Hello everyone, thank you for waiting. Welcome to Hapvida's first quarter 2024 earnings conference call. Joining us today are Jorge Pinheiro, CEO; Luccas Adib, VP; and Guilherme Nahuz, IRO. Should you need simultaneous translation, please be aware that this feature is available on this platform by clicking on the interpretation button and choosing the English Channel. This event is being recorded and will be made available on the company's IR website with the complete earnings release materials. You can download the slide deck by clicking on the icon on the chat. Please refer to the disclaimers at the end of the presentation. During the company's presentation, all participants will be in a listen-only mode. After the company's remarks, there will be a Q&A session. In order to ask a question, please click on the Q&A button on the bottom of your screen and write your name, company, and language to enter the queue. Now I would like to turn the floor over to Jorge Pinheiro, CEO, who will start the presentation. Jorge, you have the floor. Hello everyone, thank you very much for joining us in the first quarter 2024 earnings conference call. Joining me today are Luccas, Bello, Franciane, and in New York we have Luccas, Guilherme, and Cândido Neto who will share some details with you. First, we would like to express our solidarity with our brothers and sisters in the state of Rio Grande do Sul. They are facing an extremely difficult time. We're deeply sorry for all the losses suffered in this beloved state. We have set up a crisis committee with daily meetings where we have been discussing all our actions and initiatives for the region. Despite the difficulties, our hospital service network is fully operational with our teams working overtime. We have developed extraordinary operational rituals involving specialized teams in different areas to ensure care and support to our members in the region when they need it the most. We have set up our own air logistics scheme to make sure our units can operate fully with appropriate inventory of materials and medication. Additionally, the company has been taking social actions providing care to the population in general and to mitigate the difficulties they are facing right now. We have also been providing full support to our employees in the region who are either homeless or displaced. To all of those working at Centro Clínico Gaúcho, Hospital Humaniza, and our other healthcare units in the Greater Porto Alegre area, we stand with you. Now let's get started on slide two of the presentation. Here you can see an overview with some financial highlights that will be further explored later on by Luccas. But first I would like to comment on some of them. The first quarter of 2024 was a historic quarter for us. We started the year with exceptional results that reflect the commitment and discipline in each one of the strategies implemented throughout 2023 and that are leading to significant improvements quarter after quarter. We have only been able to deliver these results because of our people. I would like to thank our team of over 65,000 employees for their dedication and commitment, as well as our teams of doctors, dentists, and other service providers, totaling nearly 130,000 people. The evolution of our cash MLR was the highlight of the quarter, with an impressive improvement of 4.3 percentage points against Q1 2023. The ratio was 68%, exceeding the numbers of the last quarter of 2023, which had been the best ratio since the business merger, comfortably beating our historical seasonality. The reduction in cash MLR, together with dilution of selling and admin expenses, resulted in Hapvida Notre Dame Intermédica reaching another significant milestone: the record number of just over BRL 1 billion in adjusted EBITDA, up 60% year-over-year. Our net revenue grew by about 4%, reaching BRL 7 billion, result of the consistent and responsible pricing in new sales and the necessary adjustments in existing contracts, where we see a consistent evolution of the average ticket. The member base remained virtually stable throughout the quarter, and the sales of new contracts continue strong. Our new clients have been choosing more verticalized products that help oxygenate the portfolio and future profitability as they come through competitive and sustainable pricing. We know that healthy tickets and healthy portfolios are the foundations for the long-term sustainability of our business. Our capital structure also showed sequential advances. We reduced leverage in nominal terms, with operational cash generation reaching close to 80% of EBITDA. Net debt over EBITDA continues its gradual downward trajectory ending the quarter at 1.13 times, a very comfortable level in our view. Moving on to slide 3, here I'd like to share a bit more about the progress we have made in the integration process. Over the past 2 years, several activities preceding systems integration have already been completed in São Paulo, such as operational standardizations, centralization of supply, and procurement of materials and medication, optimization of our own and accredited networks. For 2024, we will complete the integration of the company's operations in São Paulo, and we are in the final phase of systems implementation in our care units. 