Auna SA

Good morning and welcome to Ana's third 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'd like to turn the call over to Ana Maria Mora, Head of Investor Relations. Ma'am, please go ahead.

Thank you, operator. Hello, everyone, and welcome to AUNA's conference call to review our third 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 variances, we will be doing so on a year-over-year basis and in FX neutral or local currency terms. 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. In addition to reporting and audited 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 carefully read the definitions of these measures and metrics included in our earnings press release of yesterday to ensure that they understand them. Non-IFRS financial measures and operating metrics should not be considered in isolation of 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 uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. This includes, but are not limited to, expectations and assumptions related to the integration and performance of the businesses we acquire. For a description of these risks, please refer to our Form F-1 filing with the U.S. Securities and Exchange Commission and our earnings press release. Slide three, please. On today's call, we have Suso Zamora, our Executive Chairman and President, Giselle Remy, our Chief Financial Officer and Executive Vice President, and Lorenzo Mazal, our Executive Vice President of Strategy and Equity Capital Marketing. They will discuss AUNA consolidated and segment financial and operating results for the third quarter and will provide updates on our various strategic growth initiatives. After that, we will open the call for your questions. Tuzo, please go ahead.

Thank you, Annie. I thank you all for following AUNA and for joining our results call today. The growing strength and earnings potential of AUNA's vertically and horizontally integrated regional platform was evident again in this third quarter, with our adjusted EBITDA increasing 23% on an FX neutral basis and our margin expanding 1.4 percentage points. In Mexico and Peru, adjusted EBITDA rose to record highs. In Peru, we continue to harvest past investments. The consistent and strong performance of our fully integrated healthcare and plant business there demonstrates again the robustness and earnings power of our business model when operating at maturity and scale. As well, of course, the advantages of our growth strategy. We are replicating the success in Mexico, a far larger and more underpenetrated private healthcare market. Our progress implementing the AUNA way there is still encouraging and shows stronger results. Productivity among our physicians continues to improve, along with a growing mix of more profitable, high-complexity services. In Colombia, the regulator interventions have been recent, and in particular in Nueva EPS, as the intervention teams have changed, yet in a more stable operating mode. There we have witnessed a growing relationship that is now keenly focused on collaboration on collections. Now withstanding our strong rapport with payers and our assessment, there is a clear willingness to pay all outstanding receivables. We increased provisions to reflect the increased risk of timely payments this quarter. This, of course, impacted profitability. Further, we continue to emphasize cash flow over growth to ensure our cash cycle in Colombia remains positive. Colombia is integral to our scale advantages and excellence in medical practices, and we remain bullish on this health care market in the medium to long term. Lastly, on this slide, our growing EBITDA drove debt leverage below four times for the first time since our acquisitions in Mexico. This is the eighth consecutive quarter that we lowered our leverage since the acquisition in 2022. Let's move to slide five to review our consolidated results. On an ethics neutral basis, our regional platform revenues increased 13% year over year to 1.1 billion soles led by Mexico and Peru which grew 16% and 13% respectively. That top-line growth combined with increasing operating efficiency and synergies drove operating profit to 229 million soles for the quarter, an increase of 23% when excluding the benefit of a one-time reversal with a holdback related to our acquisition of OCA. During the quarter, Average occupancy across our healthcare services increased 3.8 percentage points to 67%. Importantly, we also saw capacity utilization rise with regard to high complexity services, such as radiology, cardiology, and urology. At Ongo Salud Peru, which is our fully integrated healthcare business, memberships in our healthcare plans grew just over 4%. to nearly 1.3 million, while memberships in our oncology plans increased about 2% to a little more than 979,000 policyholders. Lastly, our oncology