Earnings 1Q18. GrupoFleury. Conference call: April 27 th 11AM (10AM EDT) Phone: Brazil: USA: Replay:

Transcription

1 Earnings Conference call: April 27 th 11AM (10AM EDT) Phone: Brazil: USA: Replay: Code: Fleury Webcast: In March 31 th, 2018: Total shares 315,312,192 Market cap R$ 8,545MM US$ 2,571MM Share price R$ /US$ 8.15 Fleury ON B3: FLRY3 Bloomberg: FLRY3 BZ Thomson Reuters: FLRY3-BR Debentures BRFLRYDBS007 BRFLRYDBS015 BRFLRYDBS023 GrupoFleury Investor Relations ri@grupofleury.com.br

2 Earnings São Paulo, April 26 th, 2018 Grupo Fleury announces today its 1 st quarter () results. 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 due to decimal digits. Highlights Net Revenue of R$ million (+11.1%). Cancellations represented 1.4% (+89 bps). EBITDA of R$ million (+7.4%), with margin of 28.5%, the second highest margin recorded by the Company. Net Income of R$ 96.4 million (+18.2%). Return on Invested Capital (ROIC 1 ), excluding goodwill, reached 45.3% (+930 bps). NPS reached 76.0% (+366 bps). Launch in February/18 of a medium-sized Fleury brand Patient Service Center (PSC) in Santo André and, in April / 18, a large PSC of a+ brand in Guarulhos, both in the metropolitan region of São Paulo. 91% of the area inaugurated in the Expansion Plan is in the initial stage of maturation with less than 12 months of operation. In April/18, we had the 4 th issuance of debentures of the Company totaling R$ 500 million. 1 Excludes the goodwill of the stockholder s equity. Financial Indicators Financial Indicators (R$ MM) Variation Gross Revenue % Net Revenue % Gross Profit % EBITDA % Net Income % Net Cash Income % Operating Cash Flow % Cancellations (% Gross Revenue) -1.4% -2.3% 89.0 bps Gross Margin % 32.7% 34.5% -180 bps EBITDA Margin % 28.5% 29.5% -100 bps Effective Tax Rate -26.6% -33.8% 724 bps Net Income Margin % 14.8% 13.9% 88 bps Net Cash Income / Net Revenue 16.0% 18.0% -199 bps Operating Cash Flow / Net Revenue 55.9% 49.6% 628 bps ROE (LTM) 21.3% 16.4% 495 bps ROIC (LTM) 15.7% 12.8% 291 bps ROIC without goodwill (LTM) 45.3% 36.0% 930 bps Net Cash Income : excludes the impact of deferred income tax 1

3 Management Comments In line with our expansion plan, we started 2018 with the addition of 2 Patient Service Centers (PSCs) in São Paulo with the opening in February of a Fleury brand unit in Santo André, expanding our clinical and imaging analysis offer in the region, and in April, with the opening of an a+ brand unit in Guarulhos, with a complete offer of imaging exams and clinical analysis in a region where we were not yet present. In total, we have added 35 new units since the beginning of the Expansion Plan. This process of strengthening our capillarity foresees more openings this year, especially in the a+ brand in São Paulo and also in Rio de Janeiro under the two brands: Felippe Mattoso and Labs a+. With our planning that forecasts 73 to 90 new PSCs by 2021, our Expansion Plan maintains a strong pace in execution, in order to increase the presence of our brands in regions where we operate with the objective to capture new clients and better serve the current ones, delivering quality services with medical, technical and service excellence. Our geographic coverage has contributed to the increasing satisfaction and loyalty of our clients. One of our key indicators confirming this is our Net Promoter Score (NPS), which reached 76.0% in the quarter, an increase of 366 bps compared to, especially in Weinmann, Fleury and a+ brands in Paraná. At the same time, we have intensified our digital transformation strategy that is already present in different areas such as backoffice, medical relationship and customer service. In this respect, we launched the pilot phase of the Digital Reception project at the a+ Queiroz Filho PSC, in São Paulo, through an app. The project will allow the client to check-in 48 hours before the scheduled exam, and upon arrival at the PSC present their on line confirmation via QR Code, to result in a more agile and simplified customer service procedure in the unit. The project will be rolled out to other a+ units in São Paulo, to Fleury and, subsequently, to other brands of the Group. We believe that this initiative will provide our customers with a reduction in the waiting time in the units, greater convenience in service and efficiency gains with area optimization in the units. Excellence in customer service also secured important awards for the Company this quarter, such as the Brands of Who Decides Survey, which listed the Weinmann brand as the Most Remembered and Preferred in the Clinical Laboratory Category for the 20 th time in Rio Grande do Sul. Fleury brand, in turn, won the 5 th position in the Brazilian Forum of Customer Relationship out of 115 brands in the country. Another recognition for the Fleury brand was the leadership among the Most Hospitable Companies in Brazil in the award promoted by the Brazilian Institute of Corporate Hospitality (IBHE). Another highlight during this period was the 36.1% growth in the Company's shareholder base after its inclusion in the Ibovespa Index portfolio in January of this year. As per, the Fleury Group has approximately 13.8 thousand shareholders compared to 10.1 thousand registered in 4Q17. Within this context, the results presented a 10.0% increase in gross revenue and 11.1% in net revenue. The EBITDA registered a 7.3% increase, reaching R$ million, with 28.5% EBITDA Margin. Net income reached R$ 96.4 million, an 18.2% increase. In April, we held our Annual Shareholders Meeting, which counted with the participation of 65% of our shareholder base and ratified all the proposed matters. Among these, was the approval of the composition of the Board of Directors from 8 to 10 members, of which 4 were indicated by Integritas (Founding Physicians), 3 by Bradesco Seguros (Bradseg) and 3 Independent members, the latter representing 30% of the total, which reinforces our commitment to the best corporate governance practices. In addition, the Meeting also approved the constituency of a Fiscal Committee for 2018 composed of 3 members. Also in April, we launched the 4 th issuance of non-convertible debentures in the total amount of R$ 500 million, divided in two series of R$ 250 million each. The first series has a rate of CDI % maturing in April/21, and the second series at CDI % maturing in April/23. The funds raised will be used to strengthen the Company's cash position. At the same time, we continue to invest heavily in the development of products and services for personalized and precision medicine. In the first months of the year, we launched a complete portfolio of neurogenetics, consisting of 23 genetic exams, focused on the diagnosis of conditions such as autism, epilepsy and other neurological syndromes. In addition, we have entered into partnerships with different pharmaceutical companies to perform genetic tests to verify patients response to specific drugs, expanding the channels of genetic tests in diverse specialties. Throughout 2018, we will continue to deliver sustainable growth of our operations, based on the foundations of our positioning: technical, medical, service and management excellence. We will also continue the execution of our Expansion Plan, with improvements of the customer experience in our units, mainly through the ongoing digital transformation in the Company, and in the development of innovative solutions in precision and personalized medicine. 2

