Auna (AUNA) 20 Nov 242024 Q3 Earnings call transcript

Good morning, and welcome to Auna's Third Quarter 2024 Earnings Conference Call. My name is Rob, and I will be the operator for today's call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] Now I'd 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 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 regards to Mexico and Colombia unless we note otherwise.

Let's move to Slide 2.

Before we begin, we would like to remind all participants that our comments today will include forward-looking statements.

In addition to reporting unaudited 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 or substitute 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. These include, but are not limited to, expectations and assumptions related to the integration and performance of the businesses we acquired.

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 3, please. On today's call, we have Suso Zamora, our Executive Chairman and President; Gisele Remy, our Chief Financial Officer and Executive Vice President; and Lorenzo Massart, our Executive Vice President of Strategy and Equity Capital Markets. They will discuss Aruna's 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.

Suso, please go ahead.

Thank you, Ana, and 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 health care and planned 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 health care market.

Our progress implementing the AunaWay there is still encouraging and show 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 [indiscernible] 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.

Notwithstanding our strong report 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 4x for the first time since our acquisition in Mexico. It is the eighth consecutive quarter that we lowered our leverage since the acquisition in 2022.

Let's move to Slide 5 to review our consolidated results. On an FX-neutral basis, our regional platform revenues increased 13% year-over-year to PEN 1.1 billion 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 PEN 229 million for the quarter, an increase of 23% when excluding the benefit of a onetime reversal with a holdback related to our acquisition of OCA.

During the quarter, average occupancy across our health care services increased 3.8 percentage points to 67%.

Importantly, we also saw capacity utilization arise with regard to high complexity services such as radiology, cardiology and urology. At [indiscernible] Peru, which is our fully integrated health care business, memberships in our health care 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 1 percentage point to 53.7% from the last quarter, remaining at a healthy level.

Turning to Mexico in Slide 7, please. Revenue at health care services in Mexico accelerated in the third quarter, increasing 16% in local currency, validating the implementation of the AunaWay. 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 in AunaWay at our health care 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 have been recruiting.

All of these significant improvements reflect our progress in implementing the AunaWay, 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 in delivering integrated oncological services in Peru.

As a reminder, this will be Mexico's first oncology insurance, which will be fully integrated into our health care 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. OncoMexico 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 OncoMexico's commercial, clinical and risk underwriting capabilities in addition to building out a robust sales and marketing function for the product.

Slide 8, 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 planned memberships as well as by their higher average ticket, along with the health care networks' 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 health care facilities, effectively implementing our pricing strategy in this market and achieving network synergies and efficiencies across operations.

Let's move to Slide 9. Consistent with the cautious approach we have taken toward Colombia with an emphasis on maintaining healthy cash flow, revenue growth there moderated to 11% in local currency terms. The underlying business remains strong, however, with an increase in chemotherapy, surgery 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 [indiscernible] 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%. [indiscernible] had some changes in the management team as part of the regulators 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 health care 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 Auna. 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 Gisele, who will provide a more detailed review of our third quarter financials. Please, Gisele.

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 endeavor 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 planned memberships.

As explained, while operating performance remained strong in Colombia in the third quarter, we have begun dialing back growth in order to protect cash flow.

We also recorded an additional PEN 16 million of provisions for impairment losses in the quarter.

Excluding this impairment, consolidated adjusted EBITDA would have been PEN 61 million, 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 PEN 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 PEN 44 million, operating profit was still up PEN 36 million 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 PEN 23 million. Income taxes in the third quarter were PEN 30 million higher versus last year due to increased profits and lower tax credits in Mexico and Peru, noncash and extraordinary items and adjustments of PEN 26 million mostly related to the adjustment of the PEN 44 million holdback benefit which impacts our adjustments negatively.

Finally, the PEN 75 million of adjusted net income was PEN 0.98 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 PEN 200 million at the end of the third quarter. On a year-to-date basis, we have generated a solid PEN 629 million in pretax operating cash flow.

As shown near the left of the bridge on the slide, this is a 20% increase versus the first 9 months of last year. Income taxes paid during the same period rose to PEN 154 million due to increased profits and lower tax credits, resulting in net cash from operating activities of PEN 475 million, up 9% versus the 9-month period in 2023.

