Odontoprev SA

BOVESPA:ODPV3

Earnings Call Analysis

Burgeoning Growth in Dental Care Penetration and Revenue Surpassing BRL 2 Billion

The story of Odontoprev's growth starts with a striking statistic: there was a significant growth in Brazilians adopting dental plans, with the penetration quadrupling since 2006 to reach 16% of the population. This can be attributed to Odontoprev's diverse customer profiles and innovative models that bring in new business segments with higher tickets and lower cycles, embodying what the company calls a 'cycle of value innovation.' Odontoprev's stellar performance is underscored by its revenue eclipsing BRL 2 billion, outstripping competitors by a wide margin.

Strategic Expansion into SME and Individual Plans Driving Robust Profits

A ten-year growth journey has seen a strategic shift with revenues from SME and individual plans growing annually by 14%, now accounting for 44% of total revenues. The average ticket for this segment is double that of corporate plans, which has led to more than half of the company's gross profit in 2023 originating from these newer segments. The company's bestseller brand, Bradesco Dental, has also contributed almost 1 million new members since 2021, indicating strong market approval of the company's strategic direction.

Sustaining High Margins and Returning to a Stable DLR

Odontoprev reports sustaining a market-defining Dental Loss Ratio (DLR) of around 40%, a figure that has consistently characterized the company since 2020. In terms of managing operational costs, Selling, General & Administrative Expenses (SG&A) have been managed well, with the company maintaining levels below 26% in 2023, as well as expecting to keep bad debt levels around 3% looking ahead.

Solid Financial Discipline with High EBITDA Margin and Profound Net Income

Cash generation has shown impressive growth, and the company has managed a remarkable EBITDA margin between 29-30% consistently over the past four years, culminating in a net margin of 25%. However, this past quarter saw a noteworthy nominal increase of 37% in net income due to nonrecurring events.

Peaking Investment in Technology Poised to Taper in Coming Years

Odontoprev is currently in the peak phases of investment, mainly steering towards technology with a spending of about BRL 95-97 million. This high level of investment is set to stabilize in 2024 and is expected to decrease subsequently as the sponsored projects mature. The result is a robust cash position closing 2023 with around BRL 1 billion in net cash.

Commitment to Shareholder Returns Evidenced by High Payouts and New Buyback Program

Odontoprev continues its practice of rewarding shareholders, distributing over 90% of its net income annually. The proposed distribution this April amounts to BRL 427 million, representing an overall payout rate of 95% from the last year's net income. In addition, the company has launched its fourth share buyback program, further exemplifying its allegiance to returning value to shareholders. The program authorizes the repurchase of up to 10 million shares, or 3.9% of the free float, signaling management's confidence in the company's fundamentals.

Earnings Call Transcript 2023-Q4

[Diego Lyra, executive]

Good morning ladies and gentlemen, thank you for waiting. Welcome to Odontoprev's conference call to discuss 4Q '23 and the year 2023. My name is Diego Lyra. I am in Investor Relations and I will have with me Mr. Rodrigo Bacellar, CEO; and José Roberto Pacheco, CFO and IR officer. We are also transmitting it online. The link can be accessed at the IR website of the company, where we also have available the presentation or the company's channel on YouTube.

[Operator Instructions] Before we continue, I would like to explain that forward statements are based on beliefs and assumptions of Odontoprev management and on information currently available of the company. They also involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in the forward-looking statements.

We would now like to pass the floor to Mr. José Roberto Pacheco, who will start the presentation. Mr. Pacheco, you have the floor.

[Jose Robert Pacheco, executive]

Good morning, everyone. Welcome once again to our conference call to comment the results, not only of the fourth quarter but also the year of 2023. In summary, we have continuous growth based on different profiles of customers, a pioneer in innovative model in the market, bringing new segments to a business with higher ticket and lower cycles and making a difference in the cycle of value innovation.

Starting our presentation, we have data -- recent data from the Brazilian National Health Agency, the medical plans -- the dental plans with significant growth in the last decade. More than 12,000 members joined dental plans compared to a certain stability in medical plans. You can note that the penetration of dental plans in the Brazilian population has increased fourfold since 2006, achieving 16% of Brazilians.

We think that there is still a lot of potential looking forward due to the average ticket and low penetration of the product.

Our next slide shows the most recent position per revenue. We're very happy to say that we went beyond the BRL 2 billion in revenue. It's interesting to compare to the competitors. They still haven't achieved the first BRL 1 billion.

