This webinar is being recorded and summarized. Hello everyone.

This is Ahmed Moataz from EFG Hermes, and welcome to Care Medical's first quarter of 2026 results conference call. I'm pleased to be joined with Dr.

Abdulaziz Al-Obaid, Chief Executive Officer; Jahanzeb Khan, Chief Financial Officer; Naseer Ali, Chief Strategy Officer; and Alia Balbaa, Director of Investor Relations and Project Management. The company, as usual, will start with the presentation and then we'll open the floor for Q&A.

Dr. Abdulaziz, please go ahead.

Thank you, Ahmed. Good afternoon, everyone.

We'll go over the presentation where we're going to start first with the operating and performance highlights, and then we'll move on to the financial performance, and to close with, we'll go over the strategy update. Going on the first slide with the operating and financial performance highlights during the first quarter of 2026, we reported a revenue of 388 million versus 385 million last year.

Operationally, we continue to deliver growth. Total patient volumes increased by 9% year-on-year.

This volume growth came despite the full impact of Ramadan and Eid being falling entirely during the first quarter of '26 compared to '25, where we had 10 days of Ramadan and Eid falling into quarter two. That demonstrates sustained demand on our services offerings.

Our total number of beds currently is at 1,185 beds, while the occupancy remained healthy at around 82%. We also saw a reduction in the average length of stay, which is consistent with the case-mix shift towards shorter stay, lower-acuity treatments during the period, where patients do prefer to delay their complex surgeries until the end of Ramadan.

We operated with an EBITDA of SAR 92 million versus 123 million of last year, and the net profit is at 52 million compared with 85 million of last year. Jahanzaib will provide you with financial details shortly.

Overall, this quarter reflects a well-understood seasonal and cyclical pattern where timing effect, particularly Ramadan and Eid, temporarily impacts the case-mix, the payor activity, and profitability. These effects are not structural, and we have seen them reverse consistently in previous periods.

As activity normalizes, we expect case-mix and margins to progressively recover. Of note, we notice an encouraging early signs of recovery during the month of April that has been materialized, with volumes and payor activity beginning to normalize, and we expect this momentum to build up through the remainder of 2026.

Going over the operational performance, the full 2026 focus, building on our strong operational base, our focus in '26 is centered around a number of targeted initiatives to support growth, enhance margins, and strengthen our platform. On the left, you will see that starting with capacity expansion, we continue to add targeted capacity in high-growth areas, including the development of Al-Narjis Hospital, as well as incremental expansion within our existing network, including the addition of 20 beds at As-Salam that has been completed and awaiting the final approval from the MOH.

On service line expansion, we are focused on scaling high-demand and specialized segments. This including continued growth of Releaf mental health platform alongside the introduction of new service lines.

We're also expanding our services in Jiwar, where we're installing a cath lab that should be ready to operate before the Hajj season, and that will be the only cardiac catheterization facility in the central Haram area, where previously all patients were referred to hospitals outside the Haram central area. That supports higher-acuity, higher-value procedures.

Third, we are working to optimize payor and revenue mix by growing volumes through stronger engagement with GOSI, as well as improving pricing dynamics with insurance providers, which would reflect positively on margins over time. Currently, we're in ongoing negotiations with insurance companies to increase the prices of our top procedures.

In parallel, we continue to advance digital integration across the network, leveraging automation and data analytics to improve the resource allocation, enhance clinical outcomes, and maintain disciplined cost control. Finally, a key area of focus is the Care Academy and talent development, where we're advancing partnership with universities to expand our Care Academy and support the development of sustainable pipeline of clinical talent, while enhancing training and clinical standards across the network.

With that, I will leave the floor to Jazz to take you through the financial details of Q1 '26.

Thank you, Dr. Abdulaziz.

Good afternoon, everyone. I will now take you through our first quarter 2026 operational and financial results.

We delivered encouraging volume growth during the quarter despite the full impact of Ramadan and Eid, which typically results in softer activity levels and a shift in patient behavior. Total patients increased by 9% year-on-year, including 16% growth in inpatient admissions and 9% in outpatient visits, reflecting continued strength in underlying demand.

In outpatient, growth was led by our Al-Malaz branch, which saw strong increase in activity, alongside continued growth at Al-Salam and Al-Haram branches. Al-Rawabi remained broadly stable, reflecting the expected slowdown in GOSI-related activity during the Ramadan and Eid period, where fewer working days translated into lower referral volumes.

On the inpatient side, admission growth was supported by higher activity at Al-Malaz and Al-Salam branches, as well as the continued ramp-up of newer capacity. At the same time, the nature of the activity shifted during the quarter.

Surgical growth was more moderate, reflecting the deferral of higher-acuity elective procedures due to seasonality, while average length of stay declined, consistent with a higher share of shorter-stay, lower-acuity cases during the period. Overall, the quarter reflects strong patient inflows despite seasonal headwinds, with the impact of Ramadan and Eid primarily visible in payor mix, as well as case-mix and complexity, rather than demand.

Moving to the income statement, revenue remained stable year-on-year at 388 million riyals in the first quarter. The key dynamic in the quarter's revenue performance is the shift in case-mix and payor mix.

