Odontoprev SA

BOVESPA:ODPV3

Earnings Call Transcript 2021-Q3

[Stella Hong, executive]

Good morning, ladies and gentlemen, and thank you for holding. Welcome to the Odontoprev conference call to discuss the earnings of the third quarter and first 9 months of 2021. I'm Stella Hong, IR supervisor. And today, we have with us Mr. Rodrigo Bacellar, our CEO; and Jose Roberto Pacheco, CFO and IR Officer. This webcast is being recorded and streamed only on the Internet. The link is available at the company on our website at ri.odontoprev.com.br, where the respective presentation is also available 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 mute original audio. Next, we'll start the Q&A session. To enter the queue, your name and company must be included via the Q&A button at the bottom of the spring. The questions will be answered in the order they are received, and when announced a pop-up to meet your microphone will appear on this screen. We suggest that your questions be asked all at once. It's important to note that submitting questions is only allowed for participants on the webcast platform. The aforementioned instructions are also available on the chat as well as the presentation of this webcast.

Before proceeding, let me mention that statements made during the call relating to the Odontoprev business perspectives, 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 occur. Investors and analysts should understand that overall conditions, industry conditions and other operating factors could also affect enterprise's future results and, therefore, could lead to results in materially differ from those expressed in such forward-looking statements.

Now I'll turn the conference over to Jose Roberto Pacheco to begin the presentation.

[Jose Robert Pacheco, executive]

Hello. Good morning, everyone. Welcome, and thank you very much for your interest and trust. We are Odontoprev. I would like to thank you for attending this company event to present the performance of the third quarter and the first 9 months of 2021. Now, to begin the presentation on Slide #3, we can see data from ANS since 2006, where the dental plans on the right-hand side of the screen continue presenting continuous growth with over 21 million new members, exceeding the 28 million members currently in the industry. And specifically, in 2021, we see the gradual resumption of the net additions in the industry, not only in health, but also in dental with an increase of 1.5 million new customers in the dental plans, approximately double the increment compared to the health care plans.

On our next Slide #4, we see the revenues and average ticket of the main dental plans in Brazil. We are presenting the size of Odontoprev portfolios not only in corporate but also noncorporate segments, meaning SMEs when an expressive leadership of Odontoprev in both of them. On Slide #5, you can see the net addition of 179,000 new members in the quarter with the highlight to the bank channels in the noncorporate segment. In the past 12 months, consolidated additions totaled more than 0.5 million, precisely 564,000 new members, and that is the best commercial performance in 10 years, as we can see on Slide #6. On our next Slide #7, we see the quarterly evolution of revenues with a sequential growth and the annual variation after the harsh impacts of the pandemic, specifically in 2Q '20.

On Slide #8, we demonstrate the execution of the long-term strategy. We can see that the corporate segment revenues has increased 17% since 2014. On the other hand, the revenues of the noncorporate segment, meaning SMEs and individual plans, goes from BRL 284 million in 2014 to BRL 774 million in the past 12 months, a 16% growth per year in the period. On Slide #9, we observed the DLR per segment compared to 9 months '20, reflecting the effects of the pandemic and also compared to 9M '19 before the social distancing we had last year. You can see the consolidated debt-to-loss ratio was 39% in the first 9 months of 2021, identical to the same period in 2020. Basically, resulting -- and this is very important, given the lower cost of services in SME products and individual plans that have increasingly become more relevant in the company's consolidated bottom line.

On our next Slide #10, we can see that sales expenses were 10.5% in the quarter, under the 10.9% year-over-year, mainly resulting from the growth of the noncorporate portfolio in bank channels as they have a lower cost of acquisition. As we can also see on our next Slide #11, the growing share of the bank channels also continuously benefits a lower bad debt, which was 3.3% in the quarter. Now moving on to the next Slide #12, we can see cash generation. Here, we show that with the drop in the cost of services, the gains in SG&A efficiency, the first 9 months of the EBITDA was BRL 441 million, with a margin increase to 32% compared to the 23% in 9M ‘19 in the pre-pandemic period.

On the next Slide #13, we have the highlights of the new profile of financial investments in which during the second quarter, last quarter, we moved part of the current assets portfolio to long-term government bonds with post fixed and prefixed interest rates higher than the short-term interest rate with the same credit risk profile. These new instruments are accounted for in the curve, mitigating the volatility of the consolidated portfolio and will be held until maturity, and we're definitely the main reason for the financial -- higher financial income absorbed. On the next Slide #14, we see that in the quarter, the company ended the period with a net cash of BRL 713 million with no debt.