You can see that we have 2 very clear portfolio under Odontoprev's management, the corporate, more than BRL 1 billion in revenues, and our small and midsized company individual plans close to the first BRL 1 billion. They both added account for more than twice the revenue of our closer competitor, more than threefold our competitor #3 and fourfold our competitive #4.

The next slide shows the recent path since the pandemic in 2020, when we offered discount to corporate customers. That's why the revenue was specifically lower year-over-year. And after that, year-after-year, through new client profiles and growing ticket and value innovation that led us to 2-digit level delivered in 2023.

Our next slide shows the last decade, how this cycle that we call value innovation is going. And the plans for SMEs, 10 years ago, we had about 12% of the total amount added to individual plans. It was 1/4 of our total revenue. This continuous growth today means 44% of our revenue compared to 56% from the corporate segment. No other player has the same journey. We're very happy in sharing these results with all of you.

Our next slide shows, in the same period of time, a growth of 14% per year on average on SME and individual plans. You can see that the average ticket in this portfolio today equals twofold corporate portfolio of BRL 34 million compared to BRL 17 million of the corporate plans. The barriers to -- for entry are very clear and high, which gives us this competitive and strategic position that is unparalleled in the market.

Our next slide shows our gross profit, the new segments -- the most recent business segments, the SME and individual plans with lower DLR has increased the margin of the company. So our revenue grew 14% on average on this segment in the past 10 years. The gross profit grew even more, 15% on average per year so that more than half of the company's gross profit in 2023 already comes from SME and individual plans.

Here is the company's bestseller brand and how it performed of Bradesco Dental exclusive and distributed by the banking channel since 2021. So almost 1 million new members were brought in by Bradesco Dental, not only in the corporate segment, but especially SMEs and individual plans.

This is an important metric that we are bringing. You can see that we're comparing to 2016. So this slide shows this new level, the stabilized bale that is a reference to the market of 40% of DLR, which has been our characteristics since 2020. So once again, in 2023, we're delivering a DLR that is reference in the market of around 40%, which is the level that we see in the past 4 years.

A little bit more flavor segment per segment, quarter-by-quarter, since 2021, there is seasonality in the company's business. Second and third quarters usually are of higher utilization. First and fourth quarter usually have holidays and the calendar brings a different use profile, therefore, different DLR profile. So all the business segments in the fourth quarter, we see convergence that in the consolidated data take us to the level of 40.3%.

Now for SG&A, you can see that compare since 2019. There isn't much change. It's around 27% in 2019. We closed below 26% in 2023. So the past quarter, we had some specific impacts with legal deposits, especially in the first quarter, and this will not be repeated. There were specific issues in the past 90 days of the year.

Now for bad debt. This is also an interesting journey, which shows the quality of the process and the importance of the growing banking of our portfolio, which leaves us between 4% to 5% of our revenue in 2019 and year-over-year, with the new members basically inside Bradesco Dental brand, bringing a more competitive bad debt, which shows the great knowledge on risk and credit that is used when approaching these higher-risk members, both SMEs and individual plans.

We believe that this level below 3%, a little bit over 2%, is the new level that we will see in the next few years. As a consequence of SG&A that we just mentioned, you can see the average annual growth in cash generation and, more importantly, this new level of EBITDA margin between 29% and 30% that we've been delivering especially in the past 4 years. The last quarter, as we mentioned, is specific. We had these specific issues in regards to expenses and the margin 26%, above the previous quarter -- fourth quarter in 2022.

Now the last line, net income achieved a net margin of 25%. We had nonrecurring events, not only in 2022, but also in 2023, which allowed us to have, specifically in this last quarter in advance of 37 nominal percent.

Now our investments, the company is now at the peak of its investments, mostly dedicated to technology. We go from BRL 30 million, BRL 35 million per year, and now it's BRL 95 million, BRL 97 million. It's not going to grow more. That's important information. It will maintain in our forecast in 2024. It will decrease in the following years due to the maturity of the projects that were sponsored by these investments since 2021. That's an important fact for all of you to know.

This is our cash flow for 2023. Cash generation is close to BRL 0.5 billion. The investments, as we just showed you, is around BRL 100 million and cash dividends, BRL 183 million. So the company closed last year with around BRL 1 billion in net cash.

