Earnings Call Transcript - AUNA Q3 2025

Operator, Operator

Good morning, and welcome to Auna's Third Quarter 2025 Earnings Conference Call. My name is Eric and I'll be the operator for today's call. Please note that this call is being recorded. 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, Head of Investor Relations

Thank you, operator. Hello, everyone, and welcome to Auna's conference call to review our third quarter 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 go to our Investor Relations website or contact Auna's Investor Relations team. Please note that when we discuss variances, we will be doing so on a year-over-year basis and in FX-neutral or local currency terms with regard to Mexico and Colombia, unless we note otherwise. Let's move to Slide 2. 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 yesterday to ensure that they understand them. Non-IFRS financial measures and operating metrics should not be considered in isolation as a substitute for or superior to IFRS financial measures and are provided as supplemental information only. Before we begin our 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. This includes, but are not limited to, our target leverage ratio, the expected resolution of the issues with physicians, suppliers and information systems in Mexico, the results of the key initiatives we are implementing in Mexico, the expected capacity and market of Torre Trecca once built, the execution of our strategic plan including the recovery of our growth levels and the rollout of the AunaWay in Mexico, our collaboration with Sojitz Corporation of America, our planned investments in Mexico and the creation of further growth and sustainable value for our stakeholders. For a description of these risks, please refer to our Form 20-F filing with the U.S. Securities and Exchange Commission and our earnings press release. Slide 3, please. On today's call, we have Suso Zamora, our Executive Chairman and President; Gisele Remy, our Chief Financial Officer and Executive Vice President; and Laurent Massart, our Executive Vice President of Strategy and Equity Capital Markets. They will discuss Auna's consolidated and segment financial and operating results for the third quarter, and will also provide updates on our various strategic growth initiatives. After that, we will open the call for your questions. Suso, please go ahead.

