Auna SAA

NYSE:AUNA

Earnings Call Transcript

[Operator]

Good afternoon, and welcome to Auna's First Quarter 2024 Earnings Conference Call. My name is Krista, and I will be your operator for today's call. [Operator Instructions]

Now I would like to turn the call over to Ana Maria Mora, Head of Investor Relations. Ma'am, please go ahead.

[Ana Maria Mora, executive]

Thank you, and hello, everyone, and welcome to our Auna conference call to discuss our Q1 2024 results. Please note that there is a webcast presentation to accompany the discussion during this call. If you need a copy of the presentation, please contact Auna's Investor Relations team.

Before we begin, I would like to remind all participants that our comments today will include forward-looking statements. In addition to reporting unaudited financial results in accordance with International Financial Reporting Standards, we will discuss certain non-IFRS financial measures and operating metrics, including foreign exchange neutral calculations. Investors should carefully read the definitions of these measures and metrics included in our earnings press release of today to ensure that they understand them. Non-IFRS financial measures and operating metrics should not be considered in isolation, as substitute for or superior to IFRS financial measures and are provided as supplemental information only.

Before we begin our prepared remarks, please also note that certain statements made during the course of today's discussion may constitute forward-looking statements, which are based on management's current expectations and beliefs, and which are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. These include, but are not limited to, expectations and assumptions related to the integration and performance of the businesses we acquired. For a description of these risks, please refer to our filings with the U.S. Securities and Exchange Commission and our earnings press release.

Speaking on today's call is Suso Zamora, our Executive Chairman and President, who will discuss Auna's consolidated and segment financial and operating results as well as provide updates on our various strategic growth initiatives. Gisele Remy, our Chief Financial Officer and Executive Vice President, will follow with a more detailed review of Auna's consolidated financial results. After that, Suso will provide a wrap-up of our first quarter performance as well as discuss our performance outlook. We will then open the call for your questions.

Suso, please go ahead.

[Jesús Zamora Leon, executive]

Good afternoon, everybody. Thank you very much, Ana. Welcome, everyone, to our earnings call, our first as a public company and definitely an exciting moment in our journey.

Let's begin our presentation and please turn to Slide 4. So our regional, vertically and horizontally integrated health care platform delivered strong top line growth, and we are reporting an adjusted net income basis of PEN 22 million. So from top to bottom, it's been a good quarter. These results reflect the growing scale advantages and increasing synergies of our regional platform.

Peru's outperformance strengthens our conviction in Mexico, for our larger market, where we are deploying the same business model and implementing Auna standards at OCA, the business we acquired in Monterrey in Mexico in the second half of 2022. Our continued growth in Mexico indicates that our strategy is gaining traction in health care services, while the launch of OncoMexico is proceeding according to our plan. Our aim is to scale Mexico with a high degree of predictability.

Let's take a closer look at our first quarter performance. Please turn to Slide 6, operator. So starting with our consolidated results, focused and consistent execution of our growth strategy drove top line revenues across our geographic segments. Key performance drivers were a growing proportion of more profitable high complexity services. Of course, increased capacity utilization and improving our operational efficiencies.

Our strong performance reflects our growing scale and returns from past investments in Peru and Colombia. And in addition, we made further progress with [indiscernible] our business model in Mexico. A key highlight of the quarter was Peru, where EBITDA margin surpassed our internal 20% EBITDA target.

We expect to continue to replicate the business practices that we have in Peru that have Peru's growing scale and the benefits thereof in Mexico. Adjusted net income, which excludes extraordinary nonrecurring items, rose to PEN 22 million. As operating results are more than covered financial expenses and taxes.

Debt leverage, a key metric for all of us at Auna fell further, and we expect will continue to decline as we gain additional traction in the latter half of the year.

In Healthcare Services, our organic and inorganic investments in Peru and Colombia are paying off as we have further implemented the AunaWay, this obsession with our patient-centric model of high medical resolution with great patient journey and standardization that scales with high predictability and delivers growing financial results.

