Auna SA (AUNA) 2024 Q2 法說會逐字稿

Welcome to Auna second quarter 2024 earnings conference call. My name is Rob and I will be the operator for today's call. (Operator Instructions) Please note that this call is being recorded. There will be an opportunity for you to ask questions at the end of today's presentation.

Now I would like to turn the call over to Anna Maria Mora, Head of Investor Relations. Please go ahead.

Thank you, operator, and hello, everyone, and welcome to Auna's conference call to review our second quarter results. Please note that there is a webcast presentation to accompany the discussion during this call. If you need a copy of the presentation, please go to our Investor Relations website or contact Auna's Investor Relations team. Please note that we will discuss variances. We will be doing so on a year-over-year basis and in FX neutral or local currency terms with regard to Mexico and Colombia unless we note otherwise.

Let's move to slide 2. Before we begin, we would like to remind all participants that our comments today will include forward-looking statements. In addition to reporting unaudited financial results in accordance with International Financial Reporting Standards, we will discuss certain non-IFRS financial measures and operating metrics, including foreign exchange neutral calculations. Investors should read carefully the definitions of these measures and metrics included in our earnings press release of today to ensure that they understand them.

Non-IFRS financial measures and operating metrics should not be considered in isolation or as substitutes for or superior to IFRS financial measures and are provided as supplemental information only. Before we begin our remarks, please also note that certain statements made during the course of today's discussion may constitute forward-looking statements, which are based on management's current expectations and beliefs and which are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control.

This include, but are not limited to expectations and assumptions related to the integration and performance of the businesses we acquire. For a description of these risks, please refer to our Form F-1 filing with the US Securities and Exchange Commission and our earnings press release.

Slide 3, please. Speaking on today's call is Suso Zamora, our Executive Chairman and President, who will discuss Auna's consolidated and segment financial and operating results, as well as provide updates on our various strategic growth initiatives. Gisele Remy, our Chief Financial Officer and Executive Vice President, will follow with a more detailed review of Auna's consolidated financial results. After that, Suso will provide a wrap-up of our second quarter performance as well as discuss our performance outlook. We'll then open the call for your questions.

Suso, please go ahead.

Thank you, Annie, and welcome, everyone. Let's begin our review on slide 4 with a few highlights on the quarter. First of all, our growth momentum accelerated in the second quarter as we continue to scale our vertically and horizontally integrated healthcare platform as well as benefits from various synergies that we achieved through regional integration and scale.

We continue to grow consistently and more predictably. Auna's adjusted EBITDA increased 25% on an FX neutral basis, while our margin expanded 2 percentage point. Growth reflects the consistently strong performance of our operations in Peru and Colombia and it validates once again the strength of our diversified and scalable healthcare platform as well as the effectiveness of our growth strategy.

Implementing the AunaWay at our healthcare network in Monterrey is gradually beginning to bear fruit. We are seeing productivity starting to rise among new and existing physicians, along with increases in certain high-complexity services.

OncoMexico is another pillar of our growth plan for Mexico, and we have launched Monterrey, the 2024 pilot of this integrated cancer insurance. It is the country's first mono-line oncology insurance fully integrated into our network of healthcare services in Monterrey and will potentially grant access many families two full healthcare solutions.

With that context, let's take a closer look at our second quarter performance, beginning with our consolidated results on slide 6, please. So our top line growth of 12.5% combined with improving operational efficiencies, drove operating income 29% higher versus last year's quarter. And our adjusted EBITDA margin expanded 2 percentage points, helping drive adjusted EBITDA 25% on an FX-neutral basis, higher, along with an improved services mix and higher occupancy levels. As such, we remain on track to achieve our 2024 guidance for adjusted EBITDA growth of 20% also on a constant currency basis.

Peru and Colombia continued to perform strongly underpinning our growth while we deploy our business model in Mexico, where we expect to replicate our success on a much larger scale given the size of Mexico healthcare market, of course, and the low penetration levels of private healthcare in the country.

