1
Teleconference1st Quarter 2007 Results
2
Disclaimer
This document contains “forward-looking statements”. Forward-looking statements may be
identified by words such as “expects”, “plans”, “believes”, “seeks”, “estimates” or words with
similar meaning. The statements contained in this presentation about the Company's forward-
looking statements, including business prospects, operating and financial projections and
potential growth are merely forecasts based on management’s expectations in relation to its
future performance. Such estimates are highly dependent on market behavior, on Brazil’s
economic performance and on industry and international market conditions. As such, they are
subject to changes.
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Overview
The 1st Quarter 2007 brought consistent results, with solid revenue, EBITDA and net profit growth;
The search for volume growth reflected on the increase of 34.7% on requisitions processed in the Outpatient & Inpatient operations;
The private healthcare market keeps its growth pace, specially over the last three years and this phenomenon is being mostly perceived on the behavior of our standard brands;
This evolution brings many challenges to the medical diagnostic market. DASA’s segmentation strategy, multi-product approach, scale and productivity gains, along with our management model, assures the competitive position to capture market opportunities.
Private Health Plans – Number of lives covered (million R$)
Growth% Change
2005 2006 1T07
Outpatient & Inpatient Revenue 17.4% 16.0% 21.4%
Volume (# of Requisitions) 14.5% 16.5% 34.7%
Price (R$/Requisitions) 2.6% -0.5% -9.8%
5.1%
Source: ANS
31.1
31.2 31.7
33.4
35.1
1.7
36.9
1.8
0.10.5
2001 2002 2003 2004 2005 2006
CAGR = 2.4%
1.7
Lives added during the year
# of Lives at the beginning
4
Gross Operating Revenue
Gross ProfitGross Margin
EBITDA
R$ million
EBITDA Margin
EBITDA adjustedAdjusted EBITDA Margin
Net Income
Net Margin
Net Debt
1Q06
25.6%
(5.0)
-3.3%
+ 22.8%
+ 21.7%
+ 91.3%
+ 18.2%
N.A.
39.4
206.2
43.4
23.0%
46.6
24.7%
49.0
25.9%
167.9
53.0
34.4%
64.5
34.2%
22.7
14.7%
Var. %1Q07
First Quarter 2007 – Highlights
(61.3) (2.7) N.A.
Same Units Sales’ growth acceleration to 9.5% y-o-y;
Acceleration in the organic growth, with 9 new standard PSC opened;
Standard Brands boosting volume growth of 34.7% in the Outpatient-Inpatient market;
Lab-to-Lab business kept the strong growth;
Adjusted Ebitda Margin in line with 2006 figures.
During 1Q07, DASA accounted on the Income Tax and Social Contribution line R$ 41.0 million of one time event adjustments (deferred income tax, net of permanent additions). Without this extraordinary adjust, net profit would have been R$ 8.0 million.
1Q07 Remarks
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Gross Revenues (R$ million) Growth Drivers (Excludes Lab-to-lab)
Gross Operating Revenues Increase of 22,8% on Gross Revenues, totaling R$ 206,2 million over the quarter, led by the
organic growth (expansion of lab-to-lab operations and same units growth), opening of new PSCs and acquisitions done during 2006.
Growth kept being fueled by volume increases (+34,7%). The decrease of 9,8% on average revenue per requisition results from the lower average ticket of acquired companies, which mainly includes clinical analysis, the rise of standard brands in São Paulo and Rio de Janeiro as well as agreements with key payers aiming to get additional volumes in exchange of lower prices;
Same Units Growth accelerated to 9,5% on 1Q07.
206.2167.9
729.7
323.8399.8
491.4576.9
2002 2003 2004 2005 2006 1Q06 1Q07
CAGR = 22.5%
22.8%3.3
3.94.6
5.2
1.4 1.8
114.3
103.097.4
102.0106.8 110.4109.9
2002 2003 2004 2005 2006 1T06 1T07
AverageRevenueper requisitionRequisitions
1.4 1.8
114.3
97.4
2002 2003 2004 2005 2006 1T06 1T07
AverageRevenueper requisitionRequisitions
6.1
66
Operating Revenue per Service Line
Imaging services kept expanding, posting 18.1% growth, however the mix from acquired companies during 2006 accelerated clinical analysis revenue growth, thus diluting by 1.0 p.p. the participation of imaging services as a percentage of net revenues;
The lab to lab activity registered a growth of 40.5%, as a result of price strategy, new exams to the main client–labs and geographic expansion.
