Auna S.A. (AUNA) Q3 2025 Earnings Call Transcript

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Overview

The earnings call summary highlights strong growth in Peru and Colombia, strategic partnerships like the one with Sojitz, and expansion plans in Mexico. Despite some concerns about Mexico's revenue decline and system integration delays, the positive outlook on market recovery, margin improvements, and strategic investments suggest a positive sentiment. The Q&A section reinforced this with optimism about growth opportunities, despite some uncertainties in guidance. Overall, the positive aspects, especially the Sojitz partnership and expansion plans, outweigh the negatives, indicating a likely positive stock price reaction.

Key Financial Performance

Total Adjusted EBITDA Decreased by 5% year-over-year, primarily due to Mexico's performance. Peru and Colombia's strong results partially offset this decline.

Consolidated Revenue Increased by 1% year-over-year in FX-neutral terms. Peru's revenue grew by 9%, Colombia's by 4%, while Mexico's revenue declined by 12%.

Capacity Utilization Decreased by 3 percentage points year-over-year to 64%. Peru's utilization increased by 1.5 percentage points, while Colombia and Mexico saw decreases of 5.2 and 4.4 percentage points, respectively.

Planned Memberships at OncoSalud Grew by 8% year-over-year, while its Medical Loss Ratio (MLR) fell to 49.3%.

Mexico Revenue Declined by 12% year-over-year due to slower recovery of volumes, market conditions, and issues with new information and ERP systems.

Peru Revenue Increased by 9% year-over-year, driven by higher ticket and volume of emergency visits and ambulatory care.

Peru Adjusted EBITDA Increased by 15% year-over-year, with a margin increase of 1.1 percentage points to 22.7%. Growth was driven by efficiencies in surgical procedures and improved pharmaceutical costs.

Colombia Revenue Increased by 5% year-over-year, driven by risk-sharing models and diversification of payers.

Colombia Adjusted EBITDA Increased by 18% year-over-year, with a margin expansion of 1.7 percentage points. Growth was driven by higher average tickets for surgery and increased chemotherapy and imaging services.

Adjusted Net Income Reported at PEN 58 million for the quarter. The year-over-year change was impacted by Mexico's performance, partially offset by finance income and lower interest expenses.

Pretax Operating Cash Flow Decreased by 5% year-over-year to PEN 595 million, mainly due to lower revenues in Mexico and accounts receivable delays related to systems integration.

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Operating Highlights

Oncology and Cardiology Services: Increased 48% versus Q2 2025, accounting for 15% of Mexico's revenues. A new OncoCenter was inaugurated at Doctors Hospital in Monterrey to enhance oncology services.

Out-of-Pocket Segment: Increased by 15% in Q3 2025. Plans to grow this segment from 8% to 20% of Mexico's revenue by the end of 2026.

Peru Market Expansion: Continued growth with a 9% increase in healthcare revenues and an 8% increase in OncoSalud memberships. Expansion into mid-segment markets and risk-sharing with payers.

Colombia Market Diversification: Revenue grew 5% due to risk-sharing models and diversification away from government-intervened payers. Added Salud Total as a new payer.

IT System Implementation: New IT systems implemented in Mexico to harmonize technology, improve data quality, and enhance decision-making.

Debt Refinancing: Successfully refinanced $765 million in debt, reducing interest rates by 125 basis points and extending maturities.

Mexico Growth Strategy: Revamped leadership team and initiatives to attract top healthcare talent. Focus on high-complexity services and expanding revenue streams in out-of-pocket, corporate, and government segments.

Partnership with Sojitz: Announced partnership to accelerate growth in Mexico while maintaining a disciplined deleveraging path.

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Risk or Challenges

Mexico Operations: Weaker financial results due to slower-than-expected recovery from legacy doctor volumes, slower market conditions, and issues with the implementation of new hospital information and ERP systems, which affected billings.

Capacity Utilization: Decreased 3 percentage points to 64%, with Mexico experiencing a 4.4 percentage point decrease due to lower surgery volumes and emergency visits.

Doctor and Supplier Relationships in Mexico: Challenges in doctor-supplier relationships have slowed the implementation of the AunaWay model, impacting revenue recovery.

IT System Migration in Mexico: Problems in migrating Doctors Hospital to new information and ERP systems caused billing delays and operational disruptions.

Colombia Risk Mitigation Measures: Risk mitigation measures, including limiting services to government-intervened payers, led to lower surgical volumes, though partially offset by higher average tickets for surgeries.

Debt and Leverage: High leverage remains a concern, though refinancing has improved the debt profile and reduced financing costs.

Healthcare Talent in Mexico: Shortage of healthcare talent in Monterrey poses challenges for growth and operational efficiency.

Economic and Market Conditions: Slower market recovery in Mexico and externalities in Colombia, such as government-intervened payers, impact revenue and operational stability.

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Guidance & Outlook

Revenue Growth in Mexico: The company expects Mexico's revenue to begin growing again next year (2026) as various growth initiatives gradually gain traction.

EBITDA Growth in Mexico: EBITDA growth is anticipated in 2026 as the implementation of the business model advances and growth initiatives gain traction.

Oncology and Cardiology Services in Mexico: The company projects significant growth in oncology and cardiology services, with a 48% increase already observed in Q3 2025. A new OncoCenter in Monterrey is expected to further enhance activity in this segment.