Jesús Zamora Leon, Executive Chairman and President

Thank you, Annie. Good morning, everyone, and thank you for joining today's results call. In this quarter, we're reporting weaker financial results, a flat quarter principally dragged down by our Mexican operations. However, in Mexico, we are seeing evidence of stable and growing operational activity; the strength of our business model, the stage of development of our operations, and the resilience of our owners integrated regional platform were reflected in the strong results of our Peruvian and Colombian segments in the third quarter, which partially offset the 5% decline in total adjusted EBITDA that was the result of Mexico's performance. Peru's strong top line and EBITDA growth was driven by a still improving health care pricing mix and strong insurance MLR as well as robust growth in plans. Our risk mitigation measures implemented in Colombia strengthened EBITDA and cash flow there. At our Mexico business, despite soft results, our hospital operations remained stable during the quarter, and we saw a second consecutive quarter of higher surgery volumes as well as an increase in oncology and cardiology services. However, the quarter was marked by slower-than-expected recovery from legacy doctors volumes and an impact from the implementation of new hospital information and ERP systems at Doctors Hospital. We are making important inroads that are positioning Auna to capture the many long-term growth opportunities that we see in Mexico. We anticipate 2026 to be a year of full recovery in Mexico, and with the New Mexico team in place, we remain very bullish in the medium term. Despite lower adjusted EBITDA, Auna's leverage was unchanged, thanks to less gross debt at the end of the quarter. Further, our debt profile improved significantly with our successful refinancing earlier this month. Our adjusted net income was a solid PEN 58 million for the quarter. And now let's turn to Slide 5. Peru and Colombia drove the 1% increase in FX-neutral consolidated revenue. Their top lines in local currency grew 9% and 4%, respectively, partially offset by Mexico's 12% decline. Capacity utilization, shown in the bottom left of the slide, decreased 3 percentage points to 64%, unchanged versus the second quarter. On a year-to-year basis, a 1.5 percentage point increase in Peru's total capacity utilization was more than offset by a 5.2 percentage point decrease in Colombia and a 4.4 percentage point decrease in Mexico. While lower utilization in Mexico was due to a year-over-year decrease in surgery volumes and emergency visits, Colombia's decrease has been a result of the risk mitigation measures that we implemented there earlier in the year, including proactively managing contracted services with government-intervened payers, while Peru's decrease was a function of the addition of beds to the operating capacity. Finally, I'd like to highlight that the total operating capacity utilization in Mexico modestly grew from the previous quarter. Planned memberships grew 8% at OncoSalud, while its MLR fell further to 49.3%. Now let's take a closer look at the segment results, beginning with Mexico on Slide 7. Of course, there were several bright spots in Mexico during the quarter. First, surgery volumes increased for the second consecutive quarter, as I noted before. Second, oncology and cardiology services, which are integral to our long-term growth strategy, increased 48% versus second quarter 2025, accounting for 15% of Mexico's revenues. Let me highlight this. An important part of our high complexity footprint in Mexico is growing. And relatedly, third, the revenues from Opción Oncología increased 21% over the previous quarter as well. This is where Auna makes a huge difference in the transformation of health care in Mexico. This is exactly where we make the difference with patients, payers, and physicians. Weighing on revenue this quarter was a slower market. Also affecting our revenue was a slower-than-expected recovery in volumes, which were impacted by the doctor supplier relationships that have slowed the implementation of the AunaWay model in this market. It is important to note that we have experienced similar hurdles when disrupting Peru's and Colombia's health care markets. Another factor was unexpected problems in migrating Doctors Hospital to new information and ERP systems, which affected billings. The implementation of these systems is part of a broader multiyear IT transition to harmonize technology across Auna's businesses and geographies as well as to improve the quality of data and information that we use to manage Auna and to serve patients. Lower revenues impacted Mexico's gross profit, and therefore, adjusted EBITDA, and there were other factors, including a higher mix of lower-margin services related to service contracts at our OCA facility for state employees. Nevertheless, the margin was 29% in the third quarter. Before discussing the performance of our other business segments, I'd like to give an update on the key growth initiatives that we have underway in Mexico, which we have summarized on Slide 8. Attracting, retaining, and investing in talent is integral to our growth strategy in Mexico. Health care talent is thin in the Monterrey marketplace. However, we have revamped the leadership team in Mexico. Alejandro Torres leads our Monterrey health care operations. Previously, he held senior roles at Star Médica and TecSalud. We also hired a new Chief Medical Officer, a prestigious and very credible physician in Monterrey, who is having a significant and positive impact as we engage with physicians to grow our practices and improve medical resolution for our patients. We've also hired