 2021. That is related to the market growth, especially in certain markets and in the public sector. We create a portfolio that will be materialized in one year. In our first quarter, our portfolio closed 87% above the first quarter of 2021. An agenda that was quite intense in recent months, starting in January with the acquisition of Azimute Med, with patient support programs and technology. We want to be closer to patients and complement our portfolio here. We are still waiting for CADE, the Brazilian antitrust authority's approval. Now we closed Medcare and BEMK in February. These companies operate in the distribution of higher value-added medical products and together have an annual revenue of BRL 15 million.
Now we are announcing the acquisition of PHD. We want to expand the same category of products to other parts of the country. As I said, PHD was announced in April, the acquisition of PHD, a distributor of medical products based in southern Brazil. PHD together with Tecno4, Pointmed, Medcare and BEMK, they expand the portfolio of technical and high added-value products offered by Viveo, and together they add around BRL 165.5 million in net revenue and more than BRL 23 million of EBITDA. That is a starting point for us to expand the operation of these companies to other regions in the country and expand our partnership with major material distributors. On slide six, we highlight the acquisition of Boxifarma, which is here to add to our offer.
It has not only the hardware technology but also differentiated software offered to complement our offer, not only to patients but also B2B clients that can use this technology in hospitals. We thought this was a great opportunity to accelerate our direct-to-patient strategy. Finally, the acquisition of Life and FAMAP that we announced in April. These are companies that specialized in compounding solutions in dialysis and parenteral nutrition, yet another service that we start to offer to hospitals and clinics through specialized and personalized services. So completing the wide range of services that we can offer outside the hospital environment using high state-of-the-art technology, reducing waste and inefficiencies. That is another way to add to our value here. These are companies with high margins and ROIC above the portfolio average.
On slide seven, we are emphasizing the approval of the acquisition of Profarma Specialty by CADE, the Brazilian antitrust authority. We are very excited about that. We are working on closing this transaction, and we expect to have the results incorporated into Viveo's results soon. We have a plan to capture all synergies. We already know what to do, so we want to focus on execution here to integrate the operations of Profarma Specialty. On slide eight, a timeline so that you can see everything that was done in recent months. I will not waste a lot of time here so that we can save time for our results. On slide 10, you can see our growth, organic growth of 17.5%, which is above the organic growth that we achieved in Q4 last year. We see that things are recovering.
January and February were still timid, but March was quite strong, and we think that is the basis for the rest of the year. We got organic growth in hospitals and clinics with an increase in our oncology numbers, an increase in market share of vaccines, and higher added value materials, as we told you. We were able to accelerate the organic growth in these fronts. When it comes to Labs, we had 27% growth compared to Q1 2021. We had three acquisitions of reagent companies throughout the way, and an organic growth of around 3.5%. We had gloves and other materials that had a drop in prices around 70% below the previous year, and with a shortage of products compared to the previous year.
That was a difficulty we faced, and we think this is going to be a reality in the second quarter of 2022 as well. Excluding the COVID effect, we would have grown 19.3% organically compared to the previous year. We are still quite excited about all the possibilities of this channel, and we are executing several initiatives in this area. For retail, a growth of almost 70% vis-à-vis Q1 2021, because of the acquisition of FW and Daviso mainly. An organic growth of almost 9% that was boosted especially by gloves that had an important share last year impacting our results. If we look at only the products manufactured, because most of the products we manufacture goes into the retail channel, we would have grown 29% compared to the previous year in manufactured products.
Our services front, almost 300% growth compared Q1 2021, especially because of the acquisition of Cirúrgica Mafra. We deliver the materials either in patient's home or in the doctor's office, which goes hand in hand with our strategy to grow and expand our service base that still accounts for an important share of our revenue. In the organic front, we grew almost 25% here in services compared to Q1 2021. Gross profit. We reached almost BRL 298 million in gross profit. As I said, an organic growth of 17% compared to the previous year. In addition to the mix between channels, because as we said, we have been focusing on higher profitability channels, but we also have better margins within our channels. That can explain our margins growth. In medical materials, as we said earlier, that has margins way above that of our portfolio.
