Diagnosticos da America SA

BOVESPA:DASA3

Earnings Call Analysis

Revenue Growth Amidst Strategic Cost Review

The company witnessed revenue growth in both business units, with a 13% uptick in hospital and oncology and stable earnings in diagnostics after adjusting for exchange rate effects. Despite the solid revenue performance, adjusted EBITDA fell, largely due to high comparison bases and increased costs. Nonetheless, net debt remained stable quarter-over-quarter, reflecting management's efforts to optimize the capital structure. Notably, the company announced strategic cost review initiatives to enhance profitability, and optimism remains high for carrying out these strategies in 2024. Overall, the company is poised for growth, emphasizing quality service over volume expansion, and maintains strong market share with expectations of continued progress in the coming year.

Hospital and Oncology Business Shows Strong Revenue Growth

The company proudly reports robust growth within their hospitals and oncology sector, tagged as BU1, clocking in a 13% increase in gross revenue amounting to nearly BRL 2 billion. Such an achievement is attributed to a 4% uptick in patient volume and a significant 9% rise in average ticket. Several factors contributed to this performance: 43% growth in oncology, higher occupancy rates which now stand at 76.3%, annual contractual adjustments, and an influx of complex treatments which align with the company's strategic focus on improved surgical mix.

Challenges Faced in Adjusted Gross Profit and Margins

Despite the revenue uptick, the company underwent a 12% decline in adjusted gross profit, a situation linked to several dynamics. There was a particularly high baseline for comparison with the previous year's extraordinary margins. Two of the company's facilities, Barra and Alphaville, are still in the ramp-up stage, leading to increased costs without a proportional revenue counterpart. Furthermore, there were heightened expenditures on staff, materials, and medicines, exacerbated by a rise in oncology's cost share. Notably, there's a dissociation between cost inflation and contractual adjustments, indicating margin pressure that the company is committed to addressing.

Growth and Challenges in Diagnosis and Care Coordination

The company's diagnosis and care coordination division reported a stable BRL 1.7 billion in gross revenue. This stability, however, masks an 8% growth in Brazilian operations counterbalanced by exchange rate impacts, particularly the hyperinflation seen in Argentina. A deeper dive into the numbers shows a 5% increase in volume without an increase in service units, alongside an 85% growth in international operations—which seems largely an accounting effect rather than a representation of actual business performance.

Operational Efficiency Efforts Pay Off

Efficiency is on the upswing as the company has managed to cut adjusted expenses by 3% in spite of inflationary pressures, revealing the positive outcomes of revising processes, reorganizing structures, and renegotiating contracts. With such continuous initiatives, the expectations swing towards sustaining these efficiencies moving into 2024.

Reduction in Investment Outlays

Investments show a notable decline—a 43% decrease year-on-year—with a planned further reduction of 22% for 2024. This is part of a strategic pivot: reducing tech investments after significant spends in recent years, maintaining existing assets to extend their lifespan, and laser-focusing on expansion projects with short-term return potential. The strategic goal is crystal clear: to enhance cash generation and ensure profitability of past and future investments.

Capital Structure and Debt Management

The company's financial stewardship has maintained stable net debt with improved amortization schedules and cost reductions, courtesy of strategic maneuvers in the debt market. Significant is the issuance of debentures aimed at restructuring existing debt, thus positioning the company for potentially better financial flexibility in the near term.

Refocusing and Restructuring Initiatives

The company is refocusing on core operations—hospitals and diagnostics including oncology—while discontinuing nonprofitable ventures and deprioritizing home care. This strategic shift extends to a reassessment of non-synergistic operations with an eye on cost reduction and quality service enhancements. There's a clear mandate to streamline operations and align the organization's structure with market norms.

Advancements in Hospital Specialty Care

A shift in approach to hospital specialties aims to increase procedural volumes, enhance negotiations for inputs, and better the dialogue with surgical teams and payers. The move fosters exchanges among hospitals to overcome their traditionally insular operation modes. The broader institutional strategy here is the standardization of medical supplies and medicine—designed to streamline costs and improve quality of care.

Diagnosis Division Drives Towards Digital Efficiency

The diagnosis arm of the company is embracing digital transformation, which has already yielded a 6% boost in volume and a simultaneous 6% reduction in service unit headcount, all while maintaining high customer satisfaction. These advances foreshadow further improvements and scale benefits anticipated for the remainder of the year.

