Earnings 1Q17. GrupoFleury. Conference call April 28 th 11AM (10AM EDT) Phone: Brazil: USA: Replay:

Transcription

1 Earnings Conference call April 28 th 11AM (10AM EDT) Phone: Brazil: USA: Replay: Code: Fleury Webcast: In March 31 st, 2017: Total shares 157,115,125 Market cap R$ 6,646MM US$ 2,098MM Share price R$ /US$ Fleury ON BM&FBBOVESPA: FLRY3 Bloomberg: FLRY3 BZ Thomson Reuters: FLRY3-BR Debentures BRFLRYDBS007 BRFLRYDBS015 BRFLRYDBS023 GrupoFleury Investor Relations ri@grupofleury.com.br

2 Earnings São Paulo, April 27 th, 2017 Fleury Group announces today its 1 st quarter (). All figures are compared to the same period last year, unless otherwise stated, and are rounded to the nearest thousand, but may have differences when compared to the financial statements because of decimal digits. Highlights: Gross Revenue reached R$ million, 15.0% growth. Same Store Sales (SSS) of the PSC s 1 grew 15.1% Deductions and Cancellations totaled 2.3% of gross revenue, down 63 bps. Net Revenue of R$ million, up 15.7% on. EBITDA margin grew 551 bps and reached 29.5%. Net Income grew 82.6% and reached R$ 81.6 million. Return on invested capital (ROIC 2 ), excluding goodwill, reached 36.0% (+1,220 bps). Inauguration of 5 new units, 2 of them under the Fleury brand and 3 of them as a+ Paraná. NPS 3 reached 72.7%, an improvement of 657 bps. Management Comments: We started 2017 focused on executing the expansion plan and, as a result, we delivered in the five new units, two of them under the Fleury brand (fast sites) in São Paulo and three of them as a+ brand in Paraná. At the same time, we have been developing several actions to capture the demand in the PSCs business unit, by expanding its offer of services, intensifying the brand s positioning with digital activation, seeking the constant evolution of our services and improving our relationship with physicians. As a result, our NPS showed a 40 bps improvement from the past quarter. In February, 2017, we started the operations with BP Group, formerly Beneficência Portuguesa, in its 3 hospitals. It is important to highlight that BP Group is one of the most important reference hospitals in high complexity cases located in São Paulo. In this scenario, we achieved a 15.7% growth in net revenue in the, demonstrating the consistent demand of our services combined with the reduction in the cancellation index reduction compared to the same period last year. The net revenue expansion allied to the constant optimization of costs and expenses contributed to a 42.3% increase in EBITDA, achieving an EBITDA Margin of 29.5%. Net income increased 82.6%, amounting to R $ 81.6 million in the period, and our cash generation totaled R$ 85.9 million, up 10.0% over. Additionally, we distributed R$ 71.1 million in dividends, corresponding to R$ 0.45/share, a payout of 95% of the net income in It is important to mention that, the increased demand is a result of the greater number of working days in compared to the same period of the previous year. 1 PSCs: Patient Service Center 2 Excludes the goodwill of the stockholder s equity. 3 NPS: Grupo Fleury s Net Promoter Score, indicator that measures the level of recommendation after the use of services. As of 3Q16, the report considers the NPS of the Rio de Janeiro brands. 1

3 Financial Highlights : Gross revenue of R$ million, an increase of 15.0% over Patient Service Centers (PSCs): Gross revenue of R$ million, an increase of 15.9% (+15.1% in SSS). Fleury brand increased 12.8% (+11.9% in SSS). Regional brands excluding RJ increased 20.3% (+19.0% in SSS). Rio de Janeiro brands increased 21.5% (+21.6% in SSS). Diagnostic Operations in Hospitals: Gross revenue of R$ 92.4 million, up 9.4% (2.5% in SSS). Reference Laboratory (Lab-to-Lab) and Preventive Medicine: Gross revenue of R$ 9.2 million, increased 17.2%. Gross Income amounted to R$ million (+32.4%) with 34.5% margin (+435 bps). EBITDA of R$ million (+42.3%), with 29.5% margin (+551 bps). Net Income of R$ 81.6 million (+82.6%) and "Cash Net Income" 1 of R$ million (+64.3%). Operational Cash flow of R$ 85.9 million (+10.0%). Quarterly financial indicators R$ MM Gross Revenue % Net Revenue % Gross Profit % EBITDA % Net Income % Net Cash Income % Operating Cash Flow % Gross Margin % 34.5% 30.1% 435 bps EBITDA Margin % 29.5% 24.0% 551 bps Effective Tax Rate -33.8% -38.5% 468 bps Net Income Margin % 13.9% 8.8% 508 bps Net Cash Income / Net Revenue 18.0% 12.6% 531 bps Operating Cash Flow / Net Revenue 49.6% 64.2% bps EV/EBITDA (LTM) % P/E (LTM) % ROE (LTM) 16.4% 8.4% 792 bps ROIC (LTM) 12.8% 8.8% 394 bps ROIC without goodwill (LTM) 36.0% 23.8% 1221 bps 1. Net Cash Income : excludes the impact of deferred income tax 2