Also higher revenue in the public market segment within our ROIC discipline and our execution discipline. In this audience, we have higher margins and also improvement in the vaccines margins. Tecno4 holds margins and increased revenue from sales in the form of logistics operations. In the segment services is valued and we can get a competitive edge here. This explains how our gross profit increased so much. In EBITDA, we achieved BRL 167 million , up 55% compared to the previous year, and an organic growth of 26.9%, an all-time high in our company. We haven't yet captured all the synergies. We had higher losses in Q1 because of the entrance of these new companies, but throughout time, we'll be able to capture synergies. We have kept a benefit of reducing expenses in Q1.
An important point to highlight here is how we have treated default in Q1. As we've been saying since September last year, this has been incorporated in the pricing of all of our competitors and the whole market throughout time. Looking at the results of the last quarter, we treated this as non-recurring, and it was already much lower than in previous quarters, and it decreased even more throughout this first quarter. We have incorporated this into our pricing strategy in order to keep our competitiveness in the market. The prices are adjusting and regulating as the market passes this cost through. Now it's part of our pricing strategy, and we don't foresee any significant changes in margins from now on. In our next slide, adjusted net profit.
We have achieved BRL 99 million , almost BRL 100 million in adjusted net profit in Q1, and BRL 23.7 million here was regarding the conclusion of reports on the subsidiaries acquisition. That helped improve our net profit even further. As a reminder, we have a schedule to capture goodwill benefits. We have a stock of BRL 848 million . Profarma, another BRL 150 million. But yesterday, we released an announcement talking about how we are starting to incorporate this with an expectation of gaining another BRL 6 million . We have a schedule to capture this goodwill benefit throughout time. There are many regulatory and operational implications, of course, but we do have an agenda to capture this benefit throughout the coming years. On slide 14, you can see our cash flow and cash cycle.
We had an increase in cycle boosted by our inventory levels comparing Q1 2022 to Q1 2021. We have an increase of eight days in our inventory. We have been reducing our inventory levels because of that excess of inventory that we had due to COVID. We are reducing the inventory, but we closed the quarter with a higher stock level. We're going to make the most of this in Q2 because of the high demand that we had in March. We prepared for that high demand. We had record sales, but now we can still make the most of this higher inventory level because of the higher demands we expect for Q2. The trend is that the inventory level will go down in the coming quarters, going back to the same levels we had in previous years.
Default levels dropped in the quarter, so we had good default results. Accounts receivable, compared to the previous quarters, had an increase because of the mix between businesses and the growth in the public segments that has a long ROIC because we do not carry the inventory. We only carry the inventory when we make the delivery to the public organ. This has an impact on our accounts receivable, but the default levels remain the same. Now, some highlights of JCP and others that were made throughout the quarter. Now on slide 15, you can see our debt levels. We have a positive cash flow. We have made some payments of M&A and debts. We have an average maturity period of 4.8 years, and we are reducing, quarter after quarter, our debt cost.
In Q4 2021, we had a CDI of 19%, and in Q1 2022, we have a CDI of + 2%. We close with a leverage of 0.7x net debt to adjusted EBITDA. Even with the payout of the acquisitions that we are going to make in the coming quarters, we see that we are very close to our optimum leverage level, which is 1.5x net debt to adjusted EBITDA. Finally, on slide 16, you can see the evolution of Far.me. March was a record month for our business. We reached a total client base of 2,186. Boxifarma 1.2, PSP 785, and in spot sales, so a one-time sale of 159. We are only starting in this modality, but we already see important advances. We had a churn of 3.98% and an NPS of 89.
