Instituto Hermes Pardini S.A.

(A free translation of the original in Portuguese)

Instituto Hermes

Pardini S.A. Quarterly information (ITR) at March 31, 2018 and report on review of quarterly information


2 PricewaterhouseCoopers, Rua dos Inconfidentes 911, 17º e 18º, Belo Horizonte, MG, Brasil 30140-128, Caixa Postal 289 T: (31) 3269-1500, F: (31) 3261-6950, www.pwc.com/br

Report on review of quarterly information To the Board of Directors and Stockholders Instituto Hermes Pardini S.A. Introduction We have reviewed the accompanying parent company and consolidated interim accounting information of Instituto Hermes Pardini S.A. ("Company") included in the Quarterly Information Form (ITR) for the quarter ended March 31, 2018, comprising the balance sheet as at that date and the statements of income, comprehensive income, changes in equity and cash flows for the quarter then ended, and a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the parent company and consolidated interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company and consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

Instituto Hermes Pardini S.A.

3

Other matters Statements of value added We have also reviewed the parent company and consolidated statements of value added for the quarter ended March 31, 2018. These statements are the responsibility of the Company's management, are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under the International Financial Reporting Standards (IFRS), which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the parent company and consolidated interim accounting information taken as a whole. Belo Horizonte, May 7, 2018 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Guilherme Campos e Silva Contador CRC 1SP218254/O-1

Earnings Release | 1Q18

EARNINGS CONFERENCE CALL (In Portuguese with simultaneous translation into English)

Date: May 8, 2018 (Tuesday)

Portuguese: 10.00 a.m. Brasília

English: 09.00 a.m. New York / 2:00 p.m. London

Phone numbers for link-up: Brazil: +55 11 3193-1001 Brazil: +55 11 2820-4001

USA: +1 646 828-8246 London: +44 20 7442-5653

Password: Grupo Pardini

Webcast: www.grupopardini.com.br/ri

TICKER: PARD3

Total number of shares: 130,978,595

Free float (*): 45,880,852 shares (35.0% of the total)

CONTACT: INVESTOR RELATIONS

e-mail: [email protected]

site: www.grupopardini.com.br/ri

Phone number: +55 (31) 3629-4503

(*) Posição em 30 de abril de 2018

2 de 70

Belo Horizonte, May 07, 2018 - Instituto Hermes Pardini S.A. (“IHP”), one of Brazil’s largest diagnostic medicine companies, is announcing its operating and financial earnings for the first quarter of 2018. Except where otherwise indicated, the amounts in this document are expressed in local currency (Reais). The Company’s consolidated financial statements are prepared in accordance with accounting practices adopted in Brazil, based on Brazilian Corporate Law and the regulations of the CVM (Brazilian Securities Commission).

1. Operating and Financial Highlights

1.1. 1Q18 Operational Highlights

As a result of the first stage of Project Enterprise, the Company selected Siemens as its main partner to implement its new automated laboratory platform, including supplies by Siemens of equipment, software, materials and resources specializing in fields that currently account for the highest volume of tests processed by the Company;

The month of March again saw a record number of tests with a total volume of over 8.5 million diagnostic tests;

Our R&D team concluded 8 project rollouts in 1Q18, of which 4 related to developing new types of tests and 3 to insourcing tests that had previously been outsourced;

We concluded the process of acquiring 51% of Labfar shares, one of the few companies in Brazil qualified to process toxicological tests with a wide range detection window. Rapid growth in this market over recent years has been driven by Brazil's tighter traffic legislation, which is starting to have positive impacts for society, including lower traffic accident numbers on federal highways.

1.2. Financial highlights in 1Q18

Gross Revenue growth (+9.5%) and higher volumes in both business segments; Adjusted EBITDA margin 20.5% and gross margin 30.3%; Return on Invested Capital (ROIC) 30.8% excluding goodwill; Kick-off for our Business Efficiency Project designed to create opportunities and improve our commercial

and administrative structures.

1.3. 1Q18 lab-to-lab segment highlights

Evolution in volume of tests (+10.6%) and gross revenue (+7.5%); Commercial strategy drove the growth of our customer base: there were 5,151 revenue generating

customers in the course of 1Q18, which was up 304 (+6.3%) on 1Q17; Average ticket was down (-2.9%) reflecting the mix of tests and more competitive environment; Growth of gross revenue per client (+1.2%) and volume of tests per client (+4.1%); Same Lab Sales grew 7.4%.

1.4. 1Q18's PSC segment highlights:

Growth in volume of tests (+10.6%) and gross revenue (+8.2%); The Hermes Pardini brand's Net Promoter Score (NPS) in Minas Gerais (MG) remained stable at 74 in 1Q18,

in line with previous periods' numbers. Its São Paulo NPS reached 73 in Feb/18 and show strong year-over-year growth, which reflected numerous initiatives taken by the operation;

We opened a new large-scale unit in Rio de Janeiro (Nova Iguaçu) in May/18 as well as two small units in Minas Gerais (Lagoa Santa and Sete Lagoas) in April/18;

We concluded the process of deploying our new front-office service system in Rio de Janeiro;

3 de 70

We added more self-service totems at several units in Minas Gerais as part of Pardini Group's technological innovation.

4 de 70

2. Letter from Management

It is a great satisfaction to submit Instituto Hermes Pardini's earnings release for the first quarter of 2018 (1Q18) to shareholders and the market in general. There has been some economic recovery in recent months, as shown by activity indicators, but it has not yet had significantly impacted the level of employment or even the number of health plan beneficiaries. Brazil's National Health Agency (ANS) reported that approximately 47.4 million people had access to health care plans at the end of March 2018, which was up only 0.3% on the prior year number. Even in this challenging context, both of our business units posted operational metrics that continued to show significant evolution in 1Q18. In the Lab-to-Lab segment, our 1Q18 numbers continued to show volume and revenue growing, but at a slightly lower pace than previous periods. In the quarter, we did approximately 16.8 million tests showing 10.6% growth on 1Q17. Gross revenue totaled R$164.0 million in 1Q18 representing a 7.5% growth on the same period of the previous year. The slowdown seen in the quarter is associated with certain effects briefly described below:

Calendar effect: there two fewer business days in 1Q18 than 1Q17;

Effect of incorporations: the gross revenue slowdown was due to the incorporation of subsidiaries (as explained in section 3.1 hereof)

Competitive environment: we saw stiffer competition in the segment, which eventually had a direct impact on the quarter's average ticket.

Volume and revenue growth-trend continuity is the outcome of a commercial strategy designed to (i) expand our customer portfolio, (ii) retain existing customers through a premium pricing and differentiation strategy, and (iii) expanding our share of wallet within the current base. On the first point, note that we ended the quarter with 5,151 revenue generating customers spread all over the country, and this number was 6.3% on 1Q17. As for the third point, standouts were the evolution of average volume per customer, which reached 3,3 thousand in 1Q18 (+4.1% on the same period of the previous year), and our Same Lab Sales indicator, which was up 7.4% on 1Q17. In the PSC segment, volume of tests ended the quarter at 6.2 million and gross revenues at R$152.1 million, which were up 10.6% and 8.2% respectively on 1Q17. An important aspect to note is that these growth indicators were boosted by recent acquisitions: (i) Ecoar Medicina Diagnóstica (MG) was acquired in October 2017 and (ii) Laboratório de Análises Clínicas Humberto Abrão (MG) was acquired in November 2017. Excluding the effect of these acquisitions, the PSC segment's gross revenue would have posted 1.2% year-on-year growth for 1Q18. Taking results by region, we still see solid growth indicators in Goiás (GO). Gross revenue grew 10.5% on 1Q17, driven by volume of clinical and image analysis tests. We believe this trend reflects (i) more favorable market conditions in the region, (ii) the attractiveness of the Padrão brand and (iii) the stability of our management and customer service model. In Minas Gerais (MG), we saw 18.6% year-over-year growth in gross revenue in 1Q18 against 2017, which was boosted by (i) growth in the volume of clinical and image analysis tests and (ii) consolidation of the numbers posted by the Ecoar and Humberto Abrão labs we acquired in 4Q17. Even excluding these acquisitions, the operation would still post 5.3% a growth rate against 1Q17, which we see as a very positive result. This performance reflects the strategy of reinforcing the attributes of the Hermes Pardini brand through innovations in the customer service process and repositioning the addresses of key units. While our biggest competitors decided to close stores in 2017,

5 de 70

we decided to keep our stores open. Additionally, in April, we opened two small units in the cities of Lagoa Santa and Santa Luzia, both located in the Belo Horizonte metropolitan region, in order to meet local demand there. On the other hand, we saw a trend reversal in the Rio de Janeiro operation, which in 1Q18 posted gross revenue down approximately 8.7% on 1Q17. This fall in gross revenue was associated to lower volume of image tests and lower average ticket. In relation to imaging test volume numbers, the fall seen in the quarter was mainly associated with (i) the incorporation made at the end of 4Q17 in order to simplify administrative structure, which meant that some plan operators could not use our units during the registration and/or re-accreditation period, (ii) strategic trends affecting a major health plan operator in the region that insourced its imaging tests, especially those involving more complexity and (iii) a calendar effect, since there were two fewer business days in 1Q18 than 1Q17. The fall lower average ticket in Rio de Janeiro was associated with (i) strong growth in the volume of clinical analysis (+10.7% on 1Q17) and (ii) reduced volume of imaging tests as mentioned above, more concentrated in tests with higher levels of complexity and health plan operators that had been posting above-average tickets in the region. A point to note is that we are continuing to upgrade the units' processes and infrastructure in order to improve the level of customer service and replicate the Company's high standards. In this respect, the first quarter is a lower volume period due to seasonal factors, so we made good use of this period to conclude the process of replacing front-office systems with a solution already used in other locations. The new system is ready to handle all operational routines in both imaging and clinical analysis. In addition, the technological platform is integrated with the Company's back-office systems, so several processes that were being performed manually can now be automated. As a result of these improvements, we expect to gain operational efficiencies and see improved levels of customer service. Our São Paulo (SP) operation showed a 6.1% fall in gross revenue on 1Q17, which was a slower pace than the previous quarter. We have developed several initiatives to upgrade the region's customer service model and this is already starting to get results, as seen in (i) strong growth of the service level indicator (NPS), which reached 73 in February 2018, and (ii) higher year-over-year volume of imaging tests in March, compared to the same month in the previous year. It is also worth noting that at the end of February 2018 we inaugurated our Morumbi unit, which is the first store in the region that follows the management model and processes already adopted in Minas Gerais. We believe this model will be very attractive for both patients - due to the portfolio of tests and quality of care with a high level of hospitality - and for health plan operators too, given its cost-benefit ratio. Unlike other stores in São Paulo, the Morumbi unit is prepared to handle high volumes of clinical analyses with a complementary image portfolio focusing on tests related to women's health and nuclear magnetic resonance. Despite growing test volumes in both business units, we saw both operating margins fall: in the Lab-to-Lab segment, 1Q18's gross margin (34.8%, down 178 bps on 1Q17) reflected (i) the company's higher cost structure required to support the operation's growth, which had been the case in 4Q17 too, (ii) there were fewer business days than in 1Q17 and (iii) there was more competition in the segment, which required our commercial area to make decisions that eventually lowered average ticket in order to attract new customers or to build on existing customer relationships. In the case of the PSC segment, the lower gross margin in 1Q18 (24.8%, down 505 bps on 1Q17) was mainly due to shrinking gross revenue in Rio de Janeiro, where the revenue-mix consisting mostly of imaging tests means that operational leverage is higher. Therefore, consolidated gross margin ended the quarter at 30.3% and was down 324 bps on 1Q17.

6 de 70

1Q18's R$59.8 million adjusted EBITDA was down 7.2% year-over-year. The quarter's Adjusted EBITDA margin was 20.5%. We continue to pose an optimistic outlook for Instituto Hermes Pardini's operational and financial prospects. In the short and medium term, Brazil's base rate (SELIC) is expected to fall while economic activity indicators will eventually pick up in the coming quarters, as several market analysts have pointed out, so these facts should help to create new jobs which will drive the total number of people with access to health plans. In the long term, the sector should benefit from Brazil's aging population since number of tests, average ticket and patient age are closely correlated. In the Lab-to-Lab segment, despite high competitive pressure in the short term, we see opportunities to pursue growth in revenue levels and higher profit margins in the medium and long term. Firstly, economic activity is expected to pick up which may drive volume of tests for our customers which should benefit the Company. Secondly, over the last few quarters we have developed strategic initiatives to strengthen our competitive edge in the segment, in particular:

Project Enterprise, in which the process of negotiating with suppliers concluded in December 2017. When implemented, this should enable Instituto Hermes Pardini to offer a whole new level of customer service;

Digital Support, which consists of redesigning customer service processes so that they will cater for current and future customer needs.

Finally, we believe that the trend toward outsourcing clinical analysis tests will continue in the coming periods, in particular for more complex tests, either through internal development (R&D) or through acquisitions. In this respect, through our Precision Medicine and Forensic Toxicology business units we will be pursuing an even higher level of specialization for our test portfolio. In relation to Forensic Toxicology tests, a highlight was the acquisition of Labfar Pesquisa e Serviços (“Labfar”), one of the few companies in Brazil to process drug abuse tests with a wide-range detection window. This market has been growing rapidly in recent years due in particular to improved Brazilian traffic legislation, and it is beginning to generate positive impacts for society, including lower numbers of traffic accidents on federal highways. The PSC segment has higher operating leverage because a significant portion of costs may be classified as “fixed costs”. Therefore any acceleration of economic recovery in the coming quarters may help this business unit to keep profit margins closer to historic averages. In this respect, our strategy is to optimize the use of our assets in Minas Gerais (MG), where we opened a significant number of stores from 2013 through 2015. Nevertheless, we are set to continue opening small stores in specific cases and focusing on collection of clinical analyzes, in order to meet demands from sources of payment and strengthen our brands` reputation in the region. In Goiás (GO), our strategy is to be pursuing opportunities to grow the image test business in order to complement our portfolio and strengthen the Padrão brand`s attributes. In Rio de Janeiro (RJ), our strategy is to pursue growth opportunities by opening new units in 2018 and bringing in new equipment for existing units. The aims of these initiatives are to continue enhancing the level of service offered to customers and strengthen our competitive position in the region.

7 de 70

In São Paulo (SP) in 2018, we are set to evaluate the service model offered at the old units and continue to focus efforts on improving service levels, in order to strengthen the Hermes Pardini brand as a byword for quality in the region. The purpose of these initiatives is to improve operational and financial indicators. Finally, we shall continue working to ensure that Instituto Hermes Pardini be one of the industry's most profitable and solid companies, honoring our corporate commitments to ethics, responsibility - and technical rigor in particular, while constantly strengthening our brand's pillars: medicine, health and wellness. Thank you Roberto Santoro Meirelles Chief Executive Officer

8 de 70

3. Income Statements for the Year

3.1. Gross Revenue

Gross revenue from the provision of services totaled R$316.6 million in 1Q18, a 9.5% increase in relation to 1Q17. This increase

was observed both in the Lab-to-Lab segment, which registered a 7.5% growth in gross revenue between the periods, and in

the PSC segment, which registered an 8.2% growth in gross revenue, mainly on account of the consolidation of the results of

the companies Ecoar and Humberto Abrão, acquired at the end of 2017.

