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Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition
and results of operations should be read in conjunction with our financial statements, and the notes thereto, and the information presented
under "Presentation of Financial and Other Information" included in our annual report on Form 20-F for the fiscal year ended
December 31, 2024, and our unaudited interim condensed consolidated financial statements, included in Exhibit 99.1 of our report on Form
6-K /A which was furnished to the U.S. Securities and Exchange Commission ("SEC") on October 28, 2025.
The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs, and involve risks, uncertainties and assumptions. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include,
but are not limited to, those discussed below and in our annual report on Form 20-F for the fiscal year ended December 31, 2024, particularly
under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements."
Our mission is to lead the transformation of healthcare
throughout SSLA by expanding access to millions of Latin Americans and delivering high-quality, value-based, high-complexity, and affordable
care, providing lifelong engagement for our population through both digital and physical channels.
We operate hospitals and clinics in Mexico, Peru
and Colombia and provide prepaid healthcare plans in Peru and Mexico. Our focus lies in providing access to healthcare, prioritizing prevention
and concentrating on some of the high-complexity diseases that contribute the most to healthcare expenditures, such as oncology, traumatology
and orthopedics, cardiology and neurological procedures. Our model offers an accessible and integrated healthcare experience to a broad
segment of the population in the markets we serve. We offer an end-to-end healthcare ecosystem that provides our members and patients
with access to lifelong healthcare and various healthcare plan options, which empowers them to be in control of their own health journey,
while offering them exceptional patient experiences and medical resolutions in their disease care. Our care delivery approach reflects
our human-centered and patient-obsessed lens.
Our unique operating model is what we call the
"Auna Way." The Auna Way is our approach to effectively managing our businesses and operations; and creating high value for
patients, families and our staff. It is our corporate DNA, our organization's spirit and our deeper meaning; the one we revert to
for clarity of action.
Our mission is underpinned by the Auna Way's
outperforming and deploying end-to-end
solutions and attend to the robust market demand for superior healthcare solutions in the markets where we operate.
This combination of mission, values and practices
put in place within our organization is what truly defines the Auna Way. See "Risk Factors" in our annual report in Form 20-F
for the year ended December 31, 2024 for the risks and challenges we face as we operate in pursuit of the Auna Way.
Operating segments are components of a company
about which separate financial information is available that is regularly evaluated by the chief operating decision maker(s) in deciding
how to allocate resources and assess performance. We have determined that our reportable segments are: (i) Oncosalud Peru, (ii) Healthcare
Services in Peru, (iii) Healthcare Services in Colombia and (iv) Healthcare Services in Mexico. Our Oncosalud Peru segment consists of
our prepaid healthcare plans and oncology services provided at our Oncosalud Peru segment facilities, including services provided under
our prepaid plans and third-party healthcare plans and paid for out-of-pocket by our patients. Our Healthcare Services in Peru segment
consists of healthcare services provided at any of our facilities in Peru other than those in the Oncosalud network. Oncosalud Peru is
a payer to Healthcare Services in Peru, as are other third-party payers, for oncology and general healthcare services provided to it by
our Healthcare Services in Peru segment, and the cost of such services are reflected as a cost to our Oncosalud Peru segment and a revenue
to our Healthcare Services in Peru segment in our segment reporting. Our Healthcare Services in Colombia segment consists of healthcare
services provided at any of our facilities in Colombia. Our Healthcare Services in Mexico segment consists of healthcare services provided
at any of our facilities in Mexico and dental and vision insurance plans. In connection with our acquisition of Grupo OCA in October 2022,
we added the Healthcare Services in Mexico segment to our reportable segments beginning with the fourth quarter of 2022. The accounting
policies we follow for these segments are the same as those for the Company on a consolidated basis.
