Centro de Imagem Diagnosticos SA
BOVESPA:AALR3
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Centro de Imagem Diagnosticos SA
Earnings Call Analysis
Summary
Q2-2024
Allianca marked a pivotal Q2 2024 by reporting its first net profit in nearly three years, a testament to successful recovery strategies. The company achieved record quarterly gross revenue of BRL 338 million, growing 5% year-over-year. Cost reductions and growth in B2B partnerships fueled the highest adjusted EBITDA in history at BRL 85 million. Imaging exam productivity hit a historic average, reflecting strategic asset optimization. The EBITDA margin soared to 27%, and net debt leverage declined to 2.7x. Allianca's future focuses on expanding revenue through partnerships, optimizing resources, and maintaining financial discipline, positioning the company for sustained growth.
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Thank you, ladies and gentlemen, and thank you for waiting for this Allianca's Second Quarter 2024 Earnings Conference Call. We will be hearing today from Mr. Ricardo Sartim, who is the company's Chief Medical Officer and Chief Operating Officer. We're also joined by José Ramos, who is the Legal Director and Investor Relations Director.
[Operator Instructions] This conference will be recorded and will be available on the company's Investor Relations website as well the full material from our earnings release. Just a few important messages. All the information presented here as well as any statements made during the conference call about business project prospects, projections, operating targets our assumptions and beliefs of the company's management. Therefore, they should not be interpreted as guarantees of future performance. Future considerations involve risks and uncertainties that may or may not materialize. Investors should understand that factors such as general economic conditions, market conditions and other operational aspects may influence the company's future performance.
To start the presentation, I'd like to hand the floor over to Mr. Ricardo Sartim.
Thank you. Thank you so much for the introduction, this is Ricardo Sartim, Company's Medical and Operations Director. I'd like to thank you all for coming. It is such a pleasure to be here with you today to announce the results from the second quarter of 2024. Next to me is Mr. José Ramos, the Company's Legal and Investor Relations Director.
Going straight to Slide 4 of the presentation. This quarter has been an important milestone for our company, and I'd like to highlight some of the key points that reflect our very positive trajectory and the impact of the strategies we've implemented. First off, after nearly 3 years of recurring losses, we are pleased to report that we now have a net profit. This is a clear sign that our recovery actions are generating expected results and that we are on the right path to financial sustainability.
Another important highlight is that the company has achieved its highest quarterly gross revenue totaling BRL 338 million. This result reflects the strength of our operations and the effectiveness of our growth strategies. This record revenue combined with significant reduction in cost and expenses, which is the result of a turnaround process have resulted in the best adjusted EBITDA in Allianca's history, totaling BRL 85 million. On the graph on the right, you can see our historic achievements as well as the EBITDA margin, which also reached levels we have not seen in years.
Moving on to Slide 5. As already explained, in this quarter, we reached a significant milestone with gross revenue totaling BRL 338 million billion, which accounts for a 5% growth compared to the same period last year. There have been a number of factors that have contributed to this growth, specifically; one, progress in terms of our commercial partnership strategy, B2B, which was boosted throughout the quarter by our start-up of diagnostic imaging services in 3 units in one of the country's main hospital chains. The first graph shows growth of over 230% in this line of business compared to the same period last year.
I'd also like to highlight the increase in the production of imaging exams which has been a result of our asset optimization strategies. On the graph on the right, you can see an increase in productivity in our imaging exams, reaching an average of 33 exams a day per MRI scanner. This is a historic average. These results clearly demonstrate that our strategy is bearing fruit.
Moving on to Slide 7. We're going to talk a bit about evolution and composition of our revenue. In second quarter 2024, gross revenue hit a record of BRL 338 million, an increase of 5% compared to the same period last year and 12% compared to the first quarter 2024. In the graph on the right, we see participation in business fronts and how this B2B vertical has become more significant and relevant, as I mentioned earlier.
Moreover, we've expanded our accreditation with one of the largest and most relevant national operators, resulting in a significant increase in the base of beneficiaries with access to our brands. This move has not only strengthened our position in the market but has also expanded our reach, allowing us to offer our services to a greater number of clients.
Now diving deep into our revenue. As you can see, revenue from MRI scans was up compared to the same period last year. This was driven mainly by higher machine productivity, as I mentioned before, and it reached its highest level on record. Other modalities grew marginally. Even though there was an impact, they were impacted by a slight drop in the average ticket, as we can see on the graph on the left.