We have been ramping up capacity utilization in Mexico through a physician relationship and incentive model. And at the same time, we have been developing referral initiatives with insurance companies and brokers. The strong growth in top line and average revenue per patient reflects a greater mix of high complexity services. Our focus on oncology, cardiology, neurology and trauma shock.

At Oncosalud, we continue to attract new customers to our oncology and general health care plan memberships, combined with higher average monthly revenue per customer, this drove revenues 15% higher, 15% higher. While intercompany price increases impacted Oncosalud's cost of revenue are very stable oncology MLR at 51.5%, also produced stable gross margins.

Can we flip to Slide 7, operator. Now let's move on to our four segments to review specific segment results. In order to be consistent with the FX-neutral metrics provided on a consolidated basis, variances for Mexico and Colombia will be provided on a local currency basis, while the financial charge remain in our functional currency that improve inflow.

Please turn to Slide 8 to discuss the results of our Healthcare segment in Mexico. So in Mexico, we continue to advance strategic initiatives in the implementation of the AunaWay. Our progress in the first quarter of 2024 is reflected in the 6% increase in health care services revenues versus fourth quarter 2023. Patients treated increased 4.7% with a range of services. Occupancy was stable at 41% due to a temporary decrease in operational volume related to an earlier Easter holiday that fell in the first quarter versus in the second quarter in 2023. And physicians also attending to medical congresses that distracted many of them, which also occurred in the first quarter of this year versus in other quarters last year.

Dentegra grew 38%, driven by growth in B2B plans. While Dentegra is a small percentage of our revenues, it serves as a platform for launching OncoMexico. In addition to its nationwide insurance license Dentegra gives us an established and an extensive insurance distribution network in the country. Dentegra will be rebranded to Oncosalud in the future.

Mexico's Healthcare Services adjusted EBITDA decreased versus the first quarter 2023, on higher SG&A as a product of investments in regional commercial and operational capabilities necessary to deliver growth in the medium to long term, along with local administrative capabilities that have not yet been implemented in the first quarter of 2023 after the acquisition.

However, a better measure, adjusted EBITDA grew 23% versus fourth quarter '23, and margins remain at a very healthy and stable level of 34%. I must highlight, we're solidly building our Mexican capability, and these replicate those in our business models that have years of proven results.

During 2024, our organizational focus has been and will continue to be Mexico and our progress in integrating Mexico to the AunaWay standards is promising. We are gradually bringing the AunaWay standards and top talent to OCA and gradually scaling this business in Monterrey, one of the Mexico fastest growing health care markets, benefiting, of course, from the near-shoring phenomenon.

Again, we remain sharply focused on the implementation of our proven capabilities and thus, to shift revenue mix towards standardized, more profitable, high complexity services and on increasing occupancy by attracting and retaining top-tier high-yield physicians with incentives and other benefits and rewards productivity within the Auna network.

Additionally, we are rolling out tailored packages and bundles for insurance and broker referrals, and these also attract out-of-pocket payers. We are on track for the launch of OncoMexico this year.

Our other key initiatives in the quarter are the implementation of SAP and our hospital information system for which had a great all-hands launch of these projects in Monterrey early in the year. We expect Mexico to perform well, definitely during the rest of the year, with a higher impact in the second half of the year as we start harvesting the benefits of our AunaWay strategy.

Now please turn to Slide 9 to discuss the Colombian Healthcare. Revenue in Colombia increased 15.3% year-over-year. This growth was primarily driven by a 22% increase in average revenue per patient due to a better service mix with a higher participation of oncology services and a decrease in certain ambulatory and in-home hospitalization services during the second half of 2023.

The latter resulted in a 5% decrease in patients versus one -- first quarter of 2023. So growth is being facilitated by investments such as increasing the number of ICU beds at our hospitals in Monteria. Outpatient consultations increased 46% in Colombia, while the number of patients we treated decreased 5% as we reallocated resources away from low-complexity areas, such as ambulatory and in-home services. This is our strategy to direct high complexity services to more expensive and specialized hospital units and service low complexity through digital channels, at home deliveries and core large volume facilities that benefit from scale.

