Executive Summary / Key Takeaways

• Strategic Resilience and Growth Reassertion: Auna (NYSE:AUNA) demonstrated operational resilience in Q2 2025, with consolidated FX-neutral EBITDA growing 5%, driven by a rebound in Mexico and strengthened performance in Colombia and Peru. This reasserts the company's growth trajectory despite regional macroeconomic headwinds.
• The "AunaWay" Differentiator: Auna's vertically integrated, patient-centric "AunaWay" model, which combines hospitals, outpatient facilities, and insurance plans, is a key competitive advantage. It drives efficiencies, as evidenced by OncoSalud Peru's record-low oncology Medical Loss Ratio (MLR) of below 50% in Q2 2025, reflecting significant pharmaceutical cost savings.
• Oncology Expansion and Market Opportunity: The company is strategically expanding its high-complexity oncology offerings, particularly in Mexico with OncoSalud Mexico and the Opción Oncología acquisition. This targets a "massive gap" in the Mexican healthcare market and aims to significantly increase Auna's market share in high-complexity services in key regions like Monterrey.
• Deleveraging Commitment and Financial Stability: Auna remains committed to its medium-term target of reducing net debt to EBITDA to 3x, down from 3.6x in Q2 2025. Recent debt refinancing and expected improvements in free cash flow in the second half of 2025 underscore a disciplined approach to capital structure optimization.
• Regional Headwinds and Adaptability: While market softness in Mexico due to tariff uncertainty and challenges with "intervene payers" in Colombia present near-term obstacles, Auna's tactical adjustments, such as risk-sharing models and payer diversification, are proving effective in mitigating risks and improving cash flows.

Auna's Integrated Vision: Transforming Latin American Healthcare

Auna S.A., founded in 1989, has evolved into a prominent healthcare service provider operating a regional network of hospitals and clinics across Mexico, Peru, and Colombia. The company's core mission is to transform healthcare in Spanish-speaking Latin America, a region characterized by fragmented, inefficient, and underpenetrated private healthcare markets. Auna's overarching strategy, known as the "AunaWay," is a vertically integrated, patient-centric model that combines hospitals, outpatient facilities, and insurance plans into a seamless ecosystem. This approach aims to modernize and integrate patient care, enhancing access to high-quality services, improving patient outcomes, and effectively managing healthcare costs.

The "AunaWay" stands as Auna's primary technological and operational differentiator. It is a systematic framework for healthcare delivery that leverages best-practice medical standards and technology to provide a people-centered experience. This model incentivizes prevention and focuses on high-complexity diseases, creating an end-to-end healthcare ecosystem. The tangible benefits of this integrated approach are evident in Auna's ability to achieve cost efficiencies, such as the record-low oncology Medical Loss Ratio (MLR) in Peru, which fell below 50% in Q2 2025, reflecting significant gains in pharmaceutical cost management. Auna also integrates cutting-edge technology into its services, including digital tools for streamlined patient management and enhanced care delivery, as well as advances in imaging and laboratory services. These technological integrations are designed to improve patient safety and diagnostic accuracy, contributing to superior medical outcomes. For investors, this integrated model and its associated technological advancements create a competitive moat, driving better margins, market positioning, and long-term growth by delivering high-quality, affordable care in underserved markets.

In the competitive landscape, Auna positions itself as a regional specialist, contrasting with larger, more diversified global players like HCA Healthcare (HCA), Tenet Healthcare (THC), UnitedHealth Group (UNH), and Fresenius Medical Care (FMS). While these global competitors benefit from immense scale and broader diversification, Auna's strength lies in its localized adaptability and customer-focused strategies, particularly its affordability-focused model that resonates with underserved populations in Latin America. Auna's established regional network in Mexico, Peru, and Colombia fosters stronger customer loyalty and recurring revenue from prepaid plans, potentially leading to superior growth and margins by reducing customer acquisition costs. However, Auna's smaller scale compared to these giants can lead to lower margins and cash flow volatility, and it may lag in the speed of technological innovation and R&D investment. The broader industry is seeing trends like AI integration in healthcare, which could reshape dynamics, potentially increasing costs for AI-dependent players. Auna's focus on integrating digital tools and innovative care solutions, as seen with its "Auna Ideas" co-laboratory, demonstrates its commitment to addressing these trends, though it must continue to invest to keep pace with more resourced global rivals.

Q2 2025 Performance: Reasserting Growth Trajectory

Auna's Q2 2025 financial results underscore its operational resilience, with consolidated FX-neutral Adjusted EBITDA growing 5% year-over-year to PEN 241 million. This growth was a collective effort, with all three core geographies contributing positively in local currency terms. On an as-reported basis, Adjusted EBITDA decreased 3%, primarily due to the depreciation of the Mexican and Colombian pesos relative to the Peruvian sol, Auna's reporting currency. The Adjusted EBITDA margin remained stable at 22.1%. Adjusted net income saw a significant sixfold increase year-over-year to PEN 89 million, positively impacted by FX and EBITDA growth.

Peru: The Vertically Integrated Success Story

Peru continues to be a strong and stable contributor, demonstrating the robustness of Auna's mature, vertically integrated model. Healthcare services revenue in Peru grew 5%, primarily driven by increased surgery volumes, price adjustments, and an improved services mix across its network. OncoSalud Peru, the health plan arm, saw revenue growth of 7% and a 10% increase in total plan membership. Notably, membership in oncology plans grew 2%, and the oncology MLR fell for the fourth consecutive quarter to a record low of below 50%. This reflects the efficiencies gained in pharmaceutical costs. Overall, Peru's EBITDA grew 8%, with its margin remaining a very solid 21%.

