MLP Saglik Hizmetleri A.S. (MPARK) Earnings Call Transcript & Summary

[Operator Instructions] Today, our CEO, Dr. Muharrem Usta; and CFO, Burcu Ozturk, are with us. Thank you for your attendance. I would like to kindly remind our disclaimers about forward-looking statements. The disclaimer is available, as you see. Financials with footnotes are also available on our website. Now I'm leaving the floor to our CEO, Mr. Muharrem Usta, for his comments. Muharrem bey?

Yes. Hello, everyone. And welcome to our webcast presentation where we will discuss MLP Care's financial results for 2024. 2024 has been a year in which we achieved strong real growth and saw the results of our strategic investments. Over the year, total revenue grew by 22%. And our EBITDA growth was also 22%. And excluding monetary gains and losses, our net profit rose by 155% to TRY 4.2 billion. Operational cash flow increased by 16% to TRY 9.5 billion, thanks to strong EBITDA growth. While sustaining our real growth, we achieved significant improvement in our debt ratios. Since the beginning of the year, total debt has decreased by TRY 754 million, and our net debt-to-EBITDA ratio has dropped to 0.5. Low debt levels provide us with flexibility for future growth plans. In 2024, we strengthened our hospital network by adding 6 more hospitals to our portfolio. Domestically, we acquired 4 hospitals in Istanbul, Izmir, Ankara and Kocaeli. And abroad, we added 2 new hospitals to our group, one being the one in Dubai and the other one in Kosovo. And so we have thus added 500 beds domestically and 100 beds internationally, increasing our total bed capacity by 10%. As a result, our total bed capacity has reached 6,300. Now I will hand over to our CFO, Ms. Burcu.

The numbers that we disclose in this presentation are all inflation-adjusted figures. So our revenues grew by 13% in Q4 and 22% for the full year '24. And domestic private medical insurance was the key growth driver in our total revenues. In 2024, we achieved a very strong revenue growth in real terms. This was supported by a variety of different payer channels. If you look at PMI and top-up insurance revenues, we saw a 39% real growth in private insurance channel. This was driven by the expansion of the top-up insurance market in Turkey overall. And if you look at the total growth in this channel, now this channel represents 44% of our total revenues. The Turkish Medical Association price tariff was raised by 41% in January '24 and with an additional 25% increase was realized effective from 1st of July '24. And if you look at '25, subsequently, we received another 20% in January '25. SSI segment has increased by 18% in real terms and now its total revenues represent 14% of our total revenues. And this growth was fueled by a 50% revenue growth in the SSI price tariff, which was effective from May 11, 2024. If you look at the self-pay segment, we experienced a 20% real growth in our self-pay revenues. And medical tourism, revenues from our medical tourism decreased by 10% on an inflation-adjusted basis. This decline was basically due to the relatively stable U.S. dollar versus Turkish lira rates against the unit price increases within the domestic revenues and lower patient traffic this year. And lastly, our other ancillary business. Revenues from our other ancillary business services, particularly which is coming from the management consultancy in our managed university hospitals grew by 15% on a real-term basis. If we analyze the components of our domestic revenues, we see a robust growth in our both outpatient and inpatient revenues. Our outpatient revenues increased by 33% and this was driven by the volume, which is 13%, and the remaining amount was -- which is around 20% was attributed to the price changes. If you look at the inpatient revenues, which grew by 25%, this was a mix of 9% coming from the volume and 17% coming from the price adjustments to our inpatient revenues. In Q4 '24, our EBITDA decreased by 7% to TRY 2.7 billion. This decline was basically related to the high base impact of the previous year of '23. The high base in the prior year was driven by the full impact of SSI price increase, which was realized as of September, which was fully reflected within the last quarter and increase in the number of inpatients specifically in the month of December '23. On the other hand, in '24, there was a slight EBITDA dilution impact coming from the newly acquired hospitals throughout '24, which is in total 4 hospitals in Turkey. And if you look at on an annual basis, our EBITDA grew by 22% to TRY 10.2 billion. The contraction in the EBITDA margin in Q4 was again related to the high base effect of '23. If you look at on an annual basis, our EBITDA margins remained stable. Our EBITDA margin remained flat in '24. And on a component basis, our material consumption as a percentage of total revenue decreased to 12.9%, largely due to the effective inventory management as well as the strong price adjustments that we could get from different payer types. If you look at the doctor costs, doctor costs increased to 25.2% of our total revenues, which was related to the salary adjustments we needed to make in '24 and slightly related to the impact of the newly acquired hospitals to our portfolio. And on the personnel side, our personnel expenses over revenues increased to 20.5% (sic) [ 20.3% ] due to the salary adjustments for the employees during the year in January as well as in July '24. Our outsourced services, which is basically laboratory imaging and cleaning type of services remain constant as a percentage of sales at 6.1%. Our other expenses, which basically includes energy, marketing and other utilities, decreased to 9.8% of our total revenues, primarily due to the relatively lower utility expenses as well as the decline in the medical tourism revenues in total revenue scheme. In '24, our net profit decreased by 16% to TRY 5.8 billion mainly related to the decline in the monetary gain arising from inflation accounting application. Monetary gain is basically calculated as an inflation and indexation of items in balance sheet such as fixed assets, including buildings, IFRS 16, inventory; and on the liability side, equity items. If we exclude the monetary gains from '23 and '24, on a like-for-like basis, our net profit would have increased by 155% to TRY 4.2 billion. On the net debt side, our total gross debt decreased by TRY 754 million, bringing the net debt down to TRY 8 billion at the end of '24. And total net debt, including obligations under IFRS 16 increased by around TRY 600 million to TRY 5.3 billion. Thanks to our strong EBITDA growth, our net debt-to-EBITDA ratio improved to 0.5 in '24. And excluding IFRS 16, our net debt decreased by TRY 700 million. And net debt, excluding IFRS 16, to EBITDA ratio further improved to almost 0, which is 0.1 in '24, down from 0.2 in '23 Additionally, we still remain in a net long position by $26 million on the FX position of balance sheet. The operating cash flow increased by 16% to TRY 9.5 billion in '24, which was basically related to the strong EBITDA growth. And our working capital position improved on the back of lower inventory days as well as improved collection days. And if you look at the corporate tax payments, taxes paid have risen in line with the increase in the corporate tax rate from 20% in '23 to 25% in '24. And CapEx also saw an increase, reflecting our ongoing investments especially in the refurbishment of the newly acquired hospitals as well as the revisions in our existing hospitals. In summary, our free cash flow decreased by 6% to TRY 5.7 billion in '24, largely related to the higher CapEx spending in '24. Now I hand over to Muharrem bey for closing remarks. Muharrem?

