Bumrungrad Hospital Public Company Limited (BH) Earnings Call Transcript & Summary

[Foreign Language] Welcome to Bumrungrad Hospital PCL's First Quarter 2021 Analyst Presentation. I'd like to start with a couple of good news that we'd like to proudly share. The first is our recognition by Newsweek as the top hospital in Thailand and among the top 200 hospitals in the world. We will expand on that later on in this presentation. The second is Bumrungrad being the first and only signatory to date in the ethical -- first and only signatory to date in Thailand of the Ethical Principles in Health Care, an initiative developed by the International Finance Corporation, a member of the World Bank Group. This initiative is dedicated to organizations committed to implementing the highest standards of ethical practices to its patients, employees and the environment and communities that they serve. We spoke last quarter of our commitment to sustainability in all aspects, and we're proud to have published our inaugural sustainability report on our website. You can find a soft copy of that at the Investor Relations website, and I'd encourage you to take a look at that. As we steadily move towards the first half of the year, our focus continues to be driving more volume and market share to the hospital, in particular the Thai and expat market, but also, as much as possible with the constraints of travel restrictions, on international medical tourists. Though this increase in volume is -- can often be offset with less intensity in the short term, we believe that it will drive in the long term sustainable value creation in the interests of our stakeholders. This was informed by data that points to patients being very loyal once they have experienced care and hospitality at Bumrungrad. To that end, the decisions, partnerships, MarTech and marketing strategies we have employed are aligned towards the attraction of new patients and to provide long-term engagement, particularly digital engagement, care, wellness services throughout their lives. With that having been said, I'd like to move on to the next part of the presentation given by Neil Sorrentino, our Chief Global Strategist. Thank you.

