Qualicorp S.A. BOVESPA:QUAL3 Last Price May 11 th, 2016 R$ 15.00/share São Paulo, May 11, 2016. QUALICORP S.A (BM&FBOVESPA: QUAL3), one of the leading full-service healthcare benefits administrator and health management services provider in Brazil, announces its consolidated results. The operating and financial data are presented on a consolidated basis in Reais ( BRL or R$ ), in accordance with Corporate Law and regulations of Comissão de Valores Mobiliários CVM (the Brazilian SEC). Shares Outstanding (03/31/2016) 274.325.288 shares Free Float (03/31/2016) 215.096.548 shares (78.4%) Cash and Cash Equivalents (03/31/2015) R$ 421.4 million Investor Relations Grace Tourinho IRO Natalia Lacava IR FINANCIAL AND OPERATING HIGHLIGHTS We closed 1Q16 with R$96.3 million operating cash flow, influenced by a strong operational result combined with seasonal fluctuations in working capital, due to the semiannual interest payments and Profit Sharing Program cash effect. After Capex, the cash flow generation reached R$64 million. Our consolidated Adjusted EBITDA grew 13.2% y/y reaching R$188.3 million, which represents a 41.4% margin, reflected by our operational efforts to reduce cost and administrative expenses and also the service tax reduction due to three associated companies that were transferred to the city of Barueri. Our consolidated Net Revenue reached R$454.8 million, 13.0% higher than the previous year, which reflects once again the resilience of our business model considering the current economic environment. In 1Q16, we were able to maintain Affinity Medical Care portfolio flat with, reaching a positive result of 177 net lives. Our total portfolio of beneficiaries reached 4.9 million lives, out of which 1.8 million in Affinity, 3.1 million in Corporate and Others, decreased 7.3% y/y in 1Q16, mainly due to the exit of Potencial s lives and the extraordinary effects of portfolios cancellations in 2015. MAIN INDICATORS (R$ MM) Phone: +55 (11) 3191-3829 ri@qualicorp.com.br www.qualicorp.com.br Conference Calls May, 11th 2016 (Wednesday) Portuguese Time: 7am EST / 10am Brasilia Phone: +55 11 3191 1012 Code: Qualicorp English Time: 9am EST / 12pm Brasilia Phone: +1 412 317 5485 Code: Qualicorp Consolidated Income Statement - (R$ MM) 1Q16 1Q15 1Q16/ Net Revenues 454.8 402.3 13.0% 465.3-2.2% Total Expenses (Ex-Depreciation and amortization) (283.0) (258.1) 9.6% (319.2) -11.3% Adjustments to EBITDA 16.5 22.1-25.3% 11.2 47.9% Adjusted EBITDA 188.3 166.4 13.2% 157.3 19.8% Adjusted EBITDA Margin 41.4% 41.3% 6bps 33.8% 761bps Net Income (Loss) 198.3 44.7 343.6% 61.4 222.7% Balance Sheet 1Q16 2015 Var. 1Q16/2015 Equity 2,183.7 1,993.9 9.5% Net Debt¹ 352.7 416.7-15.4% O ther 1Q16 2015 Var. 1Q16/2015 Net Debt / Equity 0.16x 0.21x -22.7% Net Debt / Adjusted EBITDA LTM 0.51x 0.74x -31.4% (¹) Includes acquisition payables recognized as other payables. It does not include the investment retained as a guaranteed asset in the direct subsidiary Qualicorp Administradora de Benefícios S.A., and in the indirect subsidiaries Aliança Administradora de Benefícios de Saúde S.A and CRC/Gama, according to the 33rd normative instruction by the ANS, from October 5, 2009. 1
BENEFICIARIES (MM) NET REVENUES (R$ MM) ADJUSTED EBITDA (R$ MM) NET (LOSS) INCOME (R$ MM) 2
1 Beneficiaries BENEFICIARIES (MM) BENEFICIARIES PORTFOLIO BREAKDOWN IN 1Q16 Total Portfolio The total number of beneficiaries reached 4.9 million lives in the end of the year, which represents a 7.3% y/y drop (- 4.5% q/q). However it is important to remember that part of this decrease reflects the extraordinary factors mentioned over the quarters. Thereby, out of the 4.9 million beneficiaries, 1.8 million are in the Affinity segment and 3.1 million in the Corporate and Others segment. Affinity Portfolio Medical Care Our Affinity Medical Care portfolio closed 1Q16 with 1.4 million lives, decreasing 7% y/y a total of 102.2k lives a loss y/y (flat q/q). The reasons related to this performance were widely discussed over the last quarter and refer to the exit of Potencial s lives and the extraordinary cancellations of Unimed Seguros and Unimed Paulistana. Regarding the sequential comparison we consider the addition of 177 lives as a positive result considering the actual macroeconomic scenario. According to recent data published by ANS, the Brazilian private health market lost more than 617k customers from December 2015 to March 2016 and we were able to present a small increase in our most important segment on the same period. Other products The Other products portfolio, in the Affinity segment, closed 1Q16 with 408.8k lives, a result 23.9% lower than reported in 1Q15, mainly due to the exit of 122.1k Potential s lives in 2Q15. Regarding the sequential comparison, the performance decreased 3.9% (16,5k lives) and is explained by the cancellation of life insurance portfolio. 