• Adjusted EBITDA Growth: Increased 23% on an FX-neutral basis, with margin expanding 1.4 percentage points.
• Revenue: Grew 13% year-over-year to PEN1.1 billion, led by Mexico and Peru with growth of 16% and 13%, respectively.
• Operating Profit: Increased to PEN229 million, a 23% rise excluding a onetime reversal benefit.
• Average Occupancy: Increased 3.8 percentage points to 67% across healthcare services.
• Oncology MLR: Decreased 1 percentage point to 53.7%.
• Mexico Adjusted EBITDA: Increased 34%, with margin up 4.7 percentage points to just under 36%.
• Peru Adjusted EBITDA: Increased nearly 50%, with margin expanding 5.3 percentage points to 21.6%.
• Colombia Revenue Growth: Moderated to 11% in local currency terms.
• Colombia Adjusted EBITDA: Decreased 18%, with margin down 4.5 percentage points to 12.4% due to increased provisions.
• Adjusted Net Income: PEN75 million, or PEN0.98 per share.
• Cash Position: PEN200 million at the end of the third quarter.
• Net Debt to Adjusted EBITDA Ratio: Fell below 4 times, reaching 3.7 times.

• Warning! GuruFocus has detected 6 Warning Signs with AUNA.

Release Date: November 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Auna SA (NYSE:AUNA) reported a 23% increase in adjusted EBITDA on an FX-neutral basis, with a margin expansion of 1.4 percentage points.
• Revenue growth was strong in Mexico and Peru, with increases of 16% and 13% respectively, driven by high complexity services and improved physician productivity.
• The company successfully reduced its debt leverage below four times for the first time since its acquisition in Mexico, marking the eighth consecutive quarter of leverage reduction.
• In Peru, adjusted EBITDA increased nearly 50%, with a margin expansion of 5.3 percentage points to 21.6%, driven by increased planned memberships and higher average ticket.
• Auna SA (NYSE:AUNA) is making significant progress with its OncoMexico initiative, which is expected to be a disruptive product in the Mexican market, leveraging its 35 years of experience in Peru.

Negative Points

• In Colombia, regulatory interventions have led to increased provisions for impairment losses, impacting profitability and resulting in an 18% decrease in adjusted EBITDA.
• The company is facing challenges with timely payments from Nueva EPS in Colombia, leading to increased risk and provisions for receivables.
• Despite strong performance in other regions, revenue growth in Colombia was moderated to 11% due to a cautious approach to maintain healthy cash flow.
• Auna SA (NYSE:AUNA) is experiencing volatility in payments from Colombian payors, which has necessitated a conservative stance on receivables.
• The company is focusing on maintaining a positive working capital cycle in Colombia, which may limit growth opportunities in the short term.

Q & A Highlights

Q: How long can Auna continue to expand financing from suppliers to compensate for working capital impacts from Colombia? A: Jesus Leon, CEO: There have been no changes in managing accounts receivables to accounts payables. It's a characteristic of the Colombian market. Payments from Nueva EPS have been volatile, but we believe this is transitory. We are taking a conservative approach by increasing provisions for accounts receivables to reflect higher risk. Gisele Ferrero, CFO, added that the accounts receivable and payable situation is consistent with market trends, and they have strategic relationships with suppliers.

Q: How confident is Auna in achieving its adjusted EBITDA growth guidance? A: Jesus Leon, CEO: We are not changing our current guidance and expect EBITDA growth to be at 20% in FX-neutral terms. Peru is overperforming, and Mexico is growing nicely. Colombia remains the smallest portion of our EBITDA contribution, and we believe the situation there should not prevent us from reaching our numbers.

Q: What are the optionalities for Auna to deleverage faster? A: Gisele Ferrero, CFO: We are on track to reach our medium-term target of less than 3 times net debt to adjusted EBITDA by the end of 2025 or early 2026. Deleveraging has come from EBITDA growth, and we expect to see a cash surplus next year, allowing us to reduce debt through both EBITDA growth and debt amortization.

Q: What are the short-term growth expectations for Mexico? A: Jesus Leon, CEO: Growth in Mexico will stem from increased physician recruitment, improved productivity, and a focus on high complexity procedures. We are also seeing success with our loyalty program for physicians and private sales strategies, which are driving revenue growth.

Q: Should the higher profitability levels in Peru be considered recurring? A: Gisele Ferrero, CFO: We are comfortable with the current profitability levels in Peru, which are above 21% EBITDA margin. We continue to see opportunities for growth in member base and utilization, and we expect these margin levels to be maintained.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.