Conference Call 3 rd Quarter 2007 Results. Disclaimer This document contains “forward-looking...
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Transcript of Conference Call 3 rd Quarter 2007 Results. Disclaimer This document contains “forward-looking...
Conference Call 3rd Quarter 2007 Results
Disclaimer
This document contains “forward-looking statements”. Forward-looking
statements may be identified by words such as “expects”, “plans”,
“believes”, “seeks”, “estimates” or words with similar meaning. The
statements contained in this presentation about the Company's forward-
looking statements, including business prospects, operating and
financial projections and potential growth are merely forecasts based on
management’s expectations in relation to its future performance. Such
estimates are highly dependent on market behavior, on Brazil’s
economic performance and on industry and international market
conditions. As such, they are subject to change.
1
Executive Summary
In November 2007, DASA will be listed in Bovespa for 3 years;
In this short period of time, DASA almost doubled its size through brand segmentation, introduction of imaging services and geographic expansion to new markets.
Despite the strong growth, gross margin did not oscillate significantly.
Gross Revenues Evolution (R$ Millions)
Gross Margin Evolution (%)
2
254.5
129.3
3Q04 3Q07
96.8%
31.6%32.9%
33.9%
31.4%
2004 2005 2006 9M07
40.5
55.760.4
2005 2006 9M07
45.9%
23.4%
21.4%
Jul 07 vs Jul 06 Ago 07 vs Ago 06 Set 07 vs Set 06
Executive Summary – cont.
Similarly important is DASA´s entrance in new dynamic market segments which still have a host of opportunities of consolidation.
During the quarter, besides the acquisition of CientíficaLab and Med Imagem, we opened 11 new patient service centers (2 of which were mega). The acceleration of acquisitions and organic growth has already influenced the 3Q07, specially as of September.
Monthly Revenue Growth- 2007 vs 2006
Lab-to-lab Gross Revenue (R$ Million)
Gross Revenue per Segment (3Q07)
3
* DASA´s segment of operation during the IPO
Lab-to-lab
7.9%SUS 9.2%
Outpatient
& Inpatient*
82.9%
(e) Projected
(B) Budget
2006 9M07 4T07 (e) 2008 B
Mega 4 2 5 4
Standard 12 22 5 16Total 16 24 10 20
(e)
(B) Budget
2006 9M07 4Q07 (e) 2008 B
Mega 4 2 5 4
Standard 12 22 5 16Total 16 24 10 20
Third Quarter 2007 – Highlights
4
Opening of 11 PSCs, 2 of which were “megas”, adding 24 new patient service centers in 2007 and 36 in the last 12 months;
Entry in the public sector, through the acquisition of CientíficaLab (Jul/07);
Acquisition of Med Imagem (Aug/07) with operations in Rio de Janeiro;
Strong requisition volume growth: 21.6% in outpatient and inpatient segment and 34.6% in the lab-to-lab segment;
Adjusted EBITDA margin of 23.8%, despite acceleration of the expansion strategy.
3Q07 3Q06 Change (%) 3Q07 3Q06
Gross Revenue 254.5 196.1 29.8% 108.8% 108.9%
Net Revenue 234.0 180.0 30.0% 100.0% 100.0%
Cost of Service (157.3) (112.7) 39.6% -67.2% -62.6%
Gross Profit 76.7 67.3 14.0% 32.8% 37.4%
EBITDA 52.1 47.8 9.2% 22.3% 26.5%
Adjusted EBITDA 55.6 49.9 11.5% 23.8% 27.7%
Net Income (Loss) 7.8 14.8 -47.3% 3.3% 8.2%
Equity 534.5 468.0 14.2% 228.4% 260.1%
Net Cash (Debt) (303.3) 4.8 N.A.
Source: DASA
R$ million margin %
Gross Revenue Growth (R$ Million) Gross Revenue by Service Line (R$ Million)
Operating Revenue by Service Line
Growth of 29.8% in gross revenue, which reached R$ 254.5 million in the quarter, the highest quarterly growth achieved since the IPO in November of 2004;
This result is due to revenues from organic expansion and acquisitions in the outpatient and inpatient segments (+17.7%); growth of lab-to-lab operations (+19.5%); and the entry in the public service sector through CientíficaLab;
Same-unit revenues grew by 2.2% in the 3Q07;
The entrance in the public healthcare sector (SUS) helped dilute the share of traditional payers in DASA’s revenue.
