Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Afya Limited Announces First-Quarter 2024 Financial Results


Afya Limited (Nasdaq: AFYA; B3: A2FY34) ("Afya" or the "Company"), the leading medical education group and medical practice solutions provider in Brazil, reported today financial and operating results for the three-month period ended March 31, 2024 (first quarter 2024). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

First Quarter 2024 Highlights

Table 1: Financial Highlights 1

For the three months period ended March 31,

(in thousand of R$)

2024

2023

% Chg 

(a) Net Revenue

804,239

709,961

13.3%

(b) Adjusted EBITDA 2

397,853

330,211

20.5%

(c) = (b)/(a) Adjusted EBITDA Margin

49.5%

46.5%

300 bps
Net income

208,299

117,772

76.9%

Adjusted Net income

250,966

166,377

50.8%

(1) No acquisitions were made during the period under review, therefore not affecting the comparable period.
(2) See more information on "Non-GAAP Financial Measures" (Item 08).
 

Message from Management

It is with much satisfaction that I can proudly present another quarter of great operational and financial performance for Afya. Once again, we have proven the resilience of our business, the successful execution of our strategy, the commitment of our team members, and the consistency of our business model. This quarter was marked by Gross margin expansion within our three segments and Adjusted EBITDA margin in our consolidated figures, combined with solid cash generation, and robust EPS growth, showing our consistent business expansion.

Great part of our margin expansion came from the complete integration of UNIMA and Afya Jaboatão, alongside the ramp up of the four Mais Médicos campuses that started operation in 3Q22 and the operational restructuring efforts in Continuing Education and Medical Practice Solutions segments. Our idea was to integrate all the services related to the physician continuing education into one structure, so we could extract more synergies and boost our growth.

We are also excited to expand our offering in the Undergrad business with the signing of the acquisition of Unidompedro and Faculdade Dom Luiz, this acquisition will contribute with 300 operating medical seats to Afya, in Salvador capital of Bahia and the fifth-largest city in Brazil in population size. Unidompedro will be Afya´s 4th medical school in Bahia and will serve as an strategic hub for all other medical campuses in the State, besides all the synergies that we can extract from our Continuing Education campus in Salvador.

With another round of high and sustainable growth, our mission remains solid as ever: to provide an ecosystem that integrates education and digital solutions for the entire medical journey, enhancing the development, updating, assertiveness, and productivity of health professionals. We are very proud of our business and of what we have achieved so far, as well as excited about what we are planning.

1. Key Events in the Quarter:

2. Subsequent Event

3. 2024 Guidance

The Company is reaffirming its guidance for 2024, which considers the successfully concluded acceptances of new students for the first semester of 2024. The guidance for 2024 is defined in the following table:

Guidance for 2024

Net Revenue 1

R$ 3,150 mn ? ? ? R$ 3,250 mn

Adjusted EBITDA

R$ 1,300 mn ? ? ? R$ 1,400 mn

CAPEX 2

R$ 220 mn ? ? ? R$ 260 mn

(1) Excludes any acquisition that may be concluded after the issuance of the guidance, notably, the Unidompedro acquisition was not included in the guidance provided
(2) The 2024 Capex guidance does not encompass the earn-out payment in the amount of R$49.6 million related to the 40-seat increase at Faculdades Integradas Padrão (FIPGuanambi).

4. 1Q24 Overview

Segment Information

The Company has three reportable segments as follows:

Undergrad, which provides educational services through undergraduate courses related to medical school, undergraduate health science and other ex-health undergraduate programs;

Continuing education, which provides medical education (including residency preparation programs, specialization test preparation and other medical capabilities), specialization and graduate courses in medicine, delivered through digital and in-person content, and

Medical Practice solutions which provides clinical decision, clinical management and doctor-patient relationships for physicians and provide access, demand and efficiency for the healthcare players.