During Ramadan and Eid, higher-acuity elective procedures were deferred, with activity shifting towards lower-paying and lower-margin segments, which reduced revenue per patient. This is reflected in lower average revenue across both inpatient and outpatient activity during the quarter.

At the same time, cost increased, primarily due to our continued investment in our staff. Operating expenses were also higher, reflecting both business expansion and the ECL comparison versus last year, which benefited from a relatively higher reversal.

As a result, profitability declined year-on-year. Overall margin movement during the quarter was primarily driven by the seasonal shifts in case-mix and payor mix, alongside higher operating costs and the year-on-year ECL comparison.

These are largely seasonal and timing-related factors rather than reflective of any underlying change in demand or operating performance. Looking at revenue in more detail at the facility level, performance was broadly stable, with some variation driven by seasonal factors.

Al-Rawabi declined during the quarter, mainly reflecting slower GOSI-related activity during Ramadan and Eid. Al-Malaz remained stable and resilient, while Al-Salam was broadly in line with last year as it continues to ramp up.

The strongest performance came from our newer assets. Al-Haram more than doubled its revenue, and Releaf, the mental health facility, also delivered strong growth, reflecting continued progress in scaling the recently added capacity.

Pharmaceuticals also supported the top line, growing year-on-year. On the payor side, insurance was the fastest-growing segment.

GOSI revenues declined during the quarter, reflecting a seasonal slowdown in referral activity, which was more pronounced this year due to the full overlap of Ramadan and Eid. It is important to look at this in context.

GOSI has followed a strong long-term growth trajectory, delivering a CAGR of 16.8% between 2021 and 2025. What we are seeing is a predictable cyclical pattern rather than any structural change in demand.

Q1 has consistently been the weakest quarter for GOSI referrals and has recovered in subsequent periods. In April, we are already seeing GOSI's revenue recover versus the quarter one.

This shift in payor mix towards insurance, currently priced at lower rates relative to GOSI, has impacted average revenue per patient. We are in active negotiations, as Dr.

Abdulaziz mentioned, to revise these rates, which we expect to be an uplift going forward. Cost of revenue increased during the quarter, primarily due to continued investment in people to support the group's expanding network and service offerings.

Spending on medicines and consumables also increased, in line with patient volumes and surgical activity. At the same time, revenue per case declined due to the shift in case-mix, while a large portion of the cost base remains fixed or semi-fixed.

This resulted in cost of revenue increasing as a percentage of revenue. As a result, gross margins were impacted during the quarter, primarily reflecting case-mix dynamics rather than any change in underlying cost efficiency.

Operating expenses also increased, reflecting the expansion of the business and the year-on-year ECL comparison. Overall, the cost profile reflects a combination of planned investment in growth and temporary pressure from payor mix during the quarter, consistent with the seasonal dynamics that we have discussed.

The main movement during the quarter was the increase in trade receivables, which rose significantly as collections slowed during Ramadan and Eid. This was particularly visible across key payors, including GOSI, insurance, and government entities, where settlement cycles were affected by the seasonal timing of the quarter.

As a result, working capital requirements increased, with days sales outstanding rising and the cash conversion cycle lengthening, both consistent with slower payor settlement during the period. Cash remained healthy at 505 million riyals, providing sufficient flexibility to support operations and ongoing expansion.

Net debt increased during the quarter, reflecting the continued funding for Al-Narjis development, lease-related obligations primarily relating to the long-term radiology equipment agreement with Siemens, and the seasonal working capital build-up linked to receivables. We expect these metrics to improve as collections normalize in subsequent quarters.

The increase in receivables during the quarter reflects a seasonal slowdown in payor settlements during Ramadan and Eid, rather than any deterioration in demand or activity. Insurance receivables also increased, in line with strong growth in insurance revenues and the higher contribution of this segment to the overall revenue mix.

We continue to actively monitor collections and remain focused on improving the receivable cycle. We have already seen post-quarter payment activity, including collection from GOSI in April, and expect further inflows in the near term.

This reflects a normalization of settlement cycles following the seasonal slowdown. Operating cash flow was a net outflow of 28 million riyals in the first quarter, compared to an inflow of 157 million in the prior-year period.

This change is primarily driven by working capital movements, with 129 million riyals outflow this quarter versus a 33 million inflow last year, reflecting the receivables dynamics discussed earlier. This is a seasonal and timing-driven movement, and we expect it to reverse as payor settlements normalize over the coming quarters.

Capital expenditure increased to 52 million riyals from 23 million in the first quarter of last year, primarily reflecting progress on Al-Narjis Hospital development. Financing inflows of 55 million reflect drawdown on credit facilities to support both working capital requirements and ongoing investment in Al-Narjis.

As of 31st of March, the group's cash balance stood at 505 million, providing strong liquidity to support both operational needs and strategic expansion. I will now give the floor to Naseer to walk you through the strategy's refresh pillars.

Good afternoon. I'm going to be taking you through the journey of our strategy.

