Kora Saude Participacoes SA
BOVESPA:KRSA3
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Good morning, ladies and gentlemen. Welcome to our earnings call for Kora Saúde for the third quarter of 2023. My name is Rhayza Malone, and I'm part of the Investor Relations team at Kora Saúde.
For another consecutive period, we've reached an all-time high in net revenue and adjusted EBITDA. These had strong cash generation, reflecting the different initiatives performed over since the beginning of the year to gain working capital. Our agenda to strengthen our existing units with new specialties, growth of high complexity and reinforcing the outpatient centers in emergency rooms contributed to the evolution of our main operational indicators, including the operational beds, patients per day, surgical volumes, lab exams, oncology treatments, et cetera, and other KPIs. The earnings this quarter demonstrate the evolution of Kora Saúde strategy to make this provider -- a full solution for health care, providing excellent medical services.
And to explore a bit more on these agendas, we have Dr. Benjamin with me, who is our CEO and Founder, Kora Saúde. And we also have Elias Leal, our IR and CFO. This event is taking place online, and you can keep up with the material that's presented in the webcast. Or you can perform the download of this presentation that's already available on the Investor Relations website at Kora Saúde and also on CVM.
It's worth mentioning that at the end of this presentation, we'll have a Q&A session. [Operator Instructions] Before we move on with the presentation, it's worth mentioning that any possible statements that could be done that are related to 2023 and the future of the company are not a future guarantee as they involve risks, uncertainties and external circumstances that should not be considered guidance.
And I'll pass the floor to Dr. Benjamin, our CEO, as he talks about the highlights this quarter.
Well, thank you, guys. Good morning, everyone, and welcome to another earnings call at Kora Saúde now in the third quarter of 2023.
And as we move on straight here to the point. As Rhayza has already mentioned, this was a quarter that was really positive for the company. We were able to reach almost BRL 580 million in our net revenue, a growth of 13% compared to '22 in the third quarter; and the adjusted EBITDA of BRL 132 million, a growth of 19% compared to the previous year and a strong cash generation. So we're going to talk about this a bit more up ahead, and we have almost BRL 140 million of cash generation in the third quarter and an EBITDA margin that's reaching close to 23%.
We continue with an amount of patients per day that's very strong, over 126,000, and so the growth of over 12% compared to 2023 -- '22, sorry, with 77%, 78% of occupation rate. And oncology has also been growing a lot. We have currently 8 infusion centers for oncology at Oto as well with a partnership which was one of the last infusion and oncology centers that we began, with over 2,000 oncology infusions. And we have an emergency room that's also growing at almost 100,000 services per month. We reached 280,000 in the third quarter. And exams overall, especially image exams such as MRIs, et cetera, have over 230,000 of these being done with an important consolidation in our overall sector.
As Kora had an important movement to internalize these services, this is something that's still underway. We are in progress at this every year. We have been able to internalize more of our procedures and exams and also a big growth in our surgeries, which is a growth of almost 15% compared to the third quarter of '22. So this is a quick overview of our consistency and growth and the maintenance of our main lines and areas of performance.
Next, then just to show you a bit of each of these initiatives and some important achievements in the quarter, some things that are still ramping up. So in Vitória, we opened up our radiotherapy center there this year. We're still ramping up naturally. And we have a lot of registered health plans, and others are still under negotiation basis reaccreditation, but radiotherapies has already ramped up a lot, and we've reached our balance point. And treatment in radiotherapy, that's very unique with the best services here in the state.
And we've also been consolidating a robotic surgery center with almost 1,000 robotic surgeries in the past 3 years. And also when it comes to transplant, we have the Meridional Hospital in Cariacica. That's become one of the biggest transplant centers in Brazil. We perform heart transplants, liver transplants, kidney transplants, bone marrow transports (sic) [ transplants ]. And so in this last few period, we were certified by the Ministry of Health to perform bone marrow transplants at all 3 levels, including bone marrow transplants that are cases that are more severe, more complex. And so it's rare to have a service that starts off working on this kind of service. And we still haven't performed any of these, but this should happen in the next few months once we've been certified in the past few days.