3
Corporate and Others Total Portfolio Our total portfolio of beneficiaries in the Corporate and Others segment increased 4.7% y/y in 1Q16 (-6.4% vs. ), achieving 3.1 million lives, mainly due to corporate contracts reduction. Corporate The Corporate segment decreased 6.6% y/y in 1Q16 (-18.5% q/q) which represents 921k lives, mainly due to the nonrenewal of a significant contract of 200k lives in 1Q16. SME The SME segment shows a decrease of 26.8% y/y (-10k lives) when compared to 1Q15, mainly due to some contracts that were not renewed. In the sequential comparison, there was a 19,7% drop (-6.8k lives) related to Unimed Paulistana s transfer process that ended up impacting January of 2016 churn on SME plans. TPA The self-management portfolio, which consolidates the lives of Qualicorp TPA and CRC/Gama has reached 2.1 million lives by the end of 1Q16, (-3.4% q/q and 0.2% higher than ). This small increase is explained by higher volume of lives in network rental product. Health Management In Health Management portfolio, which closed the quarter with 6.7k lives, we had a reduction of 34.6% y/y (+1.3% vs. ) mainly due to the migration of a contract to the corporate segment in 2Q15, which consolidated all providing customer service and the output of a client in 3Q15, which decided to internalize the health management processes. The slight sequential increase in 1Q16 (+83 lives) is the result of higher customer care for a specific client. 4
1.1 Portfolio of lives evolution Portfolio 1Q16 1Q15 1Q16/ Affinity Health Lives Total Portfolio (BOP) 1,365,460 1,467,190-6.9% 1,406,275-2.9% (+) Gross Adds 98,654 92,197 7.0% 114,418-13.8% (-) Churn (98,477) (91,588) 7.5% (155,233) -36.6% New Lives Added (net) 177 609-70.9% (40,815) N.A. Total Portfolio (EOP) 1,365,637 1,467,799-7.0% 1,365,460 0.0% Affinity Other Products Lives Total Portfolio (BOP) 425,312 423,476 0.4% 425,059 0.1% New Lives Added (net) (16,545) 113,396 N.A. 253 N.A. Total Portfolio (EOP) 408,767 536,872-23.9% 425,312-3.9% Affinity Portfolio 1,774,404 2,004,671-11.5% 1,790,772-0.9% Corporate 921,202 985,983-6.6% 1,130,277-18.5% TPA 2,126,731 2,200,490-3.4% 2,122,279 0.2% Small/Medium Enterprises 27,880 38,097-26.8% 34,713-19.7% Health Management 6,699 10,536-36.4% 6,616 1.3% Corporate and Others Portfolio 3,082,512 3,235,106-4.7% 3,293,885-6.4% Total Portfolio 4,856,916 5,239,777-7.3% 5,084,657-4.5% In the Affinity segment, which represented 90.6% of our revenues in 1Q16, we reached 98.7k gross additions lives, which represents a 7% increase y/y and a -13.8% decrease q/q. This sequential drop is natural and is explained by the absence of Unimed Paulistana s extraordinary factor, which impacted in several operational lines including gross additions and churn. Regarding churn level we had 98.5k cancellations in 1Q16, which represents a +7.5% increase y/y and a relevant decrease of -36.6% q/q. As mentioned before, this reduction is a result of the business seasonality and the absence of extraordinary cancellations over 1Q16. Although it is important to note that from 98.5k cancellations in 1Q16 we had a specific cancellation of approximately 4k clients. As a result of all the factors mentioned above, our portfolio in Medical Care Affinity segment remained flat compared to, with a net increase of 177 lives. 5