On Slide 15, we can see an update of the share buyback program. Everyone remembers that from the beginning of the program, which began in April this year, approximately 9.9 million shares were bought back at an average cost of BRL 13.06, an investment of BRL 130 million, which added to the cash dividends already paid up. This year, totaled BRL 379 million in total shareholder compensation in 2021 according to Slide #16.

Now moving on to the end of this quick presentation. According to our next Slide #17, in our recent highlights and recognitions, Odontoprev was recognized as the best company in the health industry by the Época 360-degree 2021 annual report from Época Negócios Magazine. We were also the winner of the biggest and the best 2021 in the health industry ranking by Exame magazine and chosen as top of mind dental plan among HR departments for the 8th consecutive year in the 24th annual edition of the event.

Now moving on to the end of this presentation on Slide 18, we can see the continuous growth in the number of individual shareholders, which for us at Odontoprev is a great reason for pride as well as the growth of our globalized investor base with an approximate free float of 88% with investors from over 30 countries. Once again, I would like to thank you all for your interest and trust in Odontoprev. Now I would like to move on to the Q&A session in our common practice of a 45-minute earnings call. Thank you all.

[Stella Hong, executive]

Now, we'll begin the Q&A session. [Operator Instructions] Our first question is from Vinicius Ribeiro from UBS.

[Vinicius Ribeiro, analyst]

Well, I have 2 questions on our side, which is not a surprise. The first one is about DLR. At the end, how do you see the network being used? When do you think that DLR will go back to pre-COVID levels? Are there any structural changes that where we may have a different DLR? The second one, with the quick changes in macroeconomic variables, do you believe that there's -- that will be a positive trend of net adds in the market as we've had during the pandemic. If yes, how will you ensure your net add share in that case?

[Rodrigo Bacellar, executive]

This is Rodrigo speaking. Thank you for your question. In relation to DLR, that was your first question, right? So this is what we envision. In individual plans, we already have DLR very close to pre-pandemic levels. And there's also a mix effect, as we call it, so bank channels and the retail channel sales that were highly affected during the pandemic. So in terms of frequency of use, it's already very similar to pre-pandemic -- before the pandemic. And what you see in the percentage is much more related to the agenda mix than the actual DLR that would be too low because we're still in the pandemic. So in the corporate segment, for instance, we're in cruising speed as we were before the pandemic. So what we're seeing is remodeling. And I also mentioned that in the last earnings call, we started resegmenting SPG. Those are the companies that are up to 200 lives -- members, excuse me. So we've created different rates from 3 to 29, 30 to 99 and 100 to 200. So we not only have segmentation to make this product more interesting because a company that 150 or 199 is already similar to the behavior of a large company.

And we've also accelerated the distribution in bank channels and together with health plans. So in that, we see -- don't forget that we're balancing out a lot of plates, so we have individuals, SMEs, corporate and then we have the plates for distribution channels. So we're talking about retail bank, own sales force, weight label, operations where we're white label for, health operations. So in SMEs, we do see a longer duration. And when that's sold together with health, we have lower DLR. So what we've been seeing in terms of results on a daily basis, it's very important for us to have a diversified strategy of brands, products, distribution channels, segments, so it really depend on how that entire mix behaves.

So if the economy recovers and the market is moving forward, then we see all of them moving together, but the potential of that SPG is extend -- so what I mean is SMEs, they're approximately 70% of the GDP of countries, right? So that's a huge potential to be explored and where the strength of our bank channels, be it Bradesco or Banco do Brazil, that are giving these SMEs oxygen on the daily basis and help them to operate is excellent fuel for us as well. So that's why we created that new segmentation in SMEs, and that's also been designed together with health plans in a number of different options. So that's how we're juggling all these plates, so channel distribution, brand, Pacheco?

[Jose Robert Pacheco, executive]

I'd like to comment on the second part of Vinicius's question, which is about sustainability of growth in the net additions. I believe that 2021 is an important year. It's the best performance in net additions in the decade of the company, and that's been increasing in a strong way and a sustainable way. So starting off with corporate, I think that it's about the free choice. So we have an important portfolio, 2.5 million in the free choice contracts, where the company doesn't have any cost and employees just -- open enrollment. So that's an exclusive option of Odontoprev, where we have new people in contracts, corporate contracts that have a great duration and long-term profile. So that's a continuous growth. And the potential of that has increased in 2021 with digital tools, also the information for those employees that still don't know the benefits of a dental plan. So that has been a determining factor in increasing the corporate portfolio, especially during the pandemic in 2020 and 2021.

