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spk01: Good morning and welcome to our second quarter 2024 earnings conference call. My name is Rob and I will be the operator for today's call. At this time all participants are in a listen only mode and please note that this call is being recorded. There will be an opportunity for you to ask questions at the end of today's presentation. Now I would like to turn the call over to Anna Maria Mora, head of investor relations. Please go ahead.
spk13: Thank you operator. Hello, everyone, and welcome to AUNA's conference call to review our second quarter results. Please note that there is a webcast presentation to accompany the discussion during this call. If you need a copy of the presentation, please go to our investor relations website or contact AUNA's investor relations team. Please note that when we discuss balances, we will be doing so on a year-over-year basis and in FX neutral, or local currency terms.
spk12: with regard to Mexico and Colombia, unless we note otherwise. Let's move to slide two. Before we begin, we would like to remind all participants that our comments today will include forward-looking statements.
spk13: In addition to reporting unadded financial results in accordance with international financial reporting standards, we will discuss certain non-IFRS financial measures and operating metrics, including foreign exchange mutual calculations. Investors should read carefully the definitions of these measures and metrics included in our earnings press release of today to ensure that they understand them. Non-IFRS financial measures and operating metrics should not be considered in isolation as substitutes for or superior to IFRS financial measures and are provided as supplemental information only. Before we begin our remarks, Please also note that certain statements made during the course of today's discussion may constitute forward-looking statements which are based on management's current expectations and beliefs, and which are subject to a number of risks and absences that could cause actual results to materially differ, including factors that may be beyond the company's control. These include, but are not limited to, expectations and assumptions related to the integration and performance of the businesses we acquire. For the description of this risk, please refer to our Form F-1 filing with the U.S. Securities and Exchange Commission and our earnings press release. Slide three, please. Speaking on today's call is Suso Zamora, our Executive Chairman and President, who will discuss Abundance Consolidated and Segmented Financial and Operating Results, as well as provide updates on our various strategic growth initiatives. Giselle Remy, our Chief Financial Officer and Executive Vice President, We'll follow with a more detailed review of AUNA's consolidated financial results. After that, Suso will provide a wrap-up of her second quarter performance, as well as discuss her performance outlook.
spk12: We'll then open the call for your questions. Suso, please go ahead.
spk06: Thank you, Annie, and welcome, everyone. Let's begin our review on slide four with a few highlights on the quarter. Our growth, first of all, our growth momentum accelerated in the second quarter as we continued to scale our vertically and horizontally integrated healthcare platform, as well as benefit from various synergies that we achieved through regional integration and scale. We continue to grow consistently and more predictably. AUNES adjusted EBITDA increased 25% on an FX neutral basis. while our margin expanded two percentage points. Growth reflects the consistently strong performance of our operations in Peru and Colombia, and it validates, once again, the strength of our diversified and scalable healthcare platform, as well as the effectiveness of our growth strategy. Implementing the EUNAway at our healthcare network in Monterrey is gradually beginning to bear fruit. We are seeing productivity starting to rise among new and existing physicians, along with increases in certain high complexity services. OncoMexico is another pillar of our growth plan for Mexico, and we have launched in Monterrey the 2024 pilot of this integrated cancer insurance. This is the country's first monoline oncology insurance fully integrated into our network of healthcare services in Monterrey. and will potentially grant access to many families to full healthcare solutions. With that context, let's take a closer look at our second quarter performance, beginning with our consolidated results on slide six, please. So our top line growth of 12.5% combined with improving operation efficiencies drove operating income 29% higher versus last year's quarter. And our adjusted EBITDA margin expanded 2% of these points, helping drive adjusted EBITDA 25% on an FX-neutral basis, higher along with an improved services mix and higher occupancy levels. As such, we remain on track to achieve our 2024 guidance for adjusted EBITDA growth of 20%, also on a constant currency basis. Peru and Colombia continue to perform strongly, underpinning our growth while we deploy our business model in Mexico, where we expect to replicate our success on a much larger scale, given the size of Mexico's healthcare market, of course, and the low penetration levels of private healthcare in the country. The implementation of the is a gradual and a deliberate process of skill building that will result in improved engagement with physicians that will produce increased volume and more so of high complexity procedures. And we are beginning to see the results of our engagement with physicians and as well with payers. Our future success in Mexico is a function of our capacity to replicate the consistent and predictable performance of our Peruvian and Colombian operations over many years. As you can see in the bottom left of this slide, occupancy across our healthcare platform increased 3.7 percentage points as we ramped up new and expanded care facilities. The vertically integrated model in Peru continued to deliver strong results, demonstrating, again, the value of our business model at maturity and at scale. Now, in this review, our second quarter performance on each of the business segments that comprise our diversified and integrated healthcare platform.