Thank you. Can we have the Q&A session?

[Operator Instructions] Now we are ready to take your questions. [indiscernible], please go ahead.

Am I on the Turkish channel now? Am I in the right place? I am not sure. Okay. I have 2 questions. I wanted to ask about the management contracts. Why was there a contraction in the last quarter of '24?

Well, because there are deductions from sales and certain penalties and adjustments were also included in that figure, and that is why it happened because if you look at the university hospitals, there is no change in their EBITDA performances.

Okay. And finally, in 2025, how much [indiscernible] should we increase?

Well, it will be probably in May, in the month of May. Yes. So I don't know what to say about the reimbursement package. I think it will be satisfactory. Well, inflation -- if inflation is going to be around 30%, 40%, yes, I think it will be -- I expect for it to be a little higher than that. Well, I don't know if [indiscernible], of course, thinks otherwise, I don't know. Please go ahead.

My question is the following. First of all, how is Q1 going because there has been an increase in personnel cost and the reimbursement scheme has not been increased, but there was an increase in private insurance. But of course -- and of course, there were no increases in utilities. That was the first question. And then secondly, a more structural question. I think Acibadem is transferring a manager from Memorial. And I think they're going to try and work with top-up insurance because, as you know, top-up insurance was not covered by them and last year they were not very successful. But I'm just wondering about how the competition will change. What are they trying to do differently to succeed because I think that is your big advantage in competition, the top-up insurance. So how do you think that will shape the competition?

Okay. I will start with the first question. How was Q1? Well, there has been no disruption in our rhythm, in our momentum. We are going quite well. And coming to Acibadem, the question about Acibadem, I frankly do not know because the situation is quite complicated. As you know, most of the patients, their patients are patients who are covered by private schemes. So I don't know how another -- whether another patient group will go into that hospital and what the insurance companies will say to that because if you consider that there are also private insurance patients in that same hospital, how are the insurance companies going to perceive this new situation with top-up insurance. So I cannot really predict what's going to happen. And I don't know if they have already started anywhere.

Are you aware of any place that they have -- any location where they have started accepting top-up insurance?

Well, that's what I heard, but I can, of course, ask and come back to you. Well, if they have started, we haven't really felt anything yet. But I understand that they may want to go into this area because this is also a big cake. But I think they have more dominance in private medical insurance and that is how they have shaped their business. And we have a big portion of patients using the top-up insurance. So that is our structure. So I don't know -- I mean, we have already started this model where we have used both models, but we were not very successful in managing. So I don't know if they can do what we have not been able to do because we have given it to try and it was not very successful.

And my final question, is there going to be another increase by the Turkish doctors association?

Yes.

And my last question is to Ms. Ozturk. Yes, you gave us the adjusted figures, TRY 362 million, I think, was the figure. In 2025, is it reasonable to expect that this will continue at the same level because there's a lot of fluctuation, as you know.

Well, we are expecting a monetary gain of TRY 200 million to TRY 250 million. Let me briefly explain that, as inflation goes down, this number is going to also go down. In 2023, of course, we had TRY 64 million. And in '24, we used TRY 44 million. And if we assume that the inflation will be lower in 2025, this means that there will be a decrease in monetary gains. But we are in a long position mostly. So I mean, it will be reasonable to expect a drop in this figure. In 2025, this will be lower. It will be even down to TRY 200 million, TRY 250 million. Yes, thank you.

[Operator Instructions] Last call for the question. Otherwise, we are closing. Muharrem bey, you may close the session because there are no further questions.

Thank you. Yes, 2024 has been a year of strong growth. And with the increase in capacity utilization rates at our major hospitals and the rise in patient traffic, we have really seen good growth. And we also have, of course, the expansion abroad. And as I said, we will see the contribution of our new domestic hospitals more clearly starting next year. Although they're not very large-scale hospitals, we will see the effect starting next year. And of course, at the same time, we will continue to focus on improving efficiency and delivering higher-quality health care services through our efforts in digitalization and sustainability. And I hope that this year will continue to be a very good year. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]