Gross Revenue of the Lab-to-Lab segment

Gross revenue for the Lab-to-Lab segment totaled R$164.0 million in 1Q18, against the R$152.5 million reported for the same

period in 2017, which represents a 7.5% increase.

R$ MM 1Q17 1Q18 Variation

Lab-to-Lab 152.5 164.0 7.5%

PSC 140.5 152.1 8.2%

Eliminations -4.0 0.6 -114.1%

Consolidated 289.1 316.6 9.5%

9 de 70

The growth in gross revenue is directly related to the increase in the number of tests and the number of clients in

the Lab-to-Lab segment. The number of tests increased by 10.6% in 1Q18 by comparison with the same period in

2017, reaching 16.8 million for the quarter. When we analyze the growth achieved in 1Q18, we note that the

Southeastern region had the greatest share in this result, with highlight going to the state of Rio de Janeiro where

we have developed many commercial initiatives in the last quarters.

The increase in the number of revenue-generating clients in the Lab-to-Lab segment, which totaled 5,151 in 1Q18

(+6.3% against 1Q17), reflects the Company’s strategy to expand its client base both on existing routes as well as by

means of opening up strategic commercial routes, mainly in the country’s Southeast, South and Midwest regions,

without any need for substantial investments in operating bases.

10 de 70

In 1Q18, the average ticket per test was R$9.8, which translates into a decrease of -2.9% in relation to the same

period the year before, mainly due to (i) the variation in the mix of tests, (ii) the growth in the volume of large

customers, as a consequence of a mix of tests with lower average ticket, and (iii) greater competition in the segment,

which required the commercial area to make decisions in relation to adjusting the prices to attract new customers

or even to encourage current customers to increase their volume.

Gross revenue per client showed a +1.2% increase in 1Q18 by comparison with 1Q17, rising from R$31.5 thousand

per client per quarter to R$31.8 thousand. The downturn in the rates of growth in this indicator, against previous

quarters, is mainly due to the calendar effect observed in 1Q18, which showed a lower number of working days by

comparison with 1Q17, and the lower average ticket for the period.

Revenue per client calculated as Gross Revenue for the period/number of clients who generated revenue in the period.

Number of tests per client calculated as Number of Tests during the period/ number of clients who generated revenue in the period

In the Same Lab Sales concept, gross revenue posted a 7.4% growth in 1Q18, by comparison with 1Q17. An analysis

of the Same Lab Sales indicator allows us to arrive at the conclusion that approximately 70% of the growth in gross

revenue showed by the Lab-to-Lab segment comes from clients that were already part of IHP’s active client base

the year before, in other words, the increase was due to factors such as gain in terms of share of wallet, and the

increase in outsourcing by clients.

11 de 70

Up until 3Q17, the PSC units located in São Paulo (Hermes Pardini/Digimagem) and Rio de Janeiro (Guanabara) were

independent legal entities. For tax reasons, when a test was collected in these regions and afterwards forwarded to

the NTO, a tax invoice for services was issued by the Parent Company and, subsequently there was recognition of

revenue in the Lab-to-Lab segment. It should be borne in mind in the results consolidation process that there was

no duplication of revenue recognition, since the amount was canceled out by the “Eliminations” line. From 4Q17

onward, with the conclusion of the corporate merger, operations in São Paulo and Rio de Janeiro became part of

the parent company. Consequently, a test collected in these regions now only generates revenue in the PSC segment

and, as a result, has no impact whatsoever on the Lab-to-Lab result.

Therefore, part of the slowdown observed in the growth rates of the Lab-to-Lab segment’s gross revenue in 1Q18

can be explained by the completion of the merger process. The Company estimates that the growth rate in 1Q18

would be approximately 10.8% if we excluded this effect, as shown in the simulation below:

Gross Revenue of the PSC Segment

In the PSC segment, gross revenue totaled R$152.1 million in 1Q18, versus R$140.5 million in the same period in

2017, which translates into an 8.2% increase. Excluding the effects of Ecoar and Humberto Abrão, gross revenue of

the PSC segment registered a 1.2% increase in 1Q18 by comparison with the same period in 2017.

Lab-to-Lab Gross Revenue (R$ MM) 1Q17 1Q18 Variation

Lab-to-Lab 152.5 164.0 7.5% Lab-to-Lab Gross Revenue Growth 7.5%

Eliminations⁽¹⁾ -4.0 0.6 -114.1% Adjusted Lab-to-Lab Gross Revenue Growth 10.8%

Adjusted Gross Revenue 148.5 164.5 10.8% Incorporation Effect on Growth Rate 3.2%

Summary Table

12 de 70

Gross Revenue including home collection and DAE (corporate service department).

The service units in Minas Gerais, where the Company operates via the Hermes Pardini, Ecoar, Humberto Abrão and

Pra Você brands, accounted for roughly 57.5% of the PSC segment’s gross revenue in 1Q18. Rio de Janeiro, a market

in which the Company primarily operates through 10 service units bearing the Guanabara brand, represented

approximately 20.6% of revenue in 1Q18. The Company’s other markets in the PSC segment, Goiás (the Padrão

brand) and São Paulo (the Hermes Pardini brand), accounted for 12.2% and 9.7%, respectively, of gross revenue in

1Q18.

The Minas Gerais and Goiás markets showed an increase in gross revenue when we compare 1Q18 to 1Q17. In the

case of Minas Gerais, this increase is mainly due to the growth registered in imaging tests, as well as to the inclusion

of the results from the recently acquired companies (Ecoar and Humberto Abrão). In Goiás, the increase in gross

revenue was due to the growth in the number of clinical analysis and imaging tests. On the other hand, in São Paulo

and Rio de Janeiro there was a decline in gross revenue, when we compare 1Q18 to 1Q17, due to the decrease in

the number of imaging tests in both locations.

13 de 70

Excluding the effects of Ecoar and Humberto Abrão, the volume of tests in the 1Q18 increased by 4.3% in relation to the same period of 2017, with approximately 5.6 million being carried out in 1Q17 and 5.9 million in 1Q18. Including the tests collected by Ecoar and Humberto Abrão, the volume of tests achieved 6.2 million in 1Q18, an increase of 10.6% by comparison with 1Q18, reflecting the positive performance of the recently acquired companies.

On the other hand, we saw a decrease in gross revenue from operations in Rio de Janeiro, reflecting a decrease in

the volume of imaging tests and average tickets.

The decrease in volume of imaging tests in Rio de Janeiro is mainly related to (i) the merger occurring in the end of

4Q17, in order to simplify the administrative structure and enable goodwill amortization, which prevented clients

of certain operators from using our units during the updating of data records and/or reaccreditation period, (ii)

strategic movement observed in a large healthcare provider in the region, which internalized imaging tests,

especially those with greater complexity level, and (iii) the calendar effect, given that in 1Q18 we had two business

days less than in 1Q17. The decrease in the average ticket is related to (i) the significant increase in the volume of

clinical tests (+10.7% in comparison with 1Q17) and (ii) decrease in the number of imaging tests, as described above,

more concentrated on tests with greater complexity level and on healthcare providers presenting tickets above the

average in the region.

The PSC segment’s consolidated average ticket was R$24.4 in 1Q18, in comparison with R$25.0 in 1Q17, a 2.1%

decrease in relation to 1Q18, reflecting the decrease in imaging tests’ average ticket in Rio de Janeiro and São Paulo,

as explained above. In 1Q18, imaging tests accounted for approximately 44% of the gross revenue of the PSC

segment.

4Q16 does not include the number of tests carried out by Guanabara between 12/23/16 and 12/31/16.

In 1Q18 gross revenue per service unit decreased by 2.6% when compared with 1Q17, totaling R$1,267.2 thousand.

The decrease in this indicator reflects (i) the decrease in revenue from imaging tests in Rio de Janeiro, (ii) opening

of units in São Paulo (1), Rio de Janeiro (1) and Minas Gerais (2), and (iii) the acquisition of the Humberto Abrão and

Ecoar labs. Excluding the effects of Ecoar and Humberto Abrão, gross revenue per unit decreased by 2.4% in

comparison with the same quarter of the previous year, from R$1,301.0 thousand in 1Q17 to R$1,270.0 thousand

in 1Q18.

14 de 70

(*) Gross revenue in the period/number of service units generating revenue in the period.

At the end of 1Q18, the Company had a total of 124 service units, compared to 112 at the end of 1Q17. The increase

in the number of service units was due to the eight units acquired from Ecoar and Humberto Abrão, the opening of

one unit of the Pra Você brand, along with the opening of a new Hermes Pardini brand unit in São Paulo and in the

metropolitan region of Belo Horizonte, in addition to a new unit of the Guanabara brand in Rio de Janeiro.

With the integration of these units, the total area went from 81.2 thousand square meters in 1Q17 to 94.2 thousand

square meters in 1Q18. The average area per unit reached 760.0 square meters at the end of 1Q18 by comparison

with 724.8 square meters in the same period in 2017, a 4.8% increase between the periods. This move is in line with

the Company’s strategy of having larger service units with a structure that is suitable for offering clinical analysis

and imaging tests.

Number of service units and area at the end of the periods, including Progenética (RJ) and Diagnostika (SP).

The PSC segment showed decrease when we analyze the gross revenue indicator per square meter. Gross revenue

per m² totaled R$1.6 thousand in 1Q18, by comparison with the R$1.8 thousand observed in 1Q17, which

represented a 7.0% decrease between the periods. This decrease in 1Q18 mainly reflects the (i) decrease in revenue

from imaging tests in Rio de Janeiro, (ii) opening of units in São Paulo (1), Rio de Janeiro (1) and Minas Gerais (2),

and (iii) the acquisition of the Humberto Abrão and Ecoar labs. Excluding the effects of Ecoar and Humberto Abrão,

revenue per square meter decreased 1.5%.

Stores 1Q17 1Q18 Variation M² (Thousand) 1Q17 1Q18 Variation

MG 64 74 15.6% MG 50.1 61.7 23.1%

GO 31 31 0.0% GO 9.3 9.2 -0.9%

SP 6 7 16.7% SP 11.4 12.9 13.0%

RJ 11 12 9.1% RJ 10.4 10.4 0.6%

Total 112 124 10.7% Total 81.2 94.2 16.1%

15 de 70

Under the Same Store Sales (SSS) concept, gross revenue posted a 1.0% growth in 1Q18. The decrease in this

indicator in relation to the same period the year before is mainly due to the decline observed in gross revenue of

the units in Rio de Janeiro and São Paulo, which was directly related to the drop in the volume of imaging tests.

Excluding the effects of the decrease in gross revenue in Rio de Janeiro, the Same Store Sales indicator for 1Q18

would be approximately 4.6%.

However, it is worth highlighting that despite the decrease observed in imaging tests in São Paulo and Rio de Janeiro,

the units in Minas Gerais and Goiânia have been showing significant increase in the Same Store Sales concept, which

indicates a gradual economic improvement in these two markets.

16 de 70

3.2. Deductions from Gross Revenue

The total deductions and rebates represented 7.8% of gross revenue in 1Q18, by comparison with 7.5% in 1Q17.

The main variation occurred in Tax on services, from 5.9% in 1Q17 to 6.2% in 1Q18, following the trend seen in

previous quarters. Provisions for Disallowances remained relatively stable between these periods, at 1.2% of gross

revenue in 1Q17, and 1.1% of gross revenue in 1Q18. It is our assessment that this level of disallowances is

appropriate for the Company’s profile.

3.3. Net Revenue

Due to the growth of gross revenue in the Lab-to-Lab and PSC business units, as previously described, net revenue

ended the year at R$291.9 million, a 9.2% increase by comparison with the same period in 2017.


Disallowances -3.3 -3.4 2.1%

Cancelled Sales and Other Rebates -1.1 -1.6 44.8%

Taxes on Services -17.2 -19.6 14.3%

Cancellations and Deductions (R$ MM) -21.6 -24.6 14.0%

% Gross Revenue 1Q17 1Q18 Variation

Disallowances -1.2% -1.1% +8 bps

Cancelled Sales and Other Rebates -0.4% -0.5% -12 bps

Taxes on Services -5.9% -6.2% -26 bps

Cancellations and Deductions / Gross Revenue (%) -7.5% -7.8% -30 bps


Lab-to-Lab 141.5 153.8 8.7%

PSC 129.4 140.3 8.4%

Eliminations -3.5 -2.2 -38.8%

Consolidated 267.4 291.9 9.2%

17 de 70

3.4. Cost of Services Rendered

Cost of services rendered totaled R$203.6 million in 1Q18, a 14.5% increase in relation to 1Q17, largely as a result

of the increase in the number of tests in both segments. As a percentage of net revenue, cost of services rendered

increased by 324 bps, from 66.5% in 1Q17 to 69.7% in 1Q18.

In the period ended March 31, 2018, the Company reclassified, in the income statement, certain expenses from the

account “General, administrative and others” to “Cost of services rendered”, because the Company believes this is

a better description of the function of these expenses. The reclassified expenses refer mainly to maintenance of

facilities in the customer service units, and expenses with acquisition of raw material used in the provision of

services. The new classification was extended to 2017 for the purpose of information comparability.

The costs in 1Q18 mainly consisted of materials and personnel expenses. The chart below shows the Company’s

main costs in 1Q18 and 1Q17:


Lab-to-Lab 89.7 100.2 11.7%

PSC 90.9 105.6 16.2%

Eliminations -2.8 -2.2 -19.2%

Total 177.8 203.6 14.5%

18 de 70

The main variations between 1Q18 and 1Q17 in the costs of services rendered were as follows:

Personnel: an increase from 22.6% of net revenue in 1Q17 to 24.4% in 1Q18, due to (i) integration of the

figures for Ecoar and Humberto Abrão, (ii) the hiring of personnel to meet the growth in the volume of tests,

and (iii) collective bargaining agreements in Goiás and Rio de Janeiro throughout the year 2017. In relation

to the first point, the operations of Ecoar and Humberto Abrão added approximately R$3.3 million in

Personnel Expenses;

Materials: increase from 22.2% of net revenue in 1Q17 to 23.7% in 1Q18, mainly due to (i) the integration

of figures for Ecoar and Humberto Abrão, (ii) variation in prices of certain materials, and (iii) greater share

of clinical tests and vaccines in the revenue of the PSC segment. In relation to the first point, the operations

of Ecoar and Humberto Abrão added approximately R$1.5 million in Materials Expenses.

