Kora Saude Participacoes SA
BOVESPA:KRSA3
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Good morning, everyone, and welcome to the call results from Kora Saúde regarding the first quarter of 2024. My name is Rhayza Malone, and I'm the Head of Investor Relations team at Kora Saúde.
The first quarter of '24 had significant progresses in the operational and financial side, of course. We started the year with several actions with the goal of keeping the sustainable growth of the company, bringing quality medicine to our patients, offering compensation plans at sustainable prices for payers, and at the same time, ensuring the profitability of our business. And to explore a little bit more of all the actions, we have Dr. Benjamim, our CEO and Founder of Kora Saúde; and Elias Leal, our CFO and RI.
This event is being broadcasted live and you can follow the shared material in our webcast screen or you can download this presentation. The link is already available in our Investor Relations website. It's important to remember that at the end of the presentation, there will be a Q&A session. [Operator Instructions]
Before we start the presentation, it's important to highlight that all possible statements that are made during this presentation that are connected to the year of 2024 and the future of the company are not a guarantee of results because they are connected to risks, uncertainties and external circumstances that are not be understood as a guidance.
Now I hand the floor to our CEO, Dr. Benjamim, who will share with us the highlights of the first quarter of '24. Dr. Benjamim, the floor is yours.
Thank you, and good morning. It is a pleasure to be here with all of you today, and another results call from Kora Saúde. I will go over the main actions and the main results from Kora Saúde in the first quarter of 2024.
So as you can see on the screen, we ended the first quarter with a net revenue of BRL 565 million, 2% above the first quarter of last year. But it's important to highlight some other important figures. We have been conducting some actions in order to improve, in our opinion, our performance in the midterm. These actions include, for example, we reviewed the procedures that use a high-cost OPD is something that we have been doing for quite some time. And since the middle of last year, this action was intensified.
So strategically speaking, some types of surgeries where the OPMA would represent 70% or 80% of the cost and would leave very little to hospitals. We have substantially decreased the volume of these procedures, obviously, reducing our revenue overall.
The second initiative has to do with medical fees, especially in the Federal District where this action actually started. In the Federal District, we have an association that deals with medical fees, and they do this in a way that we find very appropriate. So most medical fees that used to come to our accounts and then would be sent to physicians is today done directly via this Medical Association from physicians in Brazil. So the association received directly from health insurance operators and send that to physicians, especially for surgical procedures. So surgical procedures where medical -- physicians are not directly certified by the operators.
This is going to continue in a way that throughout the year, this is an action that will be intensified. And we did an important turnaround in the Anchieta Ceilândia Hospital. During the year of '23, we discontinued our partnership with different health insurance operators. And in the second half of last year, we have another -- a more healthier scenario in this hospital than we had before.
And last but not least, starting in October or November last year, we discontinued our partnership with five health insurance operators that were quite overrized 1 or 2 in Espírito Santo, 1 or 2 in Brasília and in Ceará. And these are companies that, for some time, we had been trying to improve the terms of our partnership and because we were not able to progress in those improvements. We have suspended some of these partnerships temporarily until we can negotiate better terms. And in other cases, we terminated a partnership in a more definite way.
All of them due to default issues, issue -- a default that was not solved or because of very long payment terms, though health insurance companies, [ Cerimedo ] had average, a good average ticket and a low default would take us 8, 9 or 10 months to pay, some because of initial -- that was a very above orders level and because of very low ticket that we were not able to renegotiate. So the value from these partners is quite relevant. It's above BRL 10 million, above 5% of the core revenue.
So when we compare the first quarter from last year when these companies were part of our revenue with the first quarter of this year, when these operators are no longer partner, we still see growth, showing the resilience and our ability to face these types of challenges. And our EBITDA grew much more. So we ended the first quarter with BRL 123 million in adjusted EBITDA and with a cash generation that was above average, almost more than BRL 100 million of cash generation that Elias will further comment. EBITDA, around 22%.
The oncology revenue is constantly growing, BRL 43 million in oncology revenue, reaching 8% of our revenue, more than 70% of occupancy rate, 120,000 patients a day, more than 100,000 visits today, or a month, a total of 310,000. Growth in our imaging tests and surgical volumes in line with what we were doing before.
Let's remember that the first quarter of the year is always the worst quarter of the year for hospitals, usually speaking, even though in February, we had 29 months, it's still a shorter period. But even with those factors considered, we were able to improve our numbers quite significantly.
It's important to remember that different from other regions we were not very much impacted by the Dengue fever epidemic. The only area where we operate that had more cases of Dengue were Brasília, so Espírito Santo, Cuiabá, Palmas, Ceará, Goiânia, in all these locations, the Dengue fever was not that intense or at least did not increase the rate of hospitalization. It only increased visits to the OR, emergency room. So that is what happened with our numbers in the first quarter.
Next slide. And you will be able to see now a little bit of the activities performed in each of our hubs, but we continue to have a very strong investment in quality. At the end of last year and in the beginning of this year, we reported a certification of several hospitals out of the 17 hospitals today, we have 12 that are certified with ONA 2 or 3, several hospitals have top performance ICU, measured by Epimed.