a new Head of Commercial Operations joining the company this week as well as other senior leaders for our Mexican hospitals. All of them bring to Auna significant, combined, and complementary experience in Mexico's health care market as well as decades of experience in Monterrey. We are rolling out a series of package service offerings and strengthening our collaboration with leading physicians to further penetrate three important market segments. This, of course, will expand revenue streams and increase capacity utilization at our healthcare facilities. One is the Out-of-Pocket segment, which is profitable and currently only represents 8% of our revenue in Mexico and which we intend to increase to 20% by the end of next year. In the third quarter, we increased this segment by 15%. In the Corporate segment, we continue developing attractive cost-effective packages to deliver additional services to the employees of corporate clients. Another attractive segment is government agencies. Accordingly, we are evaluating tailored services for the employees of municipalities that run Monterrey as well as those of government entities within it. Physician engagement and productivity are also integral to our Mexico strategy, including attracting the best doctors and nurses in high complexity management. This includes a series of productivity and quality initiatives that have been gaining momentum. By targeting just 140 of our top physicians who represent approximately 25% to 35% of our revenues at each of our hospitals, we've improved our alignment with them, with payers, and with suppliers as well. This simple initiative has enhanced medical practices, improved operating performance, cost predictability, and of course, control. Last month, half of those doctors experienced a double-digit increase in productivity month-over-month. Additionally, in the same month, we were able to attract a group of 10 physicians from a competing local hospital. On the payer front, we aim to expand Auna's participation with some of Mexico's largest insurance company preferred provider networks. Consequently, commencing in 2026, our health care facilities anticipate supporting heightened patient access and service volumes, thereby propelling capacity utilization. Scaling and enhancing Auna's oncology capabilities is another key component of our growth strategy in Mexico. At the end of October, we hosted Auna's Second Oncology Congress in Monterrey, an event that gathered more than 70 oncologists from across Mexico. We also used the occasion to officially inaugurate a new OncoCenter at our Doctors Hospital. It will serve as a center of excellence, providing oncology services in a single location and improving patient care and experience while being integrated with Auna's regional health care network. Our oncology efforts are already paying off, and this new center should significantly increase our activity in Monterrey. This is, again, the implementation of the AunaWay, which will grant Auna the differentiating aspects that will sustain our high growth ambitions in high complexity. Lastly, on this slide, there is the implementation of a new comprehensive IT system for our Mexico operations to bring it to our standards. Among many benefits, it will enhance the integration of financial and operational data, improve management visibility across the businesses, help us better control costs as well as enhance decision-making at our healthcare facilities. Let's move to Slide 9 to discuss Peru's third quarter performance. Our Peru business, Auna's scalable, integrated, and best practice health care platform, demonstrated the strength and predictability of our model when it's operating at scale. As it further penetrated the country's healthcare market and expanded its business with third-party payers, health care revenues grew 9%, mainly on increases in ticket and volume of emergency visits and ambulatory care. OncoSalud, the health plans business, increased revenues 8%, primarily due to the increase in membership and to annual price adjustments. We continue to see substantial opportunity ahead and Peru will remain a key contributor to Auna's growth. Peru's adjusted EBITDA increased 15%, with a margin increasing 1.1 percentage points to 22.7% driving EBITDA growth were higher efficiencies with respect to surgical procedures and improved pharmaceutical costs at OncoSalud, which contributed to its low MLR. Turning to Colombia on Slide 10. Colombia's top line grew 5%, primarily the result of implementing risk-sharing models like prospective global payments, which are unique, given the difficulty to replicate them, produce stable margins, high occupancy, and produce a reliable and positive cash cycle. These represented 18% of Colombia's revenue, up from 14% in the third quarter of 2024. Also, as of the end of the third quarter, the share of revenues from Nueva EPS, one of the major government-intervened payers in Colombia decreased from 20% in last year's quarter to 13%. And we added Salud Total as a payer under a new PGP program, reflecting the success of our efforts to diversify the payers that Auna serves in the country. Despite the lower surgical volumes stemming from us limiting services to intervene payers, higher average tickets for surgery and an increase in chemotherapy and imaging services more than offset this decrease and contributed to the quarter's revenue growth. That growth drove an 18% increase in Colombia's adjusted EBITDA and margin expansion of 1.7 percentage points in addition to lower impairment losses in the quarter, and offset by increases to doctor remuneration. That concludes my review of the quarter. Now over to Gisele for her part of today's presentation.

