Fleury SA

BOVESPA:FLRY3

Earnings Call Transcript 2022-Q2

[Operator]

Welcome, everyone. Good morning, and welcome to Grupo Fleury Second Quarter 202 Earnings Conference Call. Joining us today are Ms. Jeane Tsutsui, CEO; Mr. Jose Filippo, CFO; and Renato Braun, IR Director. I would like to inform you that this event is being recorded and that we have simultaneous translation into English available.

First, we'll hear the company's results presentation, and then we'll start a Q&A session. After the Q&A session, Mr. Jeane Tsutsui will make her final remarks. All the numbers that are mentioned here today are compared to the same quarter in 2021, except when specified. These numbers were rounded to the nearest 1,000.

Before proceeding, let me mention that this presentation may contain forward-looking statements. Such statements are not merely historical facts, but rather reflect the wishes and expectations of the company's management. The words belief, expects, plans, anticipates, estimates, projects, aims, and other similar words are intended to identify statements that involve known and unknown risks. Known risks are uncertainties that include, but are not limited to the impact of competitiveness on prices and services, acceptance of services by the market, service transactions conducted by the company and its competitors. -- regulatory approvals, currency fluctuations and changes in product mix offers, among other risks described in the company's reports.

Now I'd like to turn the floor over to Ms. Jeane Tsutsui.

[Jeane Tsutsui, executive]

Good morning, everyone. First, I would like to thank you all for joining us this morning. Before giving you the highlights of the second quarter of 2022, I would like to tell you about our strategy in a broader way. We continue building an integrated, preventive, and hybrid health care ecosystem.

As you've seen in our releases, on Slide 4, you can see the flow of how diagnostic medicine permeates our customers' health care journey from end to end. The offers of diagnostic medicine are in the upper chart of the chart with our brands and the health care journey of our customers is shown right below it, starting with prevention, with routine check-up and genomic tests and what we call primary care appointments and then appointments with physicians from other specials, which we call secondary care; and finally, tertiary care.

Grupo Fleury already offers services in all of those stages and the health care journey is complemented with diagnostic medicine providing support to medical decisions throughout the whole continuum of [indiscernible], and it's based on this strategy of an integrated ecosystem that we have defined 3 growth avenues for Grupo Fleury, that you can see on Slide 5. The first is diagnostic medicine, where we want to grow, keeping our level of quality. The second is New Link, which focuses on building a relevant footprint in the value chain. And the third is the Health Care platform. The results of the second quarter of 2022 strengthen our continuous growth, which is the result of a consistent strategy and a solid trajectory.

Slide 7, we have reached an all-time record quarterly revenue of BRL 1.2 billion, up 19% year-over-year, and an EBITDA of BRL 298 million, 19.6% above the second quarter of 2020, with margins of 26.8%. If we exclude COVID testing revenue, which has achieved the smallest share since the beginning of the pandemic, we have grown by 24.7% against the second quarter of '21. And our organic growth that does not take into account the acquisitions made last year was up 10%, which reflects the strength of diagnostic medicine in all of our brands and the recognition to the quality of products and services offered by the group.

Another highlight is the mobile service, which accounted for 8.1% of the total revenue and grew by 18.5% against the second quarter of '21. The net profit amounted to BRL 70.5 million, up 7.6% year-over-year, with margin of 6.3%. But the highlights of the second quarter of 2022, is not restricted to the robust results that we presented. We closed the quarter announcing on June 30. The combination of business of Grupo Fleury and Hermes Pardini Institute, which is a major advance in the execution of our strategy to build an integrated health care ecosystem.

In the coming slides, we're going to briefly talk about this great announcement, which is still awaiting regulatory approval. On Slide 8, you can see the strategic rationale of the business combination with the Pardini Group. As we said in the call about the transaction on the 30th of June, the business combination is leading to the merger of 2 references in diagnostic medicine with a revenue potential of BRL 6.1 billion and an EBITDA of BRL 1.6 billion a year. In addition, we have a relevant portfolio of brands that are recognized in the industry and in quality control.

There is a great regional complementary with just a small overlap of service units. The combined company brings the Pardini Group with about 56% of the revenue [Technical Difficulty] to lab and the Grupo Fleury with revenue coming mainly from service units. We see a great opportunity to create value and expand our work in the national market with strong and recognized brands. We will be present in the B2B -- B2C markets, hospitals and diagnostic medicine in addition to having an acknowledged executive Board and renowned health care professionals. So our ambition is to become a leader in the diagnostic medicine industry in Brazil.

