Corporate Presentation October 2017 New growth cycle and value innovation
Index 1 Dental benefits: an incipient sector in Brazil 2 Inside OdontoPrev 3 Strategic competitive advantages 4 Financial and Operational Performance 5 Capital Markets 2
Dental benefits: an incipient sector in Brazil 3 1
Brazil leads the global ranking of dentists Number of dentists per country (thousand) 290 ¹ 12% of the dentists in the world are located in Brazil 160 63 52 40 37 35 30 29 26 25 22 21 21 18 18 16 12 11 4 Source: FDI World Dental Federation The Oral Health Atlas 2009 ¹ Federal Council of Dentistry Brazil (September 2017)
Brazilian dental opportunity Although 12% of world s dentists are located in the country, only 11% of brazilians have a dental plan 60% 11% % of the population covered by a private dental plan 14 5 Source: OdontoPrev
Great portion of middle class don t have dental plan 100 22 Potential Market of 78 Million people in the middle class Million people already dental plan members million people 6
Proprietary research confirms importance of dentistry Do you believe your smile is your best business card? 76% totally/partially agree 7 Totally disagree Partially disagree Neutral Partially agree Totally agree
Cost per client Cost per client Attractive cost dynamics Over time, OdontoPrev Dental Plans present a predictable Medical Plans OdontoPrev Plans Price Cost Price Cost Time Cost increases by medical inflation and better technology Short-term contract: 1 year tenor TIme Predictable cost evolution due to prevention Long-term contract: 2 year + duration 8 and more attractive cost profile than Medical Plans.
OdontoPrev Prepaid Business Model High predictability of cash flow No working capital needs Low CAPEX requirements Positive cash flow generation every day Customers Fee per user Dental care reimbursement R$ R$ Accredited dentist network 9
Inside OdontoPrev2
OdontoPrev: 10 years of sustainable value creation since IPO Net revenues (R$ million) 1,070 1,156 1,250 1,365 1,402 955 685 835 182 259 318 382 IPO 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 JUL16 JUN17 11
Revenue & membership market share: 2007-2016 Revenue market Share (%) Membership market Share (%) 40.9 42.0 43.0 44.0 43.3 43.2 45.4 28.7 30.0 34.3 33.3 32.3 31.5 31.0 30.2 28.4 25.1 23.1 22.2 20.5¹ 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12 Source: ANS and OdontoPrev ¹ OdontoPrev membership portfolio ex-bradesco
Individual plans & SME: higher growth and better returns JUL16 - JUN17 AVERAGE TICKET (R$ / member / month) Contribution Margin 37 Individual Plans Revenues JUL16-JUN17 R$273 M (+33% YoY) 53% 20 Corporate SME Revenues JUL16-JUN17 R$202 M (+16% YoY) 43% 17 Revenues JUL16-JUN17 R$918 M (-2% YoY) 38% 13 ¹ M: million High Low NUMBER OF COMPETITORS
Strategic competitive advantages 3
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 15
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 16
Proprietary IT Platform: information-driven decisions 17 + Complete dental record of all beneficiaries + 29 years of actuarial data + Risk Management and fraud prevention
Proprietary IT Platform: information-driven decisions + Quality assurance + Clear barrier to entry + Cost control 18
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 19
Increasing online search for dental plans Number of dental plans search in Brazil (000 / month) 20
Innovation driven Company + OdontoPrev online: individual plans sold at the web + Launched NEW September 1st + Exclusive App for the accredited dentists network 21
Wide range of unique dental care solutions OdontoPrev online Baby tooth Well being Dental Aesthetics Dental Orto Dental VIP 22
From basic cover to aesthetic solutions Fluorine Pediatric dentistry 24/7 emergency Surgery Wisdom tooth extraction Restoration Cleanings Orthodontic radiography Braces Whitening Prosthesis Baby tooth Well being Being Dental Dental aesthetics Dental Orto Dental VIP 23
Innovation driven Company Top quality dental materials delivered door to door to the dentist free of charge Exclusive agreement to prevent oral cancer 24
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 25
Dental and medical plans evolution Million members Medical plans Dental plans 47.8 49.4 50.4 49.2 47.6 47.3 18.5 19.8 20.7 21.2 21.7 22.7 2012 2013 2014 2015 2016 AUG/17 2012 2013 2014 2015 2016 AUG/17 26 Source: ANS August 2017.