The second important factor in growing the corporate portfolio has been and will continue to be the rollout of the Odonto System model in the North and Northeast of Brazil, especially in the Northeast into new regions such as the South and Southeast, where we -- the addressable market is much bigger. And for the first time, Odontoprev is coming in with a more affordable average ticket, talking to a new customer profile, corporate customer profile and why not to say also developing medical partnerships in those channels that are pursuing us for commercial partnerships where we have a win-win situation. And the third and last aspect in growing the corporate portfolio, it's worth mentioning the Bradesco Dental. Well, I don't think I have to mention the potential of that portfolio in major corporate accounts of Bradesco Insurance of the Bradesco Bank itself. So they've had important progress in cross-selling and in communication and expanding the distribution geographies. So now it's much bigger than in previous years. And it's a huge potential in Bradesco Dental in the corporate segment.

So, Vinicius, SMEs are a strong bank area. And together with the bank partners, we brought in over 100,000 new members with a higher ticket than the industry and cost of acquisition, which is very attractive and minimum rates of bad debt. So the SME portfolio, as Rodrigo mentioned, has an extraordinary potential for us. We've been very successful in that different than previous years and bringing in returns much higher than the industry standard. And the last item in our growth strategy, individual plans which once again, the increasing bankalization has increasing bad and average and healthy ticket and are even lower than 2020 levels. So with the contribution market and cash net results, which are, in fact, unique. Thank you, Vinicius.

[Stella Hong, executive]

Next question is from Gustavo Tiseo from Bank of America.

[Gustavo Tiseo, analyst]

I have 2 on my side. Pretty much what Vinicius asked, at least a part of it. So on the first one, in the rollout of the Odonto System portfolio, you've mentioned the possibilities of growth, would there be any cannibalization? I know the products are very different, but I'd like to know if when you bring in a low ticket, would there be cannibalization with current products that you have in the South and Southeast? And the second one is what can we expect in noncorporate and corporate revenues? Is there a target, 50 or 40? Any specific targets for these 2 segments? So can you talk about the potential? You already said it's huge, but what potential can you reach in the short and medium term?

[Rodrigo Bacellar, executive]

Thank you, Gustavo, for your question. Yes, we did answer part of that in the first question. But when we talk about the Odonto System rollout, as Pacheco just mentioned, in South and Southeast, we have a very important presence of Odonto System. And about cannibalization, it does not cannibalize quite on the contrary, the business model, the brands, their add-ons. So we have the Odontoprev brand. It's positioned in the premium segment with a higher value, a larger network. Can you have Odonto System with specific plans, with specific portfolio management, specific network? So it's supplementary and you said as if it's going to cannibalize because the sales force is attacking the market, visiting companies, our planning that we do in sales management, there it's not rare to start a conversation with the sales force from Odonto System and that converts into Odontoprev because they want a premium service. And it also starts off with Odontoprev and then pressure on costs and it converts to Odonto System.

So I think they add-on to each other, there is no cannibalization. You also asked about targets in between noncorporate and corporate. We do not have a target. Once again, I believe that the beauty of our strategy in our model of operations that we built in 34 years of history is once again having a magic cube or Pentagon now, when we're talking about segments, distribution channels and brands. So we have different products and our ability to be able to service many different audiences and targets. It's not cannibalization at this time. And I don't even think that 15 years from now, we'd be talking about cannibalization. It would always be add-on.

And the potential that I mentioned in the first question, we still have a lot to do in SMEs. It's still in the beginning. And I think that health and the pandemic has shown how important it is to have health insurance, even though dental plans have grown twofold more than health, it has started growing again after 5 years in decreasing the number of members. So that shows how important it is. We're optimistic. We have companies that have been mapped in the corporate segment. We have companies that were mapped as SMEs, and we have sales strategies to attack that through our partners, distribution channels, bank channels, through health plan partners. Don't forget that we work as white label for health insurance carriers. So there are a number of plates that we have to attack that all. And we don't have a target or this is going to be X percent of revenues in whichever year. We just want to be present in the markets and take all the opportunities that are available when they come up. Pacheco?