And our partnership with Vale also, so we are fulfilling a 1-year partnership as we are a Vale ambassador in the 4 hospitals in the Vitória region. It's a partnership that's been excellent for us and for Vale, and our growth has been very significant as well. When it comes to adhesion from the Vale users as they've been working in primary care and intensify primary care for Vale patients. We've also been working on some other initiatives, with the Cariacica San Francisco Hospital going through a retrofit process. And we are opening up our new surgery center where we've also been working on a retrofit for the emergency room and the refurbishing and expansion of our hemodynamic.
And so the expectations for the end of the year, beginning of the year and beginning of January. So even in these difficult moments, we continue to be strong and bring some news as well in Vitória, where everything began. So at Oto, we have been working on the consolidation of this hub. Today, we have the Ceará hub in Fortaleza, with 100% of the beds under operation. And so it's been 2 years ever since we had the acquisitions there, and we were ramping up and opening up beds, and now we're at our full occupation, with all of the beds open and operating.
We had an increase of surgery notices when we compare 1 year ago with the other, and over 35% of surgeries, we continue to internalize main services. As we mentioned in the last quarter, we internalized image exams and the labs of each -- of all 3 hospitals, now hemodialysis as well, which was internalized. And we're opening up our oncology at Oto Meireles with a partnership with Crio, a very renowned clinic with many years of tradition in Ceará. [ That's our reasoning and serves ] a lot of room for growth.
We can move on, please, Rhayza. Now at Anchieta, I think one of the biggest positive news point is that we grew this hospital. We continue to open up new beds, and we have almost 250 beds under operation. We've continued with our occupation rates really high. And when we look at an expansion in the adult ICU and training in the children's ICU with a total of 120 ICU beds in total, increasing the amount of surgeries, increasing patients per day. Oncology is also growing at Anchieta and ramping up significantly.
And in Cuiabá, we have also been going through a retrofit process that's super important. We've been retrofitting the apartments in the hospital. And we've been working on some innovations. We had a surgery there that was very different, and we were able to open up opportunities for more advanced technologies with the surgeries we've performed this year.
We can move on, Rhayza, please? And then in Palmas Medical, also in Palmas, we also had big investments in the end of last year and beginning of this year. So we're ramping up in this emergency room with many different specialties. And we have different specialties with gynecologists, cardiology, orthopedics, so it's a real complete emergency room for the region constantly growing as well as hemodynamics, radiology that we've begun with their -- with MRIs. And so this is an important bit of news, and we never forget quality.
So we have taken to Palmas this kind of accreditation. [indiscernible] do not have any of their hospitals with this kind of accreditation and recognition. So now we have Level 2 certification, which is a very important achievement for us because as we see, this is in our DNA at Kora, providing quality medical services with accessible pricing. And so with this, we were able to complete 12 of the 17 Kora hospitals that are already certified. And constant growth in oncology, oncology there has been at Palmas Medical in Santa Thereza continues to have significant growth and consistent growth.
We can move on. And then here's a photograph of Kora overall, demonstrating our occupation rates and, despite opening up beds quarter-over-quarter, increasing our activities. About 85% of our beds are under operation, but we've been keeping up an occupation rate at about 77%, 78%. And this demonstrates our growth. When we take a look at the amount of patients per day in regards to last year and constant and sustainable growth as well in our hospitals.
We can move on, Rhayza. Well, and of course, we're always thinking about innovation, so an opportunity. So we've launched our -- about a year ago, the executive checkup here in Espírito Santo and in Ceará. This is really important because it's also a way for us to bring the group closer to the biggest companies in the state. And so we've already worked on over 108 (sic) [ 180 ] checkups and 14 companies. We confirm some corporate checkup agreements with big companies, and we're moving along with some other negotiations. So it's a way for us to be in the company when you have like self-management in your hospital using our services. That's a great way to promote loyalty among customers and users from these companies for Kora and Espírito Santo and the Meridional network as well as the Oto network.
So this has been initiatives -- these have been initiatives that bring important returns on our investments. So also the app for scheduling and viewing exam results. So we're really evolving with SADT solutions, bringing new opportunities to make things more comfortable and more agile to use our image exams for patients and physicians overall.