Dental Plans sector evolution Million members 17.7 18.5 19.8 20.7 21.2 21.7 22.7 7.3 9.2 11.1 13.3 14.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 AUG17 27 Source: ANS
Focused & dental only leadership since 1998 Key players, brazilian dental sector (AUGUST 2017 thousand members) 6,190¹ 27% market share of beneficiaries² 1,943 1,640 1,571 436 958 842 520 500 28 ¹OdontoPrev 2Q17 ² Source: ANS ( ) ( )
3 accelerated growth cycles, over the last decade, brings new investors to the sector
Cycle 01: Bradesco Dental 2006-2009 (million members) OdontoPrev EBITDA (R$ million and % Sales) Average ticket (R$/member/month) 12.25 12.53 12.07 12.80 76 81 60 46 25.1% 23.3% 23.9% 11.1 13.3 9.2 21.1% 7.3 0.6 1.5 30 2006 2007 2008 2009 Source: ANS 2006 2007 2008 2009 2006 2009
Cycle 02: Amil sold to UnitedHealthcare in 2013 (million members) OdontoPrev EBITDA (R$ million and % Sales) Average ticket (R$/member/month) 12.87 13.66 14.33 15.22 227 208 273 2.1 154 22.4% 24.9% 23.8% 25.5% 1.3 31 2010 2011 2012 2013 Source: ANS 2010 2013
Negative results in Brazil 2014-2016 2014 Net loss (R$ million) 2015 2016-108 -289-318 32 Source: Amil (Valor Econômico)
Cycle 03: Hapvida & Interodonto 2014 JUL17 (million members) OdontoPrev EBITDA (R$ million and % Sales) Average ticket (R$/member/month) 18.58 16.07 17.04 327 305 300 + 19.36 312 1.6 1.6 26.4% 26.2% 22.0% 23.3% 1.0 1.0 2014 2015 2016 JUL16 JUN17 2014 Aug/17 2014 Aug/17 33 Source: ANS
Dental plans sector evolution DEC14 AUG17 Thousand members +622 22,667 20,707 +586 +560 +192 Others DEC14 With 18% of market share, three companies represented 68% of the sector growth since 2014. AUG17 34 Source: ANS
Change in control brings a new strategy of peers Thousand members ( ) 1,878 2,062 1,808 1,846 1,944 1,943 1,571 1,260 1,262 1,023 962 1,011 1,054 ( ) 2011 2012 2013 2014 2015 2016 AUG/17 35 Source: ANS
Cross-selling dental/medical has limited upside Players Dental (A) Medical (B) A / B 1.571 1.959 80% 1.640 2.189 75% 36 Source: ANS August 2017
Average ticket evolution (R$/member/month) 2011-2016 14.3 13.7 11.8 12.1 9.0 9.1 15.2 11.5 9.6 18.6 17.0 16.1 12.5 12.8 12.9 10.1 10.5 N/A 2011 2012 2013 2014 2015 2016 37 Source: ANS
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 38
Best in class distribution channels Direct selling Bank channels Brokers Online selling Retailers Medical Plan Organizations 39
The largest bancassurance platforms in Brazil Clients + 80 million + 60 million National footprint Exclusivity 20 years 48% of branches & 52% of brazilian bank clients 40
Banks: strong and committed long-term partners + Back-office Price maker Product design Customer relationship Dentist network management Front-office Price takers Selling National footprint capilarity Bank branches and brokers distribution 41
Strategic competitive advantages World Class Dental IT Platform Largest and Specialized Dentist Network Innovation Driven Company Exclusive Distribution Channels 100% Dental Focused 42
Largest and best dentist network 28,000 dentists at 2,200 cities National distribution Differentiated academic background Continuous education 24/7 call center 43
OdontoPrev: 4 Financial and Operational Performance