3.5. Gross Profit

Gross profit totaled R$88.3 million in 1Q18, against R$89.6 million in 1Q17, which denotes a 1.4% decrease. The

consolidated gross margin in 1Q18 was 30.3%, which represents a decrease of roughly 324 bps against the gross

margin reported in 1Q17, influenced by the decrease in the operating margin of both segments.

19 de 70

In Lab-to-Lab segment, gross margin for 1Q18 decreased 178 bps in comparison with the same period of the prior

year (36.6% in 1Q17). This decrease is mainly a consequence of the decrease in the segment’s average ticket, as

described above, and an increase in the Company’s structure of costs to support the expansion of its operations.

The gross margin in the PSC segment was 24.8% in 1Q18, a decrease of around 505 bps. This decrease is mainly due

to the decrease of gross revenue in Rio de Janeiro, whose revenue mix primarily comprises imaging tests, and thus

has a greater operating leverage.

3.6. Operating Expenses (Selling, Administrative and Others)

Operating expenses totaled R$42.3 million in 1Q18, an increase of 11.5% by comparison with 1Q17. As a percentage

of net revenue, there was a 30 bps increase, from 14.2% in 1Q17 to 14.5% in 1Q18:


Lab-to-Lab 51.8 53.5 3.4%

PSC 38.6 34.7 -9.9%

Eliminations -0.8 0.1 -109.9%

Gross Profit 89.6 88.3 -1.4%

Gross Margin (%) 33.5% 30.3% -324 bps

20 de 70

With regard to Selling Expenses, the R$6.1 million increase observed between 1Q17 and 1Q18 is mainly due to the following factors:

Publicity and advertising expenses: increase of R$0.7 million with publicity in Minas Gerais, in order to

reinforce Hermes Pardini brand;

Incorporation of figures for the new companies: R$0.5 million referring to Ecoar and Humberto Abrão,

acquired in 4Q17;

Commission for the sales team: increase of R$0.9 million;

Guanabara Expenses: expenses at the Guanabara laboratory in Rio de Janeiro in 1Q17 were reduced by

various revisions and reconciliations related to the acquisition process (approximately R$2.4 million);

CRC: increase of R$0.6 million in expenses related to the Customer Service Center in Rio de Janeiro, as a

result of the outsourcing process, completed in 4Q17.

In December 2017, Management began to present losses on receipts from clients and with pre-billing in the group

of other operating revenues and expenses. In prior periods, these were shown in selling expenses. The new

presentation was extended to March 2017 for the purpose of information comparability.

The main item that caused the increase of R$1.3 million in general and administrative expenses was the integration

of the figures for Ecoar and Humberto Abrão (R$1.1 million).

R$ MM% Net

RevenueR$ MM

% Net

Revenue

Selling Expenses 14.1 5.3% 20.2 6.9%

General and Administrative Expenses 20.0 7.5% 21.3 7.3%

Other Operating Income / Expenses 3.8 1.4% 0.8 0.3%

Total Operating Expenses 38.0 14.2% 42.3 14.5%

1Q18

R$ MM

1Q17

21 de 70

3.7. Financial Result

The financial result for 1Q18 was a loss of R$5.0 million, compared with the negative amount of R$4.5 million in

1Q17. The main changes occurred in revenue from financial investments: in addition to the lower cash balance in

1Q18 (-R$218.4MM in comparison with 1Q18), the drop-in interest rates observed over the last few months had a

direct impact on revenues from financial investments.

3.8. Income and Social Contribution Taxes

The effective Income and Social Contribution Tax rate was 27.9% of Pre-Tax Income in 1Q18. The table below shows

the evolution of taxation on income for the year:

The decrease observed in the effective Income and Social Contribution tax rate when we compare 1Q18 to 1Q17 is

mainly due to the use of income and social contribution tax credits from previous years arising from expenses

incurred in previous years

The Company began to amortize goodwill and surplus value resulting from acquisitions of companies (roughly

R$187.0 million of goodwill, as described in note 11, and R$32.6 million of capital gains) during the last quarter of

2017. The following table shows the provisional schedule of the amortization of goodwill for the following periods:


Net Finance Result -4.5 -5.0 11.1%

Finance Income 5.1 2.9 -43.9%

Income from financial investments 4.2 2.2 -48.9%

Others 0.9 0.7 -19.1%

Finance Costs -9.9 -7.7 -22.4%

Interest on borrowings -4.9 -5.1 3.1%

Interest on installments -1.0 -0.5 -49.9%

Restatement of investment call option debt -0.3 0.0 -100.0%

Other finance costs -3.7 -2.1 -43.2%

Foreign Exchange Variation 0.3 -0.2 -147.0%

Foreign exchange income 0.5 0.2 -47.8%

Foreign exchange expenses -0.1 -0.4 174.8%


Earnings Before Taxes (EBT) 47.2 41.0 -13.0%

Expected taxes (standard rate of 34%) -16.0 -14.0 -13.0%

Effect on the results of subsidiaries taxed under the presumed profit 0.8 0.6 -30.8%

Income Tax and Social Contribution from previews years -0.9 1.4 -257.4%

Other exclusions (additions), net 0.2 0.6 208.4%

Income tax and social contribution -15.9 -11.5 -27.8%

% EBT -33.7% -27.9% +574 bps

Current -16.5 -10.8 -34.7%

Deferred 0.6 -0.7 -214.1%

2018 2019 2020 2021 2022 2023

Amortization Expected 4.1% 20.0% 20.0% 20.0% 20.0% 15.9%

22 de 70

Cash impact in 4Q17 and 1Q18 of the order of R$3.1 million.

3.9. Net Income

Net income totaled R$29.6 million in 1Q18, a 5.4% decrease against 1Q17, when it was R$31.3 million. The net

margin was 10.1% in 1Q18, versus 11.7% in the same period in 2017.

3.10. Non-accounting measures

Adjusted EBITDA and EBITDA

Adjusted EBITDA, excluding non-recurring effects on net income, totaled R$59.8 million in 1Q18, which represents

a 7.2% decrease over 1Q17, when Adjusted EBITDA was R$64.4 million.

1Q17 1Q18 Variation

Net Income (R$ MM) 31.3 29.6 -5.4%

Net Margin (%) 11.7% 10.1% -156 bps


Net Income 31.3 29.6 -5.4%

Finance Result 4.5 5.0 11.1%

Depreciation and amortization 10.4 12.6 20.4%

Income tax and social contribution 15.9 11.5 -27.8%

(+) Non recurrent/operating items 2.4 1.2 -49.4%

Adjusted EBITDA 64.4 59.8 -7.2%

margin 24.1% 20.5% -362 bps

(+) Non recurrent/operating items -2.4 -1.2 -49.4%

EBITDA 62.1 58.6 -5.6%

margin 23.2% 20.1% -314 bps

23 de 70

The non-operating and non-recurring effects in 1Q18 totaled roughly R$1.2 million, with an emphasis on:

Expenses with the Incorporation Process in the amount of roughly R$0.5 million;

Expenses for Financial Advisors for M&A operations in the sum of R$0.3 million;

Corporate Efficiency Project: R$0.2 million in expenses with a consulting company which has been retained to identify and implement improvements in the Company’s commercial and administrative structures.

24 de 70

4. Balance Sheet and Cash Flow

4.1. Accounts Receivable

The Company’s receivables balance showed a 16.0% increase in relation to 1Q17, mainly as a result of the increase

in net revenue in the period. It is our assessment that the Company’s receivables portfolio is at an extremely healthy

level, due to the fact that there is a low level of concentration and we have already set up a provision for the entire

portfolio of receivables that are more than 120 days overdue.

4.2 CAPEX

Investments related to additions to property and equipment and intangible assets added up to a total amount of

R$14.3 million in 1Q18, an increase of 32.0% by comparison with 1Q17, when CAPEX was R$10.8 million.

The main investments made in 1Q18 are in connection with (i) improvements in existing units and (ii) the

expansion of the NTO’s production capacity. Please see below for more details:

Renovation of units in Minas Gerais, Goiás, Rio de Janeiro and São Paulo, amounting to approximately R$6.2

million;

Investments in equipment of high specialization in the NTO for expanding production capacity, totaling

approximately R$3.6 million;

R$ MM 1Q17 2Q17 3Q17 4Q17 1Q18

Trade Receivables 229.6 243.4 252.1 244.0 264.9

Current 203.3 209.9 213.0 200.3 225.2

From 1 to 60 days past due 13.4 16.0 26.9 29.8 22.0

From 61 to 120 days past due 2.6 2.5 1.7 4.3 6.0

Over 120 days past due 8.9 10.5 6.1 5.1 6.7

Other amounts overdue 1.4 4.5 4.3 4.5 4.9

Allowance for doubtful accounts -10.2 -11.5 -6.1 -5.1 -6.9

Provision for loss on services provided and not yet billed -1.4 -4.5 -4.3 -4.5 -4.9

Disallowances 0.0 0.0 0.0 0.0 0.0

Total 218.1 227.4 241.7 234.4 253.1

Current / Trade Receivables 88.5% 86.2% 84.5% 82.1% 85.0%

Balance overdue until 120 days / Trade Receivables 7.0% 7.6% 11.4% 14.0% 10.6%

Provisions / Balance overdue for more than 121 days 113.7% 110.0% 100.0% 100.0% 103.6%

Net Revenue 267.4 286.4 290.5 272.7 291.9

Days of Sales Outstanding 73.4 71.4 74.9 77.4 78.0


Additions in Property and Equipment 6.8 13.2 93.9%

Intangible 4.0 1.1 -72.6%

Total CAPEX 10.8 14.3 32.0%

25 de 70

The amounts related to the Enterprise Project refer mainly to expenses made during the planning and setup phase

of the new production model, which were capitalized.

4.3 Indebtedness

At the end of 1Q18, the Company had a net debt of R$115.1 million, which we regard as being an extremely healthy

leverage ratio (Net Debt/ EBITDA LTM of 0.5x).

The Company’s goal for the next few quarters is to maintain its net debt position at a healthy degree of leverage,

with the aim of reducing the weighted cost of capital and optimizing the capital structure.


Gross Debt (Borrowings) 302.4 259.8 -14.1%

Cash and Cash Equivalents 363.1 144.8 -60.1%

Net Debt -60.7 115.1 -289.6%

Net Debt / EBITDA LTM -0.3x 0.5x -264.8%

EBITDA LTM / Financial Result LTM -21.6 12.5 -158.1%

26 de 70

The debenture transaction that was carried out in March 2017 (principal amount of R$210 million) represented

80.5% of the Company’s total gross debt at the end of 1Q18. At present, 84.0% of the total gross debt is pegged to

the CDI rate, which has enabled the Company to reduce its financial cost as the SELIC rate (the Brazilian economy’s

basic rate of interest) has been reduced in recent months by the Monetary Policy Committee (COPOM).

The chart below shows the repayment schedule of the balances of loans and financing as at the end of 1Q18:

27 de 70

4.4 Cash Flow

Net cash flow generated by operating activities totaled R$15.8 million in 1Q18, by comparison with R$8.8 million in

1Q17.

R$ Thousand 1Q17 1Q18 Variation

Profit for the period 31,282 29,584 -5.4%

Adjustments to reconcile net income and cash and cash equivalents provided by operating activities:

Income tax and social contribution expenses recognized in the results for the period 15,878 11,461 -27.8%

Provision for impairment of trade receivables and disallowances 1,374 1,842 34.1%

Depreciation and amortization 10,423 12,553 20.4%

Net book value on disposal of property and equipment and intangible assets 1,393 111 -92.0%

Interest expense on borrowings and installment payments and loan agreements 5,871 5,549 -5.5%

Provision for tax, labor and civil risks 2,067 1,298 -37.2%

Restatement of liabilities for purchase of investments 270 0 -100.0%

Other adjustments to the result 0 -1,223 n.m

68,558 61,175 -10.8%

Changes in operating assets and liabilities:

Trade receivables -19,821 -20,508 3.5%

Inventories 163 4,376 2584.7%

Taxes recoverable -794 -334 -57.9%

Other current and non-current assets 6,213 2,351 -62.2%

Deposits in court -95 10 -110.5%

Trade payables -999 -806 -19.3%

Tax, social security, payroll obligations, and installment payments -13,153 -13,305 1.2%

Other current and non-current liabilities -3,905 -4,838 23.9%

Cash from operating activities 36,167 28,121 -22.2%

Other cash flows from operating activities:

Payment of interest on borrowings and installment payments and loan agreements -6,961 -11,174 60.5%

Payment of tax, labor, and civil claims -222 -331 49.1%

Income tax and social contribution paid during the period -20,161 -785 -96.1%

Net cash provided by operating activities 8,823 15,831 79.4%

Cash flows from investing activities:

Acquisition of property and equipment and intangible assets -10,812 -14,267 32.0%

Net cash used in investing activities -10,812 -14,267 32.0%

Cash flows from financing activities:

Capital Increase 187,272 0 -100.0%

Share Issue Costs -1,255 0 -100.0%

Purchase/sale of treasury shares 0 -3,946 n.m

Borrowings:

- Proceeds from borrowings 208,233 240 -99.9%

- Amortization -84,741 -11,390 -86.6%

Installments:

- Amortization -1,414 -1,574 11.3%

Dividends -67,400 0 -100.0%

Net cash provided by (used in) financing activities 240,695 -16,670 -106.9%

Increase in cash and cash equivalents 238,706 -15,106 -106.3%

Changes in cash and cash equivalents

Cash and cash equivalents at the beginning of the period 124,402 159,857 28.5%

Cash and cash equivalents at the end of the period 363,108 144,751 -60.1%

Increase in cash and cash equivalents 238,706 -15,106 -106.3%

28 de 70

5. ROIC – Return on Invested Capital

Excluding goodwill, ROIC totaled 30.8% in 1Q18:

12

(1)The eliminations refer mainly to intercompany transactions and are excluded for gross revenue calculation purposes. The significant

decrease in this account between 1Q17 and 1Q18 is mainly a consequence of the merger of Company’s subsidiaries approved in Special

General Meetings (“SGM”) held on October 2, 2017 and December 1, 2017.

