Operator: On behalf of SNB Capital, I would welcome you to a conference call with Care Management regarding the Q3 2026 financial results and operating performance. I will hand it over to Ms. Alia Balbaa, Director of IR. She will introduce the speakers and she will start the presentation. Ms. Alia, please take the floor.
Alia Balbaa: Thank you, Ramin. Good afternoon, everyone, and thank you for joining us today. We are happy to report another solid quarter, where the momentum of the Q2 has continued. This quarter delivered a solid set of results across the board, from revenues growing 14% year-on-year, the gross profit reaching its highest levels, and net profit increasing 6% year-on-year. Most importantly, stronger collections have taken place. This was mainly driven by sustained momentum in GOSI referrals, stronger growth in insurance revenues, and overall increase in number of patients. This performance showcases the resilience of our business. During our presentation, Dr. Abdulaziz will open with the quarter's operational highlights. Jahanzeb will take you through our financial results, and Naseer will present our strategy growth pillars. Lastly, we will open the floor for Q&A. With that, I will hand over to Dr. Abdulaziz to begin.
Abdulaziz Saleh Alobaid: Thank you, Alia, and good afternoon, everyone. This quarter, we continue to deliver solid growth across all our key financial metrics, sustaining the momentum that was established in the Q2 and continuing the positive trend we have built over recent years. If you look at the top left paragraph, the revenue has continued to grow over this period, reaching SAR 472 million in the Q3 of 2026. This has been driven by growing patient volumes across our network and the sustained growth of our GOSI and insurance business. Our profitability has followed the same path. The gross profit reached SAR 180 million in the Q3, its highest quarterly level to date, as our payer mix continues to improve and support our margins. The EBITDA has grown in line, reaching SAR 130 million this quarter.
Abdulaziz Saleh Alobaid: The net profit has also moved higher over time, reaching SAR 87 million this quarter. These trends show how our business has grown consistently over time. The three quarters of this year have reinforced the positive trajectory, and our focus is on sustaining the momentum that we have into the Q4 and beyond. Turning to capacity, we continue to meet higher patient demand through targeted bed additions and more efficient use of our existing network. The overall bed occupancy rate stands at 82% across the network in the first nine months of 2026. Malaz at 86%, Rawabi at 83%. These high utilization numbers that validate the underlying demand of our services. What is particularly encouraging is the improvement in average length of stay. The ALOS has declined from 9.6 days to 8.8 days this quarter.
Abdulaziz Saleh Alobaid: This is meaningful operational improvement, which means that we are treating more patients with the same physical capacity and patient admissions grew 16% in the first 9 months, while inpatient days grew only 3%. We are effectively creating capacity without adding beds. That is the operational discipline that we are building on before we add more beds. I will hand it over to Jahanzeb to take you through the financial results.
Jahanzeb Khan: Thank you, Dr. Abdulaziz. Good afternoon, everyone. Starting with the income statement, revenue reached SAR 472 million during Q3. It is up 14% year-on-year. Our gross profit grew faster, rising 19% to SAR 180 million, as revenue growth outpaced the increase in cost of revenue. Gross margin improved to 38% from 36.7% a year earlier, and 37% in Q2. This reflects strong growth in activity and maintenance of our payer mix. Below gross profit, higher operating expenses limited the flow-through to earnings. EBITDA grew 12% to SAR 130 million, with a margin of 27.6%, compared with 28.3% last year and 29.5% in Q2. Higher G&A expenses were the main year-on-year pressure. Expected credit loss provisions was SAR 11 million.
Jahanzeb Khan: This is broadly stable year-on-year, but up from SAR 2 million in Q2, which had benefited from reversals due to settlements and collection and was therefore lower than typical provision levels. We anticipate further reversals once commercial negotiations with our insurers conclude. Net profit rose 6% year-on-year to SAR 87 million, with a margin of 18.5%. Compared with last year, finance cost increased to SAR 6 million from SAR 3 million, and Zakat rose to SAR 9 million from SAR 5 million. Compared with Q2's SAR 94 million, the decline mainly reflects the higher ECL charge and Zakat. For the first 9 months, revenue increased 10% and EBITDA grew by 2%, while net profit declined 6% to SAR 233 million. The 9-month performance continued to reflect Q1 profitability pressures, higher operating expenses, increased finance costs related to the medical equipment leasing agreement, and higher Zakat expenses.