2 waves of implementation covering approximately 50 care units have already been executed very successfully. Only 2 phases remain, which will take place in the coming months with the final systems turnover, that of the health insurer, expected to take place in Q4. With the end of this integration journey, we will have a 100% systemically integrated company with significant gains in customer journey control and full visibility of all our healthcare quality indicators, which are key for our management. We understand that the integration investments we have made also translate into healthcare quality and customer satisfaction. For example, looking at the overall complaint rate, or IGR, which is an index published monthly by ANS, NDI's IGR has been showing successive improvements, reaching its best position in the last 16 months. If we add up all of the group's operators, our position in the ranking would be number 22, three positions better than the average of the major operators, which is 19. It's important to mention our efforts in fighting dengue fever and other viral diseases. We're going through the largest dengue fever epidemic in the country's history, and so the company has been investing heavily in opening specialized units and increasing the number of beds in order to fulfill our mission. The volume of urgent ambulatory care and tests related to dengue fever and other viral diseases have been above our historical volume for the period. Some regions are already showing a reduction in volume, but in other regions the volume remains pronounced. Before I hand over to Luccas, who will give you further details about our results, I want to conclude by emphasizing that we continue focused and disciplined, facing the challenges and making the most of the opportunities that come ahead of us in 2024, and working hard to continue the strategies implemented last year. We continue to invest in strengthening our operations and seeking a healthy balance in our margins. Once again, we want to thank the contribution of our employees, doctors, dentists, brokers, suppliers, and the trust of the board of directors, shareholders, and most importantly, the trust of our customers. Luccas, you have the floor. Thank you. Thank you, Jorge. Hello everyone and thank you for joining us. It's a great pleasure to be with you in another Hapvida's earnings conference call. I'll get started on slide 4 about net revenue with the chart on the top left corner. Consolidated net revenue grew by 3.9% in Q1 2024 compared to Q1 2023, as Jorge mentioned earlier. Now let's move on to the chart on the top right corner about our health plan revenue, which had an increase of 5.87% year-over-year, driven by a 10.6% increase in average ticket. In dental, here at the bottom of the slide, we had a 4% revenue increase, also driven by the average ticket adjustment of 3.8%. In line with revenue from sales of services and other activities, we had a reduction of 40.5% because of the sales of some assets such as São Francisco Resgate and Maida, as mentioned before. In the sales of services, we have two effects. First, the reflection of reduced demand in the quarter, especially January and February, in line with what we saw in our operations in the market. Second, we have maintained and will continue to maintain our selectivity in offering services to third parties, reducing our exposure to credit risk, and prioritizing our hospital capacity for use by our members. Now, giving you further details about member base and average ticket on slide five. We lost 11,000 lives on a net basis, so we're virtually stable quarter-over-quarter, reflecting a gradual downturn compared to the losses we saw in recent quarters. Gross sales continue very robust. We added 480,000 new lives, high-quality contracts, verticalized products, and healthy pricing, in line with our portfolio sustainability paradigm. Another piece of good news is that we have returned to grow in areas where we were in the integration process, such as Minas Gerais. As for the cancellations of nearly 490,000 lives, they are a result of the necessary adjustments for contracts, economic balance, and optimization, verticalization, and regulation process of the care network. Turnover also showed balance this quarter. At the bottom of the slide, you can see the evolution of the average ticket, up 10.6% year-over-year. In the first column, net price, we had an increase of 11.4%, reflecting price adjustment efforts, already net of verticalization and copayment effects in existing contracts. In the second column, you can see -0.8% in what we call mix, which represents the net difference in average tickets between gross sales and cancellations. This exchange results from our commercial focus and a greater demand for more verticalized products with lower tickets, while cancellations are concentrated in contracts with higher tickets but with greater exposure to the accredited network, with higher, less sustainable MLRs. We have even started to see again a migration of lives from insurers with higher tickets to our more verticalized product line. All the movements mentioned above are part of the company's strategy and the plan to recover our historical margins, which continues firm and disciplined in 2024, and that is being executed with rigor and discipline, which are keywords for the year. On slide 6, you can see how this connects with our main operational performance indicator, MLR. Our cash MLR this