Odontoprev SA

BOVESPA:ODPV3

Earnings Call Transcript 2023-Q1

[Stella Hong, executive]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to the Odontoprev conference call to discuss the earnings for the first quarter of 2023. I'm Stella Hong, IR Manager. And today we have with us Mr. Rodrigo Bacellar, CEO; and Jose Roberto Pacheco, CFO and IR Officer for Odontoprev. This webcast is being recorded and streamed on the web. The link is available at the company IR website at ri.odontoprev.com.br, where the respective presentation is also available, or on the company's YouTube channel.

This video conference has simultaneous translation. To activate, click on the interpretation button, the globe icon at the bottom right of your screen, and choose the preferred language, Portuguese or English. You may also click on your original audio. [Operator Instructions] We suggest that all your questions be asked at once. It's important to note that submitting questions is allowed for participants on the webcast platform. The aforementioned instructions are also available in the chat as well as the presentation of this webcast.

Before proceeding, let us mention that any statements made during the call relating to the Odontoprev business perspective, projections, operating and financial goals are based on the beliefs and assumptions of company management and on information currently available to Odontoprev.

Forward-looking statements are not a guarantee of performance as they involve risks, uncertainties and assumptions, because they relate to future events, and therefore, depend on circumstances that may or may not recur. Investors and analysts should understand that overall conditions, industry conditions and other operating factors could also affect Odontoprev's future results, and therefore, could lead to results that materially differ from those expressed in such forward-looking statements.

Now I'll turn the conference over to Jose Roberto Pacheco to begin his presentation. Pacheco, go ahead.

[Jose Robert Pacheco, executive]

Hello. Good morning. Welcome, everyone, to our video conference to talk about the first quarter of 2023. We would like to thank you all for your presence and the trust that you placed in the Odontoprev model. So now to begin with our presentation, we have the data of the ANS, the Brazilian agency of healthcare.

So traditionally, we present medical plan data on the left of the slide. They still have the reference from 2014, which was a very mature market, a market that achieved its peak in 2014 with 50.5 million members. That figure starts negative in 2023 with the drop of approximately 200,000 members in the first 3 months of the year.

Odontoprev is focused on the right side of the slide in the Dental Plan segment, which continues to grow year-after-year regardless of the economic cycle or the share, already achieving 31 million members now in the month of March. The expectation for the industry is that the [ demand ] should remain constantly speeding up so the dental plans will recover terrain and have a unique position once again. And in 2023, you can see almost 24 million new members since 2006.

So on the next slide, we have the increase in the revenues for the company, which started in the end of 2021 given the ticket effect. And today we'll address that a lot. The company goes from single-digit -- mid-single-digit of growth and achieves 2-digit growth at the end of 2022. And now, we've achieved more than 2 digits as of '23. That's not a result of volume. That's a result of the innovation cycle and value cycle. And the products that sell the most are the products with a higher ticket. Therefore, the 11% of growth in revenues. And approximately 5.5% came from the ticket effect, which is the average price variation of the company -- and it's easy to see on the chart -- since the end of 2020 and beginning of 2021.

On the next slide, we can see the main players. And we split up the revenues into 2 major parts. Both are very representative for the industry. Approximately BRL 2 billion in revenues that Odontoprev has, a bit over BRL 1 billion comes from the traditional corporate segment. And right after that, the plans for SMEs and individual plans already account for almost BRL 900 million in net revenues in the past 12 months.

You can see that we are significantly ahead of the other companies be it because of a low average ticket or absence of efficient distribution channels. The revenue volume is much different and much lower than what we've been showing in the 2 main blocks of -- or 2 main revenue streams for Odontoprev.

On the next slide, we can see the strength of the Bradesco Dental brand. Here, we have net adds in each one of the 3 segments in 12, 24 and even 36 months. Odontoprev brought in more than 1 million new members since the end of 2019, of which a little over 800,000 came from the Bradesco Dental brand.