Jahanzeb Khan: Looking at revenue in more detail, GOSI remained the main driver of our growth, supported by continued strong momentum in insurance. GOSI revenue reached SAR 193 million for the quarter, up 27% year-on-year and 2% from Q2. This confirms that referral activity has normalized and continues to grow. GOSI accounted for 41% of the group revenue in the quarter, up from 37% a year earlier. Over the 9 months, GOSI revenue increased 14% to SAR 512 million, representing approximately 39% of the total revenue and keeping GOSI firmly our largest payer. On the long term, 9-month GOSI revenue has grown at a CAGR of 20.6% since 2021, despite some variation in referral activity between individual quarters and halves. Insurance growth accelerated for revenue reached a record of SAR 130 million, up 35% year-on-year and 11% quarter-on-quarter.
Jahanzeb Khan: Over the 9 months, insurance revenue increased 27% to SAR 351 million, lifting its share of our consolidated revenue to 27% from 23% a year earlier. Together, GOSI and insurance sector added approximately SAR 139 million of revenue over the 9 months. This more than offset the 7% decline in revenue that we experienced from Ministry of Health and other government entities, which mainly reflects lower MOH referrals as they continue to prioritize capacity within the dedicated long-term care facilities. Turning to costs, total expenses for the first 9 months rose 13% to approximately SAR 1 billion. Cost of revenue increased 12% to SAR 845 million. Direct salaries and benefits, our largest cost base, grew 11% to SAR 521 million. Medicine and consumables rose 16% to SAR 236 million in line with the higher patient activity. in Q3, cost of revenue grew 12%, below revenue growth of 14%.
Jahanzeb Khan: As a result, the cost to revenue ratio improved to 61.9% from 63% a year earlier and 62.9% in Q2, supporting the gross margin expansion that I mentioned earlier. Operating expenses moved differently. Over the 9 months, they increased 18% to SAR 199 million, mainly due to higher staff costs and professional fees within G&A. in Q3, G&A rose 25% year-on-year to SAR 59 million, and total operating expenses increased 27% to SAR 77 million. Turning to the balance sheet, total assets rose 15% from year-end to SAR 3.2 billion, mainly reflecting our investment in Narjis, funded in part by long-term borrowings that took total liability to SAR 1.2 billion. The key development this quarter was a clear improvement in working capital. Our DSO fell from 202 days at the end of June to 191 days at the end of September, as collections improved relative to billings.
Jahanzeb Khan: Days payable rose from 78 to 85 days, while inventory days were stable at 72. Together, these shortened our cash conversion cycle by around 18 days, from 197 to 179 days. With less cash tied up in the operating cycle, working capital released SAR 65 million during the quarter. Cash and term deposits rose to SAR 363 million from SAR 243 million in June, and net debt fell 21%, from SAR 556 million to SAR 441 million. The reduction came mainly from higher liquidity rather than lower borrowings. Q3, however, marks a clear turning point. Our priority is to build on this momentum by sustaining the improvement in collections and working capital as we progress our investment in Narjis. Looking more closely at receivables, the improvement in GOSI collections was a key part of the Q3 performance.
Jahanzeb Khan: Gross GOSI receivables declined from approximately SAR 454 million in June to SAR 432 million in September, despite GOSI revenue increasing during the quarter. This reflects progress in collecting the balances that built up earlier in the year as referral activity and billings recovered. Across all payers, total gross trade receivables stood at approximately SAR 1.5 billion, 26% above year-end and around 2% above June. The increase during the quarter mainly reflects higher insurance balances in line with the strong growth in the segment, so while DSO has improved, the overall receivable balance has yet to start declining. Looking at the aging profile, recent billings aged up to 3 months represent the largest share of gross receivables at 34%. Overall, around 67% were aged within 1 year, consistent with our normal collection cycle.
Jahanzeb Khan: The remaining 33%, or approximately half a billion SAR, was aged over one year and includes invoices already approved by the Ministry of Health and Insurance that should be collected soon. It is worth highlighting that in October alone, we collected around SAR 56 million from both GOSI and MOH. Additional payments of SAR 154 million relating to Ministry of Health claims have been uploaded in the platform and the collection should follow shortly. We continue to actively pursue these collections and advance our commercial negotiations with insurers, with an ECL reversal expected as those negotiations conclude. Looking over our cash flows, the improvement in working capital is most clearly visible in our cash flows. Operations generated SAR 202 million of cash in Q3 compared to an outflow of SAR 52 million in the same quarter last year. Working capital contributed SAR 65 million of this.
Jahanzeb Khan: Trade and other receivables released SAR 18 million, and higher trade and other payables added SAR 48 million, partly offset by inventory. Both collections and the timing of payments therefore supported the improvement. This brought operating cash flows for the first nine months to SAR 82 million compared to SAR 28 million a year earlier. Over the period, working capital absorbed SAR 265 million, lower than the SAR 324 million absorbed in the same period last year. Q3 has begun to reverse the working capital buildup from H1. We continued to invest during the quarter with net CapEx of SAR 59 million. Nine months CapEx reached SAR 215 million, primarily supporting Al Narjis and investments in our existing network. We also placed SAR 74 million in term deposits during the quarter.