4 General highlights: In April, 2017, we launched facebook pages for the following brands: the Diagnoson a+, Felippe Mattoso, Labs a + and Weinmann. The entry in Social Medias such as Facebook, helps position our brands regionally, providing specific regional information and targeted to the patients health care. In March, 2017, a+ brand launched its app that allows the consultation of clinical exams and imaging using a smartphone, as well as the consultation of historical records of previous medical exams. The app is available for ios and Android platforms and utilizes the integrated systems to enhance the customer experience, making it easy to access results for both patient and physician. In March, 2017, the Fleury Group became a signatory to the Women's Empowerment Principles, a joint commitment by UN Women and Global Compact to promote gender equality in all social and economic activities. With the adhesion, the Company reaffirms the commitment to guarantee a healthy environment, equality and opportunities for all employees. The Weinmann brand won first place in the most remembered brand in the category of Clinical Laboratory in the "Marcas de Quem Decide" research, one of the most relevant in Rio Grande do Sul conducted by Jornal do Comércio in partnership with Qualidata. This is the 19th edition and, since the category was created, Weinmann is a winning brand. Economic Scenario and Sector Macroeconomics The inflation rate of measured by the Índice Nacional de Preços ao Consumidor Amplo (IPCA) reached 0.96%, the lowest rate since 1994 (when the Real Plan was created). In the last twelve months, the IPCA reached 4.57%. On April 12 th, 2017, the COPOM decided to reduce the interest rate to 11.25% per year, which is the largest interest rate cut since Employment Brazil lost 64.4 thousand formal jobs in, according to the CAGED (General Register of Employees and Unemployed Persons). The commercial and construction sectors were the most affected in the period. Sector According to the National Agency of Supplementary Health (ANS), in December 2016 the number of beneficiaries of health plan reached 47.9 million, stable compared to the previous month. Considering all segments of the health plan and odontological plan, the number of beneficiaries grew 0.11%, amounting to 69.9 million. According to the Supplementary Health Agency (ANS), the number of health plan beneficiaries was 47,606,341, in March, Compared to December 2016, this number dropped 0.3% (-134,442 beneficiaries) and decreased 2.0% compared to March 2016 (-978,242 beneficiaries). The ANS studies new standards for health plans with coparticipation. Among the proposals submitted for public consultation, it is important to highlight the limitation of up to 40% of coparticipation and exemption from this collection in cases of preventive treatments and chronic diseases. Currently, 33% of the health plans marketed use these mechanisms and 50% of the beneficiaries have plans with co-participation or franchise. In March, the Ministry of Health submitted to the ANS the proposals for the creation of a new format of health plan called "popular plan". Among the main proposals, we can mention more affordable prices, more flexible monthly fees rules, restricting coverage of more complex treatments and extending the deadline for operators to provide services to their consumers. 3

5 Gross Revenue Financial Performance The company s gross revenue totaled R$ million in the, an increase of 15.0% compared to, highlighting the expansion of Rio de Janeiro brands (+21.5%) and regional brands excl. RJ (+20.3%). Gross Revenue (R$ million) Quarter 15.0% PSCs CADE RJ Business Line Performance vs. 1.Grupo Fleury 15.0% 1.1PSCs 15.9% Business Portfolio 16.5% 15.8% 15.5% 16.4% 16.8% 17.6% Fleury brand 12.8% Regional brands excl. RJ 20.3% 51.2% 50.2% Regional brands RJ 21.5% 1.2 Operations in Hospitals 9.4% B2B (Hospitals, L2L and Preventive Medicine) Fleury brand Regional brands excl. RJ Regional brands RJ Patient Service Centers (PSCs) and PSCs Assets Efficiency The Gross Revenue from PSCs amounted to R$ million in the quarter, an increase of 15.9%. In, the asset efficiency measured through gross revenue per square meter grew 16.2% compared to the same period of 2016, while the efficiency of gross revenue by PSC grew 11.1%, reaching R$ 3.7 million per PSCs in the quarter. Gross Revenue per m² per quarter % Gross Revenue per PSC (R$ million) 11.1% Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 PSCs Quarterly Average Gross Revenue per m² (R$ thousand) Thousands m² PSCs 4