That's a very significant differential of a brand that's a market leader and has an addressable market and a portfolio that already exists here in the company. That represents a lot. So the predictability of the Bradesco Dental brand is very important in adjusting the expectations for growing the portfolio this year and upcoming years.

On the next slide, we can see the evolution. In the dotted line, we can see the evolution of the Bradesco share in the SME. And back in 2018, only 66% of the total, now accounts for 77% of the total. And in the products for individual plans, the share was a little over 30% back in 2018 and now reaching 45%. So the Bradesco Dental brand has a higher ticket, a lower acquisition cost and efficiency in the bad debt line that's very relevant, making all of these [Audio Gap] and has been delivering especially in the past 3 years.

On the next slide, we can see the evolution in 10 years of the revenue profile. It's very important to see the innovation value cycle that's been done. In the past, we had a ratio of 75% of corporate revenue and 25% non-corporate. Today, we have similar streams, they're pretty much the same the corporate revenues and revenues coming from other products, meaning SME and individual plans.

On the next slide, we can see some important information. So, the difference between the average ticket in the 3 segments. As we mentioned before, the segments that have been selling the most are the ones that have a higher ticket. You can see the growing average ticket in the SME segment, which is much higher than corporate. And in turn, very important to note, [indiscernible] results of 2023, the average ticket for individuals already over BRL 40 per member per month, which this level has been concerning across 2023 is significant increase and is showing how the revenues in individual plans are growing in 2023 given this new level of average ticket.

On the next slide, you can see the beauty of this innovation -- value innovation strategy. Here in gray, we have data from 2014, not only for corporate revenues, but also for revenues for SMEs and individuals. When compared to last 12-month data ending in March, you can see on the right that the portfolio for SME and individual plans grew on average 15% per year since 2014.

And that's also a result of an increase in the ticket of 5% per year on average. This portfolio currently has an average ticket of BRL 34, which is much higher than the industry standards, with a lot of difficulty for the other market players to replicate that data.

On the next slide, that same dynamic. And here, we're comparing gross profit, not only revenue, but also the evolution of cost of services. You can see that the products that sell the most are the one that have a lower DLR, lower acquisition cost and lower bad debt. So gross profit grew even faster, 16% per year. And today, it's the highest part of the gross profit of the company. So 56% of the total gross profit of Odontoprev is already comprised of products for SMEs and individual plans.

Here we have the evolution of the dental care ratio. So here we have a very important point. And it's worth mentioning the transition that we had from 2019 to mid-2020, beginning of 2021. The company went from historical dental care ratio close to 50% and for 3 consecutive years, and starting 2023 at levels that are closer to 40%. It's a cycle that would be difficult for the competition to obtain.

You must have efficient distribution channels to have this ability to price and control costs. And we remain confident that this new level of DLR is here to stay. It's a consequence of the new product mix. Products that on average have a DLR of 30% compared to the traditional 50% that we see in the corporate market.

On the next slide, we see that even better when we compare each of the 3 business segments corporate, SMEs and individual plans. You can see in different colors. So in corporate, the average of the last year, so 52%, is very close to what we've been seeing more recently, which is 50%. However, not only SMEs, but also in individual plan segment the company is at a lower DLR level.

And that's given many different reasons. And one of them is a new base or a new strategy to segment the network and providers, so with a more intense use of AI in interpreting the risk and monitoring the technical quality of the tests and procedures.

Today, there're approximately 20,000 dental treatments that are audited on a daily basis here at our company headquarters. So that competitive differential and supported by proprietary technology has enabled us to have DLR standards in SMEs and in individual plans that are more difficult to be found in the market.

On the next slide, we have the historical vision of not only the new levels of DLR at the company, because you've seen that it has become stable. And in 2023, it can remain even lower than what we recorded in 2022, so with a DLR of approximately 40%. And as a result of lower DLR and more efficient at the rate of 40%, there's consequently a margin increase. If in the past it was close to 25%, 26% in the past 3 years, we have an expectation of having an EBITDA margin close to 30% for the fourth consecutive year now in 2023.