Occupancy levels grew significantly year-over-year to 79%. And this includes Clínica Vallesur in Medellín, a relatively new facility that is ramping up. Adjusted EBITDA for the segment increased a strong 16% on top line growth, while margin was stable. Cost of services were up 19%, reflecting investments to support the delivery of high complexity services. However, SG&A was also stable during the quarter.

In Colombia, we continue to develop new competencies in high complexity areas like oncology and neurosurgery and orthopedics and cardiology such as our recent inauguration of the center of excellence for pulmonary oncology. We expect the SAP implementation to be completed this year for Barranquilla and Medellín. This was a complex endeavor, one in which we learned a lot, given the need to consolidate many operations with different and older legacy systems.

Now please turn to Slide 10 to discuss our health care Peru segment. The result of health care services in Peru are a product of leveraging the expansion of the network, increasing the mix of high complexity and high ticket services and monetizing Auna network referrals as a result of our proven strategy of deploying our urban health care ecosystems. These drove average revenue per patients as did adjustments to Auna's healthcare plan in order to align rates with the highest payer within our network.

We are also harvesting growth from other organic investments as well, such as the Clínica Chiclayo Hospital. We've also expanded Clínica Vallesur in Arequipa and increasing the emergency services capacity at Clínica Delgado.

Another revenue driver in Peru with a 2 percentage point increase in occupancy. And again, this takes into consideration Chiclayo and Vallesur's expansions, which are new and are ramping up. This mainly resulted from the implementation of our model by which specialties and services are directed to the most appropriate Auna facility, principally in terms of cost of treatment. This is our operational model by which we continue to scale certain facilities for certain treatment and thus gain the efficiency of this particular operational scale. All of the revenue drivers I've covered drove operating leverage in the quarter with an adjusted EBITDA increase of 70%.

Now please turn to Slide 11 to discuss Oncosalud Peru segment. At Oncosalud, our health care plans business, we grew revenue 16%, reflecting the strength of this business and its ability to rapidly implement new growth initiatives. A key driver was increased third-party revenue from Oncosalud's integrated hospitals, which included copayments, noncovered expenses and medical grants from some international pharma labs. Other drivers included a 4% increase in the number of oncology plans.

Our oncology MLR remained stable at 51.5%. Top line growth drove the 24% increase in EBITDA with underlying operating leverage reflected in SG&A as a percentage of revenue, which fell 3 percentage points to 29%. With lower customer acquisition -- lower customer acquisition costs and deliberately slower growth as a result of price increases for general health care plans also contributed to EBITDA growth.

And with that, I'll pass it on to Gisele. Gisele, if you can, please continue with our presentation.

[Gisele Ferrero, executive]

Thank you, Suso. Good afternoon, everyone. I'll pick up the presentation now with Slide 13 to talk more about consolidated revenues. Let's take a step back and focus on the key growth drivers in the quarter. As you can see in the chart at the right of the slide, consolidated revenue grew a little bit over 20% or 11% on an FX-neutral basis. As Suso pointed out earlier, the growth was across our business and all of our segments.

Importantly, our consolidated gross margin in the quarter was 38.5%. We drove much of the top line revenue growth by leveraging prior investments that expanded our health care facilities in Peru and Colombia, coupled with a higher mix of high complexity and oncology services.

Let's now turn to Slide 14 to discuss cost of sales and services and SG&A expenses. Revenue growth drove a 26% increase in gross profit with a strong margin. I'd like to draw your attention to the points under the chart on the left. As we explained in our earnings release, there were a number of onetime accounting effects that make comparisons between the reporting periods of the first quarter of 2023 and the first quarter of 2024 difficult.

First, our cost of sales and services included PEN 11 million in headcount costs that were reclassified to SG&A beginning in the second quarter of 2023. Also versus the first quarter of last year, depreciation decreased PEN 11 million in the first quarter of this year due to the purchase price allocation method used at OCA. When excluding these accounting changes, our cost of sales and services increased 11% year-on-year on an FX-neutral basis, which was consistent with the revenue growth in the quarter.

