Alliança Saúde e Participações S.A. (AALR3) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for waiting. Welcome to Alliança Saúde conference call to discuss the third quarter of '25 results. We will begin the presentation, which will be led by Mr. Ricardo Sartim, CEO and CFO. Joining us today, we also have Mr. Jose Ramos, Chief Legal Compliance and Investor Relations Officer; and Mr. Rafael Monzani, Investor Relations Specialist. [Operator Instructions] This conference call is being recorded and will be available on the company's Investor Relations website along with the full earnings presentation. Before we begin, we would like to highlight some important remarks. We emphasize that information presented here as well as any statements made during this call regarding business outlook, projections and operational goals reflect the company's management assumptions and beliefs. Therefore, they should not be interpreted as guarantees of future performance. Forward-looking statements involve risks and uncertainties, which may or not materialize. Investors should understand that factors such as general economic conditions, market dynamics and other operational effects may affect the company's future performance. I now turn over to Mr. Ricardo Sartim to begin his presentation.

Thank you, Taina, for the introduction. Good afternoon, everyone. I'm Ricardo Sartim, CEO and CFO of the company. Besides me, Jose Ramos, Chief Legal Compliance and Investor Relations Officer; and Rafael Monzani, Investor Relations Specialist. I would like to thank you all for joining us. It is a pleasure to be here once again presenting Alliança Saúde's third quarter of '25 results. Now moving on to Slide #4. We will begin our presentation with another record for the company. We closed the third quarter of '25 with gross revenue of BRL 347 million, the highest ever recorded in a single quarter. Year-to-date, we reached BRL 992 million in revenue, the highest figure in the company's history. Looking at the chart in the upper right-hand corner, gross revenue for the last 12 months totaled slightly above BRL 1.3 billion, in line with recent quarters and 3% higher than the same period last year. These results are a direct reflection of the maturity of our strategic plan, supported by a disciplined expansion model, always focusing on profitability across our operations. Within our growth strategy, the B2B segment continues as one of the most solid and sustainable pillars of our business model with long-term contracts, which has played a very important role in recurring revenue, leading to the stability of the company's results. Furthermore, it consolidates Alliança as a strategic reference partner for health insurers and institutions across the country, expanding our presence and relevance in the sector. Now talking about the numbers of this business. B2B revenue totaled BRL 50 million, an increase of 40% when compared to the third quarter of '24. Year-to-date, we reached BRL 400 million, 34% higher than the same period last year. These advances reflect the evolution of the contract and our capacity to attract and develop new strategic partnerships, confirming B2B as a fundamental foundation of our scalable, solid and sustainable growth strategy. Another result -- another important result of our strategic plan is seen in the EBITDA. In the third quarter of '25, we reached the highest adjusted EBITDA in the company's history, totaling BRL 90 million with a margin of 28%, highlighting the consistency of our performance during a period of transformation and expansion. Now looking at the bottom right-hand chart, we can see our capacity to build and preserve healthy margins quarter after quarter. showcasing the solidity and resilience of our business model. This performance is a direct result of continuous efforts to diversify revenue sources and maintain strict and efficient cost and expense management, ensuring the company's long-term sustainability. To conclude, I highlight that we had a financial leverage of [indiscernible] the net adjusted debt, a healthy level that reflects consistent progress in operational efficiency and the strength of our capital structure, more than a one-off indicator. It confirms that the company is well positioned to capture new growth opportunities maintaining discipline and commitment to long-term value generation. And moving on with our presentation and now in Slide #5, I would like to highlight some of the main factors behind our revenue generation during the period. Number one, expansion of B2B partnerships. As seen in the first chart on the left, the increase in new contracts drove year-to-date revenue to BRL 40 million, reinforcing a recurring base that is increasingly solid, predictable and strategic within the company's portfolio. Now in the middle, I would like to highlight this front, which has been gaining increasing relevance year-to-date. We've had a growth of 14% year-over-year, resulting in over BRL 105 million in revenue, an important milestone that highlights the strength and potential of this line of business. And then on the right side, we can see the gross imaging revenue, reaching BRL 847 million year-to-date with exam volumes growing 3% in the period. These results demonstrate the efficacy of our strategy and the consistency in carrying out our sustainable growth plan, positioning Alliança as an increasingly competitive player in Brazil's health care