Now, looking ahead, our next phase of growth is driven by a combination of disciplined expansion and platform development initiatives. Now, at a high level, our strategy focuses on expanding capacity, strengthening our network footprint, and enhancing our operating model to support long-term, scalable growth.

Now, this includes a balanced approach across greenfield developments, selective acquisitions, and the rollout of outpatient clinics, alongside continuing investment in digital and AI capabilities. This will support scalability and improve clinical decision-making.

Together, these initiatives position us to grow efficiently, improve accessibility, and deliver sustainable value over the long term. Next slide, please.

Now, I'm going to walk you through the key components of our expansion strategy in a bit more detail. Now, starting with M&A, we continue to pursue disciplined, highly targeted opportunities that are value-accretive and are aligned with our long-term strategic objectives.

We are focusing on assets with a minimum of 150 beds in core markets such as Riyadh and the Western provinces. Our recent acquisitions validate this approach.

We have successfully integrated those assets, with volumes being ramped up and synergies materializing, supporting growth across the platform. Most importantly, based on our experience over the past few years, we have developed strong capabilities in executing turnaround.

Al-Salam is a very good example of this. It was a loss-making asset for several years that we were able to turn around within a relatively short period.

As a result, we remain open to similar opportunities going forward, where we believe we can create meaningful value through operational improvements and integration. Now, going towards the organic side of expansion, Al-Narjis Hospital remains a central pillar of our growth pipeline.

This is a 400-bed greenfield facility in Northern Riyadh targeting the premium segment, with a total planned investment of approximately Saudi riyals 1.4 billion. Construction is progressing very well, with capital deployment also in line with plan, and we remain on track for a 2028 opening.

In the Western Province, our Jeddah greenfield project will further strengthen our presence. Now, this expansion is going to be in the Class B segment, which is underserved in Jeddah.

This will be a phased rollout, starting with 150 beds and scaling up as utilization builds, reinforcing our dual-core strategy across Riyadh and the Western Province. In parallel, we are progressing a clearly defined expansion pipeline, targeting the addition of five to eight new facilities by 2032 through a combination of greenfield developments, selective acquisitions, and outpatient clinics.

The first clinic rollouts are expected from 2026 into early 2027, which will provide a capital-efficient model to scale and improve patient access. Alongside this, we continue to evaluate a solid pipeline of opportunities focused on the right specialties and geographies, where we can drive returns and integrate effectively.

I will now hand it over to Dr. Abdulaziz for closing remarks.

Thank you, Naseer. As a closing remark, I want to highlight something that I believe is fundamental to how we operate as a management team, and that is in the alignment between the management interest and the shareholder interest.

As part of this, we have introduced the Long-Term Incentive Plan, the LTIP, for senior management, which represents a significant and meaningful component of compensation. The LTIP was structured around a set of clear performance criteria, including profitability, return on invested capital, completion of Narjis, and the delivery of key expansion milestones.

These are the metrics we believe best reflect the long-term value creation. In particular, the management is incentivized to deliver on the same outcomes that matter to the shareholders, which is disciplined growth, strong returns, and consistent execution.

In simple terms, when we create value for our shareholders, the management shares in that success. With that, I conclude the presentation and we're happy to take your questions.

We'll

read the questions out to management. We'll start with questions from the line of Fahad Al-Dakhil.

Please unmute yourself and go ahead. To everyone, please, we have a long queue ahead.

Keep yourself to two questions, and if we still have time, I'll reopen the mic for you.

Assalamu alaikum. This is Fahad Al-Dakhil from SAB Invest.

Thank you, EFG and management, for the presentation. I have two questions from my side regarding GOSI revenue.

During the fourth quarter, management, you mentioned that there's a recovery in the case-mix that you witnessed after the end of the fourth quarter. If we look to GOSI patients, for Q4, GOSI patients grow by 6%, revenue from GOSI was down by 9%, and the same trend continues during the first quarter of 2026, revenues are down on year-over-year basis by 17%.

What's the reason behind that? Is it a pricing dynamics change between Care and GOSI?

Because if we look into patients, they are growing. My second question is regarding the net debt.

We saw a significant spike during the quarter reaching 225 million net debt, we should assume that debt increased significantly. What is the uses of the proceed, in the short term?

Thank you.

Thank you, Fahad. Yes, we did notice a decline in the revenue from GOSI during this quarter.

However, if we split the quarter into three months, we did notice an increase in the revenue in January, but then a decline in Feb and March. Feb and March falling within Ramadan and Eid period.

If you look at the historic figures, mostly it was quarter one, despite that Ramadan used to be midway between quarter one and quarter two. In the previous years as well, we've seen recovery in quarter two.

In April, we did notice a very good recovery of GOSI compared to the previous months and the previous year. There was no price adjustment or changes in GOSI, but the case-mix, yes, it did differ because if you have less injuries, less complicated procedures, that will impact the revenue as well.

Now,

regarding your question on net debt, we have drawn down facilities from our banks, and its primary purpose is to fund the construction of Narjis facility. We haven't used the fund for any other reason.

To confirm that starting from April, there is a pick-up in patient number and case-mix, and you expect it to continue going forward?

In line with our previous experience, yes.