MLR decreased a percentage point to 53.7 from the last quarter, remaining at a healthy level. Turning to Mexico in slide seven, please. Revenue at healthcare services in Mexico accelerated in the third quarter, increasing 16% in local currency, validating the implementation of the owner way. Adjusted EBITDA also accelerated, increasing 34%. As you can see in the chart on the right side of the slide, Mexico's adjusted EBITDA margin increased 4.7 percentage points to just under 36%. We achieved this despite the investments that we continue making to implement the owner way at our healthcare facilities in Monterrey. Top line and adjusted EBITDA growth were driven by a still improving mix of high complexity services and increases in related total and operating capacity, which continues increasing slowly but surely on a quarterly basis since the beginning of the year. Another contributor was productivity, which continues to rise among our existing physicians, as well as those we had been recruiting. All of these significant improvements reflect our progress in implementing the new way, which results in improved operating standards, medical protocols, related skills, physician engagement, and most importantly, patient care. As a reminder, this is an investment that scales nicely and predictably, as we've seen with our more mature business in Peru. With regard to OncoMexico, we are leveraging our 35 years of experience delivering integrated oncological services in Peru. As a reminder, this will be Mexico's first oncology insurance, which will be fully integrated into our healthcare services network. We expect it to be a disruptive product. representing a new era in monoline insurance in the country, which has an addressable market multiple times the size of Peru's. Banco Mexico remains in a pilot phase in 2024 and early 2025, leading up to its initial launch in Monterrey, initially in the B2B segment and subsequently in the B2C segment. We continue testing Uncle Mexico's commercial, clinical, and risk underwriting capabilities, in addition to building out a robust sales and marketing function for the product. Slide eight, please. In Peru, the most mature component of our regional platform, revenue grew 13%, while adjusted EBITDA increased nearly 50%. and margin expanded 5.3 percentage points to 21.6. The strong growth in profitability was driven by the increases in plan memberships, as well as by their higher average ticket, along with the health care network's continued transition towards higher complexity care and higher occupancy, resulting from maturing hospitals and efficiencies across the network. Adjusted EBITDA also increased as a result of optimizing service flows and strategically reallocating specialties among healthcare facilities, effectively implementing our pricing strategy in this market and achieving network synergies and efficiencies across operations. Let's move to slide nine. Consistent with a cautious approach we have taken toward Colombia with an emphasis on maintaining healthy cash flow, Revenue growth there moderated to an 11% in local currency terms. The underlying business remains strong, however, with an increase in chemotherapy, surgeries, and hospitalization services improving the revenue mix. While operating occupancy increased 2.4 percentage points to 89%. This was mainly driven by a surge in emergency care accompanied with moderate availability of beds due to efficiencies implemented in the facilities to accommodate our offer, given the current circumstances with our payers. Because payments from REBA by EPSA have been less predictable, we have increased the provision for impairment losses. This resulted in the 18% decrease in adjusted EBITDA that you see at the right of this slide, while impacting margin again, which decreased 4.5 percentage points to 12.4%. Excluding the provision, adjusted EBITDA would have increased 11% and margin would have been 17%. NEVA IPSA has had changes in the management team as part of the regulator's intervention, generating more uncertainty, but we have a productive dialogue with them regularly. While the conversations with them are encouraging, we remain vigilant and continue to monitor the overall situation closely. Keep in mind that the bulk of healthcare in Colombia is provided by private companies like ours. The regulator is mindful of this and therefore keen to see payers become compliant, again, with the requisite financial ratios. We still believe the situation is transitory, and we expect a resolution will be reached. To be clear, Colombia remains a key market for Aluna. It is strategic to our business model. and our medium to long-term outlook has not changed for this segment. I'll now turn the call over to Giseh, who will provide a more detailed review of our third quarter financials. Please, Giseh.