Jahanzeb Khan: After investing in financing cash flows, the cash and cash equivalents increased by SAR 46 million in the quarter to SAR 289 million. Including term deposits, total liquidity stood at SAR 363 million. Overall, stronger operating cash generation in Q3 supported our continued investment and an improvement in liquidity. Sustaining this progress in collections and working capital remains a key priority as we move into Q4. This concludes the financial review. I will now hand over to Naseer to discuss our growth strategy.
Syed Mohammad Naseer: Thank you, Jahanzeb. I will take you through our strategy now. Just to bring your attention to some of the key pillars of our strategy going forward, specifically around scaling and driving our growth. The first one, which I am sure you are familiar with, is our flagship development, which is the Al Narjis Hospital. We fully expect it to come online early 2028, with construction completed by the end of 2027. Initially, 200 beds will come online. So far, I am pleased to report that construction and our plans remain on track with no foreseeable delay at this point in time. The second project is the Jeddah Greenfield. About 150 beds are planned for the initial phase, and this actually strengthens our dual core strategy, which is on Riyadh and the Western Province.
Syed Mohammad Naseer: So this is currently undergoing design phase. Once the design phase is complete, we will give you CapEx guidance on what is going to be spent behind this particular hospital. You will recall that in the last earnings call, we also spoke about our clinical network expansion. The first clinics are targeted to come online in 2027. The first clinic is a multi-speciality clinic, which is undergoing the setup phase, and this will come online in the early part of 2027. This is in the Rabwah area, which is roughly equidistant from both of our hospitals within that catchment. This is a multi-speciality clinic. The second clinic is towards to the south of Riyadh, near industrial work sites.
Syed Mohammad Naseer: This is undergoing the design phase because this is a land on which we will build an asset-light model, which will act as a referral hub for the cases from that proximity of that particular area. The other two pillars of our strategy is basically around enablement and M&A. On the M&A side of things, we continue to manage an active pipeline. At any given point in time, we are evaluating multiple opportunities, and we look at them from the perspective of their strategic fit and how much value they can add to our shareholders. The nature of M&A is that until or unless something materializes, we will obviously, at that point in time, disclose that. The last part of it is what I spoke about enablement.
Syed Mohammad Naseer: This is related to our IT strategy, which is a complete overhaul of our systems and our processes, as well as leveraging latest tools like AI and automation. That is just a quick overview of the strategy. I will hand over to Dr. Abdulaziz.
Abdulaziz Saleh Alobaid: Thank you, Naseer. Before we close, I would like to revisit our long-term incentive framework and highlight how we ensure that the management rewards and interests have a
Abdulaziz Saleh Alobaid: A positive and significant relationship with the company's performance and with the shareholders' value. This happens through two components. First, on the left, you can see that the annual bonus, which is set as a percentage of the earnings that the company achieves. This means that the management annual reward moves in line with our profitability. Second, which is more significant on the right, is our LTIP program, which is linked to our share price. The LTIP is equity-based and payable in company shares. So its value moves in line with our share price in the same way as it does for our shareholders. The LTIP is built around three performance criteria: profitability and earnings, return on invested capital, the completion of a mega hospital within budget, and the delivery of key expansion milestones.
Abdulaziz Saleh Alobaid: The shares become payable only upon delivery of a set of targeted milestones, and only when the achievement is above 85%. With that, we conclude our presentation, and we are now happy to take your questions.
Operator: Thank you, management, for your detailed feedback. Now we will open the floor for the Q&A. If you wish to ask a question, you can click on the raise hand icon on the webcast, or alternately, you can type in your questions during the chat box as well. Our first set of question is coming from the line of Mr. Mohammed Alkahtani. Mohammed, if you can unmute yourself locally and introduce your company before asking your set of questions. Mohammed?
Mohammed Alkahtani: Salam alaikum. This is Mohammed Alkahtani from Public Investment. I have two small questions from my end. First, you have reduced the average length of stay this quarter. How much more can you shorten it, especially at Rawabi or Malaz? This would unlock capacity more for Care. Are you targeting 6 days, 7 days, 5 days? What are you guys targeting there?
Abdulaziz Saleh Alobaid: Thank you, Mohammed, for your question. We have two types of patients, the long-term patient and the acute care patient. Keep in mind that one of our hospitals is dedicated for long-term care patients, so it would be very hard to reach the 3.4. When we look at our acute care cases, the average length of stay is at 2.4 days. However, overall, yes, we can reduce it more. I would also like to highlight that the contract that we have with the Prince Sultan Military Hospital will be concluded in mid-2027, and we may choose not to continue with that contract, and that will give us more capacity to have more patients with a shorter hospital stay.