Moving on to SG&A. As we note, under the chart on the right, when excluding the reclassification of the PEN 11 million in headcount costs and impacts, which I just mentioned. SG&A increased 17% year-on-year on an FX-neutral basis, reflecting the previously mentioned investments in regional, commercial and operational capabilities necessary to deliver growth in the medium to long term along with local administrative capabilities implemented in Mexico after the acquisition.

Now let's move on to Slide 15, please. On this slide, we break down adjusted EBITDA by business segment. In total, EBITDA grew 14.3% year-on-year or 7% on an FX-neutral basis. Although margin decreased on a year-on-year basis due to the growth investments, which I just mentioned, it expanded 1.5 percentage points when compared to the fourth quarter of 2023. In Peru, where our growth strategy is very advanced, adjusted EBITDA increased 40% year-on-year with the margin increasing 4 percentage points to 20.4%.

Let's now move on to net income on the next slide, please. In the first quarter of 2024, we have introduced the concept of adjusted net income to give the market a clearer picture of our net income when adjusting exclusively for the noncash and extraordinary expenses generated by the refinancing exercise that was carried out in the fourth quarter of last year. We expect these adjustments will provide further clarity on the impact of the refinancing had on the fourth quarter 2023 net income as well as one remaining impact in this first quarter of 2024's net income.

On this slide, we show you the variations in adjusted net income for the first quarter of 2024 versus the first quarter of 2023. As you can see, adjusted net income reached a gain of PEN 22 million in the first quarter of this year, up from an adjusted net income of PEN 1 million in the first quarter 2023, and an adjusted net loss of PEN 6 million in the fourth quarter 2023.

I I'd like to draw your attention to the PEN 30 million noncash extraordinary financial cost adjustments being made to net income in this quarter, which corresponds to an extraordinary item related to the mark-to-market valuation of a legacy derivatives, which has now been extinguished in April related to the retired 2028 notes. You can find more information as to the adjusted net income in our earnings release. Similarly, the PEN 38 million increase in finance costs versus the first quarter of 2023 is also primarily explained by the same extraordinary impact just described.

Now let's move on to Slide 17 to talk about cash flows for the quarter. Operating cash flow increased 2% year-on-year to PEN 154 million. This was mainly due to the growth of our Peruvian operations as discussed. As you can see, in the cash flow bridge, cash used during the quarter was mainly [ PEN 45 million ] in taxes, PEN 31 million of CapEx, mainly maintenance CapEx and PEN 89 million in interest expenses related to our 2029 -- excuse me, to our 2028 term loan. During the quarter, we also reduced PEN 13 million in debt.

Moving to the right of the bridge, you can see that -- of the PEN 1.3 billion in net proceeds from the IPO, PEN 1.2 billion was used to acquire the noncontrolling interest of Oncosalud, and most of the remainder of the proceeds were used to pay costs related to the IPO as mall as well as a small reduction in debt in line with our deleveraging strategy.

Now I'd like to discuss our debt structure and leverage on Slide 18. Since acquiring OCA and IMAT in 2022, we have been steadily deleveraging our balance sheet. As you can see in the chart on the bottom of the slide, Furthermore, we remain committed to reaching our target ratio of 3x leverage.

As you can see in the pie chart at the right of the slide, more than half of our debt is in direct global currency funding. The balance is in U.S. dollar-denominated debt, of which 90% is hedged to Peruvian Soles. We finished the quarter with a very strong cash position of $92 million, which equates to 8% of our revenues in the last 12 months.

The other pie chart on this slide breaks down our debt structure. While the bar chart on the bottom right of the slide shows our amortization profile over the next years. Summing all of this up, we are maintaining a very healthy debt structure and maturity profile in order to support our growth strategy.

That concludes my review. I would like to pass it back over to Suso, who will wrap up our presentation.