Now 1 of the most important slides of our webcast, which is capital allocation, which is something that we watch closely and the company's practice is to distribute the maximum possible of its generation every year. This goes back to 2020 to show a distribution percentage that is high, above 90% of our annual net income, which has been a payout above 92% per year since 2020. Actually, since the last decade, this has been repeating itself. Our proposal for the assembly in April is BRL 427 million in dividend. It will take place on April 3, and we hope to have the highest number possible of shareholders.

These BRL 427 million added to interest on own capital already paid, leads us to BRL 510 million. So 95% of distribution of the nominal net income of last year of BRL 537 million.

Now going to the new share buyback program that was approved by the Board of Directors yesterday. Management -- the management's proposal was approved so we're going to put it into action. Here's the track record since 2021. It will be the fourth share buyback program, Program C, which is another tool in addition to the traditional dividend distribution cycle and IOC. The current program that starts today is up to 10 million shares, accounting for 3.9% of the free float shares ending -- expiring on August 29, 2025.

The company's capital structure is globalized. As you know, we have around 30 countries, especially North America, which accounts for most of our shareholders.

Well, those were our comments. We're now very happy in closing 1 more year of value innovation, bringing new profiles of profitability for the company's portfolio, overcoming, by far, the journey of our competitors and bringing, in essence, a special value for our shareholders in more than 30 countries. Thank you very much for being here with us. And now we're open for the Q&A session.

[Diego Lyra, executive]

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

[Gustavo Miele, analyst]

I have 2 quick questions. First, when we look at the breakdown of the DLR of the quarter, we see the cost per member with a positive trend much better than we were seeing in the past quarters and when we compare to year-over-year. I would like to understand the reasons for this strong performance in the different categories, especially, if you could tell us about the individual plans, which has a drop of cost per member. We would like to know if there is a level of frequency that is normalized going forward? Or any specific issue that you could point out?

And the second question, a different topic, about the competitive scenario. We see a net growth that is still healthy, but decreasing quarter-over-quarter. I would like to know if you see any movement of the competitors for pro seller because of you to know what's going to happen going forward?

[Jose Robert Pacheco, executive]

Thank you, Gustavo, for your questions. I'm going to start addressing the cost of services, the dental loss ratio. As you mentioned, it has different levels per business segment. And it's interesting to comment that Odontoprev has a deflation. Our cost of service today in BRLs, depending on the comparison point, is lower than it was a few years ago. So let's try to understand this a little bit better.

Basically, we have 2 portfolios, as we mentioned in our presentation, the corporate, where the DLR has a track record above 50%. And SME and individual plans has a DLR below 30%, on average, as they're almost the same. We have consolidated DLR of 40%. So what is the dynamics for the company to have gained in efficiency especially in the past few years. There are reasons for that. Among them, we can mention, first, segmentation of the accredited professionals.

So we have 27,000, 28,000 thousand accredited professionals in Brazil in 2,500 cities with different academic profiles, different technologies. And the company has been agile in monitoring this network as no other company has done in the market. So this network segmentation is 1 of the aspects we pay close attention to every day and that justifies this level of lower DLR.

The second reason is technology. The company has exclusive technology platform, auditing more than [ 20,000 ] dental procedures per day electronically, and the tools to manage the algorithms and the intelligence behind these tools has been evolving constantly. The company is more capable to attest quality, minimize fraud. And this is an additional reason for us to have this excellence or seek new higher standards of technical control and quality of our thousands of procedures that are done every day in Brazil.

So the way in which we address the higher risk products for SMEs and individual plans is; number one, a conservative pricing; number two, setting up an accredited network in Brazil that is monitored daily and constantly improved; and number three, our great competitive advantage of the technology advantage are tools that are improved every day, looking for maximum quality and minimizing fraud.

I have a brief comment about our competitors, and I'll pass the floor to Rodrigo. In fact, we do see a new shareholder control in direct competitors, be at the absence of American companies or now the change in the partners of a local competitor. So our opinion is that this is a more disciplined environment and not going into the aggressive pricing of the contracts in the past 5 years.

So I think that the competitors are behind the corporate -- the growth in corporate that we showed in the past 2 years in a row. So I think that's very positive news. And maybe this more rational behavior from our competitors.

