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.