[Foreign Language] And good morning together. Welcome to Bumrungrad Hospital Public Company Limited Q1 2021 Analyst Presentation. This morning, I'm going to talk a little bit about the performance for the quarter by market share, by nationality. But before I get into that level of detail, I want to discuss some milestone, unique accreditation achievements that Bumrungrad Hospital -- International Hospital has achieved in Q1. Khun Daniel mentioned a little bit about it earlier, but I want to reflect more deeply about it because they're very, very important as to our brand, as to our outcomes, as to the way we care for patients, as to the way we take care of the safety of our patients and the quality of our patients. In Q4 2020, we underwent our seventh consecutive Joint Commission International accreditation survey. We began this journey in 2002, and today, we are the only hospital in all of Thailand that has achieved 7 consecutive survey accreditation standards, was at an all-time record high in the way of scores given to us by Joint Commission International. It was the best score we had in the 7 times we have been through this effort together. Secondly, in the quarter, I'm sure many, if not all of you, are familiar with Newsweek international magazine, an internationally accredited magazine. And each year, they come out listing the best hospitals both in Thailand and in the world. We were humbled in Q1 by being voted the best hospital in all of Thailand, #1 in all of Thailand. If you see in the slides that we presented to you, the methodology by which Newsweek came up with this #1 hospital achievement for Bumrungrad had to do with recommendations from medical experts, not our medical experts, not our doctors, but other international and domestic managers as well as other health care professionals. They also looked at patient surveys and they also looked at medical key performance indicators on all hospitals that they surveyed. And they granted us the #1 hospital in Thailand and the only hospital in all of Thailand that was amongst the top 200 hospitals on the entire planet. So we're very happy that there's a confirmation and a validation about how we care for patients in this kind of award. The third accreditation, almost as important, if not more important, was the accreditation -- reaccreditation that was given to us by Global Healthcare Accreditation, which is also an international nonprofit accreditation standard, by which we received the first accreditation in the world outside of the United States. 3 years ago, we went up for reaccreditation in the last 2, 3 months. We were reaccredited. And in addition to that, in August of 2020, we were the only hospital in the world who achieved the Global Healthcare Accreditation Certification of Conformance with respect to COVID-19 for Medical Travel. And in April, we formally announced as having received an accreditation with excellence and performance by our institution. These 3 things together say a great deal about the validation of who we are as a brand, as a value proposition as well as how we care for the security, safety and quality of our patients. It's important I spend some time talking about it because our team, our staff, our doctors all take great pride in receiving this kind of set of awards. Moving now into the quarter. Let me talk a little bit about, in overview fashion, what happened in the quarter. As you, I'm sure, are very much aware, Thailand underwent a second surge in early December, for which it has yet to recover. It has moved from a second surge at the end of or in the back end of Q4, now having moved into the third surge, still ongoing and still growing. The second surge produced somewhere between 200 to 700 infections per day. This current surge that Thailand is in is producing somewhere between 2,000 and 3,000 COVID-19 infections daily. And it's created a temporary partial lockdown in certain red zone areas throughout Thailand that the government felt was important to get the COVID infections under control. But as it affected -- surge 2, as it affected Q1, we look at now the individual segments of our business in Q1. And firstly, we'll look at the overall market segment. As the slide depicts here, you'll see our net patient revenues for overall market were down 9.4% from Q4 and is really not comparable to Q1 2020 because that was before COVID. But within the 9.4% number, we had fairly dramatic decline in revenues at our Mongolia hospital. That country, Mongolia, was in a complete lockdown in Q1 because it had a major surge. Like the surgeries were canceled, outpatient visits were completely curtailed, inpatient care was completely curtailed for other than very, very, very sick patients. So the volume and the revenue from that institution affecting our overall consolidated number was significant. In addition to which, our Thai business in the quarter, because of the second surge, was down about 12%. Next slide, please. On the Thai side, as I just said, Thai business was down 12.9%, all principally due to COVID, although it was up from Q1 '20, up 0.5%. And that spoke a lot about how we have been going after market share and was doing very well in Q1 until the second surge had hit. So the hospital, during the end of Q4 and now into Q1, is spending an awful lot of time caring for multiple types of COVID patients. And if you look at the mixture of those patients, you have patients that test positive but are asymptomatic and are in a self-quarantine or AHQ environment. As of recently as 2, 3 days ago, the government only required these type of patients to be in quarantine for 10 days. Before that, it was 14. Then you have those patients that demonstrate symptoms and either have light symptoms or pneumonia. And those patients are the type of patients we're caring for in our inpatient setting. Then thirdly, you have the most ill type of COVID patients, which are in our ICU. So that demand for COVID patient care, coupled with the concerns by people not leaving their homes, stalling elective care, not wanting to go into any place, shopping centers, malls and including hospitals, has created this effect over Q1 leading into Q2. Now the hope is that with the government efforts to partially lock down the country, the number of infections will decline, the percentage of deaths will decline against those number of infections and people will be able to start coming out of their homes and living life normally. As will be mentioned, on the international side of the business, we have over 300 patients that are eager to come to Bumrungrad and follow up with them all the time. But for now, the government has not allowed these patients to get visas because they want to make sure that the government and the private health care beds are available for Thai people, expat who live in the country. So we're in this transition period about how we manage patient flow. Nonetheless in the quarter, we were averaging somewhere between 50 to 60 Middle Eastern patients, some long-term, some