[Rodrigo Bacellar, executive]

Gustavo, thank you for your question. Just adding to what Pacheco mentioned. I think we had first 2 liquidity events that happened in the sector. We see a behavior of both companies to grow at any cost to value their assets before a liquidity event. So since these liquidity events are over and also the medical plan situation, as you can see, and I follow your reports is more sensitive with advanced therapy and all that, that we have in struggle of the industry of medical plans in [indiscernible] ratios in general that impact them. we expect a behavior, like Pacheco said, much more rational.

So we have to have results, that result has to be -- have to be built, and that's what the line we're following. I think that is the way to go. Even considering this very aggressive scenario that Pacheco used in the recent past, I would like to remember that Odontoprev, in the past 26 quarters, we were positive in 23 quarters and negative and only 3. And 1 of those 3 negative quarters was during the pandemic, the second quarter of 2020.

So I think that it's all good news. I think it's more rational. The price to get results will make it easier for us because an aggressive -- if in aggressive environment, we were positive in 23 quarters. In this more rational behavior, I think, it's very good news for us.

[Diego Lyra, executive]

Our next question comes from Mr. Samuel Alves, BTG Pactual.

[Samuel Alves, analyst]

I have 2 questions on our side. The first is about SG&A. You mentioned the topic during your presentation, but just to explore a little bit more in detail. We noticed a sequential increase in SG&A of about BRL 30 million when we compare the third quarter with the -- fourth quarter with the third quarter. Just to understand if this standard is close to the recurring quarterly pattern?

And the second question is about the reversion of free choice plans. In the past quarters, we were seeing these reversions and not in this quarter anymore. I want to know if you expect any additional reversion, or if they not necessarily will happen in the future?

[Jose Robert Pacheco, executive]

Samuel, thank you for your question. I'm going to start with your last one. The free choice individual plans don't have reversion. This stopped happening since the third quarter of 2023. So we didn't have anything now nor will we have going forward. It was a process from 2018, 2019. We had these provisions that were reverted. And now it's concluded, and it's not a point of attention anymore.

The other 1 is about -- it's a nonrecurring issue. We did some reversions of deposits. This is the main account of reason of the sequential variation. But again, it's nonrecurring. It wouldn't exist in 2024 for the next quarters. So we wanted to draw attention in this webcast to the stability of the ratio, and that's what we expect.

And the last quarter of last year, due to its robust cash position, the company did benefit with discounts from some suppliers. So with that, we paid some expenses in advance, especially in the last quarter of 2023, generating value for the company in 2024. So it's not recurring, it's not going to happen again, and that's what happened with SG&A in the fourth quarter.

[Diego Lyra, executive]

Now our next question is from Mr. Marquezini from Itau BBA.

[Lucca Marquezini, analyst]

Our question is in the corporate segment. We see a good increase of the basis, but not such a strong ticket. Does it make sense to think that you're investing the cost efficiencies in the ticket. Does it make sense to think that? And if yes, does it make sense to think that this should continue in the next quarters to investing in cost efficiency and the ticket will grow more in the corporate basis?

[Rodrigo Bacellar, executive]

Lucca, thank you for your question. Actually, this investment that Pacheco showed of BRL 95 million last year is to bring efficiency as a whole to generate results, to finance more projects. That's what the result of finance, but the competitive dynamic is more complex than saying doing this choice or that.

So what we have in our daily activities are quotes, our simulator, a competitive environment inside the company, if it's a company that we want to go in or if it's a client that we want to defend, all that. The competitors' appetite, be it to maintain their clients that we want to achieve or the opposite.

This dynamic, we try to always maximize the value for the shareholder, for the client, our growth and portfolio. So I can't say specifically that it's this or that. There are several things involved as we said about the network segmentation so we can have a lower price, and we use a segmented network that has a lower cost. So it's a huge package of possibilities and combinations to be able to get where we want, but all towards growing and generating value.

I'm going to repeat what I said before. We've had good performance in the corporate segment around -- in the past 26 quarters and trying to explain this complex dynamic, 23 were positive, only 2 were negative. But this whole package of things we have going to be able to address.

[Jose Robert Pacheco, executive]

Just 1 comment to add to Rodrigo's comment. Odontoprev doesn't depend on new contracts to grow in the corporate segment. I'm referring here to the open enrollment, and the company brings new employees with the contract side. So half of the corporate contracts of the company is by open enrollment and that year-over-year has an inertial growth of the basis. So more employees choosing that corporate benefit. It's -- the only -- it's only in dental. There is no equivalent in medical, and that happens in the corporate segment. Okay, Lucca?