spk07: Can we go to slide eight, please?
spk06: So here, our healthcare business in Mexico in the fast-growing Monterrey area is steadily delivering better results thanks to improving productivity and higher surgery volumes. This reflects the progress we are making with finding a recruitment and incentive model with physicians. Occupancy levels were flat And 3% revenue growth was primarily driven by mix, that is, growth in high complexity services. Adjusted EBITDA was flat versus last year with a healthy 33% EBITDA margin. Aside from decision recruitment, we also intend to increase capacity utilization through initiatives with our payers, offering tailored products and bundled services. We are creating win-win partnerships with insurance companies and employers, as we do in Peru and Colombia. Longer term, Uncle Mexico will be another growth driver. During the remainder of 2024, we are establishing the necessary operational capabilities in clinical and commercial areas, as well as risk underwriting and other key functions. Let's move to slide nine, please. So, with respect to Peru, our fully integrated operations there saw adjusted EBITDA almost double from last year's second quarter, as well as a continued margin expansion. Revenue grew 15%, mainly on a sustained occupancy level of nearly 72%, as well as the growth in plan membership and revenue mix across both segments. All of this reflects the harvesting of growth investments made in prior years, focusing on high complexity and capacity utilization, as well as synergies achieved across the platform. We've maintained the gains in EBITDA margin since last quarter, with our consolidated Peru margin at 21% for this second quarter. Our healthcare services business benefited from an improved mix of high complexity services across our healthcare footprint in Peru. In our healthcare plans business, in addition to member growth, sales increased on higher revenues from our integrated hospitals, including co-payments and non-covered expenses. Revenue also benefited from price adjustments to our healthcare plans. In addition to top-line growth, adjusted EBITDA benefited from a decline in SG&A while member acquisition costs decreased on higher efficiency levels. Our oncologic MLR is at 54.7% year-to-date, increasing versus 51.5% in the last quarter, mainly impacted by an increase in intercompany fees between our OncoSalute insurance company and our integrated oncology hospitals. Given that the intercompany effect is eliminated at the gross margin level in our healthcare planning business, Gross margin remains flat in healthcare plans versus the first quarter of 2024. Lastly, on Peru, we continue implementing a number of strategic growth initiatives related to our healthcare network. We're seeking to convert more of the allocation services we perform by cross-selling adjacent services. We are strengthening our B2B relationships nationally. to increase patient referrals through this channel. And on the high complexity front, we were recruiting new doctors in the field of neurosurgery and traumatology. In the health care plans business, new growth initiatives include increasing the productivity of the direct sales channel by improving the sources of new leads and referrals, acquiring more B2B customers, and we continue to capture more of the healthier, lower risk prospective customers who have a history of good health. If we move to page 10, we can do a little dive into Columbia. In Columbia, driving the 18.3% growth in revenue was a greater mix of high complexity services and occupancy, which increased six percentage points to 81%. The more profitable mix of high complexity services coupled with higher occupancy drove a more than 10% increase in adjusted EBITDA, and also helped Colombia maintain healthy margins. Additionally, we kept levels of FD&A expenses in check, thanks to efficiency initiatives and post-merger synergies we have achieved. Given the current regulatory environment in Colombia, we will continue prioritizing working capital and profitability. With that, I'll turn the call over to Giuseppe for a more detailed review of our second quarter results.