A slight drop compared to our previous NPS of 93, but we have an accelerated growth of B2C clients. We focused on B2B2C in the past, so now we are focusing more on B2C, and we need to improve our internal processes. This is nothing of concern. It is still a high NPS. Clinical pharmacy, a type of service that demands intelligence in our prescriptions, analyzed 736 with 5,614 medications evaluated and 210 pharmaceutical suggestions. Of those suggestions, 72% are usually accepted by patients and doctors. We are using this intelligence to decrease prescription mistakes in the pharmacotherapy services that we provide. Now we see potential growth of PSP with healthcare plans. We started working organically in April last year.
We had almost 1,000 requests in one month and more than 4,000 patient visits since the beginning, with savings of 8.3% for operators and a very high NPS in this segment. We have had about BRL 7 million revenue in this modality, which started organically last year. We continue with the integration of Memed and other digital prescription platforms. Memed has launched in May its marketplace, which is a great bet for us to have a more relevant volume of electronic prescriptions through the platform. We are 100% connected here as other players of the market are as well to start testing this this month. Now, Boxifarma. We are devising a plan to integrate these companies in the coming quarters and make the most of the synergies.
And of course, we're open to other opportunities in terms of technology and businesses that can add value to our offer to patients. There is a lot to come yet. I just want to remind you now that we have adjusted our date to try and accommodate the Profarma Specialty approval by CADE. But we want to invite you to our Viveo Day on August 6, 2022, in which we're going to share our vision for the future and give you further details about how we've been operating. Thank you very much, and now we're open for questions.
Ladies and gentlemen, we'll now start our Q&A session. If you wish to pose a question, please dial star one. In order to remove yourself from the queue, please dial star two. Our first question comes from Luca Marchesini from Itaú BBA.
Good morning, everyone. Thank you for taking my question. One of the reasons for the revenue growth in hospitals was the higher number of contracts in the public segment. Can you tell us about the potential of these public contracts, and what will be the relevance of this in the long term? Thank you very much.
Thank you for your question, and thank you for joining us. We still have a low participation of the public segment as a whole. Around BRL 25 million in size in our business and a share of around 5% of our businesses. We are quite selective in terms of what contracts and what organs we are going to work with. All of the contracts that we want to take part in will be pre-analyzed by myself and another director, always looking at the ROIC metrics.
We look at the margins, their history, their credit risk, and the inventory that we will carry for them. We are quite picky, so to speak, and we don't see this share changing significantly. I can't give you any numbers, but I don't think this is going to account for 20%-25% of our business, but only around 5%-10% of our business. That's our goal, to have the public segment account for 5%-10% of our entire business.
Great. Thank you very much.
Our next question comes from Samuel Alves from BTG Pactual.
Good morning, Leo, Guilherme, and other directors. I have two questions here. First, about your cash cycle. You were saying that there was a specific increase of inventory receivables that is pretty much related to your sales to the public segment.
Can you tell us a bit more about the supplier terms? Was that something related to seasonality, or is there any other factor impacting this? That's my first question. And the second question is about the EBITDA margins mix for your own manufacture. Did this affect your margins, or did this actually boost your margins? Thank you very much.
Hi, Samuel. Thank you for joining us, and thank you for your question. Now, about our cash cycle, our accounts payable goes hand in hand with our inventory, and that will depend on the negotiation we have with each one of the suppliers at the end of the year. We try to calibrate our inventory levels with our accounts payable levels. It's not always a perfect match, though. But we believe that we should keep the levels that we had in previous years.
In Q4 2021, we did some postponements because of the negotiations of the inventories we had in mind for Q1 2022. That is how we started building our stock inventory levels for the beginning of the year. That was the dynamic we considered for Q1, but our numbers did not change that much. In terms of EBITDA margins, manufactured products had better margins in Q1 2022, especially Cremer. We had a price increase from November last year, and in January, February, we had better margins as a result. But throughout the quarter, we had new increases in raw materials affecting our margins, so we are now increasing our prices once again to reestablish our margins.
When it comes to Viveo, we had not increased our margins as we had increased for Cremer. But starting in Q2 and especially Q3, we plan to reestablish our margins as we did for Cremer. That is what we expect for the coming quarters. We are going to pass through the prices, and we are trying to act earlier on, but this is going to last at least for the next two quarters.
