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

[Interpreted] Good afternoon, ladies and gentlemen, and welcome to the results call for the fourth quarter of 2025 from Allianca Saude. We'll begin our presentation, which will be carried out by our Investor Relations Director, our Financial Director, and our Investor Relations expert. This presentation is being recorded. [Operator Instructions] This presentation will be available on the company's Investor Relations website at the Results Central tab. Any statements that may be made during the presentation connected to Allianca's business perspectives, projections, operational and financial goals are beliefs and premises from the Board of the company and based on information that is currently available. They are connected to risks, uncertainties, and premises because they are related to future events and depend on circumstances that may or may not come true. Investors must understand that the overall general economic conditions and industry-related factors can affect future performance from Allianca Saude, leading to results that are materially different from those expressed here. At the end of the call, there will be time for a Q&A to resolve any possible questions. And now I'll hand the floor to Mr. José Ramos to begin our presentation.

Good afternoon, everyone. My name is Jose Ramos. I'm the Investor Relations Director at Allianca Saude. I would like to start by thanking you all for being with us and highlighting our conviction that Allianca Saude gathers all the right conditions to become a national benchmark in diagnostic medicine. We have well-known brands, a national footprint, one of the largest imaging diagnostic installed bases, and an integrated platform with relevance in clinical analysis. In 2026, Allianca begins a new chapter in its history, changing our strategic focus from revenue growth to profitability, operational cash generation, and longevity. The foundations of this new strategy include: number one, controls and information, strengthening our internal controls and the quality of information from the financial department with the use of technology. Number two, profitability discipline with a focus on management and resource allocation, both driven by profitability and operational cash generation, capturing synergies and delivering synergies that still haven't been captured in our integrated imaging platform and clinical analysis. And number four, shared value, value generation for all stakeholders, including our patients, all the way to our shareholders. And now I'll hand the floor to Mr. Caio Carvado.