Key Revenue Drivers ? Undergraduate Programs

Table 2: Key Revenue Drivers

Three months period ended March 31,

2024

2023

% Chg

Undergrad Programs      
MEDICAL SCHOOL      
Approved Seats

                         3,203

                         3,163

1.3%

Operating Seats 1

                         3,153

                         3,113

1.3%

Total Students (end of period)

                      22,609

                      20,822

8.6%

Average Total Students

                      22,609

                      20,822

8.6%

Net Revenue (Total - R$ '000)

                   610,721

                   528,830

15.5%

Medical School Net Avg. Ticket (R$/month)

                         9,004

                         8,466

6.4%

UNDERGRADUATE HEALTH SCIENCE      
Total Students (end of period)

                      24,881

                      21,660

14.9%

Average Total Students

                      24,881

                      21,660

14.9%

Net Revenue (Total - R$ '000)

                      53,470

                      52,013

2.8%

OTHER EX- HEALTH UNDERGRADUATE       
Total Students (end of period)

                      28,563

                      25,043

14.1%

Average Total Students

                      28,563

                      25,043

14.1%

Net Revenue (Total - R$ '000)

                      40,328

                      40,133

0.5%

Total Net Revenue      
Net Revenue (Total - R$ '000)

                   704,519

                   620,976

13.5%

(1) The difference between approved and operating seats is 'Cametá'. A campus for which we already have the license but haven't started operations.  
 

Key Revenue Drivers ? Continuing Education

Table 3: Key Revenue Drivers

Three months period ended March 31,

2024

2023

% Chg

Continuing Education 1      
Total Studends (end of period)      
Residency  Journey - Business to Physicians B2P 2

                      14,693

                         9,061

62.2%

Graduate Journey - Business to Physicians B2P

                      13,275

                      11,857

12.0%

Other Courses - B2P and Business to Business Offerings

                      21,074

                      14,598

44.4%

Total Students (end of period)

                      49,042

                      35,516

38.1%

Net Revenue (R$ '000)      
Business to Physicians - B2P 

                      60,538

                      53,192

13.8%

Business to Business - B2B

                         4,877

                         5,019

-2.8%

Total Net Revenue 

                      65,415

                      58,212

12.4%

(1) The figure above does not contemplate intercompany transactions
(2) 'Content & Technology for Medical Education' which had been reported in 'Digital Services' table, has been reclassified to 'Continuing Education'
 

Key Revenue ? Medical Practice Solutions

Table 4: Key Revenue Drivers

Three months period ended March 31,

2024

2023

% Chg

Medical Practice Solutions 1      
Active Payers (end of period)      
Clinical Decision

                   159,183

                   143,832

10.7%

Clinical Management  

                      31,806

                      26,621

19.5%

Total Active Payers (end of period)

                   190,989

                   170,453

12.0%

Monthly Active Users (MaU)      
Total Monthly Active Users (MaU) - Digital Services 2

                   262,717

                   263,344

-0.2%

Net Revenue (R$ '000)      
Business to Physicians - B2P 

                      31,726

                      28,371

11.8%

Business to Business - B2B

                         4,847

                         5,168

-6.2%

Total Net Revenue 

                      36,573

                      33,540

9.0%

(1) The figure above does not contemplate intercompany transactions  
(2) 'Content & Technology for Medical Education' is now being reported in Continuing Education table
 

Key Operational Drivers ? Physicians and Medical Students Ecosystem

Physicians and Medical Students Ecosystem represents the total number of medical students and physicians in that are positively impacted by Afya. For the first quarter of 2024, Afya's ecosystem reached 334,368 users, in line with the same period of the prior year, accounting for around 41% of all medical students and physicians in Brazil.

Table 5: Key Revenue Drivers

Three months period ended March 31,

2024

2023

% Chg

Physicians and Medical Students positively impacted by Afya 1      
Undergrad (Total Medical School Students - End of Period)

                      22,609

                      20,822

8.6%

Continuing Education (Total Students - End of Period)

                      49,042

                      35,516

38.1%

Medical Practice Solutions (Monthly Active Users)

                   262,717

                   263,344

-0.2%

Ecosystem Outreach

                   334,368

                   319,682

4.6%

(1) Ecosystem outreach does not contemplate intercompany figures. Note that there may be overlap in student numbers within the data.
 

Seasonality

Undergrad's tuition revenues are related to the intake process and monthly tuition fees charged to students over the period; thus, does not have significant fluctuations during the period.

Continuing education revenues are mostly related to: (i) monthly intakes and tuition fees on medical education, which do not have a considerable concentration in any period; (ii) Medcel's revenue, derived from e-books transferred at a point of time, which are concentrated at in the first and last quarter of the year due to the enrollments; and (iii) Além da Medicina and Cardiopapers revenues, which are sold in the last and first quarter of the year due to the timeline of exams and recognized mainly over time.

Medical Practice Solutions are comprised mainly of Pebmed and iClinic revenues, which do not have significant fluctuation regarding seasonality.

