Rede D'Or São Luiz S.A. (RDOR3) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the earnings call of the third quarter of 2025 of Rede D'Or. We have here today with us Mr. Paulo Moll, CEO; Rodrigo Gavina, CEO of Hospitals; Otavio Lazcano, VP of Finance and Investor Relations; and Raquel Reis, CEO of Health and Dental of SulAmérica. The event will last for 1 hour. And the recording will be available at the IR website of the company. After the presentation, we're going to start the Q&A, and then we will provide more information. Before moving on, any forward-looking statements that might be done during the earnings call regarding to the business perspectives of Rede D'Or projections and operational goals, financial goals are based on beliefs and premises of the Board of Directors based on information that is currently available. Forward-looking statements are not a guarantee of performance, and they involve risks and uncertainties, and they refer to events and circumstances that may or may not take place. Investors should understand that general economic conditions, industry conditions and other operational factors may affect the performance of the company and may lead to results that are materially different from the forward-looking statements. Now Mr. Paulo Moll will start the call. Mr. Moll, the floor is yours.

Thank you. Good morning. Let's discuss a few numbers. Here are the main ones, and then Raquel, Otavio will have the opportunity to get into the details. A few highlights of the third quarter. Our revenue has reached BRL 15.6 billion, which is a growth year-on-year of 10.6%. The EBITDA, BRL 2.9 billion, which is a growth of 15.6% and adjusted EBITDA. Considering the financial result of the assets getting to BRL 3.3 billion, gives you a growth of 21.8% year-on-year. Net income, BRL 1.5 billion, which is almost 20% growth year-on-year. When we exclude the amortization of the portfolios of SulAmérica. The cash generation in the first 9 months operational cash flow, we get to BRL 6 billion, a growth of 22.6%. We reduced our leverage, our debt, 1.54x net debt over EBITDA. This is 0.4x less than the third quarter of '24. We did a very strong occupancy, 81%, this is due to a growth in surgeries over 21% year-on-year. The hospitals had an interesting operational gain. We have more turnover with the surgical patients. So we get to levels of occupancy that are higher. Oncology, accelerated growth due to the good strategy of organic growth connected to the main hospitals. We're talking about 22% growth in oncology year-on-year. These are strong results. Strong results, and we should celebrate all the employees of Rede D'Or, our physicians, everybody that collaborates from SulAmérica, the partners, the distribution channel, the investors that support and believe in the company. Also, we have to have the surety that in our opinion, we're still at the inception of an important agenda of efficiency and growth. We have a lot of mapped gains in productivity and areas of support. A lot of work to be done. Improving the revenue cycle, reducing mistakes and losses. We want to have more automation, more organization of the areas. We have a change in systems. As I told you, we are making the systems of the company very homogenous. We had a lot of M&As. We grew fast. We're still dealing with the legacy, the challenge of integration. And of course, that will be stabilized. Once we have that, we will have efficiency gains. Also, we have the opportunity of growing in a few units that are not at full potential. Services as well, high demand. And we are adding in a few units that we've identified opportunities, medical specialty services, oncology, diagnosis, we still see an important work to be done, and we will continue to diligently improve efficiencies. And we are once again at the beginning of a journey with results that are important, robust and that makes us ever more motivated to continue to work and grow in our company, focusing on quality, technical quality, quality perceived by the clients. Now I'll give the floor to Raquel. I will be with you during the Q&A. Thank you.

Thank you, Paulo. Good morning. It's always going to be here to talk about the highlights of SulAmérica. So the third quarter, once again, we had an increase of the membership and over 70,000 clients, 68,000 in health, 104,000 in dental. It's a positive trend that we've presented all throughout the year. It's important to highlight that this growth is aligned with the profitability that is sustainable. We closed the quarter with the consolidated loss ratio that is an improvement of 2 percentage points and also an improvement in regards to the third quarter, 1.3 percentage points. The trend is to continuously to improve gradually in the lines that we are commenting. And in the same direction of efficiency and discipline expenses and administrative expenses, we have to comment that it's controlled, representing 4.3% of the revenue. Now at the end of '25 and the agenda for '26, we will continue to grow with sustainability and profitability that we are presenting. This is our main objective. And I'd like to reinforce the thank you to all the team. Thank you to the SulAmérica team from all areas, and that's it. Now I'll give the floor to Gavina, and I will remain here for the Q&A.

