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

[Foreign Language]. Welcome to the analyst presentations for the third quarter and 9 months of 2023, Bumrungrad Hospital Public Company Limited. Thank you very much for listening in. I am Achariya Sanrattana, investor relations and sustainability. Today, the format of the presentations will be as usual: a prerecording of the analyst presentations which will be posted on Our website, www.bumrungrad.com, under Investor Relations sections. And then we will follow by an analyst meeting, the live sessions, which will be hold on Wednesday, 15 November, at 10 a.m., where our management will be happy to answer to -- your questions. [Operator Instructions] The management presenting today are Khun Neil Sorrentino, Corporate Chief Strategy Officer. He will talk about the key takes away in the third quarter and giving the guidance into the fourth quarter. Also -- he will also update the campus master plan, as usual, that we usually update at every third quarter of the year. And today, we have Khun David Boucher, Chief Executive Officer at the Bumrungrad International Hospital Phuket. He will present us an update on the progress of the Phuket campus. And later, we have Khun Oraphan Buamuang, Chief Financial Officer, talk about the financial highlight and the financial performance in the third quarter. And lastly, we have Dr. Nipat Kulabkaw, Chief Operating Officer. He will give us an update on the business update that happened during the third quarter of this year. So in this quarter, we have another excellent quarter for the year 2023, continued from the first half of the year. In terms of the profitability, we achieved a new record high of the net profit margin at 28.8% in the third quarter. And we were able to maintain a record high of the EBITDA margin at 38.9% for 2 consecutive quarter, where Khun Neil will talk about this, talk about the margin in details later on into the presentations. I would like to highlight a couple of things for the presentations in this quarter, is that we continue to have an excellent cost control in the third quarter. If you look in terms of the costs of the hospital operations, it increased by 15.1% year-over-year. This is actually favorable when you -- favorable change when you compare to the increase of the revenue of the hospital operations that increased by 18.5% year-over-year. The percentage costs of the hospital operations to the operating revenue continued to decrease from the previous quarter, which helped contribute to the higher margin gained in this quarter. We continue many cost management programs such as purchasing management and inventory management, for example. This helped contribute to the -- a decrease in the percentage of the supply cost to the operating revenue despite the fact that there is inflationary situations around the world, including Thailand. And if we look in terms of the SWB cost, the percentage of the SWB costs to the operating revenue continues at the low percentage as we continue our excellence -- operational excellence by a -- with a prudent use of the head counts and also the [ OT ]. So this has been -- contribute to the continuously low percentage of the SWB costs to the operating revenue. In terms of the discount rate. The discount rate in the third quarter is at 11.2%, [ fell ] from 11.4% in the second quarter. Please note that the discounts that -- on the service that we provide also include packages that we're selling both through the online and the off-line channel. So the packages attract patients coming to the hospital, help ramping up volume at the hospital. In additions, we bundle up the service item into our packages to become more personalized packages to -- in order to serve each individual needs and demands. Lastly, I would like to remind you about our capacity plans that we mentioned in the last quarter. The annex building which we will be the -- building, the building B, we will move-in outpatients, women and children, center into the annex building in order to decompress the building B and serve more demand in the future. And in terms of the ICU beds, we are planning to add the [ ICU 5 of 12 ] beds, which is expected to finish in the next year. And lastly, the ongoing soi 1 project: We already finished the car park in the beginning of this year. And for an additional 59 licensed beds, we expect it to finish within 18 months; however, upon the -- depending upon the approval of external party. Now that's it for my part of the presentations. Now I would like to hand over the presentations to Khun Neil Sorrentino to talk about the key takes away in the third quarter.

