UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2023
Commission
File Number: 001-38992
Afya Limited
(Exact name of registrant as specified
in its charter)
Alameda Oscar Niemeyer, No. 119,
Salas 502, 504, 1,501 and 1,503
Vila da Serra, Nova Lima, Minas Gerais
Brazil
+55 (31) 3515 7550
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
TABLE OF CONTENTS
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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Afya Limited |
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By: |
/s/ Virgilio Deloy Capobianco Gibbon |
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Name: |
Virgilio Deloy Capobianco Gibbon |
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Title: |
Chief Executive Officer |
Date: August 28, 2023
Afya Limited
Unaudited interim condensed
consolidated financial statements
June 30, 2023
Afya Limited
Unaudited interim condensed consolidated statements of financial position
As of June 30, 2023, and December 31, 2022
(In thousands of Brazilian reais)
|
Notes |
June 30, 2023 |
|
December 31, 2022 |
Assets |
|
(unaudited) |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
5 |
741,196 |
|
1,093,082 |
Trade receivables |
6 |
509,520 |
|
452,831 |
Inventories |
|
8,088 |
|
12,190 |
Recoverable taxes |
|
51,505 |
|
27,809 |
Other assets |
8 |
63,930 |
|
51,745 |
Total current assets |
|
1,374,239 |
|
1,637,657 |
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|
|
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Non-current assets |
|
|
|
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Trade receivables |
6 |
42,893 |
|
42,568 |
Other assets |
8 |
200,448 |
|
191,756 |
Investment in associate |
9 |
52,669 |
|
53,907 |
Property and equipment |
10 |
588,178 |
|
542,087 |
Right-of-use assets |
12.2.2 |
759,512 |
|
690,073 |
Intangible assets |
11 |
4,831,529 |
|
4,041,491 |
Total non-current assets |
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6,475,229 |
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5,561,882 |
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Total assets |
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7,849,468 |
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7,199,539 |
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Liabilities |
|
|
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Current liabilities |
|
|
|
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Trade payables |
|
82,632 |
|
71,482 |
Loans and financing |
12.2.1 |
193,660 |
|
145,202 |
Lease liabilities |
12.2.2 |
35,292 |
|
32,459 |
Accounts payable to selling shareholders |
12.2.3 |
401,766 |
|
261,711 |
Notes payable |
12.2.4 |
55,045 |
|
62,176 |
Advances from customers |
|
121,838 |
|
133,050 |
Labor and social obligations |
|
220,019 |
|
154,518 |
Taxes payable |
|
26,455 |
|
26,221 |
Income taxes payable |
|
30,465 |
|
16,151 |
Other liabilities |
|
3,509 |
|
2,719 |
Total current liabilities |
|
1,170,681 |
|
905,689 |
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Non-current liabilities |
|
|
|
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Loans and financing |
12.2.1 |
1,731,494 |
|
1,737,699 |
Lease liabilities |
12.2.2 |
816,553 |
|
737,066 |
Accounts payable to selling shareholders |
12.2.3 |
362,829 |
|
266,967 |
Taxes payable |
|
91,286 |
|
92,888 |
Provision for legal proceedings |
22 |
202,940 |
|
195,854 |
Other liabilities |
|
27,488 |
|
13,218 |
Total non-current liabilities |
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3,232,590 |
|
3,043,692 |
Total liabilities |
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4,403,271 |
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3,949,381 |
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Equity |
|
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Share capital |
16 |
17 |
|
17 |
Additional paid-in capital |
|
2,372,773 |
|
2,375,344 |
Share-based compensation reserve |
|
136,936 |
|
123,538 |
Treasury stock |
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(314,745) |
|
(304,947) |
Retained earnings |
|
1,199,802 |
|
1,004,886 |
Equity attributable to equity holders of the parent |
|
3,394,783 |
|
3,198,838 |
Non-controlling interests |
|
51,414 |
|
51,320 |
Total equity |
|
3,446,197 |
|
3,250,158 |
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|
|
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Total liabilities and equity |
|
7,849,468 |
|
7,199,539 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of income and comprehensive income
For the three and six-month periods ended June 30, 2023 and 2022
(In thousands of Brazilian reais, except for earnings
per share information)
|
|
Three-month period ended |
Six-month period ended |
|
Notes |
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Net revenue |
18 |
712,607 |
598,156 |
1,422,568 |
1,164,480 |
Cost of services |
19 |
(284,295) |
(219,242) |
(531,902) |
(405,972) |
Gross profit |
|
428,312 |
378,914 |
890,666 |
758,508 |
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General and administrative expenses |
19 |
(249,586) |
(207,415) |
(482,806) |
(385,929) |
Other expenses, net |
|
(2,083) |
(1,257) |
(1,678) |
(1,566) |
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Operating income |
|
176,643 |
170,242 |
406,182 |
371,013 |
|
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Finance income |
20 |
23,892 |
22,874 |
51,579 |
47,443 |
Finance expenses |
20 |
(114,118) |
(83,676) |
(238,357) |
(164,967) |
Finance result |
|
(90,226) |
(60,802) |
(186,778) |
(117,524) |
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Share of income of associate |
9 |
3,210 |
2,201 |
7,056 |
6,441 |
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Income before income taxes |
|
89,627 |
111,641 |
226,460 |
259,930 |
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Income taxes expenses |
21 |
(2,090) |
(5,568) |
(21,150) |
(18,915) |
|
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Net income |
|
87,537 |
106,073 |
205,310 |
241,015 |
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|
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Other comprehensive income |
|
- |
- |
- |
- |
Total comprehensive income |
|
87,537 |
106,073 |
205,310 |
241,015 |
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Income attributable to |
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Equity holders of the parent |
|
82,789 |
101,505 |
194,916 |
231,115 |
Non-controlling interests |
|
4,748 |
4,568 |
10,394 |
9,900 |
|
|
87,537 |
106,073 |
205,310 |
241,015 |
Basic earnings per share |
|
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|
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Per common share |
17 |
0.92 |
1.12 |
2.17 |
2.55 |
Diluted earnings per share
Per common share |
17 |
0.92 |
1.12 |
2.16 |
2.55 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of changes in equity
For the six-month periods ended June 30, 2023 and 2022
(In thousands of Brazilian reais)
|
Equity attributable to equity holders of the parent |
|
|
Share capital |
Additional paid-in capital |
Treasury shares |
Share-based compensation reserve |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
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Balances at December 31, 2021 |
17 |
2,375,344 |
(152,630) |
94,101 |
631,317 |
2,948,149 |
51,869 |
3,000,018 |
Net income |
- |
- |
- |
- |
231,115 |
231,115 |
9,900 |
241,015 |
Total comprehensive income |
- |
- |
- |
- |
231,115 |
231,115 |
9,900 |
241,015 |
Treasury shares |
- |
- |
(152,317) |
- |
- |
(152,317) |
- |
(152,317) |
Share-based compensation |
- |
- |
- |
11,581 |
- |
11,581 |
- |
11,581 |
Dividends declared |
- |
- |
- |
- |
- |
- |
(11,212) |
(11,212) |
Balances at June 30, 2022 (unaudited) |
17 |
2,375,344 |
(304,947) |
105,682 |
862,432 |
3,038,528 |
50,557 |
3,089,085 |
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Balances at December 31, 2022 |
17 |
2,375,344 |
(304,947) |
123,538 |
1,004,886 |
3,198,838 |
51,320 |
3,250,158 |
Net income |
- |
- |
- |
- |
194,916 |
194,916 |
10,394 |
205,310 |
Total comprehensive income |
- |
- |
- |
- |
194,916 |
194,916 |
10,394 |
205,310 |
Treasury shares |
- |
- |
(12,369) |
- |
- |
(12,369) |
- |
(12,369) |
Share-based compensation |
- |
- |
- |
13,398 |
- |
13,398 |
- |
13,398 |
Restricted shares transferred to executives |
- |
(2,571) |
2,571 |
- |
- |
- |
- |
- |
Dividends declared |
- |
- |
- |
- |
- |
- |
(10,300) |
(10,300) |
Balances at June 30, 2023 (unaudited) |
17 |
2,372,773 |
(314,745) |
136,936 |
1,199,802 |
3,394,783 |
51,414 |
3,446,197 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of cash flows
For the six-month periods ended June 30, 2023 and 2022
(In thousands of Brazilian reais)
|
Notes |
June 30, 2023 |
June 30, 2022 |
Operating activities |
|
(unaudited) |
(unaudited) |
|
Income before income taxes |
|
226,460 |
259,930 |
|
|
Adjustments to reconcile income before income taxes |
|
|
|
|
|
|
Depreciation and amortization |
19 |
138,264 |
99,089 |
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|
|
Write-off of property and equipment |
|
246 |
2,483 |
|
|
|
Write-off of intangible assets |
|
259 |
2,549 |
|
|
|
Allowance for doubtful accounts |
6 |
39,086 |
30,420 |
|
|
|
Share-based compensation expense |
19 |
13,398 |
11,581 |
|
|
|
Net foreign exchange differences |
20 |
539 |
320 |
|
|
|
Accrued interest |
20 |
152,404 |
95,165 |
|
|
|
Accrued lease interest |
12.2.2, 20 |
49,033 |
41,392 |
|
|
|
Share of income of associate |
9 |
(7,056) |
(6,441) |
|
|
|
Provision for legal proceedings |
22 |
6,934 |
12,047 |
Changes in assets and liabilities |
|
|
|
|
Trade receivables |
|
(62,359) |
(88,472) |
|
Inventories |
|
4,241 |
(3,314) |
|
Recoverable taxes |
|
(23,107) |
(13,644) |
|
Other assets |
|
(9,121) |
(7,886) |
|
Trade payables |
|
(1,103) |
2,952 |
|
Taxes payables |
|
18,502 |
5,247 |
|
Advances from customers |
|
(43,709) |
(31,668) |
|
Labor and social obligations |
|
59,249 |
44,565 |
|
Other liabilities |
|
4,320 |
(6,298) |
|
|
|
566,480 |
450,017 |
|
Income taxes paid |
|
(28,988) |
(22,101) |
|
|
|
|
|
|
Net cash flows from operating activities |
|
537,492 |
427,916 |
|
|
|
|
|
Investing activities |
|
|
|
|
Acquisition of property and equipment |
10 |
(56,907) |
(62,266) |
|
Acquisition of intangibles assets |
11 |
(45,250) |
(50,267) |
|
Dividends received |
9 |
5,101 |
2,838 |
|
Acquisition of subsidiaries, net of cash acquired |
|
(640,858) |
(177,815) |
|
Net cash flows used in investing activities |
|
(737,914) |
(287,510) |
|
|
|
|
Financing activities |
|
|
|
|
Payments of loans and financing |
12.5 |
(67,305) |
(53,795) |
|
Proceeds from loans and financing |
12.5 |
5,288 |
- |
|
Payments of lease liabilities |
12.2.2, 12.5 |
(66,239) |
(55,074) |
|
Treasury shares buy-back |
16 |
(12,369) |
(152,317) |
|
Dividends paid to non-controlling shareholders |
12.5 |
(10,300) |
(11,212) |
|
Net cash flows used in financing activities |
|
(150,925) |
(272,398) |
|
Net foreign exchange differences |
|
(539) |
(320) |
|
Net decrease in cash and cash equivalents |
|
(351,886) |
(132,312) |
|
Cash and cash equivalents at the beginning of the period |
|
1,093,082 |
748,562 |
|
Cash and cash equivalents at the end of the period |
|
741,196 |
616,250 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
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Afya Limited (“Afya”), collectively with its subsidiaries
referred to as the “Company”, is a holding company incorporated under the laws of the Cayman Islands on March 22, 2019. The
Company completed its initial public offering (IPO) on July 19, 2019, and its shares are listed on the Nasdaq under the symbol “AFYA”.