Mohammed Alkahtani: Yeah. Very clear. My second question was actually about the Prince Sultan contract. How do the economics of the Prince Sultan contract compare with GOSI, MOH, or insurance, for example? If you could help us and give us light there.
Abdulaziz Saleh Alobaid: It is very different because these are patients who require mostly nursing care. However, part of the contract is that if they need any medical intervention, to put it in simple terms, if they need gastric feeding tube, if they need some wound dressing that has to be done in the operating room, it will be done and it will be charged. But for the most part, it is basic nursing care. The margins are good, but you cannot compare them to patients who come for acute emergency services.
Mohammed Alkahtani: Would you say the profitability of GOSI, MOH acute patients varies in a big way from the Prince Sultan contract?
Abdulaziz Saleh Alobaid: Yes and no. Unfortunately, GOSI patients, they come with multiple injuries, and they require extensive procedures. Plus, they undergo some kind of rehabilitation after the procedure. They may need extra physiotherapy, prosthetics, et cetera. For sure, the margins are different.
Mohammed Alkahtani: Thank you very much. That is very clear. Good luck in Q4.
Abdulaziz Saleh Alobaid: Thank you.
Operator: Thank you, Mohammed. Our next set of question is coming from the line of Mr. Jonathan Milan. Jonathan, if you can unmute yourself locally and introduce your company before asking the question. Jonathan.
Jonathan Milan: Good afternoon, Jonathan Milan from Waha Capital. First of all, congratulations on a great set of results. Record revenue and gross profit in the summer months. Fantastic. With regards to the insurance settlements, can you give us a quantum of how sizable these insurance settlements can be? If we add to that the SAR 154 million approved by MOH, the SAR 500 million of receivables above one year, would it drop to zero? What would you do with that SAR 500 million? Is it pay down debt? I think that would generate interest savings of about SAR 32 million annualized. That is my first question. My second question is on the jump in OpEx. This SAR 65 million in Q3, could this be the new run rate or does it include any one-offs? Thank you.
Abdulaziz Saleh Alobaid: Thanks, Jonathan. These settlements relate to particular years. No, it is not like we agree on these settlements and the entire SAR 500 million would be deposited into our banks. They are sizable, definitely. The ECL is significant as well. We have not disclosed the exact amounts that are pending relating to the settlement period that we are currently under discussion. They are significant amounts. The target that we have set for ourselves, is to have an AR days of at least 150 to 160 days. You can understand what we are aiming to achieve for the rest of the quarter. However, as you know, Ministry of Finance payments have been sporadic. That is not under our control, especially considering that majority of our business is with GOSI and Ministry of Health.
Abdulaziz Saleh Alobaid: The one benefit that we have with GOSI is that, although the process could be a bit slow, they are financially independent from Ministry of Finance. The payments are not subject to Ministry of Finance constraints. Your second question regarding OpEx, is that there is an increase. Yes, there is an increase. There are some professional fee consultants and advisors that we have engaged, and they are directly related to our activities around how to structure the new group, dealing with new businesses, M&As. Although they are not fixed, just the stage that we are in our strategy, some sort of expenses will still be there. I do not foresee them to go down over, let us say, a longer period than where we are right now. There might be dips and recoveries in different quarters.
Abdulaziz Saleh Alobaid: Overall, we do expect consultants and advisors to be engaged with Care in the near term.
Jonathan Milan: Okay. Thank you very much. Thanks.
Abdulaziz Saleh Alobaid: You are welcome.
Operator: If you wish to ask a question, you can click on the raise hand icon on the webcast, or alternately, you can type in your questions in the chat box as well. Our next set of questions is coming from Jameel Bakhsh. Jameel, if you can unmute yourself locally and introduce your company before asking any questions. Thank you.
Jameel Bakhsh: Hi, everyone. This is Jameel Bakhsh from Bank of America. Firstly, congratulations on the great results as well. A few questions from me. I hope it is okay if we do it just one at a time. Firstly, maybe just on the receivable days and the ECLs at the same time, considering they are two sides of the same coin here. Your receivables targets of 150 to 160 days. Do you think that this is a more achievable target? Are you saying this like a longer-term estimate or like a Q4 estimate?
Jahanzeb Khan: That was our target for the year. That is what we are working towards.
Jameel Bakhsh: Okay, perfect. Sorry, excuse me. Assuming that you do meet the target very well within Q4, how much could we see the reversal in ECLs, related to that?