On Slide 9, you can see the opportunity to capture synergies of around BRL 160 million to BRL 190 million of EBITDA increase a year after we have implemented the business integration. In total, the combined company will have almost 500 service units and presence in 13 economic hubs in the country with 39 brands. We also have 24 technical areas for processing of 245 million tests a year with opportunity of improving routes, logistic gains, and better negotiation with suppliers. More than anything, the over 20,000 employees and 4,300 doctors will be able to gather leverage and increase the technical quality for which the Grupo Fleury and Grupo Pardini are recognized.

Now on Slide 10, you can see the next steps for the completion of this operation. On August 18, 2022, we will have the extraordinary general meetings at Grupo Fleury and Grupo Pardini. Right after that, we will execute conditions precedent, which includes the approval of the operation by CADE, the Brazilian antitrust authority. After that, we'll move on to the final actions for the transaction to be completed.

In summary, in addition to presenting consistent and robust results that show how sustainable our business is, we continue firmly executing our strategy in the identified growth avenues. Now I'd like to turn the floor over to Jose Filippo, our CFO, and IRO, who will give you further details about our financial performance.

[Jose de Almeida Filippo, executive]

Thank you, Jeane. Good morning, everyone. I will now continue with our presentation, share in a bit more detail on the financial results of the second quarter of 2022. On Slide 12, we can see that once again, we have achieved an all-time record revenue of BRL 1.2 billion, up 19% year-over-year. If we exclude the COVID testing effect, this increases to 24.7%. Even just considering the acquisitions that were made, the organic growth was of 10%, which reflects the strength of our core business in diagnostic medicine. The segment of mobile service has continued to grow with expansion of 18.5%, now accounting for 8.1% of the gross revenue of the quarter, which is equivalent to the average revenue of 31 physical units.

On Slide 13, we can see that the COVID-19 tests in the quarter have achieved the smallest shares since the beginning of the pandemic, accounting for only 3.9% of the revenue. This shows once again how important the structural growth drivers are over circumstantial factors.

Now on Slide 14, you can see the gross revenue of the service units that have achieved BRL 937.7 million in the second quarter of '22, up 18.2% against the second quarter of 2021, with a highlight to the strong growth of 14.2% in the Fleury brand and 16.5% in the A plus Sao Paulo brand, which shows that these are preferred service units for elective tests. It's important to mention that the Fleury and A plus brand's growth have outperformed the market, indicating therefore, a gain of market share.

In the regional, a growth of 49.7% in the quarter reflects the integration of the operational units of Pretti, Bioclinico, and Marcelo Magalhaes. In Rio de Janeiro, in spite of the decrease in the number of members of health care plans, the brands have grown 8%, which also indicates a gain of market share in that state.

Now the results of new links and health care platforms on Slide 15. We can see that together, these businesses have grown 115% in the quarter. In the second quarter of '22, the gross revenue of new links and health care platform has achieved BRL 88.4 million, up 115% and accounting for 7.4% of the gross revenue of the group. The first half of 2022, the gross revenue of New Links and Health Care platform has achieved a growth of 205% against the first half of 2021, achieving BRL 167.6 million.

The revenue coming from New Links has achieved BRL 76.2 million, up 140.2% as an effect of the acquisitions of CIP, Vita, and Moacir Cunha. It's worth mentioning that in addition to the revenue of the new unit classified as New Links, these new businesses also create demand for diagnostic medicine and reinforce our goal of acting as an integrated health care system. The health care platform has registered 249,500 telehealth appointments with revenue of BRL 12.2 million in the quarter.

On Slide 16, you can see the growth of the gross profit that has achieved BRL 300.4 million, up 16.3% year-over-year with margin of 27%. In the first half of 2022, the gross profit achieved BRL 625.1 million, up 14.6% against the first half of 2021.

On Slide 17, we can see that the operating expenses have had a contraction of 347 basis points compared to the same quarter the previous year, accounting for 10.4% of the net revenue. This behavior happens as a consequence of the cyber incident that happened in the second quarter of '21 and also due to expenses of software amortization and the expected effect of the closing of acquisitions.