Earnings Call Transcript 2023-Q4

[Operator]

Welcome to Dasa's conference call to discuss the earnings regarding the fourth quarter 2023.

This conference call is being recorded, and the replay can be accessed on the company's website, www.dasa3.com.br. The presentation will also be available for download.

We would like to inform you that all participants will be only watching the conference call during the company's presentation. We will then start the Q&A session when further instructions will be provided. We would like to let you know that any information in this presentation and any statements that may be made during this event regards business prospects, projections, operating and financial targets of Dasa are based on beliefs and assumptions of the company's management as well as on currently available information.

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'll turn the floor over to Mr. Licio Cintra to start the presentation. Mr. Cintra, you may go on.

[Lício Cintra, executive]

Good afternoon, everyone. Before we start today's presentation, I would like to reinforce my thank you to everyone who is following the company on my first public earnings conference call as CEO. Last time I was with Pedro in our transition period. As you know, as I got to the company in August '23. I always focus on getting to know our leadership's operations and particularly the positioning of our assets in each region in Brazil.

As you all know as well under the leadership of Pedro, Dasa became a large healthcare group with revenues of over BRL 15 billion. And in this period. There were lots of acquisitions of diagnosis hospitals in addition to other businesses that complemented the concept of ecosystem, whose central point was to have better quality medicine by using data and following the user journey.

Obviously, in that -- in such accelerated growth as we had in Dasa, challenges were posed. We had to review processes and take a deeper dive in the chain as a whole, and my arrival is to address this new phase that the company is going to go through in the coming years.

The idea is for me to lead the restructuring agenda and prioritizing the profitability of assets and deleveraging. And it is why myself and the whole team of executives are focusing on these issues this month and in the coming months. Just for you to have a history of the contents when I got to the company in '23, I was focused in some point that we just mentioned in the last call, which is to reassess CapEx that was already ongoing in the year of '23. So part of it already executed when I arrived, but part of it only budgeted for.

Also take a look at SG&A of business units and corporate SG&A, the challenge of integrations that were to come in terms of more recent operations and also assessing the real benefit of the voting time and energy in noncore assets. And this is exactly what I carried out in the 5 months of last year and since the beginning of this year. This restructuring agenda we know is not for the short term accomplishments, improvements are going to turn into numbers a long time. It is a journey. I think the positive point is that we start to see some numbers that already reflect this new dynamics more discipline in several of the points that I mentioned.

And the first, as an example of this new journey is the closing of the total CapEx of '23 and the budget CapEx for '24. After August, as I said, we revisited CapEx for '23. The forecast was 43% lower than that of '22. And in addition to that, it was also lower than budgeted. That is what we told you in the beginning of '23. And as we are going to elaborate later on, the idea is to follow the same rationale for our CapEx for the year of '24.

And just before hand, I want to give you the comfort that we spared no efforts to invest the necessary CapEx in the operation and in the recovery of necessary assets. We are just having a clear focus on optimizing the investments made in recent years, and we believe it's time to do that, monetize investments and extract better results from them all, both operating assets and development of technology tools. Anyway, we are going to talk a bit about that further in the presentation.

Well, secondly, I would like to draw your attention to this more in-depth dive in our SG&A. Our numbers are starting to show that. We have a structure with more than 50,000 employees. The SG&A revision is a long-term process, but I'm happy that in the beginning of this journey, we're already starting to see good numbers. Apart from any adjustment effects that Andre can elaborate more on -- further on. If we compare quarter-on-quarter, the last quarter '23, we have SG&A 3% lower than '22, and we had an increase in [indiscernible] of 6% and in another 4%, respectively. So we are starting to address the issue of being more efficient in our processes and in discipline of allocating people.

And still talking about people and efficiency, I think we had 2 notices in the last 2 months, about a change in the people and sales areas that address this new journey very clearly. But we said that -- led to human resources at a very sensitive time of the company during several acquisition M&A, he had a beautiful work for us to have a very satisfactory organizational climate that he is now turning the position to [indiscernible], a very efficient person that worked in several sectors, some with even tighter margins than the healthcare sector and really want to transform the people area into an area of performance. Therefore, supporting business units in their objectives.

So the idea, again, is to have more disciplined and a better dynamic for the allocation of people that are paying more attention to performance indicators. [indiscernible] for that. And I think we already have some actions ongoing that show that it was a successful strategy.