[Jose Robert Pacheco, executive]

I'd like to add to what Rodrigo said. Thank you, Gustavo, for your question. So going back to 2014 and comparing that today, so in 2014, 75% of our revenues were corporate, 25% were noncorporate. Today, our percentage is much different. We're talking about 57% of revenues corporate and 43% of Odontoprev revenues are already coming from SME plans and individual plans. And why is that important? This is the sixth quarter in the pandemics, so 1.5 years of performance in this new setting, and I think there's already a clear lessons learned here at Odontoprev and it's important to share that with you. We feel that there is an attempt to interpret the company's DLR and understand its correlation with health plans, but it's not the case. For us, the vision that we have a new mix, a new customer profile. The business is transforming itself and with conditions to set us apart. So during the pandemic, the lowest DLR and consequently, the highest profitability would last longer than what was expected and even modeled. So I think that's an important alert.

We see a very direct comparison to the health care models that have structural medical inflation, and it's not the case in the Odontoprev model. It's not our expectation in the short-term to have any relevant changes in the DLR standards or patterns. So it's important to mention that maybe in mid-2022, in the second half of 2022, we may come back and see in noncorporate. We may see a behavior that would go back to the numbers pre-pandemic. So we're in a cycle that's very unique in building value with bank channels adding on new customers with a very interesting risk profile. So I believe that we need to understand that further and discuss that further. In fact, it's a privilege for us to be able to execute this strategy and extract value in such a challenging moment that we're facing. Thank you once again, Gustavo, for your question.

[Gustavo Tiseo, analyst]

Congratulations on your results.

[Stella Hong, executive]

Our next question is from Renan Prata from Citibank.

[Renan Prata;Citibank;Associate Analyst, analyst]

Well, congratulations on your results, Rodrigo and Pacheco. Just a quick question. Could you comment on the G&A levels? It seems like you have some efficiency gains. And would we expect that in the future, those margins in the future? And could you quickly comment on bad debt, just any changes? Or has it been the same as the past quarters?

[Rodrigo Bacellar, executive]

Okay. Thank you, Renan. Just a quick comment, and then I'll hand over to Pacheco. About G&A, the company is highly disciplined. I believe that DLR stood out in the beginning of the pandemic when the dental offices closed and social mobility and so on. But in parallel to that, we've endeavored a lot of efforts in Pacheco can go into the details to contain expenses and in the digitalization processes. So we have the robot, the robot automation processes and so all repetitive and low complexity processes can be automated. So with that, we've had significant economies. We already have 5,000 hours per month that were robotized. That means people that can do other things, and then we can also adjust our organization. There's also reallocation, negotiation of contracts where we're present in many Brazilian states and digitalization of their dental IDs and we've saved money on post and also travel, you couldn't travel in the beginning of the pandemic.

But right after that, using tools such as this one that we're using for this call, we can streamline a number of visits that we make sales or visiting the network, the consultants that check, the dentists, talk to dentists, check their offices to see how everything that is going equipment and so on. So a number of different fronts that we have in SG&A, and then we streamline that as I've just explained depending on each one. So because of that, we can have relevant savings. We did great work on that end. We were able to evolve a lot. And I believe it's a result of that. We took advantage of that. And so in communications, and saving money and pricing the cards, and the app without having someone to talk to, someone in a call center just by using the app and all of that in terms of expenses is a result of all that work that we've carried out here.

[Jose Robert Pacheco, executive]

Yes, perfect. Just to add to what Rodrigo said. Technology is the word that we have to remember in terms of performance, productivity and efficiency gains. And the CapEx, usually close to BRL 30 million, it's doubling in recent periods. In order to support all these projects where technology is the most important aspect of it, we're implementing larger operation systems, cloud-based, best-in-class, the other example that we can give you and inform everyone is that our headquarters is moving from Alphaville here to a walking distance of where we're currently at for a 10-year contract at half the price that we have today. So there are a number of efforts towards technology and also to controlling costs that we do on a daily basis here in-house.

The other point, Renan, reinforces the strategy of bankalization which is in terms of bad debt. So the main company segment in corporate doesn't have bad debt, it's just residual. When the company executes a strategy through the bank channels to enter SME portfolio, bad debt is almost 0. When the company brings in new individual plans through bank channels, bad debt is also very low. So with the growing migration of individual plans distributed, which was previously distributed and sold in department stores to more recent cases through bank channels, it's very natural to have lower bad debt levels, and therefore, we have a margin increase. So it is strategic. The company really enjoys these individual plans, especially through bank channels for the upcoming years.