[Jesús Zamora Leon, executive]

Thank you, Gisele. So I'd now like to end today's presentation with some final comments, and of course, open to Q&A. No comments regarding our vision of the company.

So quarter results, they clearly demonstrate our ability to disrupt, modernize, integrate and consolidate health care in these underpenetrated and underserved Spanish speaking Latin American geographies. We have been succeeding with the health care platform that is more and more regional. Vertically and horizontally integrated and scaled. Also driving our success, our standardized best practices and protocols as well as the state-of-the-art equipment. These distinct competitive advantages also bring higher predictability to our insurance business.

As a long-standing health care services and oncology plan provider, who has grown in the market and accompanied millions of patients in their health care journeys, we are able to deliver a long-term approach to patient health by focusing on prevention, detection, and of course, treatment.

As Peru's outperformance demonstrated this quarter, once our operations reach a certain level of capacity utilization, we start to generate significant returns. And we always harvest the benefits of diversification as one country, one site, one business performs over expectations. It increases our predictability. We remain very excited about Mexico, given the promise of the AunaWay in that market. We continue to expect that it will deliver substantial growth and value creation both in the near and long term.

This year, we expect consolidated adjusted EBITDA to increase at least 20%. I with much of the growth in the second half. Please refer to our earnings press release for the assumptions behind this guidance. Reaching this goal is, of course, subject to risks and uncertainties inherent in our business and in the country where we operate. This is also further described in our filings, but we remain optimistic in our ability to achieve it.

We believe that as more investors recognize the strength and merits of our business model and strategy as well as the growth potential of our market, this will eventually be reflected in Auna's share price. With that in mind, we intend to invest substantial time in meeting investors in the weeks and months ahead to bring Auna to the attention of a wider audience.

Thus, I committed myself [indiscernible] and the rest of the team to frequent road shows that we can close so that we can be close to shareholders and future investors. For those of you who are current investors, thank you for your ongoing support, on and our mission.

And as a final word, I'd like to thank the doctors, nurses, physicians, and many other colleagues for their hard work and dedication to our mission of transforming health care in Spanish-speaking Latin America. All of us are highly patient-centered, steadfastly committed to the highest standard of care, quality and safety.

And with that, I conclude our presentation. We, of course, appreciate your attention and would like to now open the session to any questions you may have.

Operator, please proceed with the Q&A session.

[Operator]

[Operator Instructions] Your first question comes from Bruno Alves with BTG Pactual.

[Samuel Alves, analyst]

Actually Samuel from BTG. Our first question is about the monthly performance throughout in the first quarter in Mexico. In local currency, the adjusted EBITDA declined 10% year-on-year during the first quarter. In the presentation, in comments that some calendar effects jeopardized the year-on-year comparability in March. So just to understand, adjusted EBITDA performance in January or your February was better in your near term? That's the first question.

And the second question is about the 2024 guidance. That is also related to the first topic, considering the 20% EBITDA growth outlook for this year, do you believe that this figure will be equally split among all the three geographies or Mexico should lag the others that's happened in the first quarter.

[Jesús Zamora Leon, executive]

Gisele, do you want to take the first one? And I'll take the second one?

[Gisele Ferrero, executive]

Yes. So of course. Samuel, just to answer the first part of the question as to EBITDA growth on a year-on-year basis. As we mentioned in the call, impacting comparability was not only the seasonality effects, which were different this year versus the first quarter of last year, but also the incremental SG&A, which we already saw on our P&L in the fourth quarter of last year. That's why it's also important to note that for the OCA Monterrey operation, EBITDA increased 34% when compared to the fourth quarter of last year.

You mentioned the 10% decline in adjusted EBITDA, which was in reference to the first quarter of last year, which was before we had made those investments in the regional and local capabilities in SG&A.

As far as the month-on-month performance, basically, obviously, while there were impacts comparing March to March because of fully weak, there was also other impacts in the other months due to the congress as mentioned. So I think from a revenue perspective, the quarter is pretty much spread out between the 3 months as far as performance and growth versus last year.