On Slide 18, you can see that in the second quarter of '22, our EBITDA has reached BRL 298 million, up 19.6% against the second quarter of '21. in the first half of '22, our EBITDA totaled BRL 624.6 million, with margin of 28.4%.

Now on Slide 19, you can see that in the second quarter of '22, the net profit totaled BRL 7.5 million with margin of 6.3% if compared to the same quarter the previous year. This quarter, we have recorded higher financial expenses due to higher interest rates and an increase in our net debt. Our net profit in the first half of '22 has achieved BRL 180.9 million with margin of 8.2%, down 1.7% when compared to the first half of '21.

On Slide 20, you can see that in the quarter, we have made investments totaling BRL 112.8 million, up 31.3% year-over-year. This was mainly boosted by an increase in investments in IT infrastructure and the broadening of services at our units with greater offer and new technical areas to serve the demands of the new acquisitions.

Now on Slide 21, you can see that in the second quarter of '22, the operating cash generation has achieved BRL 298.2 million, 4.1% above that of the same period last year, boosted mainly by EBITDA growth. The conversion rate was 100.1% of the EBITDA.

Now on Slide 22, we can see that the gross debt increased 37.2% in the second quarter '22 compared to the second quarter '21, mainly due to the seventh issuance of debentures worth BRL 700 million. The net debt in June 2022 has achieved BRL 2.1 billion, up 36.9% against the previous quarter. This was impacted by the payment for the acquisition of Marcelo Magalhaes lab, the payment of interest on equity and the growth of maturing debts. In the quarter, our leverage was 1.8x against 1.4x in the first quarter '22, below the limit of 3x established by the debt instruments and covenants.

On Slide 23, you can see that the return on invested capital, excluding the goodwill with fact, has achieved 40.6% in the second quarter of '22. In terms of our Net Promoter Score, the consolidated indicator has achieved 76%. Before we move on to our Q&A session, I'd like to turn the floor over to Jeane for her final remarks.

[Jeane Tsutsui, executive]

Thank you, Filippo. We are halfway through the year, and our results show continuous growth, which has been achieved based on a consistent strategy of building an integrated health care system. And this is an accomplishment that we owe to over 30,000 employees and 3,000 physicians we have in our group who are fully dedicated to the health and well-being of our customers. I would like to thank the work of our teams and the trust that the customers and partners of Grupo Fleury place in us every day. Thank you very much. We are now available for the Q&A session.

[Operator]

Ladies and gentlemen, we'll now start the Question-and-Answer Session. [Operator Instructions]

[Renato Braun, executive]

Good morning, everyone. This is Renato Braun, the IR Director of the company. We would like to reinforce that we have 2 communication channels that you can send your questions too. So we have a WhatsApp number [indiscernible] or the e-mail address [e-mail]. Now I would like to turn the floor over to Jeane, who has a few comments.

[Jeane Tsutsui, executive]

Thank you, Renato. Before we start our question-and-answer session, I just want to talk about the wage floor for the nursing team that was approved yesterday by the President. We are conducting a detailed analysis on the impact we will have, but we don't think this will be very significant. Our largest operation, which is quite complex and need these professionals is mainly based in Sao Paulo, where the pay gap compared to the minimum wage defined is minimal.

That is here in Sao Paulo, our nursing professionals already earn something similar to the floor that has been defined. And in all of our operations, we have a mix of professionals that include also biomedicals, lab analysts, and others. So we're still assessing the impact, but I'd like to emphasize once again that the impact on our operations will not be significant.

Now we can open for the Q&A session. Thank you, Renato, for the opportunity.

[Renato Braun, executive]

Sure. We have the first question from [indiscernible].

[Unknown Analyst]

I have 2 questions. My first question is about the merger. If the transaction is approved and the companies are integrated. Do you expect improvement with payers? Do you think that your negotiation will be better because of your greater bargaining power? And my second question about the gross revenue. I saw that in the quarter, the number went down in a year-over-year comparison. So I would like to understand what were the main reasons that led to that decrease?

[Jeane Tsutsui, executive]

About the business combination with Grupo Pardini. This month, we have scheduled the extraordinary meetings that will happen on the 18th. And we're also advancing with the regulatory issue, which is CADE's approval and we are not sure how long this would take. We expect this to be approved in the first quarter of 2023. And after that, we expect to capture synergies. During that time, of course, we're going to conduct a thorough planning and conduct analysis to better understand the synergy opportunities, which are from BRL 160 million to BRL 190 million EBITDA a year, but we want to detail this better, and we also expect to have a better negotiation with payers. Of course, there are national payers and also regional payers, and that will be better detailed later as well.