The implementation of the (technical difficulty) is a gradual and deliberate process of skill building that result in improved engagement with physicians that will produce increased volume and more so of high complexity procedures. And we are beginning to see the results of our engagement with physicians and as well with payers. Our future success in Mexico as a function of our capacity to replicate the consistent and predictable performance of our Peruvian and Colombian operations over many years.

As you can see in the bottom left of this slide, occupancy across our healthcare platform increased 3.7 percentage points as we ramped up new and expanded care facilities. The vertically integrated model improved continued to deliver strong results, demonstrating again the value of our business model at maturity and at scale.

Now let's review our second quarter performance on each of the business segments that comprise Auna's diversified and integrated healthcare platform.

Can we go to slide 8, please? So here our healthcare business in Mexico in the fast-growing Monterrey area is steadily delivering better results. Thanks to improving productivity and higher surgery volumes. This reflects the progress we are making with finding our recruitment and incentive model with physicians. Occupancy levels were flat and 3% revenue growth was primarily driven by mix that is growth in high-complexity services.

Adjusted EBITDA was flat versus last year with a healthy 33% EBITDA margin. Aside from physician recruitment, we also intend to increase capacity utilization through initiatives with our payers, offering tailored products and bundled services. We are creating win-win partnerships with insurance companies and employers as we do in Peru and Colombia.

Longer-term, OncoMexico will be another growth driver. During the remainder of 2024, we are establishing the necessary operational capabilities in clinical and commercial areas as well as risk underwriting and other key functions.

Let's moved to slide 9, please. So in respect of Peru, our fully integrated operations their -- adjusted EBITDA almost doubled from last year's second quarter as well as a continued margin expansion. Revenue grew 15%, mainly on a sustained occupancy level of nearly 72%, as well as the growth in plan membership and revenue mix across both segments. All of this reflects the harvesting of growth investments made in prior years, focusing on high complexity and capacity utilization as well as synergies achieved across the platform.

We've maintained the gains in EBITDA margin since last quarter with our consolidated Peru margin at 21% for the second quarter.

Our healthcare services business benefited from improved mix of high-complexity services across our healthcare footprint in Peru. In our healthcare plans business, in addition, to member growth, sales increased on higher revenues from our integrated hospitals, including copayments and noncovered expenses. Revenue also benefited from price adjustments to our healthcare plans.

In addition to top line growth, adjusted EBITDA benefited from a decline in SG&A, while member acquisition costs decreased from higher efficiency levels. Our oncological MLR is at 54.7% year to date increasing versus 51.5% in the last quarter, mainly impacted by an increase in inter-company fees between OncoSalud insurance company and our integrated oncology hospitals. Given that the intercompany effect is eliminated at the gross margin level in our healthcare plan business, gross margin remained flat in healthcare plans versus the first quarter of 2024.

Lastly, on Peru, We continue implementing a number of strategic growth initiatives related to our healthcare network. We're seeking to convert more of the outpatient services we perform by cross selling adjacent services. We are strengthening our B2B relations is nationally to increased patient referrals to this channel.

And on the high complexity front, we are recruiting new doctors in the field of neurosurgery and traumatology. In the healthcare plans business, new growth Initiatives include increasing the productivity of the direct sales channel by improving the sources of new leads and referrals, acquiring more B2B customers, and we continue to capture more of the healthier, lower-risk prospective customers who have a history of good health.

If we move to page 10, we can do a little dive into Colombia. In Colombia driving to 18.3% growth in revenue was a greater mix of high-complexity services and occupancy, which increased 6 percentage points to 81%. The more profitable mix of high-capacity services, coupled with higher occupancy, drove a more than 10% increase in adjusted EBITDA and also help Colombia maintain healthy margins.