6 Gross revenue per exam in Grupo Fleury s PSCs increased by 3.4%. In the, we observed an increase of clinical analysis in the mix, mainly due to the strong growth of this exam category in the RJ brands. The category of clinical analysis has a lower average price than the imaging exams. Hospital operations recorded a 5.8% decrease in gross revenue per exam, impacted by the entry of new contracts (Hospitals) with distinct operating models and exclusively for clinical analyzes, resulting in a lower average price. The reference laboratory segment, in turn, showed an increase of 8.2%. Average Gross Revenue per exam (R$) Grupo Fleury % - Patient Service Centers % - Operations in Hospitals % - Lab to Lab % In the, the PSCs grew 15.9%, with an increase of 15.1% in Same Store Sales (SSS). In, the Fleury brand reported an expansion of 12.8% (11.9% in SSS). The revenue growth is explained by the activation of some medical specialties, which resulted in an increase of the number of exams, and the improvement of asset utilization related to imaging exams. In the quarter, we inaugurated 2 fast sites in São Paulo that contributed to the revenue growth. In the, the regional brands excluding Rio de Janeiro showed an increase of 20.3% in gross revenue and +19,0% in SSS, with the spotlight on the increase of a+ SP brand (+24,8%), a+ PR brand (+23,9%) and a+ Pernambuco (+21.1%). The growth is explained by the increased number of visits, mainly in clinical analysis, the result of the medical activation work and the growing recognition of these brands by physicians and clients. In the a+ SP brand, we also observed a growth in the asset utilization, together with the increase of imaging exams. In the quarter, we inaugurated 3 small units of a+ Paraná brand, which contributed to the increase in revenues. In the, the Rio de Janeiro brands showed an increase of 21.5% in gross revenue, with the highest increase in SSS among the brands, reaching 21.6%. The growth in Labs a+ and Felippe Mattoso brands is mainly a consequence of the strong increase in the number of clinical analysis exams, reinforcing the convenience model with the offer of clinical and image analysis exams in the same PSC, as a result of the medical activation work and the growing recognition of these brands by physicians and clients in Rio de Janeiro. In the quarter, we closed one Labs a+ unit located in Barra da Tijuca. The closing of the unit did not impacted our operation in the region, since it was possible to redirect the demand to another unit with a more complete portfolio. 5

7 Variation vs. Indicators PSCs Fleury Brand Regional Brands excl. RJ vs Brands RJ T o t Total (PSCs) - Gross Revenue 12.8% 20.3% 21.5% 15.9% - SSS 11.9% 19.0% 21.6% 15.1% - Gross Revenue / m % 18.9% 26.7% 16.2% - Gross Revenue / PSC 0.3% 12.5% 27.4% 11.1% B2B 1. Dignostic Operations in Hospital Gross revenue totaled R$ 92.4 million in, an increase of 9.4%, reflecting the contribution of new hospitals joining our portfolio, considering 2.5% growth in SHS. represented a strong comparison base, due to the high demand originated by the outbreak of respiratory and infectious diseases such as the Zika and H1N1 virus, verified in the previous year. We highlight the beginning of the operation, in February 2017, in 3 hospitals of BP medical group, former Beneficência Portuguesa. 2. Reference Laboratory (Lab-to-lab) Gross revenue reached R$ 7.6 million, an increase of 8.3% over. 3. Preventive Medicine Gross revenue reached R$ 1.6 million, an increase of 92.9% over. Revenue Tax and Cancellations/Deductions 1 Revenue taxes remained stable at 6.2% over gross revenue in the. In, cancellations and deductions accounted for 2.3% of gross revenue, R$ (14.7 million), presenting a 63 bps reduction compared to, reflecting the ongoing process improvement related to the accounts receivable cycle. The provisions related to Accounts Receivable (AR) over 121 days have coverage of 81.7% of this amount (66.5% in the ). AR past due over 121 days represents 9.5% of total receivables (13.6% in ). The provisions can be reverted if a payment related to receivables past due over 121 days is identified. Cancellations and deductions/gross revenue (%) and cancellations and deductions (R$ MM) Quarter 2.9% (-16.3) -63 bps 2.3% (-14.7) 6

8 Net Revenue Net revenue totaled R$ million in the quarter, an increase of 15.7% over. Net revenue (R$ MM) Quarter % 588 Cost of Services The cost of services in the amounted to R$ million, with an increase of 8.5%. The cost of services represents 65.5% of net revenue, a 435 bps reduction over the same period of It is important to highlight that, as announced in October, 2016, from this quarter our Earnings Release and Explanatory Notes will reflect the new grouping of cost and expenses. This change aims to improve the understanding of our costs and expenses. For more information access here. We reported a strong operating leverage in the quarter, in relation to fixed and semi-fixed costs, mainly in the lines of "Personnel and Medical Services" and "Rent, occupation services and utilities". Cost of services (R$ MM) Personnel and Medical Services (R$ MM) % % Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 1Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 General Services, Rentals and Utilities (R$ MM) General Expenses (R$ MM) % % Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 1Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 7