Consolidated (R$ MM) 1Q17 2Q17 3Q17 4Q17 1Q18

EBIT LTM 164.3 167.9 183.8 192.2 186.5

NOPAT (EBIT LTM - 34%) 108.4 110.8 121.3 126.8 123.1

Average Invested Capital 350.2 365.2 378.6 390.5 400.2

ROIC without goodwill 31.0% 30.3% 32.1% 32.5% 30.8%

ROIC with goodwill 20.6% 19.3% 19.6% 19.5% 18.2%


Balance sheet All amounts in thousands of reais (A free translation of the original in Portuguese)

29 of 70

Parent company Consolidated Assets Note 3/31/2018 12/31/2017 3/31/2018 12/31/2017 Current assets Cash and cash equivalents 4 128,574 146,346 144,751 159,857 Trade receivables 5 238,016 222,478 253,079 234,413 Inventories 6 21,595 25,965 22,662 27,038 Taxes recoverable 7 22,038 21,674 22,786 22,452 Dividends receivable 24 5,453 5,453 Other current assets 8 28,601 34,511 28,263 35,393

Total current assets 444,277 456,427 471,541 479,153

Non-current assets

Long-term receivables:

Judicial deposits 16 4,917 4,923 5,074 5,084 Deferred income tax and social contribution 17 32,817 30,401 32,909 30,492 Receivables from related parties 24 2,907 Other non-current assets 8 47,181 45,160 47,182 45,160

Total long-term receivables 87,822 80,484 85,165 80,736

Investments 9 146,691 143,389 460 460 Property and equipment 10 207,252 204,297 232,790 229,426 Intangible assets 11 227,043 228,575 352,599 354,360

Total non-current assets 668,808 656,745 671,014 664,982

Total assets 1,113,085 1,113,172 1,142,555 1,144,135


Balance sheet All amounts in thousands of reais (continued)

The accompanying notes are an integral part of this quarterly information.

30 of 70

Parent company Consolidated Liabilities and equity Note 3/31/2018 12/31/2017 3/31/2018 12/31/2017 Current liabilities

Trade payables 12 101,249 101,861 107,558 108,364 Tax, social security and labor obligations 13 44,136 47,784 50,745 54,073 Borrowings and financings 14 55,407 41,600 56,113 42,306 Taxes payable in installments 15 6,402 6,534 7,520 7,740 Mandatory minimum dividends 4,241 4,241 4,241 4,241 Other current liabilities 18 16,627 21,894 17,149 22,664

Total current liabilities 228,062 223,914 243,326 239,388

Non-current liabilities

Borrowings and financings 14 203,565 236,768 203,691 237,070 Taxes payable in installments 15 34,702 36,802 45,008 47,545 Provision for risks 16 32,376 31,158 33,545 32,578 Deferred income tax and social contribution 17 6,441 3,144 8,106 4,990 Provision for loss on investments 9 381 113 Other non-current liabilities 18 45,645 44,943 45,645 44,968

Total non-current liabilities 323,110 352,928 335,995 367,151

Total liabilities 551,172 576,842 579,321 606,539

Equity 19

Share capital 336,074 336,074 336,074 336,074 Share issuance expenses (8,913) (8,913) (8,913) (8,913) Capital reserves 45,038 48,984 45,038 48,984 Carrying value adjustments (23,694) (23,540) (23,694) (23,540) Revenue reserves 183,725 183,725 183,725 183,725 Retained earnings 29,683 29,683

Equity attributable to the owners of the parent

561,913

536,330

561,913

536,330

Non-controlling interests 1,321 1,266

Total equity 561,913 536,330 563,234 537,596

Total liabilities and equity 1,113,085 1,113,172 1,142,555 1,144,135


Statement of income Quarter ended March 31 All amounts in thousands of reais unless otherwise stated (A free translation of the original in Portuguese)


31 of 70

Parent company

Consolidated

Note 2018 2017 2018 2017

Net service revenue 20 266,911 199,070 291,949 267,426

Cost of services 21 (186,433) (129,384) (203,620) (177,839)

Gross profit 80,478 69,686 88,329 89,587

Operating income (expenses)

Selling expenses 21 (19,288) (12,413) (20,224) (14,144) General, administrative and other expenses 21 (18,670) (14,232) (21,286) (19,977) Equity in the results of subsidiaries 9 3,034 3,786 Other operating expenses, net 22 (631) (2,486) (806) (3,833)

Profit before finance income (costs) 44,923 44,341 46,013 51,633

Finance result 23

Finance income 2,683 6,426 2,859 5,092 Finance costs (7,303) (5,649) (7,676) (9,886) Foreign exchange variations, net (151) 57 (151) 321

Profit before income tax and social contribution 40,152 45,175 41,045 47,160

Income tax and social contribution 17

Current (9,743) (12,160) (10,763) (16,490) Deferred (880) (1,751) (698) 612

(10,623) (13,911) (11,461) (15,878)

Profit for the period 29,529 31,264 29,584 31,282

Profit attributable to:

Owners of the parent 29,529 31,264 Non-controlling interests 55 18

29,584 31,282

Basic and diluted earnings per share - R$ 0.23 0.25


Statement of comprehensive income Quarter ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese)


32 of 70

Parent company

Consolidated

2018 2017 2018 2017


Comprehensive income for the period 29,529 31,264 29,584 31,282

Total comprehensive income attributable to: Owners of the parent 29,529 31,264 Non-controlling interests 55 18

Comprehensive income for the period 29,584 31,282

Basic and diluted earnings per share - R$ 0.23 0.25


Statement of changes in equity All amounts in thousands of reais (A free translation of the original in Portuguese)

The accompanying notes are an integral part of this quarterly information. 33 of 70

Share capital

Capital reserves

Revenue reserves

Note

Subscribed

Share issuance expenses

Special reserve for

goodwill on merger

Treasury shares

Legal reserve

Proposed distribution

of additional dividends

Profit retention

Total

Carrying value

adjustments

Retained earnings

Equity attributable

to the owners of the parent

Non-controlling interests

Consolidated equity

At December 31, 2016 148,802 51,090 18,747 73,252 129,467 221,466 (15,379) 405,979 1,257 407,236

Capital increase 187,272 187,272 187,272 Share issuance expenses 19.b

(8,913) (8,913) (8,913) Profit for the period

31,264 31,264 18 31,282

Realization of deemed cost through depreciation

(265) 265

At March 31, 2017

336,074

(8,913)

51,090

18,747

73,252

129,467

221,466

(15,644)

31,529

615,602

1,275

616,877

At December 31, 2017 336,074 (8,913) 51,090 (2,106) 25,224 158,501 183,725 (23,540) 536,330 1,266 537,596

Profit for the period 29,529 29,529 55 29,584 Realization of deemed cost through depreciation

(154) 154

Share buyback 19.c (3,946) (3,946) (3,946)

At March 31, 2018 336,074

(8,913)

51,090

(6,052)

25,224

158,501

183,725

(23,694)

29,683

561,913

1,321

563,234


Statement of cash flows Quarter ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese)


Parent company Consolidated

2018 2017 2018 2017

Cash flows from operating activities:


Adjustments to reconcile net income and cash and cash equivalents provided by:

Income tax and social contribution expenses recognized in the results for the period 10,623 13,911 11,461 15,878

Provision for impairment of trade receivables 1,592 758 1,842 1,374

Depreciation and amortization 11,263 7,166 12,553 10,423

Net book value on disposal of property and equipment and intangible assets 60 1,064 111 1,393

Equity in the results and realization of fair value (3,034) (3,786)

Interest expense on borrowings, financing, installment payments and loan agreements 5,337 2,526 5,549 5,871

Provision for tax, labor and civil risks 1,445 785 1,298 2,067

Restatement of liabilities for purchase of investments 270 270

Other adjustments to profit or loss (1,223)

(1,223)

55,592 53,958 61,175 68,558

Changes in operating assets and liabilities:

Trade receivables (17,130) (15,038) (20,508) (19,821)

Inventories 4,370 (58) 4,376 163

Taxes recoverable (364) 2 (334) (794)

Other current and non-current assets 1,132 7,135 2,351 6,213

Deposits in court 6 (30) 10 (95)

Trade payables (612) (620) (806) (999)

Tax, social security and salaries (13,195) (10,113) (13,305) (13,153)

Other current and non-current liabilities (4,565) (3,849) (4,838) (3,905)

Cash from operating activities

25,234 31,387 28,121 36,167

Other cash flows from operating activities:

Payment of interest on borrowings, financing and installment payments and loan agreements (11,126) (5,567) (11,174) (6,961)

Payment of tax, labor, and civil claims (227) (177) (331) (222)

Income tax and social contribution paid during the period (195) (16,291) (785) (20,161)

Cash flows from operating activities

13,686 9,352 15,831 8,823

Cash flows from investing activities:

Acquisition of property and equipment and intangible assets (12,746) (9,965) (14,267) (10,812)

Receivables from related parties (2,890) (20,011)

Net cash inflow (outflow) from investing activities

(15,636) (29,976) (14,267) (10,812)

Cash flows from financing activities:

Capital increase 187,272 187,272

Share issuance expenses (1,255) (1,255)

Purchase/sale of treasury shares (3,946) (3,946) Borrowings and financing

- Proceeds 240 208,233 240 208,233

- Amortizations (11,214) (70,365) (11,390) (84,741)

Installment payments:

- Amortizations (902) (886) (1,574) (1,414)

Dividends paid (67,400) (67,400)

Net cash inflow (outflow) from financing activities (15,822) 255,599 (16,670) 240,695

Increase (decrease) in cash and cash equivalents (17,772) 234,975 (15,106) 238,706

Increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period 146,346 113,598 159,857 124,402

Cash and cash equivalents at the end of the period 128,574 348,573 144,751 363,108

Increase (decrease) in cash and cash equivalents (17,772) 234,975 (15,106) 238,706


Statement of value added Quarter ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese)


Parent

company

Consolidated

2018 2017 2018 2017

Revenue

Gross sales and services 284,534 211,639 311,567 284,594 Other revenue 1,357 202 1,358 192 Provision for impairment of trade receivables (1,592) (758) (1,842) (1,374)

284,299 211,083 311,083 283,412

Inputs acquired from third parties

Cost of services (82,870) (71,019) (85,564) (76,698) Materials, electricity, outsourced services and others (51,900) (29,009) (57,505) (51,742) Impairment of assets (1,147) 143 (1,359) 121

Gross value added 148,382 111,198 166,655 155,093

Depreciation and amortization (11,263) (7,166) (12,553) (10,423)

Net value added generated 137,119 104,032 154,102 144,670

Equity in the results of subsidiaries 3,034 3,786

Finance income 2,925 6,624 3,101 5,555 Others 6 178 33 183

Total value added to distribute 143,084 114,620 157,236 150,408

Personnel and social charges 55,551 37,360 62,931 53,161 Direct remuneration 38,233 26,476 43,857 38,820 Benefits 13,606 8,371 14,745 10,693 Government Severance Indemnity Fund for Employees (FGTS)

3,712 2,513 4,329 3,648

Taxes, fees, and contributions 40,482 34,826 44,883 45,514 Federal 32,640 29,661 36,041 38,435 State

3 3 Municipal 7,842 5,162 8,842 7,076 Remuneration of third party capital 17,522 11,170 19,838 20,451 Interest 7,696 5,790 8,069 10,029 Rentals 9,776 5,380 11,701 10,250 Others 50 68 172 Retained earnings 29,529 31,264 29,529 31,264 Non-controlling interests in retained earnings 55 18

Distribution of value added 143,084 114,620 157,236 150,408


Instituto Hermes Pardini S.A. Notes to the quarterly information at March 31, 2018 All amounts in thousands of reais unless otherwise stated

36 of 70

1 Operations

Instituto Hermes Pardini S.A. ("Hermes Pardini", "Company" or "Parent company"), together with its subsidiaries ("Hermes Pardini Group" or "Group"), is engaged in the provision of medical, dental, laboratory research, clinical analysis and supplementary diagnostic and therapeutic services, and may also invest in other companies as a partner, stockholder or quotaholder. The Company is a publicly-held corporation headquartered in the city of Belo Horizonte, State of Minas Gerais. In 2017 and 2018, the Company entered into agreements for the purchase and sale of shares/quotas, aiming to acquire ownership interest in companies operating in its business sector, as described below:

Subsidiary

Core business

Place of

establishment and operation

Ownership interest

Investment date

Post-acquisition ownership

interest

Diagpar Holding S.A.

Investments in companies providing surgical pathology and cytology services

Brazil 28.6% 5/23/2017 100%

ECOAR - Medicina Diagnóstica Ltda.

Diagnostic imaging tests in the medical area

Brazil 100% 10/31/2017 100%

Laboratório de Análises Clínicas Humberto Abrão Ltda.

Anatomic pathology and cytology services

Brazil 100% 11/13/2017 100%

Labfar Pesquisa e Serviços Ltda.

Medium/high complexity services and innovation in the biopharmaceutical sector

Brazil 51% 4/2/2018 51%

During the second quarter of 2017, the Company established the subsidiary Pra Você - Centro de Especialidades Médicas S.A.

The Stockholders' Extraordinary General Meeting held on October 2, 2017 approved the merger of the subsidiaries IHP Digimagem Medicina Diagnóstica S.A, Laboratórios Pro-Abordagem Genômica Diagnóstica S.A., HP Importação, Comércio e Locação de Produtos, Máquinas e Equipamentos para Diagnósticos S.A., Centro de Medicina Nuclear da Guanabara Ltda. and Diagnósticos Serviços Médicos Auxiliares Ltda. into the Company. The Stockholders' Extraordinary General Meeting held on December 1, 2017 approved the merger of the companies Diagpar Holding S.A. and IHP Comércio de Produtos para Saúde S.A. into the Company. All the merged companies were wholly-owned subsidiaries of Company, pursuant to the terms of the Merger Protocol and Justification, which stipulated the total transfer of the assets, liabilities and equity to the Company. These mergers are consistent with the strategic guidelines of the Company, which aim to consolidate its operations and assets, as well as simplify its organizational and corporate structure, thus enabling a reduction of administrative and operating costs, and the integration of the businesses and the resulting synergies. The summary of the balances merged in 2017 is as follows:


37 of 70

IHP Digimagem Medicina

Diagnóstica S.A.

Laboratórios Pro Abordagem

Genômica Diagnóstica S.A

Centro de Medicina Nuclear

da Guanabara Ltda.

Diagnósticos Serviços Médicos

Auxiliares Ltda.

HP Importação,

Comércio e Locação de Produtos,

Máquinas e Equipamentos

Diagnósticos S.A.

Diagpar Holding S.A.

IHP Comércio de Produtos

para Saúde S.A.

