Kora Saude Participacoes SA
BOVESPA:KRSA3
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Good morning, everyone, and welcome to the Earnings Call at Kora Saude for the End of 2023 and the Fourth Quarter. I'm Rhayza Malone, I'm part of the Investor Relations team at Kora Saude.
2023 was -- had important achievements operationally and financially at Kora Saude. During the year, we had many different initiatives with the objective of continuing to keep up with our sustainable growth in the company, providing quality medical services offering, compensation models and sustainable prices for the payers and also guaranteeing the profitability of our businesses.
To explore this a bit more, here, we have Dr. Benjamin, the CEO and Founder, Kora Saude; and also Elias Leal, our CFO and Investor Relations Director. This event is taking place live, and you can watch the material presenting on the webcast screen or also download the presentation, which is already available on the Investor Relations website at Kora Saude and at CVM.
It's important to mention that by the end of this presentation, we'll also have a Q&A session. To participate, you can send your question at any moment during the call using the chat button at the bottom part of your screen.
Before we move on with this presentation, I also want to highlight that any possible statements that could be made during this call that are related to 2023 and the future of the company are not a guarantee of success as they involve risks, uncertainties and external factors and must not be understood as a guidance.
Now, I'll pass the floor to Dr. Benjamin, our CEO, and he's going to talk about the main highlights of 2023. Dr. Benjamin, the floor is yours.
Thank you, Rhayza. Good morning, everyone. Welcome to one more earnings release at Kora Saude. Now we're talking about the fourth quarter of '23 and the full year of 2023.
As Rhayza mentioned, this has been a year of great challenges, but I'm sure that Kora is on the right path, delivering excellent results in the year that was so challenging, like '23.
We can move on. Great. So here are some of the main highlights. In this year we were able to achieve an all-time high net revenue close to BRL 2.3 billion, a growth of 10% year-over-year. And we also had an all-time high EBITDA of BRL 511 million, a growth of 10% year-over-year compared to 2022, and a cash generation that's a record, and 70% of the EBITDA, and an EBITDA margin that's already close to about 23%.
The amount of patients per day is also growing a lot, over 500,000 patients per day with an occupation rate of 78%. We continue to grow with oncology, and besides ramping up on oncology with Anchieta, we also opened up another oncology ward in Ceara: Oto Meireles. And our outpatient emergency room have been constantly growing with over 1 million services per year. The oncology infusions are still growing, and also one of the growth avenues we've had, which is SADT with almost 900,000 exams per year, and also confirming us our presence as many of our hospitals have a surgical center that's also very strong, with almost 10,000 surgeries per month and over 112 (sic) [ 112,000 ] surgeries per year, a growth of 13%. So we basically grew in all lines with a final growth of 10% in the revenue and margins.
We can move on, Rhayza. Well, then here, we want to highlight some points with some of the main markets we're in, and even in a year that's so challenging that we all saw the payers very restrictive, reviewing many initiatives and limiting processes to make the processes a little more balanced. But even so, we were able to grow and have a lot of important achievements that were very unique in the market.
So in Cariacica, our main hospital, in Espirito Santo, we opened up our pediatric therapy unit, which is something we didn't have there, and we've already been operating with this for 6 months. It's doing very well. We opened a bone marrow transplant system in this hospital. We've been working on heart transplants, liver transplants, kidney transplants, pancreas transplants, bone transplants, and now we're working with bone marrow transplants with relatives and non-relatives. And this has been an initiative that is very unique and differentiated to start off with this kind of transplant.
And Meridional Vitoria also started a radiotherapy service that's ramping up a lot as well. And we also worked with the accreditation for 2 new hospitals now: Meridional Praia da Costa, which didn't have the accreditation, and in the city of Vila Velha, we don't have any accredited hospitals yet. So Praia da Costa is going to be the first hospital with accreditation Level 3, ONA Level 3 Excellence. And Meridional Vitoria was accredited also in the second year, having received this with ONA 2 level, and so it became a general hospital where it used to be a maternity only. We also had over 1,000 robotic surgeries in Meridional with one of the main robotic centers for surgeries in Brazil, and also a partnership with Vale that we're really proud of, in the second year of this partnership here. And we've continued to grow, and we've been moving on to new initiatives that are similar with some other companies as well.