Thank you, Suso. Good morning, everyone. Let's continue with an overview of our consolidated financials for the quarter, beginning with our consolidated revenue on slide 11. On an FX-neutral basis, consolidated revenue grew 13% during the quarter and 12% year-to-date, led by our mature, fully integrated business in Peru. Mexico also drove top-line growth as the Aunaway gained traction in this key growth market, where we endeavored to replicate our success with this model. As Suso noted in his remarks, we have calibrated growth in Colombia, although it still grew low double digits. Let's turn to slide 12. The quarter's top line growth coupled with operational efficiencies across AUNA's platform drove a 23% year over year increase in consolidated adjusted EBITDA on an FX neutral basis. while our margin increased 1.4 percentage points to just over 22%. Mexico's adjusted EBITDA grew 34% versus the third quarter of 2023, as it benefited from an improved revenue mix. Adjusted EBITDA growth is particularly impressive when you consider the investments we have been making to build our capabilities at both local and regional levels in Mexico. Moving to the right of the bridge, Peru's consolidated adjusted EBITDA margin in this quarter was 21.6%, increasing 5.3 percentage points from the third quarter of 2023, as shown near the center and top of the EBITDA bridge on this slide. This primarily reflects a more profitable services mix, increased operational efficiencies and synergies, as well as growing plan memberships. As explained, while operating performance remains strong in Colombia in the third quarter, we have begun dialing back growth in order to protect cash flow. We also recorded an additional 16 million soles of provisions for impairment losses in the quarter. Excluding this impairment, Consolidated adjusted EBITDA would have been 61 million soles, an 11% FX neutral growth with a 16.8% margin. Let's now move on to slide 13, please. For the third consecutive quarter, our adjusted net income was positive. It was 75 million in the third quarter. As shown near the left of the bridge on this slide, our operating profit benefited from an extraordinary income as a result of the reversal of the holdback obligation related to our OCA acquisition in Mexico. When excluding this reversal of 44 million soles, operating profit was still up 36 million soles versus the comparable period of last year. The quarter benefited from a positive foreign exchange gain shown near the middle of the bridge. The gain was primarily due to the appreciation of the Peruvian sol relative to the Mexican peso, which also reduced our net finance costs by 23 million soles. Income taxes in the third quarter were 30 million soles higher versus last year due to increased profits and lower tax credits in Mexico and Peru. Non-cash and extraordinary items and adjustments of 26 million soles mostly related to the adjustment of the 44 million soles holdback benefit, which impacts our adjustments negatively. Finally, the 75 million of adjusted net income was 0.98 soles on a per share basis for the quarter based on a weighted average number of basic and diluted shares. Let's now turn to slide 14, please. Our cash position was 200 million soles at the end of the third quarter. On a year-to-date basis, we have generated a solid 629 million soles in pre-tax operating cash flow. As shown near the left, of the bridge on the slide. This is a 20% increase versus the first nine months of last year. Income taxes paid during the same period rose to 154 million soles due to increased profits and lower tax credits, resulting in net cash from operating activities of 475 million soles. up 9% versus the nine-month period in 2023. During the nine months of 2024, we invested 173 million soles in investing activities, up 49% year over year. The 107 million soles of capex that you see in red in the bridge was mainly for maintenance capex related to infrastructure, purchases of medical equipment for our hospitals and clinics, as well as the implementation of SAP across our regional platform. Other uses of cash in our investment cash flows were the previously reported 47 million soles of the earn out obligation related to the IMAT OncoMedica acquisition and an additional 18 million soles in payments that have occurred in the third quarter related to the hold back obligation corresponding to the OCA acquisition in Monterrey. As indicated in the upper part of the cash flow bridge, we generated organic free cash flow of 368 million soles during the first nine months of this year when excluding the impact of the amortizations of the earn out and the hold back obligations. And total free cash flow of 302 million soles. Please move on to slide 15. This quarter, we also crossed a very important milestone, as Suso mentioned in his remarks. With our net debt to adjusted EBITDA ratio falling below four times, and reaching 3.7 times. This was the eighth consecutive quarter of improving leverage. Getting below that threshold indicates that we are well on our way towards achieving our medium-term target of less than three times net debt to adjust to EBITDA, given Aona's solid EBITDA growth trajectory. Regarding Aona's credit facilities, At the end of the third quarter, we had approximately $196 million in revolving credit facilities, which includes a $40 million increase in credit lines from the previous quarter. With respect to the remaining stub of our 2025 bonds, AUNA is pursuing a couple of different alternatives to refinance these notes and expects to close the refinancing subject to market conditions in the near term. To summarize this slide, our debt leverage and maturity profile remain healthy, and we are still adequately funded to continue executing our growth strategy. That concludes my review of our financial results. I'll now hand the call back to Suso, who has a few closing remarks before we open the call for your questions.