In parallel to that and slightly different from what we did in the past, because I think the exponential growth the group had in the past shows clearly the commercial success of our challenges. But taking up future challenges, payers, revenue cycles, denials, average receiving times, definition of better products, where together with payers, we can come to solutions that decrease their problems with claims and also generate results.

We had an important change in our internal structure. Our previous commerce of VP is now focused completely in the companies of [indiscernible], we believe that we really is going to make a wonderful work there. And [indiscernible] that was the person in charge of our hospital operations since [indiscernible], a doctor by background has lots of technical view on the provider journey. And with that, we can really improve the discussion with payers, no longer talking only about volumes and prices but really have a more productive discussion to find solutions that enable us to extract value and payers to decrease their claims.

And finally, but certainly not less important, we are deeply revisiting assets, operations and businesses that are either not directly connected to our core hospitals and diagnosis or otherwise. And we have been working in a very disciplined manner for us not to focus our time, energy and resources on activities that are not going to impact our core. I think for the sake of introduction, these were my main points coming back in the end of the call.

But now I'm going to turn to Andre to give you a highlight of the results of the fourth quarter.

[André Covre, executive]

Good afternoon, everyone. It's a pleasure to be here with you today. Before I start, I would like to thank Glauco, our IR Director, that is leaving the company, together with [indiscernible] that is staying with us. They both drops the company's IR level to a whole different level we had before. So publicly to analysts that are listening to us, I would like to thank Glauco together with [indiscernible] developed excellent work.

I'm going to start with the results now. I would like just to tell you that during the fourth quarter of '23, we had some one-off events and items that affected the company's total numbers, some related to the restructuring that Licio mentioned as our decision to discontinue the operation in Uruguay.

All these one-off events and items are related to specific extemporaneous events that do not necessarily reflect Dasa's operational activity in the quarter. They are summarized on Page 5 of our release, and for comparability purposes, they were excluded from the data of the presentation that we are making today. So all data of this presentation exclude these events unless when otherwise indicated.

Anyway, I'm going to start with Slide 3, talking about the highlights of the period. The quarter was marked by growth in revenue in both business units. As Licio mentioned, we were able to observe gains in the reduction of adjusted costs which is a reflection of the initiatives of reviewing costs and organizational structure. The drop in adjusted EBITDA is basically due to the strong base of comparison and also the cost adjusted in hospitals and oncology and also the exchange effect in the diagnosis operation of Argentina.

Further on in the end, we are going to go back to costs in hospitals and oncology to talk about several restructuring strategies we are working with. Another highlight that Licio mentioned was the reduction of investments, a result of the focus to capture investments that were made in recent years and cash generation. And finally, we closed the quarter with stable net debt compared to 3Q '23 with a longer amortization profile and a lower cost because of actions to optimize the capital structure that were implemented along the quarter.

On Slide 4, we talk about the performance of our hospitals and oncology business, what we call BU1. In this quarter, we had growth of 13% in gross revenue compared to 4Q '22, with gross revenue of approximately BRL 2 billion. This increase in revenue compared to last year has to due to a 4% growth in the volume of patients there and 9% growth in average ticket.

Also contributed to this growth, 4 things. First, the 43% growth in oncology. Second, occupancy rates, 1.6 percentage points, reaching 76.3%. It reflects of our strategy to attract medical teams to have a higher surgical bar. Third, annual contractual adjustments and four, the increase in complex treatments. Again, a result of our strategy of having a better surgical mix.

Adjusted gross profit dropped by 12%, also due to 4 items: First, as I already mentioned, a strong comparison basis of 4Q '22 with one of the best margins for the company ever. So very strong comparison base. Also, the units of Barra and Alphaville, that are still in ramp-up stage. And therefore, we have most of the costs, but still without the counterpart in revenues. Also higher cost with personnel materials and medicines, also influenced by the higher share of oncology and for a disconnect between the cost inflation and contractual adjustments. As I mentioned, we are going to come back to this issue at the end talking about the reduction of margins, increase of costs and what we want and are doing about that.

Now diagnosis and care coordination on Slide 5. We see gross revenue of the quarter reached BRL 1.7 billion, stable compared to the fourth quarter '22. Excluding international operations, whose revenue was strongly impacted by the exchange rate fluctuation in the Argentina operation, that is in a scenario of hyperinflation, we would have growth of 8% compared to the fourth quarter '22. Therefore, the growth of our activities in Brazil was 8%. The year-on-year comparison is basically due to a higher volume of [indiscernible] 5%, without increasing the number of service units. In the international operations, the number was a lot higher, 85% growth. And therefore, the impact we see in the result has mostly an accounting effect and does not reflect the local business.

