Oncoclinicas do Brasil Servicos Medicos SA
BOVESPA:ONCO3
Earnings Call Analysis
Q3-2023 Analysis
Oncoclinicas do Brasil Servicos Medicos SA
Oncoclinicas has reported a remarkable quarter, with organic revenue growth exceeding 20% and net revenue increasing by 23.4% compared to the same period last year, reaching BRL 1.5 billion. The net profit surged more than 2.5 times year-over-year, indicating robust profitability and expansion.
The third-quarter EBITDA for the company rose to BRL 269 million with an impressive margin of 19.2%, which is 260 basis points higher than the previous year. The adjusted EBITDA margin saw even greater expansion, improving by 500 basis points year-over-year to reach BRL 814 million, signaling significant operational efficiency and an 87% escalation from last year's figures.
Although debt and leverage have increased due to acquisitions, the adjusted leverage stands at 2.8 times, excluding potential future earn-out payments. If these future payments are realized, they will correlate with an increase in EBITDA, hinting at a prudent approach to leveraging for growth while maintaining a manageable debt profile.
Oncoclinicas exhibited strong cash generation from operations, totaling BRL 322 million for the quarter. This allowed for accelerated capital expenditures predominantly directed towards expansion projects. The company managed to convert 37% of EBITDA into free cash flow in the first nine months of the year, demonstrating a substantial improvement from previous negative cash generations and highlighting efficiency in working capital management.
With its focus on brownfields and clinics, the company has emphasized an accretive growth model, using funds raised through a recent follow-on offering amounting to BRL 200 million directly for these expansion efforts. This strategy will likely contribute to more rapid revenue increases and a broader service offering to patients.
The company's organic growth rate of 20% to 25% surpasses the general market growth for oncological care, which is around 15% year-over-year. This indicates that Oncoclinicas has been successfully gaining market share, boosted by strategic expansions and value-add programs focused on patient care. Furthermore, the company expects to maintain a consistent average ticket size in future quarters, adhering to historical trends.
Regarding taxes, Oncoclinicas does not provide specific estimates for 2024 and 2025. Nevertheless, the company has conveyed a strategy focused on rationalizing the effective tax rate, which reflects in its growing profitability and net earnings. The company's dedication to optimally structuring its tax approach contributes to overall value creation, despite the lack of precise guidance.
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Good morning, and welcome to Oncoclinicas' Audio Conference Earnings Call. [Operator Instructions] This audio conference is being recorded. I would like to, at this moment, pass the floor to Dr. Bruno Ferrari, Founder and CEO of the Oncoclínicas Group. Please, Dr. Bruno Ferrari, you have the floor.
Good afternoon, everyone, and thank you so much for your presence in our teleconference of results. During the first quarter of 2023, we continued to deliver operational and financial results that are robust. I would like to start by highlighting our gross revenue. We grew 23% in the year-over-year, reaching BRL 1.5 billion. In a sequential base, in other words, comparing it to the second quarter of 2023, the advance was 4%, a highlight to the fact that these growth rates are completely organic at the same base -- at the same unit base. Once again, this growth of revenue was well distributed between the increase of procedures, which was 14.4% in the yearly comparison and the expansion of the average ticket. This reinforces the sustainability of our growth and the resilience of oncological treatment.
In the third quarter, we carried out 162,000 procedures. This volume, that is so robust, reflects a series of initiatives that the company continues to put into practice, such as strong action in the medical relationship, retaining physicians in an organic way and attracting them and more participation in the journey of our patients and are coming together closer to the health plans offering solutions that can supply their needs, mainly for the integrated management of oncological care and cost effectiveness. So we reached BRL 269 million with around 19.2%. This expansion is up 2.6 percentage points higher than what we observed in the same quarter of 2022. This is the fruit not only of the growth of the company, which has been resulting in operational leveraging, but also of the successful execution of the acquisitions, with gains in the -- gains and savings and costs in the second quarter of 2022.
It's important to remember that this EBITDA does not include adjustments or add-backs. And the expression of around BRL 14 million from noncash operations that are completely from accounting from the incentive long-term plan of the company. When we annualize the EBITDA of the third quarter of this year, we've gone past the mark of BRL 1 billion.
I would also like to mention very quickly our impressive advances in the reduction of expenses in the company for the last 9 months, staying very close to the level of 14% of operational costs, cash over growth revenue result of the efficiency of the company and the operational team and the financial team in capturing the synergies from various acquisitions that Oncoclinicas has concluded and integrated throughout the last year. In other words, our gains in margins have been coming from the growth of volume, gains in scale and more operational efficiency, which we've had in-house.