Yes. We did witness in April a recovery in both patient volume and a better case-mix.

We did witness this. Now, we still have the remainder of the quarter.

I think based on the experience and from what we're seeing now, there should be a very good recovery.

Can you quantify the percentage, the growth, percentage growth?

I'm afraid we cannot quantify it, but I can tell you that there is a good recovery. We're engaging very actively with GOSI and our relationship remains excellent.

We have no issue in terms of the relationship, the referrals, the KPIs, etc. We believe that this is mostly seasonality, and it will recover, inshallah.

Thank you.

Thank you.

We'll take questions from the line of Pratik from ENBD Saudi. Please unmute yourself and go ahead.

Thanks a lot for the call. Am I audible?

Yes, you are.

Yes.

This is Pratik from Emirates NBD. I have two questions.

First, building up on Fahad's questions basically. Can you tell us, let's say if we compare four months 2026 to four months 2025, for the overall business, is the revenue and gross margins in line with last year or still tracking downwards?

The second, we were expected to see some insurance price hike in Q1, right? Where are we on that?

Have we seen any price hike from the insurance or we expect it to delayed to Q2? These are my two questions.

Yes, I don't think we can compare the first four months of '26 to '25. What I can tell you is the same what I have told Fahad before, is that we're seeing a very good recovery in GOSI and overall in April.

Frankly, that's what we expected. In terms of the price negotiation, we're still actively engaged with the biggest insurance companies.

It's not an easy negotiation. They hold their sand, we hold our sand firmly because we know our capabilities, we know our level of services, and we do believe that the prices have to be reconsidered significantly.

You've seen no impact in quarter one, for sure, and inshallah, it will be visible in quarter two.

Got it. Just on the margins, because margins at least in Q1 has significantly declined.

Just for us to get some comfort for the whole year, how should we look into the margins? Should we expect it to be similar or slightly lower?

Because if I just take Q1 into account, it's a big decline. If you can just comment for the whole year how should we look into gross margins?

See,

although we don't give guidance as per policy, but definitely with GOSI having higher average revenue per patient compared to insurance, we do expect significant improvement in our margin profile for the remainder of the year.

All right. Thank you.

We'll take questions from the line of Mosaad Al-Khodair. Please unmute yourself and go ahead.

Assalamu alaikum. Am I audible?

Yes, you are.

Wa alaikum assalam.

Yes. Hi.

Thank you, management, for the presentation. I have two questions from my side and all of these questions will be in terms of client patients.

At first, I want to talk about the MOH revenue. I saw it was flat.

However, I believe the company has mentioned last quarter that there will be a repricing. Should that mean that there was a lower patient flow during this quarter?

No, I don't believe we mentioned MOH as subject to repricing. It's the insurance company that we are negotiating with aggressively for repricing.

You may have perhaps referring to Al-Salam that it doesn't have all the accreditations that are available to give it a price bump, and we are working towards achieving those accreditations. One accreditation should be forthcoming in the next couple of quarters, and we will have a positive impact of it.

The large, main one is the HIMSS, and that requires significant investment in the IT system. That will take some time.

Yes, we are working towards increasing the accreditations that are available to Al-Salam.

Yes. This is with regard to MOH, you mean, or the insurance?

Yes. Yes,

for the MOH.

Yes.

Okay. For the yeah.

We're negotiating as well the prices of the insurance companies for As-Salam.

Yes, this is my second question. I believe should be at the end of January, and I just want to know if you may quantify the price adjustment for the insurance, or not yet has been finalized?

It hasn't been finalized yet. We're negotiating the prices with insurance companies across all hospitals.

Rawabi, Malaz, and As-Salam. Rawabi and Malaz being in the same group and As-Salam being in the C class.

So Any projections? If you may quantify how much it may increase?

We cannot quantify it now, but we're aiming for a significant increase.

Great. Thank you, management.

Thank you.

We'll move on to questions from the line of Hekmat Salahi. Please unmute yourself and go ahead.

Hello. Am I audible?

Yes.

Okay. Thank you, gentlemen, for the presentation.

Two questions from my side. The first one is regarding your OpEx.

I noticed that it has been accumulating consistently for the previous quarters as well. I understand part of that was attributed in Q4 to professional fees, but when I look at the employee cost, and especially as a percentage of revenue, I noticed that it has increased massively.

If you can shed some light on the increase in the employee cost, what could it be attributed to? Is it due to the similar trend that we're seeing across the industry, that there is a spike in employee costs for talent acquisition, or is it for perhaps addition of new subspecialties?

What could be the reason for this? That's my first question.

My second question is regarding your Jeddah expansion. We noticed a trend over the previous years that they are expanding into the Western Region and it's becoming increasingly competitive.

How do you view the dynamics of the Western Region in light of the expansions by other players, and is it the land that you're building on the one that you acquired a few years ago, the same one, or still you're going to acquire another land for that project?

Thank you, Hekmat. Yes, there's an increase in the manpower cost because of the higher salaries of the talents, mainly the Saudi talents.

This trend is all across the other providers as well. However, we don't expect it to increase significantly, as we expect the revenue to improve.