spk10: Thank you, Suso. Good afternoon, everyone. Let's move on to our consolidated results for the quarter, starting with revenue on slide 12. As Suso mentioned, we delivered solid revenue growth in the quarter. We grew 18% in soles year-on-year, or 13% in FX neutral terms, as our mature segments in Peru and Colombia continue to drive growth, and our Mexican business steadily positioned itself to replicate the same success. All our businesses have shown consistent growth on a year-on-year basis.
spk04: Let's move on to slide 13. Trusted EBITDA growth for the quarter was 31% year-on-year in funds.
spk10: or 25% on an FX neutral basis, with the margin expanding to 22.1% off the back of strong margins in the three geographies. Strong revenue growth coupled with efficiencies across the local and regional levels drove EBITDA growth and margin expansion. Operation in Peru maintained the margin gains that we saw in the first quarter of this year, with an adjusted EBITDA margin of 21%, while our operation in Mexico sustained a 33% adjusted EBITDA margin, despite investments and increases in costs and SG&A, given the local and regional capabilities that we continue to build. Colombia had a 15.3% margin. Finally, Across the region, we continue to be very disciplined with our SG&A. Let's now move on to slide 14 to talk about net income. Kona maintained a positive adjusted net income in the quarter. This is the comparable period last year. Adjusted net income in the second quarter of 2024 was favorably impacted by an increase in operating profit as well as a deferred tax benefit. However, these benefits were offset by the FX variance for the quarter, mainly due to the accounting impact of the movement of the Peruvian soil below the floor of the call spread hedges in place in Peru, generating an FX loss for the quarter versus an FX gain for the comparable quarter in 2023. Let's now move on to slide 15 to look at cash flow generation thus far in 2024. Year-to-date operating cash flow generation remains solid off the back of growing operating results coupled with a stable cash conversion cycle. Organic capex also remains stable versus 2023 levels. This investment cash flow for the quarter had an extraordinary impact related to the 47 million soles payment of our IMAT OncoMedica earn out obligation. Let's now move on to slide 16 for an update on our balance sheet and debt position. Leverage continued to fall according to plan to 4.13 times net debt to adjusted EBITDA in the second quarter of 2024. We continue to maintain steady deleveraging on the back of solid growth. Debt levels remain stable to what we saw in the first quarter of 2024. And we continue to maintain a healthy debt structure and maturity profile in support of our growth strategy. Finally, we continue to focus on cash flow generation and deleveraging with the objective of reaching our medium-term target of three times net debt to EBITDA. This concludes our discussion on the consolidated financial results. I will now let Suso wrap up our presentation with his final remarks before we move on to Q&A.
spk06: Thanks, Giselle. Before we open the call for questions, I would like to end the remarks with our outlook and near-term priorities. Please turn to slide 17. First, we remain on track to deliver a adjusted EBITDA growth of at least 20% in ethics-neutral terms in 2024, as the fundamentals of our operations remain strong. Peru will continue to have a very material and positive impact on 2024 growth, while growth in our operations in Mexico will be more back-ended towards the second half of the year, as the aforementioned initiatives mature into the second half of the year in 2025. Finally, in the case of Colombia, we will grow moderately within the context of prioritizing cash flow. OncoMexico will become another key growth driver in the coming years as we leverage our 35 years of experience with OncoSalud and leverage Denterera, now AUNA Seguros, capabilities to roll out OncoMexico at scale. Lastly, we remain excited about Aona's future, given that we are only in the early stages of penetrating and consolidating Spanish-speaking Latin America's highly fragmented and efficient and underserved healthcare market with our proven operating model and scalable regional platform. For perspective, despite Aona's size and scale, we only have 1% market share today, so our growth runway is quite long. As always, patient centricity and value-based care are at the heart of what we do each day, with a focus on providing long-term patient care and excellent medical outcomes through prevention, detection, and treatment. With that, I conclude my remarks. Operator, please open the call for questions.
spk01: At this time, we will open the floor for your questions. As a reminder, you can also submit your questions online by using the Q&A function of the webcast platform. Your first question comes from the line of Samuel Alves from BTG.
spk03: Your line is open. Thanks.