Total Incorporado

Assets

10/2/2017

10/2/2017

10/2/2017

10/2/2017

10/02/2017

12/1/2017

12/1/2017

Current assets Cash and cash equivalents 328 2,065 2,177 484 978 6,877 10 12,919 Trade receivables 10,470 3,183 26,080 5,474 - 8,880 - 54,087 Taxes recoverable 8,669 - 202 15 46 53 - 8,985 Other current assets 1,736 550 1,932 72 - 770 7 5,067 Non-current assets Long-term receivables: Receivables from related parties - - 15 11,460 - - - 11,475 Other non-current assets 7,366 - 8,445 54 16 319 - 16,200 Property and equipment 26,690 972 19,869 1,716 1,965 3 51,215 Intangible assets 513 158 60 17 198 - 946

Total assets 55,772 6,928 58,780 19,275 1,057 19,062 20 160,894

Liabilities and equity

Current liabilities Trade receivables 4,442 543 5,825 1,107 1 3,243 - 15,161 Borrowings and financings 1,271 - 1,636 - - 299 - 3,206 Mandatory minimum dividends - 613 - - - 3,080 - 3,693 Tax, social security and salaries 546 523 1,260 626 - 1,615 3 4,573 Taxes payable in installments 1,895 - 313 33 - 14 - 2,255 Other current liabilities 3,872 149 7,133 215 - 807 - 12,176 Non-current liabilities Borrowings and financings - long-term 2,070 - 4,030 - - 647 - 6,747 Taxes payable in installments - long-term 7,418 - 3,474 377 - 12 - 11,281 Provision for risks 463 197 18,127 4,803 - 325 - 23,915 Deferred income tax and social contribution liabilities - Payables to related parties 5,746 - 38,939 2,945 - 1 29 47,660 Equity Share capital 43,091 1,000 3,362 638 1,000 679 100 49,870 Capital reserve 131 19 150 Carrying value adjustments 808 - - - - (7,108) - (6,300) Retained earnings (accumulated deficit) (15,850) - (30,471) 8,043 - - (112) (38,390) Revenue reserve - 3,903 5,021 469 56 15,448 - 24,897

Total liabilities and equity 55,772

6,928

58,780

19,275

1,057

19,062

20

160,894


38 of 70

2 Basis of preparation and presentation of the interim accounting information and summary of significant accounting practices

(a) Parent company and consolidated interim accounting information

The parent company and consolidated interim accounting information has been prepared and is presented in accordance with the Accounting Standard CPC 21 - Interim Financial Reporting and the International Accounting Standard IAS 34 - Interim Financial Reporting, issued by International Accounting Standards Board - IASB, and consistent with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of Quarterly Information (ITR). The quarterly information is presented in thousands of Brazilian reais, which is the Company's functional and presentation currency. This quarterly information was approved at the Board of Directors' Meeting held on May 7, 2018.

(b) Correlation between the notes disclosed in the complete annual financial statements and the interim accounting information

The accounting policies and practices (including the measurement, recognition and valuation principles applied to the assets and liabilities), in addition to the main accounting judgments and sources of uncertainty about estimates adopted in the preparation of this quarterly information, are consistent with those adopted and disclosed in Note 2 of the financial statements for the year ended December 31, 2017, except for the application of the new accounting pronouncements as from January 1, 2018. Therefore, this quarterly information should be read together with the annual financial statements. The Company believes that the relevant changes in its financial situation and results for the quarter ended March 31, 2018, are properly reflected in this interim accounting information, and compliant with the disclosure requirements issued by the Brazilian Securities Commission (CVM).

The correlation between the notes disclosed in the parent company and consolidated financial statements financial statements at December 31, 2017 and the parent company and consolidated interim accounting information at March 31, 2018 is shown below.

Note number 12/31/2017 3/31/2018 Explanatory note

1 1 Operations

2 2

Basis of preparation and presentation of the interim accounting information and summary of significant accounting practices

4 3 Business combinations 5 4 Cash and cash equivalents 6 5 Trade receivables 7 6 Inventories 8 7 Taxes recoverable 9 8 Other assets

10 9 Investments 11 10 Property and equipment 12 11 Intangible assets 13 12 Trade payables 14 13 Tax, social security and labor obligations


39 of 70

Note number 12/31/2017 3/31/2018 Explanatory note

15 14 Borrowings 16 15 Taxes payable in installments 17 16 Provision for risks 18 17 Current and deferred income tax and social contribution 20 18 Other liabilities 21 19 Equity 22 20 Net service revenue

23 21

Information on the nature of the expenses recognized in the statement of income

24 22 Other operating income (expenses), net 25 23 Finance result, net 27 24 Related-party transactions 28 25 Financial instruments and risk management 29 26 Segment reporting 30 27 Management remuneration 32 28 Earnings per share 34 29 Non-cash transactions

The following notes to the financial statements at December 31, 2017 were not included in this consolidated interim accounting information for not presenting relevant changes, and/or not being applicable to interim information:

Note

number 12/31/2017 Explanatory note

3

Main accounting judgements and sources of uncertainties in the estimates presented

19 Liabilities for acquisition of investments

26 Employee benefit

31 Insurance

33 Future commitments

35 Events after the reporting period


40 of 70

(c) New standards, amendments and interpretations of standards

The following new standards were approved and issued by the International Accounting Standards Board (IASB) and the Brazilian Accounting Pronouncements Committee (CPC), and are effective as from January 1, 2018. Management adopted the standards, as follows:

i. IFRS 15/(CPC 47) - "Revenue from contracts with Customers" - introduces the principles to be applied by an entity to determine the measurement and recognition of revenue, which are based on five steps: (1) identification of the contracts with customers; (2) identification of the performance obligations in the contract; (3) determination of the price of the transaction; (4) allocation of the transaction price to performance obligations in the contract; and (5) recognition of revenue when the performance obligation is satisfied. This standard replaces IAS 11, "Construction Contracts", IAS 18, "Revenue" and related interpretations. These amendments establish the criteria for the measurement and recognition of the services provided, as they have been effectively performed, with the proper presentation and the recording of the consideration receivable by the Company, including any estimates concerning impairment loss. Management's evaluation of this new standard has not identified any relevant effect on its quarterly information, considering the nature of its operations.

ii. IFRS 9/ CPC 48 - "Financial instruments" addresses the classification, measurement and recognition of financial assets and financial liabilities. The main amendments brought by IFRS 9 are the new criteria for the classification of financial assets into three categories: measured at fair value through other comprehensive income, measured at amortized cost, and measured at fair value through profit or loss. Depending on its individual characteristics, and the purpose for which it was acquired, a financial instrument can be classified within finance result or comprehensive income. In addition, IFRS 9 brings a new impairment model for financial assets, which is a prospective model, hybrid of expected and incurred losses, and replaces the current model of incurred losses. The standard also includes the relaxation of the requirements for adoption of the hedge accounting. The classification of financial liabilities remains the same as that provided for in IAS 39 (CPC 39) - "Financial instruments: Presentation", with the inclusion of rules related to financial liabilities measured at fair value, which are not applicable to the Company's operations. Management has adopted the new pronouncement, and has not identified changes which would have a relevant impact on the Company's interim accounting information, since the financial instruments currently contracted are not complex, and do not present risk of impairment arising from future losses. The new rules have been applied to the classification of the Company's financial assets, in the related categories.


41 of 70

(d) Basis of consolidation and investments in subsidiaries

The consolidated quarterly information includes the accounting information of the Company and its subsidiaries. The Company controls the entities over which it has the power to govern the financial and operating policies in order to obtain benefits from the investees' activities, and when it is exposed or has rights to variable returns from its involvement with the investees. In the parent company quarterly information, the accounting information of subsidiaries is recognized based on the equity method of accounting. The subsidiaries, as well as the Company's direct ownership interest, are shown below:

2018 2017 Subsidiaries Diagnóstico por Imagem Sete Lagoas Ltda. - CEMEDI 70% 70% Laboratório Padrão S.A. 100% 100% Pra Você - Centro de Especialidades Médicas S.A. 100% 100% Laboratório de Análises Clínicas Humberto Abrão Ltda. 100% 100% ECOAR - Medicina Diagnóstica Ltda. 100% 100%

The Company consolidates all entities which it controls, that is, when it is exposed or has rights to variable returns from its involvement with the investee, and has the ability to govern the investee's significant activities. The subsidiaries included in the consolidation are disclosed in Note 9. The parent company's interest in the subsidiaries' equity (or net capital deficiency, where applicable), as well as intercompany balances of assets and liabilities, revenue, costs and expenses, were eliminated on consolidation. Non-controlling interests in subsidiaries' equity are shown as a separate item in consolidated equity.

(e) Reclassifications in the comparative period At March 31, 2018, the following reclassifications were made:

i. After the merger of some subsidiaries into the parent, at the end of 2017, management reviewed the

calculation of the Company's income tax and social contribution, and concluded that the temporary differences arising from the revaluation surplus on acquired and merged companies should be presented net of other temporary differences. Accordingly, management opted to restate the balance sheet as at December 31, 2017, in order to reflect the offset of deferred tax liabilities amounting to R$8,493 in the parent company and consolidated.

ii. For the quarter ended March 31, 2018, certain expenses that had been recorded in the statement of income as "General, administrative and other expenses" were reclassified to the group of "Cost of services provided", since this classification reflects better the nature of these expenses. The expenses reclassified relate mainly to indirect costs incurred in the facilities of the technical center and service units, such as in maintenance and shared service areas. The corresponding amounts, originally presented in the parent company and consolidated statement of income of the quarterly information at March 31, 2017, are being restated in accordance with CPC 23 - Accounting Policies, Changes in Accounting Estimates and Correction of Errors, and CPC 26(R1) - Presentation of Financial Statements, to reflect the reclassifications mentioned above. The amounts reclassified for the period ended March 31, 2017, of R$2,055 in the parent company, and R$ 3,290 in the consolidated, had no effect on the reported profit for the period.


42 of 70

3 Business combinations On March 15, 2018, in line with its strategy of growth through acquisitions, the Company entered into a private purchase and sale agreement for acquisition of 51% of the capital of Labfar Pesquisa e Serviços Ltda. ("Labfar"), subject to the approval of the stockholders. The acquisition, although not representative of a relevant investment or increase in the Company's operational capacity, follows the strategy of expanding the portfolio of specialized tests offered to customers of the Reference Laboratory (lab-to-lab services). With this acquisition, Instituto Hermes Pardini strengthens its presence in the market of drug abuse testing. The transaction was approved at the Stockholders' Extraordinary General Meeting held on April 2, 2018, the date of the business combination. The acquisition price was R$11,294, and a portion of this amount will be deposited in an escrow account, to be released if no contingencies are identified during the due diligence process. Up to the date of this interim information, the management of Instituto Hermes Pardini had not yet completed its review of the valuation and fair value measurement of the assets acquired and liabilities assumed, in accordance with CPC 15 (R1) - "Business Combinations". In 2017, the Company acquired the following ownership interests:

Subsidiary Core business Acquisition date

Proportion of investments in

shares with voting rights and total

ownership interest (%)

Consideration transferred

(R$) Ecoar Medicina Diagnóstica Ltda (ECOAR)

Diagnostic imaging services 10/31/2017 100% 26,354

Laboratório de Análises Clínicas Humberto Abrão Ltda (LHA)

Anatomic pathology and cytology services 11/13/2017 100% 37,728

64,082

Main reasons for the business combination and description of the acquisition process The strategic plan defined by the Executive Board and the Board of Directors includes the intention of expanding the Service Units segment. This process may take place by means of organic expansion, with opening of new units in locations where the Company already operates, and/or inorganic expansion, through the acquisition of laboratories in different locations, or where the Company already operates. The acquisition of ECOAR will allow the Company to strengthen its specialized medical staff and consolidate its position in the segment of highly complex medical imaging tests, in addition to openings space to expand its focus on further specialization in other areas, such as cardiology, oncology and urology. The acquisition of Análises Clínicas Humberto Abrão Ltda. ("LHA") will enable the Company to expand its operations in Belo Horizonte, particularly in regard to the provision of services for the Premium segment, a supplementary category of customers. The acquisition will also expand the portfolio of specialized tests for these customers, including oncogenetics testing, precision medicine, and nutrigenomics. The acquisition price of ECOAR totaled R$ 26,354, of which R$ 14,353 was paid on the date of signature of the contract, R$ 6,989 on the date the deal was closed, R$ 3,512 on February 2, 2018, and R$ 1,500 was retained to guarantee the fulfilment of obligations by the sellers.


43 of 70

The acquisition price of LHA totaled R$ 37,728, paid as follows: R$ 34,500 on the date the deal was closed, R$ 1,500 to guarantee the fulfilment of obligations by the sellers, R$ 1,000 divided into 12 monthly consecutive installments, and the amount of R$ 728 was retained as a price adjustment. Assets and liabilities acquired recognized at the time of acquisition The Company's management concluded, still within the measurement period, the review of the measurement performed by the experts contracted and did not identify any need for adjusting the fair value previously disclosed. The assets and liabilities acquired in 2017 are shown below:

ECOAR LHA Total

Assets

Cash and cash equivalents 1,695 1,965 3,660

Trade receivables 2,091 2,763 4,854

Inventories 338 338

Taxes recoverable 301 195 496

Property and equipment 5,502 1,277 6,779

Intangible assets 18 316 334

Other assets 551 263 814

Liabilities

Trade payables 1,758 1,821 3,579

Tax, social security and salaries 2,822 1,473 4,295

Taxes payable in installments 12,107 12,107

Other liabilities 289 289

Deferred income tax and social contribution 1,275 266 1,541

Provision for risks 958 20 978

Net assets (liabilities) acquired (8,762) 3,248 (5,514)

Methodology used to determine the fair value

The fair value of the assets acquired and liabilities assumed was estimated by management with the support of its independent consultants, using the following methodologies: Property and equipment: The evaluation methodology used to determine the market value of these assets consisted of: Cost method: This method consists of determining the value of a new, equal, or similar machine and/or equipment through market research conducted with the manufacturers, suppliers and/or representatives, plus, if such is the case, assembling and transportation costs. Historical cost method: under this method, the value of the asset is determined based on the monetary adjustment of the acquisition cost, which includes the computation of accounting records and the application of specific indexes, generally adopted by the proper official bodies.


44 of 70

Depreciation based on Caires' method: identification of depreciation - in addition to the characteristics observed in the inspection, this method also considers the useful life, elapsed life, residual values, preservation status and obsolescence of the asset. Depreciation is calculated on the variation of the probable useful life curve. Goodwill determined on acquisitions

ECOAR LHA Total

Consideration transferred and to be transferred 26,354 37,728 64,082

Less: Fair value of identifiable net assets acquired (8,762) 3,248 (5,514)

Total 35,116 34,480 69,596

The acquisitions generated goodwill, considering that the amount paid by the control premium was included in the cost of the business combinations. In addition, the consideration paid for the business combinations included amounts related to benefits from expected synergies, revenue growth, future development of markets and specialized labor. These benefits are not recognized separately from goodwill, since they do not meet the criteria for recognition of identifiable intangible assets.

4 Cash and cash equivalents Cash and cash equivalents include cash on hand, bank accounts and financial investments, as follows: Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Cash and banks 2,623 2,365 3,593 3,124

Financial investments 125,951 143,981 141,158 156,733

Total 128,574 146,346 144,751 159,857

Short-term financial investments relate to amounts invested in Bank Deposit Certificates or Committed Operations and DI Funds, with immediate liquidity and immaterial risk of change in value, which are, therefore, considered as cash equivalents. These financial investments have an early redemption option with no penalty or loss of return. At the reporting date, there were no differences between the carrying amount and the fair value of cash and cash equivalents. These financial instruments earned, on average, 97% of the Interbank Deposit Certificate (CDI) at March 31, 2018, and 99% of the CDI at December 31, 2017.