As for adjusted gross profit, we had a decrease of 3%. Again, connected to the exchange rate fluctuation in Argentina. Apart from that, gross profit increased by 4% in the period with growth in volumes partially offset by a one-off discount for a public sector client. Costs were in line with the fourth quarter '22, reflecting the progress of initiatives to optimize our units initiatives that continue for '24.

Now we are on Slide 6. We had a nominal reduction of 3% of our adjusted expenses compared to 4Q '22 despite the increasing volume in operations and accumulated inflation in the last 12 months of approximately 5% according to the IPCA in Brazil. This inflation reflects, as I mentioned, the reviewing of our processes, organization structure, prioritization of activities and renegotiation of service contracts, initiatives that are going to continue for 2024.

On the right part of the slide, we show the evolution of our adjusted EBITDA, minus 13% compared to the fourth quarter. Again, this is a consequence of a stronger comparison base, higher oncology costs and exchange rate effect of Argentina, as I mentioned. Excluding international operation, adjusted EBITDA had a decrease of 8%.

On Slide 7, we show the investments for the quarter and year '23. Here, we can see the sequential drop that Licio mentioned quarter-on-quarter. In the year, we have BRL 727 million, a reduction of 43% compared to 22%. And if we look into you have an additional reduction of 22% compared to '23. This is our budget for investments in 2024. The decrease basically is threefold.

First, decreasing investments in technology that were quite significant along for recent years. The company is now focusing on investments that can guarantee maintenance of services and reduce the volumes invested in digital journeys. Second, maintenance of existing assets, trying to extend their useful life and keep the level of service to our patients. And third, with regards to expansion project, we are now looking into them thinking of short-term returns. All that, again, to maximize cash generation. This reduction in investments is only possible because of the quality of investments that we made in the recent past and the company's focus on making them profitable. And for '24, we have high hopes that this is going to be exponential by the implementation of management and goal systems connected to metrics on the return on capital.

On my last slide, I show the capital structure of the company in the end of '23. We closed the year with stable debt, financial net debt stable compared to the third quarter with a longer amortization schedule and lower cost due to management actions implemented. In the fourth quarter, we issued our 20th debenture, whose funds were directed to pay up the 19th issuance that was a higher debt in the amount of BRL 1 million. With that, we closed our net debt of BRL 10.7 million, a reduction compared to September and again a consequence of the payments made.

At the end of the company, our average term of debt had 3.9 years and CGI of 1.8. And in January, we had our issuance of 7 billion in the 21st debenture, basically to resume and pay up the remaining balance of the 19th debenture. With that, we went to another term of debt in 4.4% and CGI of 1.7%. In the amortization schedule on this slide, you can see that after the operations, the company has more than half of its maturity by the end of '26 and leverage ended the period at 3.94%.

Well, in summary, I think this is what I had. I would like just to emphasize that we developed some and evolved in some of our initiatives to restructure the company, but we still have a lot to do, and that's why I'm turning the call back to Licio, so that he can elaborate on the initiatives we are working with to '24 in the company's restructuring process.

[Lício Cintra, executive]

Thanks, Andre. So I'm back here on Slide 9. So here, you have an overview of the levers that we are to prioritize in the year of '24. So here I think the message is clear, focus. We are a group focused on hospitals and diagnostics hospitals, including oncology. And our time has to be fully devoted to that. And this is what we have been doing. We started the process to discontinue nonprofitable operations. As Andre mentioned, the operation in Uruguay, it starts to be one of the items in our portfolio. Again, having a discipline to check things periodically to either turn around operations and make them profitable or remove them from our operation.

We are taking out the priority of our home care. Home care was a product inside our portfolio, and you should think that home care and also care coordination involve a huge amount of people and allocation of time from the structure as a whole. And with a share in our bottom line that is quite low. So we are clearly taking out priority of these 2 products. We are going to carry on with what we have, but it is no longer a strategy in our priority in our strategy.

Also, the reassessment of non-synergistic operations. Many of you are asking us about this apparently non-synergistic operations, so basically, we are looking into them, seeing which ones can become synergistic and/or strategic and if not removing them from our operations. Also the way we look at our people, we are restructuring our people structure and aligning policies to the market. I think here, we have a clear north in reducing higher article levels at our leadership much more at the front end with an owner's attitude to reduce cost and deliver better quality services at the front end.