Revenue

Net Revenue for the first quarter of 2024 was R$804.2 million, an increase of 13.3% over the same period of the prior year, mainly due to higher tickets in Medicine courses by 6.4%, maturation of medical seats, the 40 seats expansion in Guanambi campus, the Continuing Education intake performance and Medical Practice Solutions execution.

Table 6: Revenue & Revenue Mix1
(in thousands of R$)  

For the three months period ended March 31,

   

2024

2023

% Chg

Net Revenue Mix        
Undergrad  

704,519

620,976

13.5%

Continuing Education  

65,415

58,212

12.4%

Medical Practice Solutions  

36,573

33,540

9.0%

Inter-segment transactions  

-2,268

-2,767

-18.0%

Total Reported Net Revenue  

804,239

709,961

13.3%

(1) No acquisitions were made during the period under review, therefore not affecting the comparable period.
 

Adjusted EBITDA

Adjusted EBITDA for the three-month period ended March 31, 2024, increased 20.5% to R$397.9 million, up from R$330.2 million in the same period of the prior year, and the Adjusted EBITDA Margin increased 300 basis points to 49.5%. The Adjusted EBITDA Margin expansion is mainly due to the following: (a) gross margin expansion within the three segments; (b) completion of UNIMA and Afya Jaboatão integration process in November 2023; (c) the ramp up of the four Mais Médicos campuses that started operation in 3Q22; (d) operational restructuring efforts in Continuing Education and Medical Practice Solutions segments; and (e) More efficiency in Selling, General and Administrative expenses.

Table 7: Reconciliation between Adjusted EBITDA and Net Income    
 
(in thousands of R$)

For the three months period ended March 31,

2024

2023

% Chg

Net income 

208,299

117,772

76.9%

Net financial result 

74,366

96,552

-23.0%

Income taxes expense 

10,865

19,060

-43.0%

Depreciation and amortization 

79,269

65,971

20.2%

Interest received 1

12,415

10,299

20.5%

Income share associate

(4,172)

(3,845)

8.5%

Share-based compensation 

8,630

6,495

32.9%

Non-recurring expenses:

8,181

17,907

-54.3%

 - Integration of new companies 2

5,870

5,900

-0.5%

 - M&A advisory and due diligence 3

248

11,039

-97.8%

 - Expansion projects 4

605

151

300.7%

 - Restructuring expenses 5

1,458

1,395

4.5%

 - Mandatory Discounts in Tuition Fees  6

0

(578)

n.a.

Adjusted EBITDA

397,853

330,211

20.5%

Adjusted EBITDA Margin

49.5%

46.5%

300 bps

(1) Represents the interest received on late payments of monthly tuition fees.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.  


Adjusted Net Income

Net Income for the first quarter of 2024 was R$208.3 million, an increase of 76.9% over the same period of the prior year. Adjusted Net Income for the first quarter of 2024 was R$251.0 million, an increase of 50.8% over the same period from the previous year, mainly due to: (a) enhancement of operational results (details above); (b) reduction in finance expenses due to a decrease in Net Debt (excluding IFRS 16) in R$ 237.2 million and lower interest rates; and (c) lower effective tax rates than last year.

Adjusted EPS reached R$2.26 per share for the first quarter of 2024, an increase of 54.4% YoY, reflecting the increase in Net Income and capital allocation discipline.

Table 8: Adjusted Net Income
(in thousands of R$)

For the three months period ended March 31,

2024

2023

% Chg

Net income

   208,299

   117,772

76.9%

Amortization of customer relationships and trademark 1

      25,856

      24,203

6.8%

Share-based compensation 

         8,630

         6,495

32.9%

Non-recurring expenses:

8,181

17,907

-54.3%

 - Integration of new companies 2

         5,870

         5,900

-0.5%

 - M&A advisory and due diligence 3

             248

      11,039

-97.8%

 - Expansion projects 4

             605

             151

300.7%

 - Restructuring expenses 5

         1,458

         1,395

4.5%

 - Mandatory Discounts in Tuition Fees  6

                   -  

-578

n.a.
Adjusted Net Income

250,966

166,377

50.8%

Basic earnings per share - in R$ 7

2.26

1.24

83.0%

Adjusted earnings per share - in R$ 8

2.74

1.77

54.4%

(1) Consists of amortization of customer relationships and trademark recorded under business combinations.
(2) Consists of expenses related to the integration of newly acquired companies.      
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.  
(7) Basic earnings per share: Net Income/Weighted average number of outstanding shares.      
(8) Adjusted earnings per share: Adjusted Net Income attributable to equity holders of the Parent/Weighted average number of outstanding shares.