In relation to net profit, we recorded BRL 149 million in the third quarter of 2023, more than 2.5x the profit reported in the same period from last year. This is our fifth consecutive quarter with net profit. This profit was strongly impacted by relevant advances, which we had in our agenda of reorganizations in our society -- in our shareholder structure, leading us to recognition of a fiscal asset deferred that will allow us to operate with a higher -- with a better optimized income tax when we reached the -- we reached net profit in the third quarter of BRL 163 million in the last 12 months. The net profit with the same criteria was BRL 362 million.
Still about the financial indicators. Another highlight was a quarter with very strong cash -- operational cash generation, reaching BRL 322 million. This is a record for the third quarter of the company, and it happens even in the context of a scenario that is still adverse to the health plan sector. This was only possible because of our performance, our operational performance and because of a very effective management of our working capital.
Going on to the strategies for the quarter, I would like to highlight 2 relevant happenings. The first of them is the -- the partnership that we signed with Unimed in September, through which Oncoclínicas will now coordinate the entire journey of oncological treatment for more than 200,000 beneficiaries. This transaction shows 1 more health operator or health plan that is joining forces with Oncoclinicas to have a cost-effective and sustainable solutions for long-term oncological treatment. It's important to remember that we are still under analysis for approval of CADE.
In relation to the third quarter before the disclosure of these earnings, I would like to mention 2 important realizations. First of all, the acquisition of 25% of additional participation in social campus so far the joint venture dedicated to oncological outpatient care existing in the company and Nacional Unimed in the cities of Sao Paulo, Brazil and Salvador. These acquisitions, once again, once they are concluded, will allow the company to reduce even more the participation -- minority participation in its results, in line with our strategic goals. The closings of these acquisitions are also subject to the approval of CADE.
Secondly, I would like to highlight the obtention of all approvals that we need to move forward with the partnership previously announced with the Grupo Santa in the Federal District. From now on, both companies will operate together in a model of complete care for oncological patients in hospital settings and outpatient settings.
Before passing the floor, I would like to congratulate the Oncoclínicas team once again, who has been delivering strong execution over the last quarters. And of course, I would like to thank our thousands of patients, which every day confirm and give us the privilege of taking care of their lives in the same way that we will take care of our lives.
I pass the floor now to Rodrigo Medeiros, who will give us more details on the operations and the integrations of the units acquired in each state. Rodrigo, you have the floor.
Good afternoon, everyone. Thank you so much, Bruno, for the introduction. Now we're going on to the next slide on Page 4 to the financial highlights of the quarter. In the third quarter of 2023, the company grew 23.4% in gross revenue compared to the same period of the previous year, reaching BRL 1.5 billion. I would like to highlight that this is a completely organic growth, given the fact that we are talking about the same units. It's also important to emphasize a strong expansion of 80 basis points in gross margin in the first 9 months, reaching 35.6% compared to 34.2% in the previous year. This expansion has given us efficiency in our operations and also included greater participation in the cancer centers in the mix.
On the next slide, we reported an EBITDA where we exclude the effect of the just amount of the long-term incentive plan, the amount of BRL 269 million in the quarter, an expansion of 39% in relation to the third quarter of 2022. In the first 9 months, our EBITDA was BRL 814 million, 87% higher than the previous year. Finally, in the quarter, our net profit was BRL 149 million in the third quarter of 2023, given the strong growth of our operations, of the expansion of our profitability potentialized by the gains in efficiency and the initiatives to rationalize our tax plan, which the company continues to execute.
On Slide #5, we have an update on the integrations carried out by the company and the impact that they brought throughout the last quarters through the synergies that they captured. Most of the acquisitions have already delivered the expected synergies, and Unity is in an advanced phase. It is the largest operation and the most recent one. It is composed of 35 units. The successful advance of the integration is very clear through the graph on the right, which shows that the evolution of our operational expenses as a percentage of gross revenue. In the period, a cumulative period of 2023, the level of cost over net gross revenue was 14.2% compared to 18.1% in the same period of 2022.
However, we reduced this indicator, 390 basis points. It's important to highlight 2 points here. First of all, that obviously, this does not include the synergies of costs, which appear in the gross margin. Secondly, that this indicator of 14% is the level in which the company would operate before all of the acquisitions carried out since 2021, a level that we said we would only reach in the fourth quarter of '23, which we have anticipated before that ever since the first quarter. Therefore, we are very encouraged with the speed in which the integrations have been moving, result of the expertise that the company has developed all throughout these years in acquisitions and in our flexibility of mobilizing various teams, internal teams working at the same time.