Then at Ceara, we've already incremented our emergency rooms, and we were able to increase the complexity of the emergency rooms with the former hospital Sao Mateus. Now it's Santos Dumont, we added another general surgery team. And oncology, as I mentioned, for Crio, is something where we open up oncology, Oto Meireles together with Crio, and we continue to have a significant increase of surgical warnings and notices. And some of our hospitals have a lot of surgeries now, over 3,000 surgeries per month, like in the Ceara hub. And so we continue this with about 37,000 surgeries per year, over 3,000 surgeries per month.
Rhayza, you can move on here now. And in Brasilia, we've also made some big changes when it comes to the Sao Francisco hospital that began to be called Anchieta Ceilandia. The Taguatinga Anchieta hospital also is very much acknowledged for its quality of service, complexity and capacity for resolution. And in the satellite cities, it's probably one of the hospitals with the biggest share of acknowledgement. And with this initiative, we're trying to transform the same level of quality that the Anchieta demonstrated throughout the years. So we had a major retrofit in this front. We renovated the hospital, we increased the amount of ICU beds, and we switched the entire visual communication in the hospital.
And we're sure that with this, over 2024, this hospital will perform even better. We'll have a higher occupation and better occupation, and we'll be able to expand many of our services. So we continue to have important levels of growth. And at the Anchieta hospital, we have 87 ICU beds for adults. If you add that to the pediatric ward, it's going to be over 100 beds in total ICU. So we had occupation that was above 85%, even with a lot more beds open. So the hospital has almost 240 beds under operation, with occupation rates over 85%, reaching all of our expectations for ongoing growth at the Taguatinga Anchieta hospital.
Now in Palmas, we continue to ramp up oncology, and it's been really a big division for us, very complete and complex. We're growing a lot still. And we also have been working on the internalization of certain services. In '23, we brought the lab in-house. It used to be an outsourced service, but now we operate the labs for both hospitals. We operate the hemodialysis and also endoscopy -- endoscopical surgeries. And so we're trying to bring in all of the SADT services. And radiology was already managed by us, oncology as well. So we'll be completing almost 100% of our SADT empowerments managed and conducted by us at Kora.
We can move on. Then here, we can see, in '23, we had almost the stabilization of the number of beds with the growth of occupation rates. If you compare with '22, the average occupation was 78% with the amount of beds pretty stable. And I think this was very good for such a challenging year like ours. We had growth in the amount of hospitalizations. As we mentioned, we continued to grow the average number volume of hospitalizations comparing '23 and '22, which made us move to about 78% of the occupation rate. And when it comes to the amount of beds, comparing '23 and '22, as you can see on the left side, there was a significant increase from '23 to '22 but keeping up the stability.
We can move on. Then I'm going to pass the floor on to Elias so he can talk about our financial highlights. And then we'll be with you all during the end of the presentation to clarify any questions you may have about the operational performance at Kora.
Elias, the floor is yours.
Thank you, Benjamin. Good morning, everyone.
We can move on here. Well, as Benjamin mentioned already, we had a year of '23 that was very difficult and challenging. We had a lot of restrictions for new business opportunities, first of all because of the cost of capital that was really high, and secondly, because of the natural restrictions that many payers imposed and that they, of course, are suffering when it comes to the claims rates. But even so, we were able to increase the complexity of our services and our treatments, establish some contractual increases, and grow with some partnerships, with some operators and payers, and that they've been closer to Kora. And we were still able to grow about 10% compared to '22.
So with this, we were able to reach BRL 2,260 million of net revenue, an all-time high for Kora in a year where we did not perform any acquisitions. But we were able to have a level of investments that was really controlled and focused on what would lead to quick maturity and quick revenue conversion rate. Revenue in the fourth quarter was also greater if you compare with the fourth quarter of '22. And when you look at the tickets, after the drop in the second quarter of '23, we recovered our growth and we're growing our tickets compared to '22.
