Diagnosticos da America SA
BOVESPA:DASA3
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Good afternoon, everyone, and thank you for waiting. Good afternoon, and welcome to the earnings conference call for the third quarter of 2022 of Dasa. We would like to inform you that this event is being recorded. [Operator Instructions] The link to access the webcast transmission with audio slides is available on Dasa's Investor Relations website. The presentation is also available for download from the website.
We would like to highlight that information contained in this presentation and statements that may be made during this conference call regarding the business prospects, projections, operating and financial goals of Dasa constitute the beliefs and assumptions of the company's management as well as information currently available.
Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect Dasa's future performance.
Now I pass the floor to Mr. Glauco Desiderio, who will start the presentation.
Thank you very much. Good afternoon, everyone, and thank you for attending our call. We'll start with the presentation with the remarks of Pedro Bueno, CEO; followed by Felipe Guimaraes, CFO. Also here with us, we have Andrea Dolabela, Officer of Product Marketing Experience; Emerson Gasparetto, General Officer of Hospitals in Oncology; Rafael Lucchesi, General Officers for Diagnostics. All of us will be available for the Q&A session.
Now I turn the floor over to Pedro Bueno to start the presentation.
Thank you, Glauco. It's a pleasure to be here with you. This was not the best date for disclosing presentation, but other than that we're very excited about our numbers in this quarter, and we will make a brief presentation, so we can have more time for the Q&A.
Let's move on to Slide #4. This quarter, we had a consistent quarter in the execution of our strategy. We had a quarter very strong, especially in hospitals, showing that our integrations are working well, especially the oldest ones that we had been working on for longer. And in terms of COVID is -- 2% of our revenues coming from COVID runoff only. So we end this runoff of COVID looking for growth onwards.
And in terms of platform, we exceeded 5.5 million users at Nav platform. There was a growth of 26% in gross revenue; year-on-year, 70% in diagnosis; 5% year-on-year ex-COVID. In terms of gross margin, the margin was 32.8% and an evolvement of only 2 percentage points quarter-on-quarter, especially driven by hospitals with a growth of 5 percentage points of gross margin year-on-year. And we reached BRL 604 million in adjusted EBITDA, which meant a growth of 11% year-on-year. We also continue to evolve on our NPS, which reached 78.1, which is a very strong NPS showing the quality of our services.
Let's move on to the next slide. We also continue our expansion of the Dasa ecosystem. We had Lustosa Laboratory, adding 26 units. Now -- we now have a significant presence in Belo Horizonte. And we also opened the Oncology Centers of Barra, which is a flagship Oncology Center at Barra in Rio de Janeiro. It's an outstanding unit to position oncology services in Rio.
Next slide, please. And we continue to evolve on the ESG. I'm not going to comment on everything that's on the slide. Just to mention a few. We adopted the commitment to climate from Ekos Institute. We donated almost 1,000 mammographies to the NGO Americas Amigas, and we again participate in ISEB3 cycle.
Let's move on to operating performance, starting on oncology. It's a very strong quarter with 56% in assets year-on-year, driven by M&A. But even so, we had an evolution in the occupancy rate of almost 1 percentage point year-on-year. So from 73.6% (sic) [ 76.3% ] to 77.2%. And it's interesting because the occupancy rate by itself doesn't show the entire evolution we had in hospitals because in addition to the increase in the occupancy rate, we also increased the number of beds by 40% when we compare year-on-year. So more people in hospitals and with the greater turnover, which contributed to our margin. And a 9% increase in average ticket and 8% year -- quarter-on-quarter, which shows -- proves our conviction in the integration of how certainly, we are about our policy to integrate the assets. It's the fastest, easiest way to capture and revenues.
Revenues, it's about 18 -- 24x to mature. That involves improving the quality of assets, increasing the rate of -- with which assets are integrated to capture more complexity. That's taking place, and there's a lot of opportunities to be captured still. So when we look ahead to the next quarters, we should see a positive trend in the development of revenues from hospitals in gross margin as well.