The Company’s ultimate parent company is Bertelsmann SE& Co. KGaA (“Bertelsmann”), following Bertelsmann’s
acquisition of control on May 5, 2022.
The Company is formed by a network of higher education and post-graduate institutions
focused on medicine located in 19 Brazilian states forming the largest educational group by the number of medical seats in the country.
In non-regulated education, Afya provides services that comprise the development and sale of electronically distributed educational courses
on medicine science, related printed and soft skills educational content. The Company also offers solutions to empower the physicians
in their daily routine including supporting clinic decisions through mobile app subscription, delivering practice management tools through
a SaaS (“Software as a Service”) model and supporting the patient-physician relationship.
Acquisition in 2023
On January 2, 2023, Afya Participações
S.A. (hereafter referred to as "Afya Brazil”) acquired Sociedade Educacional e Cultural Sergipe DelRey Ltda.
(“DelRey”). DelRey is a post-secondary education institution with governmental authorization to offer on-campus, undergraduate
degrees and graduate programs in medicine and health, as well as other courses, and encompasses the operations of Centro Universitário
Tiradentes Alagoas (“UNIT Alagoas”) and Faculdade Tiradentes Jaboatão dos Guararapes (“FITS Jaboatão dos
Guararapes”). See Note 4.
COVID-19
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have emerged
in Wuhan, China. COVID-19 has since spread to most of the countries around the globe, including every state in Brazil. On March 11, 2020,
the World Health Organization declared the COVID-19 outbreak a pandemic, and on March 20, 2020 the Brazilian federal government declared
a national emergency with respect to COVID-19.
During 2020, some of the Brazilian states issued decrees granting discounts to our students
because of COVID-19. These mandatory discounts have been suspended as their constitutionality has been challenged in the superior courts.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
On November 18, 2021, the Brazilian Federal Court of Justice (STF) decided, by a majority
of votes, that any lawsuit with decisions to apply linear discounts in monthly tuition fees for private universities with respect to the
COVID-19 pandemic are unconstitutional. Therefore, the Company shall not apply linear discounts on any active monthly tuition fees that
are related to the effects of the Covid-19 pandemic. Regarding the discounts granted by the date of issuance of these financial statements,
the Company is charging back the students as final legal decisions were given by the Brazilian Federal Court of Justice.
For the six-month period ended June 30, 2023, the Company has invoiced R$947 from previous
periods, net of discounts granted due to COVID-19 (R$22,077 for the six-month period ended June 30, 2022). The outstanding balances are
classified as current trade receivables and the income statement effects are classified in net revenue.
Conflict
between Russia and Ukraine.
The war in Ukraine, started in 2022, triggers a number of IFRS accounting considerations
affecting the financial statements.
Many countries have imposed, and continue to impose, new sanctions on specified Russian
entities and individuals. Sanctions have also been imposed on Belarus.
The situation together with potential fluctuations in commodity prices, foreign exchange
rates, restrictions to imports and exports, availability of local materials and services and access to local resources will directly impact
entities that have significant operations or exposures in, or to Russia, Belarus or Ukraine.
The war and its direct and indirect consequences may impact entities other than those
with direct interests in the involved countries, for instance, as a result of exposure to fluctuations in commodity prices and foreign
exchange rates, as well as the possibility of a protracted economic downturn.
As of the date of these interim financial statements, the conflict between Russia and
Ukraine has not brought significant direct impact over Afya’s operations and results.
2 | Significant accounting policies |
2.1 Basis for preparation of the unaudited interim condensed consolidated
financial statements
The unaudited interim condensed consolidated financial statements as of June 30, 2023
and for the three-month and six-month periods ended June 30, 2023 and 2022 have been prepared in accordance with IAS 34 Interim Financial
Reporting.
The unaudited interim condensed consolidated financial statements have been prepared
on a historical cost basis, except for contingent consideration that has been measured at fair value.
The unaudited interim condensed consolidated financial statements do not include all
the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s
annual consolidated financial statements as of December 31, 2022.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Afya Limited is a holding company, as such the primary source of revenue derives from
its interest on the operational companies in Brazil. As result, the Brazilian Real has been assessed as the Company`s functional currency.
The unaudited interim condensed consolidated financial statements are presented in Brazilian
Reais (“BRL” or “R$”), which is the Company’s functional and presentation currency. All amounts are rounded
to the nearest thousand.
These unaudited interim condensed consolidated financial statements as of June 30, 2023
and for three-month and the six-month periods ended June 30, 2023 and 2022 were authorized for issuance by the Board of Directors on August
28, 2023.
2.2 Changes in accounting policies and disclosures
New standards, interpretations and amendments adopted by the
Company
The accounting policies adopted in the preparation of the unaudited interim condensed
consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial
statements for the year ended December 31, 2022. The Company has not early adopted any standard, interpretation or amendment that has
been issued but is not yet effective.
Certain amendments apply for the first time in 2023, but do not have significant impacts
on the interim condensed consolidated financial statements of the Company.
Definition of Accounting Estimates - Amendments to IAS 8. The amendments
to IAS 8 clarify the distinction between changes in accounting estimates, and changes in accounting policies and the correction of errors.
They also clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments had no material impact
on these interim condensed consolidated financial statements.
Classification of Liabilities as Current or Non-current - Amendments to
IAS 1 paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments
clarify: i) What is meant by a right to defer settlement; ii) That a right to defer must exist at the end of the reporting period; iii)
That classification is unaffected by the likelihood that an entity will exercise its deferral right; iv) That only if an embedded derivative
in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification. The amendments
had no material impact on these interim condensed consolidated financial statements.
Disclosure of Accounting Policies - Amendments
to IAS 1 and IFRS Practice Statement 2 The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance
and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide
accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’
accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities
apply the concept of materiality in making decisions about accounting policy disclosures. The amendments had no material impact on these
interim condensed consolidated financial statements.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
2.3 Basis consolidation
The table below is a list of the Company’s subsidiaries and associate:
|
|
|
|
Direct and indirect interest |
Name |
Principal activities |
Location |
Investment type |
June 30, 2023 (unaudited) |
December 31, 2022 |
Afya Participações S.A. (“Afya Brazil”) |
Holding |
Nova Lima - MG |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos Porto S.A. – (“ITPAC Porto”) |
Undergraduate degree programs |
Porto Nacional - TO |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos S.A. – (“ITPAC Araguaina”) |
Undergraduate degree programs |
Araguaína - TO |
Subsidiary |
100% |
100% |
União Educacional do Vale do Aço S.A. – (“UNIVAÇO”) |
Medicine undergraduate degree program |
Ipatinga - MG |
Subsidiary |
100% |
100% |
IPTAN - Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A. (“IPTAN”) |
Undergraduate degree programs |
São João Del Rei - MG |
Subsidiary |
100% |
100% |
Instituto de Educação Superior do Vale do Parnaíba S.A. (“IESVAP”) |
Undergraduate degree programs |
Parnaíba - PI |
Subsidiary |
80% |
80% |
Centro de Ciências em Saúde de Itajubá S.A. (“CCSI”) |
Medicine undergraduate degree program |
Itajubá - MG |
Subsidiary |
60% |
60% |
Instituto de Ensino Superior do Piauí S.A. (”IESP”) |
Undergraduate and graduate degree programs |
Teresina - PI |
Subsidiary |
100% |
100% |
Centro Integrado de Saúde de Teresina (“CIS”) |
Outpatient care |
Teresina - PI |
Subsidiary |
100% |
100% |
FADEP - Faculdade Educacional de Pato Branco Ltda. (“FADEP”) |
Undergraduate degree programs |
Pato Branco - PR |
Subsidiary |
100% |
100% |
Medcel Editora e Eventos S.A. (“Medcel”) |
Medical education content |
São Paulo - SP |
Subsidiary |
100% |
100% |
Instituto Educacional Santo Agostinho S.A. (“FASA”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
ESMC Educação Superior Ltda. (“ESMC”) ** |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
- |
100% |
Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda. (“IPEMED”) |
Graduate |
Belo Horizonte - MG |
Subsidiary |
100% |
100% |
Instituto Paraense de Educação e Cultura Ltda (“IPEC”) |
Medicine degree programs |
Marabá - PA |
Subsidiary |
100% |
100% |
Sociedade Universitária Redentor S.A. (“UniRedentor”) |
Undergraduate and graduate degree programs |
Itaperuna - RJ |
Subsidiary |
100% |
100% |
Centro Universitário São Lucas Ltda. (“UniSL”) |
Undergraduate degree programs |
Porto Velho - RO |
Subsidiary |
100% |
100% |
Peb Med Instituição de Pesquisa Médica e Serviços Ltda (“PebMed”) |
Content and clinical tools and online platform |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Faculdade de Ensino Superior da Amazônia Reunida – (“FESAR”) |
Undergraduate degree programs |
Redenção – PA |
Subsidiary |
100% |
100% |
Centro Superior de Ciências da Saúde S/S Ltda. (“FCMPB”) |
Medicine degree programs |
João Pessoa – PB |
Subsidiary |
100% |
100% |
iClinic Desenvolvimento de Software Ltda (“iClinic”) |
Electronic Medical Record, Clinical Management System |
Ribeirão Preto - SP |
Subsidiary |
100% |
100% |
Medicinae Solutions S.A. (“Medicinae”) |
Healthcare payments and financial services |
Rio de Janeiro – RJ |
Subsidiary |
100% |
100% |
Medical Harbour Aparelhos Médico Hospitalares e Serviços em Tecnologia Ltda. (“Medical Harbour”) |
Educational health and medical imaging |
Florianópolis – SC |
Subsidiary |
100% |
100% |
Cliquefarma Drogarias Online Ltda.(“Cliquefarma”) |
Online platform |
São Paulo – SP |
Subsidiary |
100% |
100% |
Shosp Tecnologia da Informação Ltda. (“Shosp”) |
Electronic Medical Record, Clinical Management System |
Rio de Janeiro – RJ |
Subsidiary |
100% |
100% |
Sociedade Padrão de Educação Superior Ltda. (“UnifipMoc”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Nucleo de Atenção à Saúde e de Práticas Profissionalizantes (“NASPP) |
Outpatient care |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Companhia Nilza Cordeiro Herdy de Educação e Cultura. (“Unigranrio”) |
Undergraduate and graduate degree programs |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
Policlínica e Centro de Estética Duque de Caxias Ltda. (“Policlínica”) |
Outpatient care |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
RX PRO Soluções de Tecnologia Ltda. (“RX PRO”) |
Marketing for pharmaceutical industry |
São Paulo – SP |
Subsidiary |
100% |
100% |
RX PRO LOG Transporte e Logística Ltda. (“RX PRO LOG”) |
Marketing for pharmaceutical industry |
São Paulo – SP |
Subsidiary |
100% |
100% |
BMV Atividades Médicas Ltda. (“Além da Medicina”) |
Medical education content |
São Paulo – SP |
Subsidiary |
100% |
100% |
Cardiopapers Soluções Digitais Ltda (“CardioPapers”) |
Medical education content |
Recife – PE |
Subsidiary |
100% |
100% |
Quasar Telemedicina Desenvolvimento de Sistemas Computacionais Ltda. (“Glic”) |
Patient physician relationship |
Barueri – SP |
Subsidiary |
100% |
100% |
Sociedade Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”) * |
Undergraduate degree programs |
Maceió – AL |
Subsidiary |
100% |
- |
União Educacional do Planalto Central S.A. (“UEPC”) |
Undergraduate degree programs |
Brasília - DF |
Associate |
30% |
30% |
* See Note 4 for further details of the business combination during 2023.
