Auna SA Price & Performance (AUNA)

Thank you, operator. Hello, everyone, and welcome to ONAF's 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 web or contact Aouna'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 two. In addition to reporting, Anarita's financial we will discuss certain non IFRS financial measures and operating metrics, including foreign exchange neutral calculation. 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 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, 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-one 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 Sotto Samora, our Executive Chairman and President Giselle Remy, our Chief Financial Officer and Executive Vice President and Lorenzo Masao, our Executive Vice President of Strategy and Equity Capital Markets. They will discuss Aouna's consolidated and segment financial full year. And we'll also provide updates on our various strategic growth initiatives. After that, we will open the call for your questions. Tusa, please go ahead.

Thank you, Annie, and thank you everyone for joining our results call. We are pleased to have achieved all of twenty twenty four 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 [indiscernible] We remain excited about Auna future as we maintain our growth momentum going into 2025. Aona'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 [indiscernible] 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 business model [indiscernible] 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 underpenetrated it is As we further implement the Onaway across our hospital network in Monterrey, we've been driving operating efficiency and profitability.

Driving growth in 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 the most prestigious oncology practice in Monterrey On March 7, we have signed a five year exclusivity period with the date of Monterrey's leading oncologists and radiation oncologists who will bring their practice to Auna 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 Epeze 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 Auna long term growth potential. It also remains integral to maintaining Auna 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 BRL124 million, dollars That is a $338,000,000 gain from the net loss of $214,000,000 in 2023. So now on Slide five, revenues grew 11% on an FX neutral basis across our regional platform to about $1,100,000,000 Solis. Led by Peru and Mexico. [indiscernible] That brought full year revenue to almost 4,400,000,000.0 which was 12% higher than 2023. Also on an FX neutral basis. Among our healthcare facilities, capacity utilization increased 2.6 percentage points 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 Onco Salud, our health plans business in Peru, plan memberships continued growing. For the year, planned 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. 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 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 typically see at the end of each calendar year. The continued investment in the implementation of the NOA 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. Onco Mexico entered a new phase in 2025 After a successful pilot phase, we have started developing the B2B and the B2B to C segments to gain scale in 2025. In addition, be able to give access to policyholders outside of Monterrey, we are 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 oncologist and radiation oncologist who serve today about 30% of the private market in Monterrey. Eight leading physicians will join us Auna 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 and 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 Antwerpia 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 capacity 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 technical loan and the 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 Epeze. 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 the owner, 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 Auna 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 Auna this stance is reflected in lower total Auna operating during the quarter. Emphasizing cash flow over growth in Q1 we began phasing out services that we deliver for Nueva Epeze in Antioquia We are also diversifying and reprioritizing our base of payers by reallocating service volumes to other payers. Overall, [indiscernible] our underlying business remains strong in Colombia. As our most recent quarterly 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. [indiscernible] I will now begin my review with the breakdown of revenue on Slide 11. In local currency terms, fourth quarter revenue increased 9% in Mexico 10% in Peru, and 14% in Colombia. Auna improved services mix along with strategic pricing across payer tiers drove Mexico sales in the fourth quarter. In Peru, healthcare services, we continue to optimize the flow of towards high complexity services.

While Onco Salud expanded group memberships. Finally, in Colombia revenues were mostly driven by the implementation of risk sharing models in high complexity services. Let's move to EBITDA on Slide 12. On this slide, we breakdown the 28% FX neutral growth in adjusted EBITDA between fourth quarter twenty twenty three and fourth quarter twenty twenty four. This as well as the 23% EBITDA increase reported in the third quarter, are the back ended growth that we had previously communicated. Which led to us meeting our 2024 annual guidance as Suso previously mentioned.

Above the bridge are the corresponding margins for each of the segments. As you can see, each of our segments delivered strong levels of profitable growth and also maintained excellent margins through operational synergies, and improving efficiencies. On a consolidated basis, adjusted EBITDA margins to nearly 120 basis points. Adjusted EBITDA margin expanded three percentage points to nearly 24%. In Peru, our most mature segment, EBITDA increased 33% year over year. While its margin expanded 3.8 percentage points. In Mexico, we continue diligently implementing the Onda Way, achieving Auna improved mix of services, across a hospital network and tickets that reflect our focus on high complexity.