Gisele Remy, Chief Financial Officer and Executive Vice President

Thanks, Suso. On Slide 12, we break down the revenue contributed by each geographic component of Auna's diversified regional platform. As you can see in the bar charts, Peru still accounted for well over half of our platform's third quarter and year-to-date revenues. And with its top line increasing 9% in the quarter, Peru continues to be a strong and reliable driver of growth and cash flow. Colombia, despite the risk mitigation measures that we put in place to maintain a healthy cap cycle, also contributed to revenue growth, growing 4% in local currency for the quarter. Regarding Mexico, we note, again, that the 12% revenue decline was a product of a still slow recovery of volumes, a slower market and also included nonoperating impacts such as the multisystem migration. Finally, as Suso pointed out, we expect Mexico's revenue to begin growing again next year. Let's now turn to Slide 13. Peru was also a strong contributor of adjusted EBITDA growth at 15% growth. It also had a solid margin of 22.7% in the quarter. And despite us favoring cash preservation over growth, Colombia also supported our profitability while expanding its margin versus last year's quarter, thanks to increased revenues and lower provisions. Mexico accounted for the 5% FX-neutral decrease in our consolidated adjusted EBITDA due to the significant revenue decrease as well as the quarter's mix of payers and services. We expect EBITDA growth in 2026 as we advance the implementation of our business model, as various growth initiatives gradually gain traction and as we bring the learnings from the systems implementation at Doctors Hospital for the next phase of migrations. On Slide 14, we break down the year-over-year change in adjusted net income. The biggest one being Mexico's impact on operating income. This was partially offset by PEN 11 million of additional finance income related to FX and PEN 21 million or 16% decrease in interest expenses, both of which you can see in the middle of the bridge. There was also a PEN 31 million decrease in non-cash and extraordinary items, which include a positive impact in 2025 from the OCA holdback obligations from the third quarter in 2024. Let's now move to the cash flow bridge on Slide 15. Our pretax operating cash flow decreased 5% to PEN 595 million during the 9-month period, mainly due to lower revenues in Mexico and accounts receivable delays related to the systems integration there. Another contributing factor was the payment of performance bonuses to doctors at Opción Oncología as part of their transition to Auna. Compared to the second quarter of this year, our pretax operating cash flow increased 65% sequentially with improved collections and cash conversion in Colombia. Because Auna is a major health care provider in the country, this means that intervene payers generally make us a priority with regard to outstanding payments and collections remain healthy. However, the situation with the intervene payers remains fluid, and we continue being vigilant. Near the center of the bridge, you see PEN 119 million of investments. This is 31% lower than the first 9 months of 2024. These investments mainly consisted of PEN 98 million in CapEx; PEN 21 million in amortized payments related to the OCA holdback obligations, which were completed in the second quarter; and the IMAT Oncomedica earnout, which currently only has an outstanding balance of PEN 12 million. Moving further along the bridge, you see PEN 336 million of cash used for financing, which was 3% below last year's 9-month period. This amount consists of PEN 163 million of term loan payments, PEN 26 million of hedge premium and swap interest payments, PEN 58 million of interest paid on our 2029 notes, PEN 50 million of interest paid on our working capital facilities, and finally, PEN 39 million of borrowed working capital. That brings us to our cash position at the end of the quarter, which was a healthy PEN 226 million, albeit 4.2% lower than the beginning of the year. Now a few words about our debt, beginning on Slide 16. We continue to maintain a healthy debt structure and remain committed to improving our leverage to 3x net debt to EBITDA in the medium term. As part of our efforts to effectively manage Auna's liabilities, we took advantage of market conditions in the debt market as well as continued appetite from both bond investors as well as banks in order to undertake the recent $765 million debt refinancing that we communicated to the market earlier this month. Our refinancing included the successful issuance of $365 million of senior secured notes. We also closed on a $400 million equivalent term loan in Mexican pesos. This matches Auna's business exposure to Mexico. The loan also contemplates an incremental $60 million equivalent tranche in Peruvian soles, which we expect to disburse in the very near term. Both the U.S. dollar bond as well as the Mexican peso term loan represent 125 basis points in savings versus the interest rates on the previous debt structure. We are also very pleased to have added new lenders to the debt structure, including the IFC, which not only participated in the Mexican peso term loan, but also anchored 10% of the bond offering. Overall, in addition to extending our maturities, reducing financing costs, and enhancing short-term liquidity, the refinancing gives us more financial flexibility to continue to invest in our medium- to long-term growth initiatives. For these reasons, the rating agencies applied a B+ rating to the 2032 notes and consider the transaction credit positive. That concludes my review of the results. Before we take your questions, Suso would like to provide a wrap-up on the quarter.

Jesús Zamora Leon, Executive Chairman and President

Thank you, Gisele. I would like to conclude today's presentation with a summary of our strategy and priorities as we look ahead to the end of 2025 and into 2026. As our third quarter demonstrates, Auna's diversified footprint and integrated model provides enduring resilience. Peru embodies Auna's scalable, integrated, and best practice health care platform and demonstrates the strength and predictability of our model when operated at scale. Peru continues to make strong contributions to Auna's near to midterm growth driven by an improving MLR, consistent profitability, and our proven vertically integrated model operating at scale. The key lever we're engaging now is more growth in the mid-segment market as well as risk sharing with private and public payers. In Peru, the recent milestone of Trecca reinforces the strong confidence in Peru's health care future and highlights the long-term opportunity we continue to see in the country. Peru continues to be a formidable growth market for Auna, as we roll out our capabilities in a market that has a private insurance penetration of only 6% and where we envision taking a sizable piece of the next racket of partially insured and uninsured in the country. In Colombia, measured growth continues to fuel the business, and our risk mitigation strategy has truly paid off. Despite difficult externalities, results were very strong this quarter as Auna successfully diversified away from intervene payers and prioritized reliable cash flows from PGPs in the past year. Colombia remains a key market for us and an important contributor to scale and medical best practices across the region. As I have tried to communicate, we are focused on Mexico. We have a great, new, highly experienced team of local leadership that is excited about what we can do in Monterrey and in the country, leading the charge to reignite growth. We have made real progress seeing a second consecutive quarter of volume recovery in surgeries and stellar 48% growth in oncology and cardiology services. It is also important to note our recent public announcement on our partnership with Sojitz. This will allow us to accelerate growth in Mexico beyond what we can achieve on our own, while maintaining our disciplined deleveraging path and our target of bringing leverage below 3x. Finally, we remain acutely focused on our fellow investors and shareholders. Following the successful completion of our debt refinancing this quarter, we've already executed a major step in strengthening the capital structure and reducing long-term financial risk. In the remainder of the year, we will continue to evaluate all options to support and enhance shareholder value, as we strongly believe that Auna's current share price does not reflect the intrinsic value of our integrated platform and its long-term potential in the Latin American health care market. We are excited about what we can deliver in 2026. Thank you for your time, and we are now ready to take your questions.