2 Operating Net Revenues Net Revenues (R$ MM) 1Q16 1Q15 1Q16/ Affinity 412.1 367.8 12.1% 425.1-3.1% % on Total Net Revenues 90.6% 91.4% -79bps 91.4% -75bps Corporate and Other 42.7 34.6 23.5% 40.1 6.3% % on Total Net Revenues 9.4% 8.6% 79bps 8.6% 75bps Total Consolidated 454.8 402.3 13.0% 465.3-2.2% Our total Net Revenues grew 13% in 1Q16 y/y, reaching R$454.8 million. The annual growth is the result of (i) price adjustment in 3Q15; (ii) product mix; (iii) service tax reduction (Barueri). It is important to mention that even with the extraordinary factors that happened, specially in the second half of 2015, we were able to increase our revenues and post once again a double digit growth. On the sequential analysis, our consolidated net revenue decreased -2.2%, due to the extraordinary one-time revenue observed in regarding Unimed Paulistana process, which did not happen again in 1Q16. The Affinity segment contributed with R $ 412.1 million, in 1Q16 (+12.1% y/y and flat q/q). The Net Revenue from the Corporate and Others Segment reached R$42.7 million in 1Q16 (+23.5% y/y and +6.3% q/q), mainly due to a higher CRC/Gama net revenue. It is worth mentioning that after the transference of three subsidiaries to the city of Barueri, we have reduced our service taxes and since February 2016 we have been saving R$3 million monthly in our results. Finally we would like to remember that 1Q16 result was not affected by the PIS / COFINS increase in the brokerage business, but it will impact Qualicorp Corretora gross revenue from June 2016 onwards. 6
3 Operating Expenses Cost summary (R$ MM) 1Q16 1Q15 1Q16/ Cost of Services (114.3) (104.0) 10.0% (122.8) -6.9% Total Costs of Services (114.3) (104.0) 10.0% (122.8) -6.9% Total Adm. Expenses (115.3) (113.3) 1.8% (122.8) -6.1% Total Selling Expenses (80.6) (68.4) 17.7% (107.4) -25.0% Bad Debt (Uncollectible Receivables) (30.1) (21.2) 42.0% (31.1) -3.5% Other Operating Income (Expenses) 1.3 (3.5) -136.5% 7.8-83.9% Total Operating Expenses (224.7) (206.4) 8.9% (253.5) -11.4% Total Consolidated (339.1) (310.4) 9.2% (376.4) -9.9% (-) One-time Revenues (a) - - N.A. (0.5) N.A. (+) One Time Expenses (b) 3.7 10.8-65.6% - N.A. Total Consolidated Recurring (335.4) (299.6) 11.9% (376.9) -11.0% a) Regarding refers only to stock option plan expenses reversal in the amount of -R$0.5 million. b) For 1Q16 refers only to stock option plan expenses reversal in the amount of R$3.7 million and R$10.8 million for 1Q15. Our consolidated recurring Operating Expenses presented an increase of 9.3% y/y in 1Q16, showing once again the Company s ability to leverage its cost when compared to the revenue growth. In the sequential comparison the 9.9% decrease reflects the seasonality of the business, once the last quarter of the year is usually impacted by additional expenses. In addition we had expenses related to Unimed Paulistana s process in. The highlight of this quarter is the administrative expenses control which increased only 1.8% on the annual comparison and the cost of services level which provided gross margin increase. Furthermore it is important to mention the 3.5% sequential decrease in Bad Debt, result of a constant policy of control. On the annual analysis we had a significant increase of +42%, reflecting the challenging macroeconomic environment that impacts directly our customers' payment capacity. 7
3.1. Cost of Services Cost of Services (R$ MM) 1Q16 1Q15 1Q16/ Personnel expenses (37.0) (34.5) 7.2% (42.3) -12.4% Third Party Services (21.9) (18.1) 21.2% (23.1) -5.2% Occupancy expenses (3.7) (3.3) 12.6% (4.2) -13.4% Royalties (a) (42.3) (37.5) 12.8% (42.3) -0.1% Others (b) (9.5) (10.6) -11.0% (10.9) -13.4% Total Consolidated (114.3) (104.0) 10.0% (122.8) -6.9% Gross Margin 74.9% 74.2% 70bps 73.6% 126bps a) Refers to expenses related to financial pass through incurred in agreements signed with professional associations for the contracting and selling of affinity plans (called royalties). b) Refers mainly to lawsuits, mailing expenses and annual membership fees paid by the Company to associations, unions and councils on behalf of the beneficiaries / members of the professional associations, paid by the Company for associations, unions and councils to which the beneficiaries are affiliated. The Cost of Services consolidated reached R$114.3 million in 1Q16 (+10.0% y/y and -6.9% q/q). Thus we achieved a 74.9% gross margin, leverage of +70bps y/y and +126bps q/q. In third-party services, the increase of 21.2% y/y is the result of higher BackOffice expenses, specialized IT consultancy. The sequential decrease is due to the reduction of logistic expenses related to material printing improvement which reduced the delivery and waste of graphic material volume in stock (contracts, manuals and guides). The decrease in other s line is the result of the reduction of legal agreements volumes, lower than usual. Finally, the sequential decrease observed in the personnel expenses line is related to the Company s staff restructuring held in. In this manner, not only we had the first quarter without lay off costs, but also less employees on our payroll. 8