The cost of the manpower as a percentage of the total revenue will still remain as per the previous years. In terms of the Jeddah land expansion, it will be on the same land that we did acquire a few years ago, two years ago.

The segment seems to be more or less saturated in the A-class, VIP segment, so that's not our target. What we're aiming for is the B-class, and we believe that there's a shortage in the B-class hospitals in Jeddah.

Very clear. Just to follow up on the margin pressure that we saw.

If I look at the revenue per inpatient on a quarter-over-quarter basis, it wasn't a decline. It's mainly coming from employee cost and operating leverage of the business, because it doesn't seem that the revenue per inpatient has declined on a quarter-over-quarter basis.

Average revenue has declined compared to previous quarters. You can say it's exasperated by the manpower cost because throughout quarter two of 2025 till quarter one, we have been investing in our people as we offer more specialties and services to our patients.

You're referring on the per patient on a blended patient basis or on an inpatient basis?

On a blended patient.

On a blended. Because on an inpatient basis, it hasn't declined.

Just to clarify that, okay. It's on a blended basis.

Okay. Very clear.

Ya'tikum al-afiah, and wish you the best of luck.

If we will share our data pack as well, and you will see that there will be a decline in inpatient as well.

It is there. I can see that.

It was, for example, in Q1 '26, 4.93 per inpatient, and Q4 '25, it was around 4.5. Khalas, very clear.

Thank you very much, gentlemen.

Okay.

Thank you.

Thank you very much. We'll move on to the line of Ricardo from Morgan Stanley.

Please unmute yourself and go ahead.

Hello. Thanks for taking my question.

I just wanted to confirm something you mentioned before. In April, the GOSI patients have recovered both on the volumes and on the complexity compared to a normalized level?

Then the second point, when you mentioned about M&A as one of the levers for your growth, how are you seeing valuation on some of the private assets? Just yesterday, we saw two of your peers announcing a transaction on a Class B hospital in Riyadh.

Is that something that you looked at, this asset? Or how are you seeing competition for some of those private hospitals?

Thank you.

Thank you, Ricardo. Let me take the first question.

Yes, we've seen a recovery in both volume and case-mix complexity. For the second question, Naseer, do you want to take it?

Yeah. Ricardo, on the question in terms of assets while we are continuing with M&A, keep in mind when we look at assets, surprisingly over the past year, we have seen quite a few single assets starting to come up.

It's usually fall into two categories. It's usually either players who have started constructing an asset to capitalize on the growth of Riyadh, but do not have the funding nor expertise to continue with it, or assets that they have set up, but their strategy changed and they have shifted out.

We are seeing some assets come out. Now, in terms of specific assets announced by others, I cannot confirm or deny whether we were in the bid process for any of those assets.

What I can say is that as far as an active M&A pipeline is concerned, it's quite active, and at any given point in time, we are evaluating and looking at multiple opportunities. We are very mindful of the fact that we have capital to deploy, and this is what we are focused on to make sure we get the value-accretive returns out of that.

Okay. Thank you.

We'll take questions from the line of Niranjan from Derayah. Please unmute yourself and go ahead.

Am I audible?

Yes, you are.

Yeah. Just a couple of brief questions.

If you look at your cost of sales on a sequential basis, fourth quarter versus first quarter, we see an increase. That is despite the fact that the volumes came down.

I presume that the variable costs came down, but there was some increase in fixed costs on a sequential basis. If you could elaborate on the reason for that, that would be helpful.

The second one is, did you experience any inflation with regards to your cost of drugs and consumables because of this current ongoing crisis? Thank you.

Those are my two questions.

Okay. I'm sorry, your first question was?

That's regarding the cost of sales.

Cost of sales from quarter four to quarter one, yeah?

Yes.

It's again mainly driven by manpower costs. As we've said, we are investing in people, and specialties, which are going to deliver revenue in the coming quarters and years, right?

Now, as far as your question on the cost of supply chain due to the ongoing geopolitical issues, yes, we have seen increase in shipping costs to our suppliers, because we generally purchase from local suppliers, but they are suffering from higher costs, and we are managing it as well.

The consumable, the cost of the logistics, did it have a material impact on the first quarter results?

To a certain extent, yes, but because we also carry inventory from previous periods, it's a mix. You will continue to see some impact in quarter two and some in quarter three as well, if the situation continues.

Okay. Thank you very much.

Welcome.

Thank you. We'll take our next questions from the line of Mohammed.

Please introduce yourself and go ahead with your questions.

This is Mohammed from Merzam Investments. I just had a question.

Can you please clarify whether GOSI has been referring to other hospitals and the intensity? What is the commercial incentive for GOSI to remain dealing with Care?

We cannot confirm a number whether they have referred to other hospitals because we don't have access to the number of injuries reported in Riyadh yet. What we can say is that we remain a preferred partner given our expertise and the quality of care that we have built over the previous decades.

I don't have access to the numbers so I can say there is a decline of the overall referrals from GOSI or not. That's something that simply we don't have.

What I can tell you is that our relationship remains strong with them, and we engage with them on regular basis.

If there were to be an alternative to Care for GOSI, who would it be?