45 of 70

5 Trade receivables Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Trade notes receivable 165,716 160,916 169,577 163,280

Services provided and not yet billed (a) 83,244 70,661 95,341 80,690

248,960 231,577 264,918 243,970

Provision for impairment of trade receivables (6,379) (4,787)

(6,941) (5,099)

Provision for loss on services provided and not yet billed (4,565) (4,312)

(4,898) (4,458)

238,016

222,478

253,079

234,413

(a) Services provided and not yet billed refer to services performed for which, at the balance sheet date,

the respective tax documents had not yet been issued. The aging analysis of accounts receivable at March 31, 2018 and December 31, 2017, is as follows: Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Amounts falling due 211,567 189,300 225,248 200,340

Overdue:

From 1 to 60 days 21,097 29,018 22,031 29,758

From 61 to 120 days 5,593 4,160 6,040 4,315

Over 120 days 6,138 4,787 6,701 5,099

Other amounts overdue 4,565 4,312 4,898 4,458

248,960

231,577

264,918

243,970

Other amounts overdue refer to unbilled trade receivables that management considered as not recoverable at the reporting date, and recorded provision for losses considering the whole amount outstanding.


46 of 70

Changes in the provision for impairment of trade receivables were as follows:


3/31/2018 12/31/2017 3/31/2018 12/31/2017

Opening balance 4,787 3,265 5,099 8,796

Merger 2,372

New provisions 2,273 5,684 2,565 12,760

Business combination 40

Reversals (681) (2,577) (723) (8,371)

Write-offs (3,957) (8,126)

Closing balance 6,379

4,787

6,941

5,099

6 Inventories Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Direct materials (a) 17,884 21,523 18,584 22,313

Maintenance material 716 680 716 680

Consumables 2,768 3,285 2,893 3,285

Others 227 477 469 760

21,595 25,965 22,662 27,038

(a) Mainly consisting of reagent kits used as inputs for the collection and performance of clinical

analyses and imaging tests.


47 of 70

7 Taxes recoverable Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Prepaid income tax and social contribution (a) 21,352 11,925 21,366 11,940

Income tax and social contribution withheld on service provision (b)

361 8,769 552 9,046

Social Integration Program (PIS) and Social Contribution on Revenues (COFINS) withheld

on service provision (b) 85 86 207 227

Service Tax (ISS) withheld on service provision (b) 52 52 78 78

Income tax withheld on earnings from financial investments

89 58 159 125

Others 99 784 424 1,036 22,038 21,674 22,786 22,452

(a) Relates to income tax and social contribution on services provided in prior periods, paid based on estimates.

(b) Relates to taxes withheld at the receipt for services provided, which will be offset against future taxes due.

8 Other assets Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Advances to suppliers 5,079 4,340 5,420 4,383

Prepaid expenses 3,576 3,016 4,028 3,038

Advances to employees 1,348 5,536 1,509 5,729

Restricted financial investments 56,598 56,688 56,598 56,688

Exposure to foreign exchange risks (a) 3,390 6,475 3,390 6,475

Other assets 5,791 3,616 4,500 4,240

75,782 79,671 75,445 80,553

Current assets 28,601 34,511 28,263 35,393

Non-current assets 47,181 45,160 47,182 45,160

(a) Result from the derivative financial instrument contracted to hedge the exposure to fluctuations in the exchange rate of borrowings and financings denominated in foreign currency.


48 of 70

9 Investments

Balances and information on investments in subsidiaries:

3/31/2018 12/31/2017

Assets:

Diagnóstico por Imagem Sete Lagoas Ltda. 3,080 2,952

Laboratório Padrão S.A. 79,866 76,323

Laboratório de Análises Clínicas Humberto Abrão Ltda. 38,459 37,642

ECOAR - Medicina Diagnóstica Ltda. 25,286 26,472

146,691 143,389

Liabilities: Pra Você - Centro de Especialidades Médicas S.A. (381) (113)

146,310 143,276

Changes in investments in subsidiaries, presented in the parent company's accounting information, were as follows:

Subsidiaries Balances in 2017

Equity in the results of

subsidiaries

Fair value

realization

Balances

in 2018

Diagnóstico por Imagem Sete Lagoas Ltda. 2,952 128

3,080

Laboratório Padrão S.A. 76,323 3,686 (143) 79,866

Pra Você - Centro de Especialidades Médicas S.A. (113) (268) (381)

Laboratório de Análises Clínicas Humberto Abrão Ltda. 37,642 848 (31) 38,459

ECOAR - Medicina Diagnóstica Ltda. 26,472 (1,010)

(176)

25,286

143,276 3,384 (350)

146,310

The main balances presented in the financial statements of the subsidiaries at March 31, 2018, are as follows: 3/31/2018

Subsidiaries Current

assets

Non-current

assets

Current liabilities

Non-current

liabilities

Equity

Diagnóstico por Imagem Sete Lagoas Ltda. 2,994 1,857 442 8 4,401 Laboratório Padrão S.A. 25,433 14,958 15,739 541 24,111 Pra Você - Centro de Especialidades Médicas S.A. 111 760 1,252 (381) Laboratório de Análises Clínicas Humberto Abrão Ltda. 4,489 870 1,864 1 3,494 ECOAR - Medicina Diagnóstica Ltda. 4,226 3,528 5,924 13,958 (12,128)


49 of 70

3/31/2018

Gross revenue

Costs

and expenses

Profit (loss) before

finance result

Profit (loss)

before taxation

Profit (loss), net

Subsidiaries

Diagnóstico por Imagem Sete Lagoas Ltda. 954 (635) 238 267 183 Laboratório Padrão S.A. 18,572 (12,951) 4,239 4,305 3,686 Pra Você - Centro de Especialidades Médicas S.A. 17 (211) (271) (267) (268) Laboratório de Análises Clínicas Humberto Abrão Ltda. 5,221 (3,736) 1,046 1,001 848 ECOAR - Medicina Diagnóstica Ltda. 4,602 (4,929) (597) (848) (1,010)

Non-controlling interests: 3/31/2018

Ownership interest - % Profit Equity Subsidiaries

Diagnóstico por Imagem Sete Lagoas Ltda. 30% 55 1,321

55 1,321

10 Property and equipment Parent company

Useful lives (in years) 3/31/2018 12/31/2017

Maximum

Minimum

Cost

Accumulated depreciation

Net

Cost


Net

Buildings 40 12 9,743 (4,452) 5,291 9,743 (4,300) 5,443 Vehicles 5 5 506 (486) 20 506 (482) 24 Furniture and fittings 15 4 16,443 (9,558) 6,885 15,936 (9,302) 6,634 IT equipment 15 3 40,667 (33,506) 7,161 40,042 (32,441) 7,601 Machinery and equipment 15 3 243,892 (143,166) 100,726 239,436 (138,638) 100,798 Safety equipment 25 3 714 (306) 408 657 (288) 369 Facilities 25 10 59,280 (42,967) 16,313 59,280 (41,639) 17,641 Communication equipment 12 5 1,444 (1,169) 275 1,448 (1,142) 306 Refrigeration equipment 20 5 14,416 (8,090) 6,326 13,944 (7,746) 6,198 Leasehold improvements 25 8 89,666 (27,050) 62,616 82,407 (26,175) 56,232 Construction in progress 201 201 Improvements in progress 1,231 1,231 2,850 2,850

478,002 (270,750) 207,252 466,450 (262,153) 204,297 Consolidated

Useful lives (in years)

3/31/2018 12/31/2017

Maximum

Minimum

Cost


Net

Cost


Net

Buildings 40 12 9,743 (4,452) 5,291 9,743 (4,300) 5,443 Vehicles 5 5 605 (566) 39 605 (553) 52 Furniture and fittings 15 4 19,335 (11,025) 8,310 18,926 (10,791) 8,135 IT equipment 15 3 44,555 (36,503) 8,052 43,775 (35,293) 8,482 Machinery and equipment 15 3 276,090 (165,013) 111,077 272,032 (160,117) 111,915 Safety equipment 25 3 799 (350) 449 720 (321) 399 Facilities 25 10 59,331 (42,993) 16,338 59,577 (41,850) 17,727 Communication equipment 12 5 1,586 (1,237) 349 1,533 (1,180) 353 Refrigeration equipment 20 5 15,868 (8,828) 7,040 15,079 (8,245) 6,834 Leasehold improvements 25 8 104,328 (30,466) 73,862 96,162 (29,128) 67,034 Construction in progress 4 4 Improvements in progress 1,983 1,983 3,048 3,048

534,223 (301,433) 232,790 521,204 (291,778) 229,426


50 of 70

Changes in the balance of property and equipment were as follows:

Parent company

12/31/2017

Additions

Write-offs

Depreciation

Transfers

3/31/2018

Buildings 5,443 (152) 5,291 Vehicles 24 (4) 20 Furniture and fittings 6,634 348 (9) (265) 177 6,885 IT equipment 7,601 628 (3) (1,068) 3 7,161 Machinery and equipment 100,798 4,550 (36) (4,551) (35) 100,726 Safety equipment 369 57 (18) 408 Facilities 17,641 (1,328) 16,313 Communication equipment 306 (2) (29) 275 Refrigeration equipment 6,198 475 (6) (347) 6 6,326 Leasehold improvements 56,232 3,819 (865) 3,430 62,616 Construction in progress 201 (4) (197)

Improvements in progress 2,850 1,765 (3,384) 1,231

204,297 11,642 (60) (8,627) 207,252

Consolidated

12/31/2017

Additions

Write-offs

Depreciation

Transfers

3/31/2018

Buildings 5,443 (152) 5,291 Vehicles 52 (13) 39 Furniture and fittings 8,135 365 (10) (337) 157 8,310 IT equipment 8,482 688 (3) (1,184) 69 8,052 Machinery and equipment 111,915 4,611 (36) (5,111) (302) 111,077 Safety equipment 399 57 (20) 13 449 Facilities 17,727 (1,329) (60) 16,338 Communication equipment 353 (2) (34) 32 349 Refrigeration equipment 6,834 587 (56) (374) 49 7,040 Leasehold improvements 67,034 4,338 (1,134) 3,624 73,862 Construction in progress 4 (4)

Improvements in progress 3,048 2,517 (3,582) 1,983

229,426 13,163 (111) (9,688) 232,790

The main additions recorded in 2017 and in the first quarter of 2018 relate to purchases of machinery and equipment, and leasehold improvements intended to extend the operational capacity and renovate the service units.


51 of 70

11 Intangible assets Parent company


3/31/2018 12/31/2017

Maximum

Minimum

Cost Accumulated amortization

Net Net

Goodwill

186,650 186,650 186,650 Software 10 3 49,307 (25,231) 24,076 26,277 Brands 5

8,761 (513) 8,248 8,248

Contracts with customers 20 2 8,523 (1,887) 6,636 6,894 Others 15

1,659 (226) 1,433 506

Total

254,900 (27,857) 227,043 228,575

Consolidated


3/31/2018 12/31/2017

Maximum

Minimum

Cost Accumulated amortization

Net Net

Goodwill

311,551 311,551 311,551 Software 10 3 50,283 (25,845) 24,438 26,683 Brands 5 12,677 (4,136) 8,541 8,709 Contracts with customers 20 2 8,523 (1,887) 6,636 6,894 Others 15 1,659 (226) 1,433 523

Total

384,693 (32,094) 352,599 354,360

Intangible assets that have a finite economic useful life are amortized based on the straight-line method, taking into consideration their useful lives, which reflect the economic benefit arising from these assets. Changes in the balance of intangible assets are shown below:

Parent company

12/31/2017 Additions Amortization 3/31/2018

Goodwill 186,650 186,650 Software 26,277 166 (2,367) 24,076 Brands 8,248 8,248 Contracts with customers 6,894 (258) 6,636 Others 506 938 (11) 1,433

228,575 1,104 (2,636) 227,043


52 of 70

Consolidated

12/31/2017 Additions Amortization Transfers 3/31/2018

Goodwill 311,551 311,551 Software 26,683 166 (2,411) 24,438 Brands 8,709 (185) 17 8,541 Contracts with customers 6,894 (258) 6,636 Other 523 938 (11) (17) 1,433

354,360 1,104 (2,865) 352,599

The goodwill recognized in the parent company arose from mergers of wholly-owned subsidiaries. Allocation of goodwill to the cash generating units Goodwill and brands were tested for impairment at December 31, 2017, and no need for adjustment was identified.

12 Trade payables

Trade payables are broken down as follows: Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Local suppliers 95,577 98,155 101,886 104,658 Foreign suppliers 5,672 3,706 5,672 3,706

Total 101,249 101,861 107,558 108,364

The Company has policies in place for managing financial risks in order to ensure that all its obligations are settled within the originally agreed upon terms. Trade payables substantially comprise test materials, services, IT suppliers, machinery and equipment, and infrastructure works. Trade payables are paid in 48 days, on average.


53 of 70

13 Tax, social security and labor obligations These obligations are broken down as follows: Parent company Consolidated

3/31/2018

12/31/2017

3/31/2018

12/31/2017

Salaries and social charges 32,226 33,738 36,001 37,161 Withheld taxes payable 1,718 6,341 2,280 6,963 Taxes on sales 8,024 7,660 9,315 8,874 Income tax and social contribution payable 2,168 45 3,149 1,075

44,136 47,784 50,745 54,073

Municipal, state and federal taxes and contributions levied on the Company's operations are subject to inspection by government authorities for a period of five years.

14 Borrowings and financings

Rates (%) Parent company Consolidated

Type

Index

Minimum

Maximum

3/31/2018

12/31/2017

3/31/2018

12/31/2017

Working capital (a) CDI 1.50 1.50 10,664 21,434 10,664 21,434 Working capital Fixed rate 0.00 0.00 637 796 637 796 Debentures (b) CDI 1.57 1.57 209,075 213,782 209,075 213,782 FINEP Fixed rate 5.00 5.00 22,867 24,902 22,867 24,902 FINAME Fixed rate 3.00 12.76 4,571 5,619 5,403 6,627 FINAME SELIC 6.92 7.22 2,965 3,239 2,965 3,239 FINAME TJLP 4.50 4.50 1,364 1,463 1,364 1,463 Lease Fixed rate 10.71 13.72 6,829 7,133 6,829 7,133

258,972

278,368

259,804 279,376

Current liabilities 55,407 41,600 56,113 42,306 Non-current liabilities 203,565 236,768 203,691 237,070

FINEP: Fund for Financing of Studies and Projects FINAME: Machinery and Equipment Financing Fund CDI: Interbank Deposit Certificate SELIC: Special System for Settlement and Custody TJLP: Term Interest Rate

(a) In 2013, the Company contracted with Itaú BBA, a borrowing denominated in U.S. dollars, in the

original amount of US$22,262 thousand, bearing interest of 2.82% per year. A swap operation was contracted to hedge against foreign exchange variations by swapping the borrowing currency to reais and fixing the interest rate at CDI+1.5 % p.a.


