First Quarter 2023 Results

First Quarter 2023 Results

São Paulo, May 10th, 2023. Qualicorp Consultoria e Corretora de Seguros S.A. ("Quali" or "Company") (B3: QUAL3), a leading full-service healthcare benefits broker, administrator, and health management services provider in Brazil, announces its consolidated results for the first quarter of 2023 (1Q23). 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 figures as well as their historical series are available in MS Excel format on the website ri.qualicorp.com.br.

Highlights:

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Free Cash Flow: R$140.4 million in 1Q23, +20.3% vs. 4Q22 and 7x higher than 1Q22, with cash commissions of R$64.1 million in 1Q23 (-8.3% vs. 4Q22). ROIC of 16.4% in 1Q23.

Lives Portfolio: 961.5 thousand Affinity Health lives in 1Q23 (-4.3% vs. 4Q22), with organic gross adds of 63.6k lives and 107.2k cancellations. SME portfolio of 88k lives in 1Q23 (+5.3% vs. 4Q22).

Net Revenue: R$457.3 million in 1Q23 (+0.9% vs. 4Q22 and -8.9% vs. 1Q22).

Adjusted EBITDA: R$210.3 million in 1Q23 (-2.4% vs. 4Q22), with 46.0% margin (-160 bps vs. 4Q22).

Net Income: R$16.7 million in 1Q23 (-77.5% vs. 1Q22).

Net Debt of R$1.4 billion in 1Q23, or 1.59x Adjusted EBITDA LTM, vs. 1.60x in 4Q22 and 1.41x in 1Q22.

Key Indicators (R$ MN)

1Q23

1Q22

YoY

4Q22

QoQ

Affinity Portfolio (thous. lives)

2,337.0

2,583.7

-9.6%

2,420.8

-3.5%

Affinity Health (thous. lives)

961.5

1,153.1

-16.6%

1,005.1

-4.3%

Gross Adds - organic (thous. lives)

63.6

115.2

-44.8%

78.2

-18.7%

Churn (thous. lives)

(107.2)

(131.2)

-18.2%

(135.9)

-21.1%

Net Revenue

457.3

502.2

-8.9%

453.1

0.9%

Adjusted EBITDA1

210.3

252.8

-16.8%

215.5

-2.4%

Adjusted EBITDA Margin

46.0%

50.3%

-436 bps

47.6%

-158 bps

Net Income

16.7

74.1

-77.5%

(79.9)

NM

Net Debt

1,418.4

1,439.6

-1.5%

1,496.3

-5.2%

Net Debt / Adj. EBITDA LTM

1.59x

1.41x

0.18x

1.60x

-0.01x

Free Cash Flow

140.4

20.1

599.5%

116.8

20.3%

ROIC

16.4%

26.2%

-9.8 p.p.

18.6%

-217 bps

2

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Management Highlights

Recent data published at ANS' Yearbook show the highest historical MLR levels and operating losses for the Brazilian supplementary healthcare sector in 2022, a year in which consolidated HMOs' revenues declined in nominal terms. Add to this a contractionary economic environment of high interest rates, and the sector faces today one of the most challenging scenarios in its history.

In this context, Quali's management has acted within a more conservative strategic direction, aiming to prioritize a better capital allocation in the short term, and the first quarter of 2023 results corroborate this strategy. Despite all macro and microeconomic challenges presented, the Company generated R$140 million of free cash flow - the best in 8 quarters - through strict expense control, improvements in working capital and rationalization of investments, and reduced its net debt by 5%. It is also important to note that the credit rating of our debentures was recently reaffirmed at brAAA by S&P agency.

From an operational standpoint we presented a reduction in our beneficiary base (-4% QoQ in the Affinity Health Lives), as a reflection of the lower sales and the high cancellation levels, and we continued to work with lower take-rate due to the high medical loss ratios in the sector. We partially offset the impact of these factors by increasing average ticket, in a way that revenues were relatively stable in 1Q23, and by controlling costs and fixed expenses our Adjusted EBITDA stood at R$210 million, only 2% lower than the previous quarter.

In the end of April, we held our General Meeting with the participation of shareholders representing 72% of Quali's capital stock, when, among other matters, were approved dividends in the minimum mandatory of R$22 million over 2022 results, the expansion of the Audit, Risks and Compliance Committee's scope of competence, and other improvements to the Company's Bylaws, in line with the best governance practices in the market.

From a commercial standpoint, Quali and the Ministry of Justice reaffirmed an agreement to offer healthcare plan to public servants at the beginning of April. We also highlight the winning of the international IF Design Award 2023 in the branding category for the new Qualicorp brand. And in line with our current strategic focus and the digital channels improvement, we decided to terminate the activities of our physical sales channel, the Qualistores, which was operating in a pilot project since late 2021.

Throughout 2023, we will continue to dedicate ourselves to expenses control, with discipline in capital allocation, to face the current market conjuncture in the best way possible. At the same time, Quali will continue to seek medium- and long-term value generation levers, in order to reinforce the competitive differentials it has always had as a leader in the benefits administration market. And, together with its partners, it will continue to work towards the sector's sustainability.

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Lives Portfolio

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Disclaimer

Qualicorp Consultoria e Corretora de Seguros SA published this content on 10 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2023 22:11:01 UTC.