quarter was 68%, a decrease of 4.3 percentage points compared to Q1 2023 and 1.3 percentage points compared to Q4 2023, far surpassing seasonality, which indicated an increase for the period. Our goal is this gradual and responsible margin recovery journey to overcome seasonality. This is not rocket science. It's all about a series of initiatives that we implement, monitor, and refine every day to deliver this evolution. All of this is coupled with our perennial goal of delivering quality healthcare, as you can notice in our better position in the IGR rate since the beginning of last year. We continue to work hard on price adjustments, increasing verticalization, standardizing protocols, optimizing provider network, and various cost control measures. As a result, per capita costs have been decelerating, and verticalization and tickets have been increasing. As Jorge mentioned earlier, it's important to highlight that we're going through possibly what is the largest dengue fever epidemic in Brazil's history, and we're closely monitoring the high volumes of urgent ambulatory care and tests. Volumes have been quite pronounced and above our historical levels in March and April. On slide seven, you can see cash admin expenses, excluding the effects of SOP, depreciation, amortization, and non-recurring items. We are half a point better than Q1 2023 and 20 basis points above Q4 2023. This quarter, we included one more chart at the bottom of the page about personnel to help in our explanations as a more visual aid. We had positive impacts in Q4 2023 that were not repeated in Q1 2024. We explained this last quarter, but let me highlight this again. We had reversals of BRL 47.2 million between variable compensation from 2023 and reclassification of retroactive expenses from the dental sales team. This quarter, we have made specific reclassification between lines of BRL 16.8 million in system maintenance, moving from location and operation to third-party services. Just a line swap here. We also had nearly BRL 14 million in IT expenses related to system changes that impacted the third-party services item, in line with what we have been saying about specific one-off expenses with these integrations. Now, personnel. An additional reversal of BRL 16 million from variable compensation in 2023 after final assessment of our goal achievement and an allocation of variable compensation to cost of BRL 10.5 million and sales expenses, BRL 5.3 million that was provisioned entirely in admin expenses in 2023. Finally, we have a column that says others with BRL 5 million, which is basically provisions for salary increases. As mentioned in the last call, we can see erratic behavior in the coming quarters. This is normal and expected since there are expenses related to systems integration with changes and implementation involving support staff, travel, temporary coexistence of legal assistance with new systems, which may cause this line to behave up or down. We are confident that there is room for improvement through initiatives that we will undertake as these integrations stabilize. Now, moving on to sales expenses on slide 8. We can see here a stable level compared to the previous quarter without major news. As we said earlier about the reallocations between admin expenses and selling expenses, the positive highlight here is on commissions for two reasons. First, due to a reduction of deferred acquisition costs, write-offs, the brokerage due to a lower level of contract cancellations within these deferral products. Second, after the systems implementation in Clinipam and NDI Minas, we updated the deferral periods, making them longer within our standardization of policies and processes. The reduction of BRL 12 million in advertising and marketing is normal as expenses are temporarily lower at the beginning of the year while we structure the campaigns for the rest of the year. Now, PDD has increased by BRL 32 million because we're being more conservative and slightly more rigorous in credit assessments, imposing an incremental safety view in light of IFRS 9. The remaining value in this line comes from a specific client-related provision. On slide 9, you can see our Adjusted EBITDA, which was a bit over BRL 1 billion in the quarter, a milestone in our history, as Jorge mentioned. Just to recap briefly, this is the company's highest EBITDA since the merger, resulting from an increase in net revenue, continuous efforts in different areas for cost control and optimization, as well as rationalization of admin expenses. Now, moving on to slide 10, cash flow. This chapter was a novelty that we introduced last quarter to facilitate understanding of our cash management. Free cash flow for Q1 2024 of BRL 614 million also came at a very significant volume with a conversion of 80% of EBITDA into operating cash, an extremely healthy level. Looking at the table in the bottom left corner, we can see cash consumption of BRL 132 million in Q1 2024, which comes basically from the following math: BRL 614 million from free cash flow generation, BRL 35 million from M&A activities, and a consumption of BRL 781 million in financial activities, which I will detail later. We also had a balanced work in capital management between clients and providers. We highlight the main cash consumption coming from rents and payment of annual bonuses in March, which usually happened