Odontoprev SA

BOVESPA:ODPV3

Earnings Call Transcript 2022-Q4

[Stella Hong, executive]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to the Odontoprev conference call to discuss the fourth quarter results and 2022. I'm Stella Hong, the IR Manager, and I have with us today, Rodrigo Bacellar, the CEO; and José Roberto Pacheco, CFO and IR Officer. This webcast is being recorded and strained on the Internet. The link can be seen on the company's 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 which is a 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. Next, we'll start the Q&A. [Operator Instructions]. We suggest that your questions be asked all 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 me mention that 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 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 José Roberto Pacheco to begin the presentation. Jose, you may begin.

[Jose Robert Pacheco, executive]

Hello. Good morning, everyone. It's a great pleasure to be here with all of you today. Welcome to our video conference to talk about our results of the fourth quarter 2022 as well as 2022. I believe it's important to mention something first. 2022 concludes a 3-year cycle, where the company has been presenting DLR lower than historical records, therefore, margin and return above historical levels. And we had 4% in revenues to 6% growth in 2022, ending the year at 9.5%, according to our expectations and achieving double-digit growth of annual revenues. And that should follow in the upcoming quarters in 2023. Therefore, this moment is very important. This is our first video conference. So it's important for us to outline our strategy that will be pursued and that has been pursued and delivered in the past years, so we can see the strategic differential and the unique positioning that the company has in during such important moments in the market. 

Now in the presentation on Slide #3, we can see data from ANS since 2006, where the dental plans on the right-hand of the screen, present continuous growth. Regardless of the macroeconomic scenario or job generation, achieving 30 million members with net additions of 4.5 million in dental plans compared to 2020 or even 2 million new customers in 2022. The health plans, in turn, added 3 million new customers since 2020, reaching the same level as 2014.

On our next slide, #4, we can see the quarterly evolution of revenue with a sequential growth for the ninth consecutive quarter, totaling 19.4% growth since 2Q '20. Everybody remembers that was the beginning of the pandemic, achieving record quarterly revenue now in the past quarter of -- last quarter of 2022, BRL 54 million.

And on the next Slide, #5, we can see an annual growth of 9.5% in the quarter with 4.7% of a positive variation in the average ticket. That's very unique, very special, very different than the industry. On our next Slide #6, we can see the evolution of the portfolio in the past 3 years with a highlight to the Bradesco Dental brand, the best-selling brand, which already accounts for 49% of the total portfolio. And according to our next Slide #7, we can see a growing share in all segments. The Bradesco Dental brand offers strong predictability and performance does not depend on the macro economy or the GDP or even the creation of formal jobs.

On our next slide, #8, we can see the revenues of the main players in medical and dental plans in Brazil in 2022. We'd like to highlight Bradesco Saude with expressive leadership in the medical plan. And as you can see, Odontoprev in dental with an annual revenue that's very similar to the sum of the other companies here mentioned on this slide.

On Slide #9, we highlight the execution of our long-term strategy, in which the revenue of the corporate segment has been growing 26% in the variation of 2014. And on the other hand, in noncorporate segment, that would be SMEs and individual plans, presented a growth of 15% per year in the same period and already accounts for 43% of the total consolidated revenue. It's worth noting that the SME company portfolio presents favorable price elasticity in the distribution in bank channels and in individual plans segment, the change in the mix, aiming in the bankability of that portfolio provides an incremental average ticket, resulting in 47% growth of that ticket since 2014 in a very unique moment that's very difficult to be replicated by our competition.

On the next slide, #10, we can see the evolution of gross profit which is a similar way to see the same phenomenon. But now in the business segment with a highlight for the noncorporate segments with a CAGR of 16% in gross profit compared to 2014. On the next Slide #11, we can see that the annual dental loss ratio was 40% in 2022, in line with previous years, the levels in previous years, which were 2021 and 2020. In the analysis per segment on Slide #12, we can see that the DLR of the corporate segment was almost 50% in the year, in line with the historical average. On the other hand, in the SME segment, DLR was 27%, which reflects a new customer profile in that market niche, not necessarily connected to a health plan.