As a result, EBITDA increased 30% while margin expanded 5.7 percentage points. To 34.7%. In Colombia, EBITDA growth was impacted by certain price increases and procurement rebates that reflect full year performance that were agreed in the fourth quarter.

The quarter's consolidated EBITDA growth was partially offset by the provisions and risk mitigation measures that we implemented in Colombia and also by the investments that we have been making to build out our local and regional capabilities in Mexico. Let's turn to Slide 13, which presents an EBITDA bridge For the year, our regional operation delivered nine ninety million, of adjusted EBITDA. 20% higher than 2023 and in line with the guidance we had given. Peru and Mexico led the way with stellar EBITDA growth in the case of Peru. Our most mature business. Showing once again that our vertically integrated mollusks scale delivers incredible value. Peru's adjusted EBITDA increased 51% while its margin expanded 5.4 percentage points. Mexico's EBITDA increased 10% in FX neutral terms And despite Colombia's setbacks, with payer interventions and related provisions, affecting the P and L the segment managed to grow EBITDA. Which increased 6% for the year also in FXN. Let's move on to adjusted net income on Slide 14. Adjusted net income was a positive ZAR36 million in the fourth quarter. Versus negative $6,000,000 in last year's fourth quarter.

It was our fourth consecutive quarter of positive adjusted net income. Behind the year over year improvement operating profit increased 46% or $60,000,000 while our operating margin expanded just over five percentage points to nearly 18% Keep in mind, this includes a 9,000,000 in impairment provisions in Colombia. The $73,000,000 FX loss variance that you see in the bridge is the product of a noncash FX loss of INR24 million in the quarter compared to an FX gain in the comparable period last year.

Mainly related to the depreciation of the Peruvian relative to the U. S. Dollar during the quarter outside the levels of the call spread hedges that we have in place. Moving across to net interest expenses, these sell 63% versus last year's quarter. Mainly due to the fact that the fourth quarter twenty twenty three included Ps. $215,000,000 of refinancing costs related to the 2023 refinancing exercise. Let's please move on to the next slide. Adjusted net income for the year was $146,000,000 up from $14,000,000 in 2023. Our operating profit increased 40% or CHF223 million. This increase included the TRY44 million dollars reversal of the holdback obligation from our 2022 acquisition of Allka in Mexico. This was partially offset by the CHF26 million of impairment losses in Colombia that we incurred during the year. The $118,000,000 so less FX value versus last year includes a negative non cash impact of CHF 42,000,000 in 2024, which compares to a positive FX gain of 76,000,000 in 2023. When the Peruvian soil appreciated versus the dollar. For the year, net interest expenses decreased 26% compared to 2023 due to last year's refinancing that I explained earlier. Income taxes in 2024 decreased $30,000,000 dollars or 34% as our effective tax rate has normalized in 2024.

Given the recognition of deferred tax benefits which we should be able to capture in cash flows in the following years. The $2.00 $3,000,000 and adjustments for the year include again mainly the refinancing effect from fourth quarter twenty twenty three. Let's now please turn to cash on Slide 16. Our cash position improved for a second consecutive quarter to CHF236 million at the end of the year and represented an 18% sequential increase from the third quarter of twenty twenty four.

Net cash from operating activities increased 15% year on year or SLS86 million. To $668,000,000 in 2024. Cash generated from operating activities during the million or 24% partially offset by an $80,000,000 increase in tax payments in Mexico and Peru We due to higher profits. Regarding the $160,000,000 of CapEx shown in the bridge, This was mainly maintenance CapEx, which represented 3.7% of 2024 revenues. It was mostly related to infrastructure, met work, but and the implementation of SAP throughout our regional platform. The $77,000,000 of earn out Refer to the extraordinary earn out payment [indiscernible] And the holdback obligation for the OCA acquisition. In 2024, we generated Ps.432 million of free cash flow.

