Good morning, ladies and gentlemen, and thank you for holding. We welcome you to the Quali Webcast to Release Results for the Second Quarter of 2025. With us today are Mr. Mauricio Lopes, the CEO, Mr. Eder Grande, the CFO and IRO, and Mr. Eduardo Garcia, the IR Superintendent. Some statements in this webcast can be projections or statements regarding future expectations. Such statements are subject to known and unknown risks, uncertainties that can lead such expectations not to materialize or be substantially different from what was expected. This event is being broadcast simultaneously over the internet and can be accessed at ri.qualicorp.com.br, where the respective presentation can also be found. This event is being recorded, and all participants will be in listen-only mode during the company presentation.
In pursuing this, we will go on to the question and answer session when further instructions will be provided. I would now like to turn the floor over to Mr. Mauricio Lopes, who will begin the presentation. You may proceed, sir.
Good morning, everybody. It is a pleasure to be with you once again. Thank you to the community of investors, partners, and our Quali to release results for the second quarter of 2025. The main highlights are that the context of the sector continues to be challenging. We have claims as to other players, and most of the interactions we have with operators have grown quarter- on- quarter. We have launched several products during the year. At the beginning of the year, in the first half of the year, the launches are very similar to what we had last year.
Of course, this enables us to balance out the company. It has to deal with several new products that are recorded simultaneously. This shows our capacity of distribution and the plurality that the market requires in that field. Now, how are we working on this process? Helping with our strength, helping to redesign the sector, launching new products continuously over and beyond that. Besides helping to reconfigure the market, we're working with that turnaround project that is proceeding as planned. We're working very consistently. The restructuring is underway. We're doing very well, proceeding at full steam, and the process as operational, as subscription and other processes continue on. We haven't taken our hands off the helm at any moment. We're quite well advanced, and we're harvesting results quarter on quarter. In the last two months regarding the restructuring, we carried out two additional deals.
One, we have transferred the corporate portfolio. Secondly, we have the sale of Gama that will restructure our capital structure and require an internal reconfiguration that will impact headcount and the processes linked to these two projects where we're making changes. Once again, this is part of the turnaround, attempting to eliminate the complexity of the process and the focus on core, the distribution of retail healthcare throughout the country. This is where we have our expertise, and this is where we have diligently and continuously focused our attention. Our flywheel continues to be untouchable. We control their churn in a very relevant way. Now, the figures for 2025 are lower than 2024, and that were lower than 2023. In 2024, we stood at 23%, and in 2025, without a doubt, we will be below 20%.
Year- on- year, we have had a reduction of three percentage points, a readjustment in line with the control of churn, an enhancement in quality, and of course, fixing up these retail portfolios that have a very selective nature. Now, we have products that have good subscriptions. They have a diligent readjustment. They're geared towards the customer, and the customer feels more protected. This, of course, translates into better profitability. Our new product portfolio has made great strides. We have launched 84 products, some of which are exclusive, and we continue to work on the enhancement of our product portfolio. Eder is going to refer to this in the presentation. We had the lowest net portfolio loss of 0.9% since the fourth quarter of 2021, which means we're returning to levels close to the pre-pandemic level and the lowest churn since the fourth quarter 2020 of 8.3%.
This is the result of controlling the flywheel. We protect the customer. We offer a greater range of products. Those customers that are not satisfied can be allocated to other products, other operators. This enables the customer to be linked to the health plan, which is of their interest. These are the points with which I would like to open the highlights for this quarter. I will now give the floor to Eder to speak in greater detail. At the end, we will all be at your disposal should you have any questions, Eder.
Thank you, Mauricio. Good day to all of you. Now, we're going to begin with our managed portfolio. In the second quarter, we had 5,086,500 lives, with additions of 43,500 lives, 33% over the first quarter of 2025. Of course, this is relevant because we're working with better-positioned products, and we're strengthening the operators.