Slide 9 shows everything that we're doing in terms of costs and expenses. We've seen a reduction in all lines, with the exception of medical fees. Highlighted here is a reduction in human resources, where we've finalized operational restructuring of our back office, as we mentioned in the previous quarter and reduced by 4 percentage points net revenue. These changes ensure that the organizational structure is more aligned with Allianca's current situation.
Looking at the cost of medical fees, we kept up our efforts to gain productivity by integrating our clinical staff. On the other hand, we had a marginal increase of 1 percentage point in cost as a result of the expansion of our B2B business line and this is more representative than in net revenue. However, the margins of this business line are similar to other Allianca units and the overall unit cost of medical fees remain stable.
We saw a significant 15% reduction in the cost of medical and hospital supplies and services year-on-year. Also here, we maintained our previously mentioned strategy of: one, reviewing care protocols with standardization of controls and the use of inputs and therefore, guaranteed reduction in waste; and two, renegotiating the main inputs and the establishment of strategic partnerships with our primary suppliers that includes price reductions even though the macroeconomic scenario showed significant inflationary pressure. Our diligent execution of a strategy to readjust costs and expenses and practically all items led to a margin gain of 5 percentage points. We continue with our strategy of strict control of disbursements in order to maximize operating cash generation.
Slide 10 now. Let's comment a little bit on the evolution of our adjusted EBITDA. It's a summary of everything that we've mentioned thus far. Graphically, there's been significant evolution in this metric. it reached its highest value per quarter in Allianca's history, accompanied by an increase in net revenue of 5% and an increase in gross profit of 9%, the increase in EBITDA is -- corresponds to, one, actions to regain profitability, like I mentioned, such as working to achieve significant reductions in input costs, in support laboratories and in third-party services.
And, two, in the same vein, as I mentioned before, steps to reduce G&A expenses by finalizing the resizing -- by finalizing or completing resizing of the company's admin areas. We see a development of adjusted EBITDA, corresponding to an increase of 28% compared to the same period last year and an 81% increase compared to first quarter 2024. The EBITDA margin in this quarter was 27%, which marks a return of this indicator to healthy levels for the diagnostic medicine sector.
Slide 11 shows the company's great achievements in this quarter. We basically returned to getting a net profit. After nearly 3 years, we managed to achieve a positive net result, reaping the rewards of the strategies implemented throughout the entire restructuring process.
Moving on to Slide 12. I'm just going to mention quickly our financial -- or amortization. You can see on the graph on the left, we see amortization schedule for loans and financing and cash and equivalents balance totaling BRL 255 million at the end of the quarter. On the right, you see Allianca's financial leverage. It reached one of its lowest levels historically at 2.7x net debt LTM adjusted EBITDA. This is a very important milestone for the company. It speaks to our commitment to continuous cash generation as well as to our obligations to creditors. And with this, we aim to improve our capital structure in each and every quarter.
Moving on to Slide 14. And we're going to talk a little bit about our successful strategy, which, as you can see here, and this will guide us into our prosperous future. It's based on 3 pillars, and I'm going to discuss them in detail right now. Pillar 1, revenue expansion. Our growth strategy is centered on expanding revenue through increased partnerships. We firmly believe that collaboration with other organizations will allow us to reach new markets and new clients. This will enhance our presence and the services offered.
Moreover, we will maintain effective management of existing assets such as optimizing use to maximize value. We're also committed to continued development of the clinical analysis sector. And of course, we will explore strategic and opportunistic M&As that will position us at new levels of competitiveness, presence and innovation.
The second pillar is resource optimization. Optimizing human, technological and financial resources is a key point in our strategy. We're constantly reviewing our processes, our cost structures and our organization to guarantee that we are operating as efficiently as possible. Maintaining a structure appropriate to our size and regularly reviewing contracts and scopes of work allows us to adapt quickly to market changes and of course, to improve our operational performance.
And last but not least, Pillar 3, financial discipline. We strictly adhere to the principles of financial discipline, keeping our capital structure balanced and managing our debt with long-term and attractive rates. This ensures that we are prepared to face economic challenges and to take advantage of all the growth opportunities with due financial security.
But this strategy is only a winning strategy if it is based on a solid foundation. And to that end, we are very proud of our base. This base is reflected in our national popularity, strong and recognized brands in the markets, all the markets in which we operate and primarily by over 5,000 employees and 1,600 partner doctors. We firmly believe that by focusing on these pillars, we are positioning Allianca for future success and innovation. We will continue to be a benchmark in the health care sector.