Thank you, Jisa. To summarize our performance and outlook, Peru maintained its outperformance, further demonstrating the earnings power of our business model when it's operating at maturity and scale. Mexico's EBITDA also increased to a record high. We expect to continue driving growth in this massive and highly underpenetrated market. As we continue implementing the owner way in Mexico, we expect our performance to accelerate there as we attract additional physician talent, improve doctor productivity, and increase the mix of high-complexity services at our current healthcare facility in Monterrey, which has one of the country's fastest-growing economies. Colombia remains strategically important with regard to operating with regional scale and to achieving excellent patient outcomes through excellent medical practices. For the foreseeable future, we are focused on maintaining a positive working capital cycle until the situation with payers returns to normal. We're very excited about the growth potential of Uncle Mexico, intending to replicate the long-term success we have had with Uncle Salud in Peru. We continue building and testing Uncle Mexico's capabilities during its current pilot phase, and we're looking forward to a successful launch. Looking ahead, We also remain excited about the significant progress that we continue to make investing in and scaling Auna's vertically and horizontally integrated regional health care platform with our proven business model. And we are only just getting started penetrating private health care in Spanish-speaking Latin America, which is largely fragmented and inefficient and for which demand is substantial. Accordingly, we will continue to innovate to modernize and to expand access to integrated healthcare in the region, always with patient centricity and value-based care foremost in our minds. That concludes our remarks. Operator, please open the call for questions.

At this time, we will open the floor for questions. As a reminder, you can also submit your questions online by using the Q&A function of the webcast platform. The first question comes from Mauricio Cepeda of Morgan Stanley. Your line is live.

Hi, good morning. Thank you for the opportunity here. We have two questions. First of all, in terms of cash flow, specifically about working capital, I see that there is this impact in in accounts receivables, I imagine it's OA2 Colombia, but I also see a lot of financing coming from accounts payables. So presumably I would think you're talking about suppliers. So my question would be this kind of expansion in financing from suppliers to compensate for the working capital impacts from Colombia. How long do you think it may continue or has it reached the limit so the cash flow may be impacted because receivables, they end up increasing much more than payables? This is the first question. And the second one about Colombia, I understand that you, of course, in a good practice are now provisioning Darfur accounts. But the number that we saw in this quarter, it's a catch-up from accounts that you had previously and now you are just recalculating the probabilities of receiving them? Or should we consider these kind of a run rate? And how should we think about that for the future? Thank you.

Thank you, Mauricio. Very relevant two questions. Let me frame the response on Colombia, and then I'll ask Jesus to compliment. First of all, before I talk about Colombia, in general, there have been no changes in the way we're managing and balancing account receivables to accounts payables. It is a characteristic of the Colombian market. and also the Peruvian market in some sense, that suppliers of goods and services are financing players like ourselves with significant working capital. So it's not something that has changed dramatically in the last month. I would say that and just have a compliment. But anyway, I wanted to respond more openly because I just came back from Colombia this week and I spent the whole week there. really interesting it was a very productive very promising visit you know and um of course the takeaways a lot of these you or you guys already know but we are a large player in colombia we are a very relevant player in cancer and in high complexity in colombia i'd like to say we are undeniably a very attractive provider of services to most of the payers in colombia In the cities where we operate, we are needed, not only as a traditional provider of services, of course, but more and more with very intimate products that are risk-sharing service provider products. And I see a lot of concentration with three of the biggest five players in Colombia. These players represent like 50% of the healthcare system, and we're intimate. and need it, and of course, we also need them. This group of payers, two of them are intervened, and we operate them with a certain level of normality. These relationships, again, have a level of mutual dependency, and this gives me and the team comfort in these stressful times. Now, payments from Nueva EPS you know, have been more volatile when seen month to month and compared to past years. You know, I do not think these are indicative of a receivables loss, but a conservative stance to provision these accounts receivables. And I think I'll be back in Colombia in December, and I expect to see more, a much more promising scenario. I want to repeat, with respect to Colombia and account receivables, I think this is a transitory And I see from this trip, I'm encouraging signs. No, absolutely that we will be paid by all our payers, insurance companies, be they private or public, be they interviewing or not interviewing. But we are taking a conservative approach by increasing the provision level to our cash receivables to reflect a higher risk. And we're also moderating our growth to make sure that any growth that comes from Colombia has a working capital cycle that is attractive or more attractive to us and we of course will continue to monitor the situation and of course share um with the public markets any any updates i don't know do you say if you want to compliment on this yeah thank you so i think you covered most of the points um on my end i would simply add um first on the point of liquidity