Now moving on to diagnostics. We had a good growth in exams 5% year-on-year, also exams by direct users and also growth in average ticket. There is a distortion because of COVID. So when we look at revenue per direct users, we've grown 8% year-on-year and 10% quarter-on-quarter. But even so, we're not pleased with the growth of revenue in this business unit. We're very focused on resuming organic growth and gaining share for the next quarters throughout 2023.
3 main points of focus: commercial fronts, new registrations, adjustment of prices with insurance companies. Most of the insurance, which provides lab services takes place in September. So that will be shown as of the fourth quarter. And we had new company registered.
And also the use of our assets. That involves the increase of revenue per square meter, new exams, new procedures, growth of new units, especially in the premium segment of Alta Lab, which is a brand that grows above market rates and also Salomão dropping Sao Paulo and a flagship of São Marcos’ in Belo Horizonte. All of these will drive organic growth.
And finally, the more transformational fronts that we can work because these are leverages of an integrated systems. If we can find targets, [indiscernible] gas and convert these users to our diagnosis. Using our hospital's oncology and other assets we have to direct patients that need to make exams for our own brands. So we are working on that front as well. And that will probably have a more relevant impact in the midterms and sales and usage of assets more quickly. So we should expect a healthy growth in our business of Diagnostics moving forward, especially considering that now our basis is ex-COVID.
Now finally, the Nav platform that shows an exponential growth 6x the number of user patients, 5.5 million users that are enrolled with Nav. And in medical users, the growth of -- was 3x, 34,500 physicians. We are uploading new features to generate more engagement and recurrent use of the platform and also to accelerate our digitization initiatives. And teleconsultation is growing almost 50% year-on-year.
So we can move on. And now I turn the floor over to Felipe, our CFO, to talk about the financial performance.
Thank you, Pedro. Starting on Slide 12, showing that we had again a record growth, BRL 3.7 billion revenue, 26% growth compared to 2021. This result reflects the operational advance as mentioned and shows how the maturity of Dasa system has been evolving.
Revenue from hospitals oncology business continues to grow 72% year-on-year, reaching BRL 1.9 billion in the quarter and becomes the business units with most relevant 51% of revenue. Some factors contributed to this result: first, the integration of new hospitals generated an increase of 1,056 active beds in the third quarter compared to the third quarter of 2021.
Another factor was the 9% increase in the unit's average ticket, which ended the quarter at BRL 8,969 compared to BRL 8,265 in the previous quarter. This reflects the higher volume of highly complex procedures, mainly surgeries with the resumption of elective surgeries offsetting the reduction in demand for ICU beds due to COVID-19.
In diagnostics, disregarding the effects of COVID-19, revenue grew 5%, closing the quarter at BRL 1.8 billion. This result when compared to the same period last year reflects the higher number of exams with -- in the period with an increase of 5% and 8% increase in the average ticket, reflecting better mix of use.
Dasa's gross profit increased by 22% compared to the third quarter of 2021, reaching BRL 1.1 billion. The adjusted gross margin in the period was 32.8%, an increase of 1.7 percentage points compared to the second quarter of 2022. The reduction in the consolidated margin, we had a reduction in the margin because of higher profitability of hospitals and oncology that has a lower margin than Diagnostics.
With that mix effect, we have expanded it by more than 1 point when compared to last quarter. The gross profit in hospitals in oncology when compared to 3Q '22 advanced 106% in the third quarter closing the period at BRL 498 million and a margin of 29.1%, reflecting the advances in the hospital integration processes and better asset management.
Contributing to this result, the increase of 72% in operating revenue, supported by last year's acquisitions, gains of efficiency compared to 2021 due to the execution strategy and the acquiring of hospitals. Adjusted gross profit for diagnostics decreased 8%, totaling BRL 626 million in the third quarter of '22 and a margin of 36.6%. This result mainly affects the effects of COVID-19 throughout 2021, which makes the comparative basis stronger. When we compare with 2Q '22, we have a gain of approximately 1 percentage point.