Factors Affecting Our Results of Operations
We believe that the most significant factors affecting
our results of operations include:
diagnostic imaging and clinical laboratory
services. We calculate utilization as (i) (x) the total number of days in which any of our beds had a hospitalized patient during the
period divided by (y) the total number of beds, times (ii) the total number of days during the period. Our utilization rates are also
affected by the number of third-party payers for which our facilities are considered in network. As the number of third-party payers for
which we are in network for increases, so does our patient population and consequently our utilization rates. As our utilization rates
increase, so does our revenue and our margins because it allows us to increase our economies of scale, as our asset base is largely a
fixed cost. Likewise, if utilization rates decrease, so do our margins, and because a portion of our costs are essentially fixed, higher
utilization rates drive higher margins in our business. The mix of healthcare services provided in a period also impacts our revenue,
as we derive higher revenue from high complexity procedures, such as complex surgeries, rather than lower complexity procedures.
becoming profitable, and it takes time
and resources to integrate new hospitals acquired from third parties into our existing networks.
Components of Our Results of Operations
Total Revenue from Contracts with Customers
Total revenue from contracts with customers.
We generate revenue from (i) the sale of healthcare services, which occurs in all of our segments, (ii) the sale of medicines, which also
occurs in all of our segments, (iii) insurance revenue on our healthcare plans in our Oncosalud Peru segment and (iv) insurance revenue
earned on our dental and vision insurance plans in our Healthcare Services in Mexico segment.
Healthcare services. The revenue we generate
from the sale of healthcare services is recognized as services rendered to our patients and includes amounts related to the services provided
as well as the products and supplies used in providing such services. The price of healthcare services is determined by the rates set
forth in reimbursement arrangements that we have with individual healthcare providers for patients that have healthcare coverage or by
reference to our standard rates for patients that do not have healthcare coverage and are generally paying out-of-pocket.
Sales of medicines. The revenue we generate
from the sale of medicines is recognized when medicines are provided to our customers and in cases when our patients are hospitalized,
when medicines are administered to them.
Healthcare plans in Peru. We sell prepaid
healthcare plans in Peru to plan members for one-year terms, which are automatically renewed and adjusted for price increases at the end
of the term, unless terminated by either party. Most of our plan members make payments pursuant to these plans on a monthly basis, while
a smaller percentage of them make payments on an annual basis. The insurance revenue we receive from the sales of healthcare plans is
recognized as revenue proportionally during the period in which a patient is entitled to healthcare services under his or her plan. Insurance
revenue related to the unexpired contractual coverage period under a healthcare plan is recognized in the accompanying statement of financial
position as unearned insurance revenue reserve.
Healthcare plans in Mexico. We started
selling oncological insurance plans in Mexico in 2024, under the same insurance company of our dental and vision plans "Dentegra."
Dental and vision plans. We sell dental
and vision insurance plans in Mexico. Most of our plan members make payments pursuant to these plans on a monthly basis. The insurance
revenue we receive from the sales of dental and vision insurance plans are recognized when they are contracted by the insured. Insurance
revenue related to the unexpired contractual coverage period under a dental and vision insurance plan is recognized in the accompanying
balance sheet as part of reserves.
Cost of Sales and Services and Gross Profit
Cost of sales and services. Our cost of
sales and services is primarily comprised of costs incurred in providing healthcare services, including the cost of medicines; personnel
expenses for medical staff; medical consultation fees;
surgery fees; depreciation of medical equipment;
depreciation of buildings and facilities; amortization of software; cost of services provided by third parties, primarily lease payments
to third parties for certain of our facilities, service and repair costs at our facilities, custodial and cleaning services and utilities;
cost of room services for inpatients; cost of clinical laboratories; technical reserves for healthcare services; and cost of services
provided by dental and vision healthcare providers for services rendered to our dental and vision members.
Gross profit. Our gross profit is the difference
between the revenue generated by the sale of our healthcare and insurance plans, healthcare services and medicines and the cost of sales
Operating Expenses, Loss for Impairment of Trade Receivables,