As Suso mentioned, what we're seeing in accounts receivable and the netting effect of accounts payable in the case of Colombia is very consistent with what we see in the market. We have a very strategic relationship with our suppliers and an open dialogue with them, and this is kind of the way the entire market is moving. And I would also add that, obviously, and as we mentioned, you know, we have abundant access to credit facilities, and we also utilize these for factoring and confirming products, which also are reflected in those accounts payable days. And from a provisioning perspective, I think Suso was very clear. Obviously, we're very constructive in the case of Colombia, and it's not that our expectation is that we will not get paid. This is just The mere reflection of our methodology, which is basically based on an expected loss model, which is now leading us to be a little bit more conservative as far as accounts receivable in the case of Columbia. And specifically, in the case of the intervened entities, we are reflecting a higher percentage of provision on accounts receivable.

Your next question comes from the line of Caio Mascardini from Santander. Your line is open.

Hi, good morning, everyone. Thanks for taking my question. First question is related to the adjusted BDA growth guidance. How confident are you that you will be able to achieve the guidance? And the second question is regarding leverage, right? What are the optionalities that you have in order to deleverage faster can you sell like some real estate assets in montana what could you do in order to be leveraged faster or are you um confident that pure cash generation will take you guys to the level that you you want over the next uh few quarters thank you thank you and good to hear you um

So with respect, again, I'll start framing the response and help me with anything that I forget or compliment, of course. So with respect to our guidance numbers, we are not changing our current guidance. And we expect our EBITDA growth to be at 20% in FX neutral. Our business and businesses are healthy and they're performing as expected. No, and of course, we don't control what happens in Colombia, but as I indicated previously, our current view is that it should not prevent us from reaching our numbers. Colombia remains the smallest portion of our IPEDA contribution. Peru has been over-performing this year. As we have guided, Mexico's growth trend is again a key element of our guidance, and it's growing nicely as well. So I would say that with the guidance, You can also answer on how we're going to continue to deliver as well.

Great. Yeah, thanks, Caio, for the question. As far as deleveraging goes, as you guys saw, very solid results, right, this quarter, dropping below four times, reaching 3.7 times. And we think this positions us very well on track to reach the three times target that we have in the medium term. so towards the end of 2025, beginning of 2026. This year, obviously, as we know, deleveraging has come as a function of EBITDA growth. However, we will see in the second half of this year that organic free cash flow covers interest payments, and this sets a very positive trend going into next year where we will begin to see a cash surplus, which will permit us to reduce debt not only through EBITDA growth, but also through debt amortization. So we're very confident there on that side that both EBITDA growth as well as cash will permit us to continue deleveraging. And obviously very conscious of our cash conversion cycle and any on operating assets that we may be able to dispose of, we will also analyze in due time.

Your next question comes from a line of Samuel L. from BTG Pactual. Your line is open.

Hello, guys. Can you hear me?

Yes.

Oh, it's Ian from BTG Pactual here. Good morning, everyone. I have two questions here on our side, right? The first one is about Mexico, a bit more focused on short and mid-term dynamics. I just wanted to understand if you could give us more color on what we expect growth to stem from in Mexico in the short term, if it should come from better occupancy rates, a mix of procedures, pricing ramp up, or the healthcare plans ramp up. So I wanted to understand a bit more of the mix of these results and what do you expect in the short term. And the second question is regarding results in Peru. We see that MLRs are running at improved levels and also OPEX in the unit, and I wanted to understand if we should expect to increase higher profitability in this business unit as it's recurring, or if you've from what things to improve current profitability levels. So I just wanted to ask these two questions. Thank you. Thank you.