in April. But even with the bonus, we had substantial growth here. We recorded payment of BRL 94 million in income tax and social contribution, remembering that there is a mismatch between competence and cash that was recorded in December and spent in January, and so on. The amount is significant and reflects the profitability of our operational entities. It's important to remember that there is an ongoing corporate restructuring program that will be accentuated once we are 100% integrated from a systemic point of view. CapEx remains under control at BRL 105 million with significant investments in IT. We are projecting CapEx between BRL 600 million-BRL 1 billion, which should be slightly higher in the coming quarters, especially if we advance in the projects of hospitals in São Paulo and Rio. On slide 11, we can see M&A activities with a generation of BRL 35 million, with a receipt of BRL 22 million from the remaining portion of the sale of São Francisco Resgate and BRL 21 million from the sale of Maida Health in February. Financial activities consumed BRL 781 million, driven by the payment of BRL 840 million from the fourth issuance of the debentures with funds raised at the end of last year. We also had financial income of BRL 186 million close to the CDI, respecting our conservative cash investment policy. As you saw last week, our board of directors approved the raising of BRL 1 billion at the cost of CDI plus 1.60% per year and maturity in 2031 to meet our upcoming maturities concentrated in the second half of 2024, restructuring our debt. Settlement already occurred in May, and the cash is already in our balance sheet. With this, the company has maintained its disciplined, gradual, and responsible pace of deleveraging quarter after quarter, reducing net debt by BRL 404 million and dropping leverage from 1.38x to 1.13x EBITDA in the methodology of the covenant of our issuances. Going to the last slide before we open for questions, we have our regulatory requirements. These are applied only to individual operators. So when trying to compare with a consolidated company, there will be differences. Technical provisions had a slight retraction, partly due to the increase in medical bills payable in March following the increase in utilization, as we mentioned, and the cost, and another part from cash consumption, as we saw earlier. In regulatory capital, on the right-hand side, we expanded our PLA surplus in relation to CBR with the net profits generated by the operators. Thank you all for your patience. I hope this has been useful. Now we open for questions. The questions will be answered by Jorge, by myself, and Guilherme Nahuz, who is here with us. Thank you very much and have a great afternoon. Okay, now we're going to start the question and answer session for investors and analysts. When your name is called, a prompt to unmute your mic will pop on your screen. Please unmute your mic and ask your question. We kindly ask you to ask two questions tops by analysts, and please ask all your questions at once. First question is by Vinícius Figueiredo, sell-side analyst at Itaú BBA. Vinícius, we're going to unmute your mic. Please ask your question. Good afternoon, everyone. Thank you for taking my question. I think we can start with a question about the competitive landscape. I think you talked a bit about this already, but a few weeks ago, we saw a strong readjustment by the competitors when we look at the readjustment input, which is made public. But what can you tell us about the new product table? What can your commercial team see here in the behavior of Amil and other competitors here in the Southeast region of Brazil? Can we see Hapvida standing out as the one with the lowest price among these products, which is a bit different from what we saw at the end of last year? Now, you commented in other opportunities about how exchanges in the accredited network bring about attrition with customers. But since PPO is an important point in your commercial perspective, it's not only about losing this portfolio, but actually improving profitability. So if there is no space to make changes in the accredited network, what are possible levers to improve MLR? Hi, Vinícius. Thank you for your questions. Okay. I will start by talking about the competitive landscape. What we can see throughout the industry and among competitors, we have made the necessary adjustments, the most radical ones, last year. Most operators made 2-3 adjustments throughout the year as well. But this year started, and we have made a first readjustment in Q1, and we might make another readjustment throughout the year, going back to our old practice of two annual reviews in those sales. So this year, we expect readjustments to new sales at a lower level than what we had last year because of all the readjustments in our portfolio and the advances in our verticalization and integration process put us in the position to make lower readjustments this year than last year. About the competition, what we see is a similar dynamic. The competitors have made strong adjustments last year, and almost all of them had similar readjustments or a bit lower than last year in their product portfolio. So, the whole industry is going to take two years in the cycle that is starting in May this year and will end in April next year with higher readjustments so that they can