Additionally, we kept levels of SG&A expenses in check, thanks to the efficiency initiatives and post-merger synergies we have achieved. Given the current regulatory environment in Colombia, we will continue prioritizing working capital and profitability.

With that, I'll turn the call over to Gisele for a more detailed review of our second quarter results.

Thank you, Suso. Good afternoon, everyone. Let's move on to our consolidated results for the quarter starting with revenue on slide 12. As Suso mentioned, we delivered solid revenue growth in the quarter. We grew 18% in [soles] year on year or 13% in FX-neutral terms as our mature segments in Peru and Colombia continue to drive growth and our Mexican business steadily positioned itself to replicate the same success. All our businesses have shown consistent growth on a year on year basis.

Let's move on to slide 13. Adjusted EBITDA growth for the quarter was 31% year on year and slowed for 25% on an FX-neutral basis with the margin expanding to 22.1% off the back of strong margins in the three geographies. Strong revenue growth coupled with efficiencies across the local and regional levels, drove EBITDA growth and margin expansion.

Operation in Peru maintain the margin gains that we saw in the first quarter of this year with an adjusted EBITDA margin of 21%, while our operation in Mexico sustained a 33% adjusted EBITDA margin despite investments and increases in costs and SG&A, given the local and regional capabilities that we continue to build. Colombia had a 15.3% margin. Finally, across the region, we continue to be very disciplined with our SG&A.

Let's now move on to slide 14 to talk about net income. Auna maintained a positive adjusted net income in the quarter. Since the compared to the comparable period last year, adjusted net income in the second quarter of 2024 was favorably impacted by an increase in operating profit as well as a deferred tax benefit.

However, these benefits were offset by the FX variances for the quarter, mainly due to the accounting impact of the movement of the Peruvian sol below the floor of the call spread as hedges in place in Peru, generating an FX loss for the quarter versus an FX gain for the comparable quarter in 2023.

Let's now move on to slide 15 to look at cash flow generation thus far in 2024. Year to date operating cash flow generation remains solid off the back of growing operating results, coupled with a stable cash conversion cycle. Organic CapEx also remained stable versus 2023 levels. This investment cash flow for the quarter had an extraordinary impact related to the PEN47 million payment of our IMAT Oncomedica earn-out obligations.

Let's now move on to slide 16 for an update on our balance sheet and debt position. Leverage continued to fall according to plan to 4.13 times net debt to adjusted EBITDA in the second quarter of 2024. We continue to maintain steady deleveraging on the back of solid growth. Debt levels remain stable to what we saw in the first quarter of 2024, and we continue to maintain a healthy debt structure and maturity profile in support of our growth strategy.

Finally, we continue to focus on cash flow generation and deleveraging with the objective of reaching our medium-term target of 3 times net debt to EBITDA. This concludes our discussion on the consolidated financial results.

I will now let Suso wrap up our presentation with his final remarks before we move on to Q&A.

Thanks, Gisele. Before we open the call for questions, I would like to end my remarks with our outlook in near term priorities.

Please turn to slide 17. First, we remain on track to deliver adjusted EBITDA growth of at least 20% in FX-neutral terms in 2024 as the fundamentals of our operations remain strong. Peru will continue to have a very material and positive impact on 2024 growth, while growth in our operations in Mexico will be more back ended towards the second half of the year as the aforementioned initiatives mature into the second half of the year in 2025.

Finally, in the case of Colombia, we will grow moderately within the context of prioritizing cash flow. OncoMexico would become another key growth driver in the coming years as we leverage our 35 years of experience with OncoSalud and leverage that data now [Auna sagutas] capability to roll OncoMexico at scale.

Lastly, we remain excited about Auna's future, given that we are only in the early stages of penetrating and consolidating Spanish-speaking Latin America's highly fragmented, inefficient, and underserved healthcare markets with our proven operating model and scalable regional platform. For perspective, despite our size and scale, we only have 1% market share today. So a growth runway is quite low.