spk08: Good evening, Susu, Giselle. Good evening, everyone. Two questions here from our end. The first one regarding the deceleration top line in Mexico. What do you guys believe drove the deceleration, if it was caused mostly by a punctual comp effect versus 2023 in the second quarter? That's the first question. And the second question, regarding Colombia, you guys commented on the press release about an increase in the impairment for PDAs. Just as a clarification, if you guys could provide like the amount of PDAs that you provided, second quarter results, and how do you guys are monitoring this situation? Thank you very much.
spk06: Thank you, Samuel. With respect to Mexico, I'm not concerned. There is some seasonality as we discussed in the first quarter. No, but we are working in high complexity. And the shift to high complexity has a certain impact that you will see very positive in the second half of the year. And so I see, and I can of course see how high complexity is penetrating the revenue mix and how our physician hunting is delivering the right doctors and the right incremental volume in what we want to be doing in Monterrey. So I'm not concerned. It's in line with what we expect, Samuel. With respect to Colombia, I don't know, Gisele, do you want to respond to Samuel?
spk10: Yeah, sure. Samuel, could you repeat the Colombia question, which I couldn't hear that well on this end?
spk07: Related to the impairment?
spk08: Yeah, the comment that you guys are making, the press release about the increase in the impairment for PDAs for not-for-what counts, just if you guys could provide the amount of PDAs that jeopardize the second quarter results, and also if you guys see risks for higher PDAs in the upcoming quarters.
spk10: Yeah, sure, of course. So the impact of the additional impairment reflected in the second quarter is approximately $750,000 in the second quarter. And this is due to the fact that we have increased the impairment recognition given the current market context in Colombia. We see that accounts receivable, as you've seen in the press release, are stable versus what we saw last quarter. We think that there will be a slightly higher recognition of impairment in the year to go, probably consistent to what we're seeing in this quarter. But this is mainly just reflecting the higher risk situation of the market currently.
spk03: Thank you very much.
spk04: Thank you so much.
spk01: Your next question comes from the line of Leandro Bastos from Citi. Your line is open.
spk09: Hello, guys. Good evening. I have two questions as well. First one, if you could just comment a little bit, the early impressions of Uncle Mexico, the launching in July, how the product is kind of evolving in the region. And that will be the first one. And then the second, if you could talk a little bit about margins in Peru, there was a big increase year over year, especially in hospitals. So just to understand whether there was any went off last year, and where were the main levers to increase margins at both hospitals? Also, Uncle Salud, despite kind of a rising MLS, if we can just kind of provide some color over the year, I think would be helpful. That'll be it. Thank you so much.
spk06: Thank you. Thank you, Leandro. Let me take the first one and maybe half of the second one, and maybe you can complement. So on Uncle Mexico, and thank you for the question. So we are... Our goal, of course, in OncoMexico is to lead in the long-term private oncology market in Mexico. And to do that, we're deploying a set of initiatives now. As you mentioned, as of July 1st, we launched our OncoSalud B2C insurance product for direct sales in our hospital floors. We have launched it in a pilot mode to test product market fit and to learn about the commercial channels and how they are performing. This, for us, is a critical stage for a predictable future escalation of the commercial efforts of Local Mexico. We have put a small sales team in each of our hospitals to start creating awareness of the product. We have achieved some sales, a lot of leads, and we feel enthusiastic as we're opening new channels in the weeks to come. New channels, we're opening, I think, a week from now or two weeks from now, digital sales After that, a couple weeks after that, telemarketing sales. And also we were working with a large broker for B2B employer negotiations. So we are convinced that this product represents a new era in insurance and mono risk insurance in Mexico. It is clearly a disruptive product that doesn't exist in Mexico. And engagement with our sales forces is really rich. In addition, when we see Uncle Mexico, we are in different stages as well of negotiations with two large payers in Monterrey, offering solutions to their challenges. For example, a breast cancer value-based contracting model that we are leveraging, of course, from Columbia and Peru. This is the first of its kind in Mexico. This would allow AUNA to build the capacity to serve payers and position AUNA as a value-based oncology organization that is part of the solution to the raising health spending in oncology in the world, but in particular in Mexico, of course. And in addition to that, very much related, we're also in the advanced stages of a physician practice association model with the most reputable oncology group in Monterrey. This association will boost our local oncology activity and, of course, help us build a local oncology center of excellence that we have planned. I want to ask the question, Leandro, because we are very much focused on this, and I love it that the market is focused on this as well. This is the highest priority project we have, given that it does not consume capital until later stages. for we are, of course, using the install capacity in Monterey for the deployment. And it promises a total industrial market of at least 10 times what we have already developed and harvested in Peru. So that's on Onco, Mexico. And on Peru, I would just like to introduce the response from Gise. It is, again, what we have done and what we know how to do and how scale works in our favor. And Peru is harvesting this very, you know, successful integrated model, vertical integrated model of care. And then, you know, the more we penetrate our sales with that or revenue to that, you know, the more scale it grants, the higher margin it also delivers. So, Tisa, can you complement this?