I think it's Samuel, right, because I couldn't hear you at the beginning. So with respect to Mexico, You know, let me first of all repeat something that I've done in the past. What are our country's strategies? And very quickly, I don't want to... Peru is proof of concept. Peru has been the winning formula of vertical and horizontal integration. Colombia's scale and excellence in medical practice at scale. Colombia is moving towards horizontal integration. And with the growth of private insurance in the future, vertical integration as well. And Mexico, the question, Mexico is a large field that needs to be planted and harvested. We are currently planting it. We have the physician groups, we have the hospitals, we have the insurance arm, and we have the commercial capabilities. We're rolling out all of this in a deliberate yet gradual way. This is how we have built our formidable businesses of patient care gradually and deliberately. Now in Mexico in particular, let me go on the two major themes in Mexico. So with respect to recruitment of physicians in Mexico, our results reflect the success of our strategy in physician recruiting. We continue with programs to incentivize doctors in the high complexity procedures. We'd like to increase their productivity with us. That's something we're already harvesting and it's going to give you some numbers in a bit. Simultaneously, our model is starting to resonate in the market. which has led to very interesting discussions of physicians wanting to join us in addition to our recruiting answers. That is high-complexity physicians coming to us and saying, hey, how can I work here in your oncology practice? That's also something that is growing in the trend. In respect to third-quarter performance drivers, what we see, for example, in surgical procedures, average surgery reached almost 2,000 surgeries, 1,900 almost, That's 6% quarter to quarter. That's boosted revenue, as you saw. Growth was primarily driven by two strategies. Of course, decision management, and then what we call the private sales strategy. I'll explain this very quickly. The position management, we have also the loyalty program. We launched in May 2024. I think I did discuss it in the previous quarterly results. This has resulted in significant and very promising results. In the second quarter of 2024, we had something like 68 enrolled physicians in this program, this loyalty program. And they produced in that first month around 20 million Mexican pesos in production. Now in the third quarter, we have 106. We've almost doubled that. Physicians generated, of those physicians that generate more than double, almost 60 million additional Mexican pesos in revenue. So very clear. Again, seeding and harvesting what we've done in the past. Currently, we have 500 enrolled physicians in Monterey. That's a big number, and you can see how it impacts the new enrollment. They're a significant part of the new enrollment. And then we have the private sales development. We call it Plan Libertad, which is offering new products, bundles to doctors and doctor-led groups. this has um this shifts away some of the violence the volume and reliance from third parties like insurers no and that has grown um also um in um in the third quarter something like 30 million mexican pesos since the end of the the previous quarter you know it went from 30 million in the previous quarter to 35 million in in this quarter this last quarter that's 17 increase Just on selling bundles of products related to doctors that can deliver those services. That's an additional source of what I described before. Of course, what are the contributing factors there? Well, we've already launched some digital tools, and we've improved pricing and cost for these bundled packages. We've increased acquisitions of new patients, higher conversion rates from consultations to surgeries. from surgeries to the horizontal integration of all the services related to that pathology. Now, we're very focused on that, and that's also resulting in very interesting increased volume. So physicians in oncology are reaching out to us, giving our positioning in oncology. So that's in general what we see in Mexico and what we see in volume increases in Mexico. And the second question was on Peru. Adisa, could you take that one on the MLR?

Yes, of course. I think it was around MLR in Peru as well as profitability levels. As we've seen over the last few quarters, we've surpassed the 20% EBITDA margin in Peru when we consolidate the healthcare network as well as the integrated portion of the business. And we are, you know, comfortable with these profitability levels, which this quarter are above 21%. As we've also seen, MLR, you know, obviously is a function of our business model, right? And as we know, even though between one quarter and another there may be some movements, which over the past few quarters have been more attributable to intercompany, impacts than real organic MLR impacts. And that is why we continue to expect our EBITDA margin in Peru to remain at these levels. We continue to see opportunities to continue growing both our member base as well as the utilization and the mix and the high complexity impact of our hospitals. And that's also why we are very, very optimistic about growth potential in Peru for next year at these margin levels. And obviously, this is a testament to how well the integrated model works at maturity and at scale.