Operator, Operator

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

Mauricio Cepeda, Analyst

I have 2 questions, a little bit more about future strategy. So on your plans for Mexico and this MoU that you announced with Sojitz. Could you explain or walk us through the rationale for expanding in Mexico so soon? And how this new agenda align with your goal to deleverage Auna and to ramp up operations in Mexico? And my second question is about Colombia. Do you think that a potential change in the country's leadership there could help ease these pressures on the EPS? Or are there deeper structural issues that might limit any meaningful improvement over the next few years?

Jesús Zamora Leon, Executive Chairman and President

Thank you, Mauricio. So on Mexico, so as we've always represented, Auna is a growth story and notwithstanding 2025 results, we do have a very interesting opportunity, growth opportunity in Mexico, repeating what we've done elsewhere. As our insurance plans have solidified certain service offerings in the different cities Guadalajara and Tijuana and Monterrey, some of those create opportunities for investment in the future. Today, I have to be very, very clear. Today, leverage is a key concern, and we want to bring it below 3x. So we don't have a balance sheet to use to allocate capital. Today, the share is really depressed. So we were also limited there in terms of issuing shares. So we have found with Sojitz a really interesting opportunity. We've been working with Sojitz, a great and admirable company and a set of executives. And we have engaged with Sojitz for the last 5 years looking at different opportunities to collaborate. The MoU we negotiated during the last few months formalizes our relationship and puts up a framework to co-invest together in Mexico. So investors must read the press release that we issued a few months ago about what we plan to do in Mexico with this MoU with Sojitz. It is an MoU to accelerate Auna's growth in Mexico. Sojitz is a great partner, and we're very excited as together, we will be able to achieve more. This helps us capture the opportunity in Mexico, maintaining our leverage target. That's very important for us. On the EPS in Colombia, I think the political environment in Colombia, given elections in particular, will not change things in the next 6 months. I'm not as optimistic either for the full year 2026, but I think that the sector is stressed enough to require some action from the government. I see there's certain milestones that are important. There are issues with the intervene insurance, EPS insurance payer, they have been recently capitalized by the central government, making it again a creditworthy institution. So I do see certain actions that are going to be fundamental in bringing stability to Colombia's health care sector. However, I see because of the latter years, I see some delay on that, maybe to the second semester next year, most probably the year after that. But again, our preferred status as a provider of high complexity services to most of the insurance companies in Colombia grants us faster payments, good margins, and large volumes. This has been tested in the worst of times in Colombia. So I'm not at all pessimistic on what Auna positioning in a very difficult circumstance in Colombia will produce, I think, attractive returns and growth. I want to highlight our Colombian operations continue to grow, notwithstanding the situation in Colombia. We're very privileged to have the positioning, the trust of many patients, and the trust of many payers. We're excited about Colombia, notwithstanding the uncertainties in the political environment. Thank you, Mauricio. If I forget anything, Gisele, please complement if need be.

Gisele Remy, Chief Financial Officer and Executive Vice President

Yes, Mauricio, to follow up on the Colombia question, I would like to add that we remain very positive about Colombia. It's an essential part of the Auna platform. We have successfully managed the situation despite external challenges. While there are some political issues affecting payment flows, we believe there will be certain opportunities for catalysts in operations towards the end of next year and into 2027. Additionally, as Suso mentioned, we have significantly decreased our exposure to intervene payers over the past year, lowering it from 20% to 13% of Colombian revenues. We have also noticed recent announcements regarding shared stakeholdership between the government and intervene payers, and we see the government's direct stake in this payer as a positive development.

Jesús Zamora Leon, Executive Chairman and President

And Gisele, I also want to complement again my previous response, Mauricio. Auna has a very attractive pipeline in Mexico because of Sojitz and a limited balance sheet today and the share price. We want to make sure we can continue to act in the pipeline within the partnership of Sojitz. That's a critical part of that response, Mauricio.