This is thanks to the exclusive deals that we are closing. This helps us with the addition of lives. Churn, as Mauricio mentioned, ended at 8.3%, the lowest, thanks to softer adjustments and a much more efficient retention period. We're working with a full portfolio with improvements quarter- on- quarter. The end result, of course, is positive. Now, the revenue ended at 3.7% lower vis-à-vis the previous quarter, basically impacted by the loss of the portfolio that we sold off in the first quarter. We spoke about this in our previous call, and we found that the performance of the portfolio was not satisfactory. Had we included this portfolio, the revenue of the quarter would be similar to that of the first quarter. Now, our CAC ended at 8.3% of revenue.
8.4%, he corrects himself, 8.4% of the revenue, higher than the previous quarter, once again due to our sales volume. On this front, it is very important to reinforce that we're working diligently when it comes to capital allocation. Our background for the last two years shows you that we have our hand firmly on the helm, not to stray from our direction. Of course, we always have opportunities, for example, exclusivity with some operators. Now, the EBITDA margin vis-à-vis CAC improved vis-à-vis the previous quarter, with a stability of fixed expenses and improvements in PCI and other operational expenses. Now, when we speak about fixed expenses in absolute values, we ended the quarter at values that are lower than the previous quarter, BRL 2.5 million, BRL 2.7 million approximately. Regarding the same period in 2024, we had BRL 18 million less in fixed expenses.
Now, the variables enhanced vis-à-vis last year, but they were somewhat higher than those last year because of our expenses with lawsuits and others. Although we have a very high backlog of lawsuits, the number of lawsuits coming in has been reduced, but we continue to be at a very high level. The positive trend will enable us to eventually see the effect of this in the company results. We had a recurring cash generation before dividends and interest of approximately BRL 2 million. The generation was expressive because of what we mentioned in the release, the payment of the premium of the operator that has taken on our portfolio, causing a slight mismatch in terms of receivables and mismatch in receivables in general, but nothing that will impact coming quarters.
The message here is that during the half of the year, we have a very coherent cash generation, coherent with the size of the company. If we look at the first and second quarters, we had expressive generation. What we have disclosed shows you that we're going strongly towards an even healthier leverage. With this, you can see the main figures of the company. I will now return the floor for the closing. Yes, I would like to underscore two points. Now, the year 2024, we had 178 new products. We're at the end of the first half with 84 new products, and we still have a rather enormous batch that will be launched. Simply a remark that I think is worthwhile, we have enhanced the operational processes in the company. These processes have undergone significant changes in the last 15 months.
Of course, this translates into internal changes, not only in fixed expenses and others, but enhancements in customer service. The customer feels extremely well-serviced through all of the company processes. Quarter- on- quarter, we improve the visibility of the customer regarding our operation. Here, you see some examples. We're going towards an optimal level, which is our goal in the coming quarter, to mention some of the procedural changes. This not only translates into changes for the company, but also represents changes in how we service our beneficiaries. Very well, we can now go on to the question and answer period.
Thank you. We will now go on to the question and answer session. Should you wish to pose a question using your microphone, please raise your hand and we will activate your phone. Questions will be answered in the order they are received.
The first question comes from Felipe Durante from Itaú BBA. You may proceed, sir.
Good morning, everybody. We have two questions at our end. First of all, about the growth of your portfolio. In this quarter, we already observe a much more stable base because of the churn improvement, which is the expectation of the company for the second half of the year. Can we think of a stable portfolio or one with the addition of lives? The second question refers to assets. In the last few months, we have seen several movements in the company. We have seen two significant operations. Now, is there room for new divestments? Thank you very much.
Thank you for the question. What we can say now is that the curve speaks for itself. The curve has been improving quarter on quarter, as we had mentioned.
The issue is that retail portfolios, whether they are Affinity, SME, or whatever, you can choose. These are portfolios that focus on the customer. What changes is the sales mechanism or the mechanism to lock in customers. They do depend on some cycles, and as cycles pass because of adjustments, all of these become more stable. We have closed that loss curve, and we think that we're definitely on the right path. Of course, this requires patience, some resiliency, and very transparently, we're showing you that this is what we're doing with a turnaround, but we are on the right path. I think the coming quarters will speak for themselves. The series are very good. They're good inputs for you to look and see what happens with the processes.