Here, the history and the evolution of the company's adjusted EBITDA. The CAGR is 17% per year. There was a significant increase of 22%, reaching record levels of BRL 202 million for the EBITDA of the first quarter of 2023.

Another important component in the company's P&L is the financial income, achieving approximately BRL 90 million in 2022, already exceeding that level in the last 12 months ending March. So it's important to mention in this case, in the financial investments portfolio of over BRL 900 million, approximately 66% is dedicated to the long-term, 100% in government bonds, and therefore, capturing actual returns with a duration of practically 4 years ahead and as of 2023. So the company has the portfolio at a level -- or revenue levels for the upcoming years.

Our next slide is talking about net income. So we had a significant increase compared to last year of 79%, where the company recorded in the first quarter the highest level for a first quarter in net income of BRL 170 million. So the CAGR of net income since 2019 is 16% per year.

Our next slide shows growing liquidity of our shares. Now in the first quarter we had BRL 27 million in trading volume per day at [ B3 ].

Our last slide is the investor base, the shareholder base. Here you should adjust your database. We cancelled the shares in the treasury during the last assembly meeting. So the current number of our shares in social capital is 552 million.

Those were our initial comments. We'd like to thank you all for your participation. And now we're open to take your questions. So let's begin the Q&A session. Thank you very much.

[Operator]

[Operator Instructions] Our first question is from Gustavo Miele from Goldman Sachs.

[Gustavo Miele, analyst]

I'd like to ask 2 questions. First of all, I'd like to take a deeper dive into the DLR dynamics in the individual plan category. I believe that there's a component from the Bradesco channel that hardly contributes to the ticket especially. So if you can comment on dynamic of the more mature portfolio in individual plans, that would be great. So the price increases in the older contracts and what enabled a reduction in the cost per member of 20% year-over-year?

I believe that these contracts -- Bradesco contracts probably have a lower frequency for the company. So that leads to a benefit at the end for cost. But I'd like to know if there any other factors in that, that helped that number, which is stronger than what the market expected. That's my first question.

And my second question is much more technical and objective in the financial results line. So the return of the INSS, approximately 10 million for this quarter. So could you comment the nature of that line, that would help a lot, so we can forecast financial results moving forward. Those 2 things.

[Jose Robert Pacheco, executive]

Starting off with the individual plans question. So there are many dynamics that we have to understand. First of all, in the average ticket, there's a significant difference in price in between the sales channels and there's a migration, moving towards bankalization.

So, the sales through the bank channel, meaning Bradesco Dental in most part, have been taking place at a level of BRL 55 and BRL 60 per member month, and that's much higher than the levels of BRL 40 or a little higher than BRL 40 that we have on average compared to the sales in the retail channel. So the bank channel has grown. The retail channel has decreased. And so when it grows, it has a higher ticket. It has a higher retention of their clients, because they have a marginal likelihood of consuming the plan which is different than the traditional retail channel.

So not only the average ticket is higher, but there's also an important drop in the migration cost moving on to the bank channel and substantially lower in bad debt. So the margin of individual plans in the bank channel is much higher than the margin than the traditional retail channels in the individual plans.

In addition to understand the DLR, in previous years, close to 2019, beginning of 2020, Odontoprev had specific provisions for individual plans as a result of the free choice of dentists for the members and that level -- that portfolio -- sales portfolio had some discrepancies and had a wrongful use. So those provisions led to very high DLRs and atypical in individual plans, even being higher than 40%.

Those problems have already been solved. And year-after-year, quarter-after-quarter, we've been reversing those provisions. There was a last one in the last quarter, and that was approximately BRL 5 million, Gustavo. And we still expect during 2Q '23 to have additional reversals of the other BRL 5 million. As the company is extremely comfortable, those products are no longer being sold. They were discontinued. So the company is very comfortable in reversing these provisions.