Jahanzeb Khan: We have not disclosed the exact amount, but it is significant.
Jameel Bakhsh: I guess they would move hand in hand if that is correct. Let us say your receivable days go midpoint of your target, that would imply, like you say, quite a high step up in ECLs, much beyond anything we have seen before, I guess.
Jahanzeb Khan: Yeah. There is one caveat to this, because we don't book ECL against government receivables. Because ECL specifically targets your customer's ability to pay. So we take the stand on, with the auditors as well, that we don't book ECL provisions against government entities because they do have the ability to pay. What we do book is a provision for rejection of medical claims based on historical rejection rates. So we feel that is enough and the government will pay once the settlements have been agreed on. We need to collect on the insurance side of the business to be able to reverse the ECL provisions.
Jameel Bakhsh: Got you. That's actually very helpful on the direction and magnitude as well. Thank you. If I just go into a couple more questions. If we look at another unfortunate regional disruption that we're facing, has that had any impact into the GOSI referrals that you've seen coming in so far within Q4? I know we're only really 29 days in there, but is there anything you can comment about whether referrals have been affected by regional disruption, either maybe through a slowdown of construction activity?
Abdulaziz Saleh Alobaid: We didn't close the month to know the exact impact. However, more than 60% of our injuries are related to construction. So, if there's a speed up of the construction activity, unfortunately, we see more injuries. If there's a slowdown, we see less injuries. So that's the general rule that we have.
Jameel Bakhsh: Sure thing. That's well noted. And the final question, Sensake, just on M&A. I know it's been a long-standing part of your strategy, and I think it's been now a couple of years, in fact, since the Prince Sultan announcement. I'm sure across that time you've got very close to signing different agreements, and you say you've got a long pipeline ahead of you as well. Just in terms of when we could expect any announcement on any signings of M&A deals, do you think that's more a near term, maybe within the next six months, for example, just looking at how you're progressing with your targets now? Or could it be just more a near to medium-term ambition? And how much in terms of size of deals are you looking for?
Jahanzeb Khan: So again, just on a lighter note, in terms of expectation, our expectation is always near term, and in terms of practicality
Jameel Bakhsh: Sure
Jahanzeb Khan: it has always been near term. So there have been times where we have come close, where it was right around the corner, and then unfortunately, something beyond our control actually happened. So our ambition, if we go back to the ambition, because that is practically the only thing we can control, is to close a deal ASAP or around the corner because again, we have capital to deploy, and that is our overriding priority. But the nature of M&A in this region is that you do not really count your chickens before they hatch, if I can put it in an analogy.
Jameel Bakhsh: Sure thing. That is well noted. I have been there myself, so I very much understand it there. Maybe just in terms of how much you would expect or maybe just in terms of maybe a target net debt EBITDA that you would look to lever up for from M&A.
Jahanzeb Khan: So look, again, I will throw out a number and Jahanzeb can correct me if I am wrong, but considering the size of our balance sheet and the leverage it can take, I think we can lever ourself up to roughly maybe SAR 2.5 billion to SAR 3 billion. So that is kind of like the range of the four or five power we can deploy. And then timing is also a consideration because as our EBITDA grows, so that number will obviously also continue to grow year over year based on when the deal materializes.
Jameel Bakhsh: Sure thing. That is very well noted, sir. Well, look, thank you very much for the detailed answers and congrats on the results again.
Jahanzeb Khan: Thank you.
Operator: Thank you, Jameel. Next question is coming from Mr. Talha Nazar. Talha, if you can unmute yourself locally and introduce us the company before asking your questions. Talha.
Talha Nazar: Thank you, Nauman and thank you, gentlemen, and congratulations on an excellent set of results. My questions are mostly related to the finance cost increase by SAR 6 million. Can you just highlight how much of that is coming from the Siemens lease and how much of that is coming from additional debt? Because I believe the debt from Narjis would be capitalized. So how much of that is, in terms of the breakdown, the increase is coming from? Can you shed a bit light on the Zakat expenses also? Thank you.
Jahanzeb Khan: Yeah. You are right. The financing cost related to Narjis facility is definitely capitalized as part of the cost of the asset. The increase in the financing cost is purely because of the lease agreement we have with Siemens for medical equipment. As far as Zakat goes, it is just the provisioning that we do based on the quarter on quarter calculation that we do as of year to date results. Nothing specific there.