On our next slide, #13, we can see admin and sales expenses, which account for 26% of revenues in the year and 28% in the quarter, given one-off noncash adjustments. The adjustments in the quarter were related to recognizing commission and the criteria for that an effect of BRL 4 million on selling expenses and equity expenses resulting from an inventory of the fixed assets, inventory taking a fixed asset, meaning BRL 3 million in admin expenses. In the year, in 2022, the noncash adjustments totaled BRL 7 million, considering the write-off of improvements to the former corporate headquarters here in Sao Paulo and discontinued software packages.

On our next slide, #14, we are talking about the cash generation as we measure from EBITDA with an average annual growth of 11% since 2019 with a 29.4% margin in 2022, which is much higher than the historical levels of 24%, 25% that the company has been showing since it became public. On the next slide, 15, we highlight the new profile of the financial revenues benefited from the migration during 2021 of part of the current assets portfolio to long-term government bonds with pre and post fixed interest rates, which are very appealing and the same credit profile -- credit risk profile. The new instruments are accounted for on the curve, mitigating the volatility of the consolidated portfolio and will be held to maturity.

On our next slide, #16, we can see that net income achieved BRL 452 million in the year, 18.9% higher than 2021 with an average CAGR of 17% since 2019 and record ROE up 39.2%. On our next Slide #17, we can see that company cash generation in 2022 was over BRL 0.5 million (sic) [ billion ], BRL 520 million and ended the period with a net cash position of BRL 795 million. As you all know, we are debt free. On the next slide, #18, we show compensation to shareholders in recent years, totaling BRL 412 million in 2022. Meaning a payout of over 90%, including the quarterly dividend proposal of BRL 120 million relating to the fourth quarter to be approved in the annual meeting in April. It's worth noting that for a profit of BRL 95 million, the proposal would be to distribute BRL 120 million in dividends. And we've already paid out last month in December, interest on loan capital of BRL 17 million, and that totals for the fourth quarter, a total distribution of BRL 137 million.

On our next slide, #19, we are very happy to inform that Odontoprev was included in the Bloomberg Gender Equality Index for the fourth consecutive year. So the company is a part of that very important global index for 4 consecutive years. On the next slide, #20, we demonstrate the increasing liquidity of shares. Going from an average of BRL 18 million traded per day in the past 12 months to BRL 40 million in the past 4 weeks. On our next slide, #21, we see the globalized investor base with an approximate free float of 84% with foreign investors from over 30 countries.

Now coming to the end of our presentation on Slide #12. We would like to inform the proposals to be approved in our next annual meeting in April, namely the cancellation of 16 million shares that are currently in treasury, which would make the total number of shares of BRL 168 million to BRL 552 million, that would be the new number of shares being held by the company as of the assembly next year. It's important to check that number. It's not necessarily correct in all electronic terminals of financial information. We're also proposing, as I've mentioned before, the distribution of quarterly dividends supplementary in BRL 120 million.

So those were our initial comments for today now. I'd like to open to the Q&A session. Thank you for your participation.

[Stella Hong, executive]

[Operator Instructions] Our first question is from Pedro Lima from BTG Pactual.

[Pedro Lima, analyst]

On our side, we have 2 questions. The first is about [indiscernible]. We realized that this quarter, you had an increase there, and that's something that you've been mentioning in our recent interactions. So could you give us some more flavor about the role of that new customer makes and that it has in the increase in the ticket, especially in SME and individual plans. And if it makes sense to think that change in corporate, if it's going to -- if it's mild or should we see tickets going up higher in SME and individual moving forward compared to corporate?

The second question is about SG&A. We can see an increase this quarter, especially if we set aside depreciation, which had a nonrecurring accounting effect last year. So I'd like to hear from you, if you believe that in SG&A, there's still some margin points that you could obtain and initiatives like digitization and other processes that you've been putting into practice if you believe that you can still find some margin, more margin points in SG&A?

[Jose Robert Pacheco, executive]

Let's start off with the ticket, and then we can talk about SG&A. it's very important to understand the importance of a ticket in this new pattern of growing revenues. As we mentioned, we're going from 1 digit to the levels that we will see in the upcoming quarters in 2023 that are 2-digit levels. It is, in fact, our expectation that all segments will have positive tickets with lower scale growth in corporate and higher scale in SMEs given the elasticity of a favorable price that we see in that channel. And here, another important thing to note is that in the individual plan segment that does deserve a lot of attention from everyone. We expect an expressive variation and positive variation in individual plans that already have a ticket of BRL 39 this year, so much higher than the BRL 27 for SMEs and on the other hand, higher than the BRL 17 per benefit per member per month that we ended -- how we ended the year in corporate plans.