coming in before the third surge as well as others from Myanmar, as well as others from Cambodia and other international destination points that, through the MOPH, they allowed us to bring them in as emergency cases. But it's not a free flow of patients as we have experienced in the past. We're hoping that in Q2 and Q3, that will get back to a much more normal distribution of patients. Next slide. On the expat side, the revenue was about flat, down 0.9%. But again, in terms of our efforts on the digital side, social media side, strong efforts by patients using telemedicine, using Bumrungrad @ Home, the revenue was up 0.6% quarter-over-quarter versus Q1 '20. Next slide. All international net patient revenue down 8%. This is principally driven by the impact of our Mongolia hospital affecting this number in consolidation. Of course, prior year is not comparable because that's pre-COVID. Next slide. When we look at the performance in the quarter by market type, meaning international, you can see here the variations of what were major contributors in the quarter. And if you look at it carefully, you will see Qatar, Myanmar were principal contributors. We conducted relief flights. The government brought in flights from Myanmar, as well that some of those patients chose to come to Bumrungrad. Look at Bangladesh, up 76.4%. So those are the winners, if you will. The United States was another winner. That's a mixture of not very, very many medical tourism international travelers, but much more expats living in Thailand with the nationality from the United States. And you can see the variations on the other side, which is what I would call the losers. Cambodia was down. Mongolia, of course, was down because of their extreme lockdown. The UAE, in the same way, and Oman, in the same way. So the net difference was minus 8% of the mixture between the average between the winners and the losers. So the Middle East, this is a bit misleading because it shows minus 4.4% variation negative for the quarter. But when you dig deeper into the numbers, the Middle Eastern revenue was actually up 6% based upon the prior slide where you saw the winners. The difference between the minus 4.4% and the plus 6% I mentioned had to do with prior period discounting adjustments for the most part. And again, it can't be compared to year-over-year because that's before COVID came to Thailand. Next slide. Indochina was up almost 1%, principally driven by Myanmar, some by Cambodia. I showed the winners and losers earlier, and that's what drove this variation in change in Indochina, again, prior year not comparable. On our ever-growing AHQ and ASQ. In the quarter, we opened up an additional AHQ number of beds at Anantara Riverside to give us additional capacity to handle AHQ patients. And you can see the growth in revenue from THB 393 million in Q4 to THB 428 million in Q1 2021. More importantly than that -- and everyone is expecting AHQ to grow. More important than that is a 54% conversion factor, meaning that those patients that were in the AHQ, they converted to using inpatient and outpatient services at Bumrungrad, which drove revenue. Less so on the ASQ, which is the bottom portion of the that slide. Only 10% conversion from there. But between this, telemedicine, Bumrungrad @ Home created an explosive effect as patients refuse to leave -- as citizens, patients refuse to leave their homes and started using digital as opposed to physically coming to the campus. Next slide. Let's move now to the dividend payout granted by the company. As I told you in November, the Board of BHPCL had recommended and approved a payout of a final dividend of THB 1.631 billion, representing THB 2.05 per share. That recommendation by the Board of Directors went to our Annual General Meeting of the shareholders this Wednesday, and they confirmed the approval of that final period payout. So that payout will be made at THB 1.631 billion. Payout date will be May 10. And then the total ratio of EPS payout for the year will be 211%. That is significant although not surprising. That is significant in the way that, historically, the Board of Directors and the shareholders have agreed to manage strong cash flow, negative debt in building and maintaining that build of loyalty with our long-term shareholders of record. You can see in the prior year, it was 66% because the net profit was THB 3.7 billion versus THB 1.2 billion. But nonetheless, the company leadership at the Board and shareholder level made the decision to continue the same amount of dividend payout to the shareholders of record. So the last item here on the list is guidance for Q2 2021. As I mentioned earlier, we are in the midst of a rather severe third surge, the largest, longest surge that Thailand has experienced. The ultimate solution to these surges is people not congregating together, and of course, vaccines becoming available. I'll talk a little bit of here about vaccine protocol because they are really tied to what the guidance could look like going forward. Today, we have vaccinated our frontline health care workers and our doctors. We've administered as of the other day 1,900-plus vaccinations to our frontline health care workers and our doctors from a small allocation received from the Thai government. We have also gone out to our national ID Thai people who are former patients of Bumrungrad and asked them, one, their consent about providing information with respect to their personal data insofar as receiving vaccines at Bumrungrad; and secondly, did they want, in fact, to get those vaccines done here at our hospital. The digital survey produced over 20,000 Bumrungrad -- former Bumrungrad patients that had a positive interest in receiving their vaccines here. We are now going to provide that data to the BMA with the consent of these patients, and this will be the marker point that will allow BMA to provide us an allocation of vaccines once they become available in Thailand. Now as you know, according to the press and the media, it has been slow, the availability of vaccines for Thai people. But the government is committed along with the private health care sector for us to work together to try and get Thai people vaccinated. There is an expectation that between 30 million to 50 million Thai people will be vaccinated by the end of 2021, hopefully sooner than that. Everyone is working very hard to get that achieved. But in the interim, as it relates to guidance, it is going to be very difficult for any health care provider with any level of certainty to provide guidance for Q2, for which we're in the middle of this third surge. So we'll leave the question of guidance for Q2 parked for now and talk about where we may be. And our hope is, is that Thailand will be moving away from this third surge and people feel much more comfortable about coming out and reengaging in society as well as seeking the alternative health care needs that they require. Thank you for your attention, and we'll continue forward with the next presenter.