3.2. Administrative Expenses Administrative expenses (R$ MM) 1Q16 1Q15 1Q16/ Personnel expenses (29.9) (32.9) -9.1% (27.2) 9.7% Third Party services (15.0) (17.7) -15.3% (19.8) -24.3% Occupancy expenses (4.1) (3.5) 16.6% (4.2) -1.8% Depreciation and amortization (56.1) (52.3) 7.3% (57.2) -2.0% Others (10.3) (7.0) 46.6% (14.4) -28.4% Total Consolidated (115.3) (113.3) 1.8% (122.8) -6.1% (+) Stock Options Expenses 3.7 10.8-65.6% (0.5) -786.5% Total Recurring Adm. Expenses (111.6) (102.6) 8.8% (123.4) -9.5% Recurring Adm. Expenses/ Net Revenue % 24.5% 25.5% -95bps 26.5% -197bps Our recurring Administrative expenses increased 8.8% y/y (-9.5% q/q), reaching R$111.6 million in 1Q16. Despite the nominal growth, we can observe a smaller representativeness of our expenses regarding the Company's net revenue, both annually and sequentially, reaffirming our commitment on costs control always seeking for operational efficiency. Another important highligh is the excellent third party expenses performance which dropped 15.3% y/y, maily due to a decrease in legal, consultancies and logistics expenses. On the sequential comparison the 24.3% decrease is related to the abscence of extraordinary expenses from Unimed Paulistana s process, which impacted R$4.7 million on our administrative expenses in. In Others line we showed a reduction compared with due to lower volume of legal agreements and the absence of specific expenses related to Unimed Paulistana s process. Lastly, the annual and sequential variations in personnel s line refers to expenses related to Stock Option Plan. Regarding occupancy expenses the increase is due to rental increment related to the three subsidiaries that were transferred in February 2016 to Barueri. 9
3.3. Selling Expenses Selling Expenses (R$ MM) 1Q16 1Q15 a) Includes office supplies, mailing expenses and discounts granted. Our consolidated Selling Expenses increased 17.7% y/y in 1Q16 (-25.0% q/q) reaching R$80.6 million in 1Q16. It is important to mention that the selling expenses are managed on a consolidated basis and that can cause distortions in the comparisons between lines depending on the Company's strategy every quarter. In the beginning of 2016, our efforts were focused on initiatives that could generate direct impact on production, such as sales campaigns launched in the second half of 2015 and the increase in brokers awards, which were in line with sales levels and products prices, directly impacting Sales Campaign. Besides that it is worth mentioning that Third-party Commission was impacted by the price adjustment in 3Q15 and higher sales volume. The sequential drop observed in a few lines is the result of the seasonality of our business combined with the absence of Unimed Paulistana s extraordinary factor in 1Q16. In, for example, our personnel expenses were impacted by a higher commissionable sales volume carried out by our internal sales channel, whereas the lines of sponsorships, sales campaign and publicity followed the peculiar seasonality of the last quarter of the year. 1Q16/ Personnel expenses (17.5) (15.6) 12.7% (22.9) -23.5% Third Party services (3.7) (2.8) 28.3% (4.0) -9.6% Occupancy expenses (2.0) (1.7) 18.9% (1.8) 9.5% Other selling expenses (1.2) (3.3) -63.9% (3.8) -68.7% Sales campaign (15.9) (8.3) 91.2% (23.8) -33.2% Sponsorships (1.9) (1.6) 22.1% (3.7) -48.1% Third-party commission (31.1) (25.2) 23.5% (35.9) -13.4% Publicity and advertising (5.4) (7.8) -30.7% (7.1) -24.0% Others (a) (1.9) (2.2) -13.8% (4.3) -56.3% Total Consolidated (80.6) (68.4) 17.7% (107.4) -25.0% Selling/Net Revenue % 17.7% 17.0% 71bps 23.1% -536bps 3.4. Bad Debt (Uncollectible Receivables) Bad Debt (R$ MM) 1Q16 1Q15 1Q16/ Bad Debt/Uncollectible Receivables (30.1) (21.2) 42.0% (31.1) -3.5% % Net Revenue Consolidated 6.6% 5.3% 135bps 6.7% -8bps Our consolidated Bad Debt expenses, reached R$30.1 million in 1Q16, representing 6.6% of our net revenue, which can be compared with 5.3% in 1Q16 and 6.7% in. This increase reflects higher churn on the last quarters and the actual macroeconomic situation. However, still lower than and within our expectations and a controlled range. 10