5
254.5196.1
729.7
266.6323.8
399.8
491.4576.9
2001 2002 2003 2004 2005 2006 3Q06 3Q07
CAGR = 22.3%
29.8%
211.1179.3
20.0
16.7
23.4
3Q06 3Q07
Outpatient & Inpatient Reference Public Sector
196.1
254.5
17.7%
29.8%
19.5%
91.5%
8.5%
82.9%
7.9%9.2%
1.7 1.6 16.8 1.9 2.0
4.6
5.2
6.1
105.0102.9103.0105.6108.4109.9110.4
106.8
2004 2005 2006 3Q06 4Q06 1Q07 2Q07 3Q07
Requisitions Average revenue per requisition
6
Operating Revenue – Outpatient & Inpatient
In the last 12 months, 4 companies were acquired in this segment: VitaLâmina, Atalaia, Exame and Med Imagem;
Growth in imaging services is still significant (+15.2%) despite a dilution of 0.8 p.p. due to the nature of the acquisitions done in the last twelve months. Excluding this effect, the share of imaging services moved up by 1.1 p.p.;
The growth in clinical analysis revenue, up by 19.2% over the same period of 2006, was fueled by 2006 and 2007 acquisitions;
As observed, the average revenue per requisition is stable. The decline comparing to the 3Q06 (-3.2%) was solely a result of the change in the revenue mix, as the average clinical analysis prices remained flat and the average imaging prices grew by 4.3%.Average Revenue per Requisition (R$) and
Requisition Volume (Million) Revenue by Service line (RS Million)
133.9 112.3
77.2 67.1
3Q06 3Q07 Clinical Analysis Imaging Services
179.3
62.6%
37.4%
63.4%
36.6%
211.1 17.7%
15.2%
19.2%
8.28.17.97.47.36.2
7.9
16.817.117.417.7
18.919.9
18.5
491473452
420418366
336
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07Average revenue/laboratory (in R$ million)Average revenue/requisition(in R$)
# Requisitions/laboratory7
Operating Revenue – Lab-to-lab
Lab-to-lab revenue grew by 19.5% as a result of an upturn in the number of laboratories served (from 2,119 in 3Q06 to 2,427 in 3Q07) and an increase in the average revenue per laboratory;
The average revenue per laboratory moved up by 4.3% y-o-y due to a growth of 17.5% in the number of requisitions processed by laboratory. This result corroborates our strategy of expansion of Alvaro’s services to laboratories which are already clients, through the offering of less complex tests, which present lower average prices.
Revenue – Support activities (R$ million) Performance analysis - Alvaro
16.7
60.4
40.5
27.2
18.0 20.0
2003 2004 2005 2006 3Q06 3Q07
CAGR = 49.7%
19.5%
CientíficaLab – Revenue (R$ million)
8.0*
23.4
3Q06 3Q07
193.4%
8
Operating Revenue – Public Sector
The expansion of CientificaLab’s services, currently in São Paulo, Minas Gerais and Rio de Janeiro, foresees an increase in the volume of tests per existing contract and the opening of new contracts for other states and municipalities;
CientíficaLab, a leading private service provider to the public sector, served 36 clients when acquired and now has 40 clients, classified between medium-sized (up to 150 thousand tests processed per month) and large-sized (more than 150 thousand per month) clients;
In this quarter, CientíficaLab’s revenue represented 9.2% of total gross revenue totaling R$ 23.4 million and up by a substantial 193.4% over the 3Q06.
CientíficaLab – Client Classification
MédioGrandePorte
Final do trimestre
Momento da aquisição
Total
36
40
8
8
28
32
MediumSize
LargeSize
End of theQuarter
Moment ofacquisition
Total
36
40
8
8
28
32
*Non-Audited
Gross Profit and Costs
The gross margin fell by 4.6 p.p. in relation to 3Q06 due to fixed costs generated by the opening of new PSCs, the larger share of business-to-business operations (Alvaro and CientíficaLab) and new hospitals;
The rise in personnel costs and general expenses are a consequence of the opening of 36 new PSCs in the last 12 months, which are still in ramp-up, and of the 5 new acquisitions in the same period, as we have not yet captured all the possible synergies, especially in central labs;
The upturn in material costs is due to the growth in business-to-business activities, where such costs are higher in relation to net revenue.
“Cash-Cogs” Evolution (3Q06 vs. 3Q07)
“Cogs” – 3Q07 (% of Total Cash Cogs)
9
61.0%
1.0%
(0.1%)
1.8%
1.9% 56.4%
Cash Cogs 3Q06
PersonnelCosts
Materials Services and
Utilities
General Expenses
Cash Cogs 3Q07
29.2%
34.5%
12.7%
23.6%
Personnel Material
Services and Utilities General costs
7.1%
51.9%
34.5% 6.5%
B2C* B2B
*B2C = Outpatient & Inpatient
Operating Expenses
3Q07 operating expenses reached R$65.0 million, with lower General and Administrative expenses and higher goodwill amortization expenses mainly related to the acquisitions and financial expenses;
The dilution of 0.4 p.p. in the expenses that affect EBITDA is a result of the dilution of expenses in the parent company (2.0 p.p.), partially offset by the increase in subsidiary expenses (1.7 p.p.), due to the five companies acquired since October 2006;
These subsidiary expenses tend to be diluted as they are integrated to DASA.