In the case of organic free cash flow, which is excludes the earn out and holdback amortization, [indiscernible] we generated 509,000,000 which was 18% higher than 2023. It is important to note that organic free cash flow rose above interest payments in the second half of the year. Interest paid [indiscernible] down 19% from 2023 and also includes interest and hedge premiums. Please move on to Slide 17. We entered 2025 with a substantially improved credit profile. As the bar chart at the bottom of the slide shows, we continue steadily deleveraging our balance sheet with the leverage ratio falling for the ninth consecutive quarter to 3.6 times [indiscernible] consistent with our commitment to deleveraging. Additionally, and as duly communicated Auna, last December, we extended L1's maturity profile with the full redemption of the outstanding amount of the notes due 2025. This was funded through a private of the existing notes due 2029. The new aggregate amount of the outstanding 2029 notes is now $310,000,000 As shown in the ring chart on the right of this slide, more than half of our Luna's debt is in direct local currency funding. While the portion in U. S. Dollars is mainly hedged to the Peruvian soy.

To conclude, our credit profile gives us the financial strength and flexibility needed to continue supporting our growth initiatives and achieve our strategic goals. Further, through the EBITDA growth trajectory, that we have established and through debt amortization, we continue to track to achieve our medium term target of three times leverage ratio in the medium term.

I'll now hand the call back to Sousa who has a few remarks before we open the call for questions.

Thank you, Gisse. We are carrying strong momentum into 2020 and remain committed to transforming and modernizing healthcare in Spanish speaking Latin America with our unique and proven operating model as well as value based care. In addition to increasing access to advanced healthcare and improving medical resolutions, we are driving sustainable long term growth. The Peruvian and Mexican segments of our regional care platform are expected to be the primary drivers of Valona's growth going forward. With a focus on continually improving synergies and operating efficiencies as well as increasing access. Peru will continue outperforming. Given the maturity and scale of this business. We expect Mexico's performance to continue strengthening this year through a greater mix of high complexity services, targeted physician recruitment increasing physician productivity. Longer term, it will gradually become a far larger contributor as we scale in the country's much larger healthcare market and vertically integrate our operations. Colombia remains a strategically important market for us. In terms of scale, and best practices in medicine. In the near term, we will continue taking a conservative approach to the health ensure reliable cash flows and operational stability. That includes diversifying and re prioritizing ONA's mix of payers in the country.

This year, we will also continue developing Onco Mexico into a disruptive insurance product. Leveraging our many years of experience with Onco Salut, and aiming to replicate the success that we've had with this product in Peru. As a reminder, the initial focus of its launch is on the beet to B and B to B to C segments. Of Mexico's insurance market. Additionally, agreements such as the one with the oncologist physicians will further position us to expand our footprint across Mexico. Finally, Auna remains strongly positioned with clear path to higher levels of growth and profitability. In addition to our proven business model, we have the right growth strategy to address the unique context of each market and capitalize on the many growth opportunities within them. And as always, patient centricity Auna value based care will be at the heart what we do. That concludes our prepared remarks. Operator, let's open the call for questions.

At this time, we will open the floor for your questions.

Platform.

Your first question comes from the line of Mauricio Cepeda from Morgan Stanley. Your line is live. Please proceed with your questions. [indiscernible] Thanks for the opportunity here. I have two questions. The first one about seasonality. If you could please explain the seasonality in Health Services in Mexico and Peru. So typically, what would be the distribution of volumes across quarters in the year for Mexico in Peru, so we can understand a little bit this kind of quarterly variation effects that you leave on? And the second question is about the demand in Monterrey. If you see that there is there are enough policyholders in Monterrey if your strategy from now will be to conquer share from this from this pool right? I understand that you're increasing complexity, but if you have Auna asset strategy to conquer share from this pool, or if you have any kind of strategy to partner with insurers there and try to increase the number of policies in the city? And by policies, I mean not your own policies. I'm referring to policies that can be offered by general insurers that somehow can bring you volumes. Thank you.