[Foreign Language]. And thank you for joining us for the Q3 Bumrungrad Hospital Public Company Limited presentation for all of our investor community. For Q3, I've put up for you a number of key takeaways for the quarter. I'm going to go through some of them now. Then I'll swing back and cover some of the other items later, including the Q4 guidance, but for the quarter, we had very, very solid and very, very purified revenue growth of 18.5%. We had very, very strong Middle East and international growth led by Qatar, UAE, Oman. And China in particular was very strong for the quarter. Year-to-date China revenue has exceeded any prior period year-to-date through 3 quarters, up to THB 461 million. We've recorded our highest EBITDA, NOPAT and respective margins for any quarter since we've been keeping the numbers. And this time for Q3, I'm going to share with you actual numbers for our VitalLife Scientific Wellness Center for Q3 because they're very, very, very useful to see and very important to know that VitalLife now is contributing almost 5% of our total performance. In the quarter, we did see -- and this is a seasonal thing usually in Q3. We did see RSV, which is respiratory virus, and seasonal flu cases. There was a significant number of Thai patients who came with RSV and seasonal flu. There was very high expat revenue growth in the quarter, in particular from the United States, both U.S. nationals living in Thailand as well as those here as tourists. It represented the highest contribution of the expat and international revenue by nationality. In the quarter, the Middle East revenue grew by 31%. And for 3 quarters, the Middle East revenue grew by [ almost ] 70%. It was the strongest 9-month Middle Eastern performance we've had in the history of the company. I'll come back to Q4 in just a moment. Now let's get into the detail. I put these numbers together for you so you can see what the net revenue trending has been. And there's 2 points I want to make about this slide. The first is that it's ascending growth. And you all know that the net revenue has been growing from 2021 through 2023, but what's also important about this slide and the way the numbers played is the variation or the difference between the revenue from period to period. If you see the net revenue in 2021, as an example. It was THB 2.6 billion, but after we came out of the pandemic in 2022, it rose to THB 4.1 billion. So when you calculate revenue growth off of a lower base, that's how you wind up with 55.2%, but as we move away from that pandemic period, you will see that the higher base of net revenue is going to show a lower quarter-over-quarter increase. And Q2 -- Y 2022 is a good example of that. If you were to take the third quarter of 2022, it showed THB 5,600 million. The growth between THB 5,600 million -- and 2023 Q3 was THB 6,700 million, and that's the quarter that we're in. We're showing 18.5% growth. If we were to take that number, the THB 6.7 billion, and match it up against the 2021 Q3 number, you'd see that the percentage growth would be huge. So these are the 2 points I want to make about that. And in summary, as we move farther away from the pandemic, you're going to see percentage growth more reverting back to the mean in terms of our overall performance. Although, when you look at all of our verticals, international, expat and Thai; and inside international, many different countries that we're in -- as an example, Saudi Arabia. It's a new country. We generated 46 million in revenue for the quarter. As we move out farther, you're going to see less of a variation in the percentage growth because the base is higher. Next slide but not to confuse the changes in the base with the purity and the high revenue intensity of the numbers: when you look at 2023 for Middle Eastern, 70% growth. When you look at that number, you have to look at the revenue intensity and the resource consumption inside of it. That is what is driving in large measure our earnings in 2023. Price is a piece, but it's a very small piece. We've only raised prices in 2023 6.6%. And I'll talk a little bit about 2024 in just a moment because we finished our budget for 2024. We presented it to our Board last Wednesday, and I'll go over some numbers for you then. This is a series of numbers that I presented to you. It's showing the EBITDA and the NOPAT for the 3 quarters. And what's interesting about this is not only the growth but the variation in the percentage of that growth both for EBITDA, NOPAT and then the margins. So you can see our margins are a -- record-number margins. And again this is coming from high revenue intensity, not solely price, but 2 things are driving this, volume and high revenue intensity, which I translate to mean purity of the revenue. And we may have even had a bit of a dilution to it even though Q3 was our strongest quarter of the year on earnings. And the dilution was as a result of what I mentioned earlier, flu and respiratory virus. Next slide, different presentation of some of the same data, except it shows year-to-date numbers for -- and take the far right side of this slide. The year-to-date numbers are also very informative for the investor community. When you look at the growth for margin on EBITDA and when you look at the EBITDA and NOPAT performance for 3 quarters, it's