Now when it comes to the capture of synergies, this is more focused on cost line, like logistics, negotiation with suppliers, and even better use of our technical areas, which, as we said, we're going to have a total of 24 technical areas. So we will have an opportunity to make better use of that. Now about the gross revenue per test. I would like to draw your attention to the mix.

In the second quarter, we had an increase of clinical tests -- and when compared to the second quarter of '21, we have operations that were added real time, Pretti, Bioclinico, Marcelo Magalhaes -- and even in our service units in general, we had an increase -- a greater increase in clinical tasks more than imaging tests. And we also have a greater number of tests per patient, but a reduction in the average unit price. So this is also a mixed effect that is related to that greater increase in clinical tests. Now we've been talking to you about the mix for a while now. We have had significant growth quarter-on-quarter also in our mobile service, which offers mainly clinical tests or clinical analysis. So there will always be a balance between the number of tests per patient and the average revenue of tests.

[Operator]

Our next question is by Vinicius Ribeiro from UBS.

[Vinicius Ribeiro, analyst]

I have 2 questions. About the topic of price, as Jeane just mentioned, but focused on the second half of the year. After implementing the strategy of diversification and creation of the ecosystem that you have been implemented in the last 12 months, what do you expect in terms of negotiating with payers in the second half of the year? Will there be any improvement because you're expanding your activities or the situation of the operators will not be changed? Now we saw a small decrease here in average prices. Is that a one-off effect or something that you expect to be capped from now on?

[Jeane Tsutsui, executive]

Thank you, Vinicius, for your questions. About the negotiation with payers. We usually do have the negotiations in the second half of the year, and this price is reflected in the beginning of the year. So this process is about to start now. And our expectation is that we'll continue to offer solutions to health care operators like a more integrated assessment or conducting procedures on an outpatient basis, which can be very interesting. And it's not an easy negotiation. It's a negotiation that has enabled us to pass through part of the inflation rate throughout the years, and we expect to keep this view to offer solutions, but that's not always easy. We know that the MLR rates of operators usually impact on our negotiations. So this is a process that will start in the second half of the year now.

About accounts receivable, I don't think there are any specific characteristics here, but I'd like to turn the floor over to Filippo so that he can answer your question.

[Jose de Almeida Filippo, executive]

Well, what happened was that we saw some variation in accounts receivable, but that was mainly due to an internal processing flow that we had. But that's a very specific issue that will not -- it's not showing any type of new trend. It changed the calculation, but it's just something related to the process. So once again, this is not a change. This is going to go back to normal in the next quarters.

[Vinicius Ribeiro, analyst]

Okay, great. That was very clear, Jeane and Filippo.

[Operator]

Our next question was sent via chat. It was sent by Emerson Vieira from Goldman Sachs.

[Emerson Vieira, analyst]

So the first question is, in spite of the incorporation of new assets in New Links with lower margins, the company has been able to keep the profitability levels. Can you comment on the cost initiatives that are being implemented as part of the core business of the company that are helping you in your results?

The second question, in terms of inorganic growth, what type of asset hospitals or outpatient clinics, the company thinks is missing in the ecosystem to execute its strategy, and after the acquisition of the Pardini Group, are you planning to make other acquisitions in the short and medium term or the profile of the acquisitions will continue to be focused on diagnostic medicine and New Links.

[Jeane Tsutsui, executive]

Thank you, Emerson, for your questions. You said, well, Emerson. We've been saying that the New Links have lower margins, but it makes perfect sense for Fleury's strategy to diversify and to offer services that will integrate the continuum of care. So although the New Links now represented 7.4% of the revenue, there has been an increase of 115%. We see that we can keep profitability through all time because we've been working really hard on cost and expenses discipline.

I have a few examples. The first, the increase in volume also helps us to dilute fixed costs and to keep our profitability levels. Now the second aspect is that we have been working on increasing productivity, which is something very relevant. And we have a lot of discipline -- we've been looking at productivity in each business line for a few years now, and we are very disciplined about this. And the third aspect is our potential to negotiate with suppliers.