So the final takeaway about the individual plans and your question is individual plans historically give us a lower DLR ratio. They have a risk profile that is higher given the selection or adverse selection of consumers or potential cancellation of contracts by customers, and lastly, as a result of default of nonpayment. So all of these factors are taken into account so that the company can price with a higher sales ticket and use patterns that are under control, such as the grace period.

At the same time, there is a growing bankalization of individual plans. So the place where we want to reach is -- the individual plans do have DLR that's historically lower than corporate plans. And there has been DLR in recent plans and individual plans that's been under 30%, and that's what we should expect moving forward. So a DLR of 30% or lower. Therefore, much more efficient than the traditional 50% that we see in corporate. And that's what enables us to have that development and planning that's expected to have a return regarding the individual plans.

And the second part of your question that was about the INSS and the reversal. So it was -- it's nonrecurring. It will not take place again. Those procedures were adopted now by the company and the company feels comfortable in reversing that in the first quarter.

That's related to the managed plans that were offered in the past, and the company won that in court. So the last step for the reversal of those provisions took place now in the first quarter. That's the reason for the data that you just mentioned for the first quarter. So once again, it's non-recurring. It won't happen again. That's it.

[Operator]

Next question is from Leandro Bastos from Citi.

[Leandro Bastos, analyst]

I have 2 questions as well on my side. And the first one is about DLR, but here in this case in the corporate channel. So in the presentation, you showed us the comparison with the historical DLR. And in the corporate channel, it's still 2 points under. Historical was approximately 52%. So I'd like to understand if the 50%, is that the new normal? Or is the gap going to come back in the mid and long-term? That's one of the questions.

And the second one is about sales. Would you expect for the first quarter -- usually, you're weaker in sales in the first quarter. So I'd like to hear your expectations for the year. What do you see per channel? And that's it.

[Rodrigo Bacellar, executive]

This is Rodrigo speaking. About DLR, I was actually going to add to Pacheco on the first question. We have to think of DLR as a fraction. And on the top, you have the 3 elements, the frequency times the number of procedures per patient times the cost of that procedure. All of that divided by the revenues. So in the sales mix and -- today you have the bank channel that's been increasing much more than retail that even shrunk given the problem that we have in retail right now. Like here, I'm talking about the department stores.

So in that equation, when you have frequency -- and I'm going to decouple that. When you have frequency, it's the same. It's absolutely back to normal. We mentioned that in the past call that corporate has become normalized since December 2021. And now, we have normalization not only of individual plans, but also SMEs. So the first factor of the multiplication by frequency number of procedures and cost of procedure, that's already back to normal for the all 3 segments.

And the cost of procedure, that's also normal. So it's a negotiation -- annual negotiation that we have with our 32,000 dentist network and 20,000 some that want to be part of our network. So that's a normal commercial process with our network team and the dentists. And the number of procedures where we were able to had -- to have more control.

So the AI topic that we've been mentioning in the past 2 calls, we went with heavy investment and development improvements and even new tools to control procedures and audits and operating in clinic audit. We were able to have that control to avoid waste, to avoid abuse, to avoid fraud. So we moved forward in the past 2 years in a good way in that direction. So I'd say that the revenue, which is the bottom line. Where Pacheco mentioned that there's more appraising in this channel as it's non-corporate and exclusive for our operation. Corporate is more competitive. It's a daily competitive war.

But in the numerator, both are normalized. And in one of them, we've been able to have more control. And what do we expect moving forward? We expect that the control will continue, because we've implemented more control or at least the step that we have right now in 50% to 60% of these services in Brazil. And we have 40% or 50% more to still roll out. So today, we're very comfortable that the DLR levels are not a result of exogenous or extemporary facts. Actually, they're here to stay based on the investments that we make, as I just mentioned.

So about sales activities. Obviously, it's going to be a challenging year. It has started already that way, and it will continue in this first quarter. We've been seeing what in the past 10 years. We had a first quarter that was similar to this one in 7 of them. So there's the seasonality, but we highly believe that we see an interesting market with traction.