** ESMC was merged with UnifipMoc in February 2023.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The financial information of the
acquired subsidiaries is included in the Company’s consolidated financial statements beginning on the respective acquisition dates.
The Company consolidates the financial information for all entities
it controls. Control is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and it ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company
gains control until the date the Company ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements
of subsidiaries in order to bring their accounting policies in line with the Company’s accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating to transactions are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss
of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets
(including goodwill), liabilities, non-controlling interest and other components of equity, while any resulting gain or loss is recognized
in the statement of income.
Non-controlling interests in the results and equity of subsidiaries are shown separately
in the consolidated statements of financial position, consolidated statements of income and comprehensive income and consolidated statements
of changes in equity.
The Company has three reportable segments as follows:
• Undergrad, which provides educational services through undergraduate
courses related to medicine, other health sciences and other undergraduate programs;
• Continuing Education, which provides specialization programs
and graduate courses in medicine; and
• Digital Services, which provides content and technology for medical education,
clinical decisions software, practice management tools and electronic medical records, doctor-patient relationship, telemedicine and digital
prescription for physicians and provides access and demand and efficiency for the healthcare players.
Segment information is presented consistently with the internal
reports provided to the Company's Chief Executive Officer (CEO), which is the Chief Operating Decision Maker (CODM) and is responsible
for allocating resources, assessing the performance of the Company's operating segments, and making the Company's strategic decisions.
No operating segments have been aggregated to form the reportable
operating segments. There is only one geographic region and the results are monitored and evaluated as a single business.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The following tables presents assets and liabilities information for the Company’s
operating segments as of June 30, 2023 and December 31, 2022, respectively:
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of June 30, 2023
(unaudited) |
|
|
|
|
|
|
Total assets |
7,406,279 |
165,317 |
283,058 |
7,854,654 |
(5,186) |
7,849,468 |
Current assets |
1,195,559 |
72,119 |
111,747 |
1,379,425 |
(5,186) |
1,374,239 |
Non-current assets |
6,210,720 |
93,198 |
171,311 |
6,475,229 |
- |
6,475,229 |
|
|
|
|
|
|
|
Total liabilities and equity |
7,406,279 |
165,317 |
283,058 |
7,854,654 |
(5,186) |
7,849,468 |
Current liabilities |
941,053 |
71,693 |
163,121 |
1,175,867 |
(5,186) |
1,170,681 |
Non-current liabilities |
3,129,238 |
58,931 |
44,421 |
3,232,590 |
- |
3,232,590 |
Equity |
3,335,988 |
34,693 |
75,516 |
3,446,197 |
- |
3,446,197 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of June 30, 2023 (unaudited) |
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (*) |
52,669 |
- |
- |
52,669 |
- |
52,669 |
Capital expenditures (**) |
64,655 |
8,130 |
29,372 |
102,157 |
- |
102,157 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of December 31, 2022 |
|
|
|
|
|
|
Total assets |
6,775,829 |
149,254 |
275,564 |
7,200,647 |
(1,108) |
7,199,539 |
Current assets |
1,461,802 |
61,673 |
115,290 |
1,638,765 |
(1,108) |
1,637,657 |
Non-current assets |
5,314,027 |
87,581 |
160,274 |
5,561,882 |
- |
5,561,882 |
|
|
|
|
|
|
|
Total liabilities and equity |
6,775,829 |
149,254 |
275,564 |
7,200,647 |
(1,108) |
7,199,539 |
Current liabilities |
711,896 |
57,605 |
137,296 |
906,797 |
(1,108) |
905,689 |
Non-current liabilities |
2,938,960 |
63,990 |
40,742 |
3,043,692 |
- |
3,043,692 |
Equity |
3,124,973 |
27,659 |
97,526 |
3,250,158 |
- |
3,250,158 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of December 31, 2022 |
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (*) |
53,907 |
- |
- |
53,907 |
- |
53,907 |
|
|
|
|
|
|
|
As of June 30, 2022 (unaudited) |
|
|
|
|
|
|
Capital expenditures (**) |
128,499 |
4,788 |
27,931 |
161,218 |
- |
161,218 |
(*) Investment in UEPC is included in non-current assets in the statement of financial
position.
(**) Capital expenditures consider the acquisitions of property and equipment and intangible
assets.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The following tables present the statements of income for the Company’s operating
segments for the six-month periods ended June 30, 2023 and 2022:
|
June 30, 2023 (unaudited) |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,246,240 |
70,584 |
105,744 |
1,422,568 |
- |
1,422,568 |
Inter-segment |
- |
- |
5,186 |
5,186 |
(5,186) |
- |
Net revenue |
1,246,240 |
70,584 |
110,930 |
1,427,754 |
(5,186) |
1,422,568 |
Cost of services |
(474,165) |
(29,935) |
(32,988) |
(537,088) |
5,186 |
(531,902) |
Gross profit |
772,075 |
40,649 |
77,942 |
890,666 |
- |
890,666 |
General and administrative expenses |
|
|
|
|
|
(482,806) |
Other expenses, net |
|
|
|
|
|
(1,678) |
Operating income |
|
|
|
|
|
406,182 |
Finance income |
|
|
|
|
|
51,579 |
Finance expenses |
|
|
|
|
|
(238,357) |
Share of income of associate |
|
|
|
|
|
7,056 |
Income before income taxes |
|
|
|
|
|
226,460 |
Income taxes expenses |
|
|
|
|
|
(21,150) |
Net income |
|
|
|
|
|
205,310 |
|
June 30, 2022 (unaudited) |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,028,940 |
47,662 |
87,878 |
1,164,480 |
- |
1,164,480 |
Inter-segment |
- |
- |
1,817 |
1,817 |
(1,817) |
- |
Net revenue |
1,028,940 |
47,662 |
89,695 |
1,166,297 |
(1,817) |
1,164,480 |
Cost of services |
(354,120) |
(28,121) |
(25,548) |
(407,789) |
1,817 |
(405,972) |
Gross profit |
674,820 |
19,541 |
64,147 |
758,508 |
- |
758,508 |
General and administrative expenses |
|
|
|
|
|
(385,929) |
Other expenses, net |
|
|
|
|
|
(1,566) |
Operating income |
|
|
|
|
|
371,013 |
Finance income |
|
|
|
|
|
47,443 |
Finance expenses |
|
|
|
|
|
(164,967) |
Share of income of associate |
|
|
|
|
|
6,441 |
Income before income taxes |
|
|
|
|
|
259,930 |
Income taxes expenses |
|
|
|
|
|
(18,915) |
Net income |
|
|
|
|
|
241,015 |
Seasonality of operations
Undergrad’s tuition revenues are related to the enrollment process and monthly
tuition fees charged to students over the period; thus, does not have significant fluctuations during the semester. Continuing Education
revenues are related to monthly intake and tuition fees and do not have a significant concentration in any period. Digital Services is
comprised mainly of Medcel, Pebmed, and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality,
Medcel’s revenue is concentrated in the first and last quarter of the year due to the enrollments of Medcel’s clients’
period. In addition, the majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point
in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results
of operations in the first and last quarters of the year compared to the second and third quarters.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The preliminary fair values of the identifiable assets acquired and liabilities assumed
as of acquisition date were:
Assets |
DelRey |
Cash and cash and equivalents |
7,804 |
Trade receivables |
33,741 |
Inventories |
139 |
Recoverable taxes |
589 |
Other assets |
8,563 |
Property and equipment |
24,980 |
Right-of-use assets |
65,408 |
Intangible assets |
722,654 |
|
863,878 |
Liabilities |
|
Trade payables |
12,253 |
Lease liabilities |
65,408 |
Labor and social obligations |
6,252 |
Taxes and contributions payable |
2,282 |
Advances from customers |
32,497 |
Provision for legal proceedings |
152 |
Other liabilities |
4,188 |
|
123,032 |
Total identifiable net assets at fair value |
740,846 |
|
|
Preliminary goodwill arising on acquisition |
91,390 |
Purchase consideration transferred |
832,236 |
Cash paid |
575,000 |
Consideration to be transferred |
250,000 |
Digital solutions * |
7,236 |
Analysis of cash flows on acquisition: |
|
Transaction costs of the acquisition (included in cash flows from operating activities) |
12,332 |
Cash paid net of cash acquired with the subsidiary (included in cash flows from investing activities) |
567,196 |
Net of cash flow on acquisition |
579,528 |
* Part of the purchase consideration to be transferred is also comprised by digital solutions,
specially from Medcel, Pebmed and Medical Harbour, to be transferred to the selling shareholders education entities from 2023 to 2030.
This part of the purchase price was measured using assumptions like current product prices, inflation, approved seats for the selling
shareholders education entities and present value discount rates. The balances of such consideration are classified in other liabilities
on the statement of financial position.