9 Cost of Services R$ MM % Net Revenue R$ MM % Net Revenue Personnel and medical services 194,3 33,1% 175,5 34,6% 10,7% -150 bps General services, rentals and utilities 108,2 18,4% 101,7 20,0% 6,4% -162 bps Materials and outsourcing 57,5 9,8% 49,3 9,7% 16,7% 8 bps General expenses 2,0 0,3% 1,5 0,3% 30,3% 4 bps Depreciation and Amortization 23,2 4,0% 26,9 5,3% -13,8% -135 bps Cost of Services 385,2 65,5% 355,0 69,9% 8,5% -435 bps HA Variation VA Below, the analysis of the main lines of costs in compared to : Personnel and Medical Services (+10.7%) are the Company s main costs and represented 33.1% of net revenue in the quarter, a decrease of 150 bps. This growth can be explained by the salary readjustments and the increase of 438 new positions compared to, due to the opening of new agendas, expansion of services offered and new units. Despite the increase in the number of employees, it was possible to generate efficiency, increasing productivity. Gross Profit General Services, Rentals and Utilities (+6.4%) represented 18.4% of net revenue, a decrease of 162 bps. The efficiency gain can be explained by the lower costs of electrical energy, due to the change in the collection flag and the continued control over fixed costs. Direct Materials and Exam Intermediation (+16.7%) accounted for 9.8% of net revenue, stable in relation to the previous period. General expenses (+16.7%) represented 0.3% of net revenue. Depreciation and amortization (-13.8%) accounted for 4.0% of net revenue, a 135 bps decrease compared to the previous period. This reduction can be mainly explained by the revision of estimated useful life of specific medical equipment, occurred in Gross profit amounted to R$ million, representing an increase of 32.4% over. The gross profit margin reached 34.5%, up 435 bps compared to. Operating expenses Operating expenses amounted to R$ 62.4 million in, a reduction of 5.7% compared to and accounted for 10.6% of net revenue, resulting in a decrease of 240 bps. Variation R$ MM % Net Revenue R$ MM % Net Revenue HA VA G&A % % 7.5% -63 bps Depreciation and Amortization % % 25.1% 13 bps Other Operating (Income) Expenses % % -48.3% -95 bps Provision (Reversal) for Contingency (0.2) 0.0% % % -93 bps Subsidiaries' share of profits (0.4) -0.1% (0.2) 0.0% 90.0% -3 bps Operating Expenses % % -5.7% -240 bps 8

10 Below, the analysis of the main lines of operating expenses in compared to : General and administrative expenses, excluding depreciation and amortization (+7.5%) it represented 8.2% of net revenue, a 63 bps decrease. The efficiency gain can be explained mainly by (i) consulting expenses (ii) renegotiation of corporate rental agreements and (iii) reduction of electrical energy expenses due to the change in the collection flag and actions taken towards efficiency gain. Depreciation and amortization (+25.1) represented 1.7% of net revenue, an increase of 13 bps over. This is due to the increase of software amortization, as a result of the SAP re-implantation. Other operational income/expenses (-48.3%) represented 0.8% of net revenue, a decrease of 95 bps. This reduction corresponds to a write off of R$ 4.6 million in recoverable taxes in the. Provision for contingencies (-105.3%) totaled R$ 0.2 million, impacted mainly by the reversal of labor provisions. Consolidation by the equity equivalence method: Grupo Papaiz, a dental diagnostic company in São Paulo, was acquired by Grupo Fleury and Odontoprev in the end of The figures have been reported by the equity equivalence method because the operation is in the form of a Joint Venture and Grupo Fleury holds a 51% stake of the business. Below is the performance in : Equity Equivalence Papaiz R$ thousand % Net Revenue R$ thousand % Net Revenue Net Revenue 4, , EBITDA 1, % % Net Income % % Net Income attributed to Grupo Fleury (51%) EBITDA EBITDA reached R$ million, a 42.3% increase, resulting from the strong net revenue performance, combined with the continued effort to gain operational efficiency. The EBITDA margin reached 29.5%, 551 bps higher than in. EBITDA (R$ MM) and Margin (%) Quarter 42.3% % 29.5% 9

11 R$ MM % Net Revenue R$ MM % Net Revenue Net Income % % bps Financial Result % % 8.5 bps Depreciation and Amortization % % bps Income Tax and Social Contribution % % bps Subsidiaries share of profits (0.4) -0.1% (0.2) 0.0% -2.9 bps Reported EBITDA % % bps EBIT EBIT amounted to R$ million, an increase of 61.4%. The margin was 23.8%, an increase of 673 bps. EBIT (R$ MM) and Margin (%) Quarter 61.4% % 23.8% Financial Result The financial result reached R$ (16.9) million, an increase of R$ 19.1%, impacted by the decrease of gross debt and the reduction of the average cash position, which resulted in lower financial results, due to the profit distribution related to Indebtedness R$ million Variation Net financial income (expenses) (16.9) (14.2) 19.1% Financial income % Interest and inflation adjustment % Exchange rate change and hedge % Interest received % Other (0.7) (1.1) -38.1% Financial expenses (31.2) (37.7) -17.2% Interest and inflation adjustment (29.6) (36.0) -17.7% Exchange rate change and hedge (0.4) (0.8) -46.1% Other (1.1) (0.9) 26.3% In the quarter, the Net debt / EBITDA LTM reached 0.9x vs. 0.8x registered in the same period of R$ MM 4Q16 Next 12 months Gross Debt (Debentures and Financing ) Cash, Cash Equivalents and Marketable Securities (657.1) (406.8) (337.2) Net Debt (Gross debt - Cash and Cash Equivalents) Net Debt / EBITDA LTM 0.8x 0.9x 0.9x EBITDA LTM / Financial Result LTM 6.9x 10.9x 11.3x The Company issued three series of debentures, amounting to R$ 950 million to be repaid until February, 2020 as follows: 1 st Issuance (Second Series): R$ 300 MM; maturity in 2018; remuneration of CDI % per year. 2 nd Issuance: R$ 500 MM; maturity in 2020; remuneration of CDI % per year. 10