Good morning. Great to be here with you once again. Everybody talks about this and you recognize how challenging it's been. It's been to work in this current context, very challenging. And we need to celebrate a good result facing a scenario such as this. It's a lot of joy. So once again, thank you to all the collaborators in general, Rede D'Or, SulAmérica, the performance of everyone so that we can reach these objectives, the trust of our patients and physicians. Every day, we work just a bit to increase this improvement to improve the trust in the investors that believe in our company and believe in the strength of the company. Now let's talk about the volumes. You've seen on the Page 5 that we had the occupancy record [indiscernible] average rate was 79% for this period, and we went over 81%. This is due to a lot of work and dedication of all of our employees going back to that issue of trust so that our physicians and our patients will have more trust. They feel safe. They feel that they're getting an excellent service. Our surgeries have grown. We are a mature company. We've grown 21% quarter-on-quarter, but we are not satisfied with this. Paulo has commented, and we are working -- seeking operational excellence and operational efficiency in many aspects. And this is from the best dispensation of medications until the best charging system and automation, working to gain efficiencies for the operation. We believe that regardless of these results, we have a lot of work to be done, and this makes us excited. We are not at the top of our efficiency. We still have a lot of work to do. Page 6. Let's see the beds. We realized a growth in the first 9 months of this year in regards to the last year, we've grown over 586 beds operational. This is extremely significant, and it improved the capacity to have a level of occupancy, always concerned about having an optimal level of occupancy. We know that hospitals are hospitals that have pediatrics, they have a seasonality with maternity wards and the occupancy can vary with that. To finish with Page 6, we see that we've grown in over 200 beds recently this year, total beds. So there was a growth of operational beds total beds, growth in occupancy and more complex surgeries. So this gives you dedication and the work for all the team. I'm going to give the floor to Otavio to talk about the gross revenue on Page 7. Gavina, once again. Thank you.