Now about your second question related to inorganic growth. We've been looking at different specialties, and we opened orthopedic, which, in addition to the inorganic growth with the acquisition of Vita, we also have an organic growth plan after the acquisition of that asset that has many great medical knowledge and training of new professionals. It's important to remind you that we make a mix of acquisitions to create value, but we're very disciplined in the integration to capture value. Ortho is a great example. We made the acquisition. In this quarter, we opened one unit and there are other units to be opened soon, so that we can capture value.

Now you asked a specific question about other potential transformational assets to be acquired. We always assess what's going on in the market. And this business combination with Grupo Pardini is transformational, and it will give us complementary in national coverage, great synergies to be captured and complementary of skills. We'll be present in the B2B, B2C market and the whole executive team at the Pardon Group, which is amazing. So we'll assess other opportunities and we'll continue on our pipeline of M&A, which is more focused on diagnostic medicine and New Links, as we said before.

[Operator]

Thank you, Jeane. Our next question is by Joseph Giordano from JPMorgan.

[Joseph Giordano, analyst]

I would like to talk about the resumption of growth in Rio, which was a great highlight here. I would like to understand what the main initiatives are to drive this flow to the new units. So I'd like to hear from you. Do you have any new payer that will boost growth?

Now my next question is about your core business, Fleury, Sao Paulo mainly. I would like to understand about the new initiatives that are more focused on women, medicine, and assisted reproduction. And then finally, the oncology vertical. You just got the approval to do this joint venture with Beneficencia Portuguesa. So what can you accelerate on this front? What is in your pipeline? Does it make sense to think about like a lower complexity asset on that front as well?

[Jeane Tsutsui, executive]

Excellent, Joseph. Thank you for your questions. About the resumption of growth in Rio de Janeiro. We saw in all brands, even Fleury, which is a traditional brand with a high market share and a plus also had gain in market share. Rio de Janeiro is a location that has presented us with difficulties. We see no growth in the number of members in Rio, but we have signed new contracts. At the end of the year, we announced a major contract in which we were adding more lives specifically in Rio de Janeiro. And we've also been looking into new opportunities. So we think that the market share gain in Rio de Janeiro is a result of all of those commercial actions that we have been taking in Rio de Janeiro. And clearly, we also have an opportunity to grow, for example, with the mobile service offer in Rio, which is another business line that has presented good results.

About the new initiatives, when it comes to women's medicine, we already have integrated women health care centers like the unit in Republica or the thyroid assessment center, and we have also opened a fertility center that is doing well. This is a center that is following the business plan and even doing better than expected in the business plan, and we continue to assess new opportunities. This is an area in which we usually believe that we can launch new products, new tests. Last year, we have launched a total of 430 new products and services, which also brings results to women's medicine. Now about the oncology JV, Joseph, we're still waiting for CADE's, final decision for us to be able to start our activities. So this is the joint venture that we announced in May. We have submitted this to CADE. We had a first assessment, which was positive, but we're still waiting on the final decision by CADE in the coming months so that we can start working on that JV. We have great perspectives. Oncology is an area of that.

Because of the aging of population, we have an increase in the number of cases, and we have estimates of having an increase of 4% in new cases per year in the oncology field and also an increase in new treatments. So as soon as we get the regulatory approval, we intend to accelerate our oncology vertical. We cannot forget that we're doing really strong in diagnostic and genomic, we had a 33% growth in the quarter, and many of these tests are also focused on diagnostics oncology.

[Operator]

Our next question was sent via chat Rafael Barrows from XP.

[Unknown Analyst]

We've seen that most of the operators are suffering with MLR. Do you think this is going to become a pressure for smaller prices with you?

[Jeane Tsutsui, executive]

Yes. Well, this is a trend that after the pandemic, we saw a resumption in the level of elective tests. And we also have some post-COVID effects. So the MLR was higher. And as a result, the negotiations are harder for us throughout time. Our positioning is to offer outpatient solutions that can contribute to the sustainability of the health care system as a whole. And size also matters in those negotiations. So in that way, the business combination with Grupo Pardini is another important factor that will help us have national relevance.

[Operator]

The next question also sent via chat by Gonzalo Olivera. The question is, how is the Marcelo Magalhaes performance? Will this lead to a decrease in margins?