12 In, interest payment for the 2 nd Issuance, amounting to R$ 36.0 million was made. In August, 2014, the Company signed a contract for a loan of R$ 155 million with FINEP (Funding of Studies and Projects). Of this total, R$ million was released in October The repayment of the loan will be done in 97 months (24 months of grace period and 73 months for principal payments), from the signing of the contract, with an annual interest rate of 4%. This loan is related to projects such as: (i) expansion plan; (ii) technologies to increase productivity; (iii) development of the customer service process; (iv) education and training. In February, 2017, the Fleury Group obtained with BNDES a financing in the form of FINAME, with the objective to finance national machines and equipment accredited with the BNDES. Until the end of the, R$ 2.8 million were released. These equipment were included in the 2016 financing conditions granted by BNDES, of which BNDES finances 70% of the total equipment. The repayment period is 60 months (grace period of 24 months and 36 months for principal amortization), as of the signing of the agreement, with interest rates equal to TJLP + Spread BNDES/bank. Income Tax and Social Contribution The effective rate of income tax and social contribution totaled R$ 41.7 million, an increase of 49.1%.The effective rate of was -33.8%, an improvement of 468 bps. (R$ MM) Variation Earnings Before Taxes (EBT) % Expected taxes (standard rate of 34%) (41.9) (24.7) 69.7% Non-deductible expenses and taxes breaks 0.1 (3.0) % Subsidiaries share of profits 0.1 (0.2) % Income tax and social contribution % % EBT -33.8% -38.5% 468 bps Current (17.7) (8.4) 111% Deferred (24.0) (19.6) 22% Below we inform the expectation for the amortization of goodwill for tax purposes, whose impact reduces the cash tax. Expected Amortization of Goodwill Period Balance R$ MM Remaining

13 Net Income Net income reached R$ 81.6 million, an increase of 82.6% over. The net income margin was 13.9%, resulting in an expansion of 508 bps. Excluding the impact of deferred taxes (net cash income), the result was R$ million, an increase of 64.3% over. The margin reached 18.0%, an expansion of 531 bps. Net income (R$ MM) and Margin (%) Cash Net Income (R$ MM) and Margin (%) Quarter Quarter 82.6% % % 13.9% % 18.0% Cash flow The operating cash flow was R$ 85.9 million in the quarter, an increase of 10.0%. The average receivables collection period was 69 days, an improvement of 4 days compared to. The investment activities were mainly impacted by the increase in property, plant and equipment and intangible assets, as a result of our organic expansion. The financing activities were impacted by the payment of dividends, resulting in a payout of 95% of net income in R$ MM Net Income 81,6 44,7 82,6% Items not affecting cash: Financial revenues and expenses 13,6 14,0-2,7% Depreciation and amortization 33,5 35,1-4,7% Income tax and social contribution 41,7 28,0 49,1% Provisions (Reversals) 27,0 28,1-3,9% Others 2,4 3,7-34,6% Net Income before non-cash effects 199,8 153,6 30,1% Working capital: Accounts receivables (91,3) (56,5) -61,6% Suppliers (3,4) (2,2) -54,7% Salaries / Charges (20,5) (17,6) -16,6% Others Assets and Liabilities 13,5 7,1 91,7% Other Operating Cash Flow: Income tax and social contribution (12,1) (6,2) -96,5% Operating Cash Flow 85,9 78,1 10,0% Investment Activities: Acquisition of fixed and intangible assets (56,3) (25,1) -124,2% Interest income and dividends received 12,0 18,4-34,9% Marketable Securities 13,4 (4,0) 432,1% Acquisitions (0,0) (5,2) 99,8% Financing Activities Others Financing Activities (40,1) (38,6) -4,0% Dividends and/or interest on capital (71,1) 0,0 0,0% Cash Flow (56,2) 23,6-338,5% Conversion (Operating Cash Flow / EBITDA) 49,6% 64,2% bps 12