54 of 70

The reconciliation between the operation originally contracted and the swap instrument is shown below: Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Borrowing originally contracted in USD 10,664 21,434 10,664 21,434 Financial investments - CDI swap contracted (3,390) (6,475) (3,390) (6,475) CDI net debt 7,274

14,959

7,274

14,959

(b) In 2017, the Company made its first issue of simple, non-convertible debentures, in a single series, with

personal guarantees, for public distribution under restricted placement efforts, in the total amount of R$ 210,000. The total time of the operation is five years, with a grace period of two years with semi-annual amortization. The expenses incurred with the 1st issue of debentures, including fees, commissions and other costs, totaled R$1,849, and are classified as a cost to be amortized, within the borrowing line item, and allocated along with the debt repayment installments. Composition of the debentures issued:

Issue

amount (R$)

Quantity

Final maturity

Semi-annual interest

Total issued

1st Issue - single series

210,000

210,000

Mar/2022

CDI + 1.57% p.a.

210,000

Management monitors compliance with the restrictive covenants mentioned above and believes that all the above mentioned covenants were complied with at March 31, 2018. The schedule for repayment of borrowings, and the respective nominal amounts at March 31, 2018 were as follows: Parent company Consolidated

Nominal Disbursements Nominal Disbursements

amounts expected amounts expected

2018 22,239 31,931 22,769 32,484 2019 72,363 93,842 72,665 94,148 2020 70,449 87,495 70,449 87,495 2021 64,184 73,719 64,184 73,719 After 2021 29,737 31,621 29,737 31,621

258,972

318,608

259,804

319,467

Changes in borrowings at March 31, 2018 were as follows:


55 of 70


Opening balances (current and non-current) 278,368 279,376 Proceeds from borrowings 240 240 Inflation adjustment 5,060 5,073 Repayments of principal (11,214) (11,390) Payment of interest (10,398) (10,411) Foreign exchange variation (3,084) (3,084) Closing balances (current and non-current) 258,972 259,804

The fair values of borrowings do not differ significantly from their respective carrying amounts.

15 Taxes payable in installments Parent company Consolidated

Description 3/31/2018 12/31/2017 3/31/2018 12/31/2017

Tax on Services of Any Kind (ISSQN) payable in installments - 1998 to 2007

990 1,029 990 1,029

Payment in installments - fine referring to issue of tax document

1,813 1,814 1,813 1,814

ISSQN payable in installments 3,083 3,363 3,963 4,588 Installment program - Law 11941/09 29,600 31,427 30,354 32,203 Installment program - Law 12,996/14 2,699 2,725 5,451 5,508 Special Tax Regularization Program (PERT) payable in installments - 2017

1,408 1,415 8,446 8,416

Others 1,511 1,563 1,511 1,727

41,104

43,336

52,528

55,285

Current liabilities 6,402 6,534 7,520 7,740 Non-current liabilities 34,702 36,802 45,008 47,545

Changes in the balances of installment programs at March 31, 2018 were as follows:

Item Parent

company Consolidated

Opening balances (current and non-current) 43,336 55,285 Inflation adjustment 294 476 Repayments of principal (902) (1,574) Payment of interest (728) (763) Reclassification (i) 327 327 Write-off due to restatement of balance (i) (1,223) (1,223)

Closing balances (current and non-current)

41,104

52,528

(i) Result from the segregation of social security debts and the subsequent reconsolidation of installments provided for Law 11,941/09 under the modality "Debts not previously included in the installment program - Art. 1 - Social Security Debts to the Brazilian Federal Revenue Service (RFB)", with the settlement of the remaining balance.


56 of 70

16 Provision for risks

The Company is a party to lawsuits and administrative proceedings at various court and government levels, arising from the normal course of its business, and involving tax, labor and civil matters. The provisions for risks are determined based on analyses of ongoing lawsuits, notices of infraction, and risk assessments where the risk of loss is considered probable by management and its legal advisors. The composition of and changes in the provisions for tax, labor and civil risks are shown below. Parent company Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Tax 26,898 25,519 27,713 26,311 Labor 3,124 3,363 3,375 3,687 Civil 2,354 2,276 2,457 2,580

32,376 31,158 33,545 32,578

Judicial deposits (long-term receivables)

4,917 4,923 5,074 5,084

Changes in the provisions for tax, labor and civil risks during the quarter ended March 31, 2018, were as follows:


Opening balance 31,158 32,578 Additions 1,664 1,692 Payments (227) (331) Reversals (219) (394)

Closing balance 32,376 33,545


57 of 70

17 Current and deferred income tax and social contribution

(a) Deferred income tax and social contribution Breakdown of tax credits

Parent company Consolidated 3/31/2018 12/31/2017

3/31/2018 12/31/2017

Assets:

Credits recognized on:

Provision for impairment of trade receivables 2,097 1,534 2,149 1,581 Provision for risks 9,253 8,784 9,256 8,786 Provision for taxes on unbilled revenues 1,549 1,128 1,554 1,133 Provision for other expenses temporarily non-deductible 4,592 2,838 4,624 2,875 Deferred tax asset arising from goodwill on merger (i) 24,258 25,534 24,258 25,534 Provision for profit sharing 1,006 393 1,006 393 Others 258 653 258 653

43,013 40,864 43,105 40,955

Liabilities: Deemed cost of property and equipment (iii) 1,900 1,970 1,900 1,970

Deferred taxes on surplus value (ii) 8,296 8,493 8,296 8,493

10,196 10,463 10,196 10,463

Total assets, net 32,817 30,401 32,909 30,492

Deferred taxes on surplus value (ii) 1,665 1,846 Goodwill arising from acquisition of subsidiaries 6,441 3,144 6,441 3,144

Total liabilities

6,441 3,144 8,106 4,990

i. At December 31, 2012, the investment company GIF Aperana Participações S.A. was merged into the

Company and the goodwill balance previously recorded in the merged company was fully provided for at the merger, generating a tax credit of 34% of the goodwill amount. At the merger, this tax credit was recognized in a special goodwill reserve account, with a corresponding entry to deferred income tax and social contribution assets, which is being used by the Company from 2013 and will be used up to 2022.

ii. Deferred income tax and social contribution assets recognized in a business combination, arising

from the appreciation of assets identified, which had not been previously recognized, as shown below:


58 of 70


3/31/2018 12/31/2017 3/31/2018 12/31/2017

Total identified assets at fair value 69,294

69,294

85,305

85,305

(-) Assets already recognized previously (36,889)

(36,889)

(42,981)

(42,981)

(-) Realization through depreciation and amortization (8,006)

(7,425)

(13,028)

(11,915)

Net surplus value arising from acquisition of subsidiaries

24,399

24,980

29,296

30,409

Taxes on revaluation surplus of business combination (34%)

8,296

8,493

9,961

10,339

iii. This relates to deferred income tax and social contribution assets calculated on the deemed cost of

property and equipment.

(b) Income tax and social contribution - reconciliation of expenses at nominal and effective rates

The reconciliation between the nominal and effective expenses for the periods is as follows: Parent company Consolidated

3/31/2018 3/31/2017 3/31/2018 3/31/2017

Profit before income tax and social contribution 40,152 45,175 41,045 47,160 Nominal rates 34% 34% 34% 34% Income tax and social contribution at the nominal rates (13,652) (15,360) (13,955) (16,034) Adjustments to nominal expense:

Equity in the results of investees 1,032 1,296

Reversal of bonus to officers 386 386

Income tax and social contribution of prior years 1,370 1,360 (864) Effect on the results of subsidiaries taxed under the presumed profit method

582 841

Other exclusions (additions), net 241 153 166 179 Income tax and social contribution (10,623) (13,911) (11,461) (15,878)

The Company's income tax returns are subject to review and possible tax assessment by the tax authorities for a period of five years. Other taxes, rates and contributions are also subject to review, according to applicable legislation.


59 of 70

18 Other liabilities

Parent

company

Consolidated

3/31/2018 12/31/2017 3/31/2018 12/31/2017

Advances from customers 1,702 2,153 2,043 2,416 Restricted obligations 58,299 58,239 58,299 58,239 Liabilities for acquisition of subsidiaries 636 5,156 636 5,156 Others 1,635 1,289 1,816 1,821

62,272 66,837 62,794 67,632

Current 16,627 21,894 17,149 22,664 Non-current 45,645 44,943 45,645 44,968

19 Equity

(a) Share capital During the first quarter of 2017, the Company completed the Initial Public Offering process with the subsequent listing on BM&FBovespa Novo Mercado (New Market). As a result, the Board of Directors approved two requests for capital increase, as described below:

Base Offering: On February 10, 2017, the Board of Directors approved a capital increase, within the

limit of its authorized share capital, in the amount of R$162,857. Accordingly, the Company's share capital increased from R$148,802 to R$311,659, through the issue of 8,571,429 registered book-entry common shares, with no par value, at the price of R$19.00 each, which will be the subject matter of the public offering. Consequently, the number of shares representing the Company's capital increased from 121,122,166 to 129,693,595 common shares.

Additional: On 2 March 2017, the Board of Directors approved an increase in the Company's share capital, within the limit of its authorized capital, totaling R$24,415, through the issuance of 1,285,000 new registered, book-entry shares, without par value ("Shares"), arising from the full exercise of the additional-allotment option granted by the Company to Banco Morgan Stanley S.A. under the Offering. Therefore, the Company's share capital increased to R$336,074, represented by 130,978,595 common shares.

(b) Share issuance expenses

The transaction costs, proportional to the primary issue, incurred on the raising of funds through the issuance of equity securities totaled R$ 8,913, and were recorded separately in an equity reduction account, as established in CPC 08 (R1).


60 of 70

(c) Capital reserves At March 31, 2018 and December 31, 2017, capital reserves were comprised as follows: Description 3/31/2018 12/31/2017

Special reserve for goodwill on merger

51,090

51,090

Treasury shares (6,052)

(2,106)

45,038 48,984

(i) Special reserve for goodwill on merger At December 31, 2012, the investment company GIF Aperana Participações S.A. was merged into the Company and the goodwill balance previously recorded in the merged company was fully provided for at the merger, generating a special goodwill reserve of 34% of the goodwill amount, which was recorded as deferred income tax and social contribution assets.

(ii) Share-based remuneration plan At December 1, 2017, the Stockholders' Extraordinary General Meeting approved the Share-based Incentive and Retention Plan ("Share-based Remuneration Plan"), under which the Company's shares are granted to the officers and employees of the Company, its subsidiaries and its associates ("Beneficiaries"), with the aim of fostering the expansion of the Company, align the interests of stockholders and Beneficiaries, and stimulating the Beneficiaries' long-term commitment. In accordance with the Share-based Remuneration Plan, the Board of Directors is authorized to grant up to 2,422,443 (two million, four hundred and twenty two thousand, four hundred and forty-three) shares of the Company to the Beneficiaries. The First Program of the First Share-based Incentive and Retention Plan was approved at the Board of Directors' meeting held on January 3, 2018.

(iii) Treasury shares On November 13, 2017, the Board of Directors approved the Share Buyback Plan, under which up to 1,000,000 (one million) registered book-entry common shares, with no par value, issued by the Company may be repurchased. This amount is equivalent to approximately 2.16% of the total number of the Company's shares outstanding. The Program has the purpose of (i) enabling the granting of shares to the management and employees of the Company and its subsidiaries, in the scope of long-term remuneration and incentive plans; or (ii) maintaining the shares in treasury for subsequent sale or cancellation, without capital reduction, in order to maximize the generation of value for the stockholders of the Company. Acquisition period: up to 18 months, from November 14, 2017 to May 13, 2019. The Company's Executive Board will decide the best time to purchase/sell the shares. Resources to be used: acquisitions under the Share Buyback Plan will be made with resources from the Company's "Profit reserve" and "Capital reserve" accounts. The cost of acquisition of the treasury shares, including negotiation costs, was as follows:


61 of 70

Opening balance at 12/31/2017

Closing balance at 3/31/2018

Acquisition Funding (in R$)

Quantity Amount Quantity Amount Quantity Amount Minimum Medium Maximum

69,600 2,106 122,644 3,946 192,244 6,052 28.50 31.46 32.50

69,600 2,106 122,644 3,946 192,244 6,052

20 Net service revenue

The reconciliation between gross revenue and net revenue presented in the statement of income for the period is as follows: Parent company Consolidated

2018 2017 2018 2017

Gross service revenue 289,382 213,775 316,594 289,052 (-) Disallowances (3,337) (1,612) (3,417) (3,346) (-) Cancelled sales and other rebates (1,511) (524) (1,610) (1,112) (-) Taxes on sales (17,623) (12,569) (19,618) (17,168) Net service revenue 266,911 199,070 291,949 267,426

21 Information on the nature of the expenses

recognized in the statement of income

The Company classified the expenses in the statement of income based on their function. Information on the nature of the expenses recognized in the statement of income is as follows: Parent company Consolidated

2018 2017 2018 2017

Direct and consumption material (66,294) (54,014) (68,935) (59,555) Specialized technical services (16,243) (6,015) (17,935) (16,038) Depreciation and amortization (11,263) (7,166) (12,553) (10,423)

Employee salaries, charges and benefit expenses

(67,432)

(45,449)

(76,055)

(64,974) Rentals of real estate and vehicle leases (10,316) (5,860) (12,321) (10,885) Consultancy and services (12,508) (10,320) (13,502) (14,140) Freight and haulage (13,229) (10,763) (13,426) (11,433) Rental and maintenance of machinery and equipment (10,463) (6,076) (11,664) (9,137) Electric energy (3,573) (2,261) (4,059) (4,016) Telephone and telecommunications (1,515) (923) (1,876) (1,489) Maintenance of facilities and systems (2,934) (2,410) (3,217) (2,847) Other expenses (8,621) (4,772) (9,587) (7,023)

Total (224,391) (156,029) (245,130) (211,960)


62 of 70

Classified as:

Cost of services (186,433) (129,384) (203,620) (177,839) Selling expenses (19,288) (12,413) (20,224) (14,144) General and administrative expenses (18,670) (14,232) (21,286) (19,977)

Total (224,391) (156,029) (245,130) (211,960)

22 Other operating expenses, net


2018 2017 2018 2017

Provision for tax, labor and civil contingencies (22) (550) 237 (633) Losses on disposal of property and equipment (50) (963) (51) (1,272) Recovery of judicial deposit 178 178 Provision for loss on pre-invoicing (a) (498) 95 (686) 52 Provision for impairment of trade receivables (a) (1,592) (723) (1,842) (1,298) Restructuring of installment debt 1,223 1,223

Other, net 308 (523) 313 (860)

(631)

(2,486)

(806)

(3,833)

a) From December 2017, losses on trade receivables and pre-invoicing, which were previously recorded under selling expenses, started to be presented as other expenses. The new presentation was retroactively extended to March 2017, for comparison purposes.