Now we follow the IFRS 4 and 11 to facilitate the analysis in the records and the best follow-up of the indicators, Page 7, gross revenue and average ticket. hospital services, graph on the left. Third quarter on this year, gross revenue of this was BRL 9.3 billion, growth of 16.2% in the year-on-year. This is an increase of the average ticket of 5.6%, an increase of volume of the patient days of over 10%. The quarterly increase of 4.5% and an increase in the number of day patients of 0.5% in the center of the page, gross revenue of the segment in the first 9 months, we got to BRL 26,294 billion, a growth of over 12%, an increase of the average ticket of 7.7%, an increase of patient days of 4.4%. On the right, we have graphically the average ticket evolution. Page 8. Gross revenue and average ticket in the oncology segment. Third quarter totaled BRL 1.055 billion, a growth of 28.1% year-on-year. an increase in the average ticket of 10.4%, an increase in the volume of 16%. In the comparison quarterly, the increase is 12.2%, an increase of the average ticket of 2%, the volume of 10.1%. In the center of the page, the gross revenue of this segment accumulated in 9 months, BRL 2.863 billion, a growth of almost 21%, an increase in the ticket -- average ticket of 11.7%, increase of volume 8.3%. On the right, we see graphically the evolution of the average ticket. Page 9. On the graph on the left, third quarter of this FY, the cost in hospital services, BRL 6.17 billion, a growth of 13.4% comparison year-on-year growth of 2.3% in the quarterly comparison. Once the revenue of the company grew faster than the cost, we had an expansion of the margin in both temporal analysis at the center of the page, the cost with the hospital services accumulated in 9 months totaled BRL 17.7 billion, a growth of 13.1%. On the right, the records of the general and administrative expenses that totaled third quarter, BRL 253 million, a reduction of 17.2% in the year-on-year, reduction of 22.4% in the quarterly comparison. Here is an event on recurring positive. We had a win in the justice system involving the correction index that should be applied over the base. Over the ISS tax base calculation, the company here is SolANet. On the extreme right, administrative accumulated expenses of BRL 907 million, 5.9% higher than those reported in the same period in FY '24. Page 10, EBITDA and net income. EBITDA in the hospital services reported for the third quarter of this FY BRL 2.323 billion a growth of 8.6% in the annual comparison, a comparison of 13% in the quarterly comparison and in the center of the page, the EBITDA reported by the segment accumulated 9 months totaled BRL 6.54 billion, a growth of 7.4%, a margin EBITDA of 26%. On the right, we see graphically the evolution of the company. Net income consolidated third quarter, we added BRL 1.5 billion and accumulated 9 months, BRL 3.7 billion when we adjust to the accounting effect of the amortization of the SulAmérica portfolios that we took on when we did the M&A at the end of '22. Page 11. of SulAmérica. Top left, net revenues total of the third quarter, BRL 8.4 billion year-on-year, almost 11% growth and almost 4% in the quarterly comparison, an increase in the base of clients and also the readjustments of the premiums. So on the top right, the consolidated loss ratio, 80.1%, 2 percentage points lower than the one reported for the third quarter of the previous FY. The consolidated loss ratio of 80.2% a drop of 2 percentage points in the annual comparison and 1.3 percentage points in the quarterly comparison. Still on the right, at the lower part of the page, the graphic evolution. We got 7.4 beneficiaries. And at the end, on the left, EBITDA adjusted third quarter to BRL 1.024 billion, 68% higher than the one reported on the year and 40.4% higher in the comparison quarterly. Let's go to Page 12, indebtedness. At the top left, September 30, cash and cash equivalents position, real estate, almost BRL 45 billion. the technical reserves, BRL 25.3 billion. The net debt, BRL 16.9 billion, net debt over EBITDA, 1.54x. Once we insert the technical provisions for insurance in a reading to calculate the exposure to monetary shocks, the net debt over EBITDA is lower than 0.9x. The average cost of debt on the right, CDI plus a year and the increase of the debt amortization to 5.8. And we see the schedule once again of the amortization. Page 13, managerial cash flow. We reconcile the reported EBITDA with 9 months with the cash variation of the company. I'm going to start with the information on the left and very slowly, I will move to the right. So we start with the reported EBITDA 9 months, BRL 7 billion, BRL 678 million. We had a positive working capital variation, BRL 534 million in this period. So the consumption of working capital res the positive cash flow of SulAmérica BRL 1.4 billion. We're moving once again to the right, we have other items of the balance sheet, negative BRL 728 million. Here, we have GSH, BRL 470 million of cash that asset was in the quarter previously reclassified as available for sale selling, BRL 600 million in contingencies and judicial deposits. We have advancements, BRL 200 million and other items. We have leasing BRL 596 million, once again to the right payment of taxes, BRL 886 million BRL 367 million BRL 529 million SulAmérica. We have BRL 2.7 billion positive that stem from the financing activities. Here, we have captures new captures of the market resources. amortizations of credit lines, BRL 3.1 billion. We have net expenses of BRL 1 billion, payment of dividends and interest of capital BRL 1 billion and BRL 390 million of repurchasing of shares. To the right, we have investments, BRL 1.963 billion, among BRL 860 million in greenfield, brownfield investments, BRL 381 million in maintenance BRL 360 million in small expansions. We have receivables of BRL 383 million regarding the transfer of Campinas Hospital to under JV. And we have receivables of BRL 371 million of the door consultancy that was done last year. So we have a cash variation of BRL 6.789 billion or BRL 4.46 billion once we exclude the variation of private pension technical resource balances from the private pension of the company. We finished the presentation. We are ready for the Q&A.

[Operator Instructions] First question, Gustavo Miele, Goldman Sachs.