Great. Thank you, Mauricio. Great. Set of questions. And the first one, I can only comment more conceptually and maybe direction on seasonality. Will we see is, of course, at the end of the year, people delay the procedures as everybody knows. At the beginning of the year, especially in the Southern Hemisphere, also because of the summer of the summer season. So we see that in addition to that, we see particularly in Mexico Auna in the second semester, notwithstanding that December is slow and January as well is slow. I must forewarn investors, January is also slow. We see that because of this impatience and doctors as well. Deferring. Procedures. I'll ask J. C. When I finish the second question, maybe she has the numbers or she wants to complement the view on seasonality. Don't have much more than that. Maybe in the future, we can do can share something else earnings release, but we wouldn't need to be a little more diligent and just respond something out of the customer. In demand in Monterrey, I would say a couple of things.

We're working with insurers. To expand the size of the market. We're working with insurers to take on some of the high complexity risk and the attached volume of that. We're working with employers also to expand the market that has some kind of coverage sometimes covered by employers through insurance companies or not. We think we will be very deliberate in conquering high complexity share And we are I think we're very excited about not these these are not transactional relationships. We're working with them important payers to partner [indiscernible] with respect to complexity procedures curtailing the cost for them, and for us increasing the volume and the predictability of that business. So we are excited in that We are not I wish I want to repeat this. No, we're not just another provider of healthcare services. Auna I think I'm very convinced about this. Yes, insurer the leading shares in Mexico. And clearly, no one seizes as another provider of healthcare services in Mexico. Our model is unique and transformative It's not easy to digest, I must say that. It's not easy. It does take a bit more time to ground and expand in a country like Mexico.

But I think we're getting great traction. The relationship with payers and insurance companies in general is very promising. Very promising. Jason, do you want to complement on seasonality? Do you have any view on that?

Yes, sure, Sussa. I would just kind of reiterate the point that we do tend to see softer volumes across the geographies in Q4 and Q1. [indiscernible] the holidays and the seasonal impacts of the end of the year and the beginning of the year where as Sue saw mentioned elective types of procedures are deferred. [indiscernible] Auna not only elective, so sometimes it's just procedures that can be deferred.

That can be deferred or deferred. There's some procedures in orthopedics. People don't want to have their hip replaced in December and January. They want to have it in a month that's outside of those months. So there are some things that are not elective that can be delayed and they are delayed.

That's very clear. Thank you. Thank you, Susu. Thank you, Your next question comes from the line of Samuel Alvis from P. T. Pactual. Your line is live. Please proceed with your question.

Good morning, Sousa, Gizelle, Lorenzo. Good morning, everyone.

Two quick questions here. The first one is about the growth by geography. It's for 2025. Last year, the growth in local currencies was largely driven by Peru, right? So for 2025, do you think that Mexico will be the top growth market with Colombia maybe remaining flattish? Flattish and Peru somewhere in between? Does it make sense, this breakdown? And the second question is about liability management. Maybe if you guys could recall what the main liability management initiatives recently done by the company Auna what additional appearances the company might do this year if you guys [indiscernible] to speed up the deleverage process?

Thank you, Louis Hamlin. The second one the second question, I didn't hear Was it about management or delevering?

Liability management. High what? [indiscernible] Okay. Great. You can do that one, Giselle. And so in general, in general, Samuel, so I have to explain this. I've tried to explain in the past. So we run the company. With a 20% EBITDA EBITDA growth, So all our managers know that is the goal. That is the goal.

This is not something we we it's not something for guidance for the market. This is how we run the company. But it is a product Auna we run it for the the consolidated basis. And we also have the benefit, we believe it's a benefit of diversification three countries and the insurance and the healthcare services business. And we run all those business to make sure that we're always hitting the 20%. Annually. It's very important annually.

This is our target. And this is an internal target that, of course, coincides with what we declared to the market. This 2025, more generally someone, because of externalities, limit our growth there We see that as something that we're acting on, we're aggressive on. But we don't have full control of So we're saying, let's make sure that internally management has the right incentives, we have the right action plans to deliver the 20%. But we also know that we might be hit by some news that is not under control.