14 Account Receivables Comparing quarters, there is an improvement in the aging profile with current receivables accounting for 84.4% of the total compared to 75.1% in. The amount over 121 days decreased from 13.6% to 9.5% in this quarter. R$ MM 1Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 Trade Receivables Current Up to 120 days past due to 360 days past due Over 360 days past due Sales Deductions Provisions (60.7) (60.3) (49.6) (45.1) (43.7) (49.5) (40.9) (41.6) (40.6) Total Current / Trade Receivables 60.1% 67.1% 73.0% 73.1% 75.1% 76.1% 78.6% 78.6% 84.4% Up to 120 days past due/ Trade Receivables 22.2% 15.5% 12.0% 12.2% 11.3% 8.0% 8.1% 8.2% 6.1% Over 121 days past due / Trade Receivables 17.7% 17.4% 15.0% 14.7% 13.6% 15.9% 13.3% 13.1% 9.5% Provisions / Over 121 days past due 65.4% 69.7% 68.6% 69.3% 66.5% 66.4% 66.1% 71.4% 81.7% Expansion Plan In the, Fleury Group inaugurated five new units of which two were Fleury brand in São Paulo and three under the a + Paraná brand. Since October 2016, the Company inaugurated eight new PSCs which are part of the 5-year expansion plan announced in December, which forecasts a total of 73 to 90 new PSCs to be inaugurated in the period. PSCs¹ Complexity Size (m²) State Date Fleury Ipiranga Fast site 206 São Paulo Mar-17 a+ Ecoville Small 47 Paraná Feb-17 a+ Champagnat Small 81 Paraná Feb-17 a+ Centro Small 29 Paraná Feb-17 Fleury Brasil Fast site 235 São Paulo Jan-17 Fleury Moema Fast site 126 São Paulo Dec-16 a+ Batel Small 134 Paraná Dec-16 a+ Nossa Saúde Small 79 Paraná Oct-16 Investments CAPEX (additions to fixed and intangible assets) totaled R$ 56.3 million, mainly concentrated in (i) expansion and improvements in PSCs and central laboratories, which represented R$ 36.4 million. (R$ 56.3 million) Renewal of equipments 12.9% (R$ 7.3 million) Infrastructure 4.4% (R$ 2.5 million) IT 2.9% (R$ 1.6 million) Strategic Projects 15.1% (R$ 8.5 million) Expansion and improvements in PSCs and Central Laboratories 64.8% (R$ 36.4 million) 13

15 Stock Market Performance Fleury shares (BM&FBOVESPA: FLRY3) at the end of were quoted at R$ 42.30, an increase of 96.3% compared to. Average Daily Trade Volume (ADTV) in the period was R$ 25.4 million, five times higher than the volume for the same period in Average Daily Trade Volume (ADTV) R$ MM NI ADTV 0.372% 0.375% 0.300% 0.217% 0.125% 0.086% 0.057% 0.086% T16 2T16 3T16 4T16 1T17 * NI: Negotiability Index Investor Relations Phone: ri@grupofleury.com.br Website: Address: Avenida General Valdomiro de Lima, São Paulo, SP Brasil 14