[Interpreted] Thank you, Jose, and good afternoon, everyone. I'll be sharing the company's results. My name is Caio. I'm the CFO at Allianca. And I will be discussing the company's financial performance, highlighting the main challenges that we have faced in the year and how they impacted our financial results. If we can go to Slide #4, you'll be able to see the year's highlights. We have an adjusted gross revenue with a 2.7% growth versus 2024 on net revenue, BRL 1.2 billion, also representing a growth of around 2%, and our margin was at 26%, consistent with the numbers we had in 2024. This growth in revenue reflects the expansion in our registrations and the acquisition of the Cura brand, which was completed in the last quarter. Looking at our gross margin, this retraction was caused by cost pressures that will be detailed further along the presentation. Maintenance and input. This is a point of attention that we'll be covering in more detail once we discuss costs. On the operational side, we have 2 important highlights. The volume of exams grew 25% in the last quarter. Our gross B2B revenue grew 34% in the annual comparison and 43% when we do a quarter-over-quarter comparison, reinforcing the diversification of revenue sources in the company and the work that was carried out in 2025. It's important to highlight our clinical analysis lines, which are one of the verticals that will be further explored and that bring us good profitability, representing one of the profitability drivers for 2026. Looking at our EBITDA, we have BRL 240 million in the year with a 20% margin, sustaining the recurrent levels of margins we have had over the past 2 years. In the fourth quarter, the adjusted EBITDA was BRL 3 million with a margin of only 1%, and this drop was mostly concentrated in the last quarter due to increased costs, as mentioned previously, with strong pressure coming from our suppliers due to liquidity restrictions, and there was also an impact from a higher number of claims adjusted with the asset reviews we've made. Also on this slide, it's important to highlight the high concentration of short-term debt that led to a reduction of our total debt, ending the year with BRL 498 million, a 39% reduction compared to '24. This concentration had a direct impact on the company's liquidity with a direct impact on the operations. With that, we got to a liquidity level of 0.3 and negative working capital of BRL 1.3 billion, reflecting the deterioration of the short-term situation faced by the company, especially in the last quarter. So it is on the liquidity front that most of the ongoing actions that will be described later will be concentrated. We're going to go back to operational profitability and liquidity in the following slides. Before that, I just would like to take some time to explain the accounting adjustments I just referred to. Going to the non-recurring effect slide, we see a total adjustment of BRL 1.3 billion in the financial results of 2025. The biggest component in this result, BRL 728 million reflect the adjustment in the accounting values of the assets in relation to the new strategy. By prioritizing cash generation and profitability, we have renewed our projections, leading to a recoverable barrel that's below the balance sheet. This is strictly an accounting adjustment with no cash effect and no impact on operations. The balance sheet now mirrors the plan that will guide the company in the next cycle. The second component is the review of our accounts receivable with a BRL 180 million impact. We have reviewed our PBD estimate losses, which reflect an integrated consolidation with provisioning of all the credits that are still open for more than 365 days. We also have BRL 106 million in provisions related to Ribera open credits. So this is due to operational synergies that were discontinued after the change of control of the company. The credit is still being discussed for a possible liquidation agreement. But right now, there are no expectations of payment, and that's why we're being more conservative in making this provisioning. The liquidity crisis also had an impact on the update of our fiscal liabilities, with an impact of BRL 100 million that is connected to penalties, interest rates, loss of installment benefits, and tax transactions, which was fully reflected in the company's results. We also have BRL 65 million on the loss of deferred taxes. This is backed by an independent study. But at the same time, this represents an opportunity that is being chased by the company to do a tax transaction in order to reduce this liability, which is expected to be reflected in future results. We also did a reconciliation adjustment of around BRL 93 million, including the CTO operations, contingency taxes, additional provisioning, and the reconciliation of balances that happened in the year 2025. These adjustments totaled BRL 1.276 billion as detailed in our report and reconciled with our financial statements. But none of these adjustments have an impact on the company's operations, the current contracts, or our cash generation availability. These are accounting adjustments that are being done for a technical reason. We remain confident that this is a profitable company with opportunities for improvement that still haven't been captured. From the operational perspective, we have eliminated the accounting adjustments that were just detailed, and recognize that the scenario remains challenging. This will be addressed with concrete actions that make us confident that we have great opportunities to be captured in the short to medium term. And now we're going to discuss our gross revenue. On the left-hand chart, we see that the adjusted gross revenue grew 4.6% in the last quarter when compared to the previous quarter and 2% in the annual perspective, a continuous evolution even if it's at a moderate pace. On the right-hand side, we see the chart divided by segment. The Imaging segment, which is the strategic differentiator for this company, mostly MRI, which is around 83%. But it's important to highlight the evolution in the share of clinical analysis in the mix, an area that is gaining relevance and continues to be one of the most important growth drivers for this company, with opportunities to improve our profitability. If we can go to the next slide, we'll be able to see our gross revenue breakdown by payer. The B2B segment was one of our growth pillars, with BRL 58 million in the last year and a 34% growth when compared to the previous year. In the quarter, we had a 43% growth. Speaking of payers on the right-hand side, health insurance companies concentrate most of our revenue, but the diversification continues to evolve with a growing share of B2B out-of-pocket payments, the public sector, and PPPs. This diversification continues to be one of our competitive advantages. Now talking about gross profit. We see that the margin was at 23% in the last quarter, with a relevant contraction compared to the 25% in the previous quarter. Year-to-date, we had an adjusted margin of 26% versus 29% in 2024. This contraction is connected to 3 main factors, mostly concentrated in the last quarter: more challenging commercial negotiations, a higher rate of equipment with unscheduled downtimes, and other expenses. Now we're not satisfied with this result. But at the same time, we understand this as an opportunity that can be tackled and addressed in the year of 2026, and that is already ongoing. We have already discussed the low profitability contract renegotiations, standardization of equipment, standardization of maintenance contracts, and other negotiation levers we have with our suppliers that will be addressed in the year of 2026 to improve the profitability of the company. On operational expenses, we see growth mostly connected to the integration of the Cura unit in the last quarter of the year that was fully consolidated in the comparison basis and also the cost pressure on the service line, mostly connected to the liquidity crisis that has already been described on previous slides. These are real costs that we are facing with a lot of engagement, so they can be reflected in better results in the year of 2026. Our EBITDA margin in the last quarter was 1% with the operational challenges that have already been mentioned. We talked about equipment downtime, increasing costs, and some other items that were addressed that impacted our results. In the year, we had a BRL 240 million EBITDA with a 4 percentage drop, also explained by the same reason described previously. The profitability of the company remains consistent at the 20% level, but we understand that there are real opportunities for improvement that will be addressed in the next cycles. Now looking at the debt, this is one of the main challenges of the company. Our gross debt level with financial agents is BRL 498 million, with a 40% reduction, mostly concentrated in loans and debentures. This financial leverage was reduced to 1.6%, actually 1.6x compared to 2.5% that we had in December 2024. It is important to highlight that this leverage indicator in isolation does not reflect the company's payment capabilities, considering that this debt is mostly concentrated in the short term. And most of them have already expired or will be anticipated, as described previously when we were talking about our financial results, which had, of course, a direct impact on the current liquidity index that we are facing. So how do we plan to address this new stage? Some strong actions have already been taken in the year of 2026. Remarkably, we were able to get the suspension of the execution of charges. It opened space for a broad renegotiation with our supplier. We were very effective and were successful in some of these renegotiations, and the process is still ongoing. Another positive highlight is that the company was able to raise BRL 126 million in debentures in the first half of 2026, which certainly helped the company to reduce the number of equipment that are idle, optimize our use of inputs, and go back to past production levels, which is already being expressed in our performance in this semester. We also did a broad review of our budget, identifying a lot of opportunities for bringing operational improvements and cost reductions. We are implementing many actions to improve our profitability performance, including a lot of technology solutions. This is a company that has a very strong technology portfolio and has had one for many years. The reality of artificial intelligence is also something that we have already been capturing, adding intelligence to our customer service and in the management of our scheduling. Finally, we also have the renegotiation of our liabilities. As mentioned, we have a relevant uncovered liability, which is being addressed in a structured, organized way. With a really detailed plan with dedicated financial and legal individuals. It is a challenge to be addressed in 2026, but one that is completely normal in our opinion. With that, I'll hand the floor to our colleague, Jose Ramos, to conclude the presentation and talk a little bit about our governance.