rather stunning. From 9M 2022, 9 months of 2022, through 3 quarters of 2023, the variation is THB 5 billion, up to THB 7.2 billion on EBITDA. Very, very strong performance. Next slide, and this shows the same information but for net profit. Again the comparatives are dramatic from period to period, positively dramatic. Next slide. Now let me move away from the performance for the quarter, as sterling as it was and we're very pleased with the performance. I mentioned earlier that we completed our FY 2024 budget, for next year, and presented it to our Board, which was approved by our Board. Out of that budget effort by everyone here concern came a 5-year revised campus master plan. And in summary, what are we going to be doing next year? And what are we going to be doing over the next 5 years? Well, at the top of this, you'll see we're talking about new construction. The soi 1 project I've mentioned earlier was in 3 phases. We've accelerated [ Phase 3 into Phase 2 ]. Phase 1 has been completed; and that's the car park, 200-car car park. Phase 2 is budgeted to begin in 2024. We will have a new hospital, a new 59-bed hospital, as the part A of Phase 2. And the part B of Phase 2 will be the third building of the group. That will include a Bumrungrad oncology institute inside of it as well as some other advanced technologies that we're going to put in that building, but we're going to finish the next 2 buildings of the 3, starting in 2024. We have announced -- and David Boucher, our CEO of the campus in Phuket, is going to talk a little bit about the Phuket hospital project and its status, but that is inside new construction in our budget for 2024 going forward. But we've already spent money on buying the land in 2023. For the existing campus, this is the listing of the key things we're going to be doing inside of the building which is the hospital. Moving to the 5-year plan, for those of you that follow this closely. This total number at the end of 5 years has been about THB 13 billion-plus for the 5-year period. It has moved to THB 17.8 billion, and the biggest part of that are 2 pieces: one, the Phuket expansion, a new project there. And we have included, beginning in 2028, the Phuket -- sorry, the Phetchaburi hospital that we've been moving out because we haven't needed the beds. But I've left it on the road map nonetheless. And that originally was THB 8.8 billion, but given inflation and cost of living, that number now has ballooned to THB 9.3 billion. But that's in the road map, in the budget. We're not sure if it's going to start in 2028. We'll build it when we need it, but at least it's in the budget so we can calculate CapEx needs for the next 5 years. That's our latest campus master plan and hospital construction update. One other thing about our CapEx budget for next year. Our hospital routine CapEx, including IT, will be about 931 million. That's about 250 million more than what it has been historically. We delayed -- during COVID, we delayed some reconformance. We delayed some replacement, especially in IT. And there's that difference in monies specifically being spent for IT renovation and IT additions and replacements. Next slide. So now we go back to some of the detail for the quarter. What's interesting about this slide is that, for expat and international, it was 67% of our total revenue. That was the highest percentage all year long. We touched 67% but not quite, 66% and change. This quarter, it was 67%. And if you look at the year-to-date 9 months, it's 66%, so it was a bit higher in Q3 than the average for the 9 months. Next slide. So the net patient revenue overall, as I said earlier when we first opened up here, was 18.5%. Through 9 months, it's 28.1%. International was 15%, but more interestingly, through 9 months -- and this goes to the question about revenue intensity of very sick international patients. It was up, through 9 months, 41%. Thai was up 20% for the quarter, and I referenced what that was really about. For the year, through 9 months, it's 14.5%. And expat, 27%. I talked about that earlier, what that was being driven by. And 17% overall. Next slide. Now the Middle East. Of that number where I talk about international total, the Middle East, as I had said earlier, was 70.8% for the year, and for the quarter was 31%; very high utilization of our Middle Eastern sponsors coming to Bumrungrad, led by the -- led by several countries. And I'll talk what they are in a bit. Indochina was down 4.4% for the quarter-over-quarter. That's principally driven by Myanmar. Myanmar is having very significant difficulties with ForEx depreciation, military intervention. The political unrest there is -- continues, not approving approved passports, not issuing visas, difficult for patients to come to Thailand, difficult for patients to come to Bumrungrad, but nonetheless, we're seeing about 75% to 80% of the patients we were seeing a year ago. That 20% decline is what's driving that minus 4.4% overall for the Indochina sleeve. And all others were 17% and 43%. Next slide. So this is the top 10. And China has made it to #10 because -- we were very pleased with the performance of China business. That's 2 pieces. So that's international patients coming from China. And that's expats, Chinese nationals living in Thailand. And the 2 combined for the year-to-date