We can move on. And so I'll pass the floor on to Elias now so that he can talk about the financial highlights at Kora, and after, we'll be able to get into the Q&A.
Elias?
Good morning. We're, for the first time, scheduling this call in the morning. And so we'll share some important news that we have, especially when it comes to cash generation. So we'll move on with the presentation.
So as Benjamin has already mentioned, we've been growing quarter-over-quarter, and we've been achieving BRL 577 million in our net revenue. In this quarter, we grew 13% compared to the same period last year and 78% compared to the third quarter of 2021.
And in the accumulated results in the 9 months, we've been also growing, and we've been reaching 12% growth. And this growth is mainly a result of the main -- amount of patients per day and also the ticket growth, with many adjustments performed in this quarter in the hospitals and also the [ effectivation ] of some adjustments in health plans that have major results in this third quarter. And so we've been improving this mix of procedures. And this has -- they have continued to be really full, and this has also helped us to quickly improve the levels of our tickets growing almost 5% compared to last quarter, although we continue to see a lot of room to improve this ticket level in the last -- or in the next quarters.
So moving on, we also see oncology as it continues to grow, and we had some recent openings in oncology centers that are reaching maturity. Hospitals that are connected to the center gain even more importance and become benchmarks for the specialties in oncology. Physicians refer our hospitals more and more as important centers for oncology treatment. And along with this, we also have accreditation through these outpatient [indiscernible] in cases where we have not been referenced yet by payers and the payers have seen us as an important partner now, not only for hospitalization and treatments but also for oncology. And this has made us grow our tickets and also grow our volumes in oncology in the past quarters.
And so we've also had recent openings in Anchieta. Then we had Meridional Serra, Meridional Vitória and more recently in Ceará, and there's big potential for continuous growth. And some of these are a little older, such as Palmas, Praia da Costa, Meridional Cariacica that have also been growing.
And as a reflection for all of this growth, our revenue and our constant control costs and expenses, we've been able to have growth in our EBITDA, reaching an all-time new high with BRL 132 million in the last quarter, which is a growth of 19% compared to the same quarter in '22. And the LTM that's been growing also about 17% compared to 2022. So we were able to reach almost BRL 500 million EBITDA -- adjusted EBITDA in the last 12 months in the third quarter.
And another important achievement this quarter was our operational cash generation, which is a very important indicator we look at every day, which is fundamental for our business. And it demonstrates that we've been able to go back to having numbers that are closer to what we believe in, which is the numbers in the sector of the company. And then I'm just going to talk about some other initiatives we have been working on as well in each of these initiatives so that we can achieve even more than 6 -- in our EBITDA cash generation with BRL 139 million.
So the 3 main levers are these I've been demonstrating here in the past few quarters. So just a moment. Just -- all right.
So we've been talking about these 3 levers in the last quarter. The first lever that -- which is the average term for receipt, and we've already seen a reduction to 4, 5 days. It may seem lagging, not that much. But that represents almost BRL 7 million per day on average. So that does bring in a significant cash generation when it comes to this topic. And we have also a reduction of our average stock terms and also the increase of the average payment terms, which helped us consolidate our working capital days and improve this to 81 days.
And then we have some of the main initiatives on behalf of the average term for receipt. We have a bunch of different initiatives that have been done simultaneously by our entire team for accounts receivable and our billing team, and it's a team that is centralized at the corporate level. We've had many different agreements signed with amounts, nonpayment and delinquency, but these agreements have been signed and fulfilled and with all of the payers. And so sometimes, these involve some accumulated amounts that are paid in installments throughout some years -- some months, sorry, and then adjusted according to an index that's negotiated among parties to recover this amount over time. We've also had regular meetings that are normally monthly with a top 5 or 10 payers, depending on each hub or region we're in. And the nonpayment percentages that these payers have in order to monitor these rates among these payers and insurances and handle them very quickly, either it's an administrative delay or a technical delay.