Mauricio Cepeda, Analyst

Yes. Just to follow up, could part of this interest from Sojitz be to invest in Auna itself and help the capital structure, or is it only for new opportunities?

Jesús Zamora Leon, Executive Chairman and President

I think I don't want to speak for Sojitz, but the dialogue that we've been having for years is very clear. They appreciate our integrated model and value Auna. We've had discussions about Peru, and they like the integration of the insurance and health care sectors. I want to emphasize that while there is a wide range of opportunities to discuss in the MoU, it's not limited to new initiatives but focuses on ensuring we can enhance the growth potential of Auna, especially in Mexico and throughout Auna as a whole.

Operator, Operator

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

Ana Maria Mora, Head of Investor Relations

Thank you, operator. So the questions, we're going to see that repeated, so if we miss anything, please let me know, but internally. But the first question on the webcast comes from Joseph Giordano from JPMorgan. Could you provide more details around the partnership with Sojitz and Trecca project? What are the advancements in Mexico over Q4 '25? And when should we see the operations getting back to 2024 levels in terms of operating leverage?

Jesús Zamora Leon, Executive Chairman and President

Great. I'll take part of it and Gisele, if I forget anything, please add. Regarding Trecca, we’ve discussed Sojitz extensively and ensured the market stays informed as we progress with the Memorandum of Understanding. Trecca is a public-private partnership that was awarded to Auna in 2010. It represents some hidden opportunities we have within Auna. We’ve collaborated with Salud, which is the Social Security entity in Peru, and PROINVERSIÓN, the investment promotion agency, to modify the concession and secure the necessary permits to initiate the project. We announced that the building permit has been authorized, which was a significant obstacle in recent years. To summarize, this is a very interesting project. When considering healthcare globally, it's apparent that there are limitations; however, in Latin America, there is a large total addressable market of private payers alongside a substantial segment of state-funded payers, both directly and indirectly. The contract spans 18 years with a 2-year construction period. We anticipate beginning construction at the start of next year, which will take 2 years, followed by 18 years of operation. Over those 18 years, we expect to provide 1.9 million ambulatory services, 0.5 million preventive package services, and other services amounting to a total of 3.2 million services annually. This is a considerable commitment to serve social security beneficiaries in Peru. This contract is projected to generate sales exceeding $200 million annually once it reaches full scale. It’s a compelling opportunity as we expand our presence in both the private sector and indirectly in the state-funded sector. I am genuinely excited about Trecca. This endeavor isn't limited to Peru; we're engaging with government authorities in Mexico about similar discussions. These efforts will allow us to demonstrate our capability to provide services to millions, and that’s what we aim to showcase in the coming years with regard to Trecca. Gisele...

Gisele Remy, Chief Financial Officer and Executive Vice President

Yes. I would complement there, Suso, with respect to Trecca the way that public-private partnerships are structured in Peru. This can be structured in such a way that it's debt-neutral for Auna.

Jesús Zamora Leon, Executive Chairman and President

That's very important. Thank you, Gisele. This and the pipeline in Mexico is debt-neutral to debt reduction for Auna, very important. We're going to continue to grow without exposing our balance sheet to any additional debt. This public-private partnerships in Peru have a very defined process as the state finances not only the building but also all the services. So this will have no impact on leverage for Auna. There were some other questions from Joe, I think, Gisele.

Gisele Remy, Chief Financial Officer and Executive Vice President

Yes, which we covered the subject announcement as well as the progress that we're making in Mexico.

Jesús Zamora Leon, Executive Chairman and President

Great. I think Joe asked whether we're going to return to 2024 levels regarding operating leverage. While we're hesitant to provide specific forward-looking numbers or guidance, we anticipate that 2025 will be a flat year and 2026 will experience growth, especially in Mexico.

Ana Maria Mora, Head of Investor Relations

Thank you, Suso. Let me continue with the questions since we're receiving many at the moment. The next question is about the turnaround and expected inflection. We understand that the turnaround strategy is underway, but what key performance indicators should we monitor to confirm a tangible recovery in 2026? For example, occupancy, payer mix, surgical productivity. When do you anticipate seeing significant improvements in revenues and EBITDA? There is also a question regarding the recent weakness in share price. The stock has underperformed even with strong operations in Peru and Colombia. Do you have any insights on whether specific institutional investors have been selling? Are you engaged in discussions with those investors to strengthen the investment case? Lastly, there is a third question which may have already been addressed. Regarding Sojitz's potential, could you elaborate on the next steps with Sojitz Mexico? Do you see any chances for co-investment in new assets or possible partial asset sales to expedite returns on capital?