2 topics. First, SulAmérica. When we look at the addition of beneficiaries quarter-on-quarter, just looking at the portfolio of health, we see a positive performance naturally decelerating versus performance is very robust over the last quarters. I want to get the help of Raquel to try and reconcile how this performance is broken down between gross additions and canceling. Maybe this is an important discussion because I understand that a great deal of this improvement in the consolidated loss ratio has been coming from the recycling of portfolios and more. Well, if you can help us to the -- to this impact, it would be interesting. Second topic, maybe more direct. Let's see a take on how it's been the evolution of the gains of margins of efficiencies of the assets of JV. Paulo already commented a bit of the midterm expectations. But I want to understand what is the evolution of the previous quarters for the improvement in these assets? How much has this contributed for this strong margin in the quarter?

Thank you for the question. Okay. Improvements of consolidated loss ratio in general. We always say we never have a short-term action. We start to see the results in 8 months. So everything that started at the inception, beginning of '22, beginning of '23, well, reworking the synergies of Rede D'Or in regards to materials, medications, maybe a cleanup, all that has evolved and brings us to where we are. Directly speaking to your first point on the prepayment. This quarter, we have the migration of 3 clients that total a very relevant number of lives from pre to post payment. So it was a combined and orchestrated action by both sides. So it makes sense. Clients with a high volume of lives and those that leaves the prepayment and lower margin and the migration to the postpayment make all the sense. And what maintains our presence of market share, our bargaining power due to the insured mass whether if it's in pre and post pinpoint, this is what happened, the migration of 3 clients, but the volume of sales and the retention of the clients in house have been doing very well. I take the second one about the JV hospitals. We're very satisfied with the ramp-up of these assets. They're growing and they're delivering margin in a more accelerated way than we projected. Every quarter, we are growing revenue and still with a lot of space to ramping up the beds and adding more margin. We have great expectations moving up ahead. I'd like to congratulate you for the consistency in the results.

Next question comes from Flavio Yoshida, Bank of America.

Congratulations on the strong results. I have a few questions on my side. First, hospital margin. Our vision is that it was a strong number. So I want to understand how much of this improvement of margin was because of a better seasonality we had more business days. Is it a structural improvement that you're delivering? Because I think that in the last call, Paulo said that there could be an expansion of margin. And I wanted to understand if that's part of the sale. Can you find these 200 basis points of improvement in the margin? And the second question is in regards to the consolidated loss ratio of SulAmérica. We see an improvement in the results. So I want to understand if there is a space for improvement. There is a competitive environment that is very high, but we understand that you have a series of internal initiatives in regards to co-payment, control of frauds, improvements. So I want to understand what should we expect when we get this into the same equation?

Flavio, let me start by the first. It's really multifactorial. Improvement of margin, we cannot say that it has a single origin. I have been pointed that once those 9 assets are mature that are ramped up, they could contribute with 2 margin points, and this is in a long period. we see the complete maturity almost of these assets, the coverage of beds and the expansion of margin. The contribution for this last quarter comes from these assets. The rest comes from several efficiency actions, reiterating what I just mentioned. We have a lot of things to do. When we look at the hospital, it's an indicator and all of our hospitals have opportunities of gains of performance, improvement of the cycle of the rest -- we can add services. So this is a journey that we have. We don't give guidance of margin, as you know but we are extremely excited. We have great opportunities of gains of efficiencies for the performance of the company.

Flavio, this is Raquel. If there is space, there is always space for improvement. And when we look at the current number, we look at it with good eyes. We are comfortable with them. We were looking at a constant search for balance between the growth of the base and the profitability. Now going back to a point that I commented with [indiscernible], these are long-term actions. I'm going to give you an example that I always comment. And I always defend co-participation. We would only have sustainability and balance in this sector when we can evolve all the actions, all the agents in this sustainability. In that sense, co-participation is a strong tool. 3 years ago, co-participation didn't even exist for the retail. Now I would like to say that almost 25% of all the portfolio of small-sized companies, we have co-participation. When I look at new sales, specifically for this year, over 36%. And with that, I could give you other numbers. This is just to exemplify the lives, the people, the clients that come with the logic of the modular reimbursement, better rationality and the correct utilization, all of that generates better margins. Therefore, it gives you space to replenish, to reposition the prices and the readjustments because our objective is always to have the best price, the smallest readjustment possible that can allow us to rebalance this. Of course, we are going to have a strategy with higher investment that is growing in a region or to achieve a certain brand or a client that is relevant for the strategy as a whole. In general lines, that's it.