[Jesús Zamora Leon, executive]

Samuel, with respect to the second question, I think that we feel very comfortable on the 20% guidance in EBITDA growth. And I wouldn't want to represent how will it come out, but it's not going to come out very different to what we are planning with respect to Mexico, Peru and Colombia. It is a fact that we -- building the capabilities in Mexico that produce predictable results takes a little longer time.

So I always want to take -- at least giving myself some caution that we will deliver the 20%, but there might be some difference, not substantial, some differences as to how the countries are producing the results. I think in Mexico is an amazing market made for Auna, and I don't want to hit it right quarter-by-quarter. I want to hit it right year-by-year and the 5-year, in the 5-year metric, I think we will be, I think, the most significant player in oncology at least. So I think that I would leave it there somewhere.

[Gisele Ferrero, executive]

And we need to complement before Suso -- we see that this question is coming up on the chat from several participants. Our guidance is on a consolidated basis. And we think given the synergies and the regional footprint that Auna have, it is most appropriate and predictable for us to provide it always on a consolidated basis and not by region.

[Operator]

Your next question comes from the line of Alejandro Zamacona from HSBC.

[Alejandro Zamacona Urquiza, analyst]

A couple of questions here. The first one is, can you comment on the status of this plan of recruiting doctors in Mexico? I mean any color in terms of timing challenges and strategy to be helpful.

And then my second question is on the occupancy rates in Mexico. I mean, during the quarter, we saw a flat year-over-year growth. What can we expect going forward?

[Jesús Zamora Leon, executive]

Thank you very much. I think we're on track and attracting the doctors that will produce some high yield. But qualitatively, our focus on high complexity also has a timing issue. So it's not about just filling up the hospital with doctors that deliver any type of practice. But qualitatively, we need to make sure that what we're building is an institution that has the best standard in this high complexity.

So I -- OncoMexico, OncoMexico is a project that's -- that it has to the two-pronged strategy. One is a market share strategy in terms of hospital services related to oncology and the other one is the insurance business. Both require a distinguished number of physicians that align to the AunaWay. And I think the conversation we've had, I was in Monterrey last Tuesday and before that, only meeting with doctors. And now here in Mexico City as well, we've been meeting with some doctors, we will be meeting with some doctors next week.

Now I think that we are very well known and prove in Colombia, I must admit. We are less known still in Mexico. So our strategy to be a significant player in oncology and other high complexity diseases is one that has many diversity of actions, including clinical trials, research relating ourselves to some of the other players in oncology, prevention campaigns.

So, and these, again, will produce the traction that we've achieved in Peru and Colombia in the physician world. Our offering is distinct. But once one is implemented, it has improved in Colombia, it delivers predictability and the AunaWay that anticipated this, this high medical resolution, and high patient experience and great financial returns. But it needs to be built over time.

So I would say that 2024 is a very important year as we invite and retain key doctors into our network. That's happening at the right pace. But we still have a substantial opportunity to complete what we want to achieve here.

[Operator]

Your next question comes from the line of Mauricio Cepeda with Morgan Stanley.

[Mauricio Cepeda, analyst]

Two questions from our side. The first one about Colombia. I understand I saw in the release that you are now receiving direct payments from ADRES. But if you could detail a little bit how it has been interfering with working capital, we saw the receivables going up a little bit. So if there is any kind of relation there? What we were foreseeing in terms of this financial relation now directly with ADRES. But also, if you could also talk about the patient flow after the intervention in the EPS. And I understand that you are focusing on high complexity oncology if this kind of administrative control of the EPS may have changed somehow the way you get the patient flow. So my first question is about Colombia.

And the second question, a little bit about Mexico. So we saw that you were increasing patients, but not necessarily the ones that increased hospital occupancy, if you somehow perceive a different ramp up there in terms of hospital occupancy or it's -- it somewhat has kind of a competitive reaction there? As you know, we were trying to capture more volumes there if there was any competitive reaction in the hospital business.