And why will we see that evolution in the ticket in individual plans? The answer is bankability. So the bank channels have a much higher sales price. So BRL 20 higher than the average price of the portfolio and sales price in other channels. So since we can see a continuous increase in the portfolio in the bank channels, especially in Bradesco Dental in individual plans. And momentarily, we've seen a slowdown in retail stores portfolio. So there's a natural mix in individual plans that translates into a much higher average ticket across 2023 compared to what we've seen in 2022. So that's our behavior. What we expect from the behavior in tickets, and that's very important in comprising the revenues for 2023.

The second point is about SG&A. So we ask everyone to disregard the last quarter of 2022, where we have one-off adjustments in recognizing some metrics on the contrary to that. The investments in technology, the increasing amortization of processes. We do expect a dilution of SG&A. Therefore, a potential factor to increase our margin in '23 compared to '22, resulting from that action in SG&A. So we did highlight that, and we've observed that not only in selling expenses but also in admin expenses. So they're one-off adjustments that definitely will not repeat across 2023. And once again, given the constant investments that we had in technology and we actually more than doubled those investments in the last years. So that's what we believe in the base scenario for SG&A, which will, at the end of the day, add margin to us in 2023.

[Stella Hong, executive]

Next question is from Leandro Bastos from Citi.

[Leandro Bastos, analyst]

On my side. I have 2 questions. The first one, going back to the top line. I'd like to know what you see for 2023 that you should follow the standard in the fourth quarter in this -- how do you see the ticket and the growth of number of members? How do you see the dynamics for top line? And if you can make that even better based on -- compared to today. And about the DLR, looking at the corporate plans, you have a very interesting chart comparing what you're -- where you're at today in the average pre-pandemic. So in the corporate channel, you're maybe 200 bps under compared to the pandemic. Last year, you had a first quarter that may have been affected by Omicron. I don't know if that affected frequency. So now that things are pretty much back to normal in 2023. Is DLR and corporate be close to 52%, which is pre-pandemic? Or given the mix and other reasons, will it stay low?

[Rodrigo Bacellar, executive]

Rodrigo here. Thank you for your question. Well, about DLR. On Page #12, Slide #12 of the presentation. We see 2018 till today, the DLR per segment. So it's important to note that corporate and it is back to normal in 2022. But actually, it came back to normal in the last quarter of 2021. So we see in frequency and procedures, it's pretty much in a normal scale and that it started up first in individual plans. You see that there is a peak in 2020, and that was even highlighted in the presentation. And as of 2021, it's at normal levels. So '20 was 21.9%, '22 was 29%. So we can admit that those 2 are at the levels, as always in control and eventually with the mix of the portfolio. And the question that we answered before, with the decrease in retail channels. And here, a stronger entrance in Bradesco, making that bigger. We can expect individual at historical levels of a year or even a little lower. And in SMEs, the new level is here to stay. We're leaving an average of 4.8 in DLR to go to 27 and 28, which seems something very reasonable. So we're strongly working on that hypothesis.

Regarding revenues José mentioned a little bit of that in his first answer. Yes, it goes through the ticket. Because when we see things going back to normal, during years of pandemic, it was very hard to transfer the inflation to prices. Quite on the contrary, we didn't have to give discounts and we had lower DLR. So now we can imagine that we can improve prices together with the growth strategy we see segments that could be better, like you mentioned, CGD and SMEs have been standing out a strategy that was implemented. This is transatlantic. You have to train a huge sales force at home. And brokers -- and when you're looking for SMEs with more employees that was 100 to 199 or 30 to 99 employees, has been giving us significant results because they're longer duration contracts, control DLR.

So I would say that in corporate, we work strongly not only to win over new contracts. If we look at the past 21 or 22 quarters, we were positive in the corporate segment. In 20 quarters of the past 22 and 20 of them were positive. So in the 10, 12 -- last 10, 12 in a sequence positive. So we're done out in corporate. And even though the CGD might not help us if your hypothesis makes sense, we could go back companies to make sales when it's a contract for open enrollment. It brings in many members. So we're very confident. So if we consider fourth quarter '21 compared to quarter '22. So we increased 9.5% in revenues compared to 4.5% to 4Q '21. So the 4.5% went up to 6%, 6.5% to 9.5%. And we believe that we're carrying some of that inertia in addition to our positive vision in sales performance.

