CM Hospitalar (VVEO3) Q1 2025 earnings summary

Executive summary

• 1Q25 results reflect progress after a year of internal reorganization, with improved gross and EBITDA margins despite a 5.7% decline in net revenue to R$2,784.9 million, mainly due to lower March sales and a smaller CMED price adjustment, especially impacting Hospitals and Clinics.

• Gross profit reached R$384.2 million, down 3.4% year-over-year, but gross margin improved to 13.8% (+0.3 p.p.), the highest in five quarters, reflecting a focus on higher-margin contracts and operational efficiency.

• Adjusted EBITDA was R$159.6 million, up 1.3% year-over-year, with margin rising to 5.7% (+0.4 p.p.), driven by cost control and commercial discipline.

• Free cash flow consumption was R$52.2 million, the lowest for a first quarter since 2021, despite higher inventories.

• Celebrated 90 years of the Kramer/Cremer brand, with a new wet wipes plant to be inaugurated in 2Q25.

Financial highlights

• Net revenue: R$2,784.9 million (-5.7% YoY); gross profit: R$384.2 million (-3.4% YoY); gross margin: 13.8% (+0.3 p.p.).

• Adjusted EBITDA: R$159.6 million (+1.3% YoY); adjusted EBITDA margin: 5.7% (+0.4 p.p.).

• Adjusted net loss: R$20.9 million, compared to a loss of R$3.6 million in 1Q24.

• Free cash flow: -R$52.2 million, a significant improvement from -R$173.5 million in 1Q24.

• Net debt at R$2,888.4 million, with leverage (Net debt/Adjusted EBITDA) at 4.49x at quarter-end.

Outlook and guidance

• Inventory levels impacted by lower March sales are expected to normalize in 2Q25.

• Strategic initiatives include contract renegotiations, the launch of a new wet wipes plant, and further integration of acquired companies to drive synergies.

• Guidance for leverage to return to 3.5x by June 2026, with no divestments required.