And finally, it's very important to mention that this combination of reach, reputation of human talent, all of this reinforces our commitment to the future, promoting health and holding firm to our purpose of continuous growth, perpetuality and sustainable value generation.
I would like to thank each and every one of you for coming, and we will now open to questions and answers. Thank you very much.
[Operator Instructions] The first question is, could you please explain a little bit more about the partnerships that were mentioned for subsequent events?
Yes. Thank you very much for the question. In our release, we mentioned and this is also part of our strategy for opening for growth or focusing on growth so that we can really reach the public government market. We work with a public institution for the state -- with the state of Sao Paulo, and we'll be able to work with some of their customers in the Sao Paulo units and in the Paraiba Valley area. This was a contract that we signed through a new bidding law, and it has a 1-year term.
We've also begun talks with a number of public and government agencies that have limited access to health, especially when it's highly complex medicine like nuclear medicine. So what we're doing is offering access to the public to the government market to these very complex medical needs. So what we've done is started negotiating and started talking with our partner operators. Clinical analysis is going to be wonderfully helped with this. We're going to have an increase in results in the second -- that's what will also help the second quarter of this year and moving forward.
[Operator Instructions] We have one more question. Can we expect a growth in the B2B business line? What are your expectations?
Yes, this has been a wonderful surprise with these commercial partnerships and the growth in these commercial partnerships. We are working with a current contract already in place for image diagnosis with 3 hospitals, and this contract includes 2 further units where this is going to be implemented in the next 60 days. And we're very optimistic. I think the results speak for themselves. This is a very significant area for us, and it allows us to increase capillarity to increase our presence and to diversify our revenue. So this has been very positive for results.
And there's also additional benefit where we import and help our cycle -- our financial cycles. This helps us with our operators and also decreases some of the financial strains that we face. So we're very optimistic with this business chain, and we have accelerated prospects of new clients.
[Operator Instructions] We have one more question. In terms of liquidity, are you improving? Are you working to improve liquidity?
Thank you for the question, Juliana. As you know, the company has a very long-term view on this. So we did have an offer for minorities and then there was a control acquisition. And of course, we do have shares. We are in a novo mercado or new market, so that we can recompose the free float of the company, and this will continue to benefit us and for all of the governance changes that we are implementing. So these actions that we're taking are being addressed. And I believe that very soon, we will see that most of this free float is properly in place and replaced.
One more question. Could you please comment on what we can expect in terms of volumes of images and types of imaging for the second quarter?
Thank you for the question. We're quite optimistic. As I mentioned before, the expansion of these accreditations, just in the main markets where we're operating, we have an explosion of 500,000 more lives of supplementary patients that didn't have access to our services before. We've also taken some steps to improve the productivity of our equipment, improving yield and profitability. So we've made a significant investments so that we can improve these technologies, implement technologies like artificial intelligence.
So that gives us extra gains. On one hand, we're able to improve productivity of the equipment and that improves profitability. And also, we offer our customers patients better experiences because they spend less time in the units, and they're better able to optimize their time -- to better use of time. So we're very optimistic because these new accreditations with this optimization that we're implementing, we hope to see significant gains for growth in imaging exams.
And in terms of ticket, we work directly with the operators. So this has been excellent. We have relations that expand access and also check inflation. So we believe that we will end the year with being able to reach a ticket that replaces or adjust for inflation.
[Operator Instructions] Another question. There have been significant increase in accounts receivable. Can you please explain what happened specifically for working capital?
Thank you for the question. This is representative of our ongoing work for better financial health. We work very closely with health insurers to improve the financial cycle so that we can address financial needs and the economics of the entire system. We've been able to better address these financial cycles so that it's more sustainable for all parties involved.
And also, as I mentioned, this expansion of our B2B which allows for us to receive revenue in a more short -- faster with health insurance, also helps us in terms of working capital. So it's part of our ongoing efforts and it's a challenge given the health system here, the health sector in this country, but it's allowing us as a company to be more healthy, financially healthy.
All of the questions sent in were answered. I now pass the floor over to Ricardo Sartim for his final words.
Once again, I thank you all for being here today. These results from the second quarter 2024 show that this is the end of extensive work in my 2 years of the company, when there was a change in control. And the entire team has been working over 5,000 employees and collaborating doctors have all been helping us to bring the company back to a level and to this wonderful point where we should be. And so these results really reflect the work of an entire dedicated team. So I really wanted to thank everyone at Allianca for all of these efforts because this is a result of all of your hard efforts. Thank you, and have a wonderful afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]