Cash and Debt Position

On March 31, 2024, Cash and Cash Equivalents were R$611.1 million, an increase of 10.5% over December 31, 2023. The Net Debt, excluding the effect of IFRS 16, totaled R$1,577.4 million compared to December 31, 2023, Afya reduced its Net Debt by R$237.2 million due to solid Operating Cashflow generation.

For the three-month period ended March 31, 2024, Afya reported Cash Flow from Operating Activities of R$429.1 million, up from R$349.4 million in the same period of the previous year, an increase of 22.8% YoY, boosted by the solid operational results. Operating Cash Conversion Ratio achieved 110.1%, slightly down from 111.9% in the three-month period that ended on March 31, 2023.

Table 9: Operating Cash Conversion Ratio Reconciliation

For the three months period ended March 31,

(in thousands of R$)

Considering the adoption of IFRS 16 

2024

2023

% Chg

(a) Net cash flows from operating activities

417,860

331,554

26.0%

(b) Income taxes paid

11,194

17,819

-37.2%

(c) = (a) + (b) Cash flow from operating activities

429,054

349,373

22.8%

 
(d) Adjusted EBITDA

397,853

330,211

20.5%

(e) Non-recurring expenses:

8,181

17,907

-54.3%

 - Integration of new companies 1

5,870

5,900

-0.5%

 - M&A advisory and due diligence  2

248

11,039

-97.8%

 - Expansion projects 3

605

151

300.7%

 - Restructuring Expenses 4

1,458

1,395

4.5%

 - Mandatory Discounts in Tuition Fees  5

0

-578

-100.0%

(f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses 

389,672

312,304

24.8%

(g) = (c) / (f) Operating cash conversion ratio

110.1%

111.9%

-180 bps
(1) Consists of expenses related to the integration of newly acquired companies. 
(2) Consists of expenses related to professional and consultant fees in connection with due diligence services for M&A transactions.
(3) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(4) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of acquired companies.
(5) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.  

The following table shows more information regarding the cost of debt for 1Q24, considering loans and financing, capital market and accounts payable to selling shareholders. Afya's capital structure remains solid with a conservative leveraging position and a low cost of debt, Afya's Net Debt (excluding the effect of IFRS16) divided by Adjusted EBITDA mid guidance for 2024 would be 1.2x.

Table 10: Gross Debt and Average Cost of Debt    
(in millions of R$)

For the three months period ended March 31,

 

 

 

 

Cost of Debt

Gross Debt

Duration (Years)

Per year

%CDI²

 

2024

2023

2024

2023

2024

2023

2024

2023

Loans and financing: Softbank

826

825

2.1

3.1

6.5%

6.5%

57%

48%

Loans and financing: Debentures 

510

519

3.3

4.4

12.7%

15.7%

117%

114%

Loans and financing: Others

446

580

1.3

1.9

12.7%

15.7%

116%

114%

Accounts payable to selling shareholders

405

828

0.9

1.2

10.8%

13.3%

100%

97%

Total¹| Average

2,189

2,751

2.1

2.6

9.8%

12.1%

91%

89%

(1) Total ammount refers only to the "Gross Debt" columns 
(2) Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference: 1Q24: ~10,65% p.y. and for 1Q23: ~13.65% p.y.
 
Table 11: Cash and Debt Position        
(in thousands of R$)          
 

1Q24

FY2023

% Chg

1Q23

% Chg

(+) Cash and Cash Equivalents

611,077

553,030

10.5%

722,691

-15.4%

Cash and Bank Deposits

                  5,573

                    11,746

-52.6%

            28,375

-80.4%

Cash Equivalents

            605,504

                 541,284

11.9%

         694,316

-12.8%

(-) Loans and Financing

1,783,094

1,800,775

-1.0%

1,923,737

-7.3%

Current

            161,675

                 179,252

-9.8%

         193,214

-16.3%

Non-Current

        1,621,419

            1,621,523

0.0%

     1,730,523

-6.3%

(-) Accounts Payable to Selling Shareholders

            405,410

            566,867

-28.5%

         769,274

-47.3%

Current

            244,865

                 353,998

-30.8%

         417,398

-41.3%

Non-Current

            160,545

                 212,869

-24.6%

         351,876

-54.4%

(-) Other Short and Long Term Obligations

                                 -  

                                 -  

n.a.