As always patient centricity and value-based care are at the heart of what we do each day with a focus on providing long-term patient care and excellent medical outcomes through prevention, detection, and treatment.

With that, i conclude my remarks. Operator, please open the call for questions.

(Operator Instructions)

Samuel Alves, BTG.

Thanks. Good evening. Suso, Gisele. We could have a one -- two questions here from our end.

The first one regarding the deceleration in top line in Mexico. What do you guys believe that drove business deceleration? What caused mostly by a total comp effect versus a 2023 in second quarter? That's the first question.

And the second question regarding Colombia. You guys comment on the press release about increasing the impairment for PDAs. Just as a clarification if you guys could provide like the amount of PDA that you're provided second quarter results and how do you guys are monitoring this situation? Thank you very much.

Thank you, Samuel. with respect to Mexico, I'm not concerned -- there is some seasonality as we discussed in the first quarter, no, but we are working in high complexity. And the shift to high complexity. So it has a certain impact that you will see very positive in the second half of the year. So of course see how high complexity is penetrating the revenue mix and how are physicians hunting is delivering the right doctors and the right incremental volume in what we want to be doing in Monterrey. So I'm not concerned. It's in line with what we expect somewhat.

With respect to Colombia, I don't know, Gisele, if you want to respond to a summary?

Yeah, sure. Samuel, could you repeat the Columbia question, which I couldn't hear that well on this and?

Whether it's the impairment --.

Then you had a comment that you guys are making the press release about the increase in the impairment for PDAs for doubtful accounts. Just wish you guys could provide the amount of PDA that will jeopardize in the second quarter results. And if also guys see risks for higher PDAs in the coming quarters.

Yes, sure. Of course. So the impact of the additional impairment reflected in the second quarter is approximately $750,000 in the second quarter. And this is due to the fact that we have increased the impairment recognition given the current market context in Colombia.

We see that accounts receivable as you've seen in the press release are stable versus what we saw last quarter. We think that there will be a slightly higher recognition of impairment in the year to go probably consistent to what we're seeing in this quarter. But this is mainly just reflecting a higher risk situation of the market currently.

Thank you very.

Thank you, Samuel .

Leandro Bastos, Citi.

Hello, guys. Good evening. And I have two questions as well. First one, if you could just comment a little bit the early impressions of OncoMexico, the launching in July, how you're seeing kind of -- how the product is kind of evolving in the region? That will be the first one.

And then the second if you could talk a little bit about margins. In Peru, there was a big increase year-over-year, especially in hospitals. So just to understand whether there was any one-off last year and where are the main levers to increase margins at both hospitals also OncoSalud despite kind of a rising MLR. So if you can just kind of provide some color on what is your [ER] I think would be helpful. That'll be it. Thank you so much.

Thank you, Leandro. Gisele, let me take the first one and maybe half of the second one and then you can complement. So on OncoMexico -- And thank you for the question. So we are -- our goal of course OncoMexico is to lead in the long term private oncology market in Mexico. And to do that, we're deploying a set of initiatives now.

As you mentioned as of July 1, we launched OncoSalud B2C insurance product for direct sales in our hospital floors. We have launched it in a pilot mode to test product market fit and to learn about the commercial channel and how they are performing. This is for us at a critical stage for a predictable future escalation of the commercial efforts of OncoMexico.

So we have put a small sales team in each of our hospitals to start creating awareness of the product. We have achieved some sales, a lot of leads. And we feel as enthusiastic as we are opening new channels in the weeks to come. New channels, we're opening, I think, a week from now to research our digital sales. After that a couple of weeks or so, tell the market and sales. And also we were working with a large broker for B2B employer negotiations.

So we are convinced that this product represents a new era insurance in mono-risk insurance in Mexico. It is clearly a disruptive product that doesn't exist in Mexico. And engagement with our sales forces is really rich.