Revenue per Service line (% of the Gross Revenue)
Revenue – Lab to Lab (R$ million)
12.2
60.4
40.5
27.2
18.0 17.1
2003 2004 2005 2006 1Q06 1Q07
CAGR = 49.7%
40.5%
12.2
60.4
40.5
27.2
18.0 17.1
2003 2004 2005 2006 1Q06 1Q07
CAGR = 49.7%
40.5%
Clinical Analysis Imaging Services
119.5
58.9
69.5
96.8
1Q06 1Q07
167.8
206.2
18.1%
23.5%
17.1
22.8%
63.2%
36.8%
37.8%
62.2%
12.2
40.5 %
. Alvaro Lab.Clinical Analysis Imaging Services
119.5
58.9
69.5
96.8
1Q06 1Q07
167.8
206.2
18.1%
23.5%
17.1
22.8%
63.2%
36.8%
37.8%
62.2%
12.2
40.5 %
.
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Gross Profit and CostsThe gross margin registered a decrease of 0.2 p.p. in the quarter, mainly due to higher
depreciation and amortization costs. “Cash-Cogs” gained 0.3 p.p., due to the reduction of personnel costs;
The cost of materials increased as a consequence of the growth on the lab to lab operations, where this line is more representative than in the outpatient & inpatient activities;
In Services and Utilities, the increase of 0.6 p.p. reflects higher costs related to new PSCs opened (25) and new agendas for imaging tests.
“Cash-Cogs” Evolution (1Q06 vs. 1Q07) “Cash-Cogs” – 1T07 (% of Total Cost)
Personnel
28.7%
Materials
26.5%
Services and
Utilities
33.8%
General Expenses
1.0%
Depreciation and
Amortization
10.0%
“Cash-Cogs”1Q06
Personnel Materials ServicesandUtilities
General Expenses
59.5%59.2%
1.2
0.3
0.7 0.0
“Cash-Cogs”1Q071Q06
Materials ServicesandUtilities
General Expenses
59.5%59.2%
1.2
0.3
0.6 0.0
1Q07
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Operating ExpensesThe nominal decrease in Operating Expenses is a consequence of the reduction in General
and Administrative and Financial expenses that provided a gain of 10.6 percentage points as a share of net revenue;
The decrease in General and Administrative expenses (G&A) is a result of lower non-recurring expenses that, in the 1Q06, included R$ 16.7 million of capital market operations related expenses;
The parent Company G&A expenses remained in the same level as of the previous quarters. The increase in the subsidiaries’ G&A expenses refers to the four companies acquired from June 2006 on. 1Q07 1Q06 1Q07 1Q06 %
Dillution(p.p)
General and Administratives (36.9) (42.1) 19.5% 27,3% -12.2% -7.7Net Financial (2.4) (6.4) 1.3% 4,1% -62.2% -2.9Goodwill Amortization (9.4) (7.6) 5.0% 4,9% 23.9% 0.0Other Operating Revenues/ Expenses 0.3 0.2 -0.2% -0,1% 50.4% 0.0OperatingExpenses (48.4) (55.8) 25.6% 36,3% -13.2% -10.6
In R$ Million % of Net Revenues 1Q07 vs1Q06
1Q07 1Q06 1Q07 1Q06 %Dillution(p.p)
General and Administratives (36.9) (42.1) 19.5% 27,3% -12.2% -7.7Net Financial (2.4) (6.4) 1.3% 4,1% -62.2% -2.9Goodwill Amortization (9.4) (7.6) 5.0% 4,9% 23.9% 0.0Other Operating Revenues/ Expenses 0.3 0.2 -0.2% -0,1% 50.4% 0.0OperatingExpenses (48.4) (55.8) 25.6% 36,3% -13.2% -10.6
In R$ Million % of Net Revenues 1Q07 vs1Q06
1Q07 % Net Rev. 4Q06 % Net Rev. 3Q06 % Net Rev. 2Q06 % Net Rev. 1Q06 % Net Rev.
