Auna S.A. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Mexico: Revamped leadership team, hired new CMO, Head of Commercial Operations, and senior leaders. Rolled out package services, engaged with physicians, scaled oncology capabilities, and implemented a new comprehensive IT system to enhance data integration and decision-making.
• Peru: Auna's scalable, integrated health care platform demonstrated strength with growth in revenues and EBITDA, remaining a key contributor to growth.
• Colombia: Measured growth with risk mitigation strategy, diversified away from intervened payers, and prioritized PGP revenues.
• Debt Refinancing: Successfully refinanced $765 million debt, including $365 million senior secured notes and $400 million term loan in Mexican pesos, reducing financing costs and enhancing financial flexibility.

Segment Performance

• Mexico: Experienced a 12% revenue decline. However, there were bright spots: surgery volumes increased for the second consecutive quarter, oncology and cardiology services rose 48% vs Q2 2025 (accounting for 15% of Mexico's revenues), and Opción Oncología revenues grew 21% QoQ. But slower market recovery, doctor supplier issues, and IT system migration impacted revenue. Gross profit and adjusted EBITDA were affected, though the margin was 29% in Q3.
• Peru: Revenue grew 9% due to increases in emergency visits and ambulatory care, with OncoSalud revenues up 8%. Adjusted EBITDA increased 15% and margin was 22.7%.
• Colombia: Top line grew 5% due to risk-sharing models. Revenues from Nueva EPS decreased, but added Salud Total as a payer. Adjusted EBITDA increased 18% with margin expansion.

Guidance

• Anticipate 2026 to be a year of full recovery in Mexico.
• Expect EBITDA growth in 2026 as growth initiatives gain traction and lessons from systems implementation in Mexico are applied.
• Trecca project in Peru to start building next year with an 18-year contract, offering significant growth potential.

Risks

• Factors beyond control such as target leverage ratio, resolution of issues in Mexico (physicians, suppliers, info systems), execution of strategic plan in Mexico, capacity and market of Torre Trecca, collaboration with Sojitz, and planned investments in Mexico.
• Political uncertainties in Colombia affecting EPS and payment flows.
• Share price weakness due to external factors not reflecting company fundamentals.

Question and Answer

Q: Rationale for expanding in Mexico with Sojitz and alignment with deleveraging?

A: MoU with Sojitz to accelerate growth in Mexico while maintaining leverage target. Sojitz is a strong partner to capture Mexico's growth opportunity while keeping leverage in check.

Q: Impact of Colombia's political change on EPS?

A: Political environment in Colombia unlikely to change soon in the next 6 months. However, sector stress may require government action for stability, with certain actions like EPS capitalization by the central government potentially bringing stability later.

Q: Details on Trecca project and Mexico operations recovery?

A: Trecca building permit authorized, with a 18-year contract and 2-year building period. Mexico expects growth in 2026 as growth initiatives and improved operations take effect.

Q: Share price weakness and investor exit?

A: Share price doesn't reflect company fundamentals. Evaluating ways to enhance shareholder value, with speculation on a competitor in Mexico selling stock recently, and considering block trades to address share price impact.

Q: Insurance risk management policy?

A: Managed by MLR by policy type, e.g., oncology with 50% MLR goal through pricing and cost containment, balancing risk and profitability.

Q: Partnership with Sojitz and $500 million investment?

A: MoU with Sojitz is part of $500 million investment plan in Mexico, expected to drive top line growth through co-investment and expanded operations in key segments.