spk10: Yes, of course. Thank you, Suso. Margin for the consolidated Peru business will be at the approximately 20% level for Peru this year, and you guys already saw us at 20% in the first quarter, so the 21% that we're seeing this quarter is just basically consistent with that and maintaining the gains that we had already seen in the first quarter of the year. Growth versus last year, as far as the EBITDA in Peru, does have a slight seasonality impact in the base of last year because of some SG&A seasonality last year. However, the 20% margin levels for this year are sustainable, and that is what we should be seeing in 2024. Great, guys.
spk08: Thank you so much. Very clear.
spk01: Your next question comes from the line of Paul Ruscio-Cepeda from Morgan Stanley. Your line is open.
spk00: Thank you. Thank you, Susu, Gisele, for the opportunity here. So, two questions. The first one, again, about Colombia. We know that the discussions about the healthcare system seems to persist there. How are your risk assessments about future impacts, notably in terms of the cash flows from the EPSs or for address or even risks of having to negotiate tickets and other things like that. So a little bit on your risk assessments about the country. And the second question about the MLR in Peru, we saw it's kind of varying a little bit, varying up now. So if you see that is a problem of seasonality or the fact that the mix of the B2B mix or if there is any influence on freshness of wallet or lack of freshness of the wallet, if there was differences in designs of policies or health technology pressure. So whatever reason that is making the ZMLR oscillate. Thank you. Great.
spk06: Thank you very much, Paulo. I'll try to give introductions on both, and maybe you can compliment each other as well. So in the first one, Colombia, I think we've seen the worst of it. A lot of discussion on the reform that didn't pass, a lot of pressure. Yes, an intervention of a large payer, but with the agenda that this intervened payer should perform better than when it was not intervened. So in terms of a hospital group like us, we do not see our accounts receivables growing in a number of days. And notwithstanding that, of course, we're risk-averse, and we've taken a position to make sure that our revenues do not have risk of collections. So you'll see us, I think if we didn't have that consideration, we could grow very fast in Colombia. But we are now being very conservative and saying, listen, let's make sure that everything, every service that we deliver and we issue in our account receivable is because we're going to collect it within the days that we have as a policy and not anything more than that. So you'll see us growing, but And we could grow faster, but we wanna make sure we don't take any more risk. In general terms, I see Columbia and the whole discussion in the healthcare sector, I think being directed to an important and social solution in 2025. As I like to recall everybody, 85% of the hospital groups in Columbia are private. are private. All of us depend on the payment system working well. That has been a very big concern of the central government as well as many regional governments. And that puts pressure on all the different stakeholders to make it work. And so that I would say is an introduction to Colombia. Jesus, do you want to add something else?
spk10: Yeah, what I would add, Suso, just as we mentioned earlier, accounts receivable days have been stable versus last quarter, as well as the net cash conversion cycle. So basically, as far as our risk assessment, given the market context, we are, of course, prioritizing cash flow, and we will be maintaining our accounts receivable days. and we will be managing the business as a function of maintaining those days stable.