So when we go into non-corporate, we see the SME channel that we've also been highlighting in the past calls where we've been bringing growth -- historical growth levels in SMEs using the bank channel a lot and the partnership and the relationship that all our partner banks have as well as our sales team here at Odontoprev, where we have a re-segmentation process and we've broken that down into different tiers, 3 tiers: 1 to 29, 30 to 100 and 100 to 199. So it takes a while.

You train people, you go to market with that, start talking to partners, to brokers, to customers and bank channels. And that will have inertia until it gains traction. And it has since last year. So we have a constructive view. In the first quarter, obviously, we're monitoring everything that's happening. So we have a very constructive view for the year on the commercial front as well. So I hope I answered your question, Leandro.

[Operator]

Our next question is from Yan Cesquim from BTG Pactual.

[Yan Cesquim, analyst]

I have 2 questions on my side. First about the solvency rule. If I'm not mistaken, the new one based on risk is valid as of this first quarter. So I'd like to understand if there's already any impact to you, if you see that there's more room for minimum regulatory capital or for capital distribution. So I'd like to hear you on that. And if you can give us more flavor?

The next question is about prices -- price transfers. We can see that in the healthcare industry, price transfer has been very high once again to bring in the economic balance of the industry that was deregulated in these past years. But although it's not directly correlated, I'd like to know if you see any opportunity from that externality to continue to advance and speed up in terms of best pricing. That's it.

[Jose Robert Pacheco, executive]

I'll start off with the regulatory and solvency side. And after that, Rodrigo can comment about the price transfers. Risk-based capital has started, yes, in January 2023. Based on the regulatory aspects, you've realized that we've also inaugurated in 2023, disclosing our numbers in IFRS 17 to comply with the CVM Brazilian SEC requirements, and we also understand that based on the Federal Revenue Service and the ANS.

So the solvency rules are given by the ANS, the Brazilian healthcare agency, and they define the potential that we have in distributing the results. That interpretation continues in the first couple of months. And as you mentioned, we're optimistic. And what we believe from the industry overall is that there may be even during the year additional flexibility. So the takeaway is that Odontoprev is a traditional payer of dividends.

So there's no reason why 2023 would be an exception to our payout. Our payout traditionally exceeds 98% of the net income that can be distributed. So in June, as we traditionally do, we expect to announce the interest on paid capital. And after finishing the studies and the capital -- risk-based capital, we can have a distribution of dividends. So we're optimistic about compensation, distribution of dividends and interest on capital this year, supported by this new moment of regulations in the healthcare industry. Those are my comments about solvency.

[Rodrigo Bacellar, executive]

About the price dynamics, I'm going to go break that down into segments in corporate, the more competitive market -- as we know it, where the share is approximately 95%. So the competitors are looking at the market. So it's a market that we used to working in our 35 years of existence. That's how we started with the corporate market. So what do we expect?

Well, we expect what we already have. If we take a look at the past 21 quarters, we were positive in '18 or '19 quarters in the corporate fight. And the 3 negative in the past '20 or '21 was the second quarter in 2020, which is the peak of the pandemic. So it's an environment where we are accustomed to working in. We have the operation that when we add on to healthcare, we have healthcare partners.

We have Bradesco and others where we work together as well as we have what we've been doing a lot is following our contracts, taking quality dental plans to our clients focused on the operations. When we go into SMEs and individual plans, we had space to increase prices, and that's ongoing. It wasn't much, but it will be reflected. We didn't adjust the individual prices for 3 years or 3.5 years. So there's room for that. We still have it, and it will be done.

And there's the product mix. So we have portfolio approximately 500 products that are registered with ANS. And obviously, we have corporate products in those 500. But we do have the ability to play on with specific products for our bank channel customers. So individuals or SMEs may have more on the specific type of coverage or network and with a waiting period or not or co-share or without co-share.