[Stella Hong, executive]

Next question is from Yan Cesquim from BTG Pactual.

[Yan Cesquim, analyst]

Just one question on our side. It's a follow-up of some of my colleagues' questions. Basically about the bank sales channel compared to retail sales channels. So we've seen a drop, a significant drop in DLR that came from that difference in the mix. And I'd like to know how you see that moving forward? Are there any incentives to maintain that strength in the bank channel? But on the other hand, the retail channel was also negatively affected by the pandemic. So I'd like to understand what you expect? If we can expect retail to come back to normal slowly but still focusing more on the bank channels, what do you imagine in that strategy?

[Jose Robert Pacheco, executive]

Hi, Yan. Thank you for your question. Actually in the company, we've been setting up our operational plan and individual plans. So it's up to us to provide all over Brazil. We cover all states, over 2,500 cities, through a very unique and large network of dentists, we're able to deliver solutions. So there are a number of different individual plans traditionally distributed through retail partnerships, meaning department stores. And more recently, we see company shareholders, not only Bradesco, but also BB Seguridade supporting that growth. What we've been seeing is the change in the mix. So we have open doors for both types of growth. On one hand, we can say that the growth through bank channels is more predictable, it's more strategic and definitely more profitable with a superior to higher ticket sales expense is lower and bad debt lower.

So without a doubt, the growth of individual channels through banks is disruptive. And it's definitely our more profitable segment in the company portfolio overall. It doesn't mean that the company isn't open to new retail partnerships. It is a different customer profile. It's a different distribution strategy together with individual plans. And once again, that strategically speaking, it is a segment that highly interests us in future years where there's very low competition. But the biggest challenge is to, for the first time, sell a product that consumers don't know and not accustomed to.

So the final understanding there is that Odontoprev wants to demonstrate and be a unique operating platform for different distribution channels of individual plants. The more predictable ones and with the relevant potential would be with our shareholders, Bradesco and Banco do Brasil, we're not restricted to those 2 banks. There may be others that could be digital, for instance, in a similar logic when we think of any potential partners or distribution in retail. I believe that the beauty of the adulterate strategy is to be multibrand, domestic and strictly focused on dental offering excellent returns for those who work with us and unique quality when we deliver to our end users.

[Rodrigo Bacellar, executive]

I'd like to add to what Pacheco mentioned, actually just I want to stress reinforce. There's a lot of importance in what he said. So each one has their own characteristics. But we have our arms open to any kind of growth.

[Stella Hong, executive]

Next question is from Mauricio Cepeda from Credit Suisse.

[Mauricio Cepeda, analyst]

I'm going to go back to DLR. We talked about opportunities where it may come back, but that's not what the figures show. DLR is still pretty low. So in qualitative terms, what has hindered people from using again? So what's going on? And how can that affect price? If use is still low, I imagine that the negotiation, especially in corporate plans would be more difficult. So can you comment on that?

[Jose Robert Pacheco, executive]

Cepeda, that's a very important question and probably the main topic here in today's conversation, definitely one of the most relevant ones. We have to understand that answer in 2 different contests and split things out. Corporate is one thing, noncorporate is another. So Rodrigo mentioned before that we already see things coming back to normal in the corporate segment compared to before the pandemic, where we have a lower ticket given lower use, but still very close to what we were seeing before. So in corporate, DLR is close to 50%, 40%, which is very similar to the past 10 years in that type of market in customers. However, almost half of our revenues today come from a different type of risk, a different type of segment and represent lower DLR. So given that mix effect, it's very normal to see similar DLR in 2021 compared to 2020, given the growth of SME plans with a higher ticket, higher revenues, higher number of members. So the price effect is driving interesting revenues into individual plans.

And through the joint work, they're sold together with other products, giving us higher duration and the annual plans for individual plans gives us better duration, well-behaved and predictable DLR. So structurally speaking, the profile of DLR and cost of services in the company is changing. It's not just a result of the pandemic of less frequency, I mean, given the scenario. And that's an extremely important message. And I know there may be some anxiety in the market. So for instance, which quarter will the company go back to the cost of services that we had before the pandemic in the consolidated results. That is not going to happen in the short-term. It's good news. The company is in a cycle of change, which is very relevant in its customer profile and consequently in consolidated DLR. It's very important to see that the value addition cycle and why the margin will be different and higher in coming years compared to the years before the pandemic.