landscape. And now in Slide #7, we will talk a little bit more about the company's financial performance this quarter, focusing on the composition and evolution of revenue over recent quarters. On the left side, we can see a gross revenue of BRL 347 million, a growth of 2% year-over-year. And then year-to-date, we reached BRL 992 million of revenue, up 1% versus '24. Both results are historical records for the respective periods and reflect the efficacy of our commercial strategies as well as our consistent advancement in capturing opportunities that strengthen and expand our revenue base. On the right side, we can see the evolution of our mix over recent quarters. The composition remained stable with imaging service continuing as the main business line, representing 85% of the total. We remain committed to expanding the share of B2B and strengthening clinical analysis, pillars which support our diversification strategy. This combination places us well to capture new market opportunities, increase predictability of revenue and support sustainable and balanced growth. Now we're going to detail our gross revenue. Slide #8. Looking at the chart on the left, we highlight the consistent growth of the B2B segment, which has become one of Alliança's main growth levers. In the quarter, the business unit grew 30%. And on a 12-month view, we had a recorded strong growth of over 48% year-over-year, clear evidence of the efficacy of the initiatives that were implemented by means of the expansion of our contracts, also the consolidation of long-term partnerships, reinforcing the role of B2B as a strategic pillar for our sustainable growth. And now moving on to the graph. On the right side, we can see the composition of our revenue, reflecting consistent expansion. Health care operators represent the largest share with 69%, but we see increasing contributions from B2B, out-of-pocket exams and PPPs. This evolution enhances the resilience and sustainability of our business model over time. We also highlight the growth of our out-of-pocket exams and the B2B segment, which gained meaningful relevance in our mix, contributing directly to stronger profitability and improved cash flow. In addition, we remain committed to expanding revenue from PPPs by means of the inclusion of new units in the existing contract with the state of Bahia government as occurred this quarter and as well as participation in new auctions and projects. This combination of diversification and discipline reinforces our strategic positioning and expand Alliança's sustainable growth potential for the coming periods. Now in Slide #9, here, we share an overview of the evolution of costs and expenses within our strategy of expansion with operational efficiency this quarter. Starting with personnel and medical fees, the most representatives of all, we can see that although there was an increase in absolute values, their percentage remains relative to net revenue in line with business growth. This performance reflects the progress achieved by means of restructuring efforts in operations and back office, which have provided greater flexibility and agility in allocating human resource, allowing us to quickly adjust our structure to actual demand at each unit. Now moving on to supplies and medical hospital services. We recorded an increase of BRL 3 million year-over-year, equivalent to 1 percentage point. This reflects higher volume and the increased share of clinical analysis exams in the revenue mix, fully aligned with our strategy to diversify and strengthen revenue sources, reinforcing our discipline, we continue reviewing contracts and suppliers to ensure efficiency without compromising service quality, the quality and excellence of our services. And then finally, third-party services and other expenses increased by 5 percentage points when we exclude nonrecurring costs. This is partially explained by the outsourcing of the call center, a move that brings greater operational flexibility, reduces the need for in-house personnel and allows quicker adjustments to seasonal demand. Additionally, we had investments in infrastructure and IT to integrate the recently acquired CURA Group units. Some of these increases reflect one-off and nonstructural effects such as specialized advisory services, system upgrades and facility restructuring. These investments are strategic to prepare the company to capture operational synergies, strengthening our basis, guaranteeing efficiency for the next growth cycles. In summary, the actions taken this quarter reinforce the effectiveness of our operational strategy and despite temporary pressures, we maintained healthy margins and are well positioned to capture expected synergies and sustain solid, efficient and sustainable growth, always focusing on service quality and long-term value creation. We maintain profitability at very healthy levels. Now on Slide 10, I highlight another record for the company. In the third quarter of '25, we recorded the highest adjusted EBITDA in our history, totaling BRL 90 million with a 28% margin. This reflects our ability to maintain a solid profitability base even during a period of structural adjustments and temporary investments. Year-to-date, adjusted EBITDA reached BRL 238 million, an increase of 10% over '24, demonstrating the consistency of our performance even in a transformation cycle. It's important to highlight that this quarter's EBITDA was also impacted by