4 Financial Performance Gross Revenue In the quarter, the Company recorded gross revenue of R $ million, corresponding to an increase of 10.0%. Highlight to the growth of regional brands excluding Rio de Janeiro (+21.7%) and Hospital Operations (+9.9%). Gross Revenue (R$ MM) +10.0% Grupo Fleury Business Line Performance vs. 10.0% 1.1 PSCs Fleury brand 6.4% 10.0% Regional brands excl. RJ 21.7% Regional brands RJ 8.5% 1.2 Operations in Hospitals 9.9% Business Portfolio 15.8% 15.8% 16.4% 16.1% 17.6% 19.5% 50.2% 48.6% B2B Regional brands RJ Regional brands excl. RJ Fleury brand Gross Revenue and Asset Efficiency from Patient Service Centers (PSC s) Gross Revenue from PSC s reached R$ million in, a 10.0% increase. The asset efficiency indicators, measured by gross revenue per square meter and number of PSCs, reflect the Expansion Plan that added a significant patient service area to our portfolio of brands. At the same time, the new PSCs are advancing in the maturity curves according to plan, to reach their revenue potential and profitability. In, asset efficiency measured by gross revenue per square meter showed a slight decrease in comparison to the same period in 2017, while gross revenue efficiency per PSC decreased by 6.1%, reaching R$ 3.5 million per PSC in the quarter. Gross Revenue per m² Gross Revenue per PSC (R$ MM) % % Q16 2Q16 3Q16 4Q16 2Q17 3Q17 4Q17 PSCs Quarterly Average Gross Revenue per m² (R$ thousand) Thousands m² PSCs 3

5 Since the announcement of our Expansion Plan in the 4 th quarter 2016 up until March/18, we inaugurated 34 PSCs, corresponding to a gross increase of 11.1 thousand square meters of patient service area. Of this total, 91% were launched less than 12 months ago, which means that they are in the early stages of the maturity curve. Patient Service area - Expansion plan (m² thousand) 11.1 (100%) 3.4 (33%) 0.6 (5%) 3.7 (36%) 0.9 (9%) >12 months 2.5 (25%) 9 to 12 months 6 to 9 months 91% launched in the last 12 months 3 to 6 months <3 months Total Gross Revenue per Exam Grupo Fleury s Gross revenue per exam increased by 1.4% in the quarter. This growth is a reflection of the mix of exams, brands and segments carried out in the period, as well as the new price list resulting from the annual adjustments. PSC s: gross revenue per exam grew 0.4%. This growth is due the mix of exams and brands, as well as the annual price readjustment that reflects the lower level of inflation, considerably below the comparison to the previous year. Hospital Operations: gross revenue per exam increased by 3.1%. The increase is a result of the maturation process in the mix of exams in new hospital operations, which had already been observed in previous quarters. Lab to Lab: increased by 1.8%. Gross Revenue per exam Variation Grupo Fleury % - Patient Service Centers % - Hospital Operations % - Lab to Lab % 4