go back to historical levels of profitability. Our model, given the verticalization, integration, and all the improvements that we have been making, allows us to be, on average, 30%-35% less readjustments than our competitors. And this has been helping us greatly in corporate channels where we've been selling a lot. About the PPO products, Vinícius, we have no network adjustments to be made. We have made changes throughout last year. We discontinued the sales of some of the products that we considered to be unsustainable. But on the other hand, we ended up encouraging the sales or creating products in PPO because we have a good relationship with some providers that we now consider to be more sustainable. And this has led to improved margins in PPO as well. So, the recovery that we shared with you is stronger in HMO plans, but we also see improvement in margins in PPO. And PPO products are very important for larger cities like the Greater São Paulo, the Greater Rio de Janeiro, and the Greater Belo Horizonte area, especially in São Paulo, which will compose our product grid. This is key so that we can have all types of offers to make to a large company in those regions. Great. That was very clear. Thank you very much, Jorge, Luccas, and other executives, and congratulations on your results. Okay, let's move on to our next question by Leandro Bastos, sell-side analyst at Citi. Leandro, please unmute your mic and ask your question. Hi everyone. Good afternoon. I have two questions here. First, can you tell us about the effect of dengue fever in the months of March and April? Is the frequency much higher in Q2 as well? And what can the effects be on MLR, which is seasonally higher in Q2? Now, my second question is about the commercial dynamics. Can you tell us about your readjustment strategy for the large corporate channel? I remember what you saw, what you said during Hapvida Day last year. What are you planning now for the large corporate channel? Thank you. Hi Leandro. Thank you for your questions. First, let's talk about frequency and volumes that we've been seeing with the dengue fever. You know that our business is seasonal. The seasonality respects variations in rainfall and temperatures starting in the north of the country and then moving south. It's been following a typical seasonality of recent years this year as well. But this year, we have a higher intensity with dengue fever affecting several regions of the country. Therefore, we have a higher volume this year than the average of previous years, with higher volume. And we see that some cities are already in a downward trajectory. This is a typical curve. You have 45-60 days in an upward trajectory, and then you have a drop in a shorter period than that. So, the curves are respecting their historical patterns, but with a higher intensity of volume in and lower complexity admissions. About Q2, well, we cannot tell you much. But yes, we have a greater volume. But on the other hand, when we look at the longer run, we can see that this is part of our historical seasonality curves, and this should not affect us in the longer run. About commercial readjustments, well, when we look at the mix between individual small businesses and large corporate companies, the results of all of that will bring us for the year, according to our strategy, something that can vary from 1 percentage point to a bit more than that, lower than what we had last year. The readjustments vary according to each region. We see a greater need for readjustments in small and medium businesses in Region 2 and a lower need for that in more mature regions such as north, northeast, and the countryside of the state of São Paulo. But in total, we should have 1 or 1-something percentage point lower rates than what we applied last year. Okay, moving on to our next question by Samuel Alves, sell-side analyst at BTG Pactual. Samuel, please unmute your mic and ask your question. Good afternoon, Jorge, Luccas, and everyone. I have two questions here on my side. First, about the aspiration for MLR. What is your target? You talked earlier about how the company wanted to have a cash MLR of 68%. So now, after this first quarter, which brought you a victory in this recovery trajectory, can you have a bolder target? And my second question is about Net Adds. Luccas mentioned in the presentation that you've been seeing a migration of higher ticket insurance companies to Hapvida. So, do you foresee a growing base in Q2? An organic growth there in Q2? I don't know whether you're still foreseeing such a growth in the second half of the year rather than in the second quarter. Okay, I will start, and then Luccas and Guilherme can add to my answer. About cash MLR, 68% is a number that accounts for the combination of MLR pre-merger of Hapvida and NGI and pre-pandemic levels, excluding the new or most recent acquisitions that have higher MLRs. So, the number that we achieved is indeed spectacular. Delivering this number before the integration is completed is something we should be celebrating for two reasons. First, because it shows the consistency of implementation of all of the measures that we've been taking and that are not finalized yet. We still have integration to go, verticalization to go, portfolios to be launched. So, we see room for improvement here in the long run, respecting, of course, the seasonality of