through 9 months is 461 million, far exceeding what we've done through 9 months of prior years. Qatar leads the way. The growth there is astounding 85.4% for the quarter. And so forth on down, you can see Myanmar is down 9.4%; from a year ago, up 5.5%, but that's you have to take into account that you're looking at the sort of the beginnings -- or the endings of the pandemic there. That's why it's up 5.5%, but the number for Q3 should be higher. But because of the unrest, it's down 9.4%. United Arab Emirates was also a big contributor in the quarter, so as the United States. I mentioned that earlier. Oman was up a significant amount. These are not revenues. These are percentages, but the totals are significant. I'll go through what those numbers are, if you're -- for those of you that are interested. Next slide. And for the first time, I'm going to cover not only the VitalLife margins, NOPAT and EBITDA, but I'm going to cover for you the actual revenue and EBITDA performance and the NOPAT performance, which I've not covered before, because it's now becoming a very significant piece of our business. And this whole idea of scientific wellness longevity lifestyle is becoming a bigger and bigger and bigger piece of the business all over the world, and we're sharing in that. And we expect this business to grow. To inform you. We are going to open a VitalLife Phuket, which a number of the staff are going to oversee, including David Boucher since this is his market. We will be opening that in 1H 2024, but looking at the performance for the quarter: This piece of business generated THB 138 million, up 41%; and up almost 50% through 9 months from the prior year, for this 9-month period 2023, generated THB 348 million, but more pleasantly than that is the margins of this business, 44%, and year-to-date 52%. And you can see the margin changes here at the EBITDA and NOPAT numbers. And you can review this when you take a more -- closer look at it, but it's a very important piece of business for future growth and we intend on expanding this business beyond even Phuket. Next slide. Please go back to the takeaways. I did not mention Oman, but that too was a major contributor in Q3 2023. Going to finally the Q4 guidance. It's a seasonal issue with Q4 holidays, Christmas, new year, Thanksgiving, et cetera. International tourists slow down in the last 2 to 3 weeks of every year-end of our business. I'm guiding low double-digit growth, might be high single digits, but I'm going to guide very low double-digit growth for Q4. And we'll see where that turns out. We'll look forward to answering all your questions next week, in the live stream Q&A. Please join us if you can. Thank you very much. [Foreign Language].

[Foreign Language]. And good morning, everybody. Thank you for your valuable time today. Again my name is David Boucher. And I serve as the CEO of Bumrungrad International Hospital Phuket and the Phuket market. Today, I will share with you some updated information about our first-ever greenfield project. As noted last quarter, we've acquired over 16 rai of land near the Phuket International Airport in the North of the island. We are designing a 150- to 250-bed boutique hospital, an advanced diagnostic center and a car park of sufficient size to comfortably accommodate our patients, their visitors, our physicians, and, of course, our dedicated employees. We have engaged [ dwp ] architects and are working 7 days a week with them to design this new 6-star facility. We've also engaged with [ Menyhart ] for mechanical, electrical, plumbing and traffic; along with several other contractors such as laundry, linen and food services. We are working in a focused, measured manner; and have many aspects of this major project on parallel tracks. We continue to expect to open the new facility in late 2025 or early 2026. The new campus will consume between 47,000 and 50,000 square meters. As Neil mentioned earlier, we intend to open a VitalLife center totally separate from this in Phuket in Q1 of 2024. We also have made the decision to purchase additional property and to build a staff accommodations. We increasingly find that the Phuket market is a compelling one for a number of reasons. Today, I will not list out all of the many encouraging reasons that I did back in the Q1 update. However, I will share that, since my family and I relocated to Phuket and are now living here full time, we find that the reception to Bumrungrad is substantially gracious and undeniably positive. In fact, the Phuket referral office that we opened back in mid-2022 continues to increase the number of patients that we facilitate to Bumrungrad and Bangkok almost every single month. As I shared with you back in May, we fully intend to leverage existing referral relationships from many parts of the world as we expand our clinical capacity and footprint in Phuket. In addition, we are 100% confident that the 40 airlines which now service Phuket will facilitate our international medical tourist growth at our new boutique hospital. Let me close today by sharing that we are both excited and confident that this THB 4 billion project in Phuket -- we are excited to begin construction just as soon as we have all the necessary permits in hand. Thank you again very much for your time and attention. [Foreign Language].