Great. Thank you very much and have a great day, everyone.
Our next question comes from Gustavo Tiseo , Bank of America.
Good morning, everyone. Thank you for taking my questions. I also have two questions here. First about Profarma. Can you give us a better idea of the timeline to capture synergies? Also related to that, you were saying a 4% EBITDA.
After the synergies are captured, do you think you can get to 8% EBITDA in an asset like that? What can we expect for the long term? Now, my second question. You have had some important movements here in the pharmacy business. Do you think this business needs a longer maturity, or can we expect an acceleration of revenue in 2022 already?
Thank you for joining us, Gustavo, and thank you for your question. About Profarma, as I said, we are starting to capture the synergies in June. We have a plan devised to capture those synergies, and for distribution businesses, we have to look at the full capture throughout one year. This is going to grow in the coming quarters, but we will be able to capture the whole amount of synergies in one year.
Most of it will be captured in 2022, but some of it will be left for Q1 2023 as well. We see a possibility of an EBITDA in line with what we calculated in previous acquisitions, in which we were able to double the EBITDA margins. That is what we expect for Profarma as well. Now, we are working to connect the Pharma business with the ability to monetize delivery of materials in medical offices or patients' homes. We already had a great increase in revenues because we were already focusing on this since our IPO. But now we see a more organic growth, and yes, we can have some M&A movements, but mostly organic growth. I do not see a significant acceleration or a change in level compared to the first quarter.
As we said, we see strong organic growth, but that is not going to double in size this year. In 2023, though, we expect to see some acceleration in that area.
Okay, perfect. Thank you very much.
Our next question comes from Vinicius Ribeiro from UBS.
Good morning, everyone. Thank you for taking my questions. My first question is about post-COVID normalization. Can you please tell us a bit more about what we can expect in terms of the recovery of the diagnostics area? Is that going to have an impact on your gross margins throughout 2022? A second question is regarding the oncology segment. You said that there was some acceleration in Q1. What can we expect for the rest of the year? Another question, which is also similar.
What can we expect in light of the recovery of volumes after COVID-19 in terms of the cash cycle? Do you think that we can go back to historic levels of cash cycle right now, or is this more for the long run? Thank you very much.
Thank you, Vinicius, for joining us. Congratulations on the title of your report. I really enjoyed it. I will turn the floor to my colleague to talk a bit about Labs, and then I will give you further details about your second question, okay?
Good morning, Vinicius. You are asking about margins. Margins are quite stable right now. We had great discipline in passing through prices. The industry usually passes through prices in February to customers, and we did that in March, and we were able to sustain margins in the analytical and pre-analytical channels, both of them.
I do not see any losses or gains for the coming months. I think we are going to maintain the margins. Now we have a challenge regarding volumes. COVID tests and glove prices impacted our average ticket. But what makes me confident is that when you look at the number of customers, we had a significant growth of 21%. So we had a drop in the average ticket prices, but when you look at the growth of our client base, we think that throughout time, these behaviors will stabilize, and we will see, once again, robust growth rates as we had until then. That is an overlook of diagnostics. Of course, we had the impact of the pandemic, but from now on, the pressure on volume will go away, and we can focus on growth.
Now, about cash cycle, Vinicius, our expectation is to normalize our inventory levels throughout Q2.
The second quarter of 2021, we had 48 days of cash cycle and eight days of inventory cycle. So we want to go back to those levels. This is very much related to medication because of the demand of March and CMED, and we also had the COVID impact. We still have a stock of BRL 50 million in excess, which will be normalized from the second quarter on. Now, about the oncology dynamics, our expectation is to continue growing above the market average. That is one of the segments that grows the most within the healthcare segment today. And since the beginning of last year, we have put together a dedicated structure to oncology to provide services to small and medium-sized clinics as well as large customers. And after one year that we have had that structure, the results are coming.
We are able to adapt our value proposition to that channel, and we work really hard not only to deliver the oncology drugs, but also to add materials, to add a service platform, and everything else that we do in other channels, we want to be able to offer to the oncology segment as well, and we expect to continue growing above the market average from now on.