In addition, when we see OncoMexico, we are in different stages as well as negotiations with two large payers in Monterrey, offering them solutions to their challenges, for example, a breast cancer, value-based contracting model that we are leveraging, of course, in Colombia and Peru. This is the first of its kind in Mexico. This would allow Auna to build the capacity to serve payers and position Auna as a value-based oncology organization that as part of the solution to the raising health spending in oncology in the world, but in particular, Mexico, of course, now.

And in addition to that very much related, we are also in the advanced stages of a physician practice association model with the most reputable oncology group in Monterey. So this association will boost our local oncology activity and of course, some help to build a local oncology centers of excellence that we have planned.

I have a question Leandro because we are very much focused on this and I love it that the market is focused on this as well. This is the highest priority projects we have, given that it does not consume capital until later stages, so we are of course, using the installed capacity in Monterrey for the deployment. And it promises a total addressable market to at least 10 times what we have already developed and harvested in Peru. So that's on OncoMexico.

And on Peru, I would just like to introduce the responses come from Gisele, it is, again what we have done and what we not know how to do, and how scale works in our favor. Peru is harvesting with very successful integrated model vertical, integrated model of care. And then the more we penetrate those sales with that or revenue to that, the more scaling grant, the higher margin is also delivered. Gisele, if you can you complement this?

Yes, of course. Thank you, Suso. Margin for the consolidated Peru business will be at approximately 20% level for Peru this year. And you guys already saw us at 20% in the first quarter. So the 21% that we're seeing this quarter is just basically consistent with that and maintaining the gains that we had already seen in the first quarter of the year. Growth versus last year as far as the EBITDA in Peru does have a slight seasonality impact in the base of last year because of some SG&A seasonality last year. However, the 20% margin levels for this year are sustainable, and that is what we should be seeing in 2024.

Great, guys. Thank you so much. Very clear.

[Paul Rischapira], Morgan Stanley.

Thank you, Suso, Gisele for the opportunity here. So two questions. The first one, again about Colombia, we know that the discussions about the healthcare system seems to persist there. How are your risk assessments about future impacts? And notably in terms of the cash flows from EPS's or for address or even risks of having to negotiate tickets and other things like that? So a little bit on your risk assessments about the country.

And second question about the MLR in Peru, we saw it's kind of varying a little bit very not now. So if you see that is a problem of seasonality or the fact that the mix of the B2B mix or if there is any influence on freshness of wallet or lack of freshness of the wallet, if there's this differences in designs of policies or health technology pressure. So whatever reason that is making the similar oscillates. Thank you.

Okay. Thank you very much. So I'll try to get direction in both and maybe you can complement, Gisele. So on the first on Colombia, I think we've seen the worst of it. A lot of discussion on the reform that didn't pass, a lot of pressure. Yes, an intervention of a large payer. But with the agenda these intervening payer should perform better than whenever that intervene. So in terms of a hospital group like that, we do not see nor our accounts receivables are growing in number of days.

And notwithstanding that of course we're risk averse and we've taken a position to make sure that our revenues do not have risk of collections. So you'll see -- I think we could -- if we didn't have a consideration, we can grow very fast in Colombia, but we are now being very, very conservative and say, listen, the mixture that we -- everything we -- every service that we deliver and we issue account receivable is because we're going to collect it within the days that we have a policy and not anything more than that.

So you'll see us growing, but we could grow faster, but we want to make sure we don't take any more risk. In general term, I see Colombia and the whole discussion in the healthcare sector, I think, being directed to a an important and success solution in 2025, as I like to recall everybody, 85% of the hospital in hospital groups in Colombia are private.

All of us depend on the payments system working well, that has been a very big concern of central government and as well as many regional governments. And that puts pressure on all the different stakeholders to make it work. And so that I would say, as an introduction to Colombia. Gisele, do you want to add something else?