(a) Acquisition of DelRey
On January 2, 2023, Afya Brazil acquired 100% of the share capital
of DelRey. The aggregate purchase price comprises of: i) R$825,000 of which R$575,000 was paid in cash on the transaction closing date,
and R$250,000 is payable in cash in three annual installments, respectively, of R$150,000 in January 2024, R$50,000 in January 2025 and
R$50,000 in January 2026, adjusted by the SELIC rate; and ii) offer of AFYA’s digital solutions free of charge until December 31,
2030, for students of medicine of UNIT Sergipe and FITS Goiânia which are universities owned by the sellers and not part of the
transaction. The fair value of this service was estimated at R$7,236 at date of acquisition. There are 84 additional seats still pending
approval which, if approved by MEC, will result in a potential additional payment of up to R$105,000. Given the future event that will
trigger the potential payout is not under the Company’s control, the probability of such payout cannot be reliably estimated and
thus the contingent consideration was not measured at the acquisition date. Should the additional seats be approved, it will result in
additional licenses, which will be measured accordingly if and when approved.
DelRey is a post-secondary education institution with governmental authorization to
offer on-campus, undergraduate degrees and graduate programs in medicine and health, as well as other courses, in the States of Alagoas
and Pernambuco.
The acquisition of DelRey was accounted for under IFRS 3 – Business Combinations.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Transaction costs to date amount to R$12,332 and were expensed and are included in general
and administrative expenses in the consolidated statement of income.
At the acquisition date, the fair value of the trade receivables acquired equals its
carrying amount.
The goodwill recognized includes the value of expected synergies arising from the acquisition,
which is not separately recognized. Goodwill is allocated entirely to the Undergrad segment. The preliminary goodwill recognized is not
expected to be deductible for income taxes purposes.
The valuation of the identifiable assets acquired and liabilities assumed in the business
combination of DelRey is preliminary and therefore items such as intangible assets and property and equipment, as well as fair value of
the digital solutions consideration, may be adjusted when the valuations are finalized.
The Company did not recognize deferred taxes related to the business
combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business
combination.
The valuation techniques used for measuring the fair value of separately identified
intangible assets acquired were as follows:
Intangible assets acquired |
Valuation technique |
Licenses |
With-and-without method
The with-and-without method consists of estimating the fair value of an asset by
the difference between the value of this asset in two scenarios: a scenario considering the existence of the asset in question and another
considering its non-existence. |
Customer relationships |
Multi-period excess earnings method
The method considers the present value of net cash flows expected to be generated
by customer relationships, by excluding any cash flows related to contributory assets. |
The valuation technique for property and equipment consists of determining the fair
value of an asset by using methodologies like replacement costs and market value.
DelRey has contributed R$116,305 of net revenue and R$38,440 of income before income
taxes to the Company in 2023.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
5 | Cash and cash equivalents |
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Cash and bank deposits |
17,057 |
57,509 |
Cash equivalents |
724,139 |
1,035,573 |
|
741,196 |
1,093,082 |
Cash equivalents correspond mainly to financial investments in Bank Certificates of
Deposit (“CDB”) with highly rated financial institutions and investments funds managed by highly rated financial institutions.
As of June 30, 2023, the average interest on these investments are equivalent to 100.25% of the Interbank Certificates of Deposit (“CDI”)
(December 31, 2022 - 99.21%). These funds are available for immediate use and have insignificant risk of changes in value. Cash equivalents
denominated in U.S. dollars totaled R$3,488 as of June 30, 2023 (December 31, 2022: R$24,447).
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Tuition fees |
441,863 |
356,074 |
Educational content (a) |
41,496 |
50,913 |
FIES |
66,935 |
62,325 |
Educational credits (b) |
26,643 |
27,535 |
Mobile app subscription (c) |
19,668 |
27,675 |
Others |
14,940 |
14,923 |
|
611,545 |
539,445 |
(-) Allowance for doubtful accounts |
(59,132) |
(44,046) |
|
552,413 |
495,399 |
Current |
509,520 |
452,831 |
Non-current |
42,893 |
42,568 |
(a) Related to trade receivables from sales of printed books, e-books
and medical courses through digital platform from Medcel.
(b) Related to the financing programs offered by our subsidiaries
to its students that existed prior to the acquisitions. The Company closed such programs to new enrolments and maintained only the agreements
that were outstanding as of the acquisition date.
(c) Related to trade receivables from mobile applications subscriptions
for digital medical content.
As of June 30, 2023 and December 31, 2022, the aging of trade receivables was as follows:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Neither past due nor impaired |
281,990 |
261,025 |
Past due |
|
|
1 to 30 days |
66,278 |
56,280 |
31 to 90 days |
110,975 |
90,734 |
91 to 180 days |
88,770 |
80,522 |
More than 180 days |
63,532 |
50,884 |
|
611,545 |
539,445 |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The changes in the allowance for doubtful accounts for the six-month periods ended June
30, 2023 and 2022, was as follows:
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Balances at the beginning of the period |
(44,046) |
(45,013) |
Additions |
(39,086) |
(30,420) |
Write-offs |
24,000 |
28,548 |
Balances at the end of the period |
(59,132) |
(46,885) |
The table below summarizes the balances and transactions with related parties:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Assets |
|
|
Trade receivables (a) |
193 |
917 |
Other assets (b) |
- |
1,975 |
|
193 |
2,892 |
Current |
193 |
2,892 |
|
|
|
Liabilities |
|
|
Accounts payable to selling shareholders (c) |
32,645 |
30,653 |
|
32,645 |
30,653 |
Current |
32,645 |
30,653 |
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Other income |
|
|
UEPC (a) |
304 |
286 |
|
304 |
286 |
Leases |
|
|
RVL Esteves Gestão Imobiliária S.A. |
11,294 |
9,562 |
UNIVAÇO Patrimonial Ltda. |
1,786 |
1,624 |
IESVAP Patrimonial Ltda. |
2,577 |
2,344 |
|
15,657 |
13,530 |
(a) Refers to sales of educational content from Medcel to UEPC.
(b) Refers to amounts reimbursed from Bertelsmann SE& Co. KGaA during the period,
regarding expenses incurred in connection with Afya’s change in control, paid in February 2023;
(c) Refers to amounts to be payable to our shareholder Nicolau Carvalho Esteves regarding
the agreement to which Afya Brazil acquired the right to develop ITPAC Garanhuns medical school, a greenfield unit. The remaining balance
of the last installment is due in November 2023, adjusted by the CDI rate.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Key management personnel compensation
Key management personnel compensation included in the Company’s consolidated statement
of income comprised the following:
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Short-term employee benefits |
7,131 |
8,037 |
Share-based compensation plan |
9,905 |
8,273 |
|
17,036 |
16,310 |
Compensation of the Company’s key management includes short-term employee benefits
comprised by salaries, labor and social charges, and other ordinary short-term employee benefits. The amounts disclosed in the table above
are the amounts recognized as an expense in general and administrative expenses during the reporting period related to key management
personnel.
The executive officers participate in share-based compensation plans described in Note
15(b).
As of June 30, 2023, the Company has R$264,378 (R$243,501 on December 31, 2022) accounted
for as Other assets as follow:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Indemnification assets (a) |
148,175 |
145,300 |
Advances |
29,013 |
30,626 |
Judicial deposits |
14,412 |
12,693 |
Prepaid expenses |
19,296 |
18,441 |
Selling shareholders receivables |
9,723 |
6,052 |
Dividends receivable |
3,193 |
- |
Other FIES receivables |
18,096 |
26,440 |
Other assets |
22,470 |
3,949 |
Total |
264,378 |
243,501 |
|
|
|
Current |
63,930 |
51,745 |
Non-current |
200,448 |
191,756 |
(a) Under the terms of the Share Purchase and Sale Agreements ("Agreements")
between the Company and the selling shareholders of the subsidiaries acquired, the Company assesses that the selling shareholders are
exclusively responsible for any provisions (including labor, tax and civil), which are or will be the subject of a claim by any third
party, arising from the act or fact occurred, by action or omission, prior to or on the closing dates of the acquisitions.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The Company holds a 30% interest in UEPC, a medical school located in the Federal District
that offers higher education and post-graduate courses, both in person and long-distance learning. The Company’s interest in UEPC
is accounted for using the equity method. The following table illustrates the summarized financial information of the Company’s
investment in UEPC:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Current assets |
37,425 |
32,651 |
Non-current assets |
122,384 |
122,378 |
Current liabilities |
(35,698) |
(22,840) |
Non-current liabilities |
(92,491) |
(96,442) |
Equity |
31,620 |
35,747 |
Company’s share in equity – 30% |
9,486 |
10,724 |
Goodwill |
43,183 |
43,183 |
Carrying amount of the investment |
52,669 |
53,907 |
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Net revenue |
77,023 |
70,180 |
Cost of services |
(29,633) |
(27,430) |
General and administrative expenses |
(20,396) |
(16,982) |
Finance result |
(2,589) |
(2,621) |
Income before income taxes |
24,405 |
23,147 |
Income taxes expenses |
(886) |
(1,677) |
Net income for the period |
23,519 |
21,470 |
Company’s share of income for the period |
7,056 |
6,441 |
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Opening balance |
53,907 |
48,477 |
Dividends received |
(5,101) |
(2,838) |
Dividends receivable (included in Other assets) |
(3,193) |
- |
Share of income |
7,056 |
6,441 |