So to conclude, you have a new customer profile, new ticket profile, higher EBITDA margin given the lower intrinsic and structural DLR in SMEs and new individual bank plans. So that's a very important point for us to talk about. Thank you once again for your question, Cepeda, that's a very relevant point that you mentioned.

[Mauricio Cepeda, analyst]

Well, can I ask something else? So I understand corporate is coming back and their negotiation with companies, but there's a lot of your revenues that are coming from other types of products. But given the fact that you've been growing more in the others, wouldn't there be a lag in use to lower use in some contracts, and that would come back to normal or are you structuring yourself for lower DLR actuarially speaking?

[Rodrigo Bacellar, executive]

Well, Mauricio, Rodrigo speaking. There's some mix that he mentioned and something that I mentioned about SMEs when that's sold together with health. So it has to do with the mix that we're seeing through different business models we have, Odonto System with a different model and Mogidonto with a different model with a different use profile own clinics and 70% of their customers go to their own practices. They call it dental boutique and as Odonto System also had 60%, 65% of service in their Totalis clinics, and we still maintain those agreements. So there's a different profile. but we've been monitoring the use and approval for use on a daily basis. So we see that's different. And also if it's a repressed demand, we believe that's less relevant. Dental plan, it's different than grace period that you have in health.

So usually when people buy it, there's like 60, 90 days for them to use. But when they migrate, its immediate use. So different profile like Prosecco mentioned, being sold together and the bank channel losing the share in terms of retail during the pandemic, right? Yes, that's the beauty of strategy of having the pricing power and access to a unique audience with a higher risk, but we're pricing that in a unique manner as well. So the way to price SMEs leads to lower DLR and the same is valid for individual plans. There is a higher intrinsic risk. Therefore, we desire and model an even lower DLR in individual plans. So with that mix effect that happens, the company DLR is most likely lower depending on the higher success in distributing them in SMEs and also the individual plans through bank channels. So it's an important strategic factor. And in our vision, it does not change in the short-term. So the company still has returns and margins that are very different than the traditional health insurance plans. So for some quarters now, we've had different -- we will have -- still have unique returns moving forward.

[Stella Hong, executive]

Next question is from [ Estela Strano ], JPMorgan.

[Unknown Analyst]

Congratulations on your results. Actually, we have 2 questions from our side. The first one, going back to the Odonto System discussion in numbers and looking at the members, what's the share of that model in the base in new sales? Can you go into details about product profile of the clients that are joining Odonto System?

[Jose Robert Pacheco, executive]

Customer profile. So what does Odonto System offer? It offers very high-quality service. We are paranoid about quality. We go to bed and wake up thinking about now every single day. We will never give up on quality. But sometimes you may have a dental office on a premium avenue or in the countryside. Some will give you coffee while you wait and some of them don't. But the quality of the dentists, their technical certification, quality of equipment and even the materials they use because we deliver them to dentists they're always top quality. So the model is different. This model works. When they buy the product, we call them and say, you've just acquired an auto system program. And we'd like to invite you to go to one of our accredited dentists for a review because if you have any problems, first, we need to clean your mouth and map out your problems, so we can organize your treatment. We call that prevention that first visit, and then we call it a treatment plan. So then we say, okay, you're going to have to get A, B and C. And then we are proactive, and we schedule them so that they can take care of their oral care.

And for patients that are being treated, that's very relevant. On the other hand, for us, being able to schedule their treatments and picking the date, time, dentists with lower dental units, which is a lower cost. That's how we call it. It means we're being proactive in taking care of our customers. So prevention, treatment or scheduling treatment and then the treatment. And the other thing is that the dentist that gives treatment isn't the one that does the prevention or gives the treatment plan, because they may even make up things just or even unnecessary treatments, right? So that's a very successful model, 33 years. It's already been proven. It works well. And you can have a different network in that case, different dentists that accept to work, plugged into that model, having an open schedule in calendar, so that we can do that. So it's a different model, and it's very attractive for consumers that want a cheaper dental plan. And it still offers quality, and they don't have to go to a very fancy clinic. That's how the Odonto System model works. I lost the second part of your question. Can you repeat that please?

[Unknown Analyst]

Yes, of course. Can you give us the numbers of the share in that? What's the share of that model right now?