3.4. Bad Debt - Uncollectible Receivables (cont.) Bad Debt Breakdown 1Q15 2Q15 3Q15 1Q16 1Q16/ Bad Debt (26.0) (22.8) (33.2) (36.4) (33.8) -7.2% Recovering 4.8 4.7 4.2 5.3 3.7-29.2% Total Consolidated (21.2) (18.1) (29.0) (31.1) (30.1) -3.5% The past due credit recovery contributed positively with R$3.7 million during 1Q16, which can be compared with R$5.3 million over. This sequential decrease is explained by (i) the high recovery volume held in with a R$1 million impact related to customers cancelations at the beginning of the Unimed Paulistana s transfer process; and (ii) a good performance on our Bad debt collection strategies by the end of 2015 related to the 13 th salary. It is important to mention that the positive result in recoveries has remained strong due to more aggressive strategies to recover credits. However the actual performance is already lower than in 2015, once the credit reserves from the previous periods are running out. It is worth noticing that this benefit had a counterpart in the administrative expenses, due to the fees for the collection agencies and Serasa expenses. 3.5. Other Operating Income / (Expense) Other Operating Income/Expenses (R$ MM) 1Q16 1Q15 1Q16/ Expenses related to contingencies 0.6 (2.1) -129.5% (2.0) N.A. Impairment (1.3) - N.A. (3.4) -62.8% Operational Losses 4.3 (1.3) N.A. 7.0-38.6% PIS COFINS on other revenues (0.0) - N.A. (0.5) -95.2% Other income (expenses) (2.4) (0.1) N.A. 6.7 N.A. Total Consolidated 1.3 (3.5) N.A. 7.8-83.9% In 1Q16, our Other Operating revenues reached R$1.3 million, (-R$3.5 million y/y and R$7.8 million q/q). As in, the first quarter of 2016 was positively impacted by operational gains through improvement of our reconciliation bills process. As nonrecurring highlights we have R$1.3 million impairment on goodwill in 1Q16 which is related to the tax work carried out by the Company during the quarter. However, the largest benefits of this work are showed up on our income tax line. 11
4 Financial Income (expenses) Financial Income (Expenses) (R$MM) 1Q16 1Q15 1Q16/ Financial income Income from short-term investments 15.8 17.2-8.0% 17.5-9.6% Interest and fine on late payment of health plans 12.8 11.4 12.8% 13.4-4.1% Monetary update from tax rate change - PIS/CONFINS - 0.8 N.A. 0.0 N.A. Other income 3.3 3.0 10.9% 0.2 1445.8% Total 31.9 32.3-1.2% 31.1 2.8% Financial expenses Debentures Interest (19.6) (16.7) 17.4% (21.6) -9.3% Monetary adjustment from acquisition payables (7.5) (6.2) 20.5% (7.4) 1.0% Other financial expenses (15.3) (10.2) 50.1% (22.7) -32.8% Total (42.3) (33.0) 28.1% (51.7) -18.2% Total Consolidated (10.3) (0.7) 1436.1% (20.6) -49.8% The Company s financial income results comes from two main sources: interest on financial investments and interest and penalties on late payment of premiums from beneficiaries. Financial expenses refers primarily to interests over debentures, fee collections and other bank charges, in addition to the monetary adjustment of payables acquisitions. In financial expenses on this quarter, the largest contribution once again came from the cost of our debentures, whereas the monetary adjustment from payable acquisitions of R$7.5 million in 1Q16 reflects the adjustment over 25% which we still have as a call option for Aliança. 12