Closing balance |
52,669 |
52,080 |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Cost |
Building |
Machinery and equipment |
Lands |
Vehicles |
Furniture and fixtures |
IT equipment |
Library books |
Leasehold improvements |
Construction in progress |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2022 |
52,433 |
77,371 |
18,852 |
1,467 |
69,834 |
53,184 |
30,072 |
152,976 |
31,786 |
487,975 |
Additions |
87 |
8,366 |
- |
752 |
10,484 |
5,721 |
503 |
935 |
35,418 |
62,266 |
Business combinations |
- |
39 |
- |
- |
- |
41 |
- |
- |
- |
80 |
Write-off |
- |
(124) |
- |
(87) |
(934) |
(81) |
(355) |
- |
(1,533) |
(3,114) |
Transfer |
24,291 |
21 |
- |
- |
266 |
863 |
- |
10,084 |
(34,710) |
815 |
As of June 30, 2022 (unaudited) |
76,811 |
85,673 |
18,852 |
2,132 |
79,650 |
59,728 |
30,220 |
163,995 |
30,961 |
548,022 |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
91,857 |
100,390 |
18,852 |
1,053 |
90,712 |
68,593 |
37,362 |
145,846 |
86,688 |
641,353 |
Additions |
95 |
11,842 |
- |
409 |
11,010 |
10,295 |
717 |
46 |
22,493 |
56,907 |
Business combinations |
- |
7,729 |
- |
- |
4,384 |
734 |
1,329 |
10,741 |
63 |
24,980 |
Write-off |
- |
(502) |
- |
(319) |
(288) |
(136) |
(3,133) |
(125) |
(7) |
(4,510) |
Transfer |
400 |
2,371 |
- |
- |
23 |
78 |
- |
57,504 |
(60,376) |
- |
As of June 30, 2023 (unaudited) |
92,352 |
121,830 |
18,852 |
1,143 |
105,841 |
79,564 |
36,275 |
214,012 |
48,861 |
718,730 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As of January 1, 2022 |
(1,673) |
(16,391) |
- |
(220) |
(12,496) |
(14,922) |
(13,600) |
(8,865) |
- |
(68,167) |
Depreciation |
(1,564) |
(4,320) |
- |
(143) |
(3,584) |
(5,562) |
(1,655) |
(4,094) |
- |
(20,922) |
Write-off |
- |
284 |
- |
- |
94 |
153 |
100 |
- |
- |
631 |
As of June 30, 2022 (unaudited) |
(3,237) |
(20,427) |
- |
(363) |
(15,986) |
(20,331) |
(15,155) |
(12,959) |
- |
(88,458) |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
(5,751) |
(20,630) |
- |
288 |
(10,349) |
(21,837) |
(22,888) |
(18,099) |
- |
(99,266) |
Depreciation |
(1,862) |
(7,446) |
- |
(174) |
(6,177) |
(6,049) |
(1,752) |
(12,090) |
- |
(35,550) |
Write-off |
- |
456 |
- |
92 |
150 |
34 |
3,465 |
67 |
- |
4,264 |
As of June 30, 2023 (unaudited) |
(7,613) |
(27,620) |
- |
206 |
(16,376) |
(27,852) |
(21,175) |
(30,122) |
- |
(130,552) |
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
As of June 30, 2023 (unaudited) |
84,739 |
94,210 |
18,852 |
1,349 |
89,465 |
51,712 |
15,100 |
183,890 |
48,861 |
588,178 |
As of December 31, 2022 |
86,106 |
79,760 |
18,852 |
1,341 |
80,363 |
46,756 |
14,474 |
127,747 |
86,688 |
542,087 |
The Company assesses at each reporting date, whether there
is an indication that a property and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s
recoverable amount. There were no indications of impairment of property and equipment as of and for the six-month
period ended June 30, 2023.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
11 | Intangible assets and goodwill |
|
Goodwill |
Licenses with indefinite useful life |
Trademark |
Customer relationships |
Software |
Education content |
Developed technology |
Educational platform |
Software in progress |
Other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2022 |
1,184,336 |
2,165,406 |
133,369 |
431,277 |
21,759 |
17,305 |
34,397 |
76,444 |
28,847 |
- |
4,093,140 |
Additions (i) |
36,481 |
24,408 |
- |
8 |
915 |
- |
858 |
19,936 |
16,346 |
- |
98,952 |
Write-off |
- |
- |
- |
- |
- |
- |
- |
(2,549) |
- |
- |
(2,549) |
Transfer |
- |
- |
- |
- |
7,422 |
- |
- |
2,780 |
(11,017) |
- |
(815) |
Business combinations |
46,735 |
- |
46,793 |
3,829 |
33 |
1,536 |
6,612 |
- |
- |
1,055 |
106,593 |
As of June 30, 2022 (unaudited) |
1,267,552 |
2,189,814 |
180,162 |
435,114 |
30,129 |
18,841 |
41,867 |
96,611 |
34,176 |
1,055 |
4,295,321 |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
1,257,045 |
2,189,814 |
182,060 |
435,816 |
43,300 |
69,589 |
90,749 |
55,697 |
14,734 |
1,055 |
4,339,859 |
Additions |
- |
- |
- |
- |
481 |
3,722 |
18,922 |
8,439 |
13,686 |
- |
45,250 |
Write-off |
- |
- |
- |
- |
(2,272) |
- |
- |
(893) |
- |
- |
(3,165) |
Remeasurement (ii) |
2,556 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
2,556 |
Transfer |
- |
- |
- |
- |
13,062 |
4,785 |
16 |
(3,058) |
(14,805) |
- |
- |
Business combinations (iii) |
91,390 |
576,604 |
- |
145,987 |
63 |
- |
- |
- |
- |
- |
814,044 |
As of June 30, 2023 (unaudited) |
1,350,991 |
2,766,418 |
182,060 |
581,803 |
54,634 |
78,096 |
109,687 |
60,185 |
13,615 |
1,055 |
5,198,544 |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2022 |
- |
- |
(8,529) |
(142,270) |
(12,699) |
(16,672) |
(657) |
(11,478) |
- |
- |
(192,305) |
Amortization |
- |
- |
(2,987) |
(36,829) |
(3,141) |
(680) |
(2,683) |
(4,482) |
- |
(26) |
(50,828) |
As of June 30, 2022 (unaudited) |
- |
- |
(11,516) |
(179,099) |
(15,840) |
(17,352) |
(3,340) |
(15,960) |
- |
(26) |
(243,133) |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
- |
- |
(14,955) |
(212,363) |
(17,277) |
(26,562) |
(10,093) |
(17,039) |
- |
(79) |
(298,368) |
Amortization |
- |
- |
(3,469) |
(46,007) |
(4,042) |
(6,615) |
(8,787) |
(2,582) |
- |
(51) |
(71,553) |
Write-off |
- |
- |
- |
- |
2,013 |
- |
- |
893 |
- |
- |
2,906 |
As of June 30, 2023 (unaudited) |
- |
- |
(18,424) |
(258,370) |
(19,306) |
(33,177) |
(18,880) |
(18,728) |
- |
(130) |
(367,015) |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2023 (unaudited) |
1,350,991 |
2,766,418 |
163,636 |
323,433 |
35,328 |
44,919 |
90,807 |
41,457 |
13,615 |
925 |
4,831,529 |
As of December 31, 2022 |
1,257,045 |
2,189,814 |
167,105 |
223,453 |
26,023 |
43,027 |
80,656 |
38,658 |
14,734 |
976 |
4,041,491 |
(i) During the measurement period, the preliminary goodwill for the acquisition of Unigranrio
was adjusted by R$36,481 (R$130,073 initial goodwill) as a result of an increase of liabilities regarding tax contingencies and judicial
deposits to be reimbursed to selling shareholders.
(ii) During the measurement period, results of operation such as net revenue differed
from the foreseen, resulting in a remeasurement of the contingent consideration for the acquisitions of Além da Medicina, CardioPapers
and Glic. Contingent consideration has been remeasured by R$4,773, R$5,082 and R$(7,299), respectively, totaling R$2,556 for the period
ended June 30, 2023.
(iii) On January 2, 2023, Afya Brazil acquired DelRey, a post-secondary education institution
with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and health, as well as other
courses. See Note 4.
Impairment testing of goodwill and intangible assets with indefinite
lives
The Company performed its annual impairment test in December and when circumstances
indicated that the carrying value may be impaired. The Company’s impairment test for goodwill and intangible assets with indefinite
lives is based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the different cash generating
units were disclosed in the annual consolidated financial statements for the year ended December 31, 2022. There were no indications of
impairment of goodwill and intangible assets with indefinite lives for the six-month period ended June 30, 2023.
Intangible assets with definite lives
For the six-month period ended
June 30, 2023, there were no indicatives that the Company’s intangible
assets with finite useful lives might be impaired.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
12 | Financial assets and financial liabilities |
Financial assets |
June 30, 2023 |
December 31, 2022 |
At amortized cost |
(unaudited) |
|
Trade receivables |
552,413 |
495,399 |
Total |
552,413 |
495,399 |
Current |
509,520 |
452,831 |
Non-current |
42,893 |
42,568 |
12.2 | Financial liabilities |
Financial liabilities |
June 30, 2023 |
December 31, 2022 |
At amortized cost |
(unaudited) |
|
Trade payables |
82,632 |
71,482 |
Loans and financing |
1,925,154 |
1,882,901 |
Lease liabilities |
851,845 |
769,525 |
Accounts payable to selling shareholders |
764,595 |
528,678 |
Notes payable |
55,045 |
62,176 |
Advances from customers |
121,838 |
133,050 |
Total |
3,801,109 |
3,447,812 |
Current |
890,233 |
706,080 |
Non-current |
2,910,876 |
2,741,732 |
12.2.1 | Loans and financing |
Financial institution |
Currency |
Interest rate |
Maturity |
June 30, 2023 |
December 31, 2022 |
|
|
|
|
(unaudited) |
|
Banco Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.90% p.y. |
2025 |
517,844 |
518,134 |
FINEP (a) |
Brazilian real |
TJLP p.y. |
2027 |
12,671 |
8,418 |
Banco Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.75% p.y. |
2024 |
32,210 |
32,252 |
Softbank |
Brazilian real |
6.5% p.y. |
2026 |
825,003 |
824,258 |
Debentures |
Brazilian real |
CDI + 1.80 p.y. |
2028 |
537,426 |
499,839 |
|
|
|
|
1,925,154 |
1,882,901 |
Current |
|
|
|
193,660 |
145,202 |
Non-current |
|
|
|
1,731,494 |
1,737,699 |
On March 3, 2023 and June 12, 2023, the Company received a new tranche from FINEP, totaling
R$5,288. The terms and conditions are the same as the previous tranches disclosed in the annual financial statements for the year ended
December 31, 2022.
The Company has lease contracts for properties. The lease contracts generally have maturities
in the lease terms between 5 and 30 years. There are no sublease or variable payments in-substance lease agreements in the period.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The carrying amounts of right-of-use assets and lease liabilities as of June 30, 2023
and December 31, 2022 and the movements during the six-month periods ended June 30, 2023 and 2022, are described below:
|
Right-of-use assets |
Lease liabilities |
As of January 1, 2022 |
663,686 |
714,085 |
Additions |
27,030 |
27,030 |
Remeasurement |
21,548 |
21,548 |
Depreciation expense |
(27,339) |
- |
Interest expense |
- |
41,392 |
Payments of lease liabilities |
- |
(55,074) |
Write-off |
(6,894) |
(7,156) |
As of June 30, 2022 (unaudited) |
678,031 |
741,825 |
|
|
|
As of January 1, 2023 |
690,073 |
769,525 |
Additions |
2,487 |
2,487 |
Remeasurement |
35,138 |
35,138 |
Business combinations |
65,408 |
65,408 |
Depreciation expense |
(31,161) |
- |
Interest expense |
- |
49,033 |
Payments of lease liabilities |
- |
(66,239) |
Write-off |
(2,433) |
(3,507) |
As of June 30, 2023 (unaudited) |
759,512 |
851,845 |
|
|
|
As of December 31, 2022 |
|
|
Current |
- |
32,459 |
Non-current |
690,073 |
737,066 |
As of June 30, 2023 (unaudited) |
|
|
Current |
- |
35,292 |
Non-current |
759,512 |
816,553 |
The Company recognized lease expense from short-term leases and low-value assets of
R$4,644 for the six-month period ended June 30, 2023 (R$5,106 for the six-month period ended June 30, 2022).
