Auna SA

Good morning, and welcome to Elna's fourth quarter 2024 earnings conference call. My name is Rob, and I will be your 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. Ma'am, please go ahead.

Thank you, operator. Hello, everyone, and welcome to our UNAS conference call to review our fourth quarter and full year 2024 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 our UNAS 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 regards to Mexico and Colombia, unless we know otherwise. Let's move to slide two. In addition to reporting financial results in accordance with international financial reporting standards, we will discuss certain non-IFRS financial measures and operating metrics, including foreign exchange neutral 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 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 we 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. These include, but are not limited to, our expected adjusted EBITDA growth, the expected impact on revenues and profitability of certain initiatives we are pursuing in Mexico, and long-term financial position and flexibility as a result of certain initiatives we are pursuing related to payers in Colombia and our target leverage level. For a description of these risks, please refer to our Form F-1 and or Form 20-F 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 Massal, our Executive Vice President of Strategy and Equity Capital Markets. They will discuss AUNA's consolidated and segment financial and operating results for the fourth quarter and full year, and will also provide updates on our various strategic growth initiatives. After that, we will open the call for your questions. Tulsa, please go ahead.

Thank you, Annie, and thank you, everyone, for joining our results call. We are pleased to have achieved all of the 2024 milestones at AUNA, including our patient experience, medical resolution, and our 20% FX-neutral EBITDA growth target for 2024. We expected the second half of the year to outperform the first part, given the seasonality effect on surgical volumes principally. We remain excited about AUNA's future as we maintain our growth momentum going into 2025. AUNA's vertically and horizontally integrated regional platform delivered 28% of FX-neutral adjusted EBITDA growth in the fourth quarter. with the margin expanding 3.1 percentage points versus last year's quarter and 1.4 percentage points for the year. This is as expected for the last quarter of the year. In Peru, our fully integrated healthcare and plans business remains strong as we reap the returns on earlier investments we made to build, integrate, and scale our business. Peru continues to demonstrate the consistent earning powers of AUNA's business model when it is operating at scale. With that in mind, we continue the deployment of our model in Mexico, where the business opportunity and potential is even greater, given the size of the country's private healthcare market and how under-penetrated it is. As we further implement the AUNA way across our hospital network in Monterrey, we've been driving operating efficiency and profitability driving growth from new service offerings and our focus on higher complexity offerings. We are also learning what works well in Mexico and not so well, as we always continue to refine our business model across our markets. In Mexico, we were pleased to announce an agreement with the physicians of the most prestigious oncology practice in Monterrey. On March 7th, we have signed a five-year exclusivity period with eight of Monterrey's leading oncologists and radiation oncologists who will bring their practice to own. This will position us as the oncology player of reference in Monterrey with a sizable practice and stellar results. Near-term challenges remain in Colombia with additional provisions this quarter. Accordingly, we are limiting our risk exposure in the country by calibrating growth and focusing on preserving cash flow. As we announced yesterday in our earnings report, We are lowering our exposure to Nueva EPS and replacing those volumes with other payers under risk-sharing models to prioritize cash generation. That said, we are still bullish on Colombia, given its medium and long-term growth potential. It also remains integral to our maintaining our own scale and achieving medical excellence across our platform. We believe 2025 will continue to be a challenging year in Colombia, but expect 2026 to have an important increase in volume and complexity mix. Turning briefly to our balance sheet, our debt leverage fell again to 3.6 times at year end. That's almost a full turn below our leverage last year. Q4 was also the fourth consecutive quarter of positive adjusted net income. And for the year, we reported net income of 124 million soles That is a 238 million soles gain from the net loss of 214 million soles in 2023. So now on slide five, revenues grew 11% on an FX neutral basis across our regional platform to about 1.1 billion soles led by Peru and Mexico. That brought full year revenue to almost 4.4 billion soles, which was 12% higher than 2023. also on an FX neutral basis. Among our healthcare facilities, capacity utilization increased 2.6%, this points to 66%, but our focus remains on growing high complexity services that carry higher margins rather than merely increasing capacity utilization. That focus is what drove our growth in Mexico once again this quarter. At OncoSalud, our health plans business in Peru, plan