During the 9 months of 2024, we invested PEN 173 million in investing activities, up 49% year-over-year. The PEN 107 million 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 PEN 47 million of the earn-out obligation related to the [ EMA Onco Medica ] acquisition and an additional PEN 18 million in payments that have occurred in the third quarter related to the holdback 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 PEN 368 million during the first 9 months of this year when excluding the impact of the amortization of the earnout and the holdback obligations, and total free cash flow of PEN 302 million.

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 4x and reaching 3.7x. 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 3x net debt to adjusted EBITDA given Auna's solid EBITDA growth trajectory.

Regarding Auna'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 expect 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, Gisele. 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 to implement to the AunaWay 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 health care facility in Monterrey, which has one of the country's fastest-growing economies.

Colombia remains strategically important with regard to Auna operating with regional scale and to achieve 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 OncoMexico, intending to replicate the long-term success we have had with OncoSalud in Peru.

We continue building and testing OncoMexico capabilities in 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 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 health care 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.

[Operator Instructions] The first question comes from Mauricio Cepeda of Morgan Stanley.

We have two questions.

First of all, in terms of cash flow, specifically about working capital, I see that there is this impact in accounts receivables. I imagine it's [ only to ] Colombia, but I also see a lot of financing coming from accounts payable.

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 [ doubtful ] accounts. But the number that we saw in this quarter, it's a catch-up from accounts that you had previously, and now you're just recalculating the probabilities of receiving them? Or should we consider this kind of a run rate? Or -- and how should we think about that for the future?

Thank you, Mauricio. Very relevant two questions.

Let me frame the response on Colombia, and then I'll ask Gisele to complement.

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 or financing players like ourselves with significant working capital.

So it's not something that has changed dramatically in the last months. I would say that, and Gisele will complement.

But anyway, I wanted to respond more openly because I just came back from Colombia this week, and I spent a whole week there. Really interesting. It was a very productive, very promising visit. And of course, the takeaways, a lot of these, 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 city where we operate, we are -- in 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 product.

And I see a lot of consideration with 3 of the biggest 5 players in Colombia.

Now these represent -- these players represent like 50% of the health care system, and we're intimate and needed. And of course, we also need them. This group of payers, 2 of them are [ intervene ], 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 ] have been more volatile when seen month to month and compared to past years.

So I do not think these are indicative of receivables loss. But a conservative stance, to provision these accounts receivables.

I think I'll be back in Columbia in December and expect to see more -- a much more promising scenario there.

I want to repeat with respect to Colombia and accounts receivables, I think this is a transitory. And I see from the strip encouraging signs, absolutely that we will be paid by all our payers, insurance companies, be they private or public, be they intervene or not intervene. But we are taking a conservative approach by increasing a provision level to our accounts 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, we will continue to monitor the situation and, of course, share with the public markets any update.

I don't know, Gisele, do you say if you want to complement on this?

Yes. Thank you, Suso.

I think you covered most of the points. On my end, I would simply add, first on the point of liquidity, as Suso mentioned, that 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, 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 Colombia. 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 Moscardini from Santander.

First question is related with the adjusted EBITDA 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 Monterrey? What could you do in order to deleverage faster? Or are you confident that pure cash generation will take [indiscernible] to the level that you want over the next few quarters?

Thank you, Caio, and good to hear you.

So with respect to -- again, Gisele, I'll start to framing the response and help me with anything that I forget or complement, of course.

So with respect to our guidance numbers, we are not changing our current guidance, and we expect our EBITDA growth to be 20% in FX-neutral.

Our business and business sales are healthy and they're performing as expected. And of course, we don't control what happens in Colombia with [ Nueva ]. But as I indicated previously, our view -- our current view is that it should not prevent us from reaching our numbers.

Colombia remains the smallest portion of our EBITDA contribution. Peru has been overperforming this year.

As we have guided, our Mexico growth trended again, the key element of our guidance, and is growing nicely as well.

So I would say with guidance. Gisele, do you have any comment you can also answer on how we're going to continue to delever as well?

Great. Yes. Thanks, Caio, for the question.