Slide 14. Starting with the graph in the upper left corner, we show our adjusted general and administrative expenses. Totaled BRL 498 million in this quarter versus BRL 376 million in 3Q '21. The increase between the periods can be explained mainly by the expense brought by the acquired companies and BRL 91 million and by the increase in expenses with third-party services to support the company's growth and digitization strategy BRL 30 million.
In the analysis versus the second quarter of this year, we can identify dilution of expenses compared to the company's net revenue, reflecting Dasa's current strategy to control expenses and consequent gain efficiency.
It's important to emphasize that we have been showing a constant growth in our expenses in line with our strategy investments for the future. Today, we can already see a stabilization trend at this level. And we understand that there is still several actions to gain productivity efficiency to be captured over the next quarters.
Moving on to the chart on the lower left corner of the slide, we have the evolution of adjusted EBITDA, which increased by 11% compared to the third quarter '21 from BRL 544 million to BRL 604 million. The adjusted EBITDA margin was 17.6% in the quarter. Compared to the second quarter of '22, adjusted EBITDA grew by 8% and showed a margin increase of 0.5 percentage points. Adjusted EBITDA mainly reflects the growth in gross profit and the effects of higher net revenue in the period and the points now highlighted.
Nonrecurring items and remuneration in stock options did not have an impact in the quarter when compared to the positive effect of BRL 37 million in 2021. It's important to note that as of the third quarter of '22, we started to adjust only expenses related to M&A and stock options processes.
Going to Slide 15. We closed the quarter with leverage for the purpose of covenants of 3.75x the value of net debt over the pro forma EBITDA in the last 12 months. We had a substantial reduction of the amount to be paid in M&A by almost BRL 1 billion versus the 2022. Our net debt closed the quarter at BRL 7.8 billion. And it's important to point out 2 recent transactions that reinforce the cash of Dasa and that guarantee fulfillment company's obligations.
In October, we carried out 18th issuance of debentures in the amount of BRL 1 billion. In November, we completed the issuance of real estate deposit certificates, also in the amount of BRL 1 billion. Both operations are part of an ongoing debt management process to optimize the company's capital structure.
Today, the average cost is CDI plus 1.5%, and the average term is 3.6 to 3.8 years. We'll continue to work to optimize our capital structure in order to take advantage of organic and inorganic opportunities in the future.
Thank you, and let's start the Q&A session.
[Operator Instructions] Our first question comes from Vinicius Figueiredo from Itaú BBA.
If you could address 2 topics. First, about the increase in ticket in the hospital segment. You mentioned that there was an impact regarding the increase in complexity of procedures. But if you could comment on how this breaks down between the older hospitals in the portfolio and those that are recently acquired, whether the increase in complexity was more due to the integration process.
And the other point is about the EU, whether there was an increase in the oncology costs. Could you comment on this increase, the nature of it, whether it's temporary maybe or should we look into that towards the future?
Vinicius, thank you for your question. About your first question on the average ticket. Obviously, the acquired hospitals are less mature and the management of complexity of the ease of having to invest in technology due to the increase in complexity, that happens in the acquired hospitals more strongly. But it also takes place in the hospitals of the network that are more mature because what we noticed is a reduction when compared to last year of CDI patients because we had a strong impact of ICU last year. So this increase in ticket is slightly higher in acquired hospital.
As for your second question, there are 2 leverages. When we look at the average cost versus the net revenues, 50% in oncology. This is how the business works. So essential costs are very much lower. When you look at indirect cost is much lower. At the end, the margin is similar. So when the medical materials cost in oncology is higher. So -- but this is good news because oncology is growing well. And this is a business that is doing fine and it brings complexity to the hospital, and it brings care in the entire journey of the oncology patients.
And when we look at average materials, more than our revenue from hospitals in the daily hospital space. And so it's relevant. It's a part of expense that's not part of the package of the hospital stay fee. So when we look at average net is a cost that's carrying a revenue. So it doesn't necessarily have to be proportionately reduced. So there are these 2 leverages in this line that are significant.