So the next question, Joseph Giordano from JPMorgan.

I want to explore a small part of the business, but that had a very strong result. So oncology, it's a very strong growth. I want to understand, we are delivering a competitive environment in this segment, the capture of new physicians is a great factor to bring volume to the company. How is the competitive positioning of the company? Do you have opportunities higher to explore given the weakness of this competition? And well, talking about the expansion. I want to explore how do you see the opportunity of medical tourism. I understand that Brazil is still very relevant for the growth and the occupancy that you've shown. But do you have any opportunities in that sense?

Oncology. We've always positioned ourselves in oncology, and this is a big differential of what we offer as well, integrating a complete solution for the oncologic patient and of every need that they have, integrating the oncology clinics, radiotherapy with the hospital structure and diagnosis. The oncologic patient needs diagnosis. They're going to go through intervention, biopsy, surgery, chemotherapy, radiotherapy. So to be able to service these patients in all their needs is a differential in our opinion. So that's why we invested diligently in the integration of our services with the main hospitals, developing cancer centers that are connected to the hospitals, having a complete integration of these multidisciplinary teams. The result of this is clear. Of course, this is the moment of the market that we've been looked for in patients and physicians that seeing the differential and excellency in the services that we observe and with all the integration, which is a great differential. About the medical tourism. You talked about the international. We see a search for services in Sao Paulo, Rio de Janeiro and other capitals, where we are present in the federal district in Salvador, Recife. You see Brazilians from smaller cities looking for these centers. Yes, there is an internal tourism that is strong. It is relevant within our numbers. When we talk about international patients, that is a bit more restricted to a small number of hospitals where we're still growing, and we still see an opportunity of growth, Vila Novo Star. So it's the number of foreign patients is growing. And we see opportunities for these business units. If you look at this number in regards to everything that Rede D'Or works with, it's well diluted. It's not going to move the pointer so much of Rede D'Or that's it.

Next question is from Leandro Bastos, Citibank.

Two questions. First, in hospitals, we have an important volume. If you can discuss a few points that have helped with this result. There is a specific utilization that has called your attention for the quarter. And is this trend of utilization is strong and it has kept with what you have a visibility for October? That would be the first point. Second, in regards to SulAmérica, the competitive environment, we see the numbers improving a lot. Better profitability and more competition. So what do you see if -- what calls your attention here?

Raquel, I'm going to start by the last one, and then I'll give you the floor to Gavina. Of course, we see more aggressiveness of one region or another or some competition. And we are very consistent, very sure of our strategy of pricing. So we have a logic that privileges products that have a better profitability that privileges regions where we have a higher presence but the expansion of beds, opportunities, GDP, whatever it is, relevant brands. And we've had much success in growth also in wholesale and retail. And so I want to mention the flexibility with which we've done the customized the products for the big clients. We have a company that on the fifth is 130 years, the flexibility and agility with which we are working and we're making a product along with these clients. So that's what we're looking for. And mainly for this last quarter, we're growing strongly with retail with small companies and the best and the bigger ones, mentioning those up to 500,000 labs. So yes, there is some movement, but nothing that will make us change the strategy that is well succeeded in 2024 and 2025. I don't see anything different up ahead.