memberships continued growing. For the year, plan memberships increased 7.4%, while oncology memberships increased 1.6%. Lastly, on this slide, our oncology MLR decreased 0.7 percentage points to 53%, a very healthy level, very much in line with our expectations. Let's move to slide seven to take a closer look at the Mexican component of our regional platform. The implementation of the AUNA way continues to bloom in Mexico, where the addressable market for us is a high multiple peruse. In Mexico, we maintained our growth momentum with revenues growing 9% versus last year's quarter, while adjusted EBITDA increased 30%, also in local currency terms. Driving both was higher volume and improved ticket mix in hospitalizations and ICU therapies. Also driving revenue was strategic pricing across payer tiers in our network. The sequential decline that you see in the revenue and EBITDA charts mainly reflect the seasonality we typically see at the end of each calendar year. The continued investment in the implementation of the NOA in our Mexico operations has paid off with adjusted EBITDA, increasing 30% in local currency and a margin expansion of 5.7 percentage points. Our model continues driving physician engagement and productivity higher while raising operating standards, enhancing medical protocols and improving skills at our healthcare facilities. OncoMexico entered a new phase in 2025 After a successful pilot phase, we have started developing the B2B and the B2B2C segments to gain scale in 2025. In addition, to be able to give access to policyholders outside of Monterrey, we're developing arrangements with a network of service providers in the major cities in Mexico that will serve our policyholders outside of Monterrey while we develop our physical footprint in those cities. In parallel, as I mentioned earlier, We signed a five-year exclusivity agreement with Monterrey's top oncologists and radiation oncologists who serve today about 30% of the private market in Monterrey. Eight leading physicians will join us and together we will continue positioning AUNA Mexico as the best alternative in oncology and the high complexity player of choice. Let's turn to slide eight on Peru. The fourth quarter revenue of our most mature fully integrated platform in Peru increased 10% as it continued capturing more of the payer population, optimizing pricing, and growing plan members. These dynamics, along with the network synergies and efficiencies that we have been achieving, drove a 33% increase in adjusted EBITDA, which increased 51% for the year, also compared To 2023, Peru's margin expanded 3.8 percentage points in the quarter and 5.4 percentage points for all of 2024. These margin improvements were despite increases in cost of goods sold and SG&A, the latter increasing in support of growth. Now let's move to Colombia on slide nine. Our fourth quarter revenue in Colombia increased 14% in local currency. mostly because we have been gradually implementing risk-sharing models in Antioquia, an area that includes Medellin. Examples of these are cardiology and chemotherapy for breast cancer. Also increasing revenue was the addition of 14 ICU beds in Barranquilla. Together, these additional high-compensity services improved Colombia's revenue mix with larger tickets. Adjusted EBITDA increased 23% in local currency, primarily due to price adjustments from previous quarters agreed upon in the fourth quarter and procurement rebates, as well as adjustments to a technical loan and a risk-sharing contract. These items, many of which typically fall in the fourth quarter of the year, also accounted for the large increase in EBITDA. Conversely, EBITDA was negatively impacted by additional provisions for impairment losses related to outstanding receivables with payers, especially Nueva EPS. The situation with the intervened payers in Colombia has deteriorated since our last earnings call, but we remain cautiously optimistic that a resolution is forthcoming. The current state of healthcare in Colombia cannot be ignored by the government nor any political party in Colombia as frustration within the population is high. And it relates to a universal healthcare system that offers high quality of services, mostly from private companies like Auna. The government interventions have impacted all healthcare providers in the country, not just Auna, although we believe that Auna, given its high complexity focus, is in a stronger position than most. We expect a sector solution in 2025. Until then, we remain cautious and continue to monitor our exposure closely with a disciplined focus on maintaining a positive and predictable cash cycle. Our cautious stance in Colombia has not curtailed our attempts to continue to grow in volume and arrangements that require upfront payment for services. And these initiatives may deliver some upside during the latter part of the year. For now, I repeat, We remain cautious, and this stance is reflected in lower total and operating capacity in Colombia during the quarter. Emphasizing cash flow overgrowth in Q1, we began phasing out services that we deliver for Nueva EPS in Antioquia. We are also diversifying and reprioritizing our basic payers by reallocating service volumes to other payers. Overall, though, Our underlying business remains strong in Colombia. As our most recent quality results there make clear. With that, I'll turn the call over to Gise who will provide a more detailed review of our quarterly and full year results.