So any kind of discussions with the physicians as well to discuss cases and have administrative delays and event and prevent administrative delays, not only among the top 10 payers. But whenever there's something out of the curve or that stands out from our profile that didn't have this kind of profile and increase this rate for some reason, we quickly schedule meeting and sit down and solve these problems, whether they're technical or administrative, very quickly to ensure that, that amount can be received as soon as possible.
And besides this, we also have been continuing to automate our bill submission process so that we can issue this as soon as possible, as soon as the patients received services. We tried to send the bill as quick as possible to the payers so that their terms for receipt can begin as soon as possible and payment can take place as quick as possible.
So we've also worked on an improvement in all of our stocks, and we've been improving this work [ system ], some things we've been working on the integration during the first 100 days. We have some other items also considering the paralyzation and rediscussing and reanalyzing these processes to make our stock more efficient among Kora units as well as trying to improve stock planning. So at an item level, looking at that item in each hospital, each hub and adjusting our stock as well as necessary, which is the case, for example, in Espírito Santo.
And then on the supplier front, we've negotiated with all of the main suppliers, and we've been working on new contracts with this new assumption in the sector with a greater term for payments. And especially for [ OP&E ] suppliers, we've been working with some negotiations to make our business in line with theirs, paying only upon receipt. And these are items that are high-cost items. And so in most cases, they have already been agreed upon with the payers. And when this is not the case, we also consider the assumptions upon the receipt of that and these initiatives operationally, and the cash generation really make us reduce our gross debt.
Now we've been paying our main debt in the first quarter. Month after month and semester after semester, we've been able to improve our cash position and also reduce our net debt in the last quarter by BRL 18 million. So we still have some work to reduce this net debt with the sales leasebacks, which is something that we've been deploying in the company. But on an operational level, we've been very happy with the results we've been achieving.
Now just about ESG. We have had, in the last quarter, the entrance of the Santa Thereza Hospital and the first hospital at Kora Saúde to adhere to more sustainable practices with energy consumption. So we have hospitals that are already in the free market, and we also have hospitals that are generating some energy with solar panels. And we have begun some work in Espírito Santo to manage -- to have a more sustainable management of our energy and the level of services and automatic turning off the light and air con within hospital rooms and facilities.
So to be able to analyze this, we've been working on some campaigns that were very important in our business, the Gold August (sic) [ Golden August ] campaign to encourage nursing and breastfeeding and as well as milk donations. And so maternity is an important business in our company to work with the society and also the health plans that need this within our -- any of our hubs.
We also had our Green September with the organ donation, which is very important in Kora, which -- and also brings a lot of complexity in our hospitals, so we had a strong donation and donor campaign. And also, Yellow September, where we work on mental health campaigns with our employees but also with the overall society.
And finally, in the last quarter, we also had our second executive forum, where we gathered all of the Kora leaders to discuss the growth we want to have and some of the investments and understanding their role in this development.
So with this, I reached the end of our presentation here in our call. I want to thank you all for your presence, of course, and we'll have time for questions and answers. And me, Benjamin and Rhayza will be here to try to answer your questions as well.
Well, now we're going to begin our Q&A session. [Operator Instructions] We had some questions already submitted throughout the presentation.
The first one is from [ Matias Veral ]. He said, "The adjusted leverage is still above the covenant, which is the final measure for the fourth quarter of '22. I want to understand what mechanisms will be used to fulfill the covenant."
Well, we have many different initiatives here underway. The first one is an initiative for the sales leaseback that we're working on. I still can't give you too much detail about this because we're still under confidentiality agreements, but we've been advancing with this topic, and we've been also talking about some readjustments in our debt levels with some of the main creditors. We had an extension of our debt in the end of last year, beginning of this year.
And we also have been working on constant initiatives with our main creditors, and we've also started some conversations with accounts payable and some renegotiations in the sense and some other measures as well that are still under development, but that should also make us, once again, achieve the covenants without having this kind of problem.
So we have over 2 months to define this. And as soon as we have some news about sales leaseback or any other initiatives, we'll let everyone know and issue a notice on this and provide more details.
Our next question is from Estela Strano from JPMorgan. So how has the company seen the dynamics for negotiation with the payers? Is there a perceived improvement? Or is the environment still pressured?