6 Gross Revenue from PSCs In, gross revenue from PSCs grew 10.0%, with an increase of 3.2% in Same Store Sales (SSS). In the quarter, we recorded fewer business days and more extended holidays compared to the same period in the previous year, which impacted demand in all segments. In the first quarter, we already have the effect of price negotiations with healthcare operators concluded at the end of We emphasize that our annual price adjustments are based on the consumer price inflation index (IPCA), which reflects the lower level of inflation, considerably lower compared to the previous year. Fleury Brand Fleury brand s gross revenue increased 6.4% in the quarter, with most part of the growth resulting from volume, mix of exams and the capture of existing demand with the launch of 8 units in the last 12-months ended in March/18, consisting of 4 fast sites, 2 large units and 2 medium-sized units. The Fleury brand SSS is impacted by the new PSCs. This effect is related to the distribution of clients, old and new, between existing PSCs and the new PSCs in the same geographic area of influence (clusters). This is evidenced by the fact that the clusters where the two large PSCs, Anália Franco and Morumbi, were launched, presented significant revenue growth. With the opening of a new PSC, a readjustment is carried out in the existing PSCs of the cluster through retrofit or restructuring of the service mix, which impact SSS. This quarter, we had the suspension of the MRI and tomography services during 3 months for the replacement of these equipments, in the República do Líbano III unit in São Paulo. Customer orientation and redirection is supported by the call center and social media. Our goal is to maintain and develop the Fleury brand as a reference in the premium segment. These investments, together with the calendar effect, affected the growth indicators. Our attention will continue to focus on the growth of operating clusters. We will make adjustments in mix, offer and customer allocation according to our demand planning. The new PSCs are maturing according to plan, advancing in their revenue potential and better serving regions/neighborhoods where we had limited service offerings. This way, we continue to grow significantly, despite the decrease in beneficiaries in the Brazilian private health system in the recent years according to ANS. It should be noted that we recorded impacts with the calendar effect, with fewer working days, and with the lower level of price readjustment due to a significant decrease in inflation indices, as mentioned previously. Regional Brands excluding Rio de Janeiro Gross Revenue of Regional Brands excluding Rio de Janeiro registered growth of 21.7%, with the spotlight on the increase of gross revenue in a+ São Paulo (28.9%), which all organic growth, and Rio Grande do Sul regional (+31.7%), due to the Serdil integration, brand acquired in 4Q17. The growth in these regional brands, despite the calendar effect, is explained by (i) the increased number of visits, (ii) increased supply after the opening of new PSCs, (iii) medical activation, and (iv) the growing recognition of these brands by physicians and customers. In the last twelve months ended in March/18, the revenue increase was also a result of the 11 PSCs launched, composed of 7 fast sites and 4 medium PSCs. 5

7 Rio de Janeiro Brands Gross Revenue of Rio de Janeiro Brands increased 8.5% in the quarter. In this quarter, it was already possible to observe a trend of acceleration compared to 4Q17. This is due, among other factors, to the affiliation of new healthcare operators in the region initiated in the previous quarter. Gross revenue was impacted by one-time effects with the interruption of services to a relevant regional healthcare operator, in addition to the calendar impact with fewer business days and inferior price readjustment due to considerably lower inflation rate, already mentioned. In the last twelve months ended in March/18, with concentration of new openings in the 4Q17, the revenue increase was also a result of 6 new PSCs in Labs a+ and 1 Felippe Mattoso unit, all of them fast sites. Indicators Gross Revenue Indicators vs. Fleury Brand Regional Brands excl. RJ Brands RJ Total (PSCs) - Gross Revenue 6.4% 21.7% 8.5% 10.0% - SSS 0.1% 9.4% 6.1% 3.2% - Gross Revenue / m 2* -6.1% 3.9% 3.9% -1.0% - Gross Revenue / PSC* -17.9% 10.2% -7.3% -6.1% * Operational Efficiency Indicators reflect the impact of the Expansion Plan on Fleury and Regional brands in which the new PSCs are still advancing on the maturity curve. Gross Revenue from B2B Hospital Operations Gross revenue in Hospital Operations totaled R$ million in the quarter, an increase of 9.9%. In Same Hospital Sales (SHS), there was an increase of 3.7% in the same period. In February/18, we started the clinical analysis operation in A.C. Camargo Hospital, in São Paulo, the largest Cancer Center in Latin America. In 2016, this hospital performed 4.4 million exams including clinical and imaging analyzes, according to data released by the National Association of Private Hospitals (ANAPH). Lab-to-lab Gross revenue reached R$ 9.0 million, an increase of 17.4%. This increase is a consequence of the volume growth and the mix of exams in the same clients, where we highlight a greater demand for exams related to Genomics. It is worth mentioning that we have made available through our lab-tolab operation - as in our PSCs, Hospitals Operations and e-commerce - a complete portfolio of Genomic lab exams that allows the Fleury Group to be positioned at the forefront of personalized and precision medicine. Preventive Medicine Gross revenue reached R$ 1 million in the quarter. 6

8 Revenue Tax and Cancellations/Deductions Revenue taxes remained stable at 6.2% over gross revenue in the quarter when compared to same period last year. In the quarter, cancellations and deductions accounted for 1.4% of gross revenue, R$ -9.9 million, representing an 89 bps reduction. The result reflects the ongoing improvement in systems and processes of the accounts receivable cycle and renegotiations with healthcare payers. Disregarding these one-time effects, the indicator of cancellations and deductions would be 1.6%. In this quarter, the accounting standard CPC 48 was enforced, which, among other requirements, impacted the Company with a new classification for estimated losses resulting from bad debt. Until 2017, the classification of these losses was carried out as a reduction of gross revenue and will now accounted for in Other Operating Expenses (Notes letter "e" and 31). On a managerial basis, we continue to demonstrate the percentage of cancellations and deductions considering the estimated losses with bad debt. Deduction + Cancellation/Gross Revenue and Deduction and Cancellation (R$ MM) 2.3% (-14.7) -89 bps 1.4% (-9.9) Net Revenue Net revenue totalled R$ million, an increase of 11.1%. Net Revenue (R$ MM) %