23 Finance result, net Parent company Consolidated

3/31/2018 3/31/2017 3/31/2018 3/31/2017 Finance income

Income from financial investments 1,972 4,036 2,156 4,223 Inflation adjustment 139 33 139 222 Income from intercompany loans 17 1,749

Discounts obtained 56 42 59 70 Other finance income 499 566 505 577

2,683 6,426 2,859 5,092

Finance costs

Interest on borrowings and financings (5,060) (3,591) (5,073) (4,920) Interest on installments (294) (684) (476) (951) Bank commissions (488) (385) (592) (785) Restatement of commercial and tax liabilities (86) (373) (135) (1,233) Monetary adjustment of provision for risks (1,196) (58) (1,204) (1,212) Discounts granted (1)

(2) Taxes on financial transactions (25) (144) (40) (375) Restatement of investment call option debt (270)

(270) Other finance costs (154) (143) (156) (138)

(7,303) (5,649) (7,676) (9,886)


63 of 70

Foreign exchange variation

Foreign exchange income 242 198 242 464 Foreign exchange expenses (393) (141) (393) (143)

(151) 57 (151) 321 Finance result, net (4,771) 834 (4,968) (4,473)

24 Related-party transactions

The balances presented below refer to transactions carried out between the Company and related parties at March 31, 2018, and December 31, 2017:

(a) Balances from services provided Parent company

Current assets - receivables

3/31/2018 12/31/2017

Diagnóstico Por imagem Sete Lagoas Ltda. 16 10 Laboratório Padrão S.A. 2,112 1,931 Pra Você - Centro de Especialidades Médicas S.A. 5 3

Laboratório de Análises Clínicas Humberto Abrão Ltda. 120 2,253 1,944

Parent company

Current liabilities - payables

3/31/2018 12/31/2017

Diagnóstico Por imagem Sete Lagoas Ltda. 16 61 Pra Você - Centro de Especialidades Médicas S.A. 6

22 61

(b) Service operations

Parent company

3/31/2018 3/31/2017

Revenue from services rendered (i) Diagnóstika - Unidade Diagnóstica em Patologia Cirúrgica e Citologia Ltda. 14 IHP Digimagem Medicina Diagnostica S.A. 1,177 Laboratório Pro-Abordagem Genômica Diagnóstica S.A. 23 Laboratório Padrão S.A. 1,806 2,346 Pra Você - Centro de Especialidades Médicas S.A. 1 Laboratório de Análises Clínicas Humberto Abrão Ltda. 159

1,966 3,560


64 of 70

Parent company Cost of services (i)

3/31/2018 3/31/2017

Diagnóstico Por imagem Sete Lagoas Ltda. 91 131 Diagnóstika - Unidade Diagnóstica em Patologia Cirúrgica e Citologia Ltda. 181 Laboratório Pro-Abordagem Genômica Diagnóstica S.A. 750

91 1,062

The related-party transactions, as shown above, are eliminated in the consolidated quarterly information.

(i) Amounts related to the provision of clinical analysis services.

(c) Rental transactions

Parent company

Result (ii)

3/31/2018 3/31/2017

IHP Digimagem Medicina Diagnóstica S.A. 108 108

(ii) Amounts corresponding to the apportionment of property rental expenses

At March 31, 2018, transactions with other related parties consisted of expenses for the rental of properties owned by Empresa de Empreendimentos Imobiliários Vista Alegre (EIVA), the quotaholders of which are VP Participações e Gestão de Negócios Eireli, and RP Participações e Gestão de Negócios Eireli, totaling R$ 2,048, and properties owned by AP Imobiliária Ltda., totaling R$ 734 (R$ 2,091 at the period ended March 31, 2017).

(d) Shared Service Center (SSC)

Shared services incurred and transferred to the subsidiaries at March 31, 2018 and March 31, 2017 are shown below:

Parent company

3/31/2018 3/31/2017

IHP Digimagem Medicina Diagnostica S.A. 1,083 Diagnóstika - Unidade Diagnóstica em Patologia Cirúrgica e Citologia Ltda. 501 Laboratório Pro-Abordagem Genômica Diagnóstica S.A. 75 Diagnóstico Por imagem Sete Lagoas Ltda. 24 33 Laboratório Padrão S.A. 502 532

ECOAR - Medicina Diagnóstica Ltda. 30

556 2,224


65 of 70

(e) Loan agreements Parent company assets

Borrower

3/31/2018

12/31/2017

Rate

ECOAR - Medicina Diagnóstica Ltda. 2,907 CDI + 3.5% p.a.

2,907

Management considers that no guarantees are necessary for intercompany loan agreements, which have undefined maturity dates. Changes in the balances of loan agreements at March 31, 2018 were as follows:

Parent

company

3/31/2018

Opening balance

Loans granted 2,890 Inflation adjustment 17

Closing balance 2,907

Finance income Parent company

Borrower

3/31/2018

3/31/2017

IHP Digimagem Medicina Diagnóstica S.A. 1,626 Diagnósticos Serviços Médicos Auxiliares Ltda. 28 Centro de Medicina Nuclear da Guanabara Ltda. 95 ECOAR - Medicina Diagnóstica Ltda. 17

17 1,749

(f) Dividends The balances of dividends receivable, disclosed in the parent Company's balance sheet, refer to the portions of minimum mandatory dividends computed for the following subsidiaries: Dividends receivable 3/31/2018 12/31/2017

Laboratório Padrão S.A. 5,453 5,453

5,453 5,453


66 of 70

(g) Other assets

3/31/2018 12/31/2017

Centro Especialidades Médicas S.A. (i) 1,788 1,788

i) The amounts receivable at March 31, 2018 refer to transfer of expenditures between related parties.

25 Financial instruments and risk management

The main risk factors inherent in the Company's operations at March 31, 2018, are as follows:

(a) Exposure to interest rate risks: the Group is exposed to risks related to interest rates arising from borrowings linked mainly to the Interbank Deposit Certificate (CDI) and fixed rates.

At the period-end closing date, based on the projections disclosed by Itaú BBA in the "Brazil Scenario - March 2018" report, management estimated a probable scenario of interest rate variations for its financial liabilities linked to the CDI and SELIC rates at 6.75% p.a., considering that these rates are equivalent in the market. The probable rates were stressed by -25% and -50%, for the possible and remote scenarios, respectively .

Parent

company 3/31/2018

Index

Risk

Amount

Probable Scenario

Possible scenario

Remote scenario

Financial investments CDI/Selic

Increase in CDI/Selic

125,951 8,502

10,628 12,753

Borrowings CDI/Selic Increase in CDI/Selic

(222,704) (15,033)

(18,791)

(22,550)

Net exposure

(96,753)

(6,531) (8,163) (9,797)

Consolidated 3/31/2018

Index

Risk

Amount

Probable Scenario

Possible scenario

Remote scenario

Financial investments CDI/Selic

Increase in CDI/Selic

141,158 9,528

11,910 14,292

Borrowings CDI/Selic Increase in CDI/Selic

(222,704) (15,033)

(18,791)

(22,550)

Net exposure

(81,546)

(5,505) (6,881) (8,258)


67 of 70

(b) Exposure to foreign exchange risk: the result of the Group's operations is affected by the risk of fluctuations in exchange rates, since a portion of its obligations is denominated in foreign currencies (Euro and U.S. dollar). These risks are assessed, and if necessary, mitigated by the financial department, which periodically monitors the Group's financial and operating flows. The parent company contracted swaps to hedge against fluctuations in the exchange rate, which influences directly the financing contracts. Effects on the result are recognized in "Finance income", with a corresponding entry to "Financial liabilities" for the difference payable and to "Financial assets" for the difference receivable. The main contractual conditions are as follows:

Parent company and

Consolidated

Notional amount

Asset position

Liability position

Fair value

Maturity

12/31/2015

Index

Rate

(% p.a.)

Index

Rate

(% p.a.)

3/31/2018

Itaú 7/5/2018 50,000 USD 2.82 CDI 1.50 3,390

At the period-end closing date, based on the projections disclosed by Itaú BBA in the "Brazil Scenario - March 2018" report, management estimated a probable scenario of foreign exchange rate variations for its financial liabilities, in accordance with the maturity date of each transaction. The probable exchange rates used were as follows:

Currency Probable rates

U.S. dollar R$ 3.2451 Euro R$ 4.0564

The probable rates were stressed by -25% and -50%, for the possible and remote scenarios, respectively. The sensitivity analysis of the Group's net exposure to the fluctuations in foreign exchange rates is presented below: 3/31/2018

Parent company and Consolidated

Basis Probable Possible Remote

Net exposure in EUR - trade payables (218) (215) (269) (323) Net exposure in USD - trade payables (5,454) (5,325) (6,656) (7,988) Net exposure in USD - borrowings (10,664) (10,410) (13,013) (15,615) Derivative financial instruments - swap 10,664 10,410 13,013 15,615 Net asset (liability) exposure after derivatives (5,672)

(5,540)

(6,925)

(8,311)

Net effect of foreign exchange variation - (loss) 132 (1,253) (2,639)


68 of 70

26 Segment reporting The activities developed by the Company are divided, basically, into the following areas: (i) Patient Service Centers (PSC)

The Company provides direct services to the customer through its Patient Service Centers, which include the services appropriate to the segment of care units, as described in Note 1 - Operations.

(ii) Reference Laboratory (lab-to-lab):

This refers to supporting services that are provided nationwide to affiliated laboratories through a logistics network with high capillarity and integrated IT systems, including the analyses described in Note 1 - "Operations" under the brands "Hermes Pardini", "Diagnóstika" and "Progenética".

Therefore, the Group's management performs its analyses based on these two relevant business segments: Reference Laboratory (lab-to-lab) and Patient Service Centers (PSCs). The consolidated statements of income by operating segment are as follows:

Lab-to-lab PSC

Eliminations /reclassifications Consolidated

1Q18

1Q17

1Q18

1Q17

1Q18

1Q17

1Q18

1Q17

Net revenue 153,760 141,518 140,343 129,428 (2,154) (3,520) 291,949 267,426 Costs (100,246) (89,742) (105,603) (90,856) 2,229 2,759 (203,620) (177,839)

53,514 51,776 34,740 38,572 75 (761) 88,329 89,587 Gross profit

Operating Expenses:

Selling

(20,224) (14,144)

General, administrative and other

(22,092)

(23,810)

Result before finance costs, net 46,013 51,633

Finance costs, net

(4,968) (4,473)

Profit before income tax and social contribution

41,045

47,160

Income tax and social contribution

(11,461)

(15,878)

Profit for the period

29,584 31,282

27 Compensation of key management personnel The Company is managed by a board of directors comprised of five members. The quarterly remuneration approved for the board of directors and senior management during the period is shown below:


69 of 70

Parent company

3/31/2018 3/31/2017

Board of Directors Fees 360 412

Benefits 28 Management and Executive Board

Fees and remuneration 1,469 895 Profit sharing 2,547 Bonus 508 Social charges 467 379

Benefits 126 79 2,930 4,340

On September 4, 2017, the remuneration of the Executive Board, which was paid according to the CLT system (Consolidated Labor Laws), started to be paid according to the Company's bylaws, as approved by the Board of Directors. Consequently, the payment of profit sharing started to be recognized as Bonus.

28 Earnings per share

As required by technical pronouncement CPC 41 - Earnings per share, the earnings at March 31, 2018, were calculated based on the result for the period attributable to the owners of the parent, and the respective weighted average number of the Company's registered common shares with no par value outstanding in the period was compared to the period ended March 31, 2017, and retrospectively adjusted according to item 64 of the aforementioned CPC, as disclosed below.

Parent company

2018 2017

Profit for the period attributable to the stockholders of the parent company 29,529 31,264 Average number of outstanding shares (in thousands) 130,796 126,203

Basic and diluted earnings per share - R$ 0.23 0.25 Actual number of shares (in thousands) 130,979 130,979

During the period ended March 31, 2017, the common shares representing the Company's share capital were split, and common shares were issued, as mentioned in Note 19. There are no situations that could lead to dilution of the shares.


70 of 70

29 Non-cash transactions

During the periods ended March 31, 2018 and 2017, the Company carried out transactions not involving cash, which, therefore, are not reflected in the statement of cash flows. These transactions are shown below: Parent company Consolidated

3/31/2018 3/31/2017 3/31/2018 3/31/2017

Increase in the balance of borrowings against other assets due to FX swap contracted

(3,085) (3,145) (3,085) (3,145)

Increase in the capital of IHP Digimagem Medicina

Diagnóstica S.A. (41,719)

Provision for IPO expenses, recorded in Equity. (7,657) (7,657) (3,085) (52,521) (3,085) (10,802)

30 Subsequent events The Board of Directors, at a meeting held on May 7, 2018, approved the payment of interest on capital in the amount of R$ 9,313, for the period ended March 31, 2018.

* * *

Opinions and Statements / Officers' Statement on the Financial Statements Officers' Statement on the Financial Statements In compliance with the provisions of Article 25, paragraph 1, items V and VI of CVM Instruction 480/09, of December 7, 2009, the Company's Officers state that they have reviewed, discussed and agreed with the financial information (Parent company and Consolidated) for the period ended March 31, 2018. Belo Horizonte, May 7, 2018. Chief Executive Officer - Roberto Santoro Meirelles Administrative and Financial Executive Officer and Investor Relations Officer - Camilo de Lelis Maciel Silva

Reports and Statements / Officers' Statement on the Independent Auditor's Report Officers' Statement on the Independent Auditor's Report In compliance with the provisions of Article 25, paragraph 1, items V and VI of CVM Instruction 480/09, of December 7, 2009, the Company's Officers state that they have reviewed, discussed and agreed with the conclusions expressed in the independent auditors' review report dated May 7, 2018, on the interim accounting information (Parent company and Consolidated) for the period ended March 31, 2018. Belo Horizonte, May 7, 2018. Chief Executive Officer - Roberto Santoro Meirelles Administrative and Financial Executive Officer and Investor Relations Officer - Camilo de Lelis Maciel Silva

EXECUTIVE BOARD

Roberto Santoro Meirelles Chief Executive Officer

Camilo De Lelis Maciel Silva Administrative and Financial Officer and

Investor Relations Officer

CHIEF ACCOUNTANT

Fernando César Sales de Faria

Accountant CRC MG - 055.016/O-2

Instituto Hermes Pardini S.A.

Documents

Transcript of Instituto Hermes Pardini S.A.