[Jose Robert Pacheco, executive]

We don't give the exact guidance on that, but I'll give you an example. We bought Odonto System with 640,000, 630,000 members. And by rolling out into the Southeast, we grew another 180,000 members after the acquisition. Acquisition was in 2018. Since 2018, another 180,000 members in the Odonto System and that's part of all the different plates that we're juggling and that's part of our life. So distribution channel, brand, segment, product, that's it.

[Stella Hong, executive]

Next question is from Vinicius Figueiredo from Itau BBA.

[Vinicius Figueiredo, analyst]

First question is about the competitive environment in the corporate segment. Do you believe that in terms of price, that scenario is already stable? Or would you consider ticket stabilization in that segment? And the third point is, can you give us an update in the digital channel performance, your own and partners? How much have they contributed towards the growth that we've seen?

[Jose Robert Pacheco, executive]

Vinicius, the first part. I'll answer that. What was that again? Yes, competition in corporate. So what we see is the part of price and pressure was very relevant last year. And in the first half now, where DLR was still pressed in health and dental. So a DLR is low, let's renegotiate. And the contract always considers 2 things: medical or dental inflation, the variation of the dental costs or hospital costs, and also considers inflation. So what we've seen is when we had very low DLR throughout the pandemic, the pressure was more intense. And there were also some contracts that were canceled, especially individual plans. So there was more pressure at that time. We believe that, that now has been incorporated or embedded in it. And as we mentioned, not only in medical plans, you see all the other results and now elective procedures are coming back and at the end, you see COVID. So the higher pressure that we could expect given the utilization effects has already happened and now back to normal. At corporate market, we believe is that 85%, 95% already in Brazil.

And then, obviously, you do have some more competition. It's easy to recognize the big companies. It's harder to recognize SMEs, especially the small ones. And that competition in the corporate market is old. There was more pressure because of low DLR during the pandemic and now it's back to normal levels. Moving forward, we can expect exactly the same behavior that it's always had. So it's tough. It's our day to day, but we will compete in a healthy manner with them. And for SMEs, I mentioned 85%, 95% share in corporate. But in SME, considering their potential, we believe that it's approximately 8% to 10% share today. So there's a huge potential for us to advance with new products and partnerships. and better alignment with our bank channels and our broker partners. So we're at the top again. I don't expect anything too different than what we've already been experiencing today.

Vinicius, I'm going to mention the digital channels and your question about online distribution Today, they're more present in individual channels, individual plans. That's a strategic matter that's very important. And to clarify, yes, Odontoprev is absolutely interested in individual plans, namely e-commerce, in electronics sales. providing electronic sales.

We already sell that these are very difficult consumers. It's a new frontier, I'd say, in dental plans. We are the pioneers in that, not only with our own platform, but also developing other opportunities together with the bank channels and together with retail channels that already have well or initial movements in e-commerce. So we're highly interested in that. The voluntary by the product, the plan, they choose online, that will be connected via solutions via credit card or debit in their account. The most chosen product is the longer duration, the annual plan as well as products where the average online ticket is higher than the in-person one. And lastly, the company's opportunity to work on the online individual plans, together with other solutions, be it through the bank market or the retail market, is certainly relevant as well.

As we have a platform in SMEs, that's already well established with the bank channels, that's still not the reality in these individual plans, but once again, the digital strategy will be absolutely important in coming years in growing that segment. And here at Odontoprev, we wish to create a platform, a domestic platform that will have many different profiles and solutions for online individual plants, be them distributed on our own platforms or partner banks or even healthcare marketplace, so trying to develop that in Brazil.

And finally, retail trade marketplaces as well. We can be the platform and the partner of choice of each one of those channels, aiming at digital sales. So that's an excellent question. It's an excellent theme, and we'll definitely talk about that during many years to come. Today, we can't really give you much transparency on that, but some of the brands that we've already mentioned over half of the sales are incremental online. So it's a lot of work, but it's being done, and there's a huge potential that's really inspiring. Thank you for your question, Vinicius.

[Stella Hong, executive]

We have no further questions. So the Q&A session is now over. I'd like to hand over to Pacheco for his final remarks.

[Jose Robert Pacheco, executive]

I would like to thank everyone for your participation and yet another company event, and we remain optimistic and constructive in the development of adding value to over 60,000 shareholders in 30 countries. Thank you, everyone. Have a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]