We are growing in the complexity line with a marginal CapEx in several of our hubs but still a CapEx of opportunities in investing in oncology, in SADT, in opening of new ICU beds, and hemodynamics, and this increasing the level of our complexity. And in the midterm, that is going to bring a very interesting return for it.
On the screen, we see some examples. The oncology maturation for bone marrow transplants is now ready to operate. Our growth in oncology, like I mentioned before. Radio therapy, we have already reached good results in the Meridional Hospital in Vitória. So we have surpassed that balance point. And some usual highlights with the Meridional Hospital as ranking first in the hospitals in the state of Espírito Santo.
In Oto, we see a similar scenario. We are investing in quality and certified hospitals to our performance ICUs, highlighting the oncology and in partnership with OTOCrio in Meireles, already reaching BRL 1 million in oncology revenue coming from Oto Meireles. Growing SADT, I don't know if you remember that, but we have internalized SADT from Oto Santos Dumont. On Oto Meireles Automates about a year ago. So that continues to grow.
At Anchieta, oncology in Taguatinga is another highlight. We started oncology from scratch there about 1.5 years ago, and we have already reached a balance point or breakeven with a lot of possibilities of growth, also investing in quality there with the ICU beds in the Anchieta Hospital in São Francisco. Like I mentioned before, in São Francisco, Ceilândia, we did a turnaround in the hospital, and we use that opportunity to do a branding thing.
So, and that was very important for us, and that is combined with a significant retrofit and modernization investment at the facade of the hospital that now is going to be called Anchieta Ceilândia. We opened 10 ICU beds. So now the hospital has 40 ICU beds close to 100 ICU beds now in operation. This new ICU is focused on neurovascular and cardio patients. All the apartments were renovated. So like I said, we continue to do CapEx investments with a focus on these opportunities.
Next slide, please. And finally, in Palmas, in the state of Tocantins, we also made some significant progress in oncology. We have increased the number of ICU beds, 10 ICU beds in our Palmas hospitals. I'd like to highlight the investment on the performance of the ICU beds. In Palmas, we created the first hospital with a recognized AVC care line and certified by the Angels Initiative, treating that care line for neurological acute patients. So once again, highlighting our work to improve the level of quality of the hospitals where we operate.
Some more numbers. Like I mentioned, we have capped our occupancy rate in the first quarter of approximately 76%, even considering the fact that we have ended or suspended some partnerships with a volume of revenue that represented 6% of the total revenue.
So when you compare the first quarter of '24 to the first quarter of '23, we had 6% more revenue and at least that same amount of more patients. And even with those changes, we were able to keep our occupancy rate and grow the number of beds in operation and the volume of hospitalization at was also kept showing once again the resilience of the business, allowing us to change and improve our high chart for payers without generating a negative impact on the operation, quite the opposite. We are expecting better results from now on after that change.
And now I'll hand the floor to Elias Leal to discuss some financial results and to continue with the presentation.
Thank you, Benjamim. In the first quarter, we -- our revenue grew 2%, like Benjamim presented versus the first quarter of the previous year. So we had pretty much the same revenue that we had in the fourth quarter of 2023. However, all those changes that Benjamim described happened. We are not working with five more insurance plans that represent 5% of the total Kora revenue and several other initiatives were also implemented.
Speaking a little bit more of these partnerships that ended, we had been negotiating with them for quite some time. And at a certain point, we decided that it was best to stop working with them. And when we met -- had a negotiation that makes sense for both side, we could resume conversation. Either the loss was higher, or the ticket was a little bit lower than we expected. Long payment terms. So these were health insurance plans that we're making our [ P&L model ] increase as a whole.
Some of them are partners. So that's why we have an open conversation to possibly resume our partnership and conditions that make sense to both parties. And in other cases, we were not able to evolve with the negotiations. So we interrupted the partnership. So even with that, even with losing about 5% of our revenue, we were able to grow 2% and recover the revenue that was lost after the termination of the partnerships. And again, in a quarter that seasonally speaking, tends to be weaker than the other quarters in the year. So we expect that the seasonality is going to be capped when we look at the future of the year.
Talking about the average ticket, there was a slight decrease, which is natural to see in the first quarter of the year, and again, driven by the OPMA reduction in revenue. So that was something that last year, we started working strongly on the second quarter of 2023. It's a revenue that comes with a high average ticket, but a low margin. So we have pretty much recovered the ticket from the first quarter of 2023 and with other SADTs, revenues like oncology and more margin in imaging and some others and overall, with surgical procedures and hospitalization.
Speaking of oncology, we continue to see a very strong growth in that line, reaching BRL 43 million of net revenue only from oncology. And that, of course, after the openings that we had in Brasília and in the state of Ceará last year. Let's remember that we opened the oncology department in Anchieta Taguatinga and Oto Meireles, both of those actions took place last year. And after that, growth has been quite significantly reaching a ramp-up in the past few months. Besides that, we continue to grow in Espírito Santo, where we have the largest amount of infusion centers, and also in the city of Palmas where we are the main infusion center for that state.