[Diego Lyra, executive]

Our next question comes from Mr. Mauricio Cepeda from Morgan Stanley.

[Mauricio Cepeda, analyst]

I have 2 questions. The first is about your strategy for individual plans. Because I see that the ticket is getting better. I think that was a cleanup in the portfolio if you remove the free choice plans, the DLR is also lower, but there is still a bit of loss in the portfolio. So what do you think for individual plans going forward? Because it seems that unlike DME, it's not in the same growth strategy. So what are you thinking on making them grow?

And the second question, knowing that Bradesco is very important for you as a sales channel, if recent results from Bradesco in some way have changed anything in the sales approach, if you are communicating about that, and what you expect for the future?

[Jose Robert Pacheco, executive]

Cepeda, I'm going to start with the individual plans. That's a great point for us to talk about here. Individual plans, by definition, bring higher risk of adverse selection or predatory use. So a product has to be well priced, and the model is different from SMEs and also different from corporate.

So different risks, sales price and expectation of return, it grows the higher the risk that we are running. Not with that reason, we had the expansion of consolidated margin in the past years in different company portfolios. So what is the specific dynamics for the individual plans? We're building a new profile of individual members. If in the past 15 years ago, the portfolio was mostly with retail institutions, today, it's not like that anymore.

So in the retail companies that support us, there are several different models and strategies. And what clearly has been happening in the past years is that our individual plan portfolio dropped in 2021, 2023, but with higher tickets, the return is much higher than it used to be. So we are cleaning up the portfolio, yes, with retail players that had lower enrollment to the product, making room for those who have a more determined vocation.

Straight to the point. The bank channel has 20% to 30% of tickets above the retail channel, bringing a more competitive commissioning and more than that, a much more effective bad debt. So the margin of individual plans in the bank channels is much higher than the margin of individual plans in the retail channels. So what has been happening and probably will continue to happen is this cleaning of the individual plan portfolio, we call it, improvement of the mix, but it's also important to understand this circumstance of the company and the company's distribution channels in this specific segment.

A direct metric for all of you, the participation of bancassurance, Bradesco and SME is already predominant. 75% of the SME portfolio already made under Bradesco Dental. When we look at individual plans, that share drops to 45%. So the importance of a bancassurance in individual plans is still being built, and it tends to become more relevant in the next quarters.

So summarizing my comment, individual plan is a higher risk plan. It's a plan that doesn't compete with medical plans because they don't depend on that. The company deals with this higher risk with a conservative pricing and it's becoming more and more efficient in its distribution, migrating for less channels that have lessened enrollment to those who have a clear advantage in this segment. This work is in progress. It's far from being mature, and we see great enthusiasm in the individual plans share in the following years. If you do have any additional questions, please let me know.

[Rodrigo Bacellar, executive]

Thank you, Mauricio for your question. Just to add to what Pacheco just mentioned about individual plans. And it's connected with your second question. I think that we have a great distribution channel, a great company, a great partner, a company with 52.9% of share in Odontoprev with very attractive results, and not only individuals, but also companies, it's still very low. So we have an ocean in front of us to swim in. We have meetings with the insurance company and the bank's sales team.

So we're all very well connected and in line with the distribution channels, either bank or insurance company so much that the group represents these 1 million members in our portfolio and with a lot to be done yet. So I think we have a great relationship, and we have a lot to build. Thank you very much.

[Mauricio Cepeda, analyst]

Just an additional question. The individual portfolio is dropping even with the bancassurance, Will it still continue to grow?

[Rodrigo Bacellar, executive]

We are building products. We have a product for families. Like always, we have several things going on, developing with the demand that comes from there, demands from our clients, also our understanding of the competition and market and environment. So yes, we want to grow all channels. We did [ a bit opera ] and our 3 segments are profitable.

We have tracks dedicated to each one. We have additional products, NPF that you know well, all the product -- and one better than others with different product designs, but our portfolio demonstration is a task of every day to build the best product to meet the best clients with aspirations of companies and channels and all that put in place.

[Diego Lyra, executive]

Our next question is from Mr. Bastos from Citibank.

[Leandro Bastos, analyst]

A question is on a comment that was made about partnerships, changes in the sector. I watch your opinion. How does the company see of the strategy if there are any M&A insight, how much that would be appealing? But as a concept, how could that work in this strategy?

