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

[Foreign Language] Welcome to the first quarter 2022 analyst presentation. Thank you for listening in. Before we begin jumping into the crux of the analyst presentation, and there are a number of speakers who will be talking further about the developments of the quarter and the business updates and the financial performance, I'd like to draw your attention to 2 key themes. We've prepared for you a slide, which indicates the quantum of business recovery on a quarter basis in comparison to pre-COVID levels. And then in this case, it's 2019. So if you look at the fourth quarter of 2021, the previous quarter, we achieved 82% of the revenue from hospital operations compared to the fourth quarter of 2019, and for net profit, 69%. Following that, the increase in international business and the quantum of recovery has continued to drive our business performance further and further towards pre-COVID levels and towards a full business recovery. The international business was a key contributor of the revenue of the quarter. And in particular, Myanmar, Bangladesh, Kuwait and the UAE were outstanding contributors to that quarter. In addition, there was some impact on the Thai and the expat business. On the Thai, mainly as a result of a COVID flare-up during the Omicron flare-up in the beginning of the first quarter, which had some impact to Thai volumes. And as well as that, when you compare with the fourth quarter, which we mentioned in the last presentation, there is typically a high seasonality prior to the end of the year as people avail themselves to checkups, to visiting the hospital prior to the long Christmas and New Year holidays. And therefore, it presented a high base on a quarter-on-quarter basis. On the expat side, there was some impact from the Test & Go interlude, whereby the Test & Go scheme was paused temporarily due to the aforementioned Omicron variant flare-up, but has since been restarted, and that impact has slightly affected our expat business as well. There are some other minor impacts, and we can go into more details about that, but we really wanted to give you some color about what was going on during the quarter. Looking forward though, we continue to see sustained high levels of inquiries and appointment requests across all channels, from both Thai, expat and international business. And these are strong forward indicators of the performance of the subsequent quarters as well. And we believe that the recovery momentum will continue going forward. In addition, the performance of the company will be benefiting from the discount reduction, which we've seen in the first quarter of 2022, and which we daylighted to you in the previous quarter that there will be a discontinuation of a number of programs and the tapering of others. And this is expected in addition to the higher economies of scale as a result of the higher volumes of international business to have a positive impact to the company's performance going forward, too. The discount rate development, as I mentioned in the previous slide, you can see that it has decreased to 13.7%. So that's a significant decline from 17.6%, which is a historical high for us. And in comparison to 2018, 2019 levels, the average of 9.5%, it's moving closer and closer towards the mean. We do expect further tapering of other programs that we have in place during the COVID period, and that should expect to reduce further the discount rate development as well. And with the discount rates continuing to fall, that's going to provide an uplift if all things equal are considered. Now I'd like to hand over the rest of the presentation to Neil Sorrentino, our Chief Global Strategist, who will comment further about the key takeaways for the quarter. Thank you.

[Foreign Language] Welcome to Bumrungrad Hospital Public Company Limited Q1 2022 analyst presentation. And I, along with Daniel, welcome you to this session. Thank you for joining us. I'm going to spend a little bit of time doing a bit more of a deep dive for you on the numbers and what has gone on behind the numbers for the quarter but more relevantly, how would they compare to prior periods and what's really happening to the successful drive of our earnings, our EBITDA, our NOPAT and our margins, which exceeded our expectations for the quarter. When you look at Q4 2021, we jumped our revenue 33% from Q3 2021. And then in Q1, even with the beginnings of Omicron in the middle of December into January, we still jumped our revenue 5.7% in Q1. But the story for the quarter was not only that the revenue drive was 5.7%, but the real story for the quarter was the increased revenue intensity. And where did it come from? That revenue intensity came from our international patients, Middle Eastern patients, Indochina patients. Others, of course, but those were the 2 principal drivers. We still had significant substantial growth in Middle Eastern patient support that continue to come into Thailand even through and around the Omicron scare in mid-December and almost all of January. What was impacted because of the Omicron scale was the Thai business in the month of January. But