16 Performance Indicators Income Statment Description Unit 1Q15* 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 Gross Revenue Gross Revenue R$ MM 496,7 531,8 547,0 521,8 558,6 577,1 592,2 572,4 642,1 Net Revenue COGS SG&A Gross Revenue - Tax (ISS and PIS/COFINS) - Cancellations Personnel and Medical Services + Materials and Outsourcing + General Services, Rent and Utilities + General Expenses + Depreciation and Amortization Does not include Other Operating Expenses / Revenues neither Contingency Provisions R$ MM 446,9 479,6 495,5 473,0 507,9 525,1 539,8 523,2 587,8 R$ MM -322,0-351,6-360,3-358,2-355,0-373,8-374,8-391,4-385,2 R$ MM -51,5-53,9-57,9-58,9-53,1-59,2-62,0-69,1-58,5 EBIT Earnings Before Interest and Taxes R$ MM 67,1 67,5 70,6 54,4 86,6 85,7 102,3 63,1 139,7 EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization R$ MM 96,7 98,4 101,9 85,1 121,7 122,0 138,6 100,7 173,2 Net Finance Income Interest Revenue - Interest Expenses R$ MM -15,6-15,0-15,9-13,4-14,2-15,0-8,7-6,6-16,9 Net Income Net Income R$ MM 31,8 32,9 35,2 25,9 44,7 46,1 63,1 74,9 81,6 Net Cash Income Net Income - Deferred income tax R$ MM 41,1 46,4 49,8 37,7 64,2 57,8 80,9 75,1 105,6 Cancellation Index Cancellations / Gross Revenue % -3,8% -3,6% -3,2% -3,1% -2,9% -2,8% -2,7% -2,4% -2,3% Gross Margin Gross Profit / Net Revenue % 27,9% 26,7% 27,3% 24,3% 30,1% 28,8% 30,6% 25,2% 34,5% EBIT Margin Earnings Before Interest and Tax / Net Revenue % 15,0% 14,1% 14,3% 11,5% 17,0% 16,3% 18,9% 12,1% 23,8% EBITDA Margin Earnings Before Interest, Tax, Depreciation and Amortization / Net Revenue % 21,6% 20,5% 20,6% 18,0% 24,0% 23,2% 25,7% 19,3% 29,5% Effective Tax Rate Current Tax / Earnings Before Tax % -44,6% -37,4% -35,8% -36,8% -38,5% -35,1% -32,9% 32,3% -33,8% Net Margin Net Profit / Net Revenue % 7,1% 6,9% 7,1% 5,5% 8,8% 8,8% 11,7% 14,3% 13,9% Net Cash Income Margin (Net Income - Deferred income tax) / Net Revenue % 9,2% 9,7% 10,1% 8,0% 12,6% 11,0% 15,0% 14,4% 18,0% Market and Multiples Price Closing price in the last day of the quarter R$ 16,0 18,3 16,3 16,0 21,6 27,5 38,4 35,7 42,3 P/E LTM (Price-to-Earnings Ratio) Quarter Closing Price / Net Cash Income LTM Multiple 17,3 17,4 15,6 14,3 17,0 20,5 24,9 20,1 20,8 P/B (Price-to-Book Ratio) Quarter Closing Price / (Asset excl. Intangibles) Multiple 1,5 1,6 1,4 1,5 1,9 2,4 3,2 3,8 4,4 EV / EBITDA LTM (Market Capitalization + Short and Long Term Debt - Cash and Equivalents) / EBITDA LTM Multiple 9,2 9,3 8,1 7,5 9,1 10,5 13,1 12,5 13,3 Financial Debt Cash & Equivalents Cash, Equivalents and Marketable Securities R$ MM 471,0 544,3 617,1 629,5 657,1 759,3 835,5 406,8 337,2 Gross Debt Short and Long Term Debts (Borrowings and Debentures) R$ MM 1.035, , ,8 990,0 983,7 988,7 981,9 832,0 817,2 Net Debt Gross Debt - Cash and Cash equivalents R$ MM 564,2 494,3 420,7 360,5 326,6 229,4 146,4 425,2 480,0 Net Debt / EBITDA LTM (Gross Debt - Cash and Cash equivalents) / EBITDA LTM Multiple 1,8 1,5 1,2 1,0 0,8 0,5 0,3 0,9 0,9 Profitability and Return ROIC without Goodwill (LTM) NOPAT LTM (tax= 34%) / Capital Employed (Shareholders Equity + Net Debt - Goodwill) % 17,0% 20,0% 20,7% 23,0% 23,8% 27,2% 32,1% 32,9% 36,0% * 1Q15 results were adjusted by non-recurring item: joining of the Company to the Installment Incentive Program of São Paulo City Hall to settle debts related to Health s Solid Waste Tax (TRSS). The agreement covered the debts from 2003 to 2013 and recognized the 2014 year liabilities, totaling R$ 27.2MM, already considered the discounts of 75% fine and 85% interest set out in that program. Impact in EBTIDA was R$ (24.1MM) and in net profit it was R$ (18.3MM). 15

17 FLEURY S.A. CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 (In R$ thousands) Consolidated Consolidated Assets 3/31/ /31/2016 Liabilities and equity 3/31/ /31/2016 Current Current Cash and cash equivalents 257, ,834 Financing 19,259 19,532 Marketable securities 79,564 92,976 Debentures 282, ,460 Accounts receivable 479, ,041 Derivative financial instruments Inventories 16,375 31,598 Trade accounts payable 139, ,050 Taxes recoverable 75,392 66,745 Payroll and related taxes payable 83,087 93,246 Other assets 23,813 25,031 Taxes and contributions payable 33,337 24,304 Total current 932, ,225 Accounts payable - company acquisition Other accounts payable Non-current Total current 558, ,182 Judicial deposits 44,283 42,634 Credits receivable 8,998 11,470 Non-current Other assets 14,160 15,596 Financing 82,193 84,029 Debentures 433, ,000 Deferred income tax and social contribution, ne 314, ,232 Provision for tax, labor and civil risks 34,099 34,107 Taxes and contributions payable 44,106 44,798 Accounts payable - company acquisition 7,981 7,747 Total non-current 915,934 1,060,913 Equity Share capital 1,400,453 1,400,453 Capital reserve - options granted recognized 11,639 9,412 Revaluation reserve Investments 9,166 8,762 Legal reserve 54,650 54,650 Property and equipment 491, ,409 Profit for the period 81,564 - Intangible assets 1,522,303 1,523,724 Additional dividends proposed - 71,133 Total non-current 2,090,643 2,072,595 Total equity 1,548,384 1,535,725 Total assets 3,023,098 3,005,820 Total liabilities and equity 3,023,098 3,005,820 16