So, we can work with that -- as it's another way to price or at least sell products with a higher price. A number of different things that go through coverage distribution channel, the segment that's being served in a competitive environment in each one of them. So what we see of revenues growing 11.1% and what Pacheco mentioned that the bank channel increasing more and diluting even more the retail channel, that's widely explaining the behavior that we saw in revenues and also the chart that was shown today with growing tickets.

[Operator]

Next question is from Felipe Amancio from Itau BBA.

[Felipe Amancio, analyst]

We have 2 on our side. This quarter, we saw that Bradesco Dental brand is still gaining market share and lost members in the quarter. So, if you could talk about the initiatives and what you expect from these 2 brands, especially Brazil dental moving forward? And next question is that in the result, we saw a drop in some of the expenses that are impacting G&A. What should we expect in that line in the upcoming quarters? Do we see any opportunities to make that even leaner that line?

[Jose Robert Pacheco, executive]

Thank you, Felipe I'll start off with Bradesco and [ BB ]. Bradesco, we mentioned a lot, so I'll talk about BB. BB is a huge bank. It's an amazing distribution channel over 70 million customers in Brazil. So we always hope that it would gain the traction that Bradesco gained in the past. Obviously, selling insurance at Bradesco in the oldest bank already had the talent to do that.

But we're monitoring together with BB Dental all the time, they have products on the shelf that have been designed and during pilot testing and so on. So, we always hope that we'll gain more traction at some point. So, we've been supporting the operation even more with training products and helping wherever we can so that we can get that -- space in their commercial front. So that's our daily channels. Let's see how that will behave during the year.

Felipe let me talk about expenses. In fact, company SG&A has been more efficient, I'd say, in the past years, specifically in this first quarter. I'd say that it was peculiar. It's an outlier. We have to look at the last 12-month period. I think it best reflects what we expect it from the company. But in fact, we have reached more efficient levels and expenses, and there are many examples that we can have here.

First of all, the new headquarters here in Alphaville, Sao Paulo with a 10-year contract with a lower cost compared to the previous one in about 20% continuous efforts in robotization. There are a number of new robotized processes in the company in the past years. And you've been seeing that with the higher CapEx, the company more than doubled the levels of CapEx. It's modest compared to the annual cash generation.

So today, it's at the level of BRL 80 million per year. And we believe that, that will remain in 2023 and 2024 and starting to change in 2025 and that historical level for BRL 40 million to BRL 50 million. So that daily pursuit for efficiency, it's our mantra. It's highly important. But you should not consider the first quarter as a proxy for the year. It would be more reasonable to analyze the data from last 12 months that the company has obtained with the gains in G&A, continuous gains in G&A. That's the message that we would like to give to the market. Thank you for your question, Felipe.

[Felipe Amancio, analyst]

Perfect.

[Rodrigo Bacellar, executive]

Pacheco, I'd like to add to your point about SG&A. We also made some efforts. And in that sense, the pandemic helped us for the derivation for the service channels. So we worked a lot in digitalization. And Pacheco mentioned robotization, but there was the digitalization process that enabled us to have brutal decrease in post office expenses in the cards, because you would -- print all of that and then post-of expenses to see network list.

So digitalization helped a lot in that sense. So second copies of the payment orders and the card in the call center so inbound where we can outsource that with efficiency, travel with teams and Zoom now that enabled us to have more synergy and higher efficiency. So the sales team that would use 3 days for a trip to add members to a contract. Now they can do 5 in 1 day without leaving the office.

So that shows us that we can always look at the expenses line obsessively and see where we can add more efficient processes, automatic, digital, robotized, anything that's high -- low has low complexity and high repetition, we can automate that. So that's some more flavor about our SG&A. So we already had the first movement, and that doesn't end. And we're always revisiting that to try to improve even more. Thank you.

[Operator]

Next question is Ricardo Boiati from Safra Bank.