Great. Thank you so much, and congratulations on your results.
Our next question comes from the webcast platform. Caio Rocha from Bradesco. We see a strong M&A activity on the part of Viveo. What can we expect for the rest of the year? Will you slow down in order to focus on capturing synergies? Otherwise, which channel has a more robust M&A pipeline?
Thank you for your question, Caio.
There is no question that our priority focus is integration and capturing the synergies of the acquisitions that were already made. We have a very robust plan to capture the synergies. On Viveo Day, we want to be able to give you further details about the potential synergies. Yes, our number one priority is to capture the synergies throughout the year. However, we do have an active M&A pipeline that we're still working on. We have space in our balance sheet for other movements in addition to the ones that we have announced. If we think that we have attractive businesses ahead of us, then we'll go for them throughout the year. But our main focus is to capture the synergies of the acquisitions that were already made.
We have another two questions from Caio. Can you give us further details about the magnitude of impacts? Is the demand of March being kept high in April? We saw a drop in the Labs channel. Do you have any initiatives to accelerate the business in that channel after the decline after the COVID-19 pandemic?
We had a growth in Q1, and that's the dynamic we see, strong growth in Q1, especially in March. That was no different from other years. In 2020, exceptionally, the movement happened in August due to the pandemic. But in 2021, it was already a normal movement, so nothing different. In Q2, what usually happens is that April, we have a weaker demand because of the strong movement in March. But then in May and June, we see a recovery, and that's exactly what we're seeing in Q2. In April, we had higher inventories, and May, the demand was coming back. That's no different from previous years.
We continue to expect a double-digit growth for Q2 compared to Q2 the previous year. So a two-digit year-over-year growth. I think we have another question from Caio, is that right?
There was a question about diagnostics. What are the initiatives that the company is implementing to accelerate revenue after the slowdown caused by the COVID-19 pandemic?
We have customers that demand different things from our portfolio. I conducted a very thorough analysis of our portfolio because of prices and categories. So we have a structured initiative with our procurement area to bring solutions to our portfolio that are gaps that we have today. We need a low-cost solution for certain categories. Even if we have a B curve or a C curve in terms of demand, that's going to help us to fill up that gap.
Another thing is, as we add more customers to our base, the portfolios get too big per salesperson, and we have a more reactive contact with customers as a result, rather than a proactive contact. We are expanding our sales team so that we can be closer to customers and, as a result, attract more and more business. That's what we're doing in the analytical area. In the pre-analytical area, we have a problem of instrument availability, but we were able to foresee that problem, and so we increased our inventory of equipment. We believe in the recovery of the market and having that equipment and inventory is key in order to make the most of this recovery. That's one of our bets for the analytical part.
Another question here by Guilherme about our leverage after the payment for FAMAP, PHD, and Life, the most recent acquisitions that we have announced. With a cash generation projected in the payment of all M&As, we can still have a leverage below 2 x?
Our optimum level is 1.5x. We see space in our balance sheet for other M&A movements, considering, of course, what we take as reasonable for the company. In the past, we had a leverage close to 3x , but that's not the level that we expect for now. We expect to be below 2x . But yes, we do have space in our balance sheet to continue with other M&A movements.
Ladies and gentlemen, if you wish to pose a question, please dial star one. This concludes our question and answer session. Now I'd like to turn the floor over to Mr. Leonardo Byrro for his final remarks.
Once again, on behalf of Viveo and all of us, we would like to thank you all for joining us this morning. I would like to close by saying that we continue optimistic in achieving our targets for the year. The month of March was a month of strong demand and a recovery in the healthcare industry, and we think this is what we can expect for the coming quarters as well. We'll continue with a total focus on executing our strategy to create differentiated solutions to all of our customers. Have a great day. Thank you so much, and we are available should you have any questions.
This concludes Viveo's conference call. Thank you all for joining. Have a great day, and thank you for using Chorus Call.