Q1 and Q4, which are lower than Q2 and Q3. And of course, Q1 was benefited with lower volumes. So many factors have led us to this very significant result. Now, trying to answer your question in an objective manner, yes, we do expect this year to have better MLR than we had last year, just like the second half of 2023 already had a change of behavior, achieving much better results than the first half of 2023. So, we expect the first half of 2024 to be better than the second half of 2023. We had a two-year plan, as you can recall. And at the end of that plan, we would be very close to our historical MLR levels, excluding recent acquisitions, of course. And that's what we're aiming for. Maybe in Q2 or Q3 next year, we'll be able to see what level of MLR we're going to have because it's only by then that we're going to have all of those measures implemented. About net adds, we have great news. This has been going on since Q4 last year. In Q1 this year, we have been negotiating with medium-sized and large-sized companies with significant contracts already implemented and other contracts already signed and in process of implementation with insurers and cooperatives. So, the corporate channel continues heated. And we have hope that in the coming months, this will continue quite heated considering our business pipeline. About the retail channel, the year started slow in January and February, but it's now heating up. February was better than January. March was better than February. April was better than March. May is now better than April with this upward trend in retail. That's a very encouraging piece of news. We haven't yet reached our targets in retail channels, but we are already exceeding our targets in corporate channels. The pace of growth in retail channels encourages us to believe that if we keep the same pace, we'll soon be reaching our targets in the retail channels as well. With strong corporate channel, reduction in cancellation levels, we have just finished reviewing our portfolio in April, and that's an annual journey. Now, with the retail channels in this upward trend, we believe that we're going to have a very good period from the commercial perspective. The second half of the year is quite encouraging. We expect many fruits coming from the commercial area. Thank you, Jorge, and congratulations on the improvements that you have made. Our next question is by Gustavo Miele, sell-side analyst at Goldman Sachs. Please unmute your mic and ask your question. Gustavo, you have the floor. Hi Dr. Jorge, Luccas, Guilherme, Bello. Hi Dr. Jorge, Luccas, Guilherme, Bello. I Dr. Jorge, Luccas, Guilherme, Bello. I have two questions. The first is about MLR, being more specific as well about cost per life. You had very good MLR rates in a scenario of stability in ticket prices quarter-on-quarter. So, can you share a bit with us how much this cost performance is due to the rationalization of portfolio that you've been making with a churn in contracts with a higher cost level, and how much comes from a more organic performance or more legacy portfolio? So, if you could give us some color into this, I would appreciate. That's my first question. Another topic I'd like to explore with you is about capital allocation. For some quarters now, you have had strong deleveraging. Same applies to this quarter. So, can we expect the company to accelerate your own network expansion plans, or return to shareholders is something that you're going to prioritize now with this beyond regulatory standards of solvency and other issues or not? I believe not. But can you give us some color into this as well? These are my two questions. Thank you very much. Thank you, Gustavo. I will start, and then Luccas can complement my answer, especially about capital allocation and also about the first question, cost per life. This is affected by many variables. As we grow more in corporate channels and as we sell more verticalized products, more products with co-participation, this mix of products will have a decisive impact on the average cost per life. But of course, many other factors should be added to this, such as verticalization or network adjustments or review of special material suppliers or medication suppliers, systems implementation, prevention programs, kits, and procedures. That is, there is this whole set of tools that have been helping us to control the current portfolio better. And this is added to our strategy of selling products that are more vertical. As I said earlier, we're going to keep our comprehensive portfolio with all products, but we do favor more verticalized products. That's our calling. We know this segment very well, and we believe that we can make the most of it. And it's a more affordable segment, which is a need of the Brazilian population. About capital allocation, I will start, and then Luccas can help me out here. Last year, with a lot of discipline and a focus on reducing leverage levels, we made a CapEx of around BRL 400 million. This year, this is going to vary from BRL 600 million-BRL 1 billion. Our cash generation is going to be enough for us to pay for all of these investments that will help us verticalize and enhance our operations with new projects. We're going to build three hospitals, São Paulo, Rio, and Recife. We're going to reopen a hospital in São Paulo so the CapEx of the year can get up to BRL 1 