Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apollo Hospitals Enterprise Ltd (BOM:508869, Financial) reported a strong 15% year-on-year revenue growth in its Healthcare Services business, reaching INR2,637 crores.
- The company saw a 17% year-on-year increase in revenue from insurance patients, indicating a growing consumer preference for high-quality providers.
- Occupancy across the group rose to 68%, an increase of 100 basis points year-on-year.
- Apollo HealthCo's revenues grew by 15% year-on-year to INR2,082 crores, with 44 new stores opened this quarter.
- Consolidated EBITDA increased by 33% year-on-year to INR675 crores, with Healthcare Services EBITDA at INR622 crores, showing a 15% growth.
Negative Points
- The election season resulted in lower store expansion due to delays in approvals, impacting growth momentum.
- The digital platform, Apollo 24/7, saw a slower GMV growth of 9% year-on-year, indicating challenges in scaling up.
- Higher medical admissions this quarter led to a lower ARPOB increase of only 2%, affecting overall profitability.
- The company faced increased IT and cybersecurity costs, impacting EBITDA margins by 0.25% to 0.3%.
- There was a significant reduction in digital platform cash losses, but it still stood at INR937 crores, indicating ongoing challenges in achieving profitability.
Q & A Highlights
Q: We've seen a nice pickup in inpatient volumes and insurance coverage. Are these linked, or is the volume growth due to efforts in specific regions like Hyderabad and Karnataka?
A: The insurance growth is happening across both Tier 1 and Tier 2 locations. Our deliberate effort to penetrate into corporates has led to better occupancies and sustainable benefits, even if it results in a slightly lower ARPOB.
Q: On the hospital business, you mentioned a 100 basis points margin expansion over the next three or four quarters. Will this depend on improving occupancy?
A: There are three levers for margin expansion: payer mix, international focus for better ARPOB, and case mix improvement. We expect an ARPOB increase of 7% for this year, driven by these factors and a 4% tariff revision.
Q: On Apollo 24/7, GMV growth seems slow. How will you balance GMV growth with the target of achieving breakeven?
A: We have shifted to a stronger omni approach, reducing marketing spend and focusing on loyalty programs. We expect GMV growth to pick up in the next two quarters, with a significant step-up by Q4 FY25.
Q: The volume growth in the hospital business is good, but it hasn't translated into higher profitability. Why?
A: Higher occupancy and medical admissions this quarter resulted in only a 2% ARPOB increase. Moving forward, we expect the benefit of operating leverage to play out, with a focus on increasing surgical volumes and elective procedures.
Q: What is the current customer acquisition cost for Apollo 24/7 compared to a year ago?
A: We have reduced marketing expenses from INR150-180 crores to around INR80 crores. The cost per acquisition is now between $250 and $400, significantly lower than before, thanks to our omni approach and loyalty programs.
Q: What was the contribution from international patients during the quarter, and what impact do you expect from changes in Bangladesh?
A: Bangladesh accounts for about 20% of our international revenue, which is 2% of our total revenue. We have seen some drop in volume due to political issues but are hopeful for a quick recovery. We are also exploring other international markets.
Q: Can you explain the strong pickup in OP volumes in Karnataka and Hyderabad?
A: The increase in outpatient volumes is due to our corporate outreach efforts, including on-site health checkups. This has resulted in new registrations and feeds into our inpatient volume growth.
Q: What are your expectations for IP volume growth this year?
A: We expect good volume growth for this year, driven by our focus on primary care outreach and corporate partnerships. While we can't provide specific guidance, we are optimistic about sustaining this growth.
Q: With new units coming on board, how will this affect EBITDA margins next year?
A: Existing units should see a 100 basis points margin improvement this year. The new units may reduce margins by 100 to 150 basis points, but we expect overall profitability to remain strong.
Q: What is the current discount rate for your online pharmacy, and how does it compare to the industry?
A: Our online pharmacy offers discounts between 13% and 13.5%, which is 150 to 200 basis points lower than industry standards. We have always maintained lower discounts to focus on sustainable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