[Foreign Language]. Good morning, everyone. I'm Oraphan Buamuang, Chief Financial Officer. I would like to present financial highlight and financial performance for third quarter 2023 and 9 month 2023 ka. In third quarter and 9 month this year, total revenue, EBITDA and net profit amount were improved when compared to same period last year and also above year 2019 pre-COVID situation, as shown in the first table. The improvement mainly came from the higher contribution of international segment and a positive impact to patient volume and revenue intensity continuously in this year. In term of profit margin, in third quarter this year, EBITDA margin, net profit margin were 38.9% and 28.8%, respectively. Net profit margin is the new high record ka. I'll move on to the financial performance. The consolidated revenue in third quarter this year was THB 6,775 million, increased from third quarter last year by 18% and also above then third quarter '19 by 42.4%. The total revenue improved mainly came from the increase in revenue from hospital operation. When compared to third quarter last year, revenue from Thai patient and non-Thai patient increased by 20.2% and 17.6%, respectively. And when compared to third quarter 2019, revenue from Thai patient and non-Thai patient increased by 42% and 42.3%, respectively. For 9 month this year, the consolidated revenue was THB 19 billion, increased from 9 month 2022 by 28% and also above the 9 month 2019 by 38.1%. The increase in revenue mostly came from volume and revenue intensity. In term of revenue contribution by nationality, the contribution of international in third quarter this year was 67%, with the same proportion in third quarter 2022 and third quarter 2019. For 9 month 2023, revenue contribution from international patient raised to 66%, which -- pretty close to 67% in 9 month 2019. In the overall, the percent contribution was coming back to year 2019 pre-COVID situation ka. In term of revenue contribution by service. In third quarter this year, revenue contribution from inpatient service increased to 51% from 48% in the same period last year due to IPD revenue increase by 25%, which -- more than OPD revenue increase at 10%, the higher increase in IPD revenue mostly due to higher volume and intensity of IPD case. In 9 month 2023, revenue contribution from inpatient also increased to 51% from 48% in same period last year with the same reason as already mentioned ka. In term of revenue contribution by payer type. The government third-party contribution in 9 month this year increased to 18% from 13% in 9 month last year mostly due to revenue from government sponsor increase by 77%, [ which associate with ] Middle East patient revenue increase. In term of insurance, contribution in 9 month this year increased to 18% from 16% in the same period last year due to insurance revenue for 9 month this year increased year-over-year by 43%. Self-pay contribution in this year declined to 63% from 70% in the previous year ka mostly due to the revenue from self-pay patient increased by 16%, which is lower than revenue [indiscernible] of government third-party payer and insurance payer. In term of EBITDA and EBITDA margin. As a result of increase in revenue and cost containment program, EBITDA in third quarter this year was THB 2,636 million, improved from same period last year by 26.2% and improved from third quarter 2019 by 67.5%, with EBITDA margin 38.9% ka. EBITDA in 9 month this year was THB 7,230 million, improved from same period last year by 45.6%; and improved from 9 month 2019 by 65.8%, with EBITDA margin 38% ka. In term of net profit and net profit margin. Net profit of third quarter this year was THB 1,954 million, which improved by 30.2% and 85.2% from third quarter last year and third quarter 2019, respectively. Net profit margin of this quarter improved to 28.8% from 26.2% and 22.2% in third quarter last year and third quarter 2019, respectively. For 9 month this year, net profit was THB 5,286 million, which improved by 56% and 85% from 9 month 2022 and 9 month 2019, respectively. Net profit margin for 9 month this year improved to 27.8% from 22.8% and 20.8% in 9 month 2022 and 9 month 2019, respectively. In term of leverage ratio. Net debt-to-EBITDA of 9 month 2023 was negative 0.2x due to less net debt. And net debt-to-equity in 9 month this year was also negative at 0.1x due to less net debt as well. This is our financial highlight and financial performance for third quarter 2023 and 9 month 2023. Thank you for your attention ka.