Thank you, Jessica. And there are no more questions from the phone line, so I will now turn the call over to Ana Maria Mora from HANA. We'll proceed with questions from the webcast platform.

Thanks, operator. The first question we have is from Gerard Fort from SURA. Hello. I have a few questions regarding Colombia. What percentage of your doctors and nurses are in temporary contracts? With the Colombian reform, would you need to hire these personnel full time? What are your expectations regarding the proposed price caps for high complexity procedures in Colombia? What's your current occupancy rate for Clinica del Sur, and when are you expecting to finish its ramp up?

Great. This is a series of very relevant questions. Today in Colombia, the last number I saw, a little shy over 50% of our doctors have some contractual relationship with us, be they're in the payroll or they have an independent contract or they have a group contract depending on the practices. So we have more than 50% of our doctors already have establish relations with us, especially in, again, in the high-complexity practice that we focus so much on. In addition to that, we have been doing a high-complexity, particularly oncology, for decades now. And we've done it with risk-sharing techniques. products and services that actually are very attractive to the insurance companies. Our scaling in these products has always allowed us to be the most efficient provider in cancer. So I'm reluctant to give a very clear answer on how it's going to impact some price caps. I don't see a lot of those price caps. affecting immediately in Colombia. I see some drug price caps. More than anything, there's going to be the focus on the state. I hear the Colombians wanting to replicate the Spanish system, in which the country itself is procuring and making sure it has the lowest price for some of the expensive drugs in the world. I see that happening more than a control of private hospitals. Remember, in Colombia, 82% of the hospitals in Colombia are private you know and that is a that is a uh that has a high variation with small big and very large hospitals so i would say that um with respect to my expectation um and then um our second hospital in medellin in the city of medellin you know and we inaugurated a couple years ago it's been ramping up nicely um with respect to um our current capacity of the hospital we're running at 80%. But remember, AUNA is not a holding company of countries, and it is not a holding company of hospitals. What we do at AUNA is we build ecosystems of healthcare, urban ecosystems of healthcare. So, CLISUR actually operates within the Medellin ecosystem of healthcare. So we push certain procedures to that hospital, and we leave Las Americas with other focus on other procedures in which it is more efficient, in which NPS and medical resolution is best. Now, very interestingly, from my visit last week to Colombia, two large payers have approached us to see if we could do something special at Clisur, in high complexity. That's a very attractive proposition. It's a very interesting proposition of higher volume, high complexity with one payer, maybe co-branding the facility for what's a growing trend in Colombia, which is these private insurance policies that are being rolled out that most probably will double the size of the private policies and what are called prepaid policies and complementary policies in Colombia. So those new policies that have a high growth rate require from insurance companies to make sure that they can deliver the services with cost containment. And I think we're very lucky to always have counterparties that find us quite competent in cost containment, especially in high complexity. So we see that as a growing opportunity in Colombia with respect to pieces. Did I forget anything? Is there anything else you want to compliment?

No, I think that was very complete. Okay.

Again, if you would like to ask a question over the phone or over the web, please press star 1 or enter your question into the chat box. And your next phone question comes from the line of Alejandro Zemacona from HSBC. Your line is open.

Thank you. Two questions from our side. The first one is, you know, it's kind of early, but do you have any high-level thoughts or early expectations for 2025? And then our second question is on the oncology plan fallout in Mexico. So how, so far, how is performing against your initial expectations? Are you sharing any thoughts on what's coming for that landscape? Thank you.