I'm not sure I understand the question. Ya'ni GOSI will prefer another provider?

Yes.

Highly

unlikely because see

I wouldn't speak for them, I cannot tell you whether they would prefer. I can tell you looking, with all due respect to our competitors, some of the cases requires lots of expertise.

In fact, it was an attraction point to some of the highly qualified physicians, and reconstructive surgery. From a quality perspective, focusing on the GOSI aim to rehabilitate the patient, make sure that there is limited disability and faster return to work, we have proven over the past years that we're the right partner.

Can you give us a indication of what GOSI revenues will be for 2026?

I'm afraid we don't give this guidance.

Just to follow up. Is there any reason, apart from seasonality, that GOSI revenue is down?

To our best analysis, no.

Okay. Thank you.

Thank you.

We'll move on to questions from the line of Faisal Suleman from Alpha Capital. Please unmute yourself and go ahead.

Hi, am I audible?

Yes. Hi.

Thank you, EFG, for arranging the call. I only have one question from my side.

Could you give us further clarity on GOSI? Yes, we acknowledge that you attributed the decline due to seasonality.

However, if I look at Q4, there was a clean drop as well without any seasonality factor. My question is, is there any reason that the decline in GOSI could be structural instead of seasonality-driven?

Ya'ni for example, perhaps lower spending on mega projects or the completion of many of them, which could drive the revenue from GOSI lower?

Thank you, Faisal. This is an excellent question.

If you look at '21 to '25, there's always growth. The CAGR is 19%.

That will just give you an indication that there is an overall growth in GOSI. Yes, there's a dip here and there.

I cannot comment on the projects, but what I can tell you is that still we have to build I think five more stadiums in Riyadh in preparation for the World Cup. The New Murabba is coming up.

The Expo is coming up as well. I believe that there will be continuous growth in the pipeline in terms of construction.

Unfortunately, the growth in construction comes with injuries, which is unfortunate. However, we don't expect this to slow down as there are deadlines to meet.

What we see is that these projects are going on, the World Cup and Expo, we don't expect a decline in the construction. There's no structural changes with GOSI.

As mentioned, we believe that we're their preferred partner because of our experience dealing with the trauma of these cases.

Thank you so much. That was very clear, Dr.

Abdulaziz.

Thank you. We'll move on to questions from the line of Maha Al-Marwani.

Please unmute yourself and go ahead. Maha, please try to unmute yourself again.

I think there is an issue. Maha, I just sent you a request for you to unmute.

All right. Until Maha is able to resolve this, either try again or please send your questions via the chat, and we'll move on to questions from

Am I audible?

Yes, you are now. Please go ahead.

I can hear you.

I have two questions. With the increase in manpower costs as we've seen that for the industry and the slowdown in GOSI revenue in the first quarter, do you expect to surpass net income level of 2025 or should we expect a flat net income growth this year?

This is my first question. My second questions, can you give us more color on the M&A strategy that you're focusing on?

Do you have a CapEx in mind or should we expect any M&A announcement by the end of this year?

I'll take the first question and Naseer will answer the second one. We don't give guidance for the remainder of the year.

I cannot comment whether it's going to be above or similar, but what I can tell you is that we're following a strict business plan with budgeted assumptions, and it's entirely linked to the shareholder interest, and that's what is being built in the incentive plan of the management. The second question, Naseer will take it.

As we highlighted in the presentation, our basic focus is on the core geographies of Riyadh and the Western Province. Practically what we are looking at are assets that we can scale up, drive value or turn around, and we are looking at ideally a spot of 150 beds plus, right?

Now, as I mentioned earlier, we do have an active M&A pipeline and we are evaluating multiple opportunities at any given point in time. It's very difficult to say when the announcement for an acquisition will be, because M&A by its very nature is not very predictable.

A lot of things can happen from the time you submit a non-binding offer to the time you can actually get to signing the SPA. It's very difficult to predict.

However, what we do want to do, and this has been our commitment all along, is that M&A for us is a core lever. Therefore, we will attempt to execute as many of those opportunities as we can in any particular year.

Now, in terms of a CapEx or a ticket size, while we do not disclose exact numbers, the way to look at it is if you look at the capacity of our balance sheet. Our balance sheet is mostly unlevered and we do have surplus cash, we do want to move to an optimal capital structure that is beneficial for our shareholders, which means that we can deploy quite a significant portion of our balance sheet capacity to pursue M&As of a decent size and above.

That's very clear. Thank you.

All right. We have questions from the line of Madhu from Rajhi Capital.

Please unmute yourself and go ahead.

Thank you, Ahmed, for the opportunity. Two questions, if I may.

First is related to your net debt increase in Q1 compared to Q4. You mentioned that some funds were drawn for Narjis development, but when I look at the details provided in the press release, a substantial chunk of the increase came from the lease liability related to radiology equipment.

Could you provide more details about that? Is this new equipment that you have added?

If yes, then what would be the lease expenses on an annual basis? This is question number one.

Second is a follow-up related to GOSI patients. Can GOSI send the patients to MOH-affiliated hospitals or who are the other partners in Riyadh where GOSI patients could be referred?