Going on to the next slide, Page 6, I would like to highlight an increase of 14% in the total of procedures, reaching 161,800 procedures in the third quarter of 2023, even in a quarter with less working days. In the first 9 months, there was an increase of 32% in the number of procedures and 8% in the average ticket, especially associated to the increase of complexity and the capacity of the company to transfer increased prices due to inflation. It's important to notice that our growth is very balanced, coming predominantly from the increase of volume of the procedures.
I pass the floor now to Cristiano Camargo, our CFO, Strategy Director and Investor Relations Director, who will give us some more details on the results of the quarter. Thank you so much.
Thank you, Rodrigo. Good afternoon to all. Once again, we had a very positive quarter for Oncoclinicas with the growth of revenue, which was organic higher than 20%, expansion of the EBITDA margin, the net profit growing more than 2.5x when we compare to the last year and operational cash generation higher than BRL 300 million.
On Slide 7, we'd like to highlight on the graph to the left, growth of 23.4% in net revenue in the third quarter of 2023 when compared to the same period of the previous year, reaching the record mark of BRL 1.5 billion. Following that, in other words, versus the second quarter of 2023, we had the expansion of more than 4%. These growth rates are organic, since the last main acquisition made by the company was only accounted for in our numbers in the third quarter of 2022. Therefore, we are making a comparison of the basis -- on the basis of the same units on the graph to the right.
In the comparison of the 9 accumulated months over the year, we see the expansion of 42% in our net -- our gross revenue. This was impacted not only by the growth of the same unit -- same unit growth, but also by the integrated operations between the respective periods. An important point to highlight is that the growth of the revenue that we report is -- comes much more from the volume of procedures than from the average tickets, which we understand to be an indicator on the quality and sustainability of this growth.
Slide #8 shows growth in net revenue, which was slightly lower than what we've verified for gross revenue because of the impact we had in the third quarter in the line of PCLD, our provision for credits with liquidation that are a bit. And -- we will get into these details in the next slide. So we still see more than 20% of growth in our net revenue year-over-year. Remembering that this is organic growth and higher than 40% in the 9 months of 2023 against 2022, as we show in the graph to the right.
Going on to Slide 9. We provisioned 3.6% of gross revenue through PCLD in this quarter, comparing that to 1.2% in the third quarter of 2022. Both of these indicators, be it 3.6% from this year or 1.6% from last year, go beyond our average historical levels, which is 1.2%, and this affects the comparison of the net revenue between periods or between years. This quarterly change is normal, as you can observe on the graph because of the role that the company applies that is more sensitive, therefore, more punitive at the same time. This -- that's why it's always more -- it's better to look at the average of a longer period of time. If we follow that logic, if we look at the 9 accumulated months of 2023, we are at 2.5% of PCLD over gross revenue, in line with the 2.2% observed ever since the IPO.
Another important factor is that from the increase observed in the PCLD, there's a concentration in receivables from our agencies, which usually accelerate payments in the fourth quarter, which leads us to believe that this is something specific and not necessarily -- doesn't indicate a trend.
On Slide #10, we highlight 40 basis points from the gross margin, reaching 35.4% in the third quarter, graph to the left and 80 basis points of expansion in the accumulated period of the year, reaching 35.6% in margin, graph to the right.
On Slide #11, the EBITDA with no adjustments or add-backs, limiting us only to eliminate the accounting effect and noncash effect of the calculation of the long-term incentive plan amount. We reached BRL 269 million in the third quarter of 2023, with a margin of 19.2% or 260 basis points higher than the same period of the previous year. In order to make the historical comparison, and for those who have been accompanying the adjusted EBITDA number, it was BRL 285 million in the quarter with a margin of 20.4%. And the accumulated comparison of the year, the company expanded 500 basis points EBITDA margin, reaching BRL 814 million, 87% higher than the same period in the previous year.
On the next slide, #12, we report our net profit, Ex-LTIP, of BRL 163 million compared to a profit of BRL 70 million in the same quarter of the previous year, mainly the fruit of the growth of the operations, increase of the profitability of the company and of the incentives to face the historical fiscal inefficiencies through the incorporations of operational subsidiaries and the comparison between the 9 months of 2023 and 2022. On the graph to the right, the growth of net profit is more than 6x, going from BRL 40 million to more than BRL 260 million.