Benjamin, this is your -- this is a question for you.
Thank you, Rhayza. Well, thanks for the question. And Estela, we continue to, as you've all noticed with -- we have high claims rates, and negotiations are still under a lot of pressure, but we clearly see an improvement in this scenario, especially when you have the adjustments that the payers are working on in their customer base. And this is quarter-over-quarter, and it makes us improve the claims rate and reduce this. So we do see an improvement with the payers and, of course, the overall negotiation environment.
And for the next quarters, the expectation is that this is going to get even better. So we are very close to our main partners because Kora is not a vendor. We have this goal of having quality medical services with accessible costs, and this is really a reality at Kora. So this, in some way, positions us at an advantage point in these negotiations because they know our prices are very fair.
Thank you very much, Benjamin. And I think that now we have Caio that has a request by audio, so we can open up his mic, please. Caio from Santander.
I have 2 points here on my side. The first one is if you could talk about what was the reversal in the personnel expense? And what was the total amount?
And the second point is how you're handling the potential impact with higher salaries for nursing teams. We should reach the next month with the need for payments. And how has this been progressing? Have you already been working on provisions for this for the fourth quarter? So these are my main questions.
Benjamin, let me start here, and then you'll take over with a bit of this. Okay, great. So the reversal we performed was BRL 8 million, with some provisions are a little higher throughout the year and that we reversed now in the last quarter, BRL 7.9 million in the personnel expenses.
And then about the provisions, we haven't been -- made provisions ever since that those approved because we know there's still a lot of uncertainty about how this bill will actually be deployed.
And so I'll let Benjamin get into my details.
Great, Elias. So about the bill as well, Elias already mentioned, we haven't worked on a provision. There's still a lot of uncertainty about this. There is also a TST mediation with the [ salaration ] for nurses and technicians. We have a lot of possibilities still being raised with the regionalization of risk-based salary, and the base salary may be [ imparted ] partially and deployed partially throughout 1 or 2 or 3 years. So there's still a lot that could take place.
But if the minimum salary base is going to actually take place now in the month of November, depending on these negotiations that are taking place by TST, we do see the impact of this, and we don't think it's going to be that significant. So it's going to be an impact that will be, in some way, absorbing, but up ahead, we'll have to transfer this to the payers. But it was offset a lot and mitigated by many different factors that took place in the last few months, especially the issue with the proportional workload and also the compensation base as a calculation for the minimum salary calculation.
Thank you Caio. And our next question is from [ Arthur Russia ]. Congrats on the results, how have the negotiations been with the possible sales some Kora properties to reduce the debt and leverage position of the company.
Elias?
This is kind of what I already mentioned before with our adjustments in the covenants. And also when we talked about the level, we have some properties such as Anchieta, Neurological Goiania Institute and also the [ Encore ] Hospital property in Goiás and the San Francisco Hospital in Ceilândia, and they were acquired together with the hospital operations, but they're not part of our strategy really as investors to own the properties. We want to work on the hospital operation, really, as our main focus, and so it makes total sense to sell properties and lease them for a long contract term.
And we have had some conversations in this sense for each of these properties, and some of these conversations are taking place under confidentiality, which is why we can't give you too much detail, but these are conversations that are taking place at the moment. And I think this is the main lever to really reduce the debt level and leverage in the company.
Thank you, Elias. Now our next question is from [ Corrado Hammes ]. And he said, "What's the difference in the schedule graph for amortization in the release, [ BRL 58 million ] in the short term, considering the ITR chart, [ BRL 217 million ] in the short term."
Well, [ Corrado ], we performed some renegotiations recently with some parties, had sold hospitals that had accounts receivable with some of the acquisitions, which allowed us to reduce our amortization in the short term and what we have to pay for those parties that we're selling. And that's the main difference.
Well, since we do not have any other questions, we're going to end our call here, and we thank you all so much for your participation. We -- if you have any additional questions, please let us know and contact us here by all of our different communication sources. Thank you very much.
Thanks, guys. Have a great day.
Bye. Thank you. Have a great day. Pleasure to be with you once again. Bye-bye.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]