So the question. Taking the question regarding volume, this is due to the surgical volume that has increased. especially surgeries that are more complex. Of course, when you grow the surgeries, you grow it as a whole. Giving you some color. We have 2 points here. First, the patient has to believe and know that they're being cared with a safety protocol that is very robust and they feel safe and the improvement of the line, they're not waiting. They're getting service and having -- being heard and having their problems solved. Also, it's important, the work of medical relations because the physicians that bring their patients and they are our clients, they end up having demands that we need to understand and service. So maybe these 2 points are very strong over the last times. Nothing is overnight. We've been working with this for a long time. And now we're getting the low-hanging fruits of our work with the increase of the surgeries and as Paulo commented, increasing the cash flow and the occupancy.

Next question, BTG Pactual, Samuel Alves.

Two questions on our side. First, about the sustainable level of medical material cost. We noticed an improvement in this line. So I wanted to understand the directives of this improvement? And is this more of a recurring level of ahead once this is a variable cost line. If you can explore this theme. This is the first question. Second question is extraordinary dividends. There was yesterday the approval at the Senate law that taxes the dividends in 10% for foreign deposits for people that are resident here, it seems that the controller and the foreign shareholders are sensitive to this. So the question is the company is evaluating the payout this year? And how long can you take the leverage of the company? How can we take it over 2x? If you can discuss this theme.

So about -- well, we have -- as you know, we have a very strong focus in the area looking for more standardization, integration with the medical teams. So we have good quality and we have more competitiveness. So it's a continuous work. It's difficult to mention. I consider that we are in good levels. It's difficult to say to give you a guidance and sometimes quarter-on-quarter, you have effects and small variations. I'd say that we are focused with several actions of looking for products that are not in Brazil through partners and even our distribution area has a strong focus on developing products to bring competitiveness for the area. This has a mixed effect. When you grow oncology, the medications are a bit more expensive depending on the surgery can be also heavy. So it's a combination of actions. So I can tell you that I am very happy with the work that we are developing. We had a very harsh post-pandemic period where the cost has gone up, and now we are satisfied to deliver. So it's a maintenance effort. And I had the opportunity of better reduction, but we have to be careful not to be holding out to a quarter number. We always like to look at some lines, longer period, and you will normalize some of these effects. About the payment of extraordinary dividends, there is no decision being taken. Of course, we will understand and wait on how the approvals will be the impact that we will have being very directive to your question about the comfort of leverage. We would not like to run this company above 2x net debt over EBITDA unless there is a reason -- pinpoint reason, extraordinary reason. But the level that we would like to run with the EBITDA is 2x the net debt over EBITDA. Our next question comes from Vinicius Figueiredo from Ita BBA.

I wanted to ask -- well, I wanted to continue with the follow-up with the hospitals. It seems that a few colleagues have tried to understand the recurrence of this volume. But we can understand that it's a stronger search of the client and the paying and the migration of physicians that come from a few more stressed players. But for us to understand and try to get this in the model, this movement with surgeries and a strong -- should it motivate that a higher occupancy a few bps above what is the records? But what we've seen in this third quarter, it should be translated into a rhythm of opening the beds that is better for 2026 or maybe accelerating one or the other projects of brownfield. So the second question is SulAmérica. I've heard the answer about the ESO. This is a tool that maybe SulAmérica can do better than the rest of the market. We have probably still the tools of being using the Rede D'Or as an important player for the postpayment. It reduces the consolidated loss ratio and it has a good combination because you carry over less of the owners of having this strong portfolio in the balance and the technical provision. Is there still opportunities? Was it a cycle that was more heavy of this migration and it shouldn't be repeated? Or do you still foresee that maybe we will see a market that is looking to the future, even other competitors that you have a company that doesn't want to get a lot of readjustments. Do you -- have you perceived a warmer market in this specific part? Those are the questions.