[Rodrigo Bacellar, executive]

Leandro, thank you for your question. You already answered a bit. We look at all the opportunities with care. We bought 13 companies during our history and a joint venture with Banco do Brasil, a huge distribution channel. And because of our size and specialization in dental care, a lot of things come to us, not only dental plan operators, but also other things that are related.

So we have a dedicated department for that. We had opportunities that were interesting, and we did conclude them not only operators like OdontoServ in the past 6 years and other companies, [indiscernible] in data and images, Papaiz that is very much connected to us in radiology.

So giving you a little bit more flavor, it's not only something that we look at for plan operators but also things that make sense in our value chain. We always look at that with care. And if there is something that makes sense we will look even closer. So I'm sorry, I'm going to be more generalistic but it is a conceptual answer.

[Diego Lyra, executive]

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

[Frederico Mendes, analyst]

I have 2 questions. One is just about SME, the ticket dropped 3.5 year-over-year. But more than that, it's an extremely profitable product. So looking forward, what do you imagine of this product? If the profitability can be more impacted if it decreases more because it's very much linked to the partner, and historically, you have that advantage. So you know that, that will remain for many years.

So that's my first question. The second is in line with what the other questions were, but going forward, the growth is less price and more merits.

[Rodrigo Bacellar, executive]

I loved that you asked a question about SMEs. As we've been saying for the past 2 years, we mentioned our new strategy for SMEs. We saw SMEs in the past as a cake in the same market. And then we started to see that it behaves differently because, according to the description of ANS, it's up to 200 members. And it was all different, the network and all that. So we started to segment SMEs in 1 to 3, 3 to 29 members, 30 to 99 members and 100 to 199 members.

And this effort is positioning the company in the SMEs with a higher number of members, which is #3 brings a behavior closer to corporate with a higher duration, more value, more proximity with the plans in the everyday, not only human resources, but the member, so there's a different type of service.

And the closer it is to corporate, the pricing is also different. So we have zero concerns about the tickets as you were saying that in fact has happened. Otherwise, we would have mentioned, but it's a reflex of this mix, of this migration to a portfolio with a higher weight on these larger SMEs. So it's only the mix effect that, on the other hand, brings higher growth of the portfolio.

You can see how much it grew in the past years. We're happy because we are able to implement our strategy, and it's proving to be a winning strategy. It's bringing growth and duration and this proximity with the companies that we were expecting. I'm going to pass the floor to Pacheco, so he can comment as well.

[Jose Robert Pacheco, executive]

Fred, your point is excellent. Just to add to what Rodrigo was saying, the SME portfolio is very broad. And the segment, like Rodrigo mentioned that we chose, is very close to corporate. It's on the border. So if on the 1 hand, your observation that the average ticket is lower in SMEs. On the other hand, without a doubt, the profitability is much higher than the corporate segment and the addressable market of companies with more than 100 members and less than 200 members is very interesting, especially in the bancassurance. So this caution when analyzing the segment, we can even open a fourth, which is that on the broader with the corporate, but that needs a specific strategy to draw attention.

[Rodrigo Bacellar, executive]

Pacheco, I have a comment, just would like to add. That has to do with SME, which is the blue ocean inside Bradesco. So we have Bradesco with more than 1 million SME, a low penetration, and it's a product that people can enroll in. And you were asking about the distribution channel at Bradesco. So it's a wonderful opportunity for us to explore. And the growth it offers of SMEs at the basis is amazing at Bradesco. Thank you.

[Jose Robert Pacheco, executive]

About the future view for the next few years. It's not just a matter of volume. We're talking about a mix built year-over-year with tickets above the traditional ticket. So it's not the game of commodities. We're not here after volumes. Odontoprev has been steadying out for the past years, bringing a different type of customer with a premium ticket.

So that's the heart of the strategy of value innovation. So thinking about Odontoprev for the following years is to think about this continuous innovation, opening new portfolios with premium tickets higher than the traditional ones, being able to generate returns for the company and the company did change the level of profitability in the past years. We were around, 14, 15 years ago, after our IPO in 2006 in EBITDA margin of 24%, 25%. Now this margin -- EBITDA margin is above 29% in the past few years, and it's here to stay. And it's very hard to be replicated by the competitors.