58,702

-100.0%

(=) Net Debt (Cash) excluding IFRS 16

1,577,427

1,814,612

-13.1%

2,029,022

-22.3%

(-) Lease Liabilities

902,542

874,569

3.2%

864,983

4.3%

Current

               40,030

                    36,898

8.5%

            38,026

5.3%

Non-Current

            862,512

                 837,671

3.0%

         826,957

4.3%

Net Debt (Cash) with IFRS 16

2,479,969

2,689,181

-7.8%

2,894,005

-14.3%

 

CAPEX

Capital expenditures consist of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of Afya's campuses and headquarters, leasehold improvements, and the development of new solutions in the Medical Practice Solutions segment, among others.

For the three-months period ending March 31, 2024, CAPEX was R$92.9 million, representing 11.6% of Afya's Net Revenue. However, there is a one-off effect of R$ 49.6 million regarding the Earnout of FIP Guanambi, due to the expansion of 40 seats as disclosed to the market in January 2024. By disregarding this impact, the CAPEX/Net Revenue ratio would be 5.4%.

Table 12: CAPEX
(in thousands of R$)

For the three months period ended March 31,

 

2024

2023

% Chg

CAPEX

92,901

46,429

100.1%

Property and equipment

22,955

27,299

-15.9%

Intanglibe assets

69,946

19,130

265.6%

 - Licenses

49,600

0

n.a.
 - Others

20,346

19,130

6.4%

       
Trademarks

                   -  

                    -  

n.a.
Customer relationships

                   -  

                    -  

n.a.
Software

                612

                    -  

n.a.
Education content

             2,471

                    -  

n.a.
Developed technology 

             5,557

                    -  

n.a.
Educational platform

             5,663

                    -  

n.a.
Software in progress

             6,043

                    -  

n.a.
 

ESG Metrics

ESG commitment is an important part of Afya's strategy and permeates the Company's core values. Afya has been advancing year after year on its core pillars and, since 2021, ESG metrics have been disclosed in the Company's quarterly financial results.

The 2022 Sustainability Report can be found at: https://ir.afya.com.br/corporate-governance/sustainability/

Table 13: ESG Metrics

1Q24

1Q23

2023

# GRI Governance and Employee Management    

1

405-1

Number of employees

9,914

9,567

                9,680

2

405-1

Percentage of female employees

58%

57%

58%

3

405-1

Percentage of female employees in the board of directors

36%

40%

36%

4

102-24

Percentage of independent member in the board of directors

36%

30%

36%

 

 

Environmental    

5

 

Total renewable energy generated by own photovoltaic plants (MWh)

             1,794,215

                 732,767

        4,510,637

6

302-1

Total energy consumed (MWh) 

             5,831,206

             5,468,733

      24,036,608

7

302-1

% of renewable energy consumed from own generation 

26.8%

13.0%

16.0%

8

302-1

% of energy consumed from the power grid 

30.8%

79.0%

60.3%

9

302-1

% of energy consumed from the free market

42.3%

8.0%

23.7%

 

 

Social    

10

413-1

Number of free clinical consultations offered by Afya

        147,757

        116,979

  586,611

11

 

Number of physicians graduated in Afya's campuses

          20,220

          18,126

           20,197

12

201-4

Number of students with financing and scholarship programs (FIES and PROUNI)

          10,815

            9,619

           10,584

13

 

% students with scholarships over total undergraduate students

14.2%

14.2%

16.0%

14

413-1

Hospital, clinics and city halls partnerships

                518

                718

                   649

(1) Some factors can influence in the adequate proportionality analysis of data over the years, such as: climate changes, COVID-19 pandemic effects, seasonalities, number of employees, number of students, number of active units, among others.
(2) Starting in 2Q22, previously disclosed social data were updated to consider: (a) the number of graduated physicians considering all units after its closing, and (b) partnerships related only to medical schools.
(3) The number of students with financing and scholarship programs (FIES and PROUNI) in 2023 does not include any student from Unima and FCM Jaboatão Acquisition
 

5. Conference Call and Webcast Information

When:

May 09, 2024 at 5:00 p.m. EST. 