[Foreign Language]. My name is Dr. Nipat. I'm Chief Operating Officer. So today, I'd like to share you about the business and operation updates. For the 9 month of 2023, the performance of the center of excellence -- which is including all of the cardiologies, oncologies, neurologies, gastro and colorectals and ophthalmology. For cardiologies, we focus heavily on cardiac catheterizations, which is treatment for the heart attack; and EP, electrophysiologies, treatment for abnormal heart rhythm. This performance shows very good increase from 9 month last year, 29%. For oncology, which is the top revenue generation for Bumrungrad, increased 19%. For oncologies, the majority is focused on the precision medicines, personalized and multidisciplinary. Neurologies increased 31% compared to last year. Neurologies for Bumrungrad, we combine all the neurosurgery; [ neurosis ]; and neuro interventions, which is [ of clot stop, for ] neuro intervention, to remove the blood clot. And we have many, many patients. Also in the last quarter, we promoted neuro ICU, which is for the advance and the high technologies for neuro treatment. Gastro and colorectal. For gastroenterologies, increased 26%. And colorectal surgeries increased 23%. For the ophthalmologies or on eye: Last quarter, we promote heavily on the corneal transplant, which is the high technology, to enhance our brand positioning of ophthalmology department. And of course, we are bringing the artificial intelligence to help our physicians for the better treatment precise for the diagnostic, [ for the best of sake of our ] patient as well. And for the others. Revenue contribution from [ non-COE ], like children's centers, OB and gyne, is increased 24% from last year. Next one. For the digestive disease excellence center, we had a press conference on 4th October. For the GI, we show the advance of the whole problems of the digestive system, starting from the general GI clinic; motility clinic, which is treatment for the [ GERD ] disease; the endoscopy centers with advanced technology, advanced techniques. TIF, T-I-F, are pancreatic care disease. This is very rare of the patients. Of course, it's genetic clinic for GI. For the prescreening for the disease are the gastro clinic. IBD and microbiome. These 2 disease and clinics, it's -- can treat very rare disease for the gastro problem of the patients, which is required collaboration heavily from specialists not only from the GI doctors but including for the genetic specialists. And the wellness, of course, we integrate with VitalLife for this type of service. Orthopedic centers. I'm glad to share you that we just got the, full time, very good doctor for foot and ankle. Dr. Pongpol just joined us. Because foot and ankle, there's -- problems occur a lot in children who have deformity. And of course, our big target is Middle East, which is in the past we had a lot of the questions. [ And the kids are coming in for ] treatment of this kind of disease. For orthopedics, as Bumrungrad, we focus -- are the comprehensive, all of the body part function of the bone and movement, not only for foot and ankle. We have spine, which is mostly [ first caused ] from the degenerative diseases. We have the [ endo spine ] surgery, which is very small. The [ keyhole of the wound at the spine is ] about 6 millimeters; fast recover, less pain and very good outcome. Sports science and medicines, that we have a very good doctor who is the head of this department; mostly patients' injury from the sport, from playing tennis, golf, and degenerative functions. We have this type of excellent service of the sport medicines. Okay, next is FastTrack Pay for Bumrungrad. For those who have experienced coming through to Bumrungrad: One thing that can enhance your digital patient experience is you just download our applications. And if you want to leave earlier or want to shortcut the payment, just lock your credit card; and then you can leave the hospital without waiting for a queue. That's going to be very good for a patient who has very -- time efficience. Try this. It will make your life easier. Next one is for Bumrungrad Health Villa retreat. This is a luxurious villa for patients who -- boring of the hospital environment. It's located next to the Chao Phraya River in Bang Krachao. We collaborate with [indiscernible]. You will get 6-star service and including medical attention. We have physiotherapy rehabilitation, as well as you can -- still under care of physicians. So we opened it last quarter and we got very good feedback from patients who doesn't want to stay in the hospital. As you know, in the hospital, there's a lot of limitations. You cannot do things, but here you enjoy the luxury villa, stay in the riverside yet get medical care according to your conditions. And I think that's all for the business operational update from me. Thank you. [Foreign Language].

Now we come to the end of the presentations. Thank you very much again for your time listening to our webcast. As mentioned before, we will have the live Q&A sessions on Wednesday, 15 November, at 10 a.m., where our management will be happy to answer to -- any of your questions. For today, I would like to end the presentations here. And see you again in the next presentations in February ka. [Foreign Language].