Instituto Hermes Pardini S A : Earnings Conference Call (Audio)

Belo Horizonte, March 14, 2023

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2022 Highlights

Number of tests 165.1 million

RECORD

RECORD

EBITDA Ex-COVID

R$102.0 million

Following are the results of the fourth quarter and full year 2022.

We maintained the accelerated pace of processing observed in the first three quarters of 2022: in 4Q22, volume totaled 41.0 million, a record for a fourth quarter, with consolidated growth of 14.2% from 4Q21 and

15.2% ex-COVID. In 2022, the number of COVID tests was 1.4 million. The Company set new records in 2022: volume of 165.1 million, consolidated gross revenue of R$2.3 billion, gross revenue ex-COVID of R$2.1 billion and EBITDA ex-COVID of R$387.7 million.

This record production reflects the operational maturity of our Enterprise Model, which is being implemented at the Instituto de Análises Clínicas de Santos (IACS) in Santos, São Paulo, and the stability of the Operational Technical Center (NTO) and our regional centers developed organically or via acquisitions.

Gross revenue ex-COVID came to R$531.7 million in 4Q22, growing 16.8% from 4Q21, thanks to the higher volume of exams and price adjustments at both the PSC and L2L. Consolidated gross revenue came to R$546.7 million, increasing 5.6% in 4Q22 compared to 4Q21. Gross revenue from COVID tests came to R$15.1 million in the quarter, decreasing 76% from 4Q21, before eliminations.

Gross revenue in 2022 was a record as well, totaling R$2.3 billion, up 5.4% YoY. Excluding COVID-19 tests, growth was 20.2% YoY. The acquisitions made in 2021 generated gross revenue of R$197 million in 2022.

Gross profit increased 1.8% in 4Q22 compared to 4Q21, positively impacted by: (i) the acquisitions (M&A), which contributed to volume and revenue growth, and (ii) the recovery of prices and volume at L2L; (iii) reversal of profit sharing provision; and negatively impacted by: (i) the increase in funding costs due to the new units in São Paulo: rent, medical fees, personnel expenses and depreciation; (ii) the effect of inflationary cost on expansion of the Company's structure; (iii) the reduction in COVID and toxicological tests compared

to 4Q21;

1. the impact of salary adjustments due to labor agreements in late 3Q22. As such, gross margin in 4Q22 decreased 110 bps from 4Q21.

EBITDA ex-COVID was a record for both the quarter and the year. EBITDA ex-COVID was R$102.0 million in 4Q22, up 47.3% from 4Q21, and R$387.7 million in 2022, up 29.1% from 2021.

Meanwhile, consolidated EBITDA came to R$107.4 million in 4Q22, up 8.0% from 4Q21. EBITDA margin stood at 21.1% in 4Q22, as against 20.7% in 4Q21, The increase was mainly due to price adjustments at PSC and L2L and the increase in volume, resulting in a positive operational leverage of the Company and reversal of profit sharing provision.

Margin ex-COVID also improved in 4Q22, from 16.4% to 20.6%.

PATIENT SERVICE CENTERS (PSC)

In 2022, PSC registered record volume, thanks to the successful organic and inorganic expansion of units in recent years.

In 4Q22, PSC registered 13.6% growth in total gross revenue ex-COVID year on year. Total PSC gross revenue increased 2.5% in 4Q22 vs. 4Q21. Once again, revenue ex-COVID increased in all regions, with São Paulo more than doubling its revenue in the period.

Negotiations with some important

clients in Goiânia and São Paulo at the

end of each year translated into price adjustments at PSC, which also reflected in the positive performance of this collection channel in 4Q22.

The restructuring taking place in RJ has already resulted in growth in YoY recurring gross revenue, with emphasis on the increase in bids. Fixed cost reductions and personnel structure review had a positive impact on profitability. As a result, "on going" EBITDA expanded by more than 50% in 4Q22 compared to the previous year.

GO was a reference in profitability in 4Q22 in the PSC. There was price replacement with the main paying sources and efficiencies in fixed costs helped boost the result. The quarter closed with "on going" EBITDA growth of around 50% and significant margin expansion

Revenue from the new units in São Paulo is ramping up, with profitability improving each quarter thanks to the support from the sales team, which has been working to increase the number of health plans accredited by these units.

LAB-TO-LAB

The sales efforts, focus on differentiated service and effective response from the technical area once again translated into

higher average volumes per client in L2L, increasing 9.1% in 4Q22 vs. 4Q21. Volumes too maintained the growth trend during the quarter, delivering consistent double-digit expansion in consolidated results, as well as ex-COVID and ex- COVID/ex-Toxicology.

Upholding our recurring mission of increasing our capacity to generate business with our partner labs, we once again reported growth in the number of L2L clients year on year. In 4Q22, we had 6,256 revenue generating clients, a record for a quarter and up 5.4% from 4Q21. In 2022 too, we had a record 7,013 revenue generating clients, increasing 6.2% from 4Q21.

In October, the Company announced to its clients the advancement of its price adjustment of early 2023. As such, in November 2022, L2L ticket prices were

adjusted. Prices were also adjusted for

Prices were adjusted for hospital operations as well, with a near double-digit increase, in line with other L2L business lines.

As such, the combination of volume and price adjustments in 1Q22 and 4Q22

resulted in the 14.0% growth in recurring

gross revenue ex-COVID and ex-Toxicology between 4Q21 and 4Q22. Excluding only COVID tests, gross revenue grew 19.2% in 4Q22 vs. 4Q21. Consolidated L2L revenue increased 8.1% compared to 4Q21.

The quarter was also marked by the integration of the operations of CSV, our Reference Lab in Vitória, Espírito Santo, with Pardini's L2L operations, which is already generating positive operational results. The integration was rapid and transparent for our clients, employees and suppliers.

The constant efforts to create greater value in L2L translated into several actions to drive efficiency and profitability, which have been accelerated in recent quarters

The Company has been working on logistics, replacement of and renegotiation with suppliers and rationalization of production and collection processes, which resulted in savings that translated into a lower funding costs at L2L, which mitigated the inflationary cost pressures on exams.

TOXICOLOGY

Gross revenue from Toxicological exams came to R$18.9 million in 4Q22, down 44% from 4Q21, mainly due to the smaller addressable market resulting from the relaxation in the issue of fines for drivers whose deadline for taking the test had expired.

M&A

HUGO SILVIANO BRANDÃO

Early in November, we announced

the acquisition of Anatomia Patológica Hugo Silviano Brandão, based in Belo Horizonte, for R$11 million. Founded in 1969, it is a lab specializing in pathological anatomy, cytopathology and

immunohistochemistry, which are

highly complex diagnostic exams in Oncology. The merger will enable expansion and access to highly complex exams for cancer diagnosis. Dr. Laura Silviano Brandão, the partner at the HSB lab, and the clinical team led by her remain in the business.

Roberto Santoro Meirelles

CEO

certain categories of exams in personalized medicine.

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