EARNINGS RELEASE 3Q22
NEW CHILDREN'S HOSPITAL MANDACARU
RECIFE/PE
Inaugurated in June 2022
NEW ADVANCED UNIT
BETIM/MG
Inaugurated in August 2022
Earnings Call Presentation
November 10, 2022 (Thursday)
Portuguese (with simultaneous translation to English)
9 am (EST - NY) | 11 am (BRT)
ri.hapvida.com.br/en
Message from Management
Even in a challenging period, still marked by the continuity of the scenario of global and Brazilian instability, we were able to demonstrate, once again, our commitment to a sustainable business model. Despite high volatility in the domestic market, the private health sector remained resilient and growing, supported by continued formal job creation. In this context, the Company continued to deliver robust results, taking advantage of the moment to intensify its initiatives to capture synergies, strengthen its operations and maintain discipline in the execution of its objectives.
In the quarter, we net added 122 thousand beneficiaries in health plans and 133 thousand beneficiaries in dental plans. The average ticket resumed its growth trajectory after being practically stable for almost 2 years. Our consolidated net revenues reached R$6.3 billion, an increase of 9.4% compared to the pro forma amount of the same period of the previous year. Our main operating indicator, the consolidated cash loss ratio, was 73.0% in the quarter, an improvement of 1.7p.p., continuing the trend of gradual recovery of post-pandemic margins. Adjusted EBITDA increased by 103.3% compared to the pro forma amount for the same period of the previous year, reaching R$922.7 million, including a positive and non-recurring impact of R$417.4 million related to the reimbursement of expenses as a result of a contractual adjustment in one of the Company's acquisitions.
We remain fully focused on our medium and long-term agenda, working intensely on the integration of Hapvida with NDI, on the integration of newly acquired companies and on the continuous verticalization of our operations. During the quarter, we opened 1 emergency room, 13 medical clinics and 7 diagnostic units, totaling 767 medical-hospital units spread across the country, constituting an unrivaled care infrastructure. Among the new units, we opened our first Advanced Unit in Betim/MG, which serves beneficiaries of both operators, Hapvida and NotreDame Intermédica. The operation has 24-hour emergency service and scheduled appointments in various specialties.
We continued to execute our inorganic expansion plan and announced the acquisition of Sistemas, a health plan operator with approximately 77 thousand beneficiaries located mainly in the city of São Paulo/SP. This is yet another strategic acquisition that, when completed, will further strengthen our presence, consolidating our growth through a vertical and integrated platform and reinforcing our commitment to creating value for our shareholders. Completion of this transaction is subject to certain conditions precedent including regulatory approval.
We also advanced rapidly in the integration agenda associated with the business combination between Hapvida and NotreDame Intermédica. We have completed nine months of the conclusion of the operation, with several achievements in this period and hundreds of initiatives and action plans already mapped to capture synergies. Some examples of initiatives that are already underway include:
- National Solution: Unified sales process for brokers through a single portal for quotes over 3,000 lives nationwide. This process contributed to the increase of 29 thousand lives in 3Q22 and 69 thousand lives since inception.
- Individual/Family Plans: We started selling products for individuals (individual and family plans) in different age groups, in regions where these plans were not sold by NDI, with a performance of 30 thousand lives in the quarter and 53 thousand lives since inception.
EARNINGS RELEASE | 3Q22 | 2 |
Message from Management
- Brand integration: In another step towards integration, we are now unique in the Hapvida NotreDame Intermédica brand. The launch event for the new brand usage manual took place on October 31, with all utilization details that will be implemented in all our units and materials.
- Supplies and Accreditation: The procurement area has already renegotiated supply contracts and continues to negotiate to seek the best commercial conditions with our supplier partners. This process is also being carried out by the accreditation teams, where they seek the best conditions in the accredited network. To date, more than 10,000 items have already been renegotiated with our suppliers of materials and medicines. We have also started the process of renegotiating contracts with third parties, including the areas of nutrition, safety, technology, maintenance, among others.
- Network sharing: The 87 hospitals that make up the Hapvida/NDI network are already prepared to provide urgent and emergency care to the more than 9 million beneficiaries of the combined health portfolio.
- Cross verticalization: We made progress in the process of internalizing the service of beneficiaries who were being served in accredited networks and third-party units. So far, around 30,000 beneficiaries have been shifted to be serviced inside Hapvida/NDI's own network.