 

Who:

Mr. Virgilio Gibbon, Chief Executive Officer

Mr. Luis André Blanco, Chief Financial Officer

Ms. Renata Costa Couto, IR Director

 

Webcast:

https://afya.zoom.us/j/96479347633 

OR

Dial-in:

Brazil: +55 11 4680 6788 or +55 11 4700 9668 or +55 21 3958 7888 or +55 11 4632 2236 or +55 11 4632 2237

United States: +1 719 359 4580 or +1 929 205 6099 or +1 253 205 0468 or +1 253 215 8782 or +1 301 715 8592 or +1 305 224 1968 or +1 309 205 3325 or +1 312 626 6799 or +1 346 248 7799 or +1 360 209 5623 or +1 386 347 5053 or +1 507 473 4847 or +1 564 217 2000 or +1 646 931 3860 or +1 669 444 9171 or +1 669 900 6833 or +1 689 278 1000

Webinar ID: 964 7934 7633

Other Numbers: https://afya.zoom.us/u/aON6T6YtJ

6. About Afya Limited (Nasdaq: AFYA; B3: A2FY34)

Afya is a leading medical education group in Brazil based on the number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students and physicians to transform their ambitions into rewarding lifelong experiences from the moment they join us as medical students through their medical residency preparation, graduation program, continuing medical education activities and offering digital products to help doctors enhance their healthcare services through their whole career. For more information, please visit www.afya.com.br.

7. Forward ? Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, and include risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of students and professors; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and the Brazilian economy.

The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management's beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company's financial results are included in the filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled "Risk Factors" in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

8. Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board?IASB, Afya presents Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted EPS, which are non-GAAP financial measures, for the convenience of investors. A non-GAAP financial measure is generally defined as one that intends to measure financial performance but excludes or includes amounts that would not be equally adjusted in the most comparable GAAP measure.

Afya calculates Adjusted EBITDA as net income plus/minus net financial result, plus income taxes expense, plus depreciation and amortization, plus interest received on late payments of monthly tuition fees, plus share-based compensation, plus/minus income share associate, plus/minus non-recurring expenses/income. Operating Cash Conversion Ratio is calculated as the Cash flow from Operating Activities plus income taxes paid, minus/plus non-recurring expenses/income divided by Adjusted EBITDA. The calculation of Adjusted Net Income is the Net Income plus amortization of customer relationships and trademark, plus share-based compensation, plus/minus non-recurring expenses/income. The calculation of Adjusted EPS is the Adjusted Net Income minus the non-controlling interests divided by the Weighted average number of outstanding shares.

The non-GAAP supplemental financial measures are provided with the intend to help investors in assessing the overall performance of Afya's business regarding its core operations, cash generation and profitability. The non-GAAP financial measures described in this prospectus are not substitutes for the IFRS measures. In addition, the calculations of Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted EPS are not standardized financial measures and may differ from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya's measures may not be comparable to those of other companies.

9. Investor Relations Contact

E-mail: [email protected]

10. Financial Tables

Consolidated statements of financial position
(In thousands of Brazilian reais)
 

 

March 31, 2024

December 31, 2023

(unaudited)

Assets

 

 

 

Current assets

 

Cash and cash equivalents

611,077

553,030

Trade receivables

536,175

546,438

Inventories

653

1,382

Recoverable taxes

50,665

43,751

Other assets

61,715

 

58,905

Total current assets

1,260,285

 

1,203,506

 

Non-current assets

 

Trade receivables

40,918

 

39,485

Other assets

113,807

117,346

Investment in associate

52,106

51,834

Property and equipment

610,628

608,685

Right-of-use assets

788,657

767,609

Intangible assets

4,824,422

4,796,016

Total non-current assets

6,430,538

6,380,975

 

Total assets

7,690,823

7,584,481

 

Liabilities

 

Current liabilities

 

Trade payables

122,694

108,222

Loans and financing

161,675

179,252

Lease liabilities

40,030

36,898

Accounts payable to selling shareholders

244,865

353,998

Advances from customers

156,580

153,485

Labor and social obligations

215,822

192,294

Taxes payable

28,746

27,765

Income taxes payable

9,248

3,880

Other liabilities

2,258

2,773

Total current liabilities

981,918

1,058,567

 

Non-current liabilities

 

Loans and financing

1,621,419

1,621,523

Lease liabilities

862,512

837,671

Accounts payable to selling shareholders

160,545

212,869

Taxes payable

86,959

88,198

Provision for legal proceedings

102,510

104,361

Other liabilities

17,905

18,280

Total non-current liabilities

2,851,850

2,882,902

Total liabilities

3,833,768

3,941,469

 