On Slide 13, we demonstrate the expansion of the company's gross profit from the first quarter of 2022 based on the last 12 months. The performance has been very consistent quarter after quarter, reflecting the execution of the company.
On the next slide, we detailed the behavior of the company's working capital cycle, the third quarter of 2023 was marked by 1 more sequential improvement in the average deadline of receivables, which went down from 103 days in the second quarter to 101 days in the third quarter as a result of the active management from the company, along with the payers, even though the scenario is still adverse with the pressures for more diluted payments from them. At the same time, we continue working together with our suppliers, seeking more favorable commercial conditions, which has been translated into an average payment from our suppliers of 80 days. This is an important evolution both in the comparison of the year-over-year as well as in the sequential comparison.
The combination of these results gave us a very important optimization of the net days for working capital, which reached 35 days in the third quarter against 43 days in the second quarter, reinforcing the focus of administration and efficiency gains in all indicators, including the generation of operational cash, which is directly impacted by the dynamic of our working capital.
On Slide 15, the cash flow. We generated BRL 322 million of operational cash, a record for the third quarter of the company, especially to the combination between an operational performance that was strong and the efficiency in the management of working capital. The cash generation in the quarter was BRL 224 million after the service of the debt and BRL 87 million even after the service of the debt and all of the executed CapEx.
We continue to be very focused on operational cash generation. Slide 16 shows the huge advance which we made in the conversion of FCO operational cash flow in relation to EBITDA, which was from the last -- from minus 46% in the 9 months of 2022 to 37 positive in the accumulated numbers of this year.
On Slide 17, we comment on our net debt and leverage, which increased in the quarter exclusively because we included the amount of the acquisition to be paid through the participations of the stakes that we bought in Unimed Rio, CEON and HMM. If these acquisitions had not happened, which bring us several benefits, we would have had a reduction of our net debt, and we would maintain our leverage levels by 2.9x, as the Slide 18 demonstrates. It's important to highlight as well that from our BRL 990 million that include the acquisitions that still need to be paid, BRL 374 million are payments for future earn-outs which may or may not be materialized. And if they do materialize, they will be associated to a future higher EBITDA, which is not captured in our current indicator. The adjusted leverage, excluding future payments through earn-out would be at 2.8x.
On the next slide. Finally, we will show you our debt amortization plan. With this, we close the earnings call of the third quarter, and I would like to now open for the question-and-answer session. Thank you so much.
[Operator Instructions] Our first question comes from Vinicius Figueiredo from Itau BBA.
Good afternoon, everyone. I wanted to, first of all, in relation to the cash structure, something that drew my attention more was the CapEx. So you detailed this more in your release. There was an acceleration from the second to the third quarter. So I want to understand, what were the main drivers behind this? Is there any operations specifically that is maturing still that is taking up more CapEx? And if this will go back down in the next quarter. And then another topic should be -- would be to understand -- I think we were seeing a very strong dimension on the line. In the fourth quarter, there was a strong growth. And could this be implicating the nursing costs? Are these numbers incorporated? Should we be concerned about this in the future? And then very quickly, 1 more question about what Cris just mentioned in his introduction. These provisions in relation to the PCLD in general has more to do with autarquias specifically, but just to understand the payment flow. Should we expect a normalization in the first quarter or in the short term?
Thank you so much. This is Cris. I'm going to start by addressing your cash flow question, and then I'm also going to talk about PCLD, and then I'll pass the floor to Rodrigo for him to comment on the operational expenses.
Starting with cash flow. We saw in this quarter, generation of operational cash that was very strong, as we highlighted. There were BRL 322 million, and it was that -- specifically, that is what allowed us to carry out our expansion CapEx in a more accelerated manner. So if we look at the CapEx of BRL 136 million, most of that -- most of the number is associated to expansion CapEx. Remembering that it's a discretionary number, we can open or close that cap depending on the cash flow, the company's operational cash flow.