Talha Nazar: In terms of revenue from this particular lease, is there any revenue matching for the lease agreements that you have, or we should expect slightly higher revenues coming in from
Jahanzeb Khan: There is no revenue coming in from this contract, like any direct revenue. You have to understand that Rawabi, Malaz, they are both decades old. The equipment was up for replacement, and we wanted to take advantage of the latest technology. We entered into this agreement with Siemens, where it is a 10-year agreement. It is a strategic partnership. It is not a vendor-customer relationship. It is a partnership where they replace all of our radiology and related equipment over the next 10 years. They take the responsibility of maintaining them, and replacing them as well when they are up for replacement. The equipment comes with latest technology as well, including AI. It just ensures that, A, our equipment is latest state of the art. Second, it is maintained by the OEM, so that the uptime for our equipment is guaranteed at upwards of 98%.
Jahanzeb Khan: It is just operational efficiency and a strategic partnership, no direct revenue.
Talha Nazar: Okay. Thank you.
Operator: Thank you. I will now take one question from the chat box, which is coming from Ms. Khiza. Could you quantify the impact of GOSI contribution on net income?
Jahanzeb Khan: We don't disclose the individual contribution by payer on the net income currently.
Operator: Thank you. That was very clear. Our next set of question is coming from Mr. Hikmat Matta. Hikmet, if you can unmute yourself, introduce the company before asking your set of questions. Hikmet?
Hikmat Matta: Thank you, Nauman. Thank you for hosting the call. Thank you, management. This is Hikmet from Afaq Capital. Just a small question from myself regarding the medicine and consumables trend I noticed over the past, in the previous quarter and this quarter, the growth has been quite high. I understand the growth in the revenues, but at the same time, there has been a spike in it. If you can just shed some light, did supply chain or any factors contribute to a higher than normal, let's say, increase in the medicine and consumable recorded at the gross profit level?
Operator: Yes. Hello?
Jahanzeb Khan: Sorry. The medical consumable cost definitely is variable. It is directly related to the increase in outpatient, inpatient volumes, number of surgeries, number of procedures that you do. The more procedures you do, more inpatients you admit, definitely your medical consumables and medications are going to go up. That is a given. However, given the supply chain issues that have been faced by the market, the cost inflation that we have experienced in shipping costs is around between 10% to 15%. That is also contributing to the higher cost of medical consumables.
Hikmat Matta: Okay. Very clear. Thank you very much. Thank you, sir.
Jahanzeb Khan: Good.
Hikmat Matta: Thank you.
Operator: Thank you, Hikmet. Our next set of questions coming from Ahmed Moataz. Ahmed, if you can unmute yourself, introduce your company before asking your questions.
Ahmed Moataz: Thank you very much. This is Ahmed Moataz from EFG Hermes. Congrats on a great set of results. Two quick questions, please. One is actually a clarification. When you did mention that you do not book ECLs on government receivables, but rather unexpected claim rejection. Correct me if I am wrong, that means that you take it out of gross revenue and accordingly, in a case that you manage to settle, on the insurance side, you are going to have a reversal in ECL provisions, and then on the other side of your business, you are going to have a temporary boost to revenue, given such a reversal as well in expected claim rejections. Am I correct or do I miss something?
Jahanzeb Khan: Not necessarily. You are correct that the rejection provision which is booked against all medical claims except for cash, obviously. But insurance and Ministry of Health and GOSI, we do book rejection provisions. We do not do it for Prince Sultan because it is a standard daily rate contract, and we do not do it obviously against cash. But when we do book the rejection provision, it is presented as net of the gross revenues as part of net revenue. If we do settle, so let us say as an example, now these are not exact percentages, I am just using these as an example for simplicity sake. If I book a provision of 10% of rejections and subsequently, next year or the next quarter, I do settle with the insurance company, and if I settle at the 10% that I had assumed, nothing happens.
Jahanzeb Khan: Just the related ECL for insurance receivables will be reversed. If I settle at 11% or 9%, the subsequent periods will have to take that benefit or the burden.
Ahmed Moataz: Yeah, very clear. Thank you very much. The second question, have you had the chance to assess if your business would see an impact from both the increase in tariffs for electricity starting 2027, and the second is raising the minimum wage for Saudi employees as well?
Jahanzeb Khan: For the electricity, we have looked at it. The impact is for if you consume more than 6,000 units. Apart from Rawabi, Malaz, and Al Salam, the remaining business units are not that, you can say, they are not that big to be able to be consuming more than 6,000 units in a month. What we have estimated is that our utility cost will go up by 5% to 10% maximum. 10% if we are conservative, 5% to 6% if we are pragmatic. A utility is not a significant. Well, it is a significant cost base, but not that significant. We do not believe that it is going to cause a big spike in our expenses.
Syed Mohammad Naseer: For the Saudization book that it will not have an impact in 2027, probably in 2028, we may see a small increase. But we do not anticipate any impact on 2027.
