- Net Addition of Members: 138,000 new members, with a highlight on corporate segments and SMEs.
- Total Portfolio: 8.8 million members, with Bradesco Dental accounting for half.
- Dental Claims Ratio: Stable at 40% annually since 2020.
- Net Income Growth: Annual average growth of 15% per year since 2019.
- Return on Equity: Increased from 37% to 39%.
- Quarterly Dividends: BRL85 million.
- Share Buyback Program: Total of BRL122 million.
- Net Revenue (Corporate Contracts): BRL1.2 billion in the last 12 months ending June.
- Net Revenue (SMEs and Individual Plans): BRL911 million.
- Revenue Growth (SMEs and Individual Plans): 13% per year in the past decade.
- Contribution Margin (SMEs and Individual Plans): 60%, achieving BRL538 million in the past 12 months.
- Bad Debt: 1.9% in the quarter and 2% LTM.
- Adjusted EBITDA Margin: Increased from 25% up to 2019 to 30% since 2020.
- Net Income: BRL122 million in the quarter, achieving BRL528 million in 12 months.
- CapEx: Reduction from BRL95 million in 2023 to BRL83 million in the past 12 months ending June.
- Net Cash: BRL1.2 billion with 0 debt.
- Quarterly Dividends and Interest on Own Capital: BRL85 million in dividends and BRL22 million in interest on own capital.
- Share Buyback: BRL15 million, totaling a payout of 100% of net income in the period.
- Treasury Shares: Over five million shares with an adjusted average cost of BRL11.12.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Odontoprev SA (BSP:ODPV3, Financial) reported a net addition of 138,000 new members, with significant growth in the corporate and SME segments.
- Bradesco Dental, the most sold brand, now accounts for half of the total portfolio of 8.8 million members, contributing to higher ticket prices and lower service costs.
- The company achieved an annual average net income growth of 15% since 2019, with a return on equity increasing from 37% to 39%.
- Odontoprev SA (BSP:ODPV3) maintained a stable dental claims ratio of 40% since 2020, indicating predictable and controlled costs.
- The company has a strong financial position with BRL1.2 billion in net cash and no debt, allowing for significant dividend distributions and share buybacks.
Negative Points
- Sales expenses have increased, particularly in the SME segment, due to higher acquisition costs.
- The individual plans segment has a higher risk profile, with potential for adverse selection, cancellation, and default.
- Despite the growth in corporate segments, the SME and individual plans segments showed milder growth, indicating potential market challenges.
- The company faces strong competition in the corporate segment, which requires continuous strategic adjustments to maintain market share.
- There is a potential for increased dental care ratios in individual plans, which could impact profitability if not managed carefully.
Q & A Highlights
Q: Could you provide more details on the competitive dynamics of price adjustments and the impact on your portfolio?
A: Odontoprev has been delivering a new mix of products, increasing the average ticket while maintaining its industry benchmark status. The SME plans have a premium of 50%, and individual plans have a different premium of 50% over SME plans. The company pursues a conservative pricing strategy to generate value and maintain high margins. (Jose Roberto Borges Pacheco, CFO)
Q: What are the additional triggers for increasing Bradesco Dental's proportion in your portfolio?
A: Bradesco Dental already accounts for 50% of our total clients. The potential for growth is significant, especially through bancassurance and digital channels. We are excited about exploring these opportunities further. (Jose Roberto Borges Pacheco, CFO)
Q: Can you explain the increase in sales expenses this quarter?
A: The increase is mainly due to higher acquisition costs in the SME segment, which now accounts for 85% of the SME portfolio. This cost is lower than for individual plans but higher than for corporate plans. (Jose Roberto Borges Pacheco, CFO)
Q: What are the drivers for the individual segment's dental care ratio to increase in the long term?
A: The individual plans portfolio has seen a shift towards banked customers, resulting in a lower dental care ratio and higher average ticket. The long-term dental care ratio should remain under 30%, reflecting cautious pricing strategies. (Jose Roberto Borges Pacheco, CFO)
Q: What can we expect for the payout level for the year?
A: We aim for a payout close to 100%, as seen in the second quarter. Historically, we have distributed over 90% of our profits, and this trend is expected to continue. (Jose Roberto Borges Pacheco, CFO)
Q: Why is the net addition of members stronger in the corporate segment compared to SMEs and individual plans?
A: The recovery in the corporate segment is due to more rational pricing and increased demand. The market has become more professional, allowing us to compete effectively and regain customers. (Jose Roberto Borges Pacheco, CFO)
Q: Can you provide more information on the contribution of net adds in corporate and SME segments?
A: In the corporate segment, net adds come from both new employees and existing contracts. In SMEs, the bank channel plays a significant role, contributing to a higher average ticket and lower dental care ratio. (Jose Roberto Borges Pacheco, CFO)
Q: What are the options for capital allocation given the robust cash generation and high payout levels?
A: We prioritize strong and regular distribution of results to shareholders through dividends, interest on own capital, and share buybacks. With lower investment needs in the upcoming years, we are comfortable maintaining high distributions. (Jose Roberto Borges Pacheco, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