So putting operational cash flow that is very robust with all of the initiatives that we've had in the operational actions such as efficiency and working capital management, this allowed us to advance more quickly with the expansion CapEx. And remembering also that in the expansion CapEx, we are also talking predominantly about brownfields, which will bring, we expect, revenues relatively quickly since they are brownfields, they happen in an accretive way. So we have been talking about this systematically last year. At this level, after 9 months of the year, we had 46% less EBITDA conversion in FCO. And we've been saying that we would address that, that the focus was operational cash generation, bringing to this year in the 9 months of '23, we're already at 37%. So we made it minus 46% to positive 35% of operational cash, which allowed us to accelerate our expansion CapEx. And then another point that's important to mention, and then I'll pass the floor to Bruno for him to complement, is the following -- because of the follow-on at the end of June, we made it very clear that the BRL 200 million that we had in the primary would be -- so we would not need to de-accelerate our CapEx, our expansion CapEx. So we wouldn't need to do in a more cadenced way. That's why we did it in this rhythm. In other words, the expansion CapEx that we are working with is already self-funded by the BRL 200 million which we raised in the follow-on of the primary. And making a very qualitative analysis on the CapEx, it's connected to the coverage of the full journey. So it's exactly what we said, more and more, we'll be able to take advantage of the patients that already are inside of Oncoclinicas because it is a moment we are going through.
And another thing that's also important that Cris mentioned, the company is more and more becoming a cash-generating company, and this cash generation is going to be one of the main drivers of the company's growth. This is what's going to allow us to grow organically and inorganically, and that will allow us to make more acquisitions. So that is the future of Oncoclinicas. And most of our growth will be in this cash generation. We will optimize so we can continue growing. And we will use this cash generation for that reason.
On PCLD, Vini, we have this indicator of 3.6% from gross revenue, which, as I mentioned during the presentation, both 3.6% of this year as well as 1.4% from last year, they are outside of our goal. Our historical goal is closer to 2.2%. And what happened? How did this uptick happen in PCLD during this quarter? It's concentrated in aging. So it's not specifically close. It's aging of accounts received from autarquias where most of the increase of PCLD is concentrated. Why does that not worry us? Of course, we are paying attention to it, but it doesn't worry us because we could see consistently year-over-year, the autarquias is accelerating their payments in the fourth quarter of every year. They have this characteristic of receiving extra budgetary payments so that their accounts payable are all put up to date in the fourth quarter. We've already started seeing this dynamic during the fourth quarter. Historically, we see this level of receivables increasing, and this is why we have the increase in PCLD as a point and not a trend.
Another thing that's important to highlight, we have a rule -- a provisionary rule that is very restrictive, so we start provisioning 25% of the receivables over 60 days, and we do this for the ambulatory operation as well as for the operation. And it's a naturally longer cycle, but we punish the hospital accounts in the same way. And this ends up contributing to the indicator of 3.4% in the quarter, where once again, we see it as a percentage point. I'll let Rodrigo answer the question about the operational expenses.
Thank you so much, Cristiano. Hello, Vinicius. In fact, the increase of the percentage in the third quarter is related to the salaries, and the trend is that this will dilute in the same rhythm that we've seen in the integrations where the synergies have already predominantly been captured in relation to gains in scale and efficiency, but operational leveraging that is natural where we see the business will continue having this dynamic to be able to support the structure. So gradually we have to look at this in a gradual manner. It's a trend that we will continue capturing these gains, including the ceiling -- the nursing ceiling, which we already commented on, which we believe affects our business less than other hospital structures because we work more with outpatients and not hospital structures, so the impact will be lower.
Our next question comes from Yan Cesquim from BTG Pactual.
Good morning, Bruno, Cris, and everyone else who is here. I would like to ask 2 questions. The first question is about the top line growth. I wanted to understand -- how do you understand that the volume should grow? Looking at the fourth quarter, I'm not sure if you could share how these first months have affected you in terms of volumetry? And maybe you could give us more detail on how you make reports and how you gain market share in this quarter. How do you see the market growing for the fourth quarter? And how do you think things will play out? How the volumetry will play out in the future? That's the first question.
And then the second question is about leverage. I would like to understand what you are thinking about in terms of leverage versus the cash generation perspective. That's it.
Hello, Yan. Well, starting with your question on the top line growth. We referenced our history in the last quarters, in which we have seen the top line growth on the base of the same units, organically speaking, between high-10s and low-20s. This kind of growth has been brought through the growth of the market on oncological care in general, which has been between 15 -- 15% year-over-year.
And then connecting to the question on market share. We've seen gains in market share in the company because at the same time in which the market grows with these percentages, we have been growing 20% while the market grows 15%. So we've been growing [ 20%, 25% ] in an organic way, not only because of the performance of the clinics, but also because of the ramp-up of the cancer centers. And because of our expansion in our line of care -- integral line of care through the journey of our patients, our program of attraction and medical retention, which has been done over the last few years, is also a way to contribute to this growth on the basis of the same clinics. This has given us this magnitude and has allowed us to gain market share on our net debt at the rate in which the company advances more and more expressively in cash operational cash generation.
