Qualicorp Consulting and Insurance Brokerage (QUAL3) Q3 2024 earnings summary

Executive summary

• Maintained stable adjusted EBITDA margin minus CAC and strong cash flow despite a 23% year-over-year drop in managed lives, reflecting operational resilience and cost management.

• Achieved the lowest churn rate in four years during Q3, attributed to improved product design, underwriting, and internalized retention structures.

• Net revenue in 3Q24 was R$393.6 million, down 11.2% year-over-year, with 9M24 revenue at R$1,196.0 million, a 10.4% decrease from 9M23.

• Continued the turnaround strategy with a focus on cost discipline, product quality, and commercial realignment.

• Launched three new HMOs and 16 new products, emphasizing regionalization and commercial selectivity to capture market niches.

Financial highlights

• Portfolio closed at 663,000 lives, down 23% year-over-year; Affinity Managed Portfolio at 652.9k in 3Q24; total managed portfolio ended 3Q24 at 1.6 million members, a 17.4% sequential decline.

• Q3 adjusted EBITDA was R$143.3 million (margin 36.4%), stable compared to previous quarters; 3Q24 Adjusted EBITDA reached R$172.0 million (margin 43.7%).

• Free cash flow before debt and dividends was R$113.7 million, with a 79% conversion rate from Adjusted EBITDA minus CAC.

• Net debt reduced by 19% year-over-year to R$1.0 billion, with leverage at 1.44x EBITDA.

• Fixed expenses decreased 14.4% year-over-year to R$121.0 million, representing 30.8% of net revenue.

Outlook and guidance

• Expectation of further reductions in fixed, variable, and recurring expenses in coming quarters.

• New partnerships and products, including SulAmérica Médicos and Nova Saúde, are being introduced to strengthen the portfolio and drive future growth.

• Management remains focused on operational efficiency, commercial realignment, and capital allocation, aiming for sustainable growth and value creation.

• Strategic initiatives include product portfolio expansion, regional launches, and negotiations to become the preferred distributor for new products.

• Positive outlook for continued cash generation and comfortable debt position, with plans to maintain or slightly increase CAC investment while managing leverage.