These are my two questions.

They will not send them to governmental hospital, except if it's life-saving where they have to stabilize the patient and the governmental hospital is just across the road. In general, no, they will refer them to the private sector and mainly to us.

Regarding your first question on net debt, yes, the facilities were withdrawn for the Narjis construction. The lease arrangement, it is with Siemens Healthineers.

What we have entered into is a 10-year long-term contract for all of our hospitals, the existing ones. They are providing us radiology equipment, state of the art, and they are responsible for maintaining them, providing support, training to our people.

It's a very strategic partnership that we have entered into with Siemens, and they will be responsible for replacing those assets as well under this contract. It's majority of the assets will be acquired in the first 2 years of the contract, which started earlier this year.

Yes, you will see the amortization of the leased assets in each quarter. It's around 3.6 million per quarter.

Did you recognize anything in Q1?

Yes, we recognized the leased asset liability. It's 157 million riyals discounted liability and asset that we have recorded.

Okay. Are these new equipments or these equipments are additional to what you have, or would these equipments be replacing the existing ones from what you had last year?

They are replacements.

Replacements. Okay.

One follow-up on clinics. You have plans to add clinics, which is encouraging.

We have seen with other hospitals also. Could you provide more details like what part of the country would you be doing?

Would that be Riyadh or would that be a combination of Riyadh and Jeddah? Anything on CapEx and timelines, or how many clinics you target by 2030?

I can take that one. Look, the clinics will remain within our core geographies, which is Riyadh and the Western Province, because the purpose behind the clinics is to actually build an integrated medical network, right?

What we are going to target is clinics between '26, '27. We will stabilize them, look at the proof of concept and how we can best fit them within to our network, and then we'll roll out the next.

What I can say for now is that we are definitely targeting to have at least one clinic operational during 2026.

Okay. One this year, and what about next year?

I said at least one this year. For '27 and rest of '26, I can't comment, but I'm saying the bare minimum for us is one this year.

In Riyadh?

In Riyadh.

We'll start with Riyadh,

yeah.

CapEx, is it possible to give some details on CapEx, how much would it be lease or land would be owned?

Look, we're not currently giving that guidance, but what I can tell you, it's going to be a very CapEx-light model.

Okay. Thank you.

That's all from me.

Thank you. I'll move on to questions from the chat before I go back to check if anyone has follow-ups.

Ibrahim Atteya is asking, can GOSI patients defer their surgeries?

No, GOSI patients, mostly they are acute cases. When we say defer cases, it's for a knee replacement, elective procedure, something that can wait.

Cancer patients, GOSI, trauma, they don't usually. The construction is slow down.

The hours of work, the days of work, the time off for Eid, that's what slowed them down. It's not that they will opt to delay the cases.

Plus some of the inpatient rehabilitation, they're admitted for active acute rehabilitation. Many of these patients prefer to be discharged during Ramadan and Eid to enjoy the time with their family and come back afterwards.

Understood. Another question from Mohammed Abdulaziz.

I think yeah, it's already been answered, sorry. Then Mohammed still has a follow-up.

I'll open the mic for you. Please go ahead.

Hi, hello, it's me again, Mohammed from Merzam. You emphasized management alignment with shareholders' outcome.

Can you elaborate more on what the management structure is to ensure that we are aligned with shareholder outcomes?

It's built on the certain KPIs, the ROIC, the EBITDA target being achieved, and the completion of Narjis Hospital, plus some key expansion milestones. It's of significant quantum to the management, and the minimum target is to achieve 85% of the budgeted target in the business plan.

If you don't achieve it's zero compensation or?

Inshallah, it won't come to that, but yes.

Okay. Can you assist us on what the target is?

Oh, I don't think we can mention the exact target, but the only thing we can say is that Narjis being operational in 2028 Q1.

That's easy. You can spend money, you can have a hospital that's operational.

The realization is profits and ROIC.

It's there, but I cannot mention it. It's there in the target.

Yeah.

Those are defined targets, but they haven't been disclosed publicly, we are not able to provide them as of now.

For Narjis, it has to be within the budget. It's not we can spend anything we want and get it operational.

It has to be within the approved budget.

If you allow me, I'm sorry, but what's the problem with announcing the targets?

That will be guidance for the next 2 years. As a policy, we don't give the EBITDA target for the next 2 years.

I think it would be okay if you give your ambitions, even if they don't happen, at least this is the internal ambition.

It's a subject of discussion within the board on how much we can disclose, and I agree with you, it would be helpful. However, as per policy, we don't do it yet, but it's something that's being considered.

Thank you. Thanks, Ahmed.

Thank you. I'll only ask one question that came in the chat, and afterwards, we can conclude the call since we reached the time mark.

Do you expect to add more

Ahmed, we're okay if you have a line up to stay extra minutes. Okay.

Do you expect to add more specialties during the remainder of the year, which would imply further increases to staff costs?

It's going to be a disciplined increase. We don't increase specialties and bear the cost without having a plan on what the target revenue is.

Yes, we're increasing specialties. We've done it with the oncology services, with the cosmetics services, and they're doing extremely well.