- Auxiliary Services for Diagnosis and Treatment (SADT): In the SADT area, synergies of inputs/reagents were initiated and, in addition to these actions, we are also negotiating with support laboratories. Sample shipping routes to processing centers (NTO) have already been analyzed and optimized.
Innovation remains an important pillar for Hapvida NotreDame Intermédica. We were chosen as one of the 10 corporations (Health Services category in Latin America) that most promote open innovation with startups by the Open Corps Ranking 2022 of the 100 Open Startups.
We believe we are on the right path, following firm in the execution of our business model to fulfill our commitments for 2022 and, especially, for the long term. Confident in the prospects for our business, we are grateful for the contribution of our employees, physicians, dentists, brokers, suppliers and the confidence of the Board of Directors, shareholders and, especially, our clients.
Jorge Pinheiro | Irlau Machado |
Co-CEO | Co-CEO |
EARNINGS RELEASE | 3Q22 | 3 |
Summary
1. INTEGRATION AND REPORTING CRITERIA
With the completion of the business combination with Notre Dame Intermédica Participações S.A. (NDI) on February 11, 2022, NDI was consolidated in the month of February and became part of the consolidated interim financial statements of Hapvida Participações e Investimentos S.A. in that same month.
Therefore, Hapvida's consolidated interim financial statements ended September 30, 2022, include the three months of NDI's operations in that quarter. The comparative period considers only the accounting data disclosed at the time.
Aiming at the best disclosure practices, we will present in this release some segregated operating and financial data. Thus, the results will be presented as: Hapvida (Hapvida ex-NDI), NDI and Consolidated.
2. HIGHLIGHTS
Hapvida | NDI | Consolidated | |||||
FINANCIAL HIGHLIGHTS (R$ million) | 3Q22 | 3Q21 | Var. % | 3Q22 | 3Q22 | 3Q21 | Var. % |
Net Revenues | 2,604.7 | 2,558.9 | 1.8% | 3,716.5 | 6,321.2 | 2,558.9 | 147.0% |
Medical Costs - Cash | 1,730.1 | 1,738.4 | (0.5%) | 2,884.4 | 4,614.4 | 1,738.4 | 165.4% |
Total Medical Costs | 1,818.6 | 1,851.2 | (1.8%) | 2,975.3 | 4,793.9 | 1,851.2 | 159.0% |
Commercial Expenses¹ | 220.8 | 168.6 | 31.0% | 264.3 | 485.1 | 168.6 | 187.8% |
Administrative Expenses² | -104.8 | 270.8 | (138.7%) | 348.7 | 243.8 | 270.8 | (9.9%) |
EBITDA | 650.9 | 291.5 | 123.3% | 129.7 | 780.6 | 291.5 | 167.8% |
Adjusted EBITDA³ | 307.1 | 321.9 | (4.6%) | 615.5 | 922.7 | 321.9 | 186.6% |
Net Income | 35.2 | 43.7 | (19.5%) | ||||
Adjusted Net Income | 678.8 | 240.3 | 182.5% |
Hapvida | NDI | Consolidated | ||||||
CONSOLIDATED RATIOS (% ROL) | 3Q22 | 3Q21 | Var. % | 3Q22 | 3Q22 | 3Q21 | Var. % | |
Cash MLR | 66.4% | 67.9% | -1.5 p.p. | 77.6% | 73.0% | 67.9% | 5.1 p.p. | |
Total MLR | 69.8% | 72.3% | -2.5 p.p. | 80.1% | 75.8% | 72.3% | 3.5 p.p. | |
Commercial Expenses¹ | 8.5% | 6.6% | 1.9 p.p. | 7.1% | 7.7% | 6.6% | 1.1 p.p. | |
Administrative Expenses² | -4.0% | 10.6% | -14.6 p.p. | 9.4% | 3.9% | 10.6% | -6.7 p.p. | |
EBITDA Margin | 25.0% | 11.4% | 13.6 p.p. | 3.5% | 12.3% | 11.4% | 1.0 p.p. | |
Adjusted EBITDA Margin³ | 11.8% | 12.6% | -0.8 p.p. | 16.6% | 14.6% | 12.6% | 2.0 p.p. | |
Net Income Margin | 0.6% | 1.7% | -1.2 p.p. | |||||
Adjusted Net Income Margin | 10.7% | 9.4% | 1.3 p.p. |
Hapvida | NDI | Consolidated | ||||||
OPERATING HIGHLIGHTS | 3Q22 | 3Q21 | Var. % | 3Q22 | 3Q22 | 3Q21 | Var. % | |
Members Health and Dental (EOP, thousands) | 7,736 | 7,448 | 3.9% | 8,180 | 15,916 | 7,448 | 113.7% | |