As far as deleveraging goes, as you guys saw, very solid results, right, this quarter, dropping below 4x, reaching 3.7x. And we think this positions us very well on track to reach the 3x 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 the line of Samuel Alves from BTG Pactual.

Can you hear me?

Yes.

It's Ian from BTG Pactual here. I have two questions here on our side.

The first 1 is about Mexico, a bit more focused on a short to midterm dynamics. I just wanted to understand, if you could give us more color on what do you expect growth to stem from in Mexico in the short term? If it should come from better occupancy rates, mix of procedures, pricing ramp-up or the health care plans ramp up? So [indiscernible] 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 units. And I wanted to understand if we should expect Q3's higher profitability in this business unit as recurring, or if you [indiscernible] space to improve current profitability levels.

So just want to ask these two questions.

Thank you.

I think it's [ Samuel ], right, because I can hear you in the beginning.

So with respect to Mexico.

Let me, first of all, repeat something that I've done in the past. What are our countries' strategies? I mean, very quickly, I don't want to -- Peru is proof of concept. Who has been the winning formula of the vertical and horizontal integration. Colombia is 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 -- I'll 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 efforts. That is high complexity physicians coming to us and, hey, how can I work here in your oncology practice. That's also something that is growing in the trend. And with respect to third quarter performance drivers, where we see in, 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, physician management and then what we call the private sales strategy. I'll explain this very quickly. The physician management, we have also the loyalty program we launched in May 2024.

I think I discussed it in the previous quarterly results. This has resulted in significant and very promising results. In the second quarter of 2022, we had something like 68 enrolled physicians in this program -- the loyalty program. And they produced in that first month around MXN 20 million in production.

Now in the third quarter, we have MXN 106 million. We've almost doubled that. Physicians generated of those physicians they generate more than double, almost MXN 50 million additional in revenue.

So very clear, again, seeding and harvesting what we've done in the past. Currently, we have 500 and rural physicians in Monterrey.

So that's a big number. And you can see how it impacts the new enrollment. There is a significant part of the new enrollment. And then we have the private sales development, we call it [ La Liberte ], which is offering new products, bundles to the doctors and doctor-like groups. This has -- this shifts away from the volume and reliance from third parties second shares. And that has grown also in the third quarter something like MXN 30 million since the end of the previous quarter. It went from MXN 30 million in the previous quarter to MXN 35 million in this quarter -- this last quarter. That's a 17% increase just on selling bundles of products related to doctors that can deliver those services now. That's a different and additional source of what I described [indiscernible].

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. I mean, from consultations to surgery, from surgeries to the horizontal integration of all the services related to that pathology. We're very focused on that, and that's also resulting very interesting -- in very interesting increased volume. Physicians in oncology are reaching out to us. giving our position in oncology.

So that's -- that's in general what we see in Mexico and where we'll see in volume increases in Mexico.

And the second question was on Peru. Gisele, could you take that one, on MLR?

Yes, of course.

I think it was around MLR improvement as well as profitability levels.

As we've seen in -- over the last few quarters, we've surpassed the 20% EBITDA margin in Peru when we consolidate the health care network as well as the integrated portion of the business. And we are comfortable with these profitability levels, which this quarter are above 21%.

As we've also seen, MLR 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 impact, 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.

And there are no SP1 There are no more questions from the phone lines.

So I will now turn the call over to Ana Maria Mora for -- who will proceed with questions from the webcast platform.

Thanks, operator.

The first question we have is from [indiscernible] from [indiscernible]. I have a few questions regarding Colombia. What percentage of the doctors and nurses are on temporary contracts? With the Colombian requirement, would you need to hire these personnel full time? What are your expectations regarding the proposed price cap for high complexity procedures in Colombia? What's your current occupancy rate for [ Clinica Azur ] and when are you expecting to finish its ramp-up?

Great. And this is a series of very relevant questions.

So today, in Colombia, the last number I saw, a little shy over 50% of our doctors have some contractual relationship with us, be in there in the payroll or they have an independent contract or they have a group contract that's been in the practices.

So we have more than 50% of our doctors already have an established relationship with us, especially again in the high complexity practice that we focus so much on.