[Ricardo Boiati, analyst]

Two quick questions on my side, first 1 is about the competitive environment. and commercial policy. Have you seen in the insurers, health insurers, a more rational stance, even more aggressive in adjusting or increasing the price of dental, because there's a lot of pressure non-DLR in healthcare. And dental, which was, many times used as a mechanism for bargaining to improve the package of that healthcare plan. Is that tool being used less now?

Do you see more re-composition of price in the market and even competition for dental plans. That's my first question. And the second is about M&A. Have you seen any opportunities for acquisition? Anything interesting if the company has been active in prospecting new businesses or nothing really interesting in the market right now?

[Rodrigo Bacellar, executive]

Ricardo, thank you for your questions. The first 1 is sensational because it gives us some light. Everybody sees a moment, right actually, the 2 past years that the health industry is going on with the court orders for procedures, including procedures and drugs in the list, and that's going against society. It means that health insurance is going to be increasingly more expensive, because they have to give everything to everyone.

And it will pretty much kick out people from the private healthcare industry and more people in the public health system. Given it's a world that nobody wants, government doesn't want that. And patients don't want it and the health insurers don't want it, we believe that, that should change at some point. And out of all the conversations that I'm part of inform in healthcare companies, I see that it's very hard to continue at that rate.

So I do believe that companies are going to be more careful in pricing, especially in healthcare. Because we're the pure player in dental, but the other ones also have it. That's about 1% or 2% of their revenues. And where -- they should gain efficiencies and focused on their operations to bring them back to profitability is healthcare, actually, right? So without a doubt, we expect that, and that movement is already happening.

So, we have a construction vision for the industry. It's going to be good for the Brazilian healthcare industry. And your second about M&A, we always see things knocking at our door for obvious reasons as we really stand out in the dental industry. So, there are always opportunities coming up. We analyze all of them, considering our value chain, what we already have, how much it will add or not.

So it's a constant activity? Obviously to be honest, big things, not much the last big thing was Odonto System, and we bought that in 2018. That time it was a sixth or seventh launch with 640 members. So we always look into new opportunities and talk about that as -- in addition to the organic growth that we are a result of 14 mergers. And the founders were part of the Executive Board here of those companies. So always looking and opportunities yes.

[Operator]

Next question is from Mauricio Cepeda, Credit Suisse.

[Mauricio Cepeda, analyst]

I have 2 questions. The first 1 is about commercial strategy. I understand that you are increasingly more concentrated in Bradesco. And obviously, there's, advantages in use, and ticket. But my first question would be, is that on purpose, are you concentrating on Bradesco on purpose? And if that's the case, do you trust that Bradesco will be able to offset the loss of members that you see in other channels. That's the first one?

The second one, as Pacheco mentioned, you went into a value increase cycle. So Pacheco mentioned, improving the ticket, the mix and likelihood to use. So would like to go back to the aspect about the cost per member. Is your cost per member is pretty much stable even though there is inflation, and you've answered on other occasions that dentists don't really care about that because you bring in the frequency. So I'd like to address the commercial appeal with a per capita cost that's stable, don't the products lose their commercial appeal. So my first question is, -- what's the percentage of members that in fact, use a service on an annual basis? So what's the physical frequency of use? And if in that cycle to increase or for value increase, do you have products that would have higher use and then you would have less churn, because at least for your net adds, they come from gross adds, but they also have considerable churn, that's it?

[Rodrigo Bacellar, executive]

So thank you for your question. I'll start off by answering with the Bradesco side the sales side. And then I'll hand over to Pacheco. Today, I'd like to say that 5,000, 5,500 members of Odontoprev, Bradesco Dental BB they sat in a dentist chair and were serviced. So we have 750,000 to 800,000 patients that are visiting dentist chairs every month. So 8% to 9% in the total of patients that, are there.

Now going back to the commercial side, we don't have a concentration strategy. At least as far as the way you asked the question, what we do have though is we have a product area, we have a sales area. We have the actuary area of finance and network departments. We have an orchestra and this ship that's set up to serve our distribution channels. So Bradesco, given its obvious reasons, and its importance in the Brazilian bank insurance industry, it's highly respected, 77 million customers that transact some sort of product on a monthly basis with the bank.