Yeah, I would like to add to just as we mentioned earlier, our accounts receivable days have been stable versus last quarter, as well as the net cash conversion cycle. So basically as far as our risk assessment given the market context we are, of course, prioritizing cash flow and we will be maintaining our accounts receivable days. And we will be managing the business as a function of maintaining those days stable.

Yeah. And on the MLR, Paul, so first of all, clarifying we calculate our MLR for healthcare plan business on a stand-alone basis for the insurance subsidiary. Therefore, if a hospital subsidiaries increase in inter-company fee, this is of course, is affected MLR. So the increase in our oncological MLR versus first quarter 2024 is primarily due to higher intercompany fees charged to the issuance subsidiaries. And we made an internal policy change where we used to charge the insurance company -- the average cost of treatment of a third party payer. And now we are putting a higher hurdle to the insurance company in putting the highest private payer for that service.

So it's a higher threshold, it does not affect that as all. I do want to say this, it changes the number a little bit, but this is the way, we make sure that the MLR is always tell you management, the healthcare network has good margins and there's no subsidy from one side to the other.

The other thing that I wouldn't like to share, again, this effect is eliminated at the gross margin level. So in the healthcare plans business and gross margin is flat versus Q1 of 2024. We do not expect oncological MLR in the low 50%s to change materially because as you might recall and as we've represented in the past, we continue to adjust our plant prices accordingly. So remember in Auna, MLR is not a result, but it is baked into it. We make sure that we price according to the MLR that we want. And that flexibility to do that in Peru and in the future Mexico is a very attractive condition to the market.

Do you want to add anything on MLR, Gisele, just to give complement.

Thank you, Paul.

No, I think that was quite thorough.

Thank you, Suso. Thank you, Gisele.

[Joseline Jensen, Liquor].

No, thank you very much, Suso and Gisele for taking my questions. Well I've seen that in terms of consolidated cash flows, the net [cost] of operating activities cover the interest expenses. So but still there is the free cash flow is negative. So my question is regarding CapEx and we amounts of CapEx Are you expecting for the remaining of the year and through next year? And when do you expect to have a positive free cash flow?

And regarding MMA activities and dividends payments, are you still thinking of not do any of those activities or pay the dividends until that net leverage reached its 3 times target. Those are my questions.

Okay. I'm going to start responding to that with the last part and Gisele you're going to explain our cash flow. So we are a growth company and we don't -- we have a dividend policy of no dividend. So it's not a question of leverage. I don't think we'll change that policy for the foreseeable future. So we see ourselves as very much reinvesting our free cash flow in the future, when those start to accumulate in growth more than dividends? I think most of the shareholders know that some of our policy, and that's how we envision ourselves in the future.

And Gisele on the free cash flow, please.

Yes, of course. Thank you for the question. In the year to date numbers, you will note that we have an impact due to an extraordinary payments for the earn-out obligations related to the IMAT Oncomedica acquisition. So that was a nonrecurring payment. In the context of the year to go numbers, we should see in the year to go organic free cash flow covering the interest payments. And furthermore, as far as the annual CapEx numbers and plans, we do not expect annual CapEx to be more than $50 million for the year on a consolidated level?

Sorry, $50 million?

$50 million for the year.

Okay. Thank you very much.

[Alejandro Gomez].

(Technical difficulty).

I'm sorry, Alejandro, you were breaking out. I think your question is about the decisions, right, in Mexico?

Yes. I mean my question is regarding the margin contraction for Mexico. [So the question this, I mean], how relevant is the physician recruiting process and what's the expectations going forward?

Okay. Well, first of all, I mean, we see a lot of, as I mentioned before, some seasonality in Mexico. Our expectation in margins in Mexico is that directionally we are on the right track, gaining momentum in the growth, but in line with our expectation.

Now in terms of acquisitions, yeah, I think we rolled out a winning new physician model that is attractive for high volume, independent physicians; very compelling for younger physicians looking for, it's quite a home with institutional capabilities in their practices were volume best practices and support are the key offerings. And I think we are delivering that. I'm excited of what we're collecting. We reformulated the offering to physicians and not only to produce approximately like 300 new hires, but also to boost productivity of the 1,000 doctors that we have already.