In terms of market policies, I'll give you an example of several work fronts that are being developed. In the end of last year, we had a deep review on our health plan benefit and the change we made in adjusting products without any impact to our employees, patients and users. If we have done that by the end of '22, it would have generated an impact of around BRL 70 million in '23. But we did that at the turn of the year. And the other work front is a deep restructuring of our admin centers. In Sao Paulo alone, we have 10 admin centers. We are already returning 5 of them, and we continue to look into that. And in the next quarters, we are going to bring you results on that.

On the next slide, Slide #10, I'm going to try to give you a bit more details on our business units. In hospitals, we are reviewing each of our hospital specialties for you that are very knowledgeable about the sector. The less moves in terms of payers and provider networks make very clear that the provider network will have to work more and more on specialties. That makes it easier for us to have increased volumes of a certain procedure, a better dialogue with surgical clinical teams and also a better dialogue with the whole of the chain for the negotiation of inputs, and also facilitates communication with payers because you can deliver a more standardized model with a lesser cost.

We are working with exchange between hospitals. Hospitals in the past were almost independent units, were completely in separate. And now we are working with the specialties and are reinforcing that, regardless of the hospital you are, the city you are, you can always be geared to other hospital units. Also beside leadership, having a lighter structure along the lines of what I mentioned in the previous slide. And by doing that, we bring hospitals, units and supplies areas, closer together as well as corporate maintenance.

Just when we talk about the CapEx discussion, this discussion is also fruit of a deep reassessment of costs, maintenance/extension. Again, a whole new journey where you have leadership closer to the front end that will certainly reduce G&A. A realignment of contracts with payers. We have been working very close to payers, and I am more and more convinced that the process with payers, if it is clear, if we have more bundles, you have a better flow for your revenue cycle and substantial gains in discussion with surgical clinical teams, but also with the industry, is strengthening the teams responsible for standardization of materials and medicines. I did mention that in the last call, and we continue working with that strongly.

As I mentioned before, we already had loads of renegotiations in supply because of inventory levels and others. This is not something that you capture immediately after the renegotiation, but we are going to see that in quarters to come. Also resizing structures, units, beds, again related to the specialty of each hospital, taking a look at the hospitals that are at a deficit. We know that some hospitals have very different results. And we have work front together with hospitals to really focus on that units.

Diagnosis. I would like to draw your attention to 2 actions that are quite important. First, in advance in the digitization of scheduling and services. This is a project that started back in '22. Look at the kind of expedited debt last year, but we still have a long journey to go. For you to have an idea, in the last quarter of last year compared to the last quarter of '22, showed a volume of 6% volume increase. At the time that we had a reduction in head counting service units also up 6%, keeping NPS levels, and I'm very optimistic about that.

When you think of the total number of services visits, we have about 30% enjoying the improvement in technology and a better user journey. So we still have a lot to do in '24 that will certainly enable us to have gains in scale, even expanding volumes. And then centralized and produced a number of operational technical teams at what we call the NTO. We are starting with 26 and the idea is to end '24 with 21. These NTOs are already being discontinued. This is going to happen along the year. But even with this discontinuation, we have improvements in terms of results. So we are gaining scale -- so economies upscale and better quality care at the front end.

Well, with that, we get to the end of the presentation, and we are going to open for your questions.

[Operator]

[Operator Instructions] Our first question comes from Felipe Amano from Itau BBA. Felipe?

[Unknown Analyst]

I have 2 questions on my side. The first is that in the quarter, we saw an impact that you highlighted in the release comes from the review of the statistic movement of the deny you review. If you could give us some color about how it was in the past, what it is like now? And if we should consider this a recurring level for the company or if it was more of a one-off event?

Second question, if possible, I would like to have an update for the inorganic deleveraging of the company. We have been following several news that the company may be interested in selling assets in diagnostics or hospitals, and we would like to hear your mindset on this strategy. Thank you very much.

[André Covre, executive]

Hello, Felipe. Thanks for asking your question. This is Andre speaking. I'm going to answer your first question, and then I'm going to ask Licio to answer the second question. Talking about denials. When I joined the company, and encouraged by 2 reasons. I propose that we took a better look into that. First, the operational context of higher volume of denials happening not only in the company, but in the whole of the industry just following the release of other hospital companies. And second, the company this year was able to develop a database that enable us to have a history of denials that was much better than in the past.