[Jose de Almeida Filippo, executive]

Marcelo Magalhaes, as I said, started to be included in the company's results this quarter, and it's doing really well as expected. We have a growing expectation to evolve with synergies, but even in -- right in the beginning, we've seen margins that are above our average. So it's important to comment that the performance is as expected. And we believe that we can still evolve in this as we're able to implement some synergies actions as planned. So this is now part of our revenue and results composition in the expected way with a positive contribution.

[Operator]

Next question by Gustavo Tiseo from Bank of America.

[Gustavo Tiseo, analyst]

I have 2 questions. The first is about the mobile service. You have achieved quite positive results accounting for 8% of the revenue now. Can you tell us about the possibilities? Are you in all of the regions where you're present with physical units? And do you think that you can go to more remote regions where you're not present with physical units? So I just want to understand a bit of your perspectives on the mobile service.

Now the second question is about the expansion of New Links. You talked about the lives and the expansion of 6 units this year. Are you facing the same difficulties you have in diagnostics with accreditation or not? Do you think that the organic growth for that business can be stronger from now on? So these are my 2 questions.

[Jeane Tsutsui, executive]

Thank you, Gustavo, for your questions. And you're right, we've been showing the strength of the mobile service through our time. We had that before the pandemic. And after the pandemic, we saw a major change in behavior. So answering your question, we have been increasing the number of routes. And yes, we still see a potential to expand those routes. We're also assessing other possibilities. Today, we already have a route distribution intelligence going from the service units elsewhere, which help us to increase the mobile service productivity.

We're always studying this business line, and we believe in this behavioral change that we are seeing. So depending on the brand, we already expand the service, for example, here in Sao Paulo, we go to the interior of the state and also through the coast. So we're always assessing new possibilities. Another characteristic is to expand the portfolio depending on the brand. So we're usually talking about lab tests, clinical tests. But if you look at Fleury, we do MAP, [indiscernible], Ultrasound, polysomnography and other tests. So depending on the behavior of customers will adapt our services to capture the revenue.

With regard to the expansion of New Links, we are opening our revenue, but our view is that in addition to the acquisitions that will bring us knowledge and mature units, we also intend to have a mix with organic growth. It's hard now to give you a very clear positioning about accreditation. We are able to do it in new units, but part of these services also have a significant share of out-of-the-pocket payments and to generate value, we want to combine organic and inorganic growth. I think that later on, when these operations are more mature, we'll be able to give you greater visibility on this. But right now, I think it's too early to tell. Our expectation is yes, to have organic growth.

[Operator]

Our next question is by Yan Cesquim from BTG.

[Yan Cesquim, analyst]

Good morning, Jeane. I have 2 questions on my side. The first is we saw an increase in the CapEx level. And I think this is related to the Polaris works since we're talking about expansion CapEx. But I just wanted to understand the level of CapEx that you expect for the year? And if this is going back to normal next year to more historical levels as revenue percentage? And the second question is about the consistent growth of the Fleury brand. What are the drivers of this growth? Optimization of the service units, advances and mobile service, a change in the appointments with -- or a change in console? So what do you have ahead of you?

[Jose de Almeida Filippo, executive]

Let me start by asking -- answering your question about CapEx. If we think about a recurring CapEx, we can see, as you said, an average over the last 2 years, actually 2020 was the year in which CapEx was repressed and then there was a carryover of some of those retentions in 2021. But on average, we had BRL 300 million a year. So we can use this number as a reference -- that we could use as a baseline to compare to the numbers of 2022. And if we add the investments in the new technical area, that's another BRL 100 million. So a CapEx of BRL 400 million for the year, EUR300 million would be the baseline and BRL 100 million would be an additional investment that will happen only this year.

In the second quarter, we saw growth because of the distribution of the investments throughout the year. But for the year, we would have BRL 300 million plus a BRL 100 million. So BRL 400 million in total because of the investment in the technical area that will happen this year only.

[Jeane Tsutsui, executive]

Now about your question on the Fleury brand. This is a brand that has 96 years of operations with a good market share and that is still gaining significant market share. So yes, the Fleury brand is growing because of the expansion of the mobile service, but also since last year, we started to renew the brand, we renewed some units, and we retrofitted them considering not only customer experience but also expansion of service offer whenever we can. So for example, we are changing the layout of the units and adding ultrasound rooms or fetal medicine rooms whenever we can. So the retrofitting is also accompanied by greater services offered.