temporary effects, especially related to the acquisition and integration of Cura Group units. Although short term in nature, these impacts are part of preparing to capture future synergies and strengthen our operational base. This all combined strengthened our balance and reinforces the importance of discipline, which guides the company's decisions. We had strategic reorganization, temporary expenses this quarter, but we're able to maintain healthy margins and the advancement of our business partnerships. We closed the period reaffirming Alliança's resilience and solidity now even more prepared to capture synergies from ongoing integrations and transform these investments into sustainable results. We remain confident that with a disciplined strategy, we consolidate consistent growth, generating long-lasting revenue to our partners. And now moving to slide 11. Let's detail the company's debt and leverage position. Starting with the chart on the left, we highlight the consistent reduction in our financial leverage, which remains at historically low and sustainable levels. After reaching the lowest net debt adjusted EBITDA level since the IPO in 2016 last quarter, we continue [indiscernible] to manage capital with discipline. We closed the quarter at 1.6x, demonstrating a solid and balanced capital structure that supports the execution of our strategic plan, capturing future growth opportunities with safety. Now looking at the chart on the right side, we present the total gross debt which reached BRL 624 million, a reduction of 23% versus the same period last year when it stood at around BRL 813 million. Of this amount, 78% corresponds to loans and debentures, while 22% relates to tax installments and acquisition obligations. Regarding maturity, we had 53% of debt in long term and 47% short term, reflecting a balanced and healthy structure. We continue to act proactively extending maturities, optimizing capital costs and preserving liquidity, always prioritizing sustainability. In summary, Alliança maintains a safe, stable and controlled leverage level, supported by a robust financial base that strengthens shareholder and creditor confidence. We are at a privileged position to have profitable growth, guaranteeing solidity, predictability and long-term value generation. And now moving to the end of the presentation. On Slide 13, I would like to summarize the strategic plan and the key pillars that guide us. Alliança has gone -- has undergone significant transformation in recent years focused on efficiency, financial discipline and sustainable growth. We restructured our back office, optimized processes and strengthened operations, creating a solid platform for growth in the coming cycles, anchored on 5 pillars, which you can see on the lower part of this slide. Number one, absolute focus on the patient experience, safety and clinical outcomes are at the core of every decision we make. Second, continuous innovation, adopting cutting-edge technologies and integrating artificial intelligence in our processes to improve accuracy and efficiency. We've introduced data intelligence with flexible data. Third, economic and environmental sustainability. We've generated long-term value by reinforcing ESG practices inside and outside the company, allocating capital with discipline. For us, profit cannot be at the top of our priorities. Fifth, actually, fourth, people development, investing in training, diversity and well-being to foster engagement and high performance, which are essential to engage these teams. And then finally, last but not least, fifth, operational excellence. Continues elevating quality standards across the entire service chain to remain a market reference. Within this transformation, we have clear strategies. Our asset-light model has been a key differentiator, enabling scalable expansion, strengthening B2B with strategic partnerships with low capital intensity. We maintain a healthy balance between organic and inorganic growth, acquisitions, which generate value and expand our presence in strategic areas such as São Paulo and Bahia. The acquisition of CURA units in São Paulo and Meddi in the Northeast are examples of opportunities that we've mapped and captured, which are expected to generate results in the upcoming quarters. We remain committed to operational optimization and sustainable profitability, pillars which sustain our growth. We maintain a continuous review process, improving our operations, focusing on eliminating inefficiencies, simplifying flows and maximizing productivity. We want to have a small structure, which is prepared for the expansion cycles without having an impact on the quality of services provided. In addition to that, we continue capturing synergism that result from strategic actions, strengthening profitability and guaranteeing that each advance of the company is followed by more efficiency and value generation. All of these advances are based on one of our core pillars, financial discipline. Over the past years, we have consistently reduced leverage and reached a healthy debt level, placing us in a strong position to enter a new cycle of growth, sustainable and profitable growth. We remain confident and stronger with commitment towards a more profitable company prepared to continue growing responsibly with leadership in diagnostic medicine in Brazil. I would like to thank you all for being here. And now we will begin the Q&A session.