5 Generation of Operating Cash (EBITDA and Adjusted EBITDA) 1,2 EBITDA and Adjusted EBITDA (R$ MM) 1Q16 1Q15 1Q16/ Net Income 198.3 44.7 343.6% 61.4 222.7% (+) Taxes (92.9) 46.6-299.3% 6.8-1456.2% (+) Depreciation and Amortization 56.1 52.3 7.3% 57.2-2.0% (+) Financial Expense 42.3 33.0 28.1% 51.7-18.2% (-) Financial Income (31.9) (32.3) -1.2% (31.1) 2.8% EBITDA 171.8 144.2 19.1% 146.1 17.6% EBITDA Margin 37.8% 35.9% 193bps 31.4% 638bps Non-cash Stock Option Plan Expense 3.7 10.8-65.6% (0.5) -786.5% Interest and fine on late payment of health plans 12.8 11.4 12.8% 11.7 9.5% Adjusted EBITDA 188.3 166.4 13.2% 157.3 19.8% Adjusted EBITDA Margin 41.4% 41.3% 6bps 33.8% 761bps Our consolidated Adjusted EBITDA grew 13.2% y/y reaching R$188.3 million in 1Q16 (+19.7% q/q). This performance is the result of our operational efforts related to costs and administrative expenses reductions and also due to the tax service reduction with the transfer of 3 subsidiaries to Barueri. Our consolidated Adjusted EBITDA margin reached 41.4% in 1Q16 which represents a stability when compared with 1Q15 (+7.6bps q/q), even with an important increase in Bad debts line. Adjusted EBITDA (R$ MM) 1,2 (1) EBITDA and Adjusted EBITDA are presented because management believes that they are significant indicators of financial performance. According to the IFRS, EBITDA and Adjusted EBITDA are not indicators of financial performance and shall not be considered as an alternative to net profit, operational performance, operating cash flow, or as a liquidity indicator. (2) EBITDA and Adjusted EBITDA consist of net income before income tax and social contribution, financial income, financial expense, and depreciation and amortization. Other adjustments include items such as spending on acquisitions and associations; costs of corporate restructuring and operational provisions for stock option plan; interest and penalties on late fees; and other non-cash adjustments. 13
6 Adjusted Earnings Net Income (Loss) (R$ MM) 1Q16 1Q15 1Q16/ Consolidated Net Income (Loss) 198.3 44.7 343.6% 61.4 222.7% Our consolidated net income reached R$198.3 million in 1Q16, reflecting a 343.6% y/y increase (+222.9% q/q). This significant result was directly impacted by the net effect of the positive income tax constitution and social contribution taxes of R$137.7 million, result of the tax bases review of certain intangible assets related to historical transactions conducted by the Company and supported by tax experts. CONSOLIDATED NET (LOSS) INCOME (R$ MM) 7 Amortization Amortization 1Q16 1Q15 1Q16/ Amortization Clients Relationship 26.5 25.4 4.4% 26.2 1.4% Goodwill Amortization 57.4 52.5 9.3% 52.5 9.3% Portfolio Amortization 16.7 20.5-18.7% 17.5-4.4% Amortization Summary Income Fiscal Adjustments to Amount 1Q16 Tax Statement benefit net income Amortization Clients Relationship Yes No 26.5 9.0 17.5 Goodwill amortization No Yes 57.4 19.5 19.5 Portfolio Amortization Yes Yes 16.7 5.7 11.0 Amortization Schedule 2016 2017 2018 2019 2020 2021 2022 2023 2024 Clients Relationship 106.2 104.3 95.8 90.6 53.1 0.8 0.8 0.8 0.5 Goodwill 226.3 224.7 84.5 5.8 1.0 0.8 0.3 - - Portfolio Acquisition 59.0 41.7 34.4 16.8 11.6 5.3 2.4 0.9-14
8 Capital Expenditures Capex (R$ MM) 1Q16 1Q15 1Q16/ Capex in IT 18.4 16.6 10.8% 28.7-35.9% Other Capex 8.9 5.2 72.5% 4.9 81.3% Right Assignment Agreeement / Exclusivity 4.5 16.0-71.9% - N.A. TOTAL 31.9 37.8-15.7% 33.7-5.3% Our total Capex in IT reached R$18.4 million in 1Q16, mainly due to investments in the new IT platform and operational systems improvements. The fixed assets Capex is R$8.9 million and reflects the purchase of new equipments and construction renovations mainly regarding the three associated companies that were transferred to Barueri. The R$4.5 million refers to the Exclusivity Agreement renewed between the Company and the APM (São Paulo Physician s Association) to provide stipulator or contractor services for health and dental care plans contracts with the participation of any health care plan operator. The length of the new agreement is 4 years. 9 Capital Structure Capital Structure (R$ MM) 1Q16 2015 Var. 1Q16/2015 Current Debt 334.6 50.9 557.5% Long Term Debt (1) 439.5 732.2-40.0% TOTAL 774.1 783.1-1.2% Cash and cash equivalents (2) 421.4 366.4 15.0% TOTAL NET DEBT 352.7 416.7-15.4% (1) Includes acquisition payables (2) It does not include the investment retained as a guaranteed asset in the direct subsidiary Qualicorp Administradora de Benefícios S.A., and in the indirect subsidiaries Aliança Administradora de Benefícios de Saúde S.A and CRC/Gama, according to the 33rd normative instruction by the ANS, from October 5, 2009 Our Net Debt decreased -15.4% when compared to the end of 2015 mainly due to a higher level of Cash and Cash Equivalents. 15