9 Cost of Services The cost of services in amounted to R$ million, registering an increase of 14.2%. The cost of services accounted for 67.3% of net revenue, a 180 bps increase over the same period last year. Cost of Services breakdown R$ MM Variation % Net Revenue R$ MM % Net Revenue % bps Personnel and medical services % % 15.5% 130 bps General services, rentals and utilities % % 13.2% 34 bps Materials and Exam Intermediation % % 3.9% -64 bps Depreciation and Amortization % % 36.6% 91 bps General Expenses % % -23.2% -10 bps Cost of Services % % 14.2% 180 bps Below, the analysis of the main lines of costs in compared to : Personnel and Medical Services (+15.5%) are the Company s main costs and accounted for 34.4% of net revenue, an increase of 130 bps. This increase is related to the 5.5% growth in headcount to support our expansion plan and the demand for our services (on the end of there were 8,959 employees), salary readjustments and increase of medical services due to higher volume. General Services, Rentals and Utilities (+13.2%) represented 18.7% of net revenue, an increase of 34 bps. The growth is explained by the increase in service contracts for facilities as a result of the Expansion Plan. We also observed an increase in the account of equipment rental related to equipments in the Central Laboratory, due to the new a procurement model for reagents negotiated with one of our suppliers. Materials and Exam Intermediation (+3.9%) represented 9.1% of net revenue, a decrease of 64 bps. This reduction is related to the new procurement model for reagents negotiated with one of our suppliers of the Central Laboratory. The new model with this supplier reduces the cost of reagents, having as a counterpart the increase in the rental of equipment allocated in the line of "General Services, Rentals and Utilities" and that, previously. This initiative will result in a positive impact on the 2018 EBITDA margin. Depreciation and Amortization (+36.6%) accounted for 4.9% of net revenue, a 91 bps increase compared to the previous period. The increase is a result of the Company's Expansion Plan related to improvements and new image equipment with an increase in Property and Equipment. General Expenses (-23.2%) represented 0.2% of net revenue, a decrease of 10 bps. The reduction can be explained by lower travel and transportation expenses. Gross Profit Gross profit reached R$ million, representing a 5.3% growth. The gross margin reached 32.7%, a reduction of 180 bps. 8

10 Operating Expenses and Equity in Subsidiaries Operating expenses amounted to R$ 71.3 million, representing a 14.3% growth. It accounted for 10.9% of net revenue, an increase of 30 bps compared to the same period in Operating Expenses breakdown and Equity in Subsidiaries R$ MM Variation % Net Revenue R$ MM % Net Revenue % bps G&A % % 17.6% 47 bps Depreciation and Amortization % % 21.7% 17 bps Other Operating (Income) Expenses % % -69.3% -56 bps Provision (Reversal) for Contingency % (0.2) 0.0% % 19 bps Equity in Subsidiaries (0.3) 0.0% (0.4) -0.1% -25.3% 02 bps Operating Expenses and Subsidiaries' Share of Profits % % 14.3% 30 bps Below, the analysis of the main lines of operating expenses in compared to : General and Administrative Expenses (+17.6%) represented 8.7% of net revenue, a 47 bps increase. Expenses related to consulting, legal services and marketing contributed to this growth. Depreciation and Amortization (+21.7%) represented 1.9% of net revenue, an expansion of 17 bps. Due to the increase in the amortization of in-house developed software, with the implementation of SAP. Other operational Income / Expenses (-69.3%) represented 0.2% of net revenue, a decrease of 56 bps. The reduction is related to the provision for asset write-offs, occurred in, after inventory of PSCs. Provision for contingencies (-517.5%) represented 0.2% of net revenue, increase of 19 bps impacted by tax provisions recorded in the quarter versus reversals of labor and tax provisions in the previous period. Equity in Subsidiaries 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 considering the form of a Joint Venture in which Grupo Fleury holds a 51% stake of the business. Below is the performance in : Equity in Subsidiaries Papaiz R$ thousand % Net Revenue R$ thousand % Net Revenue Net Revenue 5, , % % bps EBITDA 1, % 1, % -1.3% -358 bps Net Income % % -25.3% -589 bps Variation Net Income attributed to Grupo Fleury (51%) % 9

11 EBITDA EBITDA reached R$ million in the quarter, a 7.4% increase. EBITDA Margin reached 28.5%, the second highest margin ever recorded by the Company, demonstrating our continuous effort to gain operational efficiency. This result was achieved despite the opening of 35 units of the Expansion Plan, which are largely in the initial stages of maturation. This sustainable evolution of our EBITDA margin in was only surpassed by the same period of the previous year by 100 bps as a result of seasonal effects and reimplementation of SAP in that quarter. EBITDA (R$ MM) and margin (%) +7.4% % 28.5% EBITDA R$ MM Variation % Net Revenue R$ MM % Net Revenue % bps Net Income % % 18.2% 88 bps Financial Result % % -36.6% -124 bps Depreciation and Amortization % % 32.1% 107 bps Income Tax and Social Contribution % % -16.2% -175 bps Equity in Subsidiaries (0.3) 0.0% (0.4) -0.1% -25.3% 02 bps EBITDA % % 7.4% -100 bps EBIT (Operational Income) EBIT amounted to R$ million in the quarter, an increase of 1.4%. The margin was 21.7%. EBIT (R$ MM) and margin (%) +1.4% % 21.7% 10

12 Financial Result The financial result reached R$ million, representing a reduction of 36.6%. Financial expenses were reduced by 33.1%, while financial revenues decreased by 28.9%. These reductions are a result of a 16.2% decrease in the Company's net indebtedness, as well as the decrease in the interest rate of the economy, with an impact on the remuneration of investments and on the cost of debt. Financial Result (R$ MM) Variation Net financial income (10.7) (16.9) -36.6% Indebtedness Financial income % Earnings on financial investments % Interest and inflation adjustment % Financial expenses (20.9) (31.2) -33.1% Interest on debentures and financing (16.0) (24.3) -34.2% Interest and inflation adjustment (4.9) (6.9) -29.2% In the quarter, the ratio net debt over EBITDA LTM reached 0.6x versus 0.9x recorded in the same period in Composition of Net Debt (R$ MM) 4Q17 Next 12 months Gross Debt (Debentures and Financing ) , Cash, Cash Equivalents and Marketable Securities (337.2) (671.8) (470.5) Net Debt Net Debt / EBITDA LTM 0.9x 0.6x 0.6x EBITDA LTM / Financial Result LTM 11.3x 12.6x 14.7x In the quarter, we amortized R$ million related to the second issuance of debentures and R$ 9.5 million related to other financing. We also paid R$ 21.9 million in interest, including debentures and financing. 11