spk06: Yeah. And on the MLR, Paul, so first of all, clarifying, we calculate our MLR for our health care plan business on a standalone basis for the insurance subsidiary. Therefore, if our hospital subsidiary is increasing intercompany fee, this, of course, is reflected in MLR. So the increase in our oncologic MLR versus first quarter 2020 school is primarily due to higher intercompany fees charged to the insurance subsidy. And we made an internal policy change where we used to charge the insurance company the average cost of treatment of a third party payer. And now we are putting a higher hurdle to the insurance company and putting the highest private payer for that service. So it's a higher threshold. It does not affect it at all. I do want to say that it changes the number a little bit, but this is the way we make sure that the MLR is always totally manageable. The healthcare network has good margins, and there's no subsidy from one side to the other. The other thing that I would like to share is, again, this effect is eliminated at the gross margin level. In the healthcare plans, business and gross margin is flat versus Q1 2024. We do not expect our oncologic MLR in the low 50s to change materially because, as you might recall, and as we've represented in the past, we continue to adjust our plan prices accordingly. So, remember, in AUNA, MLR is not a result, but it is It is baked into it. We make sure that we price according to the MLR that we want. And that flexibility to do that in Peru and in the future in Mexico is a very, very attractive condition to the market. Do you want to say anything, Alyssa, on the MLRG certificate complement? Thank you, Paul.
spk10: No, I think that was quite thorough.
spk06: Okay.
spk00: Thank you, Suso. Thank you, Hisalia.
spk01: Your next question comes from the line of Jocelyn Jansen from Looker. Your line is open.
spk11: Hello, thank you very much for taking my question. Well, I think that in terms of consolidated cash flows, the net cash of operating activities It covered, you know, the interest expenses. So, but still there is the frequent flow is negative. So my question is regarding CAPEX and which amount of CAPEX are you expecting for the remaining of the year and for the next year? And when do you expect to have a positive free cash flow? And regarding MMA activities and dividends, payments, are you still thinking of not do any of those activities or pay the dividends until that net leverage reach its three-time target? Those are my questions.
spk06: okay um i'm gonna start responding to that um with the last part and then you see you're gonna you're gonna explain um our um our cash flow um so we're a growth company and we don't we have a dividend policy of no dividends so it's not a question of leverage um i don't think we'll change that policy for the foreseeable future so we see ourselves as a very much reinvesting know our free cash flow in the future when those start to accumulate and grow more than dividends. I think most of the shareholders know that our policy and that's how we envision ourselves in the future. And you say on the free cash flow, please.
spk10: Yes, of course. Thank you for the question. In the year to date numbers, you will note that we have an impact due to an extraordinary payment. for the earn-out obligation related to the IMAP Oncomerica acquisition. So that was a non-recurring payment. In the context of the year-to-go numbers, we should see in the year-to-go organic free cash flow covering the interest payments. And furthermore, as far as the annual capex numbers and plans, We do not expect annual CapEx to be more than $50 million for the year on a consolidated level.
spk04: Sorry, 50 million? $50 million for the year. Okay. Okay, thank you very much. Mm-hmm.
spk03: Your next question comes from Alejandro Gomez. Your line is open.
spk02: Hi, this is Alejandro from HLBC. I have two questions. First, in Mexico, . Can you explain, I mean, how relevant given these contractions, are the expectations going forward? And then I'll follow up with my second question.
spk06: I'm sorry, Alejandro. You were breaking out. I think your question is about the decisions, right, in Mexico?
spk02: Yes. I mean, my question is regarding the margin contraction for Mexico. So the question is, I mean, how relevant is the physician's recruiting process, and what's the expectations going forward?