We expanded more on the cardiac surgery, and they're doing very well. I think the right word would be disciplined, thoughtful expansions.

Yes.

Understood. We have follow-up questions from the line of Hekmat.

Please go ahead.

Yes, hello. Thank you, Ahmed, for letting me ask again.

I thought, gentlemen, in Q4 '25, there was a guidance or an indication that the margins, so that is the gross margins, let's say after the reclassification of some cost, that it should be around 36% in 2026. Given the sustained increase in employee cost and perhaps shifting in case and payor mix, would you consider revisiting this figure, or do you think how doable it is to achieve around 36% for the gross margin for the full year?

Again,

there was interruptions in the voice. If I understood your question correctly, is that in '25, we said the expectation for '26 margins to be around 36%?

Yes, in Q4 '25, answer to a drop in the margins and the revision, you said that 36% for gross margin would be a good indication for 2026. However, now, after the different operating trends in terms of payor mix and case-mix and the increase in employee cost, do you still maintain that guidance for '26, at least, or would you consider revising it downward maybe a bit?

We don't give guidance. I think what we may have referred to is that our existing margins on average in 2025 were 36% at gross profit level.

Exactly. That's a healthy margin that we want to maintain in future.

Yes, we are investing what we do say when we indicate that we want to maintain margins and we want to grow, right? It's not a guidance that we gave.

It's our ambition to manage our margins. Now, seeing the payor mix that we have and the kind of business that we do, majority with government, we do aim to achieve and maintain our margins that we have delivered historically.

Okay. All right.

Very clear. Thank you.

There's a question in the chat. Ryan Zahed is asking, what is the timeline for the Jeddah greenfield facility, and also what is the expected CapEx?

The plan is to get the design ready, and we have already sent the RFPs and start the construction in '27, inshallah. For Phase 1, it should be in line within a couple of years, '29.

The CapEx, it's still too early, but it's going to be a Class B hospital of approximately 250 beds, 150 for Phase 1 and 100 for Phase 2.

Understood. We received actually another question.

Is it possible to quantify the logistics-related cost impact that you have witnessed due to the war?

We did witness around 5% increase in logistics cost. Yeah.

Understood. Can you also provide us with how many clinics the Jeddah hospital will have?

We haven't set up the design yet, but I think once we get the approval from the MOH and announce, it will have all the details.

All right. We have questions from the line of Mohammed Abdulaziz.

Please unmute yourself and go ahead.

Hello. Thanks for taking my question.

I have another question on GOSI. If we assume the rate of recovery and mix that you saw in during April continue to the rest of the quarter, would this quarter I mean the second quarter margin compared to the second quarter of 2025, how it would be comparing?

Thank you.

Thank you, Mohammed. It's hard to say because still we have May and June, but especially that we cannot give guidance for the quarter, but we can say that as of April, we've seen recovery, but we're optimistic that it will continue in May and June.

We cannot go beyond this.

If we assume that the rate that you saw in April continue for May and June, would it be better than second quarter of 2025? If just hypothetical, if it's the same rate of recovery that you saw in April?

If trends of April continue, definitely we will witness growth.

Compared to second quarter of 2025, would be better, would be the same, or would be lower?

Again, we're putting lots of assumptions. Inshallah, it will continue.

Inshallah, it will be better.

Again, it's

speculation. We only had 5 days of May, but we said what we can say in terms of April, and hopefully it will continue.

All right. We'll move on to questions from the line of Abdullah Umer from Al Jazira.

Please unmute yourself and go ahead.

Assalamu alaikum. Just a quick follow-up on the Jeddah hospital.

Could you please give more color on the location of the hospital and any nearby hospital in the same Class B segment?

It's in Northern Jeddah, Obhur, Northern Obhur. It's not too far from the Kingdom Tower, on two main roads, Prince Majid and I forgot the name of the other road, but it was in the announcement the exact location.

There isn't any nearby Class B hospital, and it's a residential area with a lot of housing complexes around it.

Okay. If there are no nearby hospitals, which hospitals do you consider as your main competitors in Class B segment in Jeddah?

There aren't so many,

I think.

Habib, Fakeeh, they're all in a different class. As-Salama and King's College, they're all in a different class, Class A and above,

IMC

as well. Saudi German, we believe it's Class A in Jeddah.

There isn't a lot of competition in Class B. If you look in Riyadh, there is Kingdom Hospital, there's the SMC as well, similar network, but in Jeddah, we're not aware of a big hospital group.

Thank you for answering. Thank you.

Right. We haven't received any questions nor a raise-hand request, I'll pass it back to you in case you have any concluding remarks.

Thank you, Ahmed. Thank you, everyone, for attending the call.

As mentioned before, we remain committed to the shareholders and we strongly believe in the capacity of the company and the strategy deliverables that we have promised. Going forward, I just want to mention that we have planned to continue doing the earnings call in the same day of the announcement of the results.

Thank you, everyone, again, and I hope everyone enjoy a wonderful weekend.

Thank you very much to Care's management and to all participants. This concludes today's earnings call.

Have a good rest of the day, everyone.