Great. Thank you very much, Alejandro. So I'm reluctant to give guidance on 2025 because we're in the middle of the budget process. I don't think it's going to be very different from what we currently have. We need to make sure that We recognize the opportunities and also the risks in Colombia in terms of growth. But besides that, I think we'll have a very clear idea and we're committed to delivering guidance in our next quarterly call at the beginning of the year for 2025. On Comexico, a couple of things that are really interesting. I want to, again, highlight no so uncle mexico is being deployed um i think i said it in the conference call at a pilot level in 2024 and in early 2025 as well so we're testing the product the price is selling the channels and other variables and levers that allow us to launch the product initially in the b2b segment and subsequently in the b2c segment so we are deploying uncle mexico in the same way we have done so in the past improve First, positioning ourselves in oncology, grabbing market share of oncology practices and building B2B relationships that grants us a larger pool of patients with a payer behind sooner. This impacts our revenues, of course, positively and margin positively today and tomorrow. Rollout of the B2C to cover populations directly, now this impacts our revenues and margins in the future. So I want to make sure that all our followers understand that. We're very excited about what we have today in Peru, but it takes some time, especially to build a B2C component of our offering. This is what we've done well in the past, and we're confirming it works in Mexico. What are the general confirmations that we see in Mexico in 2024? What are the lessons learned? First of all, our products and services in oncology in Mexico are very well received. They're unique and they are liked. This confirms the market need and the potential. The product is highly appealing to the Mexican population without what's called in Mexico major medical expense insurance, which is almost 90% of those that are insured in Mexico have that type of insurance, which means that it only covers a major event and covers no prevention or early detection. none of the stuff we naturally cover in our policy. So it really fits in in what is the main traditional product of insurance in Mexico today. Our evaluation indicates that at least 20% of the Mexican population in the middle class has significant interest in this type of product, but we believe that not more than 15 million people can afford it at today's prices, at today's demographics, no. In terms of the collective sales potential that is the B2B program, we see the product gaining traction in B2Bs. Again, due to a large coverage gap among employers. For example, in Monterrey, 55 to 60% of active workers have the major medical expense insurance. We are clearly playing in the field, not only as a product of a commercial effort, but also with some requests from brokers and employers to quote coverage plans, oncology coverage plans, for employers and insurance companies and other groups represented by brokers. We have active discussions today on the B2B side with retailers, with corporates and brokers with respect to the B2B strategy. On the B2C insight, again, this is a pilot scale. First, we increase our patients from B2B. Slowly, we increase the population that we cover on the B2C. But today, we could also conclude There's a big market segmentation in Mexico, the B2C opportunity. 65% of policies will be sold through our own channels for individuals without any coverage from what I said before, the major medical expense insurance. Because this is a population that has no insurance and might only have Social Security if they're on a payroll. What have we seen today? high interest from working women. We see a lot of engaged nurses, receptionist secretaries whose jobs did not provide medical insurance, as I described before, and who insured themselves and their children. A lot of nice dialogue there. And employees that are covering their employees with Mexico's social security teams. No, but Eames has a very poor offering characterized by waiting lines and lists of appointments and surgeries. So those are also nice growing dialogue with that segment of the population. A lot of interest from independent workers, doctors, dentists, nutritionists. Remember, we're selling a lot of this as well in our receptions in our hospital. And so it does have a certain bias to those professionals. And since they are independent, they also need to secure individual insurance coverage. And that's where they find our product interesting. I think that sort of gives some insight into where we are and how we see the product landing. And I'd like to conclude it's landing well. We're very deliberate but gradual as we grow these businesses and as we take care of these populations.

At this time, I'm showing no further questions, so I'd like to turn the call back over to Suso, who has a few closing remarks.

Well, thank you very much, everybody. It's been a good quarter, as you might attest. We will continue to update you all on this progress and our various growth initiatives on our next earnings call. In the meantime, we remain keen to continue meeting with our own shareholders as well as investors that are new to the company. With that in mind, please reach out to our investor relations group, and Andy in particular, if you'd like to arrange a call or a meeting with Jesus, Lorenzo, or myself, happy to do that. Have a great day, everybody, and enjoy the rest of the week. Thank you.

This concludes today's conference call. You may now disconnect.