And together with these 2 things, we had the statistical understanding of the right level of denials for this point in the market with a better technical statistics support because the database is today a lot more extensive than what it was in the past. So that was what generated the process. Of course, the entries of December do not refer to the quarter. It's just to adjust the denial balance. If we take a look at denials compared to gross revenues, we are talking about 3%. This is not the driver. This is the output, but it seems to me that it is a common number in the market.

I'm going to turn to Licio to talk about deleverage.

[Lício Cintra, executive]

Felipe, thanks for your question. Okay. I think that using your question itself that the market has been talking about our assets and possible sales, even without we giving any guidance on that, well, this is just proof of the quality of our assets. I think at Dasa, we have a combination of a series of assets that together are very good, but individually are also very good. And several players in the market would like to have them. And probably because of this or as a consequence of that, there is a lot of here say and speculation in the market, information that really does not come from us.

In parallel to that, and I think that along the 40 minutes that we have been in this call, this is clear. We really are very optimistic about the company, improving its performance. We have some letters more in the longer term. others in the shorter term and some that really are going to be able to reap the longer hanging fruit and give more profitability to the company, and differently from other healthcare companies.

We have a controller partner that has been in the industry for decades and deeply understand the industry. And is positioned in a very clear way that does not want to leave the industry and is giving all guarantees that Dasa will continue to have the necessary support from the controller shareholder as it needs it.

So to be quite straightforward in the answer, I think my mission and that of my colleagues is, to work hard our company performance. Being aware that when we look at the quality of assets, the potential improvement in performance and the positioning and availability of the controller shareholder. Our leverage should not be a reason for concern as it has been even in speculations from the different outlets. I hope I have answered your question, Felipe.

[Operator]

Our next question comes from Leandro Bastos from Citi.

[Leandro Bastos, analyst]

Hello, everyone. I have 2 questions. The first is that you went through several initiatives you were working on. If you could, in your view, share with us, which are the quick wins that can bring more efficiency and profitability for the business in the beginning of the year. So just a bit more color for us to perhaps tell the initiatives apart. This is the first question.

And the second question, based on what Licio mentioned about payers, I would like to know the temperature of your talks with payers. We know the sector is going through different challenges, but how do you think the cycle of billing and working capital is going to work throughout '24.

[André Covre, executive]

Okay, Leandro, thanks for your questions. Well, the first, I think several of the initiatives we mentioned in the presentation do have effects in the short, mid and long term. For instance, when talk about revisiting our workforce and incentive policies, there are things that are captured immediately, and there are things that are captured in the medium term. When we talk about negotiation of materials and inputs, we have a later effect because of inventory levels. But as we complete new negotiations, we start to see results. I think this is another point that we are very optimistic about. When we see the whole of opportunities, we are not a group that is focused on 2, 3 single solutions. That is, either implement this or I won't have better performance. We are talking about a huge area of options that are right on as fast as possible, respecting implementation times.

As for your second question, payers, I'm going to include another point that makes me very optimistic when I think of Dasa as a provider, which is our low dependence on a single payer. I think if you consider the large provider groups, we are certainly the group that is most fragmented in terms of payers, which leads us in a privileged position in terms of risk and specifically talking about the largest -- our commercial position of having some one ahead of the area that has a more technical profile, us revisiting bundles and protocols, addresses the needs of payers, especially with regards to hospitals.

And we also continue to believe that in diagnostics, we have a single unique footprint and that really makes a difference for those that have our products and certainly drive sales. So again, being very direct. We have to work deep to offer solutions of quality to payers, reducing costs and keeping our margins. I think I have answered your questions.

[Operator]

Our next question comes from Mauricio Cepeda from Morgan Stanley.

[Mauricio Cepeda, analyst]

I have 2 as well. A bit more discussing the operating performance of your business units. The first question about diagnostics. We see that [indiscernible] has had a strong growth in volume, and you, on the other hand, using the words you use, the footprint. You have a very diversified portfolio, a nationwide presence in the country. So my question is what is missing? What could help you to really resume growth close to [indiscernible] levels? Just because of your signs and the capacity that you have in gaining market share.

And the second question, the hospitals. In the release, you talked about the disconnect between adjustment of tickets and growth in costs. So how do you feel in terms of balancing our contracts for the future? We know payers are pressuring. So are you comfortable with the stronger commercial adjustments perhaps even higher than inflation?

