Qualicorp Consulting and Insurance Brokerage (QUAL3) Q2 2024 earnings summary

Executive summary

• The company is navigating a challenging healthcare market with high loss ratios and significant portfolio cancellations, but is focused on resilience, operational efficiency, and commercial realignment, achieving the highest Adjusted EBITDA-CAC margin in three years.

• Net revenue in 2Q24 was R$398.8 million, down 1.2% sequentially and 8.3% year-over-year, mainly due to a reduced client base from HMO portfolio cancellations, partially offset by higher agency income.

• Adjusted EBITDA reached R$181.0 million in 2Q24, with a margin of 45.4%, while Adjusted EBITDA-CAC margin improved to 38.3%.

• Adjusted net income rose to R$30.1 million in 2Q24, up 59.0% from 1Q24 and 112.4% year-over-year.

• Free cash flow was R$129.2 million in 2Q24, a 16.4% increase sequentially, supported by operational efficiency and a one-off receipt from the sale of Qsaúde.

Financial highlights

• Managed portfolio ended Q2 2024 with 688.9k members, down 8.6% sequentially and 25.8% year-over-year, mainly due to unilateral HMO cancellations.

• Net revenue for 2Q24 was R$398.8 million, down 8.3% year-over-year due to a 26% drop in the lives base.

• Adjusted EBITDA for 1H24 was R$369.6 million, down 8.8% year-over-year, with a margin of 46.1%.

• Free cash flow before debt and dividends was R$129.2 million, with an 85% conversion rate from Adjusted EBITDA-CAC.

• Net debt reduced to R$1.10 billion in 2Q24, with leverage at 1.48x, and cash and equivalents at R$795.3 million.

Outlook and guidance

• The company expects continued improvement in loss ratios and operational efficiency, with a focus on sustainable product portfolios, further deleveraging, and commercial realignment.

• 78 new products launched in 2024, with 13 new payors, 5 partnerships signed, and 8 in negotiation.