10 Return on Investments We closed 1Q16 with 38.3% ROIC, showing an increase versus the 37.1% reported last quarter. However it is important to mention that the 3Q14 results were directly impacted by the positive effect of retroactive PIS/COFINS recognition. ROIC is based on the last twelve months, so the exclusion of 3Q14 from the base was the cause of this annual Return reduction Investment from 3Q15 on. 1Q16 3Q15 2Q15 1Q15 Invested Capital Fixed Asset 2,498,851 2,523,079 2,546,741 2,567,948 2,596,529 Working Capital (116,240) (143,986) (106,787) (74,960) (100,355) TOTAL 2,382,611 2,379,093 2,439,954 2,492,988 2,496,174 (-) Intangible - Goodwill (LBO) 924,767 924,767 924,766 924,766 924,766 (-) Intangible - Client Relationship (LBO) 346,710 366,335 385,960 405,584 425,210 Adjusted Invested Capital 1,111,134 1,087,991 1,129,228 1,162,638 1,146,198 NOPAT Adjusted EBITDA 188,334 157,266 186,104 166,433 166,364 EBIT 132,239 100,044 130,860 109,308 114,101 (+) Ammortization (43,235) (43,881) (44,152) (47,595) (45,954) EBIT adjusted 175,474 143,924 175,012 156,903 160,055 (-) taxes (34%) (59,661) (48,934) (59,504) (53,347) (54,419) NOPAT 115,813 94,990 115,508 103,556 105,636 ROIC (12m) 38.3% 37.1% 36.7% 41.9% 41.2% We closed 1Q16 with a R$96.3 million operating cash flow, influenced by a strong operational result combined with working capital increase (during the first quarter of the year we have the cash effect of Profit Sharing Program and some other seasonal factors) and with interest paid (semiannual basis). It is important to mention that this was not a relevant effect in 1Q15 due to the PIS/COFINS credit offset. After Capex, the cash generation remained strong at R$64 million. The financial cash flow was slightly affected by the shares by back. The Company remains confident in a operating cash flow expansion supported by its organic growth combined with operating improvements. Cash Flow 1Q16 2015 3Q15 2Q15 1Q15 Income adjusted by non-cash effects 195,880 730,413 160,644 216,813 175,045 177,911 Working Capital (32,470) 33,971 28,775 9,651 9,500 (13,955) Interest paid (43,236) (70,409) - (33,189) (4,117) (33,103) Dividends received/paid - (12,026) (3,234) (6,343) (2,449) - Income tax and social contribution paid (23,839) (111,770) (38,749) (34,490) (23,821) (14,710) Cash Flow from Operating Activities 96,335 570,179 147,436 152,442 154,158 116,143 Capex (TI) (22,608) (103,654) (31,795) (29,660) (21,299) (20,900) PP&E (9,529) (14,720) (4,444) (2,768) (1,260) (6,248) Intangible (M&A + Portfolio + Deals) (187) (76,200) (376) (60,029) (15,608) (187) Cash Flow from Investment Activities (32,324) (194,574) (36,615) (92,457) (38,167) (27,335) Cash Flow from Operating Activities (-) Capex 64,011 375,605 110,821 59,985 115,991 88,808 Cash Flow from Financing Activities (6,979) (548,362) (403,850) 30 (138,540) (6,002) Other Investments - (80,000) - - (80,000) - Total Cash Flow 57,032 (252,757) (293,029) 60,015 (102,549) 82,806 16
Forward-looking statements This release may contain forward-looking statements concerning the business outlook. These statements are based exclusively on the expectations of the management of Qualicorp S.A. regarding the prospects of the business and its continued ability to access capital markets to finance its business plan. These forward-looking statements are highly sensitive to changes in the capital markets, government regulations, competitive pressures, the performance of the industry and the Brazilian economy and other factors, as well as to the risk factors highlighted in documents previously filed by Qualicorp S.A., and therefore are subject to change without prior notice 17