I believe I answered your questions, not only top line, also highlights in the segments and DLR. Pacheco, would you like to add?

[Jose Robert Pacheco, executive]

Actually, I'd like to add something here about revenues. We've already informed as of 1Q '23, we count on the revenues of Papaiz explicitly in February. So 32 -- well, we'll give us 1.5% extra on top line and now in 2023 because of that. So in summary, I think that the key word is mix. That's valid not only for the perception of revenues. So why it will be growing more in '23 than in '22, but also why there is an upside risk in net income in 2023. And the mix effect is very clear. It brings in products with a higher ticket and lower DLR. So once again, it's a competitive advantage of the Odontoprev business model. It's very hard to be replicated at this time.

So once again, we are very positive and excited with those perspectives for 2023. -- which, in essence, will be the fourth year after that cycle that began in 2020 of lower DLR, which seems what will happen and a higher margin compared to the historical average. But once again, the key word and that's very important in the models is understanding the mix effect. That's very transformational in -- for company figures.

[Stella Hong, executive]

Next question is from Philippe [indiscernible] from Itaú BBA.

[Unknown Analyst]

Actually, I have 2 on my side. So in this quarter, we see a cost per month, which is lower given the seasonality, but an increase when we look at the fourth quarter of last year. So my question is, what is your perspective, not only for growth in the dental market, but the cost per month as well and to change the subject. My second question is bad debt. Even though we see that as a percentage of revenue lower than historical levels, we see a small sequential increase. So can you share with us what happened to that slight increase? And what do you expect for bad debt this year?

[Jose Robert Pacheco, executive]

Let me talk about dealer. So we see in 2020 for 2023, we see DLR that may be even lower than 2022. That, once again, is given the mix effect. So there are products that structurally not only in SME, but also an individual, the DLR rate is close to 30%, which is substantially lower than the 50%-52% in corporate. So as these products have been growing and will continue to grow in 2023, at a stronger rate than corporate, it's natural that there will be an upside risk, so to speak, regarding DLR in 2023 now.

You also mentioned that debt, right? So bad debt is basically a result of individual plans, and it's becoming lower and lower year after year in the past 4 or 5 years, given the increase in bankalization of that portfolio. So another competitive advantage that's very unique and specific to our company. So knowing the credit risk that the bank channel has is much higher than other channels have and that could add to the business. So that justifies and that's the reason for a lower bad debt. It used to be 4% or 5% of revenues and now it's just a little bit over 2%. So we're constructed in a similar bad debt than that levels, much lower than historical levels once again in 2023. So that's our vision. Not only the dealer but also for bad debt for 2023.

[Stella Hong, executive]

Our next question is from Fred Mendes from Bank of America.

[Frederico Mendes, analyst]

I have 2 questions on my side. So first one is about the ticket. I know you already mentioned this, but just to understand, when I look at corporate, in fact, it's increasing. Rodrigo and Pacheco mentioned that well, but still lower than the levels of 22% for 2017. So part of the mix we understood. But could you exceed those historical levels, so you can have more consistent price increases? That's the first question. And then the second question, I'd like to understand the channel, the Bradesco channel, so especially in SME, you give training and then you sell more, and that's what made it higher than 2021? Or does the bank focus on that? I'd like to understand if that has scale and efficiencies, so you can make that channel even bigger in 2023, especially in SMEs.

[Rodrigo Bacellar, executive]

Thank you, Fred, for your questions about the ticket and especially corporate that you're mentioning. As -- these are commercial negotiations. So in years where the loss ratio dropped given the pandemic or the other reasons, we held out our hands to dentists, to companies and offering kids in personal protection equipment and so on. And even for companies, we're helping them out in renewal. And now companies understand that now that things are back to normal. Now we have to make up the inflation. So in our experience in January and February, that's been coming since last year as companies are more open now to understand that there could be price increases. As you know, it's a very competitive market in corporate. We do -- we are leaders in that market. And we see that in the past 6 months, at least, is that we've been able to transfer the inflation to prices. So there's a constructive view on that as well. 