Thank you for the questions, Vinicius. In the hospital, you observed very well. Of course, all the care that we have to look at the different seasonalities in the quarters. But even considering the third quarter as a strong quarter, we had an occupancy that was above our records for the third quarter. The reason for this is that we grew a lot in surgeries. So if you look at the stay of the surgical patient is less. You can have a turnover that is more efficient when you grow through surgery. That's why we reached this level of patient day patients with a growth -- marginal growth of the operational beds. This brings a lot of efficiency, operational efficiency. I don't want to give any guidance, but we have a strategy very strong for the capture of physicians, growing our ambulatory structures and all those strategies together that have helped us to deliver this result. If we keep levels of growth in surgeries that is very strong, we can reach occupancy levels that are well, once again, taking into consideration seasonality, the third quarter with the third with the second. So we have the surety of how this works. But the surgical growth, it allows you to run the structures with occupancy rates that are higher. We are a hospital that needs to open beds -- we are just improving the turnover. We need to do a review of the investment plan. So this is very dynamic, very alive unit per unit, but we don't have anything else to announce. So we are aligned to expand the organic expansion that we've announced. The operational beds this quarter has grown. We are going 600 operational beds, the growth in this year, and it's an accelerated rhythm than the previous years. We had effects of discontinuity of contracts with a few operators. So our growth was moderate. But we hope to be at a new rhythm for the opening of the beds that we can continue for 2026. Raquel, the second question.

Thank you. You already helped me. Thank you. You answered all the part, the strategic part in regards to the postpayment. And we consider that, yes, there is a differentiated conditions in that sense. Looking at the company as a whole, so it's a part that we invest strongly. This movement that happened now was one client of 50,000 and the other 2 that had a migration agreed. But there is a fertile terrain. We see a lot of opportunities abroad, specifically with the customized products. We always design along with the client what they want. When the client is in postpayment on prepayment and they have risk for appetite, or even sell small companies that want to go over. And they want to have a specialized company more operational. And there is opportunities, I always remind you. We, for example, today, we're looking at a client, [indiscernible] Campo Grande, so on. So it's another path of growth, certainly. Congrats on the results.

Next question, Mauricio Cepeda, Morgan Stanley.

Two questions on my side. The first is intentions ahead. You are in a situation that is much more comfortable in the cash generation, strong cash generation. At the same time, you don't need so much cash for expansion. Proportionately, you are more comfortable in that sense. So a question that I asked you, and I receive from a lot of investors is if from now on, the idea would be to be more of a payment of dividends versus the situation that you had in the past. You had additional growth. And today, you have a lot of higher growth by margin of bets and even the pipeline. but proportionately lesser than what you had in the past. So it's a thesis of dividends versus a thesis of more growth. That's the first question. Second question about operational leverage. I know you don't want to give any guidance for margin, but can we estimate this better on our side? With this strong progression of revenue, how much do you estimate that in the hospital part, your cost is fixed? Because you have several lines of cost, they have a mix of what is fixed and what is variable. But if you can confirm that what we can estimate what is fixed, what is variable, so we can think about the expansion of margin.

This is Paulo. Thank you for the questions. About capital allocation and dividends, the way that we see this, we would love to add projects from now on with the same days of return, and we are always looking for these opportunities, organic or inorganic. And we would love to accelerate the number of projects here as long as we find projects that make sense that have the same level of historical returns, so we can allocate capital. And if along the way, the opportunities, organic opportunities, more inorganic are not enough for us to allocate the entirety of the cash allocation of the company, obviously, respecting the levels of leverage that I commented that would make us comfortable, then we can consider paying dividends. I don't have the clear response to give you. I cannot really see how many projects, what can we add in our strategies. But always, with the foot in the ground, we're not going to change our threshold in regards to the level of return and the strategy of capital allocation. Second part of the question, which is about the margins, what is fixed cost, variable cost. In our hospitals, we have 60% of our costs, which are fixed costs. So we have a leverage -- operational leverage that is important. When we grow the hospitals, obviously, very relevant when you grow without opening the beds, without doing a brownfield, but also when you do brownfields. Just so you know, the high cost of personnel, you have the average of the Rede D'Or hospitals about 6.6 employees per beds. When you open another one, you hire 3.5 employees. So you have even in the brownfields capacity of once they are occupied, we bring a lot of margin. So when we grow the average size of the hospitals, we have a good expectation that we can leverage the margin. And I am satisfied that you're adjusting the models.

Next question is from Andre Salles from UBS.