Equity

 

Share capital

17

17

Additional paid-in capital

2,364,361

2,365,200

Treasury shares

(297,485)

 

(299,150)

Share-based compensation reserve

163,703

155,073

Retained earnings

1,583,758

1,380,365

Equity attributable to equity holders of the parent

3,814,354

3,601,505

Non-controlling interests

42,701

41,507

Total equity

3,857,055

3,643,012

 

Total liabilities and equity

7,690,823

7,584,481

 
 
 

Consolidated statements of income and comprehensive income
(In thousands of Brazilian reais, except for earnings per share information)
 

 

 

March 31, 2024

March 31, 2023

 

(unaudited)

(unaudited)

 

 

 

Revenue

804,239

709,961

Cost of services

(269,504)

(247,607)

Gross profit

534,735

462,354

 

 

 

Selling, general and administrative expenses

(241,164)

(233,220)

Other income (expenses), net

(4,213)

405

 

 

 

Operating income

289,358

229,539

 

 

 

Finance income

25,530

27,688

Finance expenses

(99,896)

(124,240)

Net finance result

(74,366)

(96,552)

 

 

 

Share of income of associate

4,172

3,845

 

 

 

Income before income taxes

219,164

136,832

 

 

 

Income taxes expenses

(10,865)

(19,060)

 

 

 

Net income

208,299

117,772

 

 

 

Other comprehensive income

-

-

Total comprehensive income

208,299

117,772

 

 

 

Income attributable to:

 

 

Equity holders of the parent

203,393

112,124

Non-controlling interests

4,906

5,648

 

208,299

117,772

Basic earnings per share

 

 

Per common share

2.26

1.25

Diluted earnings per share

Per common share

2.22

1.24

 
 
 

Consolidated statements of cash flows
(In thousands of Brazilian reais)
 

 

 

March 31, 2024

March 31, 2023

 

(unaudited)

(unaudited)

Operating activities

 

 

Income before income taxes

219,164

136,832

Adjustments to reconcile income before income taxes

 

 

Depreciation and amortization

79,269

65,971

Write-off of property and equipment

19

88

Write-off of intangible assets

-

246

Allowance for expected credit losses

15,264

17,694

Share-based compensation

8,630

6,495

Net foreign exchange differences

(190)

161

Accrued interest

51,745

77,530

Accrued interest on lease liabilities

26,744

25,524

Share of income of associate

(4,172)

(3,845)

Provision (reversal) for legal proceedings

(1,851)

3,154

 

 

 

Changes in assets and liabilities

 

 

Trade receivables

(6,434)

(10,232)

Inventories

729

2,404

Recoverable taxes

(6,914)

(8,460)

Other assets

729

6,005

Trade payables

14,472

(11,507)

Taxes payable

5,439

8,480

Advances from customers

3,095

147

Labor and social obligations

23,528

28,158

Other liabilities

(212)

4,528

 

429,054

349,373

Income taxes paid

(11,194)

(17,819)

Net cash flows from operating activities

417,860

331,554

 

 

 

Investing activities

 

 

Acquisition of property and equipment

(22,955)

(27,299)

Acquisition of intangibles assets

(69,946)

(19,130)

Dividends received

3,900

3,600

Acquisition of subsidiaries, net of cash acquired

(147,262)

(600,270)

Payments of interest from acquisition of subsidiaries and intangibles

(24,735)

(7,876)

Net cash flows used in investing activities

(260,998)

(650,975)

 

 

 

Financing activities

 

 

Payments of principal of loans and financing

(10,762)

(459)

Payments of interest of loans and financing

(48,806)

(15,286)

Proceeds from loans and financing

-

3,663

Payments of principal of lease liabilities

(9,648)

(7,976)

Payments of interest of lease liabilities

(26,903)

(24,621)

Proceeds from exercise of stock options

826

-

Dividends paid to non-controlling shareholders

(3,712)

(6,130)

Net cash flows generated (used) in financing activities

(99,005)

(50,809)

Net foreign exchange differences

190

(161)

Net increase (decrease) in cash and cash equivalents

58,047

(370,391)

Cash and cash equivalents at the beginning of the period

553,030

1,093,082

Cash and cash equivalents at the end of the period

611,077

722,691

 


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