Regarding the sale of assets, those were the two larger assets that we had to be able to focus on the core again. They're very interesting, good assets, but they're not assets that we were able to manage effectively with the entire block of retail products we have simultaneously. Gama is among the largest accredited networks in the country. It's phenomenal. It works with 26 operators since the IPO, medical revenues, audits, and much more. It works for 26 different operators, but it is an asset that has been underexploited as part of the assets of Qualicorp. We cannot focus properly on that asset. An interesting party appeared. They will focus on this BPO, this business process outsourcing provider. This is a third-party network working with other operators. This is what the entrepreneurial change is about.
We create a huge chain, but we cannot simultaneously coordinate the Affinity product, the SME, and the corporate portfolio. We are working with another significant partner in the market, and we can regain forces on both sides. We can maximize our corporate portfolio, and they can maximize the portfolio they have just acquired. We can focus on the core. We divest in terms of what is not our core, and this will take us to the end of the process. Of course, this means a reduction of fixed costs, a reduction of complexity, and the operational processes. Those are the benefits we expect from this.
Thank you very much. Have a good day.
Our next question comes from Gustavo Vasavilbaso from Bank of America. You may proceed, sir. Thank you for taking our two questions. Mauricio, you remarked on the growth of demise.
I would like to explore the competition, especially with SME. Some operators have become more aggressive in terms of price. What is the difference between Affinity and SME? If this difference will tend to be nil or because of the rate you charge above Affinity, or if competition is so violent that SME is gaining space in this environment? The follow-up of a question I posed in the past. We see that operators are in a more positive situation in terms of profit and much more. Now, they pay according to the MLR. I would like to know if there is room to enhance this type of revenue and strengthen your top line. These are my two questions. Thank you.
Gustavo, thank you. Now, let me speak about that SME avenue. In thesis, SME was 20% above Affinity and was 20% below the individual plans.
This is historical until the pandemic. Since the pandemic, of course, everything has been derailed. We have Affinity 100% higher than SME, and this is what is happening at present. Now, let me offer two figures that I think are worthwhile. The Affinity product is superior when it comes to the SME, when it comes to the alignment of incentives with the commercial people and with the operator, something that the SME does not have. The SME focuses on agency fees. It pays off very quickly to the distribution channel, and permanence is quite short. The channel can sell good quality. It can privilege the permanence of the customer with the product, and the operator can have the necessary cash flow to have a product with a more acceptable CAC and LPD.
The Affinity aligns all of these incentives, and the way that we work with this is through a model with lower agency levels. Now, we have incentives on the third and 15 months. We work between the distributor, the operator, and ourselves when it comes to their remuneration and so on and so forth. This is not something that is done in the SME. I think Affinity is superior in terms of the alignment of interest for the sale of a good quality product. However, this conversation with the operator has those remains of the past when this was not managed in an efficient way, and the claims in the portfolio tend to be very high.
They're being corrected through time, but I'm convinced that we're on the right path, and several operators seem to have understood that the SME, I'm sorry, the Affinity should come back through time because it is very close to that leverage of 20% overprice vis-à-vis the SME. Now, we have had a reduction of claims in terms of MLR, and we're conversing with the operators. The lack of satisfaction of operators with the previous portfolios reached a very high index. We made agreements with the operators to try to redress the imbalance that existed between what the operator was gaining as profitability and our own profitability. In the past, you saw that all of this was changed. We worked on the take rates through time, and nowadays, I think we have a good situation. The Affinity harvest has a very good harvest, and we will have a premium through time.
These are the conversations we're holding with the operators continuously, and we can explore this in the other calls so that we can give you more color in terms of this. Thank you for the question. That was excellent.