Out-of-Pocket Segment in Mexico: The company aims to increase the out-of-pocket segment from 8% to 20% of revenue in Mexico by the end of 2026.

Peru Growth Projections: Peru is expected to remain a key contributor to Auna's growth, driven by an improving MLR, consistent profitability, and a vertically integrated model. The company sees substantial opportunities in the mid-segment market and risk-sharing with private and public payers.

Colombia Growth Projections: Colombia is expected to continue contributing to growth through risk-sharing models like prospective global payments (PGPs) and diversification away from government-intervened payers.

Debt Refinancing Impact: The recent $765 million debt refinancing is expected to reduce financing costs, enhance short-term liquidity, and provide financial flexibility for medium- to long-term growth initiatives.

Leverage Ratio Target: The company is committed to improving its leverage ratio to 3x net debt to EBITDA in the medium term.

Partnership with Sojitz: The partnership with Sojitz is expected to accelerate growth in Mexico beyond what the company can achieve independently.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is the rationale for expanding in Mexico and how does it align with Auna's goal to deleverage and ramp up operations?

A:Auna sees Mexico as a significant growth opportunity, repeating successes from other regions. The partnership with Sojitz, formalized through an MoU, provides a framework for co-investment in Mexico while maintaining leverage targets. Auna aims to grow without increasing its debt, leveraging Sojitz's collaboration to achieve this.

Q:Could a change in Colombia's leadership ease pressures on the EPS, or are there deeper structural issues?

A:While a change in leadership might not bring immediate changes, structural issues in Colombia's healthcare sector require government action. Recent government capitalization of EPS insurance payers is a positive step, but significant improvements are expected only after 2026. Auna remains optimistic about its positioning in Colombia despite political uncertainties.

Q:Is Sojitz interested in investing in Auna itself or just in new opportunities?

A:Sojitz appreciates Auna's integrated model and has shown interest in broader opportunities, not limited to new projects. The partnership aims to push Auna's growth, particularly in Mexico, but also across the organization.

Q:What are the details of the Trecca project and its impact on Auna?

A:Trecca is a public-private partnership in Peru with an 18-year contract and a 2-year building period. It will provide 3.2 million services annually, generating over $200 million in sales per year when scaled. The project is debt-neutral for Auna and aligns with its strategy to grow without increasing leverage.

Q:What key KPIs should be tracked to confirm a tangible recovery in 2026?

A:Key KPIs include occupancy rates, payer mix, surgical productivity, revenue growth, and EBITDA improvements. Auna expects meaningful improvements in these metrics by 2026.

Q:Why has Auna's share price underperformed despite resilient operations?

A:The share price drop is attributed to high trading volumes linked to a competitor's stock sales, not changes in Auna's fundamentals. Auna is exploring alternatives to support shareholder value and address the share price issue.

Q:What is the return on investment timeline for Mexico?

A:Auna evaluates investments based on return on invested capital. Despite setbacks in 2025, Mexico is expected to be a growth market by 2026, with investments optimized for productivity and returns.

Q:Are there plans to add more beds in Peru and Mexico?

A:Auna plans to increase capacity in Peru and Mexico, focusing on beds, chemotherapy, radiotherapy, and surgery rooms. In Mexico, the strategy involves creating urban healthcare ecosystems with 75-150 beds per city.

Q:Is the $500 million investment plan for Mexico related to the Sojitz partnership?

A:Yes, the $500 million investment plan over 5 years is related to the Sojitz partnership. The collaboration aims to drive significant top-line and EBITDA growth.

Q:What is Auna's insurance risk management policy?

A:Auna manages insurance risk by maintaining a 50% MLR for oncology policies through pricing and cost containment. This includes adhering to protocols, purchasing effective treatments, and continuously repricing and managing costs.

Q:Have the preferred payer network and bundled packages for corporates in Mexico been launched?

A:The preferred payer network has been launched and is evolving through ongoing negotiations. Auna is aggressively targeting out-of-pocket sales with packaged services and fast response processes to capture patients.

Q:Review of Unclear Management Responses

A:Management avoided providing specific forward-looking numbers or guidance on certain topics, such as capacity growth projections and detailed financial impacts of the Sojitz partnership. Additionally, responses to share price concerns and return on investment timelines lacked detailed clarity.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

AUNA Transcript

Auna S.A. (AUNA) Q3 2025 Earnings Call Transcript

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Auna S.A. (AUNA) Q2 2025 Earnings Call Transcript

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The earnings call presents a mixed picture. Positive aspects include revenue growth in Mexico and OncoSalud, improved EBITDA in Colombia, and strong adjusted net income. However, concerns include flat revenue in Colombia, decreasing cash position, and vague management responses about growth in Mexico. The Q&A revealed optimism about margin maintenance and risk-sharing in Colombia, but also highlighted ongoing challenges in Mexico. Given these mixed signals and lack of a market cap, a neutral stock price movement is expected.

Earnings call transcript: Auna SAA ADR Q4 2024 misses EPS forecast, stock dips

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The earnings call presents mixed signals: strong financial performance with revenue and EBITDA growth, but challenges in Colombia and lack of clear guidance. The Q&A reveals management's cautious stance and reluctance to provide specific forecasts, adding uncertainty. Despite positive financials, the strategic focus on cash flow over growth suggests limited short-term upside. The absence of a shareholder return plan and operational risks in Colombia further temper expectations. Overall, these factors balance out, leading to a neutral stock price prediction.

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