And we like to be conservative about what we say. I would say that Mexico directionally given what we're doing in harvesting, especially again in high complexity, again with the doctors we just hired, we're going to do something very similar in orthopedics and cardiology. It takes time. I want to again, it's not as SKU. I mean, this is what we do. [indiscernible] transaction that we we actually revealed last week, it took us like two years It's a great transaction. Great for them, for the doctors, great for us Auna great for patients and great for the It's a new standard of what we're doing there. But it took us two years. And we're working Auna the other practices is same way Auna we'll deliver that in the future as well.

But it takes a little bit. It takes some time. I think Mexico will be harvesting more substantial growth. This year. I think Colombia I'm uncertain if it will be no growth or maybe depending on what might occur in the system. The system right now has a huge demand of services. And we're saying we're happy to take those services if you pay upfront. And we might get traction on that. So there might be a surprise Auna we might see some growth out of Colombia. Peru is a stable growing business.

It's a stable growing business Auna we manage it that way. And we think it what it proves in 2024, I think was very high and good. And as we wanted it to. But it's a product of what we do to always deliver this 20% internally that we also represent as the guidance. Now again, in this year, we're a little bit sensitive to calling it guidance because of the Columbia uncertainty. Of these externalities. Jason, do you want to complement and also take the other question on liability management?

Yes, sure. [indiscernible] with reference to the second question, Samoyed from a liability management perspective, What has been done thus far? As commented in the earnings release, in the fourth quarter, we refinanced the remaining stub of the 2025 bonds through a private reopening of the 2029 bonds. This was a small refinancing of the approximately $57,000,000 that we disclosed. And as far as a more structural liability management exercise, we have obviously been analyzing alternatives in the market. Our bond is trading quite well, well above par, which also gives us a view that our current cost of funding is well below what we obtained when we did the 2023 denouncing exercise. We have also seen our credit profile improvement materially as is also demonstrated by what we saw in the leverage and liquidity levels. So we are obviously actively evaluating refinancing alternatives, which as we know are always booked for in local currency. So this is something that we continue to analyze Auna hopefully we'll have news there in the coming quarters.

Thank you so good morning, everyone.

Your next question comes from the line of Leandro Bastas from Citi. Your line is live. Please proceed with your questions.

Hello, guys. Hello, Susu, Giselli. Thanks for taking the question. We actually have two. First one on Onco Salud. You could discuss a little bit commercial strategy. And the outlook for twenty twenty five. I mean, we saw last year very strong commercial growth but not as much in terms of ticket progression. I don't know if you have kind of a mix component here. Or kind of how you could kind of discuss a little bit the strategy for price increases. [indiscernible] So that will be the first one. And second, just kind of on update on Colombia. You mentioned during the call kind of the increase of the risk sharing model. So if you could kind of elaborate kind of how margins look under these kind of with this new model? And also kind of what are conditions today for working capital in Colombia? And what are you currently running in terms of kind of days of working capital and so on? Thank you.

Auna with that one? On working capital? The last part of the question, uh-huh, of course. So thank you so much for the question. So from a working capital perspective Auna as we kind of mentioned in the earnings release [indiscernible] our view specifically in Colombia is obvious to prioritize cash over growth in the short term. And as we've seen from our cash conversion cycle, we've maintained it basically flat in 2024 versus what we had in 2023. Any movements in accounts receivable days have been funded through accounts payable and inventory days. We continue to work obviously dynamically in the case of Colombia Auna obviously regionally as far as working capital management. And specifically and I don't want to also give the answer to the second part of the question. I'll let Suso take the risk sharing models. But I would comment that they have a better cash conversion cycle. Given that they are paid upfront. And so obviously, the fact that we're migrating part of our mix to a larger portion of earth sharing models in Colombia is also beneficial for the cash conversion cycle.

Great. Thank you, Gisse. So two parts of the questions. So to be answered, on the risk sharing models, So the risk sharing models for us, we manage within the Access Group, which is the insurance and another plans group. Auna we see it, it's a B2B product. That we offer insurance companies. We're offering we're starting to offer them also in Mexico. And it's some relationships by which we take risk in volume or in frequency of certain types of events. For a more complete treatment that includes it might be it's not only for example with the surgery, it's everything from from the diagnosis all the way to including it could be services at home, No, we do it for cardiology, for oncology. We do it for many practices. And we take a risk especially because we cap normally a price, we say. If you give us this amount of volume of these procedures, all of them included, that will take care of your patient, integrated into our facilities at this price. So we take take a risk on the price or on the volume They're very very much aligned with what we do in oncology and other practices.