More positive headlines 45
Net Revenues R$ million 1,402 1,156 1,250 1,365 955 1,070 5.6% 669 706 4.6% 339 354 46 2012 2013 2014 2015 2016 JUL16 6M16 6M17 2Q16 2Q17 JUN17
Revenue growth per segment in 2Q17 R$ million R$ million +20.6% +4.6% 354 59 46 +17.1% 71 53 339 17% 69% 14% 65% 20% 15% 234 227 2Q16 2Q17 2Q16 2Q17 Corporate SME Individual Plans 47
2Q17 Members, revenues and contribution margin Members Revenue Contribution Margin 75% 15% 10% 65% 20% 15% 61% 23% 16% Corporate SME Individual Plans 48
Average Ticket per Segment (R$/member/month and YoY % ) +12.6% 2.1% 18.41 10.7% 20.37 34.02 38.30 16.57 16.92 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Corporate SME Individual Plans 49
Breakdown of individual plans Thousand members +4% 632 10% 657 3% 2% 56% 41% 258K members 43% 283K members 55% 2Q16 2Q17 Retailers 50
Positive effects of bank channels 2Q17 List prices & R$45.60 Retailers R$29.90 Selling expenses Profitability 10% - 15% Higher 25% - 45% Lower 51
Breakdown of SME members Thousand members +6% 912 863 1% 83% 16% 79% 7% 14% 718K members 721K members 2Q16 2Q17 52
Quarterly and LTM Cost of Services (% of Sales) 54.6 52.6 51.4 50.0 49.4 49.7 48.8 48.8 48.6 48.7 49.0 48.2 48.2 48.4 47.6 47.6 47.5 47.4 46.6 46.4 46.0 46.1 46.0 45.2 45.0 44.0 43.7 43.9 43.4 2011 2012 2013 2014 2015 2016 2017 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q¹ Quarterly LTM 53 ¹Excludes Bradesco Dental and OdontoPrev INSS reversals
Dental Loss Ratio (% of Sales) per segment 56 61 58 53 54 Corporate 45 50 46 42 43 SME 25 27 26 24 27 Individual Plans 2Q16 3Q16 4Q16 1Q17 2Q17 54
Key metrics per segment (% of Sales) 55.6 53.7 53.0 48.9 44.8 44.9 43.2 40.9 42.4 38.8 24.8 26.8 22.2 24.3 12.8 11.9 5.6 5.4 2Q16 2Q17 2Q16 2Q172Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Corporate SME Individual Plans Cost of Services Selling expenses Contribution Margin 55
G&A (% of Sales) 15.6 14.7 13.8 14.2 14.4 14.8 14.5 Personnel 7.8 7.9 7.3 7.4 7.7 7.9 8.0 Others 7.7 6.8 6.5 6.8 6.7 6.9 6.5 # of employees 1,525 1,587 1,560 1,588 1,581 1,460 1,509 2011 2012 2013 2014 2015 2016 6M17¹ 56 ¹Excludes Bradesco Dental and OdontoPrev INSS reversals
Allowance for doubtful receivables R$ million and % of Sales 17.5 15.7 16.0 13.9 5.0 4.6 4.6 4.1 11.5 3.2 2Q16 3Q16 4Q16 1Q17 2Q17 R$ million % of Sales 57 57
Adjusted EBITDA and Adjusted EBITDA margin (ex-inss¹) R$ million and % of Sales 273 305 327 300 312 208 24.9 227 23.8 25.5 26.4 26.2 164 24.5 176 25.0 76 86 24.3 22.0 22.3 22.4 2011 2012 2013 2014 2015 2016 JUL16 6M16 6M17¹ 2Q16 2Q17¹ JUN17¹ 58 ¹Excludes Bradesco Dental and OdontoPrev INSS reversals
Net Income (ex-inss¹) R$ million 188 195 221 216 224 145 146 113 121 44 52 2011 2012 2013 2014 2015 2016 JUL16 JUN17¹ 6M16 6M17¹ 2Q16 2Q17¹ 59 ¹Excludes Bradesco Dental and OdontoPrev INSS reversals
Quarterly cash dividends to investors (R$ million) INSS approval brings 100% payout policy from 3Q17 111 11 55 12 43 35 11 24 35 11 24 47 12 35 55 13 43 100 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Dividends Interest on capital 60
Net cash (R$ million) 515¹ 443¹ 208 218 257 266 334 2011 2012 2013 2014 2015 2016 2Q17 61 ¹ Includes R$114.8 million dedicated to ANS.
