CM Hospitalar (VVEO3) Q3 2024 earnings summary

Executive summary

• Net revenue reached R$2,953.3 million in 3Q24 (up 3.8% YoY) and R$8,664.9 million in 9M24 (up 5.9% YoY), driven by hospitals, clinics, and new vaccine launches.

• Adjusted EBITDA fell 41.5% YoY to R$146.8 million in 3Q24, with margin down to 5.0% due to higher non-recurring expenses and operational costs.

• Reported net loss of R$237.7 million in 3Q24, mainly from extraordinary provisions for inventory and credit losses; adjusted net loss was R$55.8 million.

• Free cash flow surged to R$506.9 million in 3Q24, reflecting improved working capital, capital discipline, and receivables sales.

• Continued integration and simplification efforts, including ERP reduction and WMS implementation, following acquisitions and rebranding.

Financial highlights

• Gross profit was R$391.9 million in 3Q24 (down 8.2% YoY), with a margin of 13.3% (down 1.7 p.p.).

• Adjusted EBITDA margin was 5.0% in 3Q24 (vs. 8.8% in 3Q23); 5.4% in 9M24 (vs. 8.9% in 9M23).

• Free cash flow reached R$506.9 million in 3Q24, a significant improvement from R$105.9 million in 3Q23.

• Net debt at 3Q24 was R$2,108.8 million, with net debt/Adjusted EBITDA at 3.14x.

• ROIC for the last twelve months was 11.3%.

Outlook and guidance

• Management expects improved operational efficiency and profitability from ongoing restructuring, technology investments, and strategic projects in supply chain and inventory management.

• All distribution centers to have WMS implemented by 2025; new ERP systems to be fully implemented by January 2025.

• Performance improvement from strategic projects expected to be noticed from 4Q24 onwards.