Behind that margin, we have an exemplary pricing, exploring and conquering new markets, and we don't see the competitors being able to do that in the short term. So that's the heart of the strategy. Thank you, Fred, once again for your question.

[Diego Lyra, executive]

Our next question is from Mr. Ricardo Boiati from Banco Safra.

[Ricardo Boiati, analyst]

I have 2 brief about the overdue payments. It's something that you've been addressing for the past [ 2.5 ] years. How could you help us think about how this will be in the future? And my second question is about what Pacheco mentioned, the potential of open enrollment that doesn't need to add to the contracts to grow. You have space of additional penetration in contracts with existing customers, capturing new members of employees that are already working the companies.

My question is, if you have anything to say about the penetration that the company has in these existing contracts, so we can have an idea of the potential growth in that segment.

[Jose Robert Pacheco, executive]

Ricardo, about the overdue payments, the company has basically 2 sources of revenue, the traditional plans and what we call the non-plans. It's made by rendering service, operations recently added to the company like Papaiz, and service rendering from ISS, revenues overseas, especially in Mexico. But in essence, there's nothing new in the overdue payments.

I don't know if there's something specific that you would like to know, but in essence it's correlated to the previous questions, in which we see constant innovation, new market segments with tickets above average and DLR below historical levels. And that's the heart of the strategy. Can we go to the open enrollment? Yes, yes, we can. Rodrigo?

[Rodrigo Bacellar, executive]

Thank you for your question, Ricardo. Open enrollment, I'll give you 2 figures. With the crisis of 2014, 2015, 2016, when the dental plans arise, it was mandatory. The companies offered that -- like the medical plans are today. And because of the company's hardships, there was a period of migration in which the companies started to study opportunities of offering dental plan, not being mandatory, but open enrollment. And that had to do with cost and profitability, and dental was chosen because it can offer a lower cost to the employee, if they were buying it somewhere else over the counter and that gained traction.

That accounts for 50% of our portfolio with our contracts that are buying open enrollment and the penetration, I can't really say because that's a strategic information, but we were able to put together a machine to go to the companies.

We have more than 100,000 companies, contracts. So there is the right moment to go to the companies so many months before the contract is expiring, then you readjust the contract. So you aim 2 visits per year in the company all over the country. And when the pandemic hit, 1 of our things that helped us is the virtual commerce. So we've been improving that. We have a team that is doing brilliant work on the way they distribute these products. And what I can say is that the potential is still very large. And in the 6, 7 years that we've been developing and improving, these contracts doubled its initial penetration.

Today, we have a penetration twice as large. So when the company gives us the opportunity to tap to 500 employees per time when explaining the product and the benefits of a dental plan of -- to prevention and not just treatment. We were able to double our penetration in the open enrollment contracts. But the actual number is confidential.

[Diego Lyra, executive]

Our next question is from Estela Strano from JPMorgan.

[Estela Strano, analyst]

It's very quick. Could you update how is Odontoprev in Mexico? How you plan to explore the growth avenues there? And as mentioned in a previous question about the potential growth -- in organic growth, how is the company's mindset looking at the Mexican market?

[Rodrigo Bacellar, executive]

Estela, thank you for your question. Mexico, last year, had good traction. It did bring good business to us. We had a meeting with the team. We were able to maintain important contracts and achieve new ones. And Brazil -- Mexico -- we see Mexico as Brazil 20 years ago in terms of dental care. We don't have a lot of culture about the benefits of a dental plan with the population.

There's the challenge of the channels. But since there are a lot of brokers, brokers that operate in Brazil also operate in Mexico, multinational companies that have the product in Brazil and also operate in Mexico. So we're exploring this type of event with brokers and insurers because the insurers, they don't have the product either.

So we have a way for the companies and insurers to promote the product. It's little by little, we're continuing to do our job. And last year was the first interesting response for the company in terms of revenue in Mexico.

We did have an interesting growth, and we hope that this work will bear fruit. So Mexico is an important market for us, close to us similar in some things to us, and we continue to bet in it.

And inorganic growth in M&A in Mexico is what I mentioned for Brazil. We look at opportunities, but there's nothing that really stands out in the short term.

[Diego Lyra, executive]

Without further questions, we would like to close our Q&A session for today. I'd like to pass the floor to Mr. Pacheco for his closing comments.

[Jose Robert Pacheco, executive]

I would like to thank you all for being with us, and I hope to see you at the next assembly in April. Thank you. See you there.

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