Mexico: Overcoming Headwinds, Building Momentum

In Mexico, Auna's business resumed growth in Q2 2025, with revenue increasing 5% year-over-year despite fewer surgeries and emergency treatments. This was attributed to higher average tickets for services and the repricing of radiology and chemotherapy. Local currency EBITDA grew 2%, maintaining a healthy adjusted EBITDA margin of 32%. The company successfully stabilized its doctor and supplier relationships, leading to a nascent volume recovery after initial operational setbacks related to the implementation of the "AunaWay" model. Management expects capacity utilization to recover with improved physician recruitment and engagement, focusing on high-complexity services. Auna's strategic expansion in Mexico includes the nationwide coverage of OncoSalud Mexico, now reaching major cities like Mexico City, Guadalajara, and Tijuana, in addition to Monterrey. The acquisition of Opción Oncología, a leading oncology group, is expected to further scale Auna's oncology offering and drive higher volumes in its networks. While market conditions remain soft due to tariff uncertainty, management believes the delayed demand for medical treatment will eventually return.

Colombia: Risk Mitigation and Margin Expansion

Colombia's operations strengthened significantly in Q2 2025. Despite revenue remaining flat year-over-year as growth was intentionally tempered, EBITDA increased 9%, and the margin expanded 1.4 percentage points. This improvement resulted from tactical measures, including implementing risk-sharing models and diversifying the payer base away from "intervene payers." Auna began serving Salud Total under a PGP contract in July 2025, which is expected to contribute to the top line in upcoming quarters. The company also reported lower provisions for impairment losses, reflecting timely payments from Nueva EPS, a major intervene payer. Auna has decreased its revenue concentration from intervene private payers and increased its risk-sharing models from approximately 7% to over 10% of total revenues in Colombia.

Financial Health and Capital Allocation

Auna's financial position remains healthy, with a cash position that, while decreasing 13% versus Q1 2025, is still robust. Free cash flow for the first six months of 2025 was PEN 143 million, impacted by non-recurring payments to Opción Oncología doctors and Q1 collections in Colombia. Interest paid decreased by PEN 41 million year-over-year. The company maintains a healthy debt structure, with approximately half of its debt in local currencies and 86% of its U.S. dollar debt hedged to the Peruvian sol. Auna successfully refinanced over $62 million of short-term debt in Q2 2025, improving its maturity profile. The company's leverage ratio stood at 3.6x in Q2 2025, and management remains committed to its medium-term target of reducing net debt to EBITDA to 3x. This deleveraging strategy, supported by projected 20% EBITDA growth for 2025, is expected to enhance financial flexibility and create room for shareholder returns or M&A.

Outlook and Risks

Auna's management expresses confidence in its medium to long-term outlook, anticipating continued improvement in performance for its Mexican and Colombian segments during the remainder of 2025. The "AunaWay" model's calibration in Mexico is expected to facilitate physician transition and re-engage high-performing doctors, leading to a recovery in volumes. In Colombia, new risk-sharing agreements are projected to increasingly contribute to revenue, and risk mitigation measures are expected to further improve cash flows. The effective tax rate for 2025 is expected to normalize to a more stable range of 35% to 38%. Historically, cash flow improves in the second half of the year, and organic free cash flow is anticipated to more than recover interest costs by year-end. Analysts project Auna's revenue to grow by 7.8% annually over the next three years, with profit margins increasing from 5.6% to 8.2% in three years.

Despite this positive outlook, Auna acknowledges several risks. The near-term growth outlook has been impacted by trade and tariff uncertainty in Mexico, particularly in the northern region, which has led to market softness and delayed medical treatments. While healthcare demand is considered resilient, the timing of its full recovery remains uncertain. In Colombia, the lack of an immediate resolution for all "intervene payers" continues to pose a risk, although Auna's proactive measures have proven effective. Operational setbacks, inherent in bringing Auna's complex care model to new markets, can periodically arise and disrupt growth. Currency volatility, particularly the depreciation of the Mexican and Colombian pesos against the Peruvian sol, also presents a headwind, impacting as-reported financial results.

Conclusion

Auna stands as a compelling investment opportunity in the dynamic Latin American healthcare sector. The company's "AunaWay" integrated model, a foundational strength, is proving its efficacy by driving operational efficiencies and improving patient outcomes across its diverse markets. The Q2 2025 results, marked by FX-neutral EBITDA growth and a significant increase in adjusted net income, demonstrate Auna's ability to reassert its growth trajectory despite regional challenges. The strategic focus on high-complexity oncology, particularly the expansion of OncoSalud Mexico, positions Auna to capitalize on substantial market gaps and drive future revenue and margin expansion.

While Auna operates in an environment with inherent risks, including macroeconomic uncertainties and operational complexities in new market integrations, its proactive risk mitigation strategies in Colombia and recalibrated approach in Mexico highlight management's adaptability. The commitment to deleveraging, aiming for a 3x net debt to EBITDA target, further strengthens the investment thesis by enhancing financial flexibility. Auna's regional expertise and patient-centric approach provide a distinct competitive edge against larger global players, making it a strategic buy for investors seeking exposure to a high-growth emerging market healthcare leader. The company's continued execution of its integrated model and technological advancements will be key to unlocking its long-term value potential.