Of course, we may be sounding a little repetitive, but we have 37% conversion for FCO in the 9 first months of this year. Last year, in the last months of last year, we had operational cash generation that was negative because of the working capital that the company was experiencing losses. And quarter after quarter, we've had these efficiency improvements in the net days of our working capital. We have a completely different situation in terms of our cash flow operation. And the focus is free cash flow to equity. So at the rate in which the expansion CapEx is growing over the next quarters being addressed and these brownfields expanding and entering into operation, we should have this dynamic contributing to the reduction of the net debt through cash -- the company's cash generation, which improves at every quarter.
Our next question comes from Caio Moscardini from Santander.
I have 2 questions, actually. I would like to go back to the CapEx subject. It's something that we observed. I want to understand a little bit more where the investments were made. If you open the clinic -- you opened 35 clinics against another number from last year. So maybe more color would help. And more color on the financial results, where there is the exchange rate also involved. If you could explain that a little bit more, it would help us.
Thank you so much, Caio, for those questions. The expansion CapEx is associated to the expansion projects, the brownfields and clinics and cancer centers, which we have been commenting that are very accretive because they bring revenue from -- in a faster way than greenfield projects. So going back to the point that we discussed at the time where the BRL 200 million in the primary, which we decided we didn't need to even raise, they came to give us this cushion so that we could conclude more quickly the expansion CapEx and these brownfields of clinics and cancer centers, which the company expects can bring revenue more -- in a more accelerated way and cover, in a broader way, our patients' journey.
Having said that, it's a tap which we may open or close in a discretionary way, which is already self-funded by the BRL 200 million that were raised in the primary and then the follow-on. The second point is related to the financial costs. We, in fact, did see an increase between the second quarter of this year and the third quarter of this year. In other words, in a sequential basis because of financial costs that are noncash. So we had approximately 16 -- BRL 20 million of mark-to-market swap in our debts, which ended up impacting BRL 15 million as well in mark-to-market of instruments connected to the exchange rate variation. So our cash costs, our financial costs were closer to BRL 100 million. And then we also had the impact of BRL 30 million in the financial accounting costs that are noncash that are mainly markets.
Our next question comes from Fred Mendes from Bank of America.
Thank you for this call. I think the first issue on strategy, just to understand how the company's brain works. I think it would be important to understand better your modifications and expansion. So now you're including M&As and partnerships and short-term M&As and partnerships, and then you're also talking about using the cash generation to expand even more with the CapEx. We understand that the larger you are, the better deals you're able to get from your suppliers. But would there be any other points that could give you long-term competitive advantages so that in 10 years you would be very concentrated? Is there a long-term competitive advantage that you see as a very strong point that could explain this very fast acceleration? I'm not sure if my question was clear, but that would be the first question.
And then in relation to the ticket, we know that the third quarter was very difficult from several of payers, and we believe that the fourth quarter will improve margins. So how do you see this? And how do you see the next few months playing out?
Hello, Fred. Thank you so much for that question. I'll try to address your question. The first is the following. It's a very good moment for us at this moment because there is a strong difficulty today for the system to provide cost-effective oncological care. So we've been announcing a lot of partnerships because we've been sought out to provide cost-effective oncological care for the health plans. Of course, some of them will want more investments. Some will want less investments, and we've been trying to do this in a way that is strategic to the group, not only opportunistic. So what am I trying to say, we will always have partnerships as long as they do not divert us from our main discipline of investments. So we are not going to sacrifice our cash generation to make investments unless our discipline is very controlled. We will not raise more debt to make partnerships. If we can generate cash at the right moment, we would raise more equity, we can accelerate this even more. It's not -- we're not trying to do everything all at once. We're trying to do things strategically, and that's how the group has performed always. And at each of these movements, more and more has been done in a way that we have a partnership that generates cash continuously. This has also been a very strong concern that we've had in the group to make an investment that could bring with it to cash generation. That is the discipline that we will always maintain, so do not expect any kind of abrupt movement for the group. That is not what we are trying to do. We do not have that mindset.