Thank you, Mauricio.
Our next question comes from Joseph Giordano from JP Morgan. You may proceed, sir.
Good morning, everybody, and thank you for taking my questions. I would like to explore that strategy to reduce churn. It's the great aggressor. You carry out new sales, and you have to maintain that customer. Now, we have seen the company working ever more on that commercial issue, working more proximity so that you can share the risk. How does that change the economics of the product through time?
Here we speak about two different currents, how much you have in quotation marks of take rate and brokerage and the commissions for the broker per se, if these can become aligned. Secondly, how have you created these products at forehand? Are you working more regionally? Are you trying to have a better adherence with the customer to understand how far you can go and when we should see a growth or at least a greater stabilization of this affinity base? Thank you.
Good morning, Joe, and thank you for the question. When it comes to the portfolio, everything is important. We pay the brokerage based on permanence. If they remain for three months or 25 months, that is how we remunerate them. The operator needs this. The broker needs this. That vertical has been resolved. 100% of the contracts of distribution of Quali were activated throughout the year 2023.
The Quali commercial team activated 100% of the contracts until December of 2023. There is no distributor that doesn't have a long-term alignment. Our remuneration with the operator is linked to retention, to permanence, and they can work with intervention, with promotions, offering more effective help to the customer, and much more. That's another vertical. Now, the product portfolio, as the product portfolio grows, we have a greater possibility of reallocating the customer to wherever they have that possibility of payment and having the right coverage. In 2023, when we had a very reduced portfolio, we could not reallocate the customer. Now, we have several options. We don't have all of the options, but we're working towards increasing them. This decreases churn. The fourth part of this is technology. We have worked with retention. We have 110 people permanently in our headcount being trained, working on this.
The entire technology has been turned around, and as we have several products, several entities, and portfolios that we have no visibility of in the training of our retention consultant, we're creating artificial intelligence layers to be able to offer the best option for the customer when we're first servicing them. This, of course, will enhance the service and enhance their retention. Will they use network A or B? Now, should the best product be X or Y? This is what we're trying to offer in a more automatic fashion to the consultant. Because of the number of entities and products connected to this, we have an increase in portfolio, an increase in operators, and an increase in distributors. All of this has led to a lower structural churn. Now, in some quarters, this will increase or decrease more. It's not a problem. It's simply a matter of readjustment.
Structurally, this should decrease continuously, and we're betting our chips on this. Thank you.
Thank you very much, Mauricio.
The session and answer question ends here. We would like to return the floor to Mr. Mauricio Lopes for the company's closing remarks. Mr. Lopes, you may proceed.
Thank you once again for attending our quarterly call. Once again, I'm going to reiterate what I have said in all of the calls. These closing remarks are important. We want to underscore them. Everybody is working on this turnaround. The company has not come to a stop. As happened before, we're not going to change the company, and we're not going to have other turnarounds until we understand that this one has finished. Now, our focus on the customer is almost compulsive. We have an insistence on partnerships.
We're going to continue to focus on all of these factors, and we are going to generate results in the best way possible going forward to our shareholders, our managers. They're all aligned with us for the long term. They have a clarity of the business we have for the future. We're highly convinced on the route that we had set forth, and we're going to move forward while the market gets organized, reduces the claims. The fact that we have cash, of course, is always tempting to spend more than we should, but we're not going to do that. We're going to continue with our hands firmly on the helm with a very responsible action. Now, the customers do require lower readjustments and stable portfolios. The operator needs a stable portfolio to enhance the offer of products. We're working towards the protection of the consumer.
We're not going to derail from the path we had set forth. We will continue to hold on to that helm, that flywheel. We want to have a high average time of permanence and, of course, very good service to the customers. I would like to thank all of the teams and shareholders who have believed in our thesis. My warm greetings to all of this, and we will speak again in three months at our coming call. Thank you very much, and have a good weekend.
We would like to thank all of you for your attendance. The earnings release call for the second quarter 2025 for Quali ends here.