when you look at the quarter, February and March began to pick up. So let me go through some of the detail for you and give you a little bit of color about what happened in the quarter, then we'll come back to this takeaway slide. But before I leave the takeaway slide, you will notice here that the international revenue I point out was 55.5%. That's significant because it's about a 10% growth from prior quarters. At [ height ] pre-COVID, our international revenue was fully 2/3 of our total revenue. And when it gets to that level, almost by definition because we're taking care of such complexly ill patients that, along with good cost control, really does drive our operating performance, our EBITDA and our NOPAT. But it does require along with it good cost control. And we did have cost control again in Q1 2022 as we did Q3 and Q4 of 2021. In the quarter, we also achieved something we had never done before. I mentioned in Q4 analyst presentation about us moving toward a very, very robust heart transplantation program. And in the quarter Q1, we completed 3 heart transplantations here at Bumrungrad, something we had not done before and we had done it very, very successfully. And we're very, very proud of that, along with our corneal transplantation program, which we also had some corneal transplantations done in the quarter. I talked again about this. We were starting these programs for the Q4 presentation, and we began them successfully in Q1, and all about us continuing to deliver additional complex centers of excellence. So let's go to the first slide, if you could, please. And we'll get into a high-level summary, but an important summary for you to better understand the performance of revenue, EBITDA and NOPAT. And I'm not going to review each one of the numbers. All I ask you to do is look at the wavy lines going in a northeasterly direction. And that tells you that quarter upon quarter upon quarter, going back from Q1 2021 through Q1 2022, which is 5 quarters, you will see the trending positive growth of revenue, EBITDA and NOPAT showing that we really are starting to come out of the COVID pandemic issue as a result of the country being shutdown. And as we get more and more patients, supporting international patients, supporting Bumrungrad, and we always knew that they would, but this demonstrates -- in fact, as you study it, this demonstrates that very strong support in Q1 and then before that, Q4 2021. That's really one that jump started at the end of Q3 2021. Next slide, please. So as I mentioned, the net revenue grew 5.7% off of 33% in Q4, but what was much more important was the revenue intensity. The comparative of revenue intensity for the quarter was 20% growth against 5.7% growth in volume. And that relationship is very, very important for our organization and for you to understand because when you look at the numbers, you say, well, how is it that this growth is occurring at the NOPAT and the EBITDA line. And that's a question I've gotten over the years from the investor community. And this is the answer. The answer is that complexity of patients on a resource consumption usage basis, it's much higher trend line than it is the actual volume percentage growth. And it's -- and in this case, 5.7% against 20%, you can see that it's 4x the difference between the ratio of volume growth and revenue intensity growth. We won't talk about year-over-year because 2021 matching it off against 2022 is really not a useful index to look at. It grew by 55%, but the prior slide shows you that in the form of revenue, EBITDA and NOPAT. Next slide, please. And here for the quarter is the answer to your question, how do they manage this kind of performance. And you'll see that all of international, which includes Middle Eastern and then all other, international grew by 27.7%. When you look at this metric, it's much more correspondingly close to the revenue intensity number of 20-plus percent that I mentioned earlier. It's almost a one-for-one relationship. So you can really better understand where the revenue drive and where the earnings drive is coming from as long as we manage our growth -- as long as we manage our costs correctly, which we have been doing. Year-over-year, it's triple-digit growth, but it's not very meaningful, except to say that we're growing the business now that the country is opening back up. And as you have read in the paper, no doubt, as of May 1, the Test & Go will be eliminated. And as of June 1, the Thailand Pass will be eliminated. So the country will be fully open on June 1. And we do expect -- as I had in my takeaway slide there, we do expect greater and greater international business support over Q3 and Q4 of 2022. What that translates into, into revenue growth in terms of guidance, I don't know. But at 5.7% is what we showed in Q1. Q2, no one knows what it's going to be because we had the impact of Ramadan. We had also the double impact of Songkran, although the initial early unaudited gross information is showing that the second quarter looks okay. We haven't closed the second quarter, obviously, but I'm encouraged by what I see in the first few days of the second quarter. But we do expect -- I do expect a very nice bounce back in Q3 and Q4. Next slide. So what I'm providing for you here are percentages of growth for all international. And I want to give you some additional information as I did in our last analyst presentation because I think you'd find it interesting. You have asked about it in the past. So I'll give it to you here, and you can do with that as you will. For the United Arab Emirates, which is part here of #7, you see it grew by 51%. But more interestingly, it grew by THB 38 million quarter-over-quarter, THB 111 million versus THB 73 million. For Qatar, you see here 23.6% that it grew. Interesting, but what does that translate into revenue? For Qatar, the growth was THB 31.7 million positive delta quarter-over-quarter. For Bangladesh, this one was really a very, very strong, strong quarter for us from Bangladesh in terms of support. For Cambodia, it grew slightly. For Oman, it grew by THB 12 million. United States is almost all expat-related growth. Next slide, please. So moving to now the Middle East, which is what -- it, in part, has been driven -- driving in the quarter, it grew by almost 20%, 19.1%. And for that, Kuwait grew by THB 7.5 million, but its base number was THB 234 million for the quarter against THB 227 million from the prior quarter. Saudi Arabia, it has a base for us about THB 10 million. But interestingly, in the middle of May, we have been invited to Saudi Arabia, and we've been waiting for this opportunity to come forward. As I've said earlier, in other analyst presentations, you have to be invited. You just can't go there. We have been invited there, and we look to set up a referral office beachhead in the coming quarters in that market. And that could be interesting and important for us in the future in terms of additional Middle East patients. Next slide, please. For Indochina, as I referred to earlier and for those who don't know, Indochina is composed of Bangladesh, Myanmar, Laos, Vietnam, Singapore, Cambodia, Philippines, Malaysia and Indochina. The big contributor is Bangladesh, was the biggest contributor. This 37% growth was driven a lot by Bangladesh. It grew from THB 79 million to THB 184 million, very strong support. And these patients, like the Middle Eastern patients, are really quite sick. They contributed heavily as well to the revenue intensity. Myanmar also was a big supporter coming back now that the country is opening up and you can travel freely now commercially from Myanmar to Thailand, that grew from THB 207 million to THB 256 million. Those were the principal growth drivers from Indochina. And for volume, as I said here, 37%. Intensity was up 4.7%. So it, along with the Middle Eastern business, major contributors in what we did. Next slide. On Thai, it shows a 6.7% reduction for Thai business. This is attributable to a couple of factors. One was that we had a great deal of Thai revenue in Q4, which was a result of a full year of Buy 1 Get 1 free promotions, which expired December 31. And of course, everybody waited until the very end. And in Q4, that Thai revenue popped up very, very high, which wasn't replaced with the same Buy 1 Get 1 free promotion in Q1. So to jump over that revenue number was almost impossible to do because it represented almost a year of promotional vouchers, et cetera. The second aspect to the minus 6.7% was that, as I said earlier, Omicron was -- it did impact January, of course, middle of December in Q4, did impact all of January, but we did recover on Thai business in February, in March of the quarter. And then finally, there were 3 extra days, business days in the quarter 4 versus the quarter 1 because February is short -- is a short month. So when you calculate all of that together, the revenue was flat quarter-over-quarter when I normalize for the Buy 1 Get 1 free. Of course, year-over-year is not meaningful for the reasons I mentioned earlier. Next slide. The expat business was flat, mostly driven by, again, expats being in Thailand being affected by the Omicron scare in all of January. Half of December and all of January, it started picking back up where people were willing to come to the campus and it wasn't so fearful as it was mid-December and throughout January. Nothing remarkable beyond that, that kept the revenue where it was essentially flat when you consider less business days in the quarter versus Q4. Next slide. So when you roll it all up for the fourth quarter against Q1, our EBITDA growth was 5%. Against Q3, it was up almost 80% Q3 -- meaning 2021, it was up almost 80%. And that trend line that I showed you, the wavy lines that I showed you at the beginning of the presentation, tell you what you need to know about how we're positively trending forward quarter-by-quarter on all the earnings indicators. Next slide. Here's the margin trend. And as Daniel had mentioned in his presentation where he did some equations relative to 2019, which we consider pre-COVID numbers, that's when Middle Eastern revenue and international revenue represented 66% of our total revenue. We are getting ever and ever closer to our EBITDA margin and our NOPAT margin as we were pre-COVID. This number, 28.2%, if you