[Jesús Zamora Leon, executive]

Thank you very much, Mauricio. So I'll start with the last one and then I'll go into the Colombian. I think we are good at selling to hospitals. But in our promise of value-based care, we're actually measuring the number of days patients go back to their families. So beds is not the perfect -- not the perfect metric for us. We still believe that in Mexico, we can double up in the next 5 years without any investment to reach our 80% standard in hospitalization.

I don't want to diminish that effort at all. But I think that -- I don't think there's a delay. But I think the first quarter was had these dislocations, and these dislocations of the Holy Week in which people don't do medical treatment and other issues. But I think we're on track to grow occupancy.

I do think that in the future, we'll try to help the market understand how we see occupancy and how we see higher complexity procedures as a better measure of our volume, as a better measure of our volume. Now we are measuring surgery rooms and utilization, ICU utilizations, chemotherapy infusion type utilization. That's the core of our business, not the hospital stay. But still, I do not want to diminish. Right now, we have a very clear strategy to fill up the hospital bed, notwithstanding what I just said, and that will be coming during the course of this year.

Now in Colombia, I believe that the fragility vulnerability of these two payers that were intervened by the regulator based on financial considerations and limits that they were not complying to will improve our working capital collections in the future, not make them worse.

I think there's -- right now, there is a transition in which we -- there's a transition in which the ADRES and the insurance companies and ourselves and other service providers are learning to work directly with the ADRES. And that might improve a few months of a dislocation.

But in general terms, I see the Colombian sector with these interventions, hopefully, the company will be back on their own footing and then return to an autonomous and operational standards. But I think that does not put us in any vulnerable position.

As you might remember, 84% of the hospital -- and 84% of the hospital services in Colombia are delivered by private institutions and the government for the intervening authority does not want hospitals to miss payments -- patients to wait for services.

So I think we're well protected there. I think there are issues that the ADRES and the payers have to resolve and make it a little more efficient. But I'm not worried. There was a lot of uncertainty before that about what was going to happen because the vulnerability of these companies was well known. This was one of the scenarios that was expected. I think it's not bad for us.

We'll be, of course, monitoring the situation being very much in tune with what is necessary for our patients. I think that -- because we are a high complexity player in Colombia, in particular, and most high complexity procedures or our diagnostics are delivered in what we call -- and packaged -- I don't want to call the capitated but they're not perfectly capitated, but in package fashion to the payers in the B2B fashion in Colombia called [ PGPs and PAVs ] and there are other modalities on them. And the fact that those are -- have a higher priority in the system, they normally get paid faster. And so I think that we had and will continue to have a better working capital situation than others because of our high complexity, from offering and credibility thereof. Thank you, Maria.

[Gisele Ferrero, executive]

And perhaps, Mauricio, from my end. Perhaps from my end, just to clarify or complement some of the points you mentioned. As far as cash conversion, you can observe in our earnings release that cash conversion has remained stable versus both the fourth quarter of last year as well as the first quarter of last year.

As we stated in our initial clarifying note on the Colombia situation and also reinforced with our earnings release payments since the administrative interventions have been consistent with what we had received in previous months. So collections have also been consistent, and this is reflected in the stable test conversion cycle, and that is on the point of Colombia.

And then just to complement the point on occupancy levels in Mexico. We continue to maintain a firm view of what we can accomplish in occupancy in Mexico in the medium to long term. And this is why we are working on the forementioned initiatives as far as the doctor incentive model as well as all the other benefits that Suso mentioned, and also focus on physician productivity as well as the bundles and packages which we're working on with the different payers, right, the insurance companies and out-of-pocket, et cetera.

We suggest looking at occupancy on an annual and multi-annual basis, tracking it every quarter. will be difficult to maybe visualize some of these results, but we continue to see that we will be able to take the Mexican operations to the long-term levels that we see in Peru, for example, right, where our facilities that are ramped up approach 80% occupancies, right, in the next 5 years.