Thank you, Neil. The next part will be on our financial highlights presented by Khun Oraphan, our CFO. Khun Oraphan?

Good morning, everyone. I will present first quarter 2021 financial performance to you all. So move on to see the financial highlights. Despite the growth in COVID case in Thailand since mid-December 2020 and continue to grow in 2021, Thai and expat business continue to grow year-over-year However, restriction on travel and medical tourism continue to impact the company's international business, especially when compared to the high base of first quarter 2020 when COVID-19 was only marginally impacting the company performance. The company report total revenue in first quarter 2020, THB 2,679 million. This amount represents a 35.3% decrease from first quarter last year. Net profit in first quarter 2021 declined by 88.1% to THB 91 million from THB 765 million in first quarter last year, with net profit margin at 3.4%. When compared to fourth quarter 2020, total revenue in first quarter this year declined by 9.1%. EBITDA and net profit declined by 18.7% and 47.3%, respectively. I will go through detail in the next slide. For financial performance, in first quarter 2021, total revenue of the company report is THB 2,679 million. This amount represents 35.3% decrease from first quarter last year. The decline, mostly due to a decrease in revenue from non-Thai patient by 54.4%, offset with an increase in revenue from Thai patient by 0.5%. For the revenue contribution by nationality. Due to restriction on travel and medical tourism continue to impact company international business, including the [ harsh ] loan promotion to stimulate the local market. As the result, the revenue contribution from Thai patient increased from 35% to 54% in first quarter 2021, and revenue from non-Thai patient dropped from 65% to 46% in first quarter this year. For revenue contribution by service. In first quarter this year, revenue contribution from inpatient service slightly declined to 52% from 53% in first quarter last year, mainly due to the overall length of stays slightly declined in non-Thai segment. For revenue contribution by payor type. There was changing in payor mix due to COVID-19 pandemic impact. The government third-party payor contribution decreased from 19% to 10% in first quarter this year due to restriction on travel continued to impact the company's Middle East business as well. Self-pay slightly increased from 62% to 64% in first quarter this year mostly due to increase in Thai, expat self-pay. And insurance contribution also increased from 18% to 23% in first quarter 2021 due to increase in Thai and expat insurance business. For the EBITDA. In first quarter this year, we have continued implementing many cost management programs in last year, including workforce management, contract management and inventory management. As the result, we could achieve cost saving around THB 130 million in first quarter this year, and we'll continue cost management program for the rest of 2021. However, there are a few fixed cost that could not be reduced or flexible with the patient volume, such as software support maintenance, service fee, software license for digital platform expansion. As the result, EBITDA in first quarter 2021 was THB 410 million, declined by 66.9% from first quarter last year. For EBITDA margin in first quarter 2021 was 15.3%, declined from 29.9% in the same period last year. For net profit, decline with the same reason of EBITDA decline, net profit for first quarter 2021 was THB 91 million, declined by 88.1% from last year. For the net profit margin in first quarter 2021 was 3.4%, declined from 18.5% in the same period last year. In terms of the net debt to EBITDA. For first quarter 2021, was slightly increased to 0.6x, higher than 2020 due to less EBITDA in this quarter. For net debt to equity in first quarter 2021, was flat at 0.1x. And interest coverage ratio in first quarter 2021 dropped to 12.6x due to less EBITDA in this quarter. However, when consider bond covenant requirement for net debt to EBITDA, it should less than 3.25x and net debt to equity less than 1.75x. The current net debt to EBITDA and net debt to equity in first quarter 2021 was still a lot lower than bond covenant requirement. This is our financial performance for first quarter 2021. Thank you for your attention.

So thank you, Khun Oraphan. On to our next section, which is on the business update side, let me just go through that with you right now. So continuing as it was in previous quarters, Bumrungrad Hospital has been introducing a number of packages designed to help manage costs and predictability of cost of treatment for our patients as well as our third-party payors. This is an example of 3 key packages which we have released during the quarter, mainly focused on cancer, genetic prevention and transplantation. In fact, these are the 3 specialties with which we are particularly focused on as a cautionary care provider. And these packages have taken an increasingly larger share of the overall payor segment due to their attractiveness and pricing. And we were expecting to continue to roll out these packages in order to assist in managing costs for our patients and payers. Next update is on the Health Fair. This is typically an annual event that we offer at very, very attractive prices, checkups and other packages. Last year, we generated approximately THB 28.7 million. This year, in fact, we reached the historical high of THB 41 million over 5 days, whereas the previous Health Fair achieved it over 12 days. So on a day -- on an average per day, we're looking at approximately THB 8 million in revenue generated. And moreover, these packages were sold at a lower discount to the previous year's Health Fair, which indicates strong market demand for packages. If you may recall, packages are essentially a downstream channel for us to generate additional revenue through checkups and finding issues and problems that we can help to address with our patients. This Health Fair actually continues in the online format with a buy 1, get 1 free campaign that runs until middle of May. Currently, as it stands, as of 28th of April, this campaign generated THB 15 million in revenue, slightly lower in monthly rate to the Health Fair at Central Embassy. However, this is also -- must be put in mind that we have currently -- we are currently undergoing a third wave in COVID infections, and as a result, there is some offset to the demand there. On to the Bumrungrad gift card. This is essentially another product we've rolled out through the MarTech team, which is being sold both online and off-line. The Bumrungrad gift card allows patients to purchase a value card which they can give to either their friends or loved ones who are currently at the hospital or even as a gift for New Year's and other special events to purchase Bumrungrad services. As you can see, we sold approximately THB 19.2 million as of the first 4 months of this year, the majority of that being from the off-line channel, and a large number of that is of that is of the THB 10,000 type. So this indicates to you the purchasing power of our patient base. Moreover, these gift cards, just for your information, are not instantly recognized as revenue but are only recognized as revenue when they are redeemed or used. So this is an item that will be accumulated on the balance sheet as unearned revenue. And as they are used, they will then be released as revenue. And that concludes some of the business updates. We'll move on to the next part, which is presented by Dr. Thassanawut on the medical transport side and what we are doing in bringing our patients from overseas. So Dr. Thassanawut, please?