If you want to understand the head of the company, the head of the company is to continue growing strategically with an investment discipline, with a lot of discipline on investment. Like the Unimed investment, it was highly strategic and it addresses structural issues for the company. So taxes, minority, so it was important to do that. And we will be reaping the fruits of that in the short term already, in the next quarter already. So it was opportunistic, and it had to be done. It was strategic. It was opportunistic. It was an opportunity, strategic and it had to be done. So that's how the company's mind works. And of course, we'll continue doing this, keeping the mentality that if it's strategic, it needs to bring also benefits in the short, medium and long term. And we are always evaluating that, keeping the discipline as -- in our investments.
Fred, just addressing your second question, which was about the health of the -- health plans in relation to the dynamic with the payers, the progress that we have done in our line -- of our working capital line connected strictly to the payers, which is our main line of receivables. We had 1 more quarter of reductions in the average deadline of receivables. This is because of the work we've done in-house with a lot of focus on efficiency in our line of revenue from the prebuilding to the collection and less because of an actual improvement in the situation in general from the health plans and the payers.
I would say that we're still stable. We have not seen any deterioration, but we also did not see an improvement in the general situation. So we think that we will still take several quarters to normalize this, but the company has been doing the work that needs to be done to manage the working capital in the best way possible, and that has been happening, and it is reflected in our operational cash flow.
Perfect. That was very clear. Just 1 last follow-up question. I would like to understand the strategy. Would you say that -- maybe you would first get the contracts. Because if you sign a contract, you can't lose it after, so it's much harder to change it. So maybe it would be an advantage in the next few years. Is there something along those lines, as Bruno said, when there's an opportunity, you do business as usual?
Well Fred, we're not even competing for the contracts. They come to us. This is the strategy that we have as partnerships with the health plans. That's what has worked. So we're not competing, and we have strategic actions. We have a long pipeline in this strategic framework. So there's no hurry. Some of them, we discussed over the months, actually, which needs to be done in-house.
Our next question comes from Emerson Vieira from Goldman Sachs.
I have 2 questions. The first of them is a follow-up on the ticket point. So you talked about the impact of the autarquias on PCLD, that was very clear. But I wanted to understand if there's any negative effect on the third quarter numbers. Because of the adjustment, do you expect any acceleration or effect when you look at the fourth quarter? That's the first question.
And the second is in relation to costs. We've seen a dynamic that's been changing in the industry, especially if we look at generics and biosimilars. I understand that Oncoclinicas is focusing on brand medications, but do you think that the biosimilars and generics expansion can impact the company? So the cost of procedures in the company is growing along with so much inflation and pressures on revenue. But however, is the dynamic of cost more effect of deflation? Or do you actually think you're able to get better purchasing conditions with the pharmaceutical companies? Those would be the 2 questions.
I'm going to start with your question on the average ticket. We have seen the ticket very well distributed, the recomposition of the ticket over the quarters. There has been nothing specific in the third quarter. And we do not expect anything different in relation to this historical dynamic, which is a recomposition of the very unified or standardized average ticket in the next quarters. I'll pass the floor to Bruno to talk about deflation, cost and medication and the impact on the margins.
In relation to the medication, we have a relative scale, our negotiation with the industry's references. So that has absolutely no relevance here in our dynamic of negotiation. So no, I wouldn't say that's an effect. So this is the time of the year where we are making our plans for next year based on our volume for next year. That's kind of how the dynamic works.
Perfect. I have 1 more question, which is a subject that was not explored until now. Could you comment on the dynamic of taxes? How do you take advantage of the taxes, looking at 2024 and 2025, if you could give me an estimate?
We do not have an estimate for that, Emerson, specifically because we would not be able to have any guidance in relation to that subject. However, we have seen this rationalization of our effective amount advancing. So if we look at the [ net ] over the last 9 months from 2022, we had around 70% of the effective level of income tax, and it's rather different than what we are seeing in this year, the last 3 months of '23 because of the advance of all of these initiatives of incorporations and the rationalization of our shareholder structure with the operational subsidiaries in our holding as well.
So what we can say, our agenda continues advancing and this is reflected in our profitability we have been delivering quarter after quarter. The net profit growing consistently. This has been -- this has been the main -- the ways that we've been able to create value. Of course, besides the organic growth and operational growth, of course, it has been the optimization of the effective value. This has been from the focus, operational focus on cash generation. Once again, being repetitive, but we went from minus 47% in 9 months to 37% this year. In 9 months, and this is of course, the reduction of the minorities line. We showed this and the reduction of the minorities in the total profit, which is the agenda that we are following with.
Our next question comes from Leandro Bastos from Citi.