They're very much aligned in what we want to do because they scale. They're standardized procedures. Know that scale very well with high predictability in terms of the revenues we get from them, the cost that we have of them Auna of course the patient journey and medical outcome.

So these normally have slightly decreased margins. To fee for services. But as we scale I think that is diminished a bit Auna and they're profitable for us.

They're attractive for us because it's their scale models but maybe slightly lower margins than fee for service. Now on Onco Salud, so we have a as you might recall, we have a strategy of always re pricing our policies depending on the medical inflation and any immunotherapies that are included. And we do it constantly Auna throughout the year. I think I'm certain uncertain as to the exact number of the 2025 price increases. But I think today, the MLR is stable. Remember, it's very much related to MLR. The MLR is stable. It's 52%, 53%. And I think right now, I see the company including what we have included in the past, which is the price increases related to medical inflation Auna nothing more specific to that. More importantly, in Gonzalud, we are rolling out new complementary insurance plans Auna other practices that we'll talk about in the future that will complement the oncology healthcare plan. Great.

Your next question comes from the line of Alejandro Zemakona from HSBC. Your line is live. Please proceed with your questions.

Thank you. Good morning, Susan O'Brien.

Couple of questions from our side. First one is on the oncology agreement with Observe Auna Colaxia. So how much volume can we bring given that they hold 30% of the market share And what percentage are you assuming these transfer to Auna? And then in addition related to this agreement, what I think we lost him.

Hello?

We have lost connection with our last analyst. We Joseph Giordano from JPMorgan. Your line is live. Please proceed with your questions.

Hi. Good morning, everyone.

Lucio, Giselle and Lorenzo, thanks for taking my question. Actually like take a different route and discuss a little bit the expansion. Of the network, right? So we do have like some plans to expand network of services in Peru. So if you could update us on that front?

That would be great. And then second, concerning Oncomax we now have like Otsun and Clovia. So very affluent oncologists the Northern Part Of Mexico, the research center being set up in Mexico. So my question to you goes like in how are you seeing accrediting new service providers [indiscernible] when it comes to Mexico City and Guadalajara, which are order two major centers that does not have like a direct presence? Thank you.

Great. Thank you, Joe. Nice to hear you. So Gisse, can you remind me the first part of the question? I remember on Com Mexico, but I jotted something down in and I can't It was Peru expansion. So I don't like commenting very much about deployments of capital in the future, I haven't really solid and well grounded. I do see that we're reaching capacity to assist. We Auna our hospitals at once they reach 80%, 85%, we start talking about like expansion. And once Onco Celud penetrates into the hospitals that are general healthcare hospitals Auna they become integrated, That's another trigger. So we see that happening at the end of the year. So most probably you'll see us starting to to assess and an expansion. Most probably is Clinical Delgado, which has all the engineering, most of the stuff already done next year. Next year, most probably to inaugurate maybe 2027. That's a little bit I take it as a direction calendar event. Know Jesus looking at me like her eyes, I can see them. But anyway, yes, so I see ourselves, yes, rolling out a little more capacity most probably in at the end of twenty twenty six and 2027.

On Mexico, So yes, it's critical for us given the conversations we're having with many of the payers as you can imagine, they're saying, yes, great in Monterrey, what are you doing in the other cities?

And we have been closing agreements in Guadalajara Auna in Mexico City to deliver services within our plans and also for third parties within our system. So we're agreeing with doctors on the protocols, on the services, on the owner way of doing things. In agreements that will normally if we're successful, end up in a much more intimate relationship, maybe in a structural integration of those facilities. So we can do that well. In for surgery and for chemotherapy stations and as well for radiation services Auna And we're way ahead of that, making sure that Onco Mexico has a national footprint. We're doing the same thing also in Auna. Also in conversations to deliver the services that we need in that city as well. So yes, we are well ahead of that. And I think we'll be able to show some of that later in the year. Thank you, Sussil.