12.2.3 | Accounts payable to selling shareholders |
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Acquisition of IPEMED |
12,063 |
22,654 |
Acquisition of UniRedentor |
51,165 |
72,064 |
Acquisition of UniSãoLucas |
14,191 |
37,301 |
Acquisition of FCMPB |
119,017 |
111,755 |
Acquisition of Medical Harbour |
1,209 |
4,053 |
Acquisition of Shosp |
1,730 |
2,206 |
Acquisition of Unigranrio |
230,799 |
216,716 |
Acquisition of RXPRO |
1,890 |
1,781 |
Acquisition of Garanhuns |
32,645 |
30,653 |
Acquisition of Além da Medicina |
17,465 |
11,996 |
Acquisition of CardioPapers |
13,550 |
7,979 |
Acquisition of Glic |
2,760 |
9,520 |
Acquisition of DelRey (a) |
266,111 |
- |
|
764,595 |
528,678 |
Current |
401,766 |
261,711 |
Non-current |
362,829 |
266,967 |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
Opening balance |
528,678 |
679,826 |
Payments and deductions |
(64,397) |
(115,296) |
Additions (a) |
250,000 |
52,330 |
Interest |
47,758 |
32,583 |
Remeasurement (b) |
2,556 |
- |
Closing balance |
764,595 |
649,443 |
(a)
On January 2, 2023, Afya Brazil acquired 100% of DelRey. The aggregate
purchase price is R$825,000 of which R$575,000 was paid in cash on the transaction closing date, and R$250,000 is payable in cash in three
annual installments, respectively, of R$150,000 in January 2024, R$50,000 in January 2025 and R$50,000 in January 2026, adjusted by the
SELIC rate.
(b)
During the measurement period, management’s expectation has been
reviewed based on performance for net revenue goals and the contingent consideration for the acquisition of Além da Medicina, CardioPapers
and Glic have been remeasured by R$4,773, R$5,082 and R$(7,299), respectively, totaling R$2,556 for the period ended June 30, 2023. These
are measured by the Company at the present value.
With the acquisition of UniSL, Afya Brazil assumed notes payable
regarding the previous acquisition of a portion of the operations of Universidade Luterana do Brasil (ULBRA) by UniSL in auction by the
end of 2018. Two of the UniSL campuses, located in the cities of Ji-Paraná and Porto Velho in the State of Rondônia, were
acquired in such transaction. As of June 30, 2023, the notes payable of R$55,045 has a final maturity in 2023 and is adjusted by 100%
of IPCA-E.
Set out below are the carrying amount of notes payable and the movements during the
six-month periods:
|
Notes payable |
As of January 1, 2022 |
72,726 |
Payments (*) |
(7,342) |
Monetary indexation |
4,072 |
As of June 30, 2022 (unaudited) |
69,456 |
|
|
As of January 1, 2023 |
62,176 |
Payments (*) |
(9,265) |
Monetary indexation |
2,134 |
As of June 30, 2023 (unaudited) |
55,045 |
|
|
As of December 31, 2022 |
|
Current liabilities |
62,176 |
Non-current liabilities |
- |
|
|
As of June 30, 2023 (unaudited) |
|
Current liabilities |
55,045 |
Non-current liabilities |
- |
(*) The amounts have been included on the investing activities of the cash flow
statement.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The table below is a comparison of the carrying amounts and fair values of the Company’s
financial instruments, other than those carrying amounts that are reasonable approximation of fair values:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
|
Carrying amount |
Fair value |
Carrying amount |
Fair value |
Financial assets |
|
|
|
Trade receivables (non-current) |
42,893 |
42,893 |
42,568 |
42,568 |
Total |
42,893 |
42,893 |
42,568 |
42,568 |
|
|
|
|
|
Financial liabilities |
|
|
|
|
Loans and financing |
1,925,154 |
1,913,048 |
1,882,901 |
1,934,295 |
Lease liabilities |
851,845 |
851,845 |
769,525 |
769,525 |
Accounts payable to selling shareholders |
764,595 |
764,595 |
528,678 |
528,678 |
Notes payable |
55,045 |
55,045 |
62,176 |
62,176 |
Total |
3,596,639 |
3,584,533 |
3,243,280 |
3,294,674 |
The Company assessed that the fair values of current trade
receivables and other current assets, trade payables, advances from customers and other current liabilities approximate their carrying
amounts largely due to the short-term maturities of these instruments.
The fair value of interest-bearing borrowings and loans are
determined by using the DCF method using discount rate that reflects the issuer’s borrowing rate as of the end of the reporting
period. The own non-performance risk at June 30, 2023 was assessed to be insignificant.
12.4 | Financial instruments risk management objectives and policies |
The Company’s principal financial liabilities comprise
loans and financing, lease liabilities, accounts payable to selling shareholders, notes payable, trade payables and advances from customers.
The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial
assets include trade receivables and cash and cash equivalents.
The Company is exposed to market risk, credit risk and liquidity risk. The Company monitors
market, credit and liquidity risks in line with the objectives in capital management and counts with the support, monitoring and oversight
of the Board of Directors in decisions related to capital management and its alignment with the objectives and risks. The Company’s
policy is that no trading of derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees with policies
for managing each of these risks, which are summarized below.
12.4.1 | Financial instruments risk management objectives and policies |
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. The Company’s exposure to market risk is related
to interest rate risk and foreign currency risk.
The sensitivity analysis in the following sections relate to the position as of June
30, 2023.
(i) Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk
of changes in market interest rates relates primarily to the Company’s cash equivalents, loans and financing, accounts payable to
selling shareholders and notes payable, with floating interest rates.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Sensitivity analysis
The following table demonstrates the sensitivity to a reasonably
possible change in interest and inflation rates on cash equivalents, debentures, loans and financing, accounts payable to selling shareholders
and notes payable. With all variables held constant, the Company’s income before income taxes is affected through the impact on
floating interest and inflation rates, as follows:
|
June 30, 2023 |
Index – % per year |
Base rate |
|
|
|
|
Cash equivalents |
720,651 |
100.25% of CDI |
98,615 |
Loans and financing |
(537,426) |
CDI + 1.80% |
(83,032) |
Loans and financing |
(517,844) |
CDI + 1.90% |
(80,525) |
Loans and financing |
(32,210) |
CDI + 1.75% |
(4,960) |
Accounts payable to selling shareholders |
(459,880) |
CDI |
(62,774) |
|
|
|
(132,676) |
|
|
|
|
Loans and financing |
(12,671) |
TJLP |
(887) |
|
|
|
|
Accounts payable to selling shareholders |
(266,111) |
SELIC |
(36,590) |
|
|
|
|
Notes payable |
(55,045) |
IPCA |
(1,739) |
|
|
|
|
|
|
Increase in basis points |
|
|
+75 |
+150 |
Effect on profit before tax |
|
(8,704) |
(17,408) |
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes
in foreign exchange rates relates to cash and cash equivalents denominated in U.S. dollars in the amount of R$3,488 as of June 30, 2023
(December 31, 2022: R$24,447).
Foreign currency sensitivity
The following table demonstrates the sensitivity in the Company’s
income before income taxes of a 10% change in the U.S. dollar exchange rate (R$4.8186 to U.S. dollar 1.00) as of June 30, 2023, with all
other variables held constant.
|
Exposure |
+10% |
-10% |
As of June 30, 2023 |
|
|
|
Cash equivalents |
3,488 |
348 |
(348) |
Credit risk is the risk that a counterparty
will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to
credit risk from its operating activities (primarily trade receivables) and from its financing activities, including cash and cash equivalents.
Customer credit risk is managed by the
Company based on the established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables
are regularly monitored. See Note 6 for additional information on the Company’s trade receivables.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Credit risk from balances with banks and
financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments
of surplus funds are made only with approved counterparties and within limits assigned to each counterparty.
The Company’s maximum exposure to credit risk for the
components of the statements of financial position on June 30, 2023 and December 31, 2022 is the carrying amounts of its financial assets.
The Company’s Management has responsibility for monitor liquidity risk. In order
to achieve the Company’s objective, Management regularly reviews the risk and maintains appropriate reserves, including bank credit
facilities with first tier financial institutions. Management also continuously monitors projected and actual cash flows and the combination
of the maturity profiles of the financial assets and liabilities.
The main requirements for financial resources used by the Company arise from the need
to make payments for suppliers, operating expenses, labor and social obligations, loans and financing and accounts payable to selling
shareholders.
The tables below summarize the maturity profile of the Company’s
financial liabilities based on contractual undiscounted amounts:
As of June 30, 2023 (unaudited) |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
82,632 |
- |
- |
- |
82,632 |
Loans and financing |
327,228 |
1,577,450 |
616,603 |
- |
2,521,281 |
Lease liabilities |
134,629 |
261,053 |
245,570 |
1,260,836 |
1,902,088 |
Accounts payable to selling shareholders |
421,385 |
447,272 |
- |
- |
868,657 |
Notes payable |
55,067 |
- |
- |
- |
55,067 |
Advances from customers |
121,838 |
- |
- |
- |
121,838 |
|
1,142,779 |
2,285,775 |
862,173 |
1,260,836 |
5,551,563 |
As of December 31, 2022 |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
71,482 |
- |
- |
- |
71,482 |
Loans and financing |
287,741 |
788,190 |
1,237,599 |
- |
2,313,530 |
Lease liabilities |
117,506 |
234,688 |
219,127 |
1,139,771 |
1,711,092 |
Accounts payable to selling shareholders |
282,481 |
339,281 |
- |
- |
621,762 |
Notes payable |
62,176 |
- |
- |
- |
62,176 |
Advances from customers |
133,050 |
- |
- |
- |
133,050 |
|
954,436 |
1,362,159 |
1,456,726 |
1,139,771 |
4,913,092 |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
12.5 | Changes in liabilities arising from financing activities |
|
January 1, 2023 |
Payments |
Additions |
Interest |
Business combinations |
Other |
June 30, 2023 |
|
|
|
|
|
|
|
(unaudited) |
Loans and financing |
1,882,901 |
(67,305) |
5,288 |
102,512 |
- |
1,758 |
1,925,154 |
Lease liabilities |
769,525 |
(66,239) |
37,625 |
49,033 |
65,408 |
(3,507) |
851,845 |
Dividends payable |
- |
(10,300) |
10,300 |
- |
- |
- |
- |
Total |
2,652,426 |
(143,844) |
53,213 |
151,545 |
65,408 |
(1,749) |
2,776,999 |
|
January 1, 2022 |
Payments |
Additions |
Interest |
Business combinations |
Other |
June 30, 2022 |
|
|
|
|
|
|
|
(unaudited) |
Loans and financing |
1,374,876 |
(53,795) |
- |
58,514 |
- |
945 |
1,380,540 |
Lease liabilities |
714,085 |
(55,074) |
48,578 |
41,392 |
- |
(7,156) |
741,825 |
Dividends payable |
- |
(11,212) |
11,212 |
- |
- |
- |
- |
Total |
2,088,961 |
(120,081) |
59,790 |
99,906 |
- |
(6,211) |
2,122,365 |
The following table provides the fair value measurement hierarchy
of the Company’s assets and liabilities as of June 30, 2023 and December 31, 2022.