This has already produced incremental revenues of the new doctors. And on the hunting, we see also really good success. I mean, we're hitting today at 50% of the doctors that we target we are able to hire. So we're hitting -- we have a great I think a high success factor. And remember, we do this very deliberately, especially in high complexity. And high complexity, 27% of those 300 doctors, as I mentioned are in the specialties that we procure that isn't high-complexity, and that is producing at least almost 40% of the incremental revenues in -- of the new doctors.

So we are excited about what we're seeing, changing the way doctors are compensated, doctors are hired in Mexico, something we've done elsewhere, but it does take time. And we do and harvest gradually incremental value from the different way that we relate to doctors. We are -- again, I would like to say we're on track with what we expect and we're gaining momentum.

But this is not a step function. This is a gradual increase, with more and more adoption in what we what we do well, which is high complexity, more and more doctors also capturing their spillover effects of adjacent services of what they bring to our hospitals there.

Okay. Thank you.

Gisele, do you want to say anything about the market in Mexico? Or do you want to complement something or --?

Yeah, what I would complement, Alejandro, is that margin impacts versus last year are more -- don't really have anything to do with the physician model. It's more related to the increases in costs and SG&A, given the investments that we're making on the local and regional level that we mentioned last quarter in our release.

Yeah, that's a good point. And I always want to remind everybody, I mean, there is a step-up in all these indirect costs because the only way is a little more expensive, scales really nicely, very predictably has a lot of value to the patient, to the medical community, medical resolution and good sustainable margins. But there is a little bit of a step-up because in most of the recent assets that we've acquired have very different standards to ours.

I think that's stable now. Do you see for the future? I don't want to commit to anything, but I think today the standards of operations in all our hospitals throughout the regions are the same in terms of compliance, in terms of security to patients, in terms of about the protocols, I think I'm today all necessarily I think have ongoing expenses that are very much related to the AunaWay and the centers we have defined in the AunaWay.

Thank you.

Thank you, Alejandro.

Caio Moscardini, Santander.

Hi, good afternoon, Suso, Gisele. Good afternoon, everyone. So the first question is regarding the G&A level in Mexico. Would like to ask if we are already at a more normalized level, or is there further investments to be made in the region.

And the second question regarding OncoSalud price hikes. What type of price hikes are you expecting for the next cycle? Are you going to reduce the level of medical loss ratio through the price hikes or you were okay with this current level So that's it. Thank you.

So I'll start with the second one. So we have had 35 years of 50% to 55% MLR in oncology. So we're not going to deviate from that. And that's why we repriced. So that was at 50% and 55%. This is the way we manage the business it's nothing that's related to one quarter or the next quarter. And this is a continuous way we operate MLR. So no, there will be no change in the MLR and where we will fall in the future, I don't plan it nor expected in any other way because of the way we run the business.

And the first question was --?

(technical difficulty) G&A level in Mexico.

In the case of SG&A in Mexico, we are now at a more stable absolute level, as you all know, this quarter second quarter also versus the first quarter of this year, right? That's on an absolute level, we are more normalized. Growth rate versus last year basically had a little bit more volatility because we still had an impact from the reclassification that we mentioned on last quarter. So while you will see it growing less this quarter versus last year, once we clean out those impacts, it was still growing similarly to what we saw in the first quarter. So what we should see for the year to go is stable normalized levels on an absolute level versus what we saw this quarter.

That is perfect. Thank you.

And there are no more questions from the phone lines. So I will now turn the call over to Anna Maria Mora, who will proceed with questions from the webcast platform.

Thank you, operator. The first question that we have from the webcast comes from Estela Strano from JPMorgan.