And the other point is SMEs. So it's everything that you talked about, it's training, it's about product design, pricing, all of that was done 2 years ago. But once again, there's sales force of 30,000 brokers and 3,500 bank agencies that do have an important chance in that. That's why it's been a highlight in sales, as Pacheco mentioned, but our Odonto brand has performed well as well with SMEs. So I think it's all of that together, and it takes the time that's necessary to train them, increasing awareness and pricing, the economy for all of that to fit together. The fact is that last year, we achieved a record growth in SME portfolio with almost 50% higher than the previous record. And this year, we have a very constructive view for that as well. So we still believe that there's -- this channel can still make us very proud.

[Frederico Mendes, analyst]

Go ahead, Pacheco, sorry.

[Jose Robert Pacheco, executive]

No, Fred, just a comment, it even has to do with other questions. It's very common for us to see and report toward inflation and comparing the average ticket to inflation regardless of the index. So it's important to mention that to all of you that actually the relevant thing is the company's internal inflation with -- based on our cost structure. So we've been successful, especially in corporate, in measuring together with our customers, the DLR of that contract that isn't necessarily connected to the inflation variation. So it's very important that in the model and in building that perception of value in the company's cash flow that we do not connect to inflation because it doesn't directly affect us. 

Our internal inflation in the past decade is definitely lower than the IPCA. So it's important for us to understand that the cost of services in the company that it's built based on a business model process and once again is disconnected from the inflation rate. And we try to balance out the return and margins of the company so we can have an average ticket that will capture that internal inflation. It's just a comment that I wanted to make to say that our internal inflation is lower than IPCA or any other inflation -- official inflation index.

[Stella Hong, executive]

Next question is from Joseph Giordano from JPMorgan.

[Joseph Giordano, analyst]

I have 2 on my side. The first one goes on to expenses that probably scared us a little, and Pacheco explain that well, some of the investments. Maybe you can help us to quantify and clean up, clean that up because historically, the company has always had a lot of discipline to correct that in discipline. And the second is changing regulatory capital, leaving traditional solvency and go into risk-based capital. So when we look at debt, there's BRL 70 billion being unlocked in December 2022. So when you look into the future about higher than the profit, would that difference be relative to that capital that's necessary and lower? Or would there be extraordinary dividends?

[Jose Robert Pacheco, executive]

Let me mention that one. So I'll start off with the second part. About the shareholder compensation in fourth quarter that's expressively above profit once again, BRL 137 million compared to a profit of BRL 95 million is not related to the risk-based capital at all, but instead with the excess solvency at end of year closing. So next month, we have the annual assembly – the assembly meeting, and we will deliberate on the payment of quarterly dividends. for the fourth quarter. 

So going back to your points, Joseph, about SG&A. The best suggestion is historical levels. The company has been gaining SG&A and gains in productivity, number of employees is lower than before, headquarters cost is lower than the previous one. The number of robots and digitization processes of the company are many. So in fact, we expect that across 2023, we expect an SG&A ratio or a dilution compared to previous years. But once again, it's correct to say that fourth quarter was an outlier where we had one-off adjustments that are nonrecurring. 

And finally, about regulatory capital. Now in 2023, we haven't reached a conclusion to share with you regarding new dividend policy. And the reflection that we should consider is there is a consensus in the market expectation of dividend -- taxing dividends in 2024 as of the next year. If that is the case, with the strong cash generation in the company, low need for investment in CapEx that we have. So without a doubt, we will prioritize dividends now in 2023. So yes, in the earnings calls in 2023, that will be our priority, not just the traditional payments and deliberation of interest on loan capital every quarter, but also dividends as high as possible in 2023. That's basically the idea.

[Joseph Giordano, analyst]

So you're saying BRL 16 million. So this year, we may have an incremental delta in cash distribution. Can I say that?

[Jose Robert Pacheco, executive]

Well, we will not hesitate to distribute any currency possible. To give more flavor here, we can say that the company has very conservative provisions among the IBNR that we study on a frequent basis. So the takeaway here is that we are traditional dividend payers, and we will not hesitate to pay whatever is possible, especially given that scenario that should come in 2024 with the reform in taxing dividends. So that's the main takeaway in these investments for 2023.