13 Income Tax and Social Contribution In the quarter, the income tax and social contribution over net income totaled R$ 34.9 million. The effective tax rate reached 26.6% compared to 33.8% registered in. It should be noted that as from 2Q17, according to accounting standards CPC 21, the Company accounts for the linearization of the effective rate, which reflects the forecast for capturing the tax benefit on Interest on Shareholders Equity (ISE), which explains the improvement observed in the comparison between quarters. Income Tax and Social Contribution (R$ MM) Variation Earnings Before Tax (EBIT) 131,3 123,2 6,6% Expected taxes (44,7) (41,9) 6,6% Non-deductible expenses and incentives 2,4 0,1 1697,8% Effective taxes linearization 7,3 0,0 0,0% Subsidiaries share of profits 0,0 0,1-94,8% Income tax and social contribution (34,9) (41,7) -16,2% % EBIT 26,6% 33,8% -723,7 bps Current (27,0) (17,7) 52,7% Deferred (7,9) (24,0) -67,0% Below we inform the expectation for the goodwill amortization for tax purposes, whose impact reduces the cash tax. Expected Amortization of Goodwill Period Balance R$ MM Net Income Net income reached R$ 96.4 million, an increase of 18.2%. The net margin reached 14.8%, an increase of 88 bps. It should be noted that the growth in net income was also benefited by the reduction of the effective rate resulting from the linearization of the effective rate which reflects of the tax benefit of Interest Shareholders Equity held in, only implemented as of 2Q17. Net Profit (R$ MM) and margin (%) % % 14.8% 12

14 Cash Flow In the quarter, operating cash flow reached R$ million, representing an increase of 20.9%. The conversion rate (operating cash flow/ebitda) reached 55.9% versus 49.6% in, due to the lower investment in accounts receivables. The average receivables collection period was 72 days in compared to 69 days in. Investment activities recorded R$ million, compared to R$ million in. In the quarter, we recorded a decrease in investments in fixed and intangible assets, but an increase in the account of Acquisitions. Financing activities reached R$ million compared to R$ million in. The increase is primarily due to the first payment of the installment of the second debentures issuance, in the amount of R$ million. Cash Flow (R$ MM) Variation Net Income % Items not affecting cash: Financial revenues and expenses % Depreciation and amortization % Income tax and social contribution % Provisions (Reversals) % Others % Net Income before non-cash effects % Working capital: Accounts receivables (53.8) (91.3) 41.1% Suppliers (6.7) (3.4) -94.7% Salaries / Charges (14.0) (20.5) 31.6% Others Assets and Liabilities (14.3) % Other Operating Cash Flow: Income tax and social contribution (17.8) (12.1) -47.1% Cash Flow from Operating Activities % Investment Activities: Acquisition of fixed and intangible assets (32.5) (56.3) 42.2% Interest income and dividends received % Marketable Securities % Acquisitions (39.8) (0.0) % Others Investment Activities % Cash Flow from Investing Activities (11.1) (30.9) 64.1% Financing Activities Others Financing Activities (238.7) (40.1) % Dividends and/or interest on capital 0.0 (71.1) 100.0% Capital increase % Cash Flow from Financing Activities (238.7) (111.2) % Cash Flow (145.9) (56.2) % Cash Flow Adjusted by Marketable Securities (201.1) (69.6) % Conversion (Operating Cash Flow / EBITDA) 55.9% 49.6% 628 bps 13

15 Account Receivables Comparing the quarters, there is a continuous improvement in the aging profile of receivables which current receivables accounted for 88.9% of the total compared to 84.4% in. The amount due over 121 days decreased from 9.5% in to 5.2% in and provisions for receivables due over 121 have coverage of 71.3% in comparison to 81.7% in. Aging Account Receivable R$ MM 1Q16 2Q16 3Q16 4Q16 2Q17 3Q17 4Q17 Trade Receivables 481,9 470,8 465,4 444,7 520,3 495,0 508,7 531,5 579,8 - Current 362,1 358,4 365,9 349,7 439,0 427,7 437,1 464,6 515,3 - Up to 120 days past due 54,2 37,8 37,7 36,7 31,6 34,1 42,1 35,9 34,6-121 to 360 days past due 40,9 45,3 38,2 31,3 26,6 22,1 20,7 24,8 26,0 - Over 361 days past due 24,8 29,4 23,6 27,0 23,1 11,2 8,8 6,1 4,0 Sales Deductions Provisions (43,7) (49,5) (40,9) (41,6) (40,6) (28,0) (23,0) (19,2) (21,4) Total 438,3 421,3 424,5 403,0 479,7 467,0 485,7 512,2 558,5 Current / Trade Receivables 75,1% 76,1% 78,6% 78,6% 84,4% 86,4% 85,9% 87,4% 88,9% Up to 120 days past due/ Trade Receivables 11,3% 8,0% 8,1% 8,2% 6,1% 6,9% 8,3% 6,8% 6,0% Over 121 days past due / Trade Receivables 13,6% 15,9% 13,3% 13,1% 9,5% 6,7% 5,8% 5,8% 5,2% Provisions / Over 121 days past due 66,5% 66,4% 66,1% 71,4% 81,7% 84,2% 77,9% 62,0% 71,3% 14