Our next question comes from Gustavo Miele from Goldman Sachs.
I have 2 quick questions. First, regarding -- I would like to explore the growth of the company in the premium segment. Pedro mentioned the performance of Alta brand that had an interesting growth in the quarter. Does this mean a gain of share? If you could give us some color on that would be nice.
The second question is more related to COVID-19, and that would apply to both [ BUs ]. You mentioned that the third quarter impact was lower. But do you see an impact of that in the end? Now looking at the beginning of the fourth quarter, the number of cases of COVID has increased significantly recently. Do you see something significant that you could share with us in any of the 2 [ BUs ] regarding COVID?
Gustavo, thank you for your questions. Well, first, about Alta, the answer is yes. We continue to grow way above the market levels with Alta, both in existing units with increasing occupancy as well as in new units that will continue to grow. There's one in [indiscernible]. There's 2 under construction in Sao Paulo and Rio. So our growth in Alta remains strong, and we continue with room for growth in that segment. So it continues to be an important pillar in our strategy.
As for COVID, is like we said, last year was very strong. We captured an important volume. This year, there is a downward curve in the third quarter. It was reduced less than 3% of revenue, and there are all the impacts from that reduction as said before. And from now on, what I can say is that last week, mainly, we again had a growth in volume but much, much lower than the previous peaks in growth, but with an upward trend, it is true.
For diagnostics, specifically, we don't think there will be that huge volume we had in the past. But these are initial projections depending on the slope of this curve and the acceleration, we are ready to capture this growth, we are able to capture whatever curve comes forward.
[indiscernible] will answer the hospitals.
In hospitals, that's very small because of Omicron the number of inpatients was very low. So some people at the -- coming to the hospital but not inpatients. So for hospital is neutral and some impact for diagnosis.
Next question comes from Fred Mendes from Bank of America.
I have 2 questions. One on Diagnostics, yet. The growth of COVID was 5% when considering inflation, 10% year-on-year. So historically, transfer 5%. So this 5% if everything remains constant according to history, that represents a transfer of prices. I know at the end of the quarter, as Pedro said, but I would like to understand in the release that there was an increase in the number of events, I would like to reconcile this growth with these 2 factors.
And the second question in Diagnostics. When I look at the gross margin year-on-year, it has decreased. Last COVID, I would like to understand if maybe this is some operational leverage and what can be done for margins to go up to historical levels of a gross margin close to 40%.
Thank you for your questions. Now starting with the ticket, when there is a change in the mix has happened now, and that explains a bit both questions. For user, whenever COVID-19 cases decrease, we increase our average user ticket. That happened because of the change in the mix. That's what's shown in the chart.
As the growth of 5% organic ex-COVID, you're right, there is a price transfer inside that figure. In addition to the reduction in the number of COVID tests, for some operations that also reduced additional exams especially at hospital operations that we have diagnostics in hospitals and in support that had a level of exams that was driven from COVID that was very high. So we saw a deceleration in growth, mainly due to COVID. And from now on, there are these 3 blocks of actions, very strong. As Pedro explained, to go back to having a stronger organic growth regardless of this drop in COVID cases from 1 quarter to the other.
As for the increase in the number of events, that's a lot due to the mix change. When COVID goes down, which is almost [indiscernible] per user, the direct user ex-COVID makes more expense. So when you see when COVID goes down to 0, we'll go back to the regular case of increment in exams per user as we had like last year, that will be gradual but not so steep as we had lately. Go ahead, Fred.
If I could just make a follow-up. I'm sorry to interrupt. Just to understand. So COVID has an impact on exams. And when we talk about COVID margin, is that related to the gross margin, maybe the lower volume of COVID tests would result in a lower gross margin or the margin tends to be more similar to ex-COVID.