[Stella Hong, executive]

Next question is from Mauricio Cepeda from Crédit Suisse.

[Mauricio Cepeda, analyst]

I have 3 questions. The first one is selling channels, especially for noncorporate. We've seen that you've been concentrating more and more at – with Bradesco. So what's the next selling channel? What are you thinking of to sell with Bradesco and take away your independence and advance and increase the number of members? 

My second question, and especially what you talked about internal inflation. We do understand that you have better internal inflation because your cost per month, as our colleague mentioned was being held down for a while, right? Because if your ticket doesn't go up with inflation and low DLR, so your cost per month is probably lower. So is there a consequence on dentists? Do they complain about low frequency or less transfer in terms of procedures? 

And about DLR and SMEs. Bacellar already mentioned that. So maybe the DLR is here to stay. But in SME is not the price isn't that higher as corporate or individual. And we see that the DLR is going down. Could that be an effect of a fresh profile, so to speak, because you've been selling a lot of SMEs, and therefore, the DLR balance may be a bit higher?

[Rodrigo Bacellar, executive]

I'll start off with DLR. Like you mentioned, it's nice and fresh. So SME DLR, the fact is, the longer the contract, like you mentioned, sold it now, no claims. The fact is it's the opposite. The longer they stay with us, and Pacheco used to show that chart since the IPO. It actually goes down. So actually, when someone joins, they join because they want to try to dissect as possible. They need to use it after a while -- their mouth was treated. So a treated mouth as we call it, we don't expect actually we don't have that concern. We don't expect that effect. 

Now going back to your first question about selling channel. Actually, we -- it wasn't a strategy to focus on Bradesco. Actually, we have sales teams that are structured in different and focus on external channels, focus on e-commerce. E-commerce has over 1 million downloads. The app has 1 million downloads. So we have the technology trying to help that and the members and the part that talks to brokers, bank channel, retailers, it's not that we're going to focus -- forget the rest and focus on Bradesco. Now the teams are doing their work. But Bradesco with their commercial strength and the quality and quantity of customers, they have a strategy and they have well execution based on the 7 million customers that they have. 

And in retail, we have that mix for other reasons and one of them included recently, but there's the difficulties and priorities -- so the ideas looks like, okay, what channels are we going to look for growth. We continue to look for one. I mentioned those. There are others that are our commercial strategies that are ongoing. And talking about first channels, and we expect that to go up and that retailers will have a normal life changing. Some partners changed their systems. Each one of them has their own dynamics. But it's not like we let go of the others to focus on Bradesco. No, we have separated dedicated teams and a framework to attack all channels for sales. Pacheco will answer your second question.

[Jose Robert Pacheco, executive]

Just a couple of words about the internal inflation and why in the decade, it's lower than the actual or official inflation rates? So depending on the product, actually, we even had deflation, and that's given many different reasons and especially in SME. So the new customer -- the new SME customer profile is not necessarily connected to health. We've mentioned that over half, over 60% of the new sales that are coming in are in the bank organization and not necessarily connected to a health insurance plan. That type of sale gives us a different type of profile, consumption and behavior that's actually slower in going to the dentist. They're not going to get a console immediately or a treatment, immediate treatment with the network. So that's allowing an interesting pricing condition. 

And once again, the average ticket is much higher in SME compared to corporate. Just to give that more flavor, the numbers are there. We're talking about almost 50% more in average ticket in SMEs compared to corporate. And in essence, it's making the DLR ratio to 30%. And the other aspect, and this is a general company strategy, we don't have just one registered network. When we talked about 25,000 to 27,000 dentists in Brazil that are part of the network, actually, there are a number of networks with different profile, seniority, technology, geography, professional training, professional specialization. So that modeling that structuring that structure is definitely unique to this company compared to other market players. So that gives us yet another reason so we can price and consequently have returns that are difficult to be replicated by the competition that do not have the same calling or strategy.

[Mauricio Cepeda, analyst]

So Pacheco just to confirm the fact that your per capita DLR doesn't follow inflation, it's not creating a problem with the dentist of lower frequency or lower transfer. It's mainly related to the customer profile that you have right now?

[Jose Robert Pacheco, executive]

Yes, exactly. Yes, without a doubt, definitely, that's correct.