Then oncology was an important highlight for us. We had some openings in '23 and businesses started to ramp up throughout the year. We began our operation with oncology in Anchieta Taguatinga, also in Oto Meireles Ceara, Benjamin mentioned, with Crio; a group that's very big for oncology. In [indiscernible], we opened the most modern radiotherapy service in Espirito Santo in Meridional Vitoria. We also opened a ward for bone marrow transplants at Cariacica. So all of these openings and services that were added on, along with the organic growth of the oncology services in Espirito Santo, Tocantins and Mato Grosso made us have a growth of 37% when comparing the fourth quarter of '22. And we hope that this will continue as these units are still ramping up, still very far from their full potential that we believe they can achieve.
We grew in complexity with our treatments, but also in volumes. As you can see, we grew 14% in the fourth quarter of '23 when we compare with the fourth quarter of '22. So I just want to demonstrate a bit of this maturity here. We still have a big potential here in oncology in these units we opened, but also in other units where we see a potential to open, especially in the Ceara hospitals, where 2 of them actually don't have an oncology center, in Brasilia, the Anchieta Ceilandia where we still see room for growth with oncology there, and also in Goiania, where we still don't have oncology implemented. So it's a field where we have been reinvesting and still see a lot of potential for growth in the next few years.
And alongside the revenue, we've been growing 10% of our EBITDA in 2023; 11%, if you consider the quarter-over-quarter comparison. And this growth is really levered by the growth of the revenue, but also some of the cost control initiatives that we structured throughout 2023. Cost and expenses, which are also leading to some effect, as we can see in the EBITDA margin, has been growing over the year, quarter-over-quarter.
And another important highlight was the recovery of the operational cash generation. The company has dedicated quite a bit of time in the revenue cycles and payment cycles and stock cycles, and we really intend to adjust these 3 to the new reality that is experienced by the industry. We've seen some evolution in how we're controlling receivables from the moment of this production, where we're trying to send this quicker and quicker to the payers. We're also working on reconciliation of receipts and non-receipts. And this process is being a lot quicker with automation and even with prior charges, before the actual maturity dates. And we've been searching for negotiations for processes so that this can be confirmed quicker and quicker. We've already confirmed some big negotiations for receipts throughout the next quarters, and this should lead to an important reduction of the average terms for receipts as well.
Besides all of this, we've been able to engage our suppliers about the new reality in the industry, and we've been able to increase the payment terms, and we've seen a reflection of the increase of prices, as you saw in the margins I demonstrated. And we've been also able to reinforce the partnerships Kora has with long term suppliers that really kept up with all of our growth and understand this new moment we're going through at this point in time.
And finally, we have a lot of work in supplies. That has been growing a lot. It was an area that was already efficient, but it's becoming even more efficient, reducing the average terms, and this was although very much impacted during the supply crisis we had during COVID, but we were able to establish a stock protection plan, which is moving along very well, and this has helped us improve our terms. And then these initiatives made us have strong growth and cash generation. We were able to generate almost BRL 400 million of operational cash, recovering historical levels in the company and above 70% of the EBITDA -- adjusted EBITDA generation into operational cash as well.
So, moving on to our capital structure a little bit. In 2022, we had success in reprofiling our debt and reclassifying them with the issuance of 2 debentures. And now in 2023, we have a lot of success also with restructuring our liabilities. And so the sales operations for [indiscernible] and leases at the hospital and other negotiations also with other sellers allowed us to extend the terms for the payment of these debts. We were able to negotiate an increase also on the average term for all of them, and we will be able to pay off until 2027.
