Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oncoclinicas Do Brasil Servicos Medicos SA (BSP:ONCO3, Financial) reported more than 30 million in free cash generation in the third quarter, marking a significant turnaround from previous quarters.
- The company achieved a 12.9% growth in gross revenue year-on-year, indicating strong market performance.
- There was a notable improvement in receivables management, with provisions for nonpayment reaching the lowest level in two years.
- The company has stabilized its leverage at 2.7 times net debt to adjusted EBITDA, showing financial discipline.
- Operational cash generation improved significantly, contributing to a positive free cash flow of 20.7 million in the quarter.
Negative Points
- The growth rate slowed down intentionally to prioritize cash generation, which may impact future revenue growth.
- Gross margin was pressured due to a mix of treatments and the introduction of new medications with lower initial discounts.
- Operating expenses increased due to restructuring costs, impacting the overall financial performance.
- The company experienced lower operating leverage due to a temporary reduction in procedures for certain payers.
- There is uncertainty regarding the sustainability of the low provision for nonpayment levels, which may not continue in future quarters.
Q & A Highlights
Q: Can you explain the slowdown in growth during the third quarter and your strategy for sustainable growth in the short to medium term?
A: The slowdown was a strategic decision to prioritize cash generation by reducing exposure to certain payers with longer payment cycles. We have not terminated any contracts but have limited new procedures with these payers. This approach has improved cash flow and is sustainable for the short to medium term. We aim to maintain low double-digit organic growth while focusing on cash generation. - Cristiano Camargo, CFO
Q: How has the reversion of provisions for nonpayment (PC LD) impacted your working capital, and what is the outlook for receivables?
A: The reversion of PC LD provisions was due to improved receivables performance, with a record of over 1.5 billion in cash receipts this quarter. We expect the level of provisions to stabilize closer to historical averages of 2-2.5%, rather than the current low of 0.5%. - Cristiano Camargo, CFO
Q: What factors contributed to the pressure on gross margins, and can we expect this to continue?
A: The pressure on gross margins was due to a strategic reduction in exposure to certain payers and the introduction of new medications with initially lower discounts. This is expected to be a temporary effect, as we anticipate margins to improve as these new medications become more widely adopted and discounts increase. - Cristiano Camargo, CFO
Q: What is the current guidance on leverage, and do you expect any changes by the end of the year?
A: Despite some one-off impacts in the third quarter, we maintain our leverage guidance of 2.7 times net debt to adjusted EBITDA by the end of the year. We expect improvements in operating leverage and cash generation to support this target. - Cristiano Camargo, CFO
Q: Can you provide more details on the restructuring efforts and their impact on operating expenses?
A: We are continuing with restructuring efforts to optimize our corporate structure and reduce redundancies. While there will be some impact in the fourth quarter, we expect these efforts to result in lower operating expenses relative to revenue in the future. - Cristiano Camargo, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