And finally, as far as the competitive environment on part of your question, no specific disruptions as far as the competitive environment. And as Suso mentioned, the physician relationship model is one that really does differentiate on.

[Operator]

There are no more questions from the phone lines. So I will now turn the call over to Ana Maria Mora, who will proceed with the questions from the webcast platform.

[Ana Maria Mora, executive]

Thank you, operator. Now we will proceed with the questions from the webcast platform. The first question is, what are your plans of expansion in Mexico and taking advantage of near shoring.

[Jesús Zamora Leon, executive]

Thank you, Ana. So I don't feel I'm very comfortable. I'm not sure how much you can talk about this, of course. Right now, we're very much focused on delivering that huge opportunity on today with 40% of capacity utilization and rolling out the OncoMexico project, the OncoMexico project, as I described before, which have spoken about, and I think we've represented well in the filing is one in which starts from Monterrey and we'll continue in Mexico City.

It is a project that we've devised as asset-light, capital-light given that the number of patients in oncology that we will be capturing is a smaller number. We don't need to do a major investment, be it CapEx or an acquisition to deliver high growth in that OncoMexico project.

So we see ourselves being very sensitive about capital allocation for that project. And we see ourselves as we've done in other countries, not in the necessity to do something large. So we do see ourselves implementing this strategy in the second half of this year, more forthright in 2025, and much more in 2025. This year of the plan. But definitely, the Mexico City market is the most attractive market. And when we see ourselves delivering a lot of value to a lot of families that don't have cancer coverage in Mexico City.

[Ana Maria Mora, executive]

Okay. Thank you, Susan. Now we're going to go ahead with another question regarding Mexico. This question is from Caio Moscardini. And the question is, can you please share our expectations for the launch of both OncoMexico and the hospital operation in Mexico City? How are these projects belong?

[Jesús Zamora Leon, executive]

So again, as we've indicated, OncoMexico is on track. In July, we'll be launching the policies and the B2B services are being negotiated today. And I think we'll deliver what we expect 2024. 2025, we will see much more significant impact in our total results. Again, mostly related to our operations in the Monterrey, while we roll out more capabilities in Mexico City, which will produce results later on in 2026. That's the way we should see it.

But I think we're on track. There's a great team involved in this with proven capabilities. And I think we confirm over and over again of the need for this coverage and the services and confirm the opportunity that we have at another.

So in Mexico City, again, it's about making sure that we have the facilities, the right number of facilities and capacities to give the services to the population that we grow at a certain pace. This can be done as we've proven in the past in an asset-light way. And you'll see us engage in that way in the next 12 months.

[Ana Maria Mora, executive]

Thank you, Suso. The next and final question because we're running out of time. It's from Jossalyn Jensen. And the question is, could you provide your CapEx expectations for the year by country? Where do you see net leverage by year-end? When do you expect to assume dividend payments?

[Gisele Ferrero, executive]

I can tackle that one. Thank you, Jossalyn. As far as our CapEx expectation for the year, this should be approximately $15 million in 2024. As far as leverage projections for the year-end, we're currently not providing guidance on leverage given that this at the end of the day, will also be a resulting factor from the EBITDA where we have provided the 20% EBITDA growth guidance on an FX-neutral basis. And as to the dividend policy, currently, Auna maintains a no dividend policy. As you guys know, we're very committed to deleveraging the company. And obviously, this will be a function of that as well.

[Jesús Zamora Leon, executive]

And also Gisele, just to add on, I mean, we are a growth company, a high-growth company. And as you see in the numbers from the past, so we reuse all as retained earnings and cash flow to continue to grow. So we will not be changing the dividend policy for were.

[Ana Maria Mora, executive]

Thank you, Suso. As mentioned before, we have run out of time. So at this time, we are going to close the Q&A session. Thank you all so much for your attention and your interest in One. As always, we look forward to hearing from you and don't hesitate to contact us. Please stay safe and healthy, and have a great evening.

[Jesús Zamora Leon, executive]

Thank you very much, Ana.

[Operator]

This concludes today's conference call. You may now disconnect.