And this helped us achieve our covenants for debentures. So we ended up with a net debt of 3.9x versus the EBITDA in 2022 and '23. And this operation is really important due to its magnitude. When we were able to close this at a cap of 8.6%. And so that's a pretty low spread considering that we didn't actually have any cash payments from the buyer and there was a negotiation where you have the absorption of part of the debt for the acquisition of a hospital we had with them. And then we have 3 other properties as well. We're still advancing on certain negotiations, but we would like to have a similar operation that can involve the sale of the properties and the long-term leases. So we've had all of these other initiatives here.
And before I pass the floor to Rhayza, I want to highlight the importance of everything we were able to achieve this year. Cor Kora is a company that has been in the capital market for very few years and was able to structure itself to have results a lot quicker. And we -- before the end of March, we are going to be disclosing our earnings. This is the achievement of all of our team. All of the different areas that were involved and active to be able to generate information and provide the necessary comfort to have such a quick closing process of our audit procedures, and we hope we'll be able to optimize and automate more of our processes and really be able to disclose things in the best way and as quick as possible.
Okay. Rhayza, we can move on.
Well, guys, I'm going to talk about how in the fourth quarter, we had some different initiatives for ESG and promoting sustainability in the company. So in the environment aspect, we always really valued the efficient management of our resources for power and waste management, which are the main points in our materiality metrics. And overall, 11 hospitals at Kora have already adhered to the 100% renewable energy market, which allows us to track our electric power consumption. And the objective till the end of the year is that we can migrate all of the hospitals to this category.
And then in the social aspect, we have many different campaigns to generate awareness, diversity and education in our operations, which involves employees and also the overall community where we are present. In the fourth quarter, we would like to highlight the campaign for Pink October, where we talk about the prevention and treatment of breast cancer. Brazil, which is talking about the important Blue November for prostate cancer awareness and also Red December for the treatment and prevention of STDs. We also launched the Inclusion without Borders to include refugees in society, offering some different job opportunities at Kora. And in last than 3 months ever since we began this project, we were able to integrate 5 refugees into our operations.
And finally, when it comes to governance here at Kora Saude, we really value compliance, ethics and respect in our business, which involves corporate procedures and also the clinical team. In the last quarter, we published our third edition of our Sustainability Report at Kora with a base date of '23, integrating all of the financial information according to the IR guidelines and the best practices adopted by the sector.
Having said that now, we will move on to our Q&A session. And once again, you can submit your questions through the Q&A button that appears on the bottom part of your screen. We've already received a few questions here. Just one moment. The first question is from [ Ricardo Pisani ], and what's the plan for the company considering a lower cash level and disclosing to honor your debt in the company?
Ricardo, thank you for this question. As I mentioned, we've been following a trend that's very positive for cash generation -- operational cash generation. And this tends to reinforce our cash position and provide us more comfort that we're on the right path. And naturally, we are gradually deleveraging. When we look at the drop in the interest rates that we have taking place in the overall country and we've seen that there's more room in our cash position to deleverage and in our balance sheet and to be able to recover our investment pace soon. So besides this, we have also been talking to the main creditors and banks and we have some amortizations also to be done this year. And we imagine that we'll be able to perform some new issuances to increase the average term of our debt as well currently for payments of all of the loans we have to pay off during '24.
Thank you, Elias. Our next question is coming from [ Felipe ] from Itau BBA.
The first one -- and we have 2 questions actually. The first one is that we noticed that there's a worsening of 4 years on receivables this quarter. We know you guys have already talked about this a little bit in the presentation, but if you could explore a little more in depth about the impact of this worsening, if this was due to a specific payer or was an overall scenario with the payments from payers, and also the specific markets where you have more evident pressure. And what's the expectation here in the company for the receivables in the overall sector to start maybe normalizing and having improvement signs.
And my second question here is that we noticed the ticket grew 1% quarter-over-quarter. Could you explore just a little bit more about what led to this if it was a complexity for any other factors? That would help us a lot.
That sounds great. Yes. So, I'm going to start off answering about accounts receivable and then Benjamim can also talk about the ticket. Felipe, we have been, throughout the year, implementing many different measures and initiatives to improve the average term for receipt, reducing nonpayment, send bills quicker but there is a balance that we must sit down and negotiate with the payers when there's an outstanding balance due. And we sometimes either sit down, put this on paper and create an action plan, to understand what the payment conditions will be [indiscernible].