What happened is that since our business has a very high fixed cost basis. Last year, with the peak of volume, both ex-COVID and COVID, we optimize the usage of our structures that dilutes our fixed cost, and we had a peak of margins, especially in the third quarter. Now we'll go back to the regular level. And as of the second part of this year, we grew our percentage of margin. So it's closer to the world ex-COVID with the possibility of increasing. And we're going after that, both in terms of resuming growth as well as in productivity usage of assets and being more efficient in our operations. So these are the leverages to continue to grow our margins.
That's clear. I don't know if Pedro will say something?
No, [ look as we ] mentioned, what I had to say. Thank you, Fred.
The next question is from Samuel Alves from BTG Pactual.
I have 2 questions. First, about the balance sheet. To understand the evaluation of the net debt we saw that it had a growth of almost BRL 500 million quarter-on-quarter. When we see the cash generation from the company, it was quite positive. Operating cash after CapEx totaled more than BRL 600 million according to our calculations. So the first question is to try to understand the reasons for this increase in the net debt even after the debt service because we see the cash generation, the cash flow generation from the company. There is a line that's not very clear acquisition of interest from noncontrolling shareholders. Maybe there is some item there that's not understood. We would like to understand the reasons for this increase in the net debt.
The second question in line with the other person's question about oncology, if you could give us some idea of how big is the development of oncology revenue may be infusions so that we can understand a little bit the leverage, operational leverage and leveraging margins that you were explaining.
I'll answer the leverage one. You made a good comment. The reason why we have a leverage of 3.75 slightly above the second quarter is basically the fact that we are having a high concentration. Both the payment of M&A is already carried out in the past as well as CapEx. The third quarter was more concentrated in terms of CapEx investments. And in terms of concentration of payments of some M&As that happened throughout this entire year. So as you may see an important reduction of M&A amounts to payable throughout this year. And now it becomes more residual. So we expect that we'll have organic deleverage of our business during 2023.
I'll let Emerson answer the question about oncology.
Samuel, regarding oncology. Oncology is a business that we started to accelerate recently. And second, it's a business that we made a major acquisition and that accounts for slightly grows our revenue in oncology is significant. The metric that's most important is the overall revenue generated the entire oncology journey. It comes from inpatients, consultations, even [ Omo ], all the outpatient labs of general specialties are inside -- are under the P&L of [ Omo ] because that's when the oncology patient is captured. So because we have outpatient oncology services and this model that we had in the acquired companies.
Now for the next release, we are preparing a specific report on oncology according to market metrics of infusions and so on. So starting with the next release, you have information more in detail about oncology. But that's undoubtedly a business that's significantly growing in the company. That's important for your comment is taking into account what Felipe said about the ticket, average ticket -- our business is a seasonal business. So the fourth quarter is historically weaker, especially in hospitals. And that will have an impact. But oncology is having a significant growth in our business.
[Operator Instructions] The Q&A session has now ended. I turn the floor over to Mr. Pedro Bueno for his final remarks.
Thank you very much for participating in our call. Looking forward, we have some important areas we'll focus on. For hospitals to continue to integrate the companies we acquired, taking them to the maturity level of our older hospitals. And for Diagnostics, resuming an accelerated growth -- organic growth in top line revenue, and more efficiency with digitization, productivity, controlling costs.
The platform is as we expand and increase the capacity of navigating these patients inside our care business, increasing efficiency, revenue and margins for the company. And finally, the G&A that we didn't talk much about, but we have a higher than our competitors G&A for 2 reasons: one, because we invest more in platform technology and innovation than our competitors by design. But we also know that our efficiencies due to so many integrations Dasa within and all the other acquisitions we made in the last 2, 3 years. So we're now focusing on efficiencies in G&A, and we expect to capture that next year. So the combination of these 2 factors should generate very healthy growth and top line for the company, and an important growth in margin for the next quarters.
Thank you all very much, and have a good week.
The earnings conference call for the third quarter of 2022 of Dasa has ended. The Investor Relations area is available to answer any other questions you may have. Thank you all for attending, and have a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]