So when they have available in their hands, something like Odontoprev like a ship that's ready to take off. They can do exceptional work for the reasons that I mentioned. So our strategy is not concentration that's far from that, but when you do have a product with these characteristics, this service level that falls into the lap of a big giant bank like Bradesco. They grow per dilution and grow their share. I'd also like to call your attention to the Odontoprev brand that does exceptional work is growing.

Everything that's valid for Bradesco is valid for Odontoprev and its SMEs as well with expressive growth in corporate as well with spectacular growth. So we specifically have a channel today a segment, and that's the retail segment and even more distribution channel than the segment is suffering from the pandemic. It's suffering because they were closed down during the pandemic or systemic issues and now the retail crisis that start off with Lojas Americanas.

So Bradesco is reaching that level through dilution, Odontoprev is growing, but Bradesco grew even more, because they are a phenomenon in selling in power and brand. So it's not a strategy that we're not looking at the rest and only looking at Bradesco. No, we service all our different channels in the segments and the ones that capture that can have extraordinary performance.

[Jose Robert Pacheco, executive]

Cepeda, I'd like to comment about our deflation. It's not that the cost went up just a little. We currently have a lower cost per member per month than we had in 2019. So Odontoprev has had cost deflation in the past years. And why is that? Because the customer profile has changed because the profile of providers has changed in addition to the management tools that are based on technology that I mentioned and Rodrigo mentioned.

It's very hard to be done and very hard to be replicated by the market, which gives us the possibility of adjusting our ticket and definitely under inflation because, once again, the company has observed cost deflation. So I believe that the company has developed new profiles of service providers inside their registered network, pursuing very sophisticated management tools, like dental tech that we mentioned.

That's giving us the frontier in image, management and database management that's very robust. So those differentials have allowed the company to have very interesting cost management. And lastly, it's important to mention and the information that we've always disclosed is that our network of providers is smaller than 5 or 6, 7 years ago. So the company studies and follows the details of the relationship with each one of its providers.

And it's been able to offer not only a financial relationship, but it's much more about a business relationship where we add value to each one of our dentists in our network. That's done in an individualized manner and very thoroughly and in essence, that has enabled the company to have significant loyalty and quality in essence of services provider -- provided with nothing like it in the market.

So that's what's supporting the framework, the new standard or new pattern of DLR of 30% in non-corporate. And the tickets are following inflation, and they are enough. So the company has been recording deflation in the past years. That's what we wanted to mention. I'd like to say that we have time for one last question. We've run over time. So that's it Cepeda.

[Operator]

Next question is from Estela Strano from JPMorgan.

[Estela Strano, analyst]

Real quick on my side. Do you see any opportunities in Odonto already in Mexico?

[Rodrigo Bacellar, executive]

Estela, thank you for your question. Yes, we do see. We're excited with the operation. I was there recently 1.5 months ago. We have an interesting pipeline. Mexico has or a culture in dental that reminds me of Brazil 2 decades ago, but it's starting to gain traction. Today, we see the market, speaking more, the broker partners have cross-border customers getting Mexican or Brazilian clients in Brazil that have operations over there and that type of conversation. So we're excited about Mexico. Obviously, it's very small.

We're excited. It's about a small company. I do feel that there's a maturity level in the Mexican market given at the insurers that don't have dental and contract our services or because of our broker partners are there or the cross-border operations that we have here and over there they're talking more about dental. So we're renewing our hope that Mexico could be what Brazil was 20 years ago, highlighting once again, it's a very small operation, but there's a lot of buzz and more culture in that sense. It's moving forward. That's the important thing. Thank you.

[Operator]

So now the Q&A session is now over. I'd like to hand over to Pacheco for his final comments.

[Jose Robert Pacheco, executive]

I would just like to thank everyone for participating. It's a pleasure to be here with all of you. See you next time. Have a good day.