go back to 2019, this number was about 30%. So we're not that far off from the 2019 number. So if you go to the next slide, you will see the NOPAT number -- next slide, please. You'll see the NOPAT number for the quarter against quarter, was up 18.5% performance. Very strong performance. It certainly beat our internal expectations as did EBITDA. Now I will remind you on these 2 financial performance numbers, because we had the cash, we paid down fully our long-term debt of THB 2.5 billion in December, which allowed us to pick up, on an annualized basis for 2022, about THB 120 million in interest expense savings. So that uplift, that THB 120 million is going to drop right to the bottom in 2022, and we benefited in part in the quarter, call it THB 30 million, if you want to divide by 4 into THB 120 million. So there is some of that in here admittedly so. But even if I take the THB 30 million out, the 18.5% net profit growth was substantially stronger than we had done in -- of our own internal projections. Next slide. So this is the other one I want to point out to you. If you look at 17.5% NOPAT margin for the quarter and you go back to 2019 pre-COVID, that number was about 20%. So for me, when we come -- where we're coming from 3.4% in Q1 2021, for me to get to 17.5% Q1 2022, 2.5% from our high pre-COVID in Q1 2019, for me, that's a very, very satisfying indicator especially where, as Daniel pointed out in his presentation, we're down to 13% discount. If I go back to 2019, we were running 9.5%, 9.8% discount against revenue. I intend for us to get down to that number. We are intentionally moving away from vast amount of promotions because we had to do it because we wanted to create traffic and gain the confidence of people coming on the campus. And we've cut the discount rate from 17% to 13%. That's 4 points, that's substantial. Even though you might add back in rate increases, that's still substantial. I intend on getting it down below double digits before the end of the year, which just adds to the bottom line performance of the company. Next slide. Take me back to takeaways. So what haven't we covered here on my takeaway slide. I've discussed with the international and Middle Eastern business drivers, the principal impetus of the quarter, the corresponding revenue intensity increases associated with that, that impacting the international revenue percentage contribution of the total, good cost control. I've talked to you about the heart transplantation program and the corneal transplantation program. I've talked to you about the long-term debt free, which we will be in 2022 with the lift of THB 120 million. I believe we mentioned to you in Q4 about the Newsweek magazine. But I don't quite recall -- I put this up here because I don't quite recall if it had been public information at the time. For the second year in a row, we were honored by Newsweek as being the best hospital in Thailand. We were also honored to be the best smart hospital in Thailand, and we were honored by Newsweek to be amongst the top 150 hospitals in the world. In the U.S., there's about 5,600 hospitals, that's just the U.S. So if you think about that and then think about Europe, where the other high concentration of hospitals are in the EU, you can see that to be among that high atmospheric company of the top 150 hospitals in the world, it's something we're extremely, extremely proud of. This past Wednesday, our shareholders met at our Annual General Meeting, and our board had recommended to them a final dividend for the year 2021 of a payout of 209% of 2021 EPS, which is THB 1.53. The shareholders approved that recommendation by the Board. And this will be paid out -- payment record date will be May 10. Why 209%? As has been the trend and consistency of our Board, they believe that sharing profits with their shareholders is part of -- 50% historically has been part of what they have done. But because of COVID, they've jumped that percentage up substantially because they want to maintain -- especially given our good cash position, they want to maintain that same level of absolute-type payout of dividends. Finally, guidance for Q2 and for the year 2022. I mentioned earlier in this presentation that I expect continued growth in the Middle Eastern business after Ramadan and after Songkran, which has now passed. I expect that to continue. I'm hopeful we'll have other virginal markets that will be open in 2022. They may not be producing like Saudi Arabia, they may not be producing in 2022. But these are markets that we will nurture and develop further because the Middle Eastern business is a big part of our business. I don't have a percentage for you what top line revenue growth will be. Look at trends. We've grown them single and double digits. What will happen in Q2? I'm not certain, but I do expect positive growth, and we are very optimistic about fiscal year 2022. That represents the essence of my presentation. On May 6, I believe, we'll be hosting a live stream for Q&A. We invite you to submit questions in advance or during the live stream. We're happy to answer those questions. Until next time, [Foreign Language] thank you for joining us.