Good afternoon. Could you just update us from Grupo Santa and Porto Seguro? What are your first impressions? Do you have any numbers on the amount of clients that they will bring in? Could you give us an estimate? Thank you so much.
Hello, this is Bruno again. No, we don't have numbers, but these will be the weeks where we will close the operations. What day is it today? We finalized the operation yesterday, but there is a full integration in the medical area. And we are sure that in 30 days we will be reaping these -- this is an operation that's already completely aligned in the medical point of view, there are synergies that are happening.
You're talking about the Santa Group and Oncoclinicas, yes. Everything is already designed by the medical area, the margins, radiotherapy from surgeons, everything is already set up. An operation that is completely aligned. Both on one end and the other, the expectation is that things will work really well.
What about Porto? And Porto is an operation that is growing very quickly. In relation to CapEx, we need to accelerate several clinics, the very important clinics. Because of their service capacity, the flow was higher than expected. So relating -- discussing expansion CapEx, these are 2 ones that we did very quickly. We delivered [indiscernible] this month, and we will be delivering BC in the beginning of December, 2 large clinics that will be completely occupied it. And we have the expectation to grow with Unimed as well. So that's 1 of the ways that we can use the expansion CapEx to attend to a repressed demand. So the expectation from Porto is that it's above our expectations, not only in terms of volume, but also in the quality of assistance.
Once again, Leandro, just to complement Bruno, we did know that the expansion CapEx would come and that it could happen faster. And that is why the BRL 200 million from the primary and the follow-on came but we created a cushion back then to have the option of accelerating the CapEx of expansion in case it was necessary -- and if it was funded by these resources. So this was already being operationalized. We expanded our presence to 2 large regions in the city of Sao Paulo, which we did not have presence in yet. So we will be growing with Porto. We will be growing in the Unimed system. We will be growing with all of the health plans. With the investments, it's not greenfields, but it's expansion. It's not even greenfield or brownfield. So this is -- part of the CapEx is explained there.
So I received a question from Rafael from XP. How much of the increase of PCLD came from cancer centers? Is there a largest difference between PCLD from the cancer centers compared to the clinics?
The answer here is -- it is very well distributed between our operations of clinics and cancer centers where there is a concentration in the source, the kind of payer source. Once again, a lot of concentration on the government sectors, autarquias, which does not concern us because most of the payments from them come in the fourth quarter. And also remembering that for the cancer centers' operations, even if we have a more stable account, therefore, a longer cycle with the auditing and longer process of retention.
We do not have 2 rules for provisioning for clinics and asset centers. We use the same rule, which is quite punitive. So it starts already in the first 90 days, and this ends up also impacting the number of 3.6%, which we had in the quarter, but still very well distributed between cancer centers and clinics following the average proportion of the representation of each operation and the company's average.
Our next question comes from Stella from JPMorgan.
Hello, everyone. This is more a strategic question on the company. Maybe you could give -- you could tell us how the environment is for future expansions that may be organic in other geographies, in terms of M&As as well, in assets as well. If it makes sense, that would be a little bit outside of what [ Corden ] said.
Hello, Stella. The first question, I'll answer with Bruno, expansion to other geographies. I think historically, we have seen that happen. Today, we have the presence in 36 cities. These are cities in all of the geographic regions of Brazil. And the trend is that they will continue -- this will continue happening over time since we still cover a relatively limited area from the point of view of municipalities. And this is also reflected in the market share.
If we look at Oncoclinicas, even though they are the largest player focused on oncological care in Brazil, according to our estimations, we have a market share of only 6.5%. So we are still talking about a very fragmented market with hundreds and hundreds of oncological clinics that are operated by different generic groups inside of Brazil and outside of Brazil. So it makes sense that we have more larger geographic expansion.
Well, it's not simple, but yes, that's exactly it. Still makes more sense to grow with more partnerships, perhaps. So more and more, that's what we've been called to -- growing into other geographies because we've been gone after. So it -- would it make sense to grow into other areas of action unless they are connected to oncology. So if we do not have the focus related to oncology, you not see how the group would go into that area.
We are now closing our questions-and-answer session. I would like to pass the floor now to Dr. Bruno Ferrari for his final considerations.
Once again, I would like to thank everyone for their participation in our earnings call and for all of the questions that were made. With that, we close our presentation on earnings and we are available. Thank you, and good afternoon.
Our Oncoclinicas' earnings call is now closed. We'd like to thank everyone for their participation, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]