Your next question comes from the line of Alejandro Zamacona from HSBC. Your line is open.

My question was regarding the oncology agreement with Option Oncologia. So how much the 30% of the market share that they currently hold, you are assuming that it's going to be transferred to Auna. And also, what are the margin expectations for the first one or two years as volume is ramped up [indiscernible] don't want to forecast or reveal margin of these businesses. But I would say a couple of things, Alejandro, so our agreement with them is about the 30%. And how it gets channeled into Auna is a question of time.

I think it can I think it can with the plans that we have in place, it's not only about the 30% market share that they have in oncology, in Monterey? Actually, for us, the spillover effect of a doctor leaving the imaging and the pharma and the labs and the surgery. Remember, these are chemotherapist which is a critical gatekeeper in oncology is a chemotherapy. He or she is normally the one that determines where the surgery is going to happen where the labs are going to happen, where the imaging is going to happen, and even where the radiation is going to happen.

Happen.

This is like the primary care in many other diseases. The The chemotherapist is the one deciding that. No. So for us, it's not only about the volume that they currently have.

Today, they actually they actually channel the surgeries and the other services just listed out to others. So this business is going to be very promising and in line from what we expected to occur. So I would not be surprised that in due time, in a couple of years, we would have 30% of the the oncology market in Monterrey.

Auna my second question regarding Colombia. In your press release, you mentioned that you have been phasing out selected services to Nova IPS in Antopia. Can you provide more detail on the phasing of these services? I mean, Auna [indiscernible] what would be the next or the new mix after the competition of these phasing strategy So I think that I think it will be difficult to see on a month to month or quarter to quarter what will be the stable state of the situation in Colombia? I think that the stresses in Colombia Healthcare systems will produce at the right time that will be a payer that has the capacity and not the political agenda. So I think that at the end of the year, I wouldn't surprise me that our business with Nelophes is reasonable.

We've been disciplined with them. And they have been they have been delivering on the commitments with us. Now from here to the end of the year, no, we're playing rough and limiting services until they I don't want to use the wrong words that until they get their full act together. Today because of the intervention and the politics down there, the act they don't have it together, but they need to get it together. I see in the last few weeks a dialogue that is the best we've had in the last six to twelve months with them. And of course, it's not only because we've been tough with them, it's because patients are being really, really tough with them. So I see It's 07:00.

Yes. So I see an opportunity there. But it's difficult to see what's going to happen quarter by quarter. But I think at the end of the year, it wouldn't surprise me. They are very relevant player, are very relevant in our geographies. I think that they'll come back in a very organized and ordered way and we'll have strong relations in the future with them. Jesus, do you want to add something to that?

I think very much in line with what you commented, Susser. Very much focused on this year. Obviously, on cash flow, which leads us to focus the revenue mix on the risk sharing models. And also diversify payer risk.

And there are no more questions from the phone lines. So I will now turn the call over to Anna Maria Mora from Auna, who will proceed with questions from the webcast platform. Thank you, operator.

The first question comes from Caio Muscarlini. Can you please comment on the different dynamics in Peru, which led to occupancy rate to fall year over year?

Can you please comment on adjusted EBITDA growth, FX and expectations for 2025? That the internal goal to achieve 20% adjusted EBITDA growth [indiscernible] per year also applies to 2025.

Well, I think important again to note, Giza, you can correct me, We're having difficulty setting a guidance of 20% this year. That's very important that we I want to highlight that. We work on the 20% internally. And that's what we represent in the past. The uncertainty in Colombia has made us not want to give a guidance of the 20%. Internally, we do work on that. I think we might be able to to come back on that point in next quarters. Right now, until we make sure of the certainty of the Colombia situation Auna and what's going to occur there, we are uncomfortable given that 20% giving that guidance. I think our goal is a 20% I don't know if I want to differentiate that in that way.

And Jesus, do you want to compliment so that our investors are clear on what we're expecting in 2025 and what we're saying we're going to do in 2025?