spk06: Okay. First of all, I mean, we see a lot of, as I mentioned before, some seasonality in Mexico. Our expectation in margins in Mexico is that directionally we are on the right track, gaining momentum in the growth, but in line with our expectation. Now, in terms of physicians, Yeah, I think we've rolled out a winning new physician model that is attractive for high volume independent physicians. Very compelling for younger physicians looking for, let's call it a home with institutional capabilities and their practices with volume, best practice and support are the key offerings. And I think we are delivering that. I'm excited of what we're collecting. We've reformulated the offering to physicians, and not only to produce approximately 300 new hires, but also to produce productivity of the 1,000 doctors that we have already. This has already produced incremental revenues of the new doctors, and also on the hunting we see also really good success. I mean, we're hitting something like 50% of the doctors that we target, we're able to hire. So we're hitting, we have a great, I think a high success factor. And remember, we do this very deliberately, especially in high complexity. In high complexity, 27% of those 300 doctors that I mentioned are in the specialties that we procure that is in high complexity. And that is producing at least almost 40% of the incremental revenues of the new doctors. So we are excited about what we're seeing. Changing the way doctors are compensated, doctors are hired in Mexico is something we've done elsewhere, but it does take time. and we do harvest gradually, incremental value from the different way that we relate to doctors. Again, I would like to say we're on track with what we expect and we're gaining momentum, but this is not a step-up function. This is a gradual increase of more and more doctors in what we do well, which is high complexity, more and more doctors also capturing their spillover effect of adjacent services of what they bring to our hospitals there. Okay. Thank you. Do you want to say anything about the margin in Mexico? Do you want to compliment something or?
spk10: Yeah, what I would compliment, Alejandro, is that margin impacts versus last year are more, don't really have anything to do with the physician model. It's more related to the increases in cost and SG&A, given the investments that we're making on the local and regional level that we mentioned last quarter in our release.
spk06: Yeah, that's a good point, and I always want to remind everybody. I mean, there is a step up in all these indirect costs, because the owner way is a little more expensive. scales really nicely, very predictably, adds a lot of value to the patient, to the medical community, medical resolution, and good sustainable margins. But there is a little bit of a step up because most of the recent assays that we've acquired had very different standards to ours. I think that's stable now, Gisa, for the future. I don't want to commit to anything, but I think today the standards of operations in all our hospitals throughout the regions are the same. in terms of compliance, in terms of security of the patient, in terms of the protocols that can come today. All the facilities, I think, have ongoing expenses that are very much related to the owner way and the standards we have defined in the owner way.
spk03: Thank you. Thank you, Will.
spk06: Thank you, Alejandro.
spk01: Your next question comes from the line of Caio Mascardini from Santander. Your line is open.
spk07: Hi, good afternoon. Good afternoon, everyone. So the first question is regarding the DNA level in Mexico. We'd like to ask if we are already at a more normalized level or if there are further investments to be made in the region. And the second question is regarding onco-salute price hikes. What type of price hikes are you expecting for the next cycle? Are you going to reduce the level of medical loss ratio through the price hikes, or you are okay with this current level? So that's it. Thank you.
spk06: So I'll start with the second one. So we've had 35 years of 50% to 55% MLR in oncology. So we're not going to deviate from that. And that's why we repriced. So it was at 50 and 55%. This is the way we manage the business. It's nothing that's related to one quarter, the next quarter. And this is a continuous way we operate MLR. So no, there will be no change in the MLR and where we will fall in in the future. I don't plan it nor expect it in any other way.
spk10: of the way we run the business though um and the first question was um sorry i couldn't yeah uh-huh in the case of sgna in mexico um we are now at a more stable absolute level um as you will know this quarter second quarter also versus the first quarter of this year, right? That's on an absolute level. We are more normalized. Growth rates versus last year basically had a little bit more volatility because we still had an impact from the reclassification that we mentioned last quarter. So, while you will see it growing less this quarter versus last year, once we clean out those impacts, it was still growing similarly to what we saw in the first quarter, right? So what we should see for the year to go is stable, normalized levels on an absolute level versus what we saw this quarter.
spk07: That is perfect. Thank you.
spk01: And there are no more questions from the phone line, so I will now turn the call over to Anna Maria Mora from ORNA, who will proceed with questions from the webcast platform.
spk03: Annie?
spk13: Hi, Cecil. Yes, thank you, operator. The first question that we have from the webcast comes from Estela Strano from J.K. Morgan. Could you please provide details on how the accreditation and relationships with doctors are evolving in Mexico? Also, what are the company expectations for ticket mix regarding volumes and complexity? Thank you.
