Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Qualicorp Consultoria E Corretora De Seguros SA (BSP:QUAL3, Financial) has shown resilience in maintaining its net revenue, with only a 1.2% drop quarter-over-quarter despite a significant decline in the managed portfolio.
- The company reported an adjusted EBITDA minus CAC of BRL152.9 million, which is flat compared to the previous quarter and 8.1% higher year-over-year, indicating strong operational efficiency.
- Qualicorp has successfully reduced its net debt by BRL230 million, bringing its leverage down to 1.48x, showcasing effective debt management.
- The company has launched new product portfolios, demonstrating its ability to innovate and adapt to market demands.
- Qualicorp has maintained a strong cash flow, generating BRL129.2 million in free cash flow before debt and dividends in the quarter, highlighting its financial stability.
Negative Points
- The managed portfolio saw a significant decline of 8.6% against the previous quarter and 25.8% year-over-year, indicating challenges in retaining members.
- The company experienced a churn rate of 14.7%, with a quarter of this churn attributed to extraordinary cancellations, reflecting instability in member retention.
- Despite efforts to mitigate cancellations, the market's lack of products for all members led to harsh portfolio cancellations, impacting overall performance.
- Variable expenses remain above the desired level, indicating ongoing challenges in achieving cost efficiency in distribution channels.
- The company is still in the process of restructuring its capital structure, which may delay potential dividends and investor compensation in the short term.
Q & A Highlights
Q: Can you provide more details on the significant drop in variable expenses this quarter? Do you see further potential for gains in this area?
A: The drop in variable expenses is a result of our commercial realignment. We have been working on recontracting with distribution partners, which has led to cost reductions. This is an ongoing process, and we believe there is still potential for further efficiency gains.
Q: At what stage is the company's turnaround strategy currently? Are you close to completing the profitability improvements?
A: We are still in the process of our turnaround strategy. While we have made significant progress in rightsizing and improving efficiency, the external environment has posed challenges. We are focusing on expanding our product portfolio and enhancing sales, but the turnaround is ongoing.
Q: How many lives were preserved through your actions to offset unilateral cancellations this quarter?
A: We managed to reverse over 50% of the cancellation requests with HMOs, which means the cancellations would have been double without our efforts. We focused on retaining members by negotiating with HMOs and redesigning portfolios.
Q: Can you provide insights into the loss ratios of the new product portfolios compared to previous ones?
A: The new product portfolios are designed with better acceptance models and co-participation, leading to improved performance. We have seen loss ratios 40% below the portfolio average in some cases, indicating better sustainability.
Q: What led to the reduction in CAC per life this quarter, and is it related to the new products?
A: The reduction in CAC per life is due to a more personalized distribution channel and better sales quality. We have segmented our distribution channels and compensation models, leading to lower early churn and more sustainable sales.
Q: What are the company's plans regarding capital structure and dividends?
A: We are focusing on deleveraging and adjusting our capital structure. While dividends are important, our current priority is to achieve a balanced capital structure. Once this is achieved, we can consider increasing dividends sustainably.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