16 Expansion Plan In, Grupo Fleury opened one Fleury brand Patient Service Center in Santo André, São Paulo. From October 2016 to April 2018, the Company launched 35 PSCs. These openings correspond to 48% of the minimum and 39% of the maximum bounds of the Company's Expansion Plan, which forecasts the launch of 73 to 90 PSCs by Fleury Brand PSCs inaugurated by brand Complexity Patient Service Area (m²) 1 Fleury Santo André Medium 587 São Paulo feb/18 2 Fleury Carlos Weber Medium 681 São Paulo oct/17 3 Fleury Alameda Jaú Fast site 380 São Paulo set/17 4 Fleury Morumbi Large São Paulo jul/17 5 Fleury Anália Franco Large São Paulo jun/17 6 Fleury Heitor Penteado Fast site 183 São Paulo jun/17 7 Fleury São Caetano do Sul Fast site 411 São Paulo may/17 8 Fleury Cerro Corá Fast site 233 São Paulo apr/17 9 Fleury Ipiranga Fast site 206 São Paulo mar/17 10 Fleury Brasil Fast site 235 São Paulo jan/17 11 Fleury Moema Fast site 126 São Paulo dec/16 State Date Regional South Complexity Patient Service Area (m²) State Date 1 a+ João Bettega Small 128 Paraná dec/17 2 a+ Água Verde Small 171 Paraná may/17 3 Weinmann General Vitorino Small 113 Rio Grande do Sul may/17 4 a+ Ecoville Small 47 Paraná feb/17 5 a+ Champagnat Small 81 Paraná feb/17 6 a+ Centro Small 29 Paraná feb/17 7 a+ Batel Small 134 Paraná dec/16 8 a+ Nossa Saúde Small 79 Paraná oct/16 a+ São Paulo Complexity Patient Service Area (m²) State Date a+ Guarulhos Large 832 São Paulo apr/18 1 a+ Pedroso de Morais Medium 421 São Paulo dec/17 2 a+ Leôncio Magalhães Medium 544 São Paulo nov/17 3 a+ Queiroz Filho Medium 673 São Paulo oct/17 4 a+ Santo André Medium 437 São Paulo jul/17 5 a+ Augusto Tolle Fast site 392 São Paulo jul/17 6 a+ Itaim Bibi Fast site 207 São Paulo may/17 Regional RJ Complexity Patient Service Area (m²) 1 Felippe Mattoso Ipanema Fast site 239 Rio de Janeiro dec/17 2 Labs a+ Catete Fast site 145 Rio de Janeiro dec/17 3 Labs a+ Shopping Santa Cruz Fast site 131 Rio de Janeiro dec/17 4 Labs a+ Mariz e Barros Fast site 134 Rio de Janeiro dec/17 5 Labs a+ Uruguai Fast site 129 Rio de Janeiro nov/17 6 Labs a+ Santa Rosa Fast site 148 Rio de Janeiro oct/17 7 Labs a+ Campo Grande Fast site 281 Rio de Janeiro set/17 State Date Regional Brasília Complexity Patient Service Area (m²) State Date 1 a+ Asa Sul Fast site 58 Brasília aug/17 2 a+ Sudoeste Fast site 119 Brasília aug/17 Total 35 PSCs 11,916 sqm 15

17 Investments Capex (additions to fixed and intangible assets) totaled R$ 32.5 million in the quarter, of which 51.9% were related to the Expansion Plan and improvement of PSCs. In the comparison with, there was a reduction of 42.2%. The Company will continue to invest in the Expansion Plan and the improvement of units, with these investments more concentrated in the coming quarters. The Others group is composed of strategic projects, infrastructure, IT and equipment renewal CAPEX (R$ MM) -42.2% 64.8% 35.2% % 48.1% Expansion and improvement in PSCs and technical areas Others Stock Market Performance Fleury shares (B3: FLRY3) at the end of were quoted at R$ The Average Daily Trading Volume (ADTV) in the period was R$ 53.0 million, 2.1x higher than the volume for the same period in We presented a 36.1% growth in the Company's investor base in the period after its inclusion in the Ibovespa Index in January/18. According to data from, Fleury Group has approximately 13.8 thousand shareholders compared to 10.1 thousand registered in 4Q17. Currently, the shares of the Fleury Group are a constituent of the Ibovespa and Sustainability Index (ISE) of B3. Average Daily Trading Volume (ADTV) R$MM 0.697% IN ADTV 0.541% 0.610% 0.246% 0.375% 0.374% % 0.057% Q17 3Q17 4Q17 * NI: Negotiability Index Investor Relations Phone: ri@grupofleury.com.br Website: Address: Avenida General Valdomiro de Lima, São Paulo, SP Brasil 16