Jesús Zamora Leon, Executive Chairman and President

Great. I'll address the share price issue first. We believe that the current prices accurately represent the company's fundamentals, which have not significantly changed from what we've been reporting. We are continually exploring options to support and enhance shareholder value, and we will provide updates as we move forward. We expect to discuss these matters at the Board level soon. Additionally, we noticed from public filings earlier this year that one of our competitors in Mexico had filed with the antitrust authority to acquire more shares of Auna. Recent SEC filings indicate that this leading healthcare company in Mexico has been consistently selling stock in the past month, making us suspect that their requests to acquire shares did not proceed. While we can't be certain due to limited public information, we've observed significantly higher trading volumes in connection with this antitrust situation. Thus, this is our speculation. The recent filings were released about a week ago, and we are ensuring to reach out to those selling shares to explore potential block trades that could stabilize the share price, which has been affected. I want to emphasize that nothing about Auna's fundamentals has changed in the last 45 days, despite the stock dropping around 25% or 30%.

Ana Maria Mora, Head of Investor Relations

Thank you, Suso. Now, let's move on to the next question from Deutsche Bank. Could you discuss the return on investment timeline for Mexico's performance and your thoughts on the share price performance?

Jesús Zamora Leon, Executive Chairman and President

So on the share price, I think we've covered. Gisele, do you want to talk about return on investment?

Gisele Remy, Chief Financial Officer and Executive Vice President

Sure, of course. So I think it's important to note that we evaluate all our investments as well as our operations throughout Auna from a return on invested capital perspective. And that is why we are constantly looking for ways to optimize those returns by making our assets more productive and reducing the amount of invested capital. Specifically in the case of the investment timeline on Mexico, as we've mentioned in the call, we have had setbacks this year as a product of the factors that have already been discussed. However, we do expect 2026 to be a growth year for Mexico.

Ana Maria Mora, Head of Investor Relations

Thank you, Gisele. The next question comes from Fundamental Capital. Regarding expansion plans, are you considering adding more beds in Peru? And in Mexico, concerning the $500 million expansion plans, how many beds do you anticipate adding there?

Jesús Zamora Leon, Executive Chairman and President

So we don't give guidance on projections on capacity growth. But directionally, you will see Auna increase capacity, not only of beds but of chemotherapy and radiotherapy and surgery rooms, which, of course, fill our beds in Peru, in particular. Some growth there. We see some plans that would be mostly inaugurated in 2027, not 2026. We see ourselves also investing in countries or cities in which we have already a large hospital footprint, more in ambulatory care as necessary. Particularly oncology, orthopedics and cardiology are moving towards outpatients. In Mexico, we see ourselves trying to repeat our strategy of urban ecosystems of health care and high complexity that requires between 75 to 150 beds minimum landing in each of the cities to produce this urban ecosystem of health care.

Ana Maria Mora, Head of Investor Relations

Thank you, Suso. The next question comes from an unidentified source, and the one after that is also from an unidentified source at SG Analytics. I will combine these questions as they are quite similar and pertain to the same topic, which is the partnership with Sojitz. Could you clarify if this collaboration is intended to be part of the previously announced $500 million investment plan for Mexico over the next 3 to 5 years, or is it a separate initiative? Additionally, how should we understand Sojitz's role in terms of co-investment, capital contributions, or involvement in the execution of the pipeline? Could you shed some light on the nature of the $500 million investment? Are there any measurable impacts on the top line?

Jesús Zamora Leon, Executive Chairman and President

I believe I've made it clear that the $500 million is indeed associated with our Memorandum of Understanding with Sojitz. This presents a 5-year opportunity amounting to $500 million. While the MoU with Sojitz does not specify an exact figure, it represents a significant portion of our investment strategy in Mexico. This partnership is expected to drive substantial top line growth, as we have historically experienced with our EBITDA growth. Ultimately, these investments aim to maintain our top line growth in the high-teens and above. Is there anything I might have overlooked, Gisele or Annie?

Ana Maria Mora, Head of Investor Relations

I think you're good. I'm going to read the next one or unless Gisele wants to chip in.