Ahmed Moataz: Very clear. Sorry, on an overall basis, are you already above the 6,000? I know you said that the three hospitals, et cetera. If I were to look at you on a consolidated basis, do you exceed the 6,000 threshold and therefore you are going to be subject to the higher increase in tariffs or not?
Jahanzeb Khan: I doubt it because I am sure this is done at a meter level. It is like how many circuit breakers you have installed in a
Ahmed Moataz: It is house to house.
Jahanzeb Khan: A particular facility.
Ahmed Moataz: not grouped, right?
Jahanzeb Khan: It is not on a group basis.
Ahmed Moataz: Okay. Very clear. Thank you very much, sir.
Jahanzeb Khan: You are welcome.
Operator: Again, if you wish to ask a question, you can click on the raise hand icon on your webcast, or alternatively, you can ask a question on the chat box as well. Our next set of questions is coming from the line of Haitham Al-Harthy. Haitham, if you can, unmute yourself locally, introduce your company before asking the questions.
Haitham Al-Harthy: Yes. Hi, am I audible?
Operator: Yes, you are audible. Please go ahead.
Haitham Al-Harthy: Thank you for your time, management. Congrats on the great set of results. I have one quick question from my end. I am just wondering here, I am assuming most of your insurance revenue is outpatient rather than inpatient, and therefore it should be more or less comparable with your outpatient volume. However, we have been seeing some discrepancy in your insurance top line and outpatient volume. I am just wondering what is causing this. Is it lower rejection? Is there something we are missing here? Is it pricing? This trend has been noticeable for a while.
Jahanzeb Khan: We do not disclose our outpatient/inpatient revenue by payer. We disclose our outpatient/inpatient on an overall basis, right?
Haitham Al-Harthy: Fair.
Jahanzeb Khan: I think what you are referring to, and correct me if I am wrong, is that our ratio from outpatient to inpatient is not in line with our peers, our listed peers.
Haitham Al-Harthy: No, that is not what I am referring to.
Jahanzeb Khan: Okay.
Haitham Al-Harthy: If I take Q2, for example, inpatient revenue is approximately SAR 300 million, and if I combine both GOSI and MOH, this gives me more or less SAR 300 million. So it is fair to assume, and obviously given the nature of MOH and GOSI, it should be more inpatient tilted, which leaves insurance to be a major contributor on outpatient, hence why I compared it to outpatient.
Jahanzeb Khan: There is outpatient for GOSI as well, for follow-up, for rehab, for physiotherapy. They do not go into inpatient. It is not that all the 100% of the inpatient is, like GOSI or MOH is 100% inpatient. Even for MOH, there are outpatient visits as well for follow-up and everything. But insurance, definitely a large segment of the outpatient revenue is coming from insurance.
Haitham Al-Harthy: Fair. Would it be fair to compare insurance trend, insurance revenue growth with the outpatient growth?
Jahanzeb Khan: Yes.
Haitham Al-Harthy: Hence my question. We are seeing some discrepancy there. We are seeing much higher growth in insurance revenue compared to outpatient volume. What is causing this?
Jahanzeb Khan: See, you have to look, it is not just outpatient. Insurance, we do a lot of inpatient and surgical procedures for insurance as well. So we have a conversion ratio of 5% on average, right?
Haitham Al-Harthy: Yeah.
Jahanzeb Khan: So 5% of our even insurance patients do get admitted into inpatient and have sometimes surgical procedures as well.
Haitham Al-Harthy: Fine. Let me rephrase the question.
Jahanzeb Khan: Okay.
Haitham Al-Harthy: What is causing the growth for insurance?
Jahanzeb Khan: Over the past few years, we have been offering new services to our insurance clients. Better doctors, more specialties. In the past, I will give you an example. Some specialties we would not be offering, like oncology was not an option in our hospitals till last year. So if a patient needed oncology services, we had to refer them out, right?
Haitham Al-Harthy: Yeah.
Jahanzeb Khan: Now we are in a position when a patient comes to us and they need oncology services, we can refer them to in-house. That means we are retaining those patients. Definitely, with the reputation that we have, that we built with our patients, we do see repeat business as well. Recently, we did a study that, in terms of retention of patients, we scored very high. It was done by an independent consultant. Once a patient does visit our hospital, they are more than likely to come again.
Haitham Al-Harthy: That's fair. Thank you for your time. Good luck.
Operator: Thank you, management, for such a comprehensive answer. We will take one question from the chat box, and this is coming from the line of Mr. Abdullah Umar. He is asking: What is the percentage share of utilities in company's reported COGS during H1 2026?