18 Performance Indicators Operational Indicators Description Unit 1Q16 2Q16 3Q16 4Q16 2Q17 3Q17 4Q17 Income Statment Gross Revenue Gross Revenue R$ MM 558,6 577,1 592,2 572,4 642,1 646,5 667,7 630,2 706,3 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 507,9 525,1 539,8 523,2 587,8 597,6 615,6 582,0 653,3 R$ MM -355,0-373,8-374,8-391,4-385,2-410,9-422,4-428,5-439,9 R$ MM -53,1-59,2-62,0-69,1-58,5-67,2-65,5-65,3-69,3 EBIT Earnings Before Interest and Taxes R$ MM 86,6 85,7 102,3 63,1 139,7 117,5 127,5 91,2 141,7 EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization R$ MM 121,7 122,0 138,6 100,7 173,2 151,4 163,4 130,7 185,9 Net Finance Income Interest Revenue - Interest Expenses R$ MM -14,2-15,0-8,7-6,6-16,9-12,7-11,2-8,3-10,7 Net Income Net Income R$ MM 44,7 46,1 63,1 74,9 81,6 87,9 86,6 64,6 96,4 Net Cash Income Net Income - Deferred income tax R$ MM 64,2 57,8 80,9 75,1 105,6 92,2 112,7 82,2 104,3 Result Indicators Cancellation Index Cancellations / Gross Revenue % -2,9% -2,8% -2,7% -2,4% -2,3% -1,4% -1,7% -1,5% -1,4% Gross Margin Gross Profit / Net Revenue % 30,1% 28,8% 30,6% 25,2% 34,5% 31,3% 31,4% 26,4% 32,7% EBIT Margin Earnings Before Interest and Tax / Net Revenue % 17,0% 16,3% 18,9% 12,1% 23,8% 19,7% 20,7% 15,7% 21,7% EBITDA Margin Earnings Before Interest, Tax, Depreciation and Amortization / Net Revenue % 24,0% 23,2% 25,7% 19,3% 29,5% 25,3% 26,5% 22,4% 28,5% Effective Tax Rate Current Tax / Earnings Before Tax % -38,5% -35,1% -32,9% 32,3% -33,8% -16,4% -25,8% -21,8% -26,6% Net Margin Net Profit / Net Revenue % 8,8% 8,8% 11,7% 14,3% 13,9% 14,7% 14,1% 11,1% 14,8% Net Cash Income Margin (Net Income - Deferred income tax) / Net Revenue % 12,6% 11,0% 15,0% 14,4% 18,0% 15,4% 18,3% 14,1% 16,0% Financial Debt Cash & Equivalents Cash, Equivalents and Marketable Securities R$ MM 657,1 759,3 835,5 406,8 337,2 433,8 482,7 671,8 470,5 Gross Debt Short and Long Term Debts (Borrowings and Debentures) R$ MM 983,7 988,7 981,9 832,0 817,2 829,7 850, ,9 872,8 Net Debt Gross Debt - Cash and Cash equivalents R$ MM 326,6 229,4 146,4 425,2 480,0 395,9 367,7 383,1 402,3 Net Debt / EBITDA LTM (Gross Debt - Cash and Cash equivalents) / EBITDA LTM Multiple 0,8 0,5 0,3 0,9 0,9 0,7 0,6 0,6 0,6 Profitability and Return ROIC without Goodwill (LTM) NOPAT LTM (tax= 34%) / Capital Employed (Shareholders Equity + Net Debt - Goodwill) % 23,8% 27,2% 32,1% 32,9% 36,0% 40,3% 44,2% 44,5% 45,3% 17

19 FLEURY S.A. CONSOLIDATED Balance Sheet as of March 31, 2018 and December 31, 2017 and (In R$ thousands) Consolidated Consolidated Assets 3/31/ /31/2017 Liabilities and equity 3/31/ /31/2017 Current Current Cash and cash equivalents 191, ,544 Financing 29,277 30,948 Marketable securities 279, ,286 Debentures 278, ,693 Derivative financial instruments - 17 Financial lease Inventories 17,226 21,545 Derivative financial instruments 23 - Taxes recoverable 58,335 49,286 Trade accounts payable 143, ,485 Credits receivable 5,190 3,854 Payroll and related taxes payable 96, ,354 Other assets 16,631 8,264 Taxes and contributions payable 36,905 30,634 Accounts receivable 558, ,241 Accounts payable - company acquisition 15,464 1,855 Total current 1,126,358 1,267,037 Dividends payable 220,252 41,420 Other accounts payable 1, Non-current Total current 822, ,146 Credits receivable 9,269 12,694 Other assets 7,997 9,555 Non-current Judicial deposits 48,079 47,521 Financing 98, ,949 Debentures 466, ,334 Financial lease 6,617 6,769 Deferred income tax and social contribution, ne 371, ,777 Provision for tax, labor and civil risks 28,151 30,480 Taxes and contributions payable 29,211 29,549 Accounts payable - company acquisition 31,431 12,800 Total non-current 1,031,507 1,181,658 Equity Share capital 1,413,608 1,413,608 Capital reserve - options granted recognized 20,077 17,923 Revaluation reserve Investments 10,066 11,296 Legal reserve 70,681 70,681 Property and equipment 642, ,920 Retained earnings 96, ,238 Intangible assets 1,610,267 1,537,309 Additional dividends proposed - - Total non-current 2,328,254 2,260,295 Total equity 1,600,873 1,706,528 Total assets 3,454,612 3,527,332 Total liabilities and equity 3,454,612 3,527,332 18

20 FLEURY S.A. CONSOLIDATED Income Statement as of March 31, 2017 and 2018 (R$ thousands) Consolidated Revenue from services rendered 653, ,753 Cost of services rendered (439,883) (385,212) - - Gross Profit 213, ,541 Operating income (expenses) General and administrative (69,253) (58,545) Other operating income (expenses), net (1,386) (4,518) Provision for tax, labor and civil risks (1,004) 240 Equity in the earnings (losses) of subsidiaries Operating profit before financial result 142, ,148 Financial income 10,157 14,291 Financial expenses (20,880) (31,210) - - Financial result (10,723) (16,919) Earnings before income tax and social contribution 131, ,229 Income tax and social contribution: Current (26,987) (17,675) Deferred (7,911) (23,990) - - Profit for the period 96,429 81,564 Earnings per share attributable to owners of the Company Basic earnings per share (weighted average) Diluted earnings per share (weighted average)