[Foreign Language] Good morning, everyone. I'm Oraphan Buamuang, Chief Financial Officer. I'm pleased to report you on the financial highlights and financial performance of first quarter 2022. For financial highlight, as the result of Thailand reopening since first November of 2021, both Thai and non-Thai revenue grew substantially year-over-year. The higher contribution of international medical tourism, particularly from Indochina region and Middle East has a significant positive impact to revenue intensity. In first quarter this year, financial performance will improve when compared to both our first quarter 2021 and fourth quarter last year. Comparing to first quarter 2021, total revenue increased by 55%. EBITDA and net profit improved by 185.1% and 695.6%, respectively, with EBITDA margin and net profit margin 28.2%, 17.5%, respectively. I will go into more detail in the next slide. So move on to the financial performance. In first quarter 2022, total revenue was THB 4,152 million, increased by 55% when compared to first quarter 2021. The increase mainly came from non-Thai patient and Thai patient revenue increase by 86.8% and 28.2%, respectively. For revenue contribution by nationality. Due to 86.8% increase in revenue from non-Thai patient reached higher than Thai patient revenue increase at 28.2% in first quarter 2022, as the result, the revenue contribution from non-Thai patient was improved to 55%, increase from 46% in first quarter last year. For revenue contribution by service. In first quarter 2022, revenue contribution from outpatients have increased to 51% from 48% in the first quarter last year due to OPD revenue increase by 58.7% while IPD revenue increased by 43.7%. In terms of revenue by payor type, self-pay contribution increased from 64% to 68% in first quarter 2022, mostly due to revenue from self-pay patient increase 66.6%. The increase came from international, Thai, expat segment. Insurance contribution in first quarter this year declined to 19% from 23% in first quarter last year due to revenue from insurance in first quarter this year increased year-over-year by 23.8%, which is lower than self-pay revenue increase at 66.6%. The government third-party contribution in first quarter 2022 increased to 12% from 10% in first quarter 2021 due to a delayed restriction on traveling policies in November 2021. Middle East patient can come back for treatment at Bumrungrad Hospital. For EBITDA in first quarter 2022, as our result of revenue increase and the continued cost containment program, which we could actually cost saving THB 58 million in first quarter this year. EBITDA in first quarter 2022 was THB 1,170 million, improved from same period last year by 185.1%. EBITDA margin in first quarter this year was improved to 28.2% compared to 15.3% in first quarter last year. For net profit, our first quarter 2022 was increased to THB 725 million or improved by 695.6% from first quarter last year. And net profit margin of first quarter this year improved to 17.5% from 3.4% in first quarter last year. In terms of leverage ratio, net debt-to-EBITDA in first quarter 2022 was negative 0.4x due to less net debt after repayment of long-term debenture THB 2.5 billion in December 2021. And net debt-to-equity in first quarter this year was negative 0.1x due to [ land ] net debt as well. This is our financial highlights and financial performance of first quarter 2022. Thank you for your attention.