I have 2 here. Well, in terms of capitalization and an update of that theme about the hospitals, the legacy system that you commented, was there any relevant advancement in this quarter in this front? Anything that has helped in the quarter? And the second question is about the expansion plan with Bradesco. We saw Rede D'Or that appeared as an expansion project for this result. But for us, it's clear the participation of the greenfield projects. When we look at the 2,400 beds or so brownfield, what is the relevance of the participation of JV in the beds?

Let's start by the part of the systems. I would like to say that it's a smaller impact. because these are implementations of uniformization of systems, but it's a project that is very long, very long term. You should have an average of 1 hospital, 2 hospitals per month that will be implemented. And once they're implemented, you have the period of stabilization, so you can have a contribution for the margin. So I wouldn't say that this is a point for the quarter that went over, but as a point of more importance, even though the vision of the medium to long term, all this work for uniformization can help us to have contribution in a few points of our margin. Now going to the JV, we have an impact that is more important in the JV, not of the brownfield. You talked about [indiscernible] is maybe the only situation of short to midterm in a hospital that we are doing the brownfield. And the other units since these are units of Macaé, Alphaville, Guarulhos, Campinas as well. These were launched a short while ago. The opportunities that we have is the ramp-up of the beds. So amongst the total beds and the operational beds, we have a difference amongst those units that are in ramp-up. The biggest benefits for the JV of Atlântica D'Or will be as we will have demand and growth, the ramp-up of these operational beds to get to these total beds.

The next question, Caio Moscardini from Santander.

I have 2 on my side on the hospital side. You commented on the level of patient days, which is a higher level of surgeries. But I wanted to ask if we can consider that the level of patient days is a new threshold for the company. We understand the seasonality, but it seems that there was, in fact, a scalability in the level of patients. Year-on-year comparison is a bit more difficult to do. Second question, how do you observe the competition in the hospital segment? We see the data of an up. We see an occupancy that improves, but the margin of the sector still drops. Cash flow is under pressure. So it seems that you're navigating a competitive environment. So I want to understand this point.

Thank you for the questions. Well, this year, we are a threshold that is higher than the last year as a rhythm that we can accelerate our growth in regards to the previous years. We think about 2026, but it is more than the current, that speed of growth in the patient days and opening of beds, our expectation is that this current pace is kept for the canceling of a few contracts in the previous years. So we don't give more details, so this is a way that we are challenging our operations, keeping the space of growth. In regards to competitive environment, we see for the market at a few, we see a lot of hospitals in Brazil of medium-sized hospitals, which is the reality of most of the Brazilian hospitals, the average of the size of the hospitals is 60 beds against 170 beds in the United States. So these hospitals have a scale that is small. So we have a decrease of cost and efficiency. So Brazil, over the last 10 years has lost over 500 private hospitals. Cost of capital is higher. As you said, a few issues of capital -- of working capital. that were increased in regards to 3, 4 years ago. So this makes the scenario more pressured. For many, many years, we see this as an opportunity, consolidation pathway that the sector needs, but it needs in our opinion, more efficient hospitals with scalability, more modern and an investment in a new hospital is more -- is higher because of the new technologies. So we understand that this benefits a company such as ours that has access to capital that is cheaper and has the capacity within in-house with the physicians, the managers, so we can grow our units and we can build the hospital units in places that are not well served, and these are reference hospitals. We have a portfolio of brands that are very strong regionally. And that we will continue to use. And in fact, we start to see the results of these good investments, good capital allocation that we've done over the few years and the several projects of Rede D'Or that we have of expansion. This is the big differential of the company when we look at the hospital market as a whole.

Since we don't have any more questions, we close the Q&A session. Now I'd like to give the floor to Mr. Paulo Mo, so he can close the session.

I think we've gone over the time. Thank you for your participation once again. Thank you to all the collaborators of Rede D'Or and SulAmérica. We will see you briefly in the next call. Thank you.

The earnings call of Rede D'Or is closed. Thank you for your participation. Have a wonderful day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]