21 Capital Social Capital Social Despesas com emissão de ações Reserva de Capital Opções outorgadas reconhecidas Reserva de Reavaliação Reserva legal Reserva de Lucros Reserva para investimentos Lucro acumulado Dividendo adicional proposto Patrimônio líquido Saldos em 31 de dezembro de ,402,531 (22,784) 5, , ,762-10,766 1,655,439 Aumento de capital - Stock Options 20, ,706 Realização da reserva de reavaliação (165) Plano de opção de compra de ações - - 3, ,629 Lucro líquido do exercício (R$0,73 por ação) , ,749 Dividendos de exercícios anteriores (216,853) - (10,766) (227,619) Destinação do Lucro - Constituição da reserva legal , (11,437) - - Juros sobre capital próprio (110,425) (110,425) Dividendos (106,887) 71,133 (35,754) Saldos em 31 de dezembro de ,423,237 (22,784) 9, , ,133 1,535,725 Realização da reserva de reavaliação Aumento de Capital 13, ,155 Plano de opção de compra de ações - - 8, ,511 Lucro líquido do exercício (R$1,02 por ação) , ,618 Destinação do lucro - Constituição da reserva legal ,031 - (16,031) - Juros sobre capital próprio (100,349) (71,133) (171,482) Lucros Retidos ,238 - (204,238) - - Saldos em 31 de Dezembro de ,436,392 (22,784) 17, , , ,706,528 Plano de opção de compra de ações - - 2, ,154 Lucro líquido do exercício (R$0,31 por ação) ,429-96,429 Dividendos (204,238) (204,238) Saldos em 31 de Dezembro de ,436,392 (22,784) 20, , ,429-1,600,873 FLEURY S.A. CONSOLIDATED Statements of Changes in Equity as of March 31, 2017 and 2018 (R$ thousands) 20

22 FLEURY S.A. CONSOLIDATED Statements of Cash Flow as of March 31, 2017 and 2018 (R$ thousands) Consolidated Profit for the period 96,429 81,564 Items not affecting cash: Income tax and social contribution 34,854 41,665 Financial and expenses income 12,593 13,595 Depreciation and amortization 44,204 33,470 Equity in the earnings (losses) of subsidiaries (321) (430) Stock option plan 2,154 2,227 Constitution (reversal) of provision for tax, labor and civil risks 1,004 (239) Estimated losses with allowance for doubtful accounts 9,879 14,676 Profit sharing 8,829 10,378 Other 878 2,875 Cash flows from operating activities before changes in assets and liabilities 210, ,781 - (Increase) decrease in accounts receivable (53,762) (91,337) (Increase) decrease in inventories 4,896 15,223 (Increase) decrease in taxes recoverable (7,943) (8,647) (Increase) decrease in judicial deposits (523) (1,649) (Increase) decrease in other assets (4,235) 5,152 Increase (decrease) in trade accounts payable (6,687) (3,435) Increase (decrease) in payroll and related charges (14,045) (20,537) Increase (decrease) in tax liabilities 5,538 3,393 Increase (decrease) in taxes paid in installments (9,121) (617) (Increase) decrease in other liabilities (2,930) 673 Total variation in assets and liabilities (88,812) (101,781) Income tax and social contribution paid (17,785) (12,087) Net cash from operating activities 103,906 85,913 Acquisition of property and equipment and intangible assets (32,535) (56,280) Sale of fixed assets - - Marketable securities and interest earned 55,274 (12,733) Redemption of marketable securities - 26,145 Payments - - Payments excepted cash (39,829) (9) Related parties increase Interest earned from financial investments 5,007 11,960 Net cash used in investing activities (11,115) (30,917) Borrowings and debentures - 2,801 Settlement (principal) of financing and debentures (174,745) (4,939) Interest paid in financing and debentures (21,892) (37,056) Financial expenses paid (611) (543) Derivative financial instruments - (351) Capital integralization - - Dividends and / or interest on shareholders' equity - - Dividends (41,406) (71,133) Net cash used in financing activities (238,654) (111,221) (Decrease) increase in cash and cash equivalents (145,863) (56,225) Cash and cash equivalents At the beginning of the period 337, ,834 At the end of the period 191, ,609 Variation in cash and cash equivalents (145,863) (56,225) 21

23 FLEURY S.A. CONSOLIDATED Statements of Value Added as of March 31, 2017 and 2016 (R$ thousands) Consolidated 31/03/ /03/2017 Revenues 696, ,595 Goods and products sold and services rendered 706, ,131 Estimated losses with allowance for doubtful accounts (9,879) (14,676) Other revenue Inputs purchased from third parties (241,506) (216,963) Cost of goods and products sold and services rendered (180,829) (167,372) Materials, electricity, outsourced services and others (60,374) (49,398) Loss/recovery of asset values (303) (193) Gross value added 455, ,632 Depreciation and amortization (44,204) (33,470) Net value added 410, ,162 Value added received through transfer 10,245 14,721 Equity in the earnings (losses) of subsidiaries Financial income 9,924 14, Total value added 421, , Distribution of value added (421,148) (391,883) Personnel and charges (178,771) (156,661) Direct remuneration (103,997) (92,924) Benefits (39,798) (33,371) Charges (34,976) (30,366) Taxes, fees and contributions (81,139) (84,386) Federal (60,503) (65,667) Municipalities (20,636) (18,392) State - (327) Interest, rental and other operating expenses (64,809) (69,272) Interest (35,918) (30,268) Rental (16,049) (24,410) Other operating expenses (12,842) (14,594) Dividends and/or Interest on Equity - - Legal Reserve - - Retained earnings (96,429) (81,564) 22