spk06: Great. I think I did answer part of this, but maybe I can add a little more color to it. No, in terms of the physician hunting and the results, and as I said before, we've added 321 new doctors, and almost 30% of them are in high complexity practices. I like trauma. We're growing rapidly in new doctors, general surgeons, of course. We're growing rapidly as well in obstetrics and gynecology, and that's going very well, as well as cardiology. So you see, again, the coincidence of what we plan to do and what we are actually harvesting, though, in terms of the physician model. So, again, it's a two-pronged approach, the way we relate to physicians. It is about productivity. and being demanding and managing doctors and the value they deliver to our facilities in Monterrey, how much adjacent services we collect from them. And of course, it's also about hunting for new doctors and the specialists that we want. And I think, as I said before, this is coming as we expect, and you'll see us harvest this in the coming quarters. Did I miss the other question, Annie? There was a part of the question.
spk04: No.
spk06: That was it. Okay. Thank you. Thank you, Estela. And let's hear the next question, Annie.
spk13: Yes. So we have a couple of questions in regards to Mexico as well. The next one comes from Pedro Floriani. What can we expect in terms of occupancy rate in the Mexican hospitals for the second half of the year? How is the first half of the year track in terms of what was budgeted and how should we see that evolving?
spk06: Great. So, I mean, we don't feel very comfortable giving a lot of guidance on occupancy, especially occupancy on beds, which is such a such a random, I think, number. When we are at such high complexity, we're looking at surgery rooms and chemotherapy and radiation treatment rooms and their capacity. And what we do see is that high complexity occupation, the services that we deliver are growing. We see it in surgery. We see it in the three hospitals. We see it in practices of trauma, as I mentioned before, with the new doctors. Urology is growing very nicely. Neuroscience is growing at a very high click as well. Something we're not a specialist in but is growing very quickly is also plastic surgery and cardiology, as I mentioned before. Again, the practices that we're really good at and that we capture. So we see these treatment rooms, these surgery rooms, no their capacity is growing much faster than bed utilization now i don't want to not answer the question um we do have a plan to increase bed utilization in the hospitals no um and um and we we see that in we see that in the second the second half of the year you will see the increase in how we how we um fill up more um or the beds in the three hospitals we have So I would like to, I don't know, GC, if you want to comment on that or leave it at that.
spk10: What I would ask, Susu, is what you've already mentioned. As far as trends for the rest of the year, we continue on track to deliver our consolidated guidance of 20% EBITDA growth, FX neutral.
spk04: Yeah.
spk12: Thank you, Susu and Joe.
spk13: Just one more question. This comes from there. The question is, are you seeing any positive impact from packages and bundling services in Mexico?
spk06: Well, definitely. Definitely. That's a key element of our growth in high complexity. I can already see how we're growing in some packages, some are simpler packages in terms of obstetrics, and others are a little more complex. That is delivering growth. In addition, something very attractive that we've done in our hospital recently is to put counters to make sure that we capture any additional prescription, as we call it, cross-selling adjacent services. So in most of the floors, the patients will leave, and before they hit the elevator, we ask them, what did the doctor prescribe? What is the next test? When is it? And we make sure that those tests, those imaging, those pharma, those labs get captured within our hospitals. And that's also measured on a weekly basis, and that's also having a great impact as well.
spk04: Oh, yeah. Thank you, Suso.
spk13: Well, at this point, I believe all of the questions have been answered. So I will pass the call back over to you, Suso, for your closing remarks.
spk06: Well, thank you again, everybody. We really appreciate everybody joining us today. It's been nice meeting some of you during recent roadshows and at investor conferences. In the US and as well as Europe, we are keen to continue engaging with owner-shareholders as well as the prospective investors. Please let us know if we can do anything better in terms of these calls. We trust that our recent financial and operating results make clear the fundamental strengths of our owners, the owners' diversified and integrated healthcare platform, as well as our ability to scale it further in the region. Please do let us know if we can do this better. Thank you very much, everybody. Have a great rest of your day.
spk01: This concludes today's conference call. You may now disconnect.
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