Now about the portfolio, we've been talking about the potential of innovation and the number of products and services that we have launched. Last year, we launched 430 new products and services, and that also helps us to offer or increase the offer in our portfolio. And finally, after the pandemic, we felt the trust that the customers have in the Fleury brand. The Fleury brand is recognized and trusted. We've been improving the communication of our differentials consistently, either with the medical community, where we've always been a reference with medical relationship events going on, and visitors that will take the differentials of our brands to them and with customers in general. So we've been working a lot on this consistent communication of our brands differential. And this is what has been leading to this gain in market share with the Fleury brand.

[Operator]

Our next question is by Mauricio Cepeda from Credit Suisse.

[Mauricio Cepeda, analyst]

I have 3 questions. The first is about your mid-tier strategy. So my question is what is the growth potential in that segment in your point of view? I know there are many pressures in the health care system. So what is the growth potential in your view? And how can the Pardini merger help? Do you think that you can preserve the ticket prices in that segment better to explore that?

Now the second question is about the legal framework. You talked about the nursing wages, but we've also heard about ANS's formulary and the expansion of coverage to be on this formulary, ANS's list. What do you expect in terms of high-cost genomic tests? How are you preparing to that change in ANS's formulary? Now above margin, in the ex-clinical analysis part because you're very strong in that part, I would like to know how your image is doing. Do you intend to accelerate growth? Or are you accompanying the pace of the market?

[Jeane Tsutsui, executive]

Thank you, Cepeda, for your questions. First, yes, we see a potential. When we look at the market share of the brands that act in that mid-tier or even the low-tier segment for which we have initiatives as well to strengthen our footprint. We see that the merger with Pardini that has great logistics efficiency in the units will increase our potential. This market is very fragmented. Our market share is still low. So yes, we have room to increase market share. We've been working on that. So once again, the market share is increasing in all brands. A plus, Sao Paulo grew by 16%, Rio, even with this harder market, we also gained market share and for sure, our business combination with Pardini will bring us differentials to continue advancing, both in clinical tests and imaging tests.

So going to your third question, Cepeda, we're certainly now recognized by the medical quality. Throughout the years, we have built a model that will keep physicians with us, not only key opinion leaders, but they also attract new physicians. For imaging, we have a fellow program in radiology to attract new talents and a continuity plan. So yes, we see a potential to grow in imaging as well. And mainly, we have this recognition of the medical community about the quality of our professionals. We have about 3,600 physicians working with us. A 1,800 of them are radiologists. We have different specialties, but half of them are radiologists. So we're always very careful when it comes to that, and it's definitely a differential at Fleury. Now some of the brands where we are now recognized for clinical tests or even acquisitions for clinical tests, we also have the possibility to include imaging. So this organic growth is being considered.

Now about ANS's formulary. Of course, when we look at some possibilities, you mentioned genomic tests. These are tests that are in the ANS formulary in a small number and have health care plan coverage. So yes, we see opportunity, especially for tests that are scientifically proven and that are already part of guidelines and that bring clear benefits for patients and for the sustainability of the system. It's very important to think about the sustainability of the system. We should all take that into account and use tests that will benefit patients in the health care system as well. We usually have examples of tests in which you already have a health economics that shows that having a genomic test can help define the management of a cancer patient, for example, and that reduces the cost of the health care system as a whole because it will avoid unnecessary treatments. So we believe it is really important to have a balance with payers in order to have sustainability in the system in general.

[Mauricio Cepeda, analyst]

About the price in this mid-tier market, do you think you have a greater bargaining power for that segment?

[Jeane Tsutsui, executive]

Cepeda, that's quite hard. We need business models that are appropriate for that proposal. We've been able to do that through our time. And looking back, we were able to capitalize on this segment. But yes, it's a price challenge. What I see, especially with that business combination with Grupo Pardini is that we can gain competitiveness because of the synergies, diluting costs, greater volume, better logistics and steerage to the technical areas. And through our time, we're going to work specifically on those fronts.

[Mauricio Cepeda, analyst]

That was very clear.

[Operator]

Our next question is by Leandro Bastos from Citi.

[Leandro Bastos, analyst]

I have 2 quick questions. First, about the mobile service. Can you tell us about the contribution margins of tests? And the second question is a follow-up on the nursing wages. You said you wouldn't have a significant impact. Can you give us a bit more color? Is this already valid and when should this go into force?