billion to cover all of that. But Luccas, can you add something to my answer? Sure, Jorge. You talked about one of the main issues of our capital allocation, which is necessary for the successful capital investments. We have a CapEx of up to BRL 1 billion in our budget for us to continue with investments in strategic locations such as São Paulo and Rio de Janeiro. But the industry has been facing many difficulties, and we have space in our balance sheet. We're very well positioned to make the most of the opportunities that may arise in the industry. We are focused on completing the integration process successfully and comfortably without any friction in users. And our focus is also on verticalization. We have a lot of space in capital allocation into verticalization. Of course, we have to check for the appropriateness of CapEx to see if this is pertinent and necessary for the company at a certain point in time. So of course, we have metrics of capital allocation in verticalization as well. And we have space to consider M&A opportunities that may arise. This is not our focus right now, but the company will get to the end of the year at a leverage level that is quite comfortable and space in our balance sheet, 100% integrated with part of our CapEx allocated for that. So yes, we can look into the opportunities. But this capital allocation, I'm not talking about any specific M&A, but this allocation, of course, will have to be tested with our strict rules of capital allocation. We're not going to acquire just for the sake of it. We want to grow in a smart way. But we're going to be very well positioned in our balance sheet to consider these opportunities at the end of the integration cycle. The company is becoming more profitable. This has impacts on distribution to controllers through payments of bonus and Hapvida Participações. When we pay net profit to the shareholders, I mean, this is going to be distributed at the proportion defined by law. But the focus of our company remains on integration, verticalization, and we do have space in our balance sheet to consider opportunities after these processes are over. Okay. Thank you very much, Luccas. Have a great afternoon. Moving on to our next question by Maurício Cepeda, sell-side analyst at Morgan Stanley. Maurício, please unmute your mic and ask your question. Good afternoon, Jorge, Luccas, Nahuz. Thank you for the opportunity. Still talking about CapEx. As far as I understand, verticalization has been helping you to control MLR. And it's good that you have migrated to a higher level of CapEx to increase verticalization in 2024. But what are your verticalization targets? Do you have internal targets? How does that translate into CapEx throughout the years? And now, second question, which is also related to this, is will that take you to choose any specific region? Are you going to verticalize in certain regions or micro-regions, or you believe some locations are not attractive and are not going to be a priority for you? Thank you very much. Hi, Cepeda. Thank you for your question. Well, of course, the best of our business model, the best of our experience, is in regions where we have the minimum concentration of lives to pay for our own network that is comprehensive with outpatient, and hospitals. And we have a minimum level for that. But we have mapped the whole country, and we have identified all of the regions for which this model would be a good fit. And they are our priorities for expansion. But we have to make choices. Right now, we're investing more in regions where we see a quicker return potential. These are regions with a lower level of verticalization. We see opportunities in São Paulo. We've been in this journey to increase verticalization in São Paulo, in Rio de Janeiro, and other cities as well. Our strategy has been to expand in regions where we can get returns quicker and where we have more volume or a greater potential to expand our own network. But of course, we're also assessing other cities where we're not present or that we are present but with a small footprint that can get further investments. The good news is that there are many opportunities in Brazil. Brazil is huge. We really like many cities that are not yet a good fit for our model, so we are prioritizing investments with a good rate of return. Lucas, would you like to add anything? Yeah, I think that you were very clear, Jorge. I fully agree with you. Cepeda, the adherence test of our CapEx is very strict. We're being very disciplined in this. So, we look at the locations that are good for our strategy, the profile of products that we have to offer in the HMO and our verticalization capacity. This is what we intend to do throughout 2024 and beyond. That's our plan. Great, Luccas. Do you see more years of investments? Well, we have many verticalization projects, and they're not going to end now. They're not going to end with these hospitals in São Paulo and Rio. Jorge is our strategic mind, and he can add something to my answer. But my view and the view of the company internally is that this is a long journey to optimize our portfolios with verticalization. So, I don't think we're going to stop in São Paulo and Rio. We have room to optimize our portfolio and verticalize MLR in the coming years as well. Great. Thank you for your answers, Jorge and Luccas. Our next question is by Joseph