[Foreign Language] Good morning, everyone. So it's my great pleasure to meet you all again today. Start from the beginning of this year, we have received a core recognition from Newsweek. You can see in the middle, Newsweek ranked us at the World's Best Hospitals in 2022. And this is the second year, and we are the only hospital in Thailand in the rank of top 250. We list in the top 150 because in this time, we got the rank #146. And we have voted by worldwide specialists, experts and management in health care industry. On the left-hand side, you can see that we have been recognized for fourth consecutive years as a finalist of Best Brand Performance on Social Media in the category of the hospitals and medical center at the Thailand Zocial Awards 2022. Last but not least, on the right-hand side, we received the award of Most Trusted Hospital Brand that reflects the quality and popularity voted by the readers of The Bangkok Post. Bumrungrad has announced our vision and future direction in the recent press conference under the name, Shifting the Future of Healthcare. With our medical advancement and innovative technology, we commit to improve quaternary care and expand our centers of excellence to develop expertise in the treatment of every complex medical conditions. And we used and focusing on the 4C1W model to serve the future direction and all of these are our key strengths, which are the first one, cutting-edge technology. You can see from the news and you know that right now, we expand a lot of cutting-edge technologies such as water vapor therapy to treat prostate enlarged and also [ high skill ], although both procedures take only 15 to 0.5 hours and then do -- the patients don't need to admit in the hospital. The second one is the collaboration of expertise. We have more than 30% international board-certified physicians and 4 of subspecialty doctors working in Bumrungrad that can treat complicated care, the 3 -- C #3. And also critical care, we also have nearly 10 intensivists and also a special nursing critical care team to serve the critical care patients 24/7. And last but not least, it's very updated health care term is the wellness and prevention. This slide, I would like to show the outcome of the cutting-edge technology. From the graph, you can see that the first quarter, we achieved 28 cases robotic surgery. With only March, 1 month, we've got 17 cases. And this is the best record since we opened the robotic surgery until now. So we believe that the trend of the robotic surgery will be significantly increased. Mainly, the robotic surgery right now, we do it in the urology center for the prostate cancer case, and we are on process of developing and expanding to other specialties like gynecology and also general surgery as well. And the second one that I would like to present is the AI for radiology. This one is a good decision support tool for our radiologists to help them reading the film chest X-ray and also mammogram. With this AI, it can help to increase accuracy, precision and can shorten lead time into only 5 minutes. So now we can read the film chest X-ray very quick. And this is another example to show the case that represent our collaboration of expertise and complicated care, which is organ transplant. In the first quarter, we achieved another case, and this is the third case of heart transplant and 9 cases of kidney transplant and 3 cases of the corneal transplant. For kidney and corneal transplant, we have quite a good growth, more than 50% compared to the first quarter last year. And this one, moving into the new trend of the health care, which is everyone knows about the term wellness and prevention now since COVID's coming. Right now, wellness and prevention have been provided by our VitalLife Scientific Wellness Center and RAKXa at Bangkrajao. You can see the 42% growth in terms of volume, especially the international segment, mainly from the UAE, Bangladesh and Kuwait. And I would like to point out that COVID support VitalLife business as proven by a big demand of immune booster-related package. As shown in the table, you can see that we provide a variety of the immune booster, which have the IV Myer cocktail; also on therapy, antioxidant boost-up; and also, customized supplement. Right now, I think healthy customer and patients -- now they're very aware of how to boost their immune, and the customized supplement has very good revenue growth and volume as well. In this quarter, the number of the membership at RAKXa increased 18%. We can recruit more 18 members. And right now, the value of the membership is THB 98.5 million. And in the below package and the pictures, this is the one of the programs that I used to mention that we plan to expand RAKXa by penetrating into the more integrative medicine business. And this is the cancer survivorship program. And coming soon, we also have cancer wellness programs, which can support cancer patients both during and post treatment. And moving to Bumrungrad Health Network. We have just opened Horizon Cancer Center at Pitsanuvej Hospital, which aim to provide specialized cancer treatment with multidisciplinary care team. And we would like to cover the area of Phitsanulok and lower northern of Thailand. And in this quarter, we have signed MOU with 3 hospitals, which are Navavej Hospital in Bangkok, Chewamitra Cancer Hospital in Ubon Ratchathani and Kalasin-Thonburi Hospital. So now in total, we have the hospital network, 73 hospitals, which can facilitate of our referrals cases and also knowledge sharing, and we have the medical conference every month. And on the graph and in total, referral revenue increased in this quarter 10%. And I know that you're going to ask about COE in network hospital. And in this quarter, it's increased 36%. But this quarter, we include the Horizon Cancer Center in Pitsanuvej Hospital. And this one, I would like to show about our positioning to becoming the academic hospital. We are very proud to present that we have partnered with St. Anna Hospital, hosted the 52nd International Full-Endoscopic Surgery training course by Dr. Verapan Kuansongtham. He is the Head of our Spine Center. And this can be arranged in both physical and virtual session. More than 230 Thai and foreign surgeons participated to share their knowledge and techniques in spine surgery, which represents a long-standing recognition worldwide. That's all for me here. Thank you.

Thank you, Khun Ling. And this concludes the first quarter 2022 analyst presentation. Stay tuned for the live Q&A session on the 6th of May, and see you next quarter. [Foreign Language]