Jahanzeb Khan: As a percentage of revenue, I would say it's less than 3% or maybe 2%. I can't recall from the top of my head, but it's not that significant.
Operator: I think the number will remain the same for nine months as well.
Jahanzeb Khan: Yeah.
Operator: Okay. Thank you. We will now take our next set of questions from Ms. Sylvia Richards. I hope I pronounced your name correctly. Ms. Richards, if you can, unmute yourself locally.
Sylvia Richards: Hi, am I audible?
Operator: Yes, you are, and apologies, Ms. Sylvia. Please go ahead.
Sylvia Richards: No worries. Thank you. It is Sylvia Richards from Morgan Stanley. I understand GOSI revenues are generally a factor of construction activity, but I just wanted to ask, now that we have seen two quarters of really strong numbers, whether we should be expecting GOSI revenues to be structurally higher, or at least maintain this momentum into Q4. My second question would be around Al Narjis. Do we have an update on the potential international partners for this hospital?
Jahanzeb Khan: Okay. I will take the first question regarding GOSI revenue. Yes, you are right. We have experienced a strong two quarters of GOSI revenue. We have maintained that in the past as well, that if you look at the CAGR now where it stands, over a nine-month period since 2021, it is at 21% CAGR for the past five years. We always expect dips and recoveries quarter on quarter when it comes to GOSI. We do believe that the fundamentals are there in the economy that would generate infrastructure investment in the future as well, for the foreseeable future. Where there is infrastructure investment, growing economy, occupational hazard cases will be there. We never comment that every quarter will be a growth quarter. However, on a longer term, if you take a bird's-eye view on an annual basis, you will see growth.
Syed Mohammad Naseer: Your second question is around update on the partnership with Al Narjis.
Syed Mohammad Naseer: Yeah. As far as the international partner is concerned for Al Narjis, we are progressing quite well in terms of working out the right international partner for her. The thing that I do want to highlight is that from a timeline perspective, you really practically need a partner to be with you when the hospital is commissioned and it starts operations, which is in early 2028. You may err on the side of caution, and you may go a little bit more into the back end commissioning and involving them, which means just a few months before the hospital becomes operational. We are working towards those timelines, and we have time on our hands. What we are expecting is that towards the latter half of 2027, we would be moving to a stage where we start formalizing these relationships.
Sylvia Richards: Okay. Thank you. Very clear.
Operator: Thank you. Again, if you wish to ask a question, you can click on the raise hand icon on your webcast, or alternately, you can type in your questions to chat box as well. Our next question is coming from Mr. Olavi. Olavi, if you can introduce yourself before asking the questions as well.
[Analyst]: Hi. Thank you for the call. I just had one question regarding the unfortunate tragic attack on the Riyadh airport. Did Care serve some of those patients?
Abdulaziz Saleh Alobaid: We were alerted by the Ministry of Health that we should be ready, and our medical teams were there. However, most of the patients went to National Guard and military hospitals.
Syed Mohammad Naseer: No, I think most of the patients went to the closest hospital after the injury, which was the Al Habib. We did get some patients. Alhamdulillah, they weren't major injuries, and we did look after them when they arrived.
[Analyst]: Okay. Alhamdulillah. Thank you.
Operator: Again, if you wish to ask a question, you can click on the raise hand icon on your webcast, or alternatively, you can type in your question through the Q&A chat box as well. We will wait for a moment for any follow-up questions to come up. This question is coming from Mr. Omar. Omar, if you can introduce yourself, your company before asking your set of questions as well, Mr. Omar. Mr. Omar, you are unmuted. If you can go ahead, ask your question. I believe Omar has certain problems unmuting himself or the speakers. Omar, if you can feed your question to the chat box, that would be much appreciated. We will wait for the moment for Omar to send the questions to the chat box if he decides to do so.
Operator: Again, just a gentle reminder, if you wish to ask a question, you can click on the raise hand icon on your webcast, or alternately, you can feed your questions through the chat box as well.
Abdulaziz Saleh Alobaid: No, Nauman, I think we are coming towards the end of the earnings call. I would like to thank you, and thank everyone who participated. We remain always available through our investor relation, Alia and the team. We are happy to take any further questions or comments. I would like to take this opportunity to thank everyone who attended, and wish you a pleasant weekend. We will always maintain our commitment to provide the best we can to our patients and make sure that our shareholders as well get the return they are hoping for. Thank you, everyone.
Operator: With this, SNB Capital would like to thank Care's management for taking the time to conduct this call. We would also like to thank all the participants for attending. We wish you all a pleasant day, a pleasant weekend. You may disconnect now. As-salamu alaykum.
Abdulaziz Saleh Alobaid: We still have the call.