18 FLEURY S.A. CONSOLIDATED INCOME STATEMENT FOR THE PERIODS ENDED IN MARCH 31, 2017 AND MARCH 31, 2016 (In R$ thousands) Consolidated Reclassified Revenue from services rendered 587, ,945 Cost of services rendered (385,212) (355,006) Gross Profit 202, ,939 Operating income (expenses) General and administrative (58,545) (53,110) Other operating income (expenses), net (4,518) (8,746) Provision for tax, labor and civil risks 240 (4,507) Equity in the earnings (losses) of subsidiaries Operating profit before financial result 140,148 86,802 Financial income 14,291 23,525 Financial expenses (31,210) (37,715) Financial result (16,919) (14,190) Earnings before income tax and social contribution 123,229 72,612 Income tax and social contribution: Current (17,675) (8,368) Deferred (23,990) (19,583) Profit for the period 81,564 44,661 Earnings per share attributable to owners of the Company Basic earnings per share (weighted average) Diluted earnings per share (weighted average)

19 FLEURY S.A. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD ENDED MARCH 31, 2017 (In R$ thousands) Balances at December 31, 2015 Realization of revaluation reserve Stock option plan Profit for the period (R$0,29 per share) Balances on March 31, 2016 Balances on December 31, 2016 Realization of revaluation reserve Stock option plan Profit for the period (R$0.52 per share) Share Capital Capital Reserve Investment Reserve Equity Additional dividends proposed Profit for the period Investment Reserve Dividends payed Balances on March 31, ,423,237 (22,784) 11, ,650-81,564-1,548,384 Legal Reserve Revaluation reserve Options granted recognized Share issue expenses Share Capital 1,402,531 (22,784) 5, , ,762-10,766 1,655, (17) (39) ,661-44,661 1,402,531 (22,784) 5, , ,215 44,661 10,766 1,700,497 1,423,237 (22,784) 9, , ,133 1,535, , , ,564-81, (71,133) (71,133) 18

20 FLEURY S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED IN MARCH 31, 2017 AND MARCH 31, 2016 (In R$ thousands) Consolidated Reclassified Profit for the period 81,564 44,661 Items not affecting cash: Income tax and social contribution 41,665 27,951 Financial and expenses income 13,595 13,966 Depreciation and amortization 33,470 35,122 Equity in the earnings (losses) of subsidiaries (430) (226) Stock option plan 2, Constitution (reversal) of provision for tax, labor and civil risks (239) 4,507 Estimated losses with allowance for doubtful accounts 14,676 15,794 Profit sharing 10,378 7,430 Other 2,875 3,973 Cash flows from operating activities before changes in assets and liabilities 199, ,575 (Increase) decrease in accounts receivable (91,337) (56,529) (Increase) decrease in inventories 15,223 3,625 (Increase) decrease in taxes recoverable (8,647) 18,395 (Increase) decrease in judicial deposits (1,649) 159 (Increase) decrease in other assets 5,152 (12,882) Increase (decrease) in trade accounts payable (3,435) (2,220) Increase (decrease) in payroll and related charges (20,537) (17,612) Increase (decrease) in tax liabilities 3,393 2,358 Increase (decrease) in taxes paid in installments (617) (1,983) (Increase) decrease in other liabilities 673 (2,615) Total variation in assets and liabilities (101,781) (69,304) Income tax and social contribution paid (12,087) (6,152) Net cash from operating activities 85,913 78,119 Acquisition of property and equipment and intangible assets (56,280) (25,107) Marketable securities and interest earned (12,733) (4,039) Redemption of marketable securities 26,145 - Interest earned from financial investments 11,960 18,363 Payments (9) (5,205) Net cash used in investing activities (30,917) (15,988) Borrowings and debentures 2,801 - Settlement (principal) of financing and debentures (4,939) (910) Interest paid in financing and debentures (37,056) (36,651) Financial expenses paid (543) (993) Derivative financial instruments (351) - Dividends (71,133) - Net cash used in financing activities (111,221) (38,554) (Decrease) increase in cash and cash equivalents (56,225) 23,577 Cash and cash equivalents At the beginning of the period 313, ,886 At the end of the period 257, ,463 Variation in cash and cash equivalents (56,225) 23,577 19

21 FLEURY S.A. CONSOLIDATED STATEMENTS OF VALUE ADDED FOR THE PERIODS ENDED MARCH 31, 2017 AND MARCH 31, 2016 (In thousands of Brazilian - R$) Consolidated 31/03/ /03/2016 Reclassified Revenues 627, ,190 Goods and products sold and services rendered 642, ,561 Estimated losses with allowance for doubtful accounts (14,676) (15,793) Other revenue 140 5,422 Inputs purchased from third parties (216,963) (198,388) Cost of goods and products sold and services rendered (167,372) (148,773) Materials, electricity, outsourced services and others (49,398) (49,498) Loss/recovery of asset values (193) (117) Gross value added 410, ,802 Depreciation and amortization (33,470) (35,120) Net value added 377, ,682 Value added received through transfer 14,721 23,751 Equity in the earnings (losses) of subsidiaries Financial income 14,291 23,525 Total value added 391, ,433 Distribution of value added (391,883) (338,433) Personnel and charges (156,661) (138,829) Taxes, fees and contributions (84,386) (65,308) Interest, rental and other operating expenses (69,272) (89,635) Retained earnings (81,564) (44,661) 20