Yes. Maybe, Sousa, to complement that point, I think it's important to note that in 2024, we met our annual guidance with 28% FXM growth despite the headwinds that we may have faced, and particularly in case of Colombia. Therefore, kind of reiterating Sousa's point as he's already commented, Given the continuous uncertainty with payers in Colombia, it is difficult to provide the same certainty of guidance for 2025. However, our internal goal continues to be to grow at 20%. That is our North Star. Even though at this point in time, it is a little bit more difficult for us to phrase it as guidance. To tackle the second part of Gaios' question. Thank you for the question, Gail, on specifically in Peru, we had slight drop in occupancy rates.

In the fourth quarter as we continue to optimize pricing and increase high complex Is that The next question comes from Derek Port.

Hi, everyone. I have two questions. Could you provide more details on how this risk sharing model has contributed to the revenue and EBITDA growth in Colombia? And what expectations do you have for the impact of these initiatives in the coming quarters? And the second question is, could you provide more details on other income in Colombia and the [indiscernible] services grew during 4Q 'twenty four.

Great. So on the first question, for us, for us, the risk sharing model is critical to our strategy and our nature. It produces what we always are looking for is predictability on the patient journey, the medical outcome Auna of course the financial results.

So for us, it's critical. Healthcare is very complex. And very anecdotal. Auna one can be lost in the variability. By conquering that variability, and producing certainty and predictability, the opportunity is much richer and much bigger. So we see ourselves scaling that I don't remember the exact numbers. In Colombia, in particular, we're going something from low teens, I mean, mid teens, to maybe high 20s in terms of the revenue mix represented by risk sharing models. It was very important, I want to highlight this is a competitive advantage. Few players can deliver that. Auna it requires a certain unique way of operating. It's a little of an insurance mentality and a healthcare service provider merged together. Because there is risk and there is the healthcare service component, of course. So I think this is something that that makes Auna very attractive. And [indiscernible] what we mostly seek, which is volume. [indiscernible] We are a growth player in volume, and this is a component that produces produces the growth in volume.

Jason, do you want to add on that? No, I think so far expressed it well Auna maybe to tackle the second part of the question vis a vis other income and corporate expenses. Specifically, in the case of other income, which as we know is a line that reflects non operating impacts as far as income and expenses. In the case of Colombia in the fourth quarter, the most material impact there would have probably been the reversal of a tax provision. Which would no longer come due. And in the case of corporate expenses, nothing too material to report, just basically, the regional and integrated capabilities that we're building. Which basically are also bearing material fruit as far as thinner practice as well as in costs and SG and A from being able to operate in a regional manner and have all of our procurement and negotiation and strategies reflect that scale. I don't know if there's more questions from the chat.

Yes.

The last question that we have from the chat, it comes from Omar Abayanala. [indiscernible] What is your expectations for debt reduction in 2025?

Great.

So you. I can tackle that question. And as I think as Suso already noted, we're not giving any specific leverage or balance sheet guidance. For the year. However, we continue to be very focused on deleveraging. And as we've seen in 2024, our proven capacity to grow EBITDA and improve liquidity has taken us to 3.6x net debt to EBITDA. At the end of twenty twenty four. And we continue to be focused on our medium term target to take that leverage level to 3x. Net debt to EBITDA.

Thank you, Dite. At this time, I'm not showing any more questions. I would like to turn the call back over to Sousa who has a few closing remarks.

Thank you very much, Annie.

I think, Gisse, I don't know if you feel comfortable, but I think we are managing the company with a little bit over $1,000,000,000 of debt ceiling. And we have no plans increase the absolute amount of debt. So I think that should give investors a clear view where we're going in the future. I just want to again thank everybody for their support. The analysts and the investors, of course. Auna I want to repeat, we're not just another provider of healthcare. Our model is really unique and very transformative. It does take a bit more time to ground Auna expand a country like Mexico, for example. But we're getting there. In the medium and long term view of this we have not changed our position. No. In the short term, we might be fine tuning the model and how we we ground it in Mexico in particular where we're just new.

But things are are clear that they're coming the way we planned them. And we see the high rising as very, very you, everybody. For the support again Auna thank you operator for the the support in the meeting as well.