Gisele Remy, Chief Financial Officer and Executive Vice President

No, I think we're good.

Jesús Zamora Leon, Executive Chairman and President

Okay.

Ana Maria Mora, Head of Investor Relations

The next question comes from Deutsche Bank. Can you please comment on Auna's insurance risk management policy at a group level?

Jesús Zamora Leon, Executive Chairman and President

That's a great question. It’s a complex topic, but we manage risk in relation to MLR by policy type. For instance, in oncology, we handle the underlying oncology risk of our insurance plan with a target MLR of 50%. This goal leads us to two main strategies: pricing and cost containment. We ensure cost containment by making sure doctors follow our protocols and that we procure the most effective drugs, devices, and therapies that are hard for others to duplicate at scale. This approach consistently yields an MLR of 60%. We apply the same strategies to the few policies we have in Peru and general health care, maintaining appealing MLRs while managing underlying risk. Through our continuous management of these plans, we regularly adjust pricing and monitor costs, addressing any increases that may arise. This involves ongoing discussions with doctors about why to exclude certain services or drugs, as we focus heavily on scalability in our plans and the value we deliver to our members.

Ana Maria Mora, Head of Investor Relations

Thank you, Suso. The last question we have pertains to the website. It is from someone at HSBC. If I remember correctly, the preferred payer network and bundled package for corporates in Mexico were discussed last year. Have these initiatives been launched, or are they different? What is your strategy for increasing the out-of-pocket sales mix in Mexico?

Jesús Zamora Leon, Executive Chairman and President

The preferred payer network has been launched, and we are currently in ongoing discussions with payers. We are very enthusiastic and believe that these negotiations, which we conduct annually, will yield positive results in the coming weeks, positioning us within the preferred networks of the largest insurance companies in Mexico for our operations in Monterrey. This process is ongoing and centers on cost containment and our dialogue with payers. Our out-of-pocket sales mix in Monterrey has been less ambitious, but we are definitely making strides toward improvement. As mentioned in the press release, we aim to double the penetration of sales from out-of-pocket patients. We are doing this mainly through two strategies: offering many packages, including those from attorneys for preventive procedures such as colonoscopies and orthopedic surgeries, and providing integrated services from diagnosis through to post-surgery, all while maintaining good margins compared to other hospitals. Additionally, we have implemented a rapid response system for out-of-pocket patients seeking quotes for services. Our goal is to capture every potential patient that seeks a quote in our hospital without losing any opportunities. We are being very aggressive with our pricing for out-of-pocket patients, which is important as this category has very high margins, allowing us to be competitive. We have established an internal process that is agile and urgent to respond effectively and capture out-of-pocket patients as they arrive.

Gisele Remy, Chief Financial Officer and Executive Vice President

I would like to add, Suso, to clarify the question, that what Suso presented today were six important and concrete initiatives we are working on in the Mexican operation. Some are new, while others have been rolled out but are still evolving. These actions are concrete steps that will help us resume growth in 2026.

Ana Maria Mora, Head of Investor Relations

Thank you, Gisele, and thank you, Suso for your answers. I don't see any other questions on the call. So at this point, I'd like to turn the call back to Suso for his closing remarks.

Jesús Zamora Leon, Executive Chairman and President

Thank you, Annie, and thanks to the Auna team, as well as all our shareholders and investors, and the research community that supports us. It has been a challenging year, but we have accomplished a lot. Some of our initiatives are public, while others are still being implemented. Mexico is undoubtedly going to be a major growth market for Auna, and we are excited about our potential there. We see strong engagement with various partners regarding this opportunity. Sojitz's interest in Mexico is a testament to our efforts and the potential that lies ahead. Although this has been a tough year, the future for Auna in Mexico and the wider region looks promising. I want to also point out that while we often consider Peru a mature market, we dominate there, and it should not be regarded as such. Trecca shows how Auna can significantly increase its market share, not only from traditional competitors but also from state entities and direct payments. In Colombia, we are growing profitably, even amidst challenges. We are effectively collecting revenue in a tough market. This showcases what Auna can achieve. The relationships we have, like those with Sojitz and Trecca, will lead to significant growth in the future. We will take action regarding our share price and will address this at the Board level when the time is right. Thank you for your support and coverage. With that, I will conclude this earnings release call and the Q&A session. Thank you.

Operator, Operator

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