[André Covre, executive]

Mauricio, thanks for your question. I'm going to turn to Lucchesi to help us out with the answer on the growth environment. But I think I have good news. I'm going to let him speak.

[Rafael Lucchesi, executive]

Cepeda, thanks for the question. Let me talk a bit about growth. We have several impacts to understand growth. We have international issues, this quarter dropped revenue down with all exchange offset. We had a negative revenues that really brings our results down. But in Brazil, we grew 8% in the quarter. And compared to the market, I think we're even higher than the market this quarter because we know it was a quarter of deceleration. In the year, we grew more and when we remove the exchange rate effect and the COVID effect, we had growth of 14% in revenue in the year, which is also very good with gains in market share in important cities and segments.

So mentioning the growth levers we are talking about, we are growing a lot in the premium segment, and we continue to do so even accelerating our annual growth also growth of more than 2 digits in individuals, which is our source of revenue that comes from OP services that do not depend on payers. Mobile services that grew more than 30% in the quarter and also an important gain of market share in B2B in the last quarter when we put together [indiscernible], which is hospitals diagnostics with [indiscernible]. So all these fronts continue to be a priority for the coming year.

One again, we have this important footprint, but also nationwide initiatives that pull our results up. And even with a lesser level of CapEx for '24. We have assets and capability to continue growing strong and above market levels. Thanks for your question.

[André Covre, executive]

And Mauricio, just to answer your second question, the disconnect between costs and the negotiation with payers. This is a fact for '24. I think that we have to take into consideration that payers came from a year where they rearrange their prices, and they will continue to do so. And on our side, having a better mix of surgical mix discussing bundles, stabilization, address that. So our negotiation is having quality revenue rather than having just an exaggerated growth in revenue. And that has been the constant pitch for payers.

And I continue -- quite confident that we can offer good services following the same rationale of payers, which is a balance between quality and cost. We are working on that, and we believe there is a huge avenue for us to follow during 2024.

[Operator]

Our next question comes from Emerson Vieira from Goldman Sachs.

[Emerson Vieira, analyst]

I have 2 questions on receivables. And if you allow me, I'm going to ask you on covenants. In the short term, we are hearing that from some providers that the scenario of receivables would only improve as of the third quarter of '24, when you have the new cycle of adjustments from payers. Do you agree with that? Is that your view? That is, should we expect an improvement in receivables just for the second half of '24? First question.

Second question about the advance of receivables. We saw this quarter you advanced about BRL 45 million, which is a level below what we saw in previous quarters. So I would like to understand if it was a decision of the company or if you're having any difficulty or an increased cost in advancing expenses?

And third, covenants are working to renegotiating your covenants given the fact that in the fourth quarter, they were very close to the 4x net debt-to-EBITDA ratio.

[André Covre, executive]

Emerson, this is Andre. About receivables, what happened to us was the following. In our numbers by the end of the third quarter '23, we had 104 days of receivables. I'm adding back the advances. Just for you to have a gross balance, and we closed the fourth quarter in December with 108 days. So 4 days more than September. Basically 3 specific situations with large players that were solved in January. So this is the trend that we saw from the third to fourth quarter.

As for the advance of receivables, the numbers that we have in our financial statements is that in the end of December, we had an advance of BRL 455 million with a financial institution and BRL 122 million in credit cards. And basically, this is the level of the third quarter. So again, a no sign of any difficulties that you referred to.

As for covenants, our focus is not on renegotiation. Our focus is to reducing debtedness. That is where we are investing our efforts both in terms of improving performance that is organic improvement, but also reassessing any possibility that enables us to reduce our indebtedness level, always with support of our controller shareholder, as Licio mentioned.

[Operator]

The Q&A session is now closed. We are going to turn the call back to the company's CEO for the final considerations -- for the final remarks, I'm sorry.

[Pedro de Godoy Bueno, executive]

I would just like to thank you all for joining us. And perhaps the takeaway message, I would like to go back to the very first question, which summarizes the moment we are growing through. Dasa has a controller shareholder that is knowledgeable about the industry and has the capacity to support company needs. It has assets that can improve its performance and assets that isolatedly are very appealing to the other players in the market. We continue quite motivated and confident that the balance of these 3 things will make Dasa have a much better journey for 2024.

I thank you very much for you joining us today and would like to wish you all happy Easter.

[Operator]

Dasa's video conference is now closed. We thank you very much for attending and wish you a good afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]