In addition to that, we have been doing a high complexity, particularly on oncology, for decades now. And we've done it with risk sharing products and services that actually are very attractive to the insurance companies.

Our scale 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 what's -- how it's going to impact some price gaps. I don't see a lot of those price caps affecting immediately in Colombia. I see some drug around price cuts. More than anything, that is going to be the focus on the state unlike. I hear the Colombians wanting to replicate the Spanish system, which was the country itself is procuring and making sure as the lowest price, of 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. And that is -- that has a high variation with small, big and very large hospital.

So I would say that with respect to our expectation. And then on [ Clizur]; [ Clizur ] is our second hospital in [indiscernible] -- in the city of [indiscernible], and we inaugurated a couple of years ago. It's been ramping up nicely. With respect to our current capacity to the hospital, we're running at a 80%. But remember, Auna is not a holding company or countries, and it is not a holding company of hospitals. What we do at Auna is we build ecosystems of health care, urban acquisitions of health care.

So [ Clizur ] operate within the [indiscernible] ecosystem of health care.

So we push certain procedures to that hospital, and we leave [indiscernible] with the other focus and other procedures and [indiscernible] is more efficient, in which NPS and medical resolution is the best.

Now very interestingly, from my visit last week to Colombia, 2 large payers have approached us to see if we could do something special at [ Clizur ] on high complexity. That's a very attractive proposition. It's a very interesting proposition of higher volume, higher complexity with 1 payer, maybe co-branding the facility for what's a growing trend in Colombia, which is the private insurance policies that are being rolled out -- that most probably will double the size of the private policies in what we call 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 Clizur. Gisele, did I forget anything? Is there anything else you want to complement?

No, I think that was very complete.

[Operator Instructions] And your next phone question comes from the line of Alejandro Zamacona from HSBC.

Two questions from our side.

The first one is it's kind of early, but do you have any final thoughts or early expectations for 2025? And then our second question is on the oncology plans rollout in Mexico.

So far how is it performing against your initial expectations? And are any thoughts on the what's coming for that [indiscernible]?

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 Mexico, a couple of things that are really interesting. I want to again highlight, so OncoMexico is being deployed, I think I said it in the conference call at a pilot level in 2024 and in early 2025.

So we are testing the product, the price, the [ solution ] 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 OncoMexico in the same way we have done so in the past in Peru, 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 ] tomorrow.

The rollout of the B2C to cover populations directly, 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 with what we have today in Peru, but it takes some time, especially to build the B2C component of our offering. This is what we've done well in the past and we're confirming it work in Mexico.

What are the general confirmation that we see in Mexico in 2024? What are the lessons learned? First of all, our products of 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 a 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 cover -- or insurance only covers a major event and covers no prevention or early detection, none of that 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 Mexico population in the middle class has significant interest in this type of the product, but we believe that not more than 50 million people can afford it at today's prices at today's demographics.

In terms of the collective sales potential, it is the B2B program. We see the product gaining traction in B2B. Again, due to a large coverage gap among employers, for example, a month 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 efforts but also with some requests from brokers and employers to quote coverage plans, oncology coverage plans for employers and insurance company and another group 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 increased 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 on 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 [ policy ] that has no insurance and has -- and might only have social security payable. What have we seen today, high interest from working women. We see a lot of engagement in the nurses, reception of secretaries, whose jobs do not provide medical insurance, as I described before, and who insure themselves and their children. A lot of nice dialogue there. And on employees that are covering their employees with the Mexico's social security. But it has a very poor offering characterized by waiting lines and list of appointments in surgeries.

So those are also nice growing dialogue with that segment of that population. A lot of interest from the independent workers, doctors, dentists, nutritionists. Remember, we're selling a lot of this as well in our reception in our hospitals.

And so it does have a certain bias to those professionals. And they -- since they are independent, they also need to secure individual insurance coverage. And that's where they find our project interesting.

I think that sort of gives some insight into where we are and how we see the product landing. I'd like to conclude, it's landing well. We're very deliberate but gradual as we grow these businesses, 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 have asked.

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 the shareholders as well as investors to the company. With that in mind, please reach out to our Investor Relations group and Annie in particular, if you like to arrange a call or meeting with Gisele, Lorenzo and 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.