10
3Q07 3Q06 3Q07 3Q06 D % Dillution (p.p)
General and Administrative (43,7) (33,8) -18,7% -18,8% 29,2% 0,1
Parent Company (23,4) (21,7) -10,0% -12,0% 8,0% 2,0
Non Recurring Expenses (3,5) (2,2) -1,5% -1,2% 63,0% -0,3
Profit Sharing Program (1,7) (1,7) -0,7% -0,9% 0,0% 0,2
Depreciation (3,9) (2,7) -1,7% -1,5% 44,5% -0,2Subsidiaries (11,2) (5,7) -4,8% -3,1% 98,9% (1,7)
(*) Profit Sharing Program
In R$ Million % of Net Revenues 3Q07 vs 3Q06
3Q07 3Q06 3Q07 3Q06 D %Dillution
(p.p)
General and Administrative (43,7) (33,8) 18,7% 18,8% 29,2% -0,1
Net Financial (7,0) (2,2) 3,0% 1,2% 219,0% 1,8
Goodwill Amortization (15,0) (7,4) 6,4% 4,1% 101,7% 2,2
Other Operating Revenues/ Expenses 0,7 0,3 -0,3% -0,2% 114,9% -0,1
Operating Expenses (65,0) (43,1) 27,8% 24,0% 50,7% 3,8
In R$ Million % of Net Revenues 3Q07 vs 3Q06
EBITDA and adjusted EBITDA
EBITDA and adjusted EBITDA (R$ Million)
Adjusted EBITDA increased by 11.5% and EBITDA grew 9.2% in 3Q07;
Despite the acquisition of five new operations during the last 12 months and recently opened PSCs still maturing, the adjusted EBITDA margin for the 3Q07 reached 23.8%, representing an upturn comparing to 2Q07.
11
15.0
15.5
15.338.5
16.9
30.4
2.2
119.0
84.684.164.9
47.2
137.4
47.8 52.1
3.5
55.649.9
167.8
135.9123.1
99.4
80.4
62.2
2001 2002 2003 2004 2005 2006 3Q06 3Q07
Non-recurring expenses
EBITDA
Adjusted EBITDA CAGR = 22.0%
11.5%
2005 2006 3Q06 1Q07 2Q07 3Q07
EBITDA margin 22.5% 20.5% 26.5% 23.0% 20.9% 22.3%Adjusted EBITDA margin 25.7% 25.0% 27.7% 24.7% 22.6% 23.8%
CAPEX totaled R$ 56.9 million in the quarter;
In the parent company, investments were primarily focused on (i) the purchase of imaging equipment and PSC construction – specially to the 7 mega PSC´s forecasted to the second semester of 2007, (ii) the construction of the new call center and (iii) images digitalizing equipments;
In the subsidiaries, the most relevant investments were made in the new Central Lab in São José dos Pinhais (PR) and testing equipment for CientíficaLab’s hospitals.
CAPEX
CAPEX (R$ million) CAPEX Breakdown (3Q07)
12
22.0
49.8
40.0
65.071.0
107.9
26.1
9.5
7.1
2003 2004 2005 2006 3Q06 3Q07
Parent Company Subsidiaries
129.9
35.6
56.9
Opening and refurbishing of PSCs;
35.9%
InformationTechnology; 14.7%
MedicalEquipment;
31.5%
Others; 5.3%
Pre-operationalInvestments;
12.5%
The acquisitions of CientíficaLab and Med Imagem, along with the quarter’s investments in organic expansion, consumed cash flow and required additional funds;
The Company’s net debt reached to R$ 303.3 million.
Cash Flow and Indebtedness
Cash Flow Analysis (R$ million)
Cash Flow 3Q07
EBITDA 52.1
Taxes (0.7)
Net Financial (7.0)
Working Capital and Others(25.8)
18.6Generated Cash Flow Cash and Cash Equivalents 65.8
Short-term Debt (77.5)
Long-term Debt (*)
(303.3)Net Debt
(339.5)
(+) Escrow Deposits 47.9
(*) Includes Escrow
13
(132.0)
(56.9)
(133.1) 18.6
(303.3)
2Q07 NetDebt
Cash FlowGenerated
CAPEX Acquisition 3Q07 NetDebt
Net Debt Breakdown (R$ million)
The revenue growth accelerated in 3Q07 and we believe the scenario will remain positive;
The acquisitions already done, the opened PSCs, investments in image digitalizing and equipments acquisitions, besides the resources invested in IT, will contribute to the future growth;
For 2008, we will proactively pursue acquisitions that allow us not only enter in new markets, but also reinforce our position in regions where DASA already operates.
Conclusions
Gross Revenue per Payer (12M06)
14
Gross Revenue per Payer (3Q07)
Insurance Health
Plans
31.9%
Self-Insured
19.0%
HMO
16.7%
Medical
Cooperatives
9.5%
Reference
8.3%
Individuals
7.1%
Hospitals
6.2%
Others
1.3%
Public Services
9.2% HMO
14.2%
Self-Insured
19.5%
Insurance Health
Plans
23.2%
Individuals
7.5%
Hospitals
6.1%
Others
1.9%
Reference
7.9%
Medical
Cooperatives
10.5%
DASA – Investor Relations
Av. Juruá, 434
Barueri – Alphaville – São Paulo
Phone: +55 11 4197 5410
Website: www.diagnosticosdaamerica.com.br
E-mail: [email protected]