Good morning, everyone. Thank you for joining us today. I'm Dr. Thassanawut Dhearapanya, Division Director of Business Development International and Medical Transport of Bumrungrad International Hospital. I'm here today to update you with the current situation regarding the alternative hospital quarantine, or AHQ, the only way to bring international patients into Thailand, especially into our hospital. As you can see right here, last year, when COVID-19 hit very hard, it started with no patient in April last year. But at the end, we could bring in 559 patients along with 545 companions of theirs into Thailand and into our hospital. This year, approaching the end of April, we could bring in 380 patients into our hospital, that was almost 100 patients per month, with 400 more companions, generating the revenue of THB 385 million. The top 5 nationalities of these patients were Myanmar, Cambodian, Kuwaiti, Ethiopian and Chinese, with many, many more to come. We didn't only sit and wait for the patient. We generated revenue by chartered flight, bringing Myanmar patients into Thailand and into the hospital. The third flight was on 17th of March this year. We brought in 70 persons coming into the hospital alone, that being 34 patients with 36 companions. These patients, with our offer, we could generate THB 140,000 from Vitallife with 5 cases, which was not the main purpose of their treatment in the hospital. Out of these 34, we had 1 high-spending case, being the neurosurgery case, that could generate THB 3.2 million for only 1 case. With this success story, we are planning to bring more patients into Thailand with our fourth relief flight, and we set the planned date on the 18th of May 2021. Even though the situation is very, very dynamic, we are keeping a close eye on the situation, and hopefully, we can bring in more patients. Where are they coming from? In our waiting list, as of 27th of April, there are over 300 patients anxiously waiting to come into Bumrungrad, 40 of them being Bangladeshi, 32 from Kuwait, 27 from Qatar and some from China, Ethiopia and Cambodia. You can see right here the Cambodian number, in fact, very high. That's because they can continuously come into Thailand. Hopefully, this year, even though the COVID is still with us, we still have a very small but consistent slip to bring international patients into our hospital. Thank you very much.

Thank you, Dr. Thassanawut. The next part is on the telemedicine update, and that is being provided by Dr. Isorn. Dr. Isorn, please?

[Foreign Language] Greeting, everyone. I'm Dr. Isorn Sookwanish, the Head of Strategic Business Unit of Bumrungrad International Hospital. So today, I'm honored to present to you the performance of the at-home service department. So this department started last year, and it's the dedicated team to provide teleconsultation services and also the on-site service for the patients who are in need but unable to come to the hospital, like bedridden patient, and also to coordinate and collaborate in delivering medication and some treatment to the patient. This -- definitely, everybody know that we start this department because of the need of COVID-19 outbreak last year. We see that the patient need to continuity of care, and also it's the easiest way for the patient to contact us. So now the team have -- the channel that the team use to contact the patient, one that I mention now is like official account of Bumrungrad International Hospital. And as you can see now, we have around 62,000 patients using this channel to contact us. And we also support the new user, around 20,000, during these 3 weeks since the beginning of the third wave of COVID-19 outbreak. And on the average, we have around 28,000 messages a day that the patient use to contact to Bumrungrad Hospital by this channel and asking for the service of this hospital. So apparently, this channel is one of the most important channel of our hospital now. And about the volume of the service. Last year, when we start this service in April, we provide around 1,000 units of service or transaction every month. But since then, we expand the service, we grow the team. Now we are having 3,000 transactions every month. But in April, since the beginning, and as like everybody knows that we have the third wave of COVID situation, we see the surge of our volume again. From the 1st of April until the 25th of April, we already rendered 3,442 transaction of service to the patient. This is 19% growth from March. And we also obtained 329 new patients through this channel, and this is 3x higher than normal period compared to March, February and January. And about the revenue. We also generate THB 25 million until -- as of 25th of April. This is 20% increase from March as well. And as of today, 29 April, the revenue already hit THB 30 million already. So this is -- this proves our assumption that telemedicine and telecommunication technology will take very important part in health care services. And our department are determined to expand the service and make sure that Bumrungrad International Hospital will be the leader and ready for the new era of health care. Thank you.

Thank you, Dr. Isorn. And that wraps up our first quarter 2021 analyst presentation. Please join us in the live Q&A session on Friday, 7th of May at 10:00. Our senior management will be here to answer live to you any questions you may have. Please do forward any questions you have to ensure that we have the most use of time as efficiently as possible. Thank you. [Foreign Language]