|
Fair value measurement |
|
Total |
Quoted prices in active markets (Level 1) |
Significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
June 30, 2023 (unaudited) |
|
|
|
|
Assets for which fair values are disclosed |
|
|
|
|
Trade receivables (non-current) |
42,893 |
- |
42,893 |
- |
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
Loans and financing |
(1,913,048) |
- |
(1,913,048) |
- |
Lease liabilities |
(851,845) |
- |
(851,845) |
- |
Accounts payable to selling shareholders |
(764,595) |
- |
(764,595) |
- |
Notes payable |
(55,045) |
- |
(55,045) |
- |
|
|
|
|
|
December 31, 2022 |
|
|
|
|
Assets for which fair values are disclosed |
|
|
|
|
Trade receivables (non-current) |
42,568 |
- |
42,568 |
- |
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
Loans and financing |
(1,934,295) |
- |
(1,934,295) |
- |
Lease liabilities |
(769,525) |
- |
(769,525) |
- |
Accounts payable to selling shareholders |
(528,678) |
- |
(528,678) |
- |
Notes payable |
(62,176) |
- |
(62,176) |
- |
There were no transfers between levels during the period presented.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
For the purposes of the Company’s capital management,
capital considers total equity. The primary objective of the Company’s capital management is to maximize the shareholder value.
No changes were made in the objectives, policies or processes
for managing capital during the six-month period ended June 30, 2023 compared to those adopted by the Company in its annual consolidated
financial statements.
15 | Labor and social obligations |
a) Variable compensation (bonuses)
The Company recorded bonuses related to variable compensation
of employees and management in cost of services and general and administrative expenses of R$9,538 and R$11,353 in the six-month periods
ended June 30, 2023 and 2022, respectively.
b) Afya Limited share-based compensation plans
b.1) Stock options plan
The stock options plan was approved on August 30,
2019 and, granted to senior executives and other employees of the Company. The fair value of the stock options was estimated at the grant
date using the Binomial pricing model, taking into account the terms and conditions on which the stock options were granted. The Company
accounts for the stock options plan as an equity-settled plan.
On July 29, 2020, the board of directors approved a change in the strike price of the
share-based compensation plan. The strike price is now measured in Brazilian Reais (where the Company’s operations are located and
valuated) adjusted by CDI rate instead of U.S. dollar adjusted by T-Bond. Furthermore, the first tranche had its vesting period extended
from May 2020 to May 2021, including one year lock-up period after the vesting period. This change was assessed as a modification by the
Company and was accounted in accordance with IFRS 2.
On July 8, 2022, the People and ESG Committee approved a change in the strike price
of the share-based compensation plan. All the tranches still to be vested had their strike price modified to the IPO price in Brazilian
Reais (R$71.22), adjusted from the IPO date until the exercise date using the Certificado de Depósito Interbancário (CDI
index), excluding dividends. The already vested tranches remained on the previous settled strike price. This change was assessed as a
modification by the Company and accounted for in accordance with IFRS 2. Furthermore, on July 31, 2023, the People and ESG Committee approved a modification to the stock options plan as disclosed in Note 24.
As result of those modifications, the expense related to the share-based payment of
the Company reflects the cost of the original award at grant date over the vesting period plus the incremental fair value of the repriced
options at modification date over the vesting period of the options.
The average incremental fair value, as result of the modification, was R$ 3.84 Brazilian
Reais per option. The following table list the inputs to the model used to determine the incremental fair value of the stock options as
result of the modification:
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Modified plan |
Original plan |
Strike price at the measurement date |
R$76 |
R$85 – R$126 |
Dividend yield (%) |
0.0% |
0.0% |
Expected volatility (%) |
48% - 59% |
42% - 69% |
Risk-free interest rate (%) |
13% - 15% |
5% - 13% |
Expected life of stock options (years) |
1 – 5 |
1 – 5 |
Share price at the measurement date |
R$48 |
R$80 – R$145 |
Model used |
Binomial |
Binomial |
Weighted average fair value at the measurement date |
R$53.06 |
R$49.22 |
On February 13, 2023 and April 17, 2023, the Company granted 15,000 and 30,000, respectively,
additional stock options:
|
February 2023 |
April 2023 |
Strike price at the measurement date |
R$56 |
R$57 |
Dividend yield (%) |
0.0% |
0.0% |
Expected volatility (%) |
46% - 56% |
48% - 55% |
Risk-free interest rate (%) |
13% |
11% - 13% |
Expected life of stock options (years) |
1 – 5 |
1 – 5 |
Share price at the measurement date |
R$ 70.69 |
R$ 62.51 |
Model used |
Binomial |
Binomial |
Weighted average fair value at the measurement date |
R$ 29.54 |
R$ 32.04 |
The following table illustrates the number and movements in
stock options during the period:
|
Weighted average exercise price (in Reais) |
Number of stock options |
|
2023 |
2022 |
Outstanding at January 1 |
79.47 |
3,729,287 |
3,086,728 |
Granted |
57.01 |
45,000 |
70,000 |
Exercised |
- |
- |
- |
Forfeited |
102.78 |
(333,111) |
(309,749) |
Expired |
87.32 |
(211,882) |
(133,611) |
Outstanding at June 30 |
81.85 |
3,229,294 |
2,713,368 |
Exercisable |
|
1,578,045 |
1,189,774 |
The share-based compensation expense recognized in general
and administrative expenses in the interim statement of income for the six-month period ended June 30, 2023 was R$9,672 (June 30, 2022:
R$11,581).
b.2) Restricted Stock Units (RSU) Program
On July 8, 2022, the Company approved the new Restricted Stock
Units (RSU) program for employees. The participant's right to effectively receive ownership of the restricted shares will be conditioned
on the participant's continuance as an employee or director in the business group from the grant date until vesting.
The executives will be entitled to these shares in a proportion
of 10%, 20%, 30%, 40% each year.
On February 2, 2023 and April 17, 2023, 8,000 and 16,000 RSUs
were granted to Afya’s executives, respectively, with vesting periods from May 2024 to May 2027. Fair value at grant date was R$70.69
and R$62.51, respectively.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Number of RSUs |
|
2023 |
Outstanding at January 1 |
447,224 |
Granted |
24,000 |
Exercised |
(44,725) |
Forfeited |
(21,894) |
Outstanding at June 30 |
404,605 |
The Company accounts for the RSU plan as an equity-settled plan, except for the portion
of labor and social securities obligations.
Total RSU expense recognized in general and administrative expenses in the statement
of income for the six-month period ended June 30, 2023 amount R$3,726. Social charges amount R$2,357 on social obligations liabilities
as of June 30, 2023.
a) Share capital
As of June 30, 2023, the Company’s share capital was
R$ 17 (R$ 17 as of December 31, 2022) represented by 93,722,831 shares comprised by 47,920,068 class A common shares and 45,802,763 class
B common shares.
b) Dividends
In the six-month period ended June 30, 2023, CCSI and IESVAP
approved the payment of interim dividends of R$34,774, which R$24,474 was distributed to the Company and R$10,300 to non-controlling shareholders.
c) Buy-back program
On January 27, 2022, the Company’s board of directors approved the third share
repurchase program. Afya may repurchase up to 1,874,457 of its outstanding Class A common shares in the open market, based on prevailing
market prices, beginning on January 27, 2022, until the earlier of the completion of the repurchase or December 31, 2022, depending upon
market conditions. The Company completed the acquisition of the approved shares repurchase under this buy-back program. The Company repurchased
R$152,317 in the six-month period ended June 30, 2022, regarding this program.
On March 24, 2023, the Company’s board of directors approved the fourth share
repurchase program. Afya may repurchase up to 2,000,000 of its outstanding Class A common shares in the open market, based on prevailing
market prices, beginning on March 24, 2023, until the earlier of the completion of the repurchase or December 31, 2024, depending upon
market conditions. The Company repurchased R$12,369 in the six-month period ended June 30, 2023, regarding this program.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The following table illustrates the number and movements in
treasury shares during the six-month periods ended June 30, 2023 and 2022:
|
Number of shares |
Average price (in Brazilian Reais) |
Outstanding at January 1, 2022 |
1,654,927 |
92.23 |
Repurchased |
2,131,358 |
71.40 |
Outstanding at June 30, 2022 |
3,786,285 |
80.54 |
|
|
|
Outstanding at January 1, 2023 |
3,786,285 |
80.54 |
Repurchased |
216,339 |
57.17 |
Restricted shares |
(32,429) |
79.28 |
Outstanding at June 30, 2023 |
3,970,195 |
79.28 |
17 | Earnings per share (EPS) |
Basic EPS is calculated by dividing net income attributable
to the equity holders of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is calculated by dividing net income attributable
to the equity holders of the parent by the weighted average number of common shares outstanding during the period plus the weighted average
number of shares that would be issued on conversion of all potential shares with dilutive effects.
Diluted earnings per share are computed including stock options granted to key management
using the treasury shares method when the effect is dilutive. The Company has the stock option and restricted share unit plans in the
category of potentially dilutive shares.
Softbank’s series A perpetual convertible preferred shares are antidilutive as
of June 30, 2023 and 2022 and are not included on diluted earnings per share.
The following table reflects the net income and share data
used in the basic and diluted EPS calculations:
|
Three-month period ended |
Six-month period ended |
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
Numerator |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Net income attributable to equity holders of the parent |
82,789 |
101,505 |
194,916 |
231,115 |
Denominator |
|
|
|
|
Weighted average number of outstanding shares |
89,808,434 |
90,480,647 |
89,872,136 |
90,740,133 |
Effects of dilution from stock options and restricted share units |
473,143 |
- |
557,174 |
- |
Weighted average number of outstanding shares adjusted for the effect of dilution |
90,281,577 |
90,480,647 |
90,429,310 |
90,740,133 |
|
|
|
|
|
Basic earnings per share (R$) |
0.92 |
1.12 |
2.17 |
2.55 |
Diluted earnings per share (R$) |
0.92 |
1.12 |
2.16 |
2.55 |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Three-month period ended |
Six-month period ended |
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Tuition fees |
866,746 |
704,734 |
1,729,136 |
1,400,931 |
Other |
62,108 |
45,011 |
127,092 |
98,693 |
Deductions |
|
|
|
|
Granted discounts |
(59,431) |
(42,057) |
(112,067) |
(107,585) |
Early payment discounts |
(45,283) |
(20,056) |
(100,000) |
(40,920) |
Returns |
(5,385) |
(4,370) |
(13,271) |
(25,209) |
Taxes |
(34,834) |
(26,155) |
(70,556) |
(50,480) |
PROUNI |
(71,314) |
(58,951) |
(137,766) |
(110,950) |
Net revenue from contracts with customers |
712,607 |
598,156 |
1,422,568 |
1,164,480 |
Timing of revenue recognition of net revenue from contracts with customers |
|
|
|
|
Tuition, digital content and app subscription fees - Transferred over time |
698,664 |
589,090 |
1,393,180 |
1,130,656 |
Other - Transferred at a point in time |
13,943 |
9,066 |
29,388 |
33,824 |
The Company`s revenue from contracts with customers are all
in Brazil. The Company is not subject to the payment of the social integration program tax (Programa de Integração Social,
or PIS) and the social contribution on revenues tax (Contribuição para o Financiamento da Seguridade Social, or COFINS)
on the revenue from under graduation degrees under the PROUNI program.