When it comes to EBITDA, we have had a significant growth in our EBITDA. We went from BRL 112 million in the first quarter of last year to BRL 123 million for this year. This growth comes mostly from the margin, we have improved our revenue, and we have significantly improved our margin in 1.6 percentage points. And again, mostly driven by the reduction of fixed costs in terms of staff and third parties. We are reducing -- the procedures would give us low margins like OPMA procedures that are very expensive and give us a very low margin and our growth in oncology that I just presented. So historically speaking, the first quarter has lower results in terms of occupancy rate, revenue, and elective procedures, but we see the seasonality that tends to happen in April and initial days of May.
When it comes to working capital, once again, we saw an improvement in supplies. So with gradual reduction in our stock level. We have now 15 days of stock and also an increase in the number of days of accountable payables with the growth in this quarter. So we continue to look for contracts and negotiations that are appropriate for this new moment of the working capital in the sector, and we are able to achieve good negotiations with our partners.
When it comes to receivables, there was worse in the average receiving because we ended the month in a nonbusiness day, operators are only paying on the next business day. Now on April 1. So we are starting to see an improvement in the financial condition of health insurance operators, and they are disclosing their results, and we see that from the conversations we are carrying out with them.
The scenario continues to be challenging, but we keep investing in control in our accounts payables and improving our internal process. So we can see the improvement in our cash that we start seeing in some of these health insurance operators. And because of that, we had another quarter with a strong generation of operational cash, showing the consistency and the sustainability of our results. 85% of our adjusted EBITDA turned into operational cash. So we are below -- above BRL 100 million in cash generation in the quarter. So we are going to keep working to keep that level of cash generation in the coming quarters, just like we did for last year.
In the first quarter of this year, we saw our debt growing because of that interruption of receivables that we did in the end of last year. However, our net debt, BRL 2.132 billion is at a much lower and much healthier level than we had in the first quarter of last year because of the reduction that we made in the end of the year with the sale of the [ Novo Anchieta ] hospital that we have already discussed. And considering amortizations, we have been working with our main partners from this company in order to address our amortization schedule that will start to happen strongly as of 2025.
Last but not least, it is publicly known, Kora has received from the controlling shareholders a letter with the request of General Assembly to deliberate on the voluntary left of the company from Novo Mercado and to make some adjustments in the social stature. After this exit, the controllers will schedule an OPA to change our level from A to B. This is a request from the controlling shareholders. It will be discussed by the company and the assembly that is going to happen in the coming days.
And we recognize as the management, the different advantages from -- it comes from in part and Novo Mercado and the advantages that has brought to the companies in terms of committees and improvements in governance, and the advantages that, that brings to shareholders. But we understand that this exit that was proposed by the controlling shareholders might contribute, so we can expand the number of alternatives for raising resources. And so we can significantly and definitely reduce our leverage with an improve in our capital structure.
And I think that's it. Thank you for your attention, and have a good day.
All right. Having said that, we are going to start our Q&A session. [Operator Instructions]
All right. We have received a question by Pedro Alves. And the question is, how do you see the improvement in the receiving deadlines for the coming quarters? Elias?
Thank you, Pedro. Well, in conversations with the different health operators, we see a mutual desire to improve this relationship. Because again, they realize that it is not sustainable to see this constant worsening of the payment terms and the percentage of loss. So we start to see that message coming from the sector. However, the result is starting to improve right now with the price increases that they are making.
So we imagine that in the coming quarters, we'll continue to see a gradual improvement of the results. And of course, that should reflect on an improvement in the negotiations in the pricing, and the return to the initial loss at lower levels, and an improvement in the payment terms that the companies have with us.
Our next question comes from Lucas Lopez. What is the impact of the changes in the compensation of the nursing staff in 2024 and how you see that for the rest of the year?
Thank you, Lucas. I think that's very important. We -- everybody remembers this discussion, a discussion that is -- has become effective since December -- the end of December and beginning of the year. So that has had an impact in the first quarter, a significant impact. We have had, again, almost 100% of our hospitals are -- have already implemented that no minimum wage for the nursing team. But even with that, we were able to see a 10% growth in our EBITDA in comparison to the first quarter of last year where that was not the scenario. In case that had happened then -- that hadn't happened, our results would have been even better. And the impact was much less than what was originally anticipated when this discussion actually started.
So this has already been implemented. So I don't -- we don't expect major impacts from that anymore and actually quite the opposite. Now with time, we expect to see some improvement in the level of our assistance now with this new scenario.
All right, everyone. Since we don't seem to have any more questions, I would like to hand the floor back to Dr. Benjamim for his final remarks.
All right, everyone. It was a pleasure to once again have you here at our results call, results that we believe to be very excellent considering the seasonality of the year when we're talking about the first quarter, which tends to be weaker.
We have had a renovation in the company. We have changed, and made changes trying to improve our payers and the contribution that they have in the -- for us. And we expect to deliver even better results with a strong work in the continuous improvement of the quality of our hospitals mainly assessed by the certifications and the medical outcomes coming from our -- to our performance ICU beds. And we believe that, that is what's going to make this a long-lasting business.
So once again, thank you for your attention, and have a great week.