General and Administrative (36.9) -19.5% (38.2) -21.8% (33.8) -18.8% (37.0) -23.0% (42.1) -27.3%
Parent Company (20.7) -11.0% (21.5) -12.2% (21.7) -12.0% (21.1) -13.1% (18.3) -11.9%
Non Recurring Expenses (3.2) -1.7% (4.1) -2.3% (2.2) -1.2% (7.4) -4.6% (16.7) -10.9%
Profit Sharing Program (1.7) -0.9% (0.7) -0.4% (1.7) -0.9% (1.7) -1.0% (1.4) -0.9%
Depreciation (3.0) -1.6% (3.9) -2.2% (2.7) -1.5% (3.1) -1.9% (2.2) -1.4%Subsidiaries (8.4) -4.4% (8.1) -4.6% (5.7) -3.1% (3.7) -2.3% (3.5) -2.3%
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EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA (R$ million)
The strong growth in the 1Q07 Ebitda (91.3%) derives from the revenue increase, from expense dilution and from the significant decrease in non-recurring expenses;
Even with the increase of the lab-to-lab activities (that currently has a lower margin), of the recently opened patience service centers yet under ramp-up and ongoing synergies, the 1Q07 Adjusted Ebitda margin reached 24.7%. The Adjusted Ebitda increased by 18.2%.
EBITDA
Non-Recurring Expenses
Adjusted EBITDA
2002 2003 2004 2005 2006 1Q06 1Q07EBITDA Margin 21.8% 23.1% 18.9% 22.5% 20.5% 14.7% 23.0%
Adjusted EBITDA Margin 27.1% 27.3% 27.5% 25.7% 25.0% 25.6% 24.7%
2002 2003 2004 2005 200621.8% 23.1% 18.9% 22.5% 20.5%27.1% 27.3% 27.5% 25.7% 25.0%
2002 2003 2004 2005 200621.8% 23.1% 18.9% 22.5% 20.5%27.1% 27.3% 27.5% 25.7% 25.0%
15.0
15.5
15.338.5
16.9
30.4
16.73.2
43.422.7
137.4
47.264.9
84.1 84.6
119.062.2
80.4
99.4
123.1
135.9
167.8
39.446.6
2001 2002 2003 2004 2005 2006 1Q06 1Q07
18.2%
CAGR = 22.0%
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During the first quarter of this year R$ 34.4 million were invested;
Most of the resources were invested in the acquisition of imaging equipments, construction and refurbishment of PSCs and information technology.
Capex
Investments (R$ million)
Pre-operatingInvestments
9,7%
Medical Equipment
47,3%
Information Technology
10,4%
Opening and Refurbishmentof PSCs31,9%
Other0,7%
22.0
29.6
40.0
65.0 71.0107.9
28.6
1.4 4.8
2003 2004 2005 2006 1Q06 1Q07
Parent Co. Subsidiaries
129.9
30.0 34.4
Investments break-down (1Q07)
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The additional investment needs for the first quarter consumed our cash generation and demanded additional resources from cash and equivalents;
The company’s net debt increased to R$ 61.3 million.
Cash Flow and Debt
Net Debt Evolution (R$ million)
(53.8)
4Q06Net Debt
(61.3)
CashGeneration
26.9
(34.4)
1Q07Net Debt
Cash Flow 1Q07
EBITDA 43.4
Taxes (7.5)
Net Financial Expenses (2.4)
Working Capital and Other(6.6)
26.9Cash Flow Generated
Cash Flow Analysis (R$ million)
Capex
Cash and Cash Equivalents 327.3
Debt – Short Term (63.4)
(325.2)Debt – Long Term
(61.3)Net Debt
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Expansion
The Company was fully prepared to absorb the 34.7% growth in the requisitions’ volume in the outpatient-inpatient market and of 49.1% in the volume on the lab-to-lab business. The only investments made were on the new Central Lab in São José dos Pinhais, the update of the hematology lab and the adjustments in the Cascavel Esoteric Lab.
However, in the organic growth front, we are increasing the number of PSCs to be opened in 2007.
On the acquisitions side, we are still confident that the goals set for 2007 will be reached. Currently, we have been favoring acquisitions in regions where DASA is already present, in order to consolidate our presence and market leadership and maximize the synergy potential.
Acquisition Strategy
Organic Strategy
ORGANIC GROWTH - 2007
Standard
Mega Total
Opened* 09 00 09
To be opened 16 08 24
New Schedule 25 08 33
Former Schedule
15 08 23
* Up to 03.31.2007