Giordano, sell-side analyst at J.P. Morgan. Joseph, we're going to unmute your mic. Please ask your question. Hello. Good afternoon, everyone. Dr. Jorge, Luccas, Nahuz, Bello, thank you for taking my question. Let's go back to MLR. There is a calendar effect here. So, what are the estimates? I want to establish the right expectations because if we look at Q1 and annualize this, considering the seasons, we would be at a better level than other normalized MLR levels. So, my first question is about April. Maybe this is not the most relevant month, but when we look at the calendar effect, this can be relevant. We had Tiradentes holiday and Easter last year, which were in different months this year. So, if we look at MLR in the first four months of the year, it's much better. But can you tell us about the magnitude of all of this? And you used to have regions one and two. Is there a gap between them as compared to the legacy times of Hapvida? Now, about capital allocation and the health of many service providers, when you think about creating a high-end PPO product, do you think it would make sense for you to acquire assets that serve this more intermediate to high segment of the chain? Okay, Joseph, I'll start, and then Luccas will answer the question about capital allocation. About MLR, Joseph, structurally speaking, the company has been able to reduce cost from a structural perspective. Q1 did really well because of that and also because of lower volumes. And these two factors led to a historical MLR level. The good news is that the improvements are structural. And in the medium and longer run, they will bring consistent MLR reductions until the end of the cycle in May next year. Seasonal variations because of holidays or a more intense viral disease period, I mean, this will always happen. More intense periods, less intense periods, this will always happen. But what matters the most here is that we see that this intense period of viral diseases that is already happening in certain cities, that is still happening in certain cities, they are self-limited, and they have a beginning and an end. So, our greatest concern is being able to see the structure of the company to make sure we have the best prevention programs in place that we're delivering on our verticalization programs with consistent integration processes, the best deals with providers. So, we will consistently reduce MLR by doing all of that. And I can tell you that, yes, we are at better levels today than we were last year. There's no doubt about that. And we expect to have margin increments this year. About PPO, yes, we do have PPO products, 470,000 lives in PPO throughout the whole country. And we've been training and qualifying our own network more and more. Of course, this product will always have a broader network of providers, but it's natural that part of the users will use our own network because of better addresses, better locations, better infrastructure, staff, medical and nursing staff that we have. So, we notice that a larger part of the PPO customer base has been using our own network because we do have a good footprint in those regions. And we have announced that we're going to build another beautiful hospital in São Paulo, another beautiful one in Rio de Janeiro, and another wonderful hospital which is in the final stages of building in Recife. So yes, we offer this to all of our users, including PPO users. We're offering better and better services. And we expect that a larger part of the PPO customers choose to use our own network. Luccas, would you like to answer the question about capital allocation? Sure. Well, about capital allocation, just like I said earlier, it's not the calling of our company to work on capital allocation, to set up. I'm sorry. Can you hear me? Yes, we can hear you, Luccas. Go ahead. I apologize. I had a connection problem here. But Giordano, as I was telling you, it's not our calling to focus on this 100%, but this is still an important factor in generating lives and revenue. The HMO plans that we sell, part is with PPO, the other part goes to HMO. So, we have to do the math to know whether we're going to have significant allocations for more sophisticated PPO products from the level of 600 to Infinity. But we're very much focused on the integration process right now and in executing our CapEx to verticalize, and this is very much related to what Jorge just said. And we're going to be very well positioned at the end of this integration cycle and at the end of this readjustment cycle to look into inorganic growth opportunities as well. Let me just add something, Luccas. Either inorganic or organic growth through greenfield movements and acquisitions, it doesn't matter. We have qualified hospitals that are reference centers in many regions in the country. And this is what we want to do, to qualify our own network to be at the best locations with the best technology and the best professionals. We'll always raise the bar constantly to offer to our members, either HMO or PPO, the best products with the best exclusive network. Great. Thank you very much, Dr. Jorge and Luccas. This completes the question-and-answer session. This is the end of Hapvida's first quarter 2024 earnings conference call. The IR team remains at your disposal should you have any further questions. Thank you for joining and have a great afternoon.