Appendix I Income Statement INCOME STATEMENT (R$ MM) 1Q16 1Q15 1Q16/ Net Operating Revenue 454.8 402.3 13.0% 465.3-2.2% Cost of Services (114.3) (104.0) 10.0% (122.8) -6.9% Gross Profit 340.5 298.4 14.1% 342.4-0.6% Operating Income (expenses) (224.7) (206.4) 8.9% (253.5) -11.4% Administrative expenses (115.3) (113.3) 1.8% (122.8) -6.1% Selling expenses (80.6) (68.4) 17.7% (107.4) -25.0% Losses on uncollectible receivables (30.1) (21.2) 42.0% (31.1) -3.5% Other operating income (expenses), net 1.3 (3.5) N.A. 7.8-83.9% Income From Operations Before Financial Income (Expenses) 115.7 92.0 25.8% 88.9 30.2% Financial income 31.9 32.3-1.2% 31.1 2.8% Financial expenses (42.3) (33.0) 28.1% (51.7) -18.2% Income Before Income Tax Social Contribution 105.4 91.3 15.4% 68.3 54.3% INCOME TAX AND SOCIAL CONTRIBUTION 92.9 (46.6) N.A. (6.9) N.A. Current (19.3) (28.7) -73.9% (7.5) 156.9% Deferred 112.2 (17.9) N.A. 0.6 N.A. NET (LOSS) INCOME FOR PERIOD 198.3 44.7 343.6% 61.4 222.7% Attributable to Controlling interest 194.1 41.5 39.1% 57.7 236.4% Noncontrolling interest 4.1 3.2 15.8% 3.7 11.0% Controlling interest 198.3 44.7 343.6% 61.4 222.7% 18
Appendix II Balance Sheet ASSETS (R$ MM) 1Q16 2015 1Q16/2015 CURRENT ASSETS Cash and cash equivalents 342.8 285.8 20.0% Short-term investments 120.2 121.0-0.6% Trade receivables 163.8 148.3 10.4% Other assets 176.8 155.9 13.4% Other financial assets 160.2 139.9 14.5% Other non-financial assets 16.6 16.0 4.1% Total current assets 803.6 710.9 13.0% NONCURRENT ASSETS Long-term assets Income tax and social contribution 239.2 136.8 74.9% Related Parties 3.8 3.8 0.1% Other assets 55.5 59.8-7.2% Other financial assets 42.4 44.7-5.0% Other non financial assets 13.0 15.1-13.8% Total long-term assets 298.6 200.4 49.0% Investments 0.3 0.3 0.0% Property, plant and equipment 76.1 70.3 8.2% Intangible assets Goodwill 1,624.2 1,624.2 0.0% Others intangible assets 798.3 828.3-3.6% Total noncurrent assets 2,797.4 2,723.5 2.7% TOTAL ASSETS 3,601.0 3,434.4 4.9% LIABILITIES & SHAREHOLDERS EQUITY (R$ MM) 1Q16 2015 1Q16/2015 CURRENT LIABILITIES Debentures 311.8 22.9 1262.0% Loans and Financing 0.0 5.8-100.0% Taxes payable 37.6 34.1 10.3% Technical Reserves 50.0 24.9 100.6% Premiums to be transferred 127.3 110.0 15.7% Financial transfers payable 14.0 13.4 4.5% Payroll and related taxes 37.0 62.6-40.9% Transferable prepayments 57.8 72.9-20.7% Related parties 54.0 54.0 0.0% Other payables 79.2 76.3 3.8% Total current liabilities 768.6 476.8 61.2% NONCURRENT LIABILITIES Debentures 219.2 519.0-57.8% Income tax and social contribution 6.9 7.0-1.3% Deferred income tax and social contribution 154.2 162.6-5.2% Provision for risks 48.2 61.9-22.1% Granted options on no controlling interest 210.5 203.4-32.7% Other payables 9.8 9.8-32.7% Total noncurrent liabilities 648.8 963.7-32.7% EQUITY Capital 1,525.1 1,537.2-0.8% Capital reserves 128.3 124.6 3.0% Earnings reserves 182.9 182.9 0.0% Asset vaaccumulated losses 194.1 0.0 N.A. Asset valuation adjustment 145.0 145.0 0.0% Total equity majority shareholder 2,175.5 1,989.9 9.3% Noncontrolling interest in subsidiaries 8.2 4.0 102.7% Total equity 2,183.7 1,993.9 9.5% TOTAL LIABILITIES AND EQUITY 3,601.0 3,434.4 4.9% 19
Appendix III Cash Flow Statement STATEMENTS OF CASH FLOWS (R$ MM) 1Q16 1Q15 CASH FLOW FROM OPERATING ACTIVITIES Profit (losses) before income tax and social contribution 105.4 91.3 15.4% Adjustments 90.5 86.6 4.5% Depreciation and Amortization 56.1 52.3 7.3% Impairment 1.3 - N.A. Result from fixed Assets and Intangibles - 0.1 N.A. Stock Option Program 3.7 10.8-65.6% Financial Expenses 30.1 21.4 40.3% Provision for Risks (0.6) 2.1 N.A. Adjusted profit (loss) 195.9 177.9 10.1% Origin Cash provided by operating activities (32.5) (14.0) 132.7% Cash provided by operating activities 163.4 164.0-0.3% Interest paid on debentures (43.2) (33.1) 30.6% Income tax and social contribution paid (23.8) (14.7) 62.1% Net cash provided by operating activities 96.3 116.1-17.1% CASH FLO W FRO M INVESTING ACTIVITIES Investments in intangible assets (22.8) (21.1) 8.1% Purchase of property, plant and equipment (9.5) (6.2) 52.5% Net cash used in investing activities (32.3) (27.3) 18.3% CASH FLO W FRO M FINANCING ACTIVITIES Amount paid in loans and financing (5.8) (7.9) -26.3% Buyback - Treasury (12.2) - N.A. Amounts paid upon issuance of debentures (300.0) - N.A. Amounts received upon issuance of debentures 311.0 - N.A. Capital Increase (0.0) 1.9 N.A. Cash provided by (used in) financing activities (7.0) (6.0) 16.3% INCREASE IN CASH AND CASH EQUIVALENTS, NET 57.0 82.8-31.1% Cash and cash equivalents at beginning of period 285.8 538.5-46.9% Cash and cash equivalents at end of period 342.8 621.4-44.8% 20