At the beginning of 2026, the company's governance went through some relevant changes. The shareholder control is now held by Tai, a fund that is managed by Gibavestimmentos. The Board was rebuilt with 3 directors, with the CEO currently being selected. Our Board of Administration now has 3 members, 2 independent. Next one. There are 4 levers that represent the foundation for the year 2026. The first one is the capture of synergies. The integration of the brands that were acquired in the past few years was not fully concluded. And that includes redundant infrastructure and disc processes, whether we're talking about corporate or supportive areas, which represent a cost that could be reduced. Another lever has to do with our profitability discipline, active management of our contract portfolio, and low-performance contracts and low-profitability services, releasing capacity for a greater added value mix. Controls and integration are another opportunity we have inside the company. The use of technology to raise the accuracy and precision of our financial information, thus reducing the perceived risk by the market and by our creditors. And last but definitely not least, cash conversion. The so-called revenue journey from production to billing and from billing to payment. In a moment of rebalancing of our cash, speed and predictability of our cash matter just as much as our margin. These 4 pillars will take us to a single purpose: making Allianca a benchmark in imaging, diagnosis and clinical analysis, putting the care for life at the core of everything that we do. The company does not provide quantitative projections right now, considering the moment we are in our restructuring plan, but will present a qualitative direction for the main levers in the year of 2026. For the gross margin lever, we expect to see a gradual recovery in the next period, with the possibility of improving our mix of services with the migration to higher average ticket size, our contract portfolio with the elimination of low-margin contracts, and a bigger focus on the more profitable contracts we have. Also, an improvement in our capital structure that will be perceived in the year of 2026 through the deleveraging via debt conversion. And a constant search for operational efficiency due to the review of processes and use of technology. And again, a big focus on cash generation by improving our revenue journey. Lastly, we would like to reinforce Allianca Saude's commitment to all the audiences for all the stakeholders we relate to, patients with quality services and care for their lives to our employees and partner physicians by building a solid and purposeful institution to our creditors with a rebalanced capital structure; and our shareholders' profitability and longevity. With that, we thank you for your attention. And now we will begin our Q&A session.

This is the end of the call results for the fourth quarter and the year 2025 from Allianca Saude. Thank you so much for joining us.