[Jeane Tsutsui, executive]

Leandro, can you repeat your second question, please? We couldn't hear you.

[Leandro Bastos, analyst]

Sure. I just want to understand the minimum wage for nurses. Is this going to be enforced starting this month or when do you expect this to go into force?

[Jose de Almeida Filippo, executive]

So about the mobile service margin, the margin right now is similar to the margins we have in operational units. As we said earlier, we have expectations to consolidate this channel, expand the channel and gain efficiency. So then we'll know how these services compare. But right now, it's similar to what we're doing with other tests and services that are offered.

Now about the nursing minimum wage. We work together with other companies and associations to understand how this is going to work. It doesn't seem to us that this is happening immediately, but we need to check what would be the best way to implement what is defined. But is it still too early to talk about that because we don't have clarity on how we will have to proceed. But as we said earlier, the impact is not very significant in our case, in our case. We will follow the industry guidelines, but we do not expect a very material impact.

[Operator]

Our next question is by Ricardo Boiati from Banco Safra.

[Ricardo Boiati, analyst]

I have 2 quick questions.

[Operator]

Ricardo, I think it got disconnected. Can you hear us? [Operator Instructions] Ricardo got disconnected. So, Mr. Renato, you have the floor.

[Renato Braun, executive]

Okay. Just a second. I think we're receiving Ricardo's message. Just a second then.

[Operator]

[Operator Instructions] Please wait while we poll for questions.

[Renato Braun, executive]

Thank you, Ricardo. I got your questions via WhatsApp. So he's asking us to detail the organic performance of our regionals.

[Jeane Tsutsui, executive]

Yes, we have a consolidated organic growth consolidation of 10%, but that takes into account a smaller share of COVID tests. So if we exclude COVID tests from the second quarter of '21, which accounted for 8.3% of the revenue in the second quarter of '22, which accounted for 3.9%, then we had a consolidated organic growth of 16%, so above the 10% that we shared because the share of COVID test was smaller. And that was quite even in all regionals. Of course, there is minimum variation, but the organic growth performance was well distributed throughout our service units overall.

[Ricardo Boiati, analyst]

Thank you, Jeane. Can you hear me now?

[Jeane Tsutsui, executive]

Yes, we can hear you now. I don't know if you had other questions, but...

[Ricardo Boiati, analyst]

Yes, the organic growth question was more based on the regional brands. In Rio, you gave us a few details, but not in the other regions. What were the reasons? Why the organic growth was so big?

Now also about your organic performance. Can you give us more details on your monthly performance? Did you have linearity in April, May, and June or do you see an acceleration in sales performance in one month or another? And can you give us details about how the third quarter is going so far?

[Jeane Tsutsui, executive]

Well, about the growth, we saw that in the beginning of the quarter, we had a greater share of COVID tests, and it's now been decreased dramatically. And as the transmission rates go up, this should also go up and then go down again. So the COVID share today is minimum. So we're only talking about [ AC and CD ] growth mainly.

About the regional, in Rio de Janeiro, we have registered a major operator with that contract that we announced at the end of the year. And in the other regions, the growth came after a thorough analysis of opportunities. So for example, we've been looking at the mobile service growth opportunity in other regions, expanding the routes, and that's a lever that we didn't have in some of the regions so much, and this is being expanded. And we're also considering the opportunity of the different agendas. In some specific regions like in Recife, we had units that conduct imaging tests, inside shopping malls. And those units are going back to higher levels. So registration of operators, mobile service, and the coverage of agendas where we see the opportunity to expand.

[Ricardo Boiati, analyst]

Okay.

[Operator]

[Operator Instructions] Please wait while we poll for questions. This concludes the Q&A session. I would now like to turn the floor over to Ms. Jeane Tsutsui once again.

[Jeane Tsutsui, executive]

Thank you all once again for joining us for the Second Quarter 2022 earnings conference call. We're confident about the execution of our strategy to build an integrated health care system. And mainly, we continue customer-focused. And this will definitely bring better results to them. We have discipline of execution, discipline of costs and discipline in the execution of our organic and inorganic growth strategies. I hope to see you again in our next quarter's earnings release conference call. Thank you very much.

[Operator]

This concludes Grupo Fleury's earnings conference call. Thank you all for joining, and have an excellent day.