[Operator Instructions] Our first question. Your efficiency in the EBITDA were based on CURA's acquisition in the order of BRL 18.1 million. I think that this was a one-off, right? So if we remove that, actually, the recurring EBITDA margin was 22.5% and not 28%. If all of this is correct, I would like to better understand the higher SG&A this quarter. Is it a one-off or a more structural thing that we will see in the future?

As I commented during the presentation, your understanding is perfect. We did have a positive impact with CURA's acquisition this quarter and the cost of acquisition was lower than the accounting value of the asset. And as you mentioned, even without a one-off, we would have had an EBITDA in line with what has been recorded in the past quarters, close to 23%. And now talking about costs, as I shared with you when I talked about costs and expenses, you can see that the recurring costs of the company are stable and safe. We're talking about medical fees or supplies, support labs. And as I commented, we had 2 events this quarter. One of them is the cost of adaptation and adjustment of all of the costs that are related with the integration of CURA [indiscernible] with advisory structural adjustments, all of them one-off costs, which will not be seen in the future, but very important for us to be able to capture the synergism faster. And another important aspect is that we made an important decision with a partial offsetting of our channels in the call center. As you know, we have some seasonal events, which end up having revenue and clients movements close to the second and third quarter and then lower towards the end of the year. So we made an important adjustment. And now we can easily adapt the amount of resources we need according to the demand. And so actually, the costs we had these quarters, which were partially offset by the one-off effect of CURA's purchase are nonstructural, will happen only this quarter and will have many positive impacts in the future, capturing synergism and allowing us to be more flexible with our backup and our client service that we can adjust very easily with accuracy according to demand.

Could we provide more details on [indiscernible]?

Thank you for the question. We had Pedro Gibbon left for personal reasons. And I would like to take this opportunity to thank him for the services provided and wish him luck in the future. I will work as Financial Director for a while. We are looking for another CFO for the company. And as usual, we will keep the market posted as soon as possible. Thank you very much.

Next question. Comparing the revenue in the third quarter with the market, we can see that the company's growth was lower. Do you think that you're losing market share?

Thank you for your question. As I commented during the presentation, I think that both the clinical analysis line and B2B, we had significant growth. And this is aligned with other companies in this sector results. Because Alliança's business still has imaging diagnosis as its main segment, which did not grow as robustly as the rest, this had an impact on the overall results. But we have a very clear strategy to expand our imaging segment in hospital settings or even with some projects directly with health operators. So we will continue diversifying. This is an important strategy for the company. We will grow fast in B2B in clinical analysis. We continue seeing this trend. And of course, we will invest -- continue investing on the company's core, which is imaging. And talking a little bit about the market share, we are growing B2B in clinical analysis in line with others and are maintaining a relevant position in imaging diagnosis, which had a slightly lower result when compared to the other lines of business.

[Operator Instructions] Next question. Could you give us some more detail regarding guarantees and capture of new businesses?

Well, thank you for the question. As a subsequent event to the third quarter, we had a capture of USD 10,000 with Siemens Financial, which is the financial arm of the Siemens Group. Siemens is an important partner of the company and most of our imaging diagnosis equipment is by Siemens. And this is a debt to last 5 years and a SOFR plus [indiscernible].

Next question. What is the company's strategies to pay short-term PNPs?

Thank you for your question. The company has tried to develop strategies to improve its liquidity by means of the increase of operational cash, and we have paid all of our financial obligations. We want to reprofile the remainder of our debt with better rates even in a more challenging economic scenario in Brazil. And actually, as I answered to the question before, this capture with Siemens, we already have more $20,000 approved with them under the same conditions I just mentioned. And this is part of our liability management and reduction of our financial expenses.

If there are no further questions, we conclude our Q&A session. Thank you all for participating. And I now return the floor to our CEO, Ricardo Sartim, for his final remarks.

Thank you, Taina. First, I would like to thank you all for joining us. The solid results we presented today are nothing more than an exceptional effort by an extraordinary team, more than 4,000 employees, over 2,200 partner physicians who together are bringing Alliança back to the level of excellence it's always deserved. This is undoubtedly the beginning of a new chapter in our history marked by achievements and confidence in a future, which is just around the corner. My special thanks go to the entire Alliança team. Each result we celebrate here is a direct reflection of your dedication and competence. I also want to take this opportunity to thank our partners who strengthen our journey and help us build another chapter of this other success chapter for the company. Thank you all, and have a great afternoon.