Cash Flow since the IPO R$ million +2,068.5 22.6% of sales +329.6-15.0 Share buyback -120.1-98.0-362.5 Capital reductions -1,428.9 Cash dividends 204.7-1,806.4-63.7 514.6 Net Cash DEC06 + - - + - - = Cash Generation Acquisitions Capex Shareholder Remuneration Stock Options² Net Cash JUN17¹ 62 ¹ Includes R$114.8 million dedicated to ANS ² Stock Options Program vesting reimbursement
INSS: Provisions reversals in 2Q17 Until 2010 After 2010 Amount provisioned R$45 million R$303 million Approval July 10th, 2017 July 14th, 2017 Cash effect Yes, in 3Q17 No Annual growth Selic (*) Selic (*) + R$ 45 million 63 * Brazilian interest rate
Key takeaways More positive outlook for new members Loss ratio back to historical levels Tax savings to expand margin From 80% to 100% payout ratio 64
Capital Markets 5
Global shareholder structure: investors from 37 countries 66 Source: OdontoPrev
Corporate Governance and professional management team 67
Superior Corporate Governance Standards Chairman # CEO, since the 1990s Board of Directors without executive functions, 56% independent members AGM previous notice to shareholders of 30 days Disclosure of minimum, average and maximum annual compensation of executives 3 CEOs since the foundation in 1987, and 1 IRO since IPO 68
Key Metrics for management s compensation Quantitative goals Perception Studies Revenue EBITDA (R$) Number of members Beneficiaries Dentists HR managers Quality of services 69
OdontoPrev awarded for the 8th consecutive year... Best Healthcare Sector IR Team of Latin America 2010 / 2011 / 2012 / 2013 / 2014 / 2015 / 2016 / 2017... Thank you! 70
Feedback from the street Well-run company, experienced and focused management team, complying with high Corporate Governance standards. Leadership position in a defensive market with favorable growth prospects. Strong balance sheet and cash generative business. One of the world s best emerging markets business models We continue to view OdontoPrev as the best business model in the healthcare segment, combining a high return and cash-flow-generation profile. #1 Company in Latin America with a technological competitive advantage Strong fundamentals stand out on current environment. We believe that high multiples are supported by: 1) strong FCF generation; 2) balance sheet with no debt; 3) dividend yield and 4) high earnings visibility. 71
Upcoming IR events Date Country Broker Event Oct 3, 2017 Oct 12, 2017 Oct 13, 2017 Oct 25, 2017 Oct 26, 2017 Oct 26, 2017 Nov 1, 2017 Nov 13, 2017 Nov 14-15, 2017 Nov 16-17, 2017 NDR Bradesco - Santiago NDR HSBC - Johannesburg NDR HSBC - Cape Town 3Q17 Earnings Release 3Q17 Webcast Investor Presentation - São Paulo NDR Credit Suisse - Rio de Janeiro ESG NDR UBS - New York Bradesco 7th Annual CEO Forum - New York ESG NDR HSBC - London Nov 20-21, 2017 Itaú BBA's 10th LatAm Conference - London Nov 30, 2017 JP Morgan 10th Brazil Opportunities Conference - São Paulo Jan 10-12, 2018 Jan 30-31, 2018 Morgan Stanley 10th Annual LatAm Executive Conference - Miami Credit Suisse LatAm Investment Conference - São Paulo 72 OdontoPrev s Investor Relations activities, including conference calls, webcasts, one-on-one meetings and public presentations are made by the Company s CEO and/or IRO since the 2006 IPO.
Why OdontoPrev? Largest and best network of dental specialists Proven & sustainable business model State-of-the-art IT platform Superior corporate governance standards Solid capital structure Proven management with an incentive to drive shareholder value Multiple growth drivers High returns on capital 73
Your award winning Investor Relations Team José Roberto Pacheco Executive Director & IRO Roberta Carneiro IR Manager Phone: + 55 (11) 4878-8893 E-mail: ir@odontoprev.com.br www.odontoprev.com.br/ir : OdontoPrevIR Darcio Nunciatelli IR Analyst Corporate Headquarters Avenida Marcos Penteado de Ulhôa Rodrigues 939 Torre II / Edifício Jatobá / 14 th floor Barueri. São Paulo. Brazil 06460-040 Stella Hong IR Analyst Custodian & Market Maker Independent Auditors B3 Ticker 74