[Stella Hong, executive]

Next question is from Vinicius Ribeiro from UBS.

[Vinicius Ribeiro, analyst]

Two quick questions. about 2023, just to hear your experience about other economically uncertain moments, new sales churn and DLR and in the individual plan. We know that, that's probably more susceptible to uncertainty. So just to understand, what are your expectations about that specific channel? And the second one, just a follow-up about capital allocation. I'd like to understand your plan for 2023.

[Rodrigo Bacellar, executive]

I think that new sales and churn, like I mentioned -- if we consider the past 22 quarters in corporate plans, we were positive in 20 of that. That's very important data, and that shows us our capacity, be it together with a health plan, Bradesco or a partner from the state of Minister eyes, it doesn't matter. We have the ability to sell and corporate and act. When we consider the HR top of mind, that's survey done with HR departments and companies and they ask you who's your main supplier and dental plans. And out of the 25 additions we won in '21 or '22. And the last 12 years was consecutive. So it's a strong brand, strong quality. We act directly to keep that at very high levels. 

And then when we go into the economic side, there's the operation that I mentioned. So if there's something like the [indiscernible] that you mentioned, the concern that you have, we have normal sales that we can even deal from other -- from the competition, and we did that, and we've been positive in the past quarters. We're accustomed to do that, doing that. We're market leaders. So we've been attacked for many years, but we are good at defending ourselves. So we're positive -- we've been positive in over 22 quarters. So that's important. 

And about the CGD and the performance of the economy, our operation is much more structured today. We like to say that we fish in an aquarium where companies that have open enrollment, so some employees leave and some employees didn't have an opportunity of enrolling, but now they do. So with those actions, we get positive results in corporate. So we have a constructive view for this year in the many different channels, many different strategies and segments. That's what I wanted to say. Pacheco, you can talk about capital allocation.

[Jose Robert Pacheco, executive]

So Vinicius about the individual products, volume and net additions have been very modest when it's the case. However, it's worth paying attention to that in 2023, given the ticket effect. So our impression is that the net revenue specific for individual plans could be relevant, not given the volume effect, but the ticket effect because, once again, there's a big differential in average ticket in the bank channel and other channels and specifically in department stores. 

And the other point is about capital allocation. So about the scenario for 2024. So as the company is a traditional dividend payer, once again, if there's an expectation of taxing the dividends in 2024, this year and 2023, we will prioritize that. And interest on capital. That's the priority. And confirming that scenario, the buybacks would be very important as of 2024, but not now in 2023. So we're closely following that movement. And obviously, we'll keep everyone posted on that.

[Stella Hong, executive]

Next question is from Caio Moscardini from Santander.

[Caio Moscardini, analyst]

Could you give us more information about the selling expenses in individual plans of the basis points year-over-year. So to understand that dynamic. And the other question is about CapEx. You went through an investment cycle in software and IT, and that was huge since the half and end of 2021, and we saw a slowdown, a relevant slowdown in the fourth quarter. So I'd like to understand the investment cycle in software and IT. If it's concluded, should we expect new levels for 2023?

[Jose Robert Pacheco, executive]

Two of the things that you mentioned are very important. So let's start off with selling expenses of individual plans. There are 2 very different levels, and that's very important in understanding the growing profitability of individual plans in our opinion. And that's given the natural migration that's been taking place in former distribution channels connected to department stores, where the selling expenses and commissioning are from 35% to 45% of the level of revenues, to levels that are more connected to the bank channel that are like 1/3 of that, 15% to 18%. So it's a very important change. And in our opinion, it gives us an upside risk. So we have lower selling expenses in time. And it's confirming the trend of outperformance of banks compared to retail stores. 

The other aspect that you mentioned is about CapEx. So in fact, the company more than doubled the investments in technology in the past years. And now we're at a rate of BRL 80 million. So we believe that that level of CapEx will remain. And in 2023, and it should go down 2024 and going back to historical levels in 2025. So we have some important projects that are structuring in the -- in technology now for '23 and '24. And in our understanding, it's very strategic and will definitely be executed. That's our opinion.

[Stella Hong, executive]

[Operator Instructions] No more questions. So now 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 participating in another earnings call. Hope to see you soon the next market event. Good morning, everyone.

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