Members Health | 4,289 | 4,264 | 0.6% | 4,746 | 9,035 | 4,264 | 111.9% | |
Members Dental | 3,447 | 3,184 | 8.3% | 3,434 | 6,881 | 3,184 | 116.1% | |
Members Health and Dental (Average, thousands) | 7,609 | 7,272 | 4.6% | 8,117 | 15,771 | 7,272 | 116.9% | |
Members Health | 4,259 | 4,169 | 2.2% | 4,692 | 8,957 | 4,169 | 114.8% | |
Members Dental | 3,350 | 3,103 | 8.0% | 3,425 | 6,814 | 3,103 | 119.6% | |
Proprietary service network | 495 | 475 | 4.4% | 264 | 767 | 475 | 61.5% | |
Hospitals | 50 | 47 | 6.4% | 37 | 87 | 47 | 85.1% | |
Emergency Units | 48 | 49 | (2.0%) | 28 | 76 | 49 | 55.1% | |
Clinics | 213 | 203 | 4.9% | 116 | 329 | 203 | 62.1% | |
Diagnostics | 185 | 176 | 5.1% | 83 | 275 | 176 | 53.3% |
The SOP amounts are accounted for and recorded at Hapvida Participações. For managerial presentation purposes, the amounts are prorated proportionally to Hapvida and NDI.
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Excluding depreciation and amortization, Long-Term Incentive Expenses and Share-Based Compensation (SOP); ² Excluding Long-Term Incentive and SOP expenses; and
³ Excluding the effects of ILP and SOP and amortization of Brands, Patents and Customer Portfolio.
EARNINGS RELEASE | 3Q22 | 4 |
Acquisitions and Integrations
3.1 ACQUISITIONS | ||||
+83 | +77 | +281k | ||
+121 | ||||
Beneficiaries (k) | ||||
+39 | +70 | |||
Beds | +31 | |||
HB SAÚDE | SMILE SAÚDE | SISTEMAS | |
Signing | Jul'21 | Feb'22 | Oct'22 |
Closing | Under analysis by CADE | Under analysis by CADE | Under analysis by CADE and ANS |
3.2 INTEGRATIONS
In addition to all the efforts undertaken in the integration at the national level between Hapvida and NDI, we continue our agenda of regional integration of the acquired companies
CCG - Rio Grande do Sul
During the third quarter of 2022, we maintained our focus on increasing the verticalization of the Centro Clínico Gaúcho (CCG), prioritizing care within our own network. In the period, we increased by 3 p.p. both the internalization of surgeries and outpatient care. The consolidation of clinical governance maintained the reduction in patient-days achieved in previous quarters.
With this, we were able to maintain the resizing actions of the accredited network, especially in the segment of high-cost imaging exams, adjusting the capacity of the own network for a greater internalization of magnetic resonance and tomography exams, as well as adjusting the operational capacity in outpatient care units of the own network.
The governance strategies of the own outpatient network led to a 35% increase in medical productivity in 3Q22 compared to 1Q22 and an expansion of the specialties available to beneficiaries.
The new telemedicine operation showed 10 p.p. increase in demand, expanding the offer of new specialties with more accessibility and ease for our beneficiaries.
INCORPORATIONS
One of the important steps in the integration process occurs when we promote the effective corporate incorporation of the legal entities, leading to a simplification of the corporate structure. During 3Q22 we incorporated the entities Rio Grande (RS) and Centro Clínico Canoas (RS) into the operator CCG, and also incorporated Hospital São Bernardo into NotreDame Intermedica Saúde S.A. We also incorporated Hospital Brasiliense (DF) into Ultra Som Serviços Médicos S.A.
EARNINGS RELEASE | 3Q22 | 5 |
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Disclaimer
Notre Dame Intermédica Participações SA published this content on 14 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2022 10:58:04 UTC.