And so although we've been able to confront some negotiations and we're able to improve these sort of initiatives in the end of the year, some payers try to shift the year and end the year with the cash position. This is something that we didn't see that much in Kora in the last few years, but something we did see this year with 2 payers. And another thing that happened also this year that happens quite frequently, which is for the payers that are self-managed normally connected to some public company like or some employees like the armed forces or things like that from certain states, these kind of operators have some budget issues at the end of the year, beginning of the year. So some years, this happens, right, with some payments that should have happened before the budget finishes in the end, they end up paying it in the beginning of the next year.
These are players that don't have credit risks or nonpayment risks, a pretty high ticket normally, but they depend on their budget to be able to perform payments. So we saw that throughout the last quarter, especially in December, we consider that most of this was already confirmed in the beginning of the year and some of the operators I mentioned, we still haven't been able to close these budgets with them and they haven't been able to solve all the payments. But we don't think that this is going to demonstrate a new worsening trend, right?
So we actually have seen that due to the negotiations and the delayed balances, we've been able to confirm. We hope that throughout the next quarters, the cash that's already coming in will start recovering the levels of reductions that we had seen in '23. So about the tickets and the slight increase, [ Dimitri ], do you want to talk about this?
Yes. So when we talk about what Elias was mentioning, this increase really had -- we have all these issues at the end of the year. But with our payers postponing payments to be able to fit this into their budgets at the end of the year. But on the other hand, it's important to remember that, in 2023, we had a super difficult year with the payers, really high claims rates and many issues we've already discussed in other conversations, therapies and different types of therapies growing from 1% to 2% and growing a lot to over 8% and transferring the oncology treatment costs and so many other challenges. But there's no -- we can't have conflicts.
We need to sit down with these operators and payers that are very long-term partners, and they have no default or nonpayment histories and readjust certain terms, accept changes and understand some postponing or extensions of these payments. So that once the crisis is over, things can be back to normal terms as always. So this is our expectation. And I think that that's what we have to do, right? The market needed this and the entire supply chain needs to be healthy, so that everything can move smoothly as always.
Now about the ticket. We've been working on many initiatives. As I mentioned, it's a year -- 2023 has been very restrictive with many limitations. So we open up ICUs, we began radiotherapy, we began oncology and so much more. We internalize certain services. And on the other hand, of course, we had more restrictions from the payers. So greater terms for procedure authorization, greater cost postponing what is possible to postpone according to the [ ANS ] guidelines.
So we have many variables that are very significant where the exponential growth of the tickets can really end up being a little compromised. But even so, we continue to follow this with these assets here we mentioned and this is the way we're looking at it. The expectations are a lot more promising for the near future if we keep up with this pace and the avenues of growth, as you already mentioned. So we have clear possibilities of services that we need to internalize SADT, oncology, et cetera. And so we think that if we keep this pace, we'll continue to grow our tickets and continue to have a higher flow as well.
Well, since we do not have any more questions now, I'll pass the floor to Dr. Benjamin as he will be working on the final remarks, and we want to thank you all for your participation.
Thank you, Rhayza. I think that's pretty much it. I think we, of course, need to thank all of our employees for their help and support. '23 was a challenging year for health and -- private health and the trust from our partners and investors and the Board. I think we're really on the right path. We've experienced a moment that was still challenging, but we have major improvement possibilities up ahead, and we're really betting on the tripod, which is providing quality medical services with costs that are accessible and also trying to note a share that is fundamental in the markets we're operating, delivering a resolution capacity and greater complexity. So I think we've moved in the right path and not giving up on these 3 important factors, which is what we believe in to have sustainable growth and really deliver the necessary results as we've been delivering in the year of '23. So I want to thank you all, and I do hope we can meet again soon in our next call with Kora. Thank you all. Have a wonderful day. Bye-bye.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]