Could you please provide detail on how the accreditations and relationships with doctors are evolving in Mexico? Also what are the company expectations for ticket mix regarding volumes and complexity? Thank you.

Great. I think I did answer part of this, but maybe I can add a little more color to it. So in terms of the physician hunting and the end results and as I said before, we've added 221 new doctors and almost 30% of their are in high-complexity practices, like trauma growing rapidly in new doctors, general surgeons, of course. We were growing rapidly as well in obstetrics and gynecology in them, and that's going very well as well as in cardiology.

So you see, again, the coincidence of work we plan to do and what we are actually harvesting though in terms of the physician manner. So again, it is two pronged approach the way we relate to physicians, it is about productivity and being demanding and managing doctors and the value they deliver to our facilities in Monterrey, how much of adjacent services we collect from them. And of course, it's also about hunting for new doctors in the specialty that we want. And I think as I said before, this is coming as we expect and will see -- you'll see us harvest this in the coming quarters.

Did I miss the question, Annie? There was a part of a question?

No.

That was it. Okay. Thank you, Estela. Next question, Annie.

Yes, so we have a couple of questions in regards to Mexico as well. The next one comes from [Pedro Floriani], what can we expect in terms of occupancy rate in the Mexico hospital of second half of the year? Probably the first half of the year truck in terms of what was budgeted and how should we see that evolving?

Great. So, I mean, we don't feel very comfortable in giving a lot of guidance on occupancy, especially occupancy on some bands, which is such a random matching a number. When we are seeing high complexity, we're looking at surgery rooms and chemotherapies and radiation treatment rooms and their capacity. And what we do see is that high-complexity occupation, the services that we deliver are growing. We see it in surgery. We see it in industry hospitals.

We see them in practice as a trauma as I mentioned before. The new doctors, urology is growing very nicely, Neurosciences is growing at a very high click as well; something we're not a specialist in, but it's growing very quickly is also plastic surgery, and cardiology, as I mentioned before. Again, the practices that we're really good at and that we've captured.

So we see the treatment room, the surgery rooms, and their capacity, they're just growing much faster than bed utilization. Now I don't want to not answer the question. We do have a plan to increase bed utilization in the hospitals and we see that in the second half of the year, you will see the increase in how we fill up more of the beds in the three hospitals we have.

So I would like to -- I don't know Gisele you want to comment on that or leave it at that?

What I would add is what you've already mentioned. As far as trends for the rest of the year, we continue on track to deliver our consolidated guidance of 20% EBITDA growth FX-neutral?

Yeah.

Thank you, Suso. Just one more question this comes from [Saikat Majumdar]. The question is are you seeing any positive impact from packages and bundling services in Mexico?

Well, definitely. That's a key element of our growth in high complexity. And I can only see how we are growing some packages, some are simpler packages in terms of [mostcentrics] and others, a little more complex. That is delivering growth. In addition something very attractive that will be done in our hospital recently is to put them counters to make sure that we capture any additional prescription that we call cross-selling education services.

So in most of the floors, the patient will leave and before they had the elevator asking, what's the doctor prescribes, what is the next test? When is it? Can we make sure that those tests, those imaging, those pharma, those lands captured within our hospitals, and that's also measured on a weekly basis, and that's also having a great impact as well.

Thank you Suso. Well, at this point, I believe all of the questions have been answered. So I will pass the call back over to you, Suso, for your closing remarks.

Well, thank you again, everybody. We appreciate everybody joining us today. And been nice meeting some of you during our recent Roadshow and at investor conferences in the US and as well as Europe. We are keen to continue engaging with our shareholders as well as prospective investors. Please let us know if we can do anything better in terms of these calls. We trust that our recent financial and operating results to make clear the fundamental strength of our owners, the owners in diversified and integrated healthcare platform, as well as our ability to scale it further in the region. Please do let us know if we can do this better. Thank you very much, everybody, and have a great rest of your day.

This concludes today's conference call. You may now disconnect.