The following table presents statements of income
for the Company’s operating segments for six-month periods ended June 30, 2023 and 2022. Recently acquired DelRey is presented in
the undergrad segment.
Revenue by segment |
Undergrad |
Continuing Education |
Digital Services |
Elimination (inter-segment transactions) |
June 30, 2023 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,246,241 |
70,584 |
110,929 |
(5,186) |
1,422,568 |
Tuition fees |
1,237,508 |
70,423 |
- |
- |
1,307,931 |
Other |
8,733 |
161 |
110,929 |
(5,186) |
114,637 |
|
|
|
|
|
|
Timing of revenue recognition |
1,246,241 |
70,584 |
110,929 |
(5,186) |
1,422,568 |
Transferred over time |
1,237,508 |
70,584 |
90,274 |
(5,186) |
1,393,180 |
Transferred at a point in time |
8,733 |
- |
20,655 |
- |
29,388 |
Revenue by segment |
Undergrad |
Continuing Education |
Digital Services |
Elimination (inter-segment transactions) |
June 30, 2022 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,028,940 |
47,662 |
89,695 |
(1,817) |
1,164,480 |
Tuition fees |
1,022,443 |
47,662 |
- |
- |
1,070,105 |
Other |
6,497 |
- |
89,695 |
(1,817) |
94,375 |
|
|
|
|
|
|
Timing of revenue recognition |
1,028,940 |
47,662 |
89,695 |
(1,817) |
1,164,480 |
Transferred over time |
1,022,443 |
47,662 |
60,551 |
- |
1,130,656 |
Transferred at a point in time |
6,497 |
- |
29,144 |
(1,817) |
33,824 |
Revenues from digital services segment are classified as other type of revenues and a
part of it is recognized as transferred over time and another part at point in time (specially books and E-Books and Cliquefarma –
website for tracking prescription drugs).
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
19 | Expenses and costs by nature |
|
Three-month period ended |
Six-month period ended |
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Cost of services |
(284,295) |
(219,242) |
(531,902) |
(405,972) |
General and administrative expenses |
(249,586) |
(207,415) |
(482,806) |
(385,929) |
Total |
(533,881) |
(426,657) |
(1,014,708) |
(791,901) |
|
|
|
|
|
Payroll |
(280,772) |
(224,285) |
(529,916) |
(419,197) |
Hospital and medical agreements |
(22,230) |
(17,698) |
(41,446) |
(30,131) |
Depreciation and amortization |
(72,306) |
(50,702) |
(138,264) |
(99,089) |
Lease expenses |
(2,017) |
(2,787) |
(4,644) |
(5,106) |
Utilities |
(5,624) |
(5,407) |
(9,776) |
(9,399) |
Maintenance |
(26,101) |
(20,191) |
(48,622) |
(35,633) |
Share-based compensation |
(6,902) |
(8,652) |
(13,398) |
(11,581) |
Tax expenses |
(2,753) |
(2,423) |
(4,892) |
(4,073) |
Pedagogical services |
(19,242) |
(8,900) |
(31,994) |
(22,889) |
Sales and marketing |
(15,803) |
(11,690) |
(29,389) |
(24,504) |
Allowance for doubtful accounts |
(21,392) |
(15,540) |
(39,086) |
(30,523) |
Travel expenses |
(3,683) |
(3,966) |
(6,794) |
(6,621) |
Consulting fees |
(12,558) |
(9,165) |
(32,488) |
(14,869) |
Other |
(42,498) |
(45,251) |
(83,999) |
(78,286) |
Total |
(533,881) |
(426,657) |
(1,014,708) |
(791,901) |
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Three-month period ended |
Six-month period ended |
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Income from financial investments |
18,291 |
14,713 |
34,944 |
29,703 |
Interest received |
4,842 |
4,892 |
15,141 |
12,579 |
Other |
759 |
3,269 |
1,494 |
5,161 |
Finance income |
23,892 |
22,874 |
51,579 |
47,443 |
|
|
|
|
|
Interest expense |
(74,867) |
(49,059) |
(152,404) |
(95,165) |
Interest expense on lease liabilities |
(23,507) |
(20,752) |
(49,033) |
(41,392) |
Financial discounts granted |
(6,828) |
(4,114) |
(13,878) |
(11,796) |
Bank fees |
(1,560) |
(2,310) |
(3,531) |
(4,431) |
Foreign exchange loss, net |
(378) |
(194) |
(539) |
(320) |
IOF taxes (taxes on financial transactions) |
(221) |
(269) |
(1,511) |
(408) |
Other |
(6,757) |
(6,978) |
(17,461) |
(11,455) |
Finance expenses |
(114,118) |
(83,676) |
(238,357) |
(164,967) |
|
|
|
|
|
Finance result |
(90,226) |
(60,802) |
(186,778) |
(117,524) |
Income taxes are comprised of taxation over operations in Brazil, related to Corporate
Income Tax ("IRPJ") and Social Contribution on Net Profit ("CSLL"). According to Brazilian tax legislation, income
taxes and social contribution are assessed and paid by legal entity and not on a consolidated basis.
Reconciliation of income taxes expense
The following is a reconciliation
of income tax expense to profit for the period, calculated by applying the combined Brazilian statutory rates at 34% for the six-month
periods ended June 30, 2023 and 2022:
|
Three-month period ended |
Six-month period ended |
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Income before income taxes |
89,627 |
111,641 |
226,460 |
259,930 |
Combined statutory income taxes rate - % |
34% |
34% |
34% |
34% |
Income taxes at statutory rates |
(30,473) |
(37,958) |
(76,996) |
(88,376) |
Reconciliation adjustments: |
|
|
|
|
Tax effect on loss from entities not subject to taxation |
(7,758) |
(8,665) |
(15,518) |
(15,257) |
PROUNI - Fiscal Incentive (a) |
77,210 |
72,494 |
167,681 |
144,964 |
Unrecognized deferred tax assets |
(42,133) |
(28,029) |
(91,241) |
(57,656) |
Presumed profit income tax regime effect (b) |
(1,919) |
(281) |
(3,417) |
(321) |
Permanent adjustments |
(884) |
(4,655) |
(5,378) |
(4,758) |
Other |
3,867 |
1,526 |
3,719 |
2,489 |
Income taxes expense – current |
(2,090) |
(5,568) |
(21,150) |
(18,915) |
Effective rate |
2.3% |
5.0% |
9.3% |
7.3% |
(a) The Company adhered to PROUNI, established by Law 11,096
/ 2005, which is a federal program that exempt companies of paying income taxes and social contribution.
(b) Brazilian tax law establishes that companies that generate gross
revenues of up to R$ 78,000 in the prior fiscal year may calculate income taxes as a percentage of gross revenue, using the presumed profit
income tax regime. The effect of the presumed profit of certain subsidiaries represents the difference between the taxation based on this
method and the amount that would be due based on the statutory rate applied to the taxable profit of the subsidiaries.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Deferred income taxes
As of June 30, 2023, the Company had accumulated unrecognized deferred income tax assets
on temporary differences and tax losses in the amount of R$1,018,824 (tax-basis) (R$778,080 tax-basis) as of December 31, 2022) which
does not have any tax planning opportunities available that could support the recognition of these temporary differences as deferred tax
assets.
22 | Insurance contracts and contingencies |
a) Insurance contracts
The Company and its subsidiaries have a risk management program with the purpose of
delimiting the risks, seeking in the market coverage compatible with its size and operations.
b) Legal proceedings and contingencies
The provisions related to labor, civil and taxes proceedings whose likelihood of loss
is assessed as probable are as follows:
|
Labor |
Civil |
Taxes |
Total |
|
|
|
|
|
Balances as of January 1, 2022 |
25,490 |
22,928 |
99,869 |
148,287 |
Additions |
4,380 |
6,341 |
53,677 |
64,398 |
Reversals |
(1,381) |
(1,342) |
(1,295) |
(4,018) |
Balances as of June 30, 2022 (unaudited) |
28,489 |
27,927 |
152,251 |
208,667 |
|
|
|
|
|
Balances as of January 1, 2023 |
22,484 |
24,664 |
148,706 |
195,854 |
Business combinations |
64 |
88 |
- |
152 |
Additions |
2,246 |
2,835 |
4,868 |
9,949 |
Reversals |
(394) |
(904) |
(1,717) |
(3,015) |
Balances as of June 30, 2023 (unaudited) |
24,400 |
26,683 |
151,857 |
202,940 |
There are other civil, labor, taxes and social security proceedings assessed by Management
and its legal counsels as possible risk of loss, for which no provisions are recognized, as follows:
|
June 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Labor |
19,878 |
13,914 |
Civil |
50,464 |
59,603 |
Taxes and social security |
7,163 |
4,931 |
Total |
77,505 |
78,448 |
The Company has judicial deposits, related to taxes, civil and labor proceedings, recorded
in other assets (non-current) in the amount of R$14,412 as of June 30, 2023 (December 31, 2022: R$ 12,693).
Under the terms of the Share Purchase and Sale Agreements ("Agreements") between
the Company and the selling shareholders of the subsidiaries acquired, the Company assesses that the selling shareholders are exclusively
responsible for any provisions (including labor, tax and civil), which are or will be the subject of a claim by any third party, arising
from the act or fact occurred, by action or omission, prior to or on the closing dates of the acquisitions.
| Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Accordingly, and considering that the provisions for legal proceedings recorded by the
Company that result from causes arising from events occurring prior to the closing dates of the acquisitions, any liability for the amounts
to be disbursed, in case of their effective materialization in loss, belongs exclusively to the selling shareholders. In this context,
the Agreements state that the Company and its subsidiaries are indemnified and therefore exempt from any liability related to said contingent
liabilities and, therefore, the provision amounts related to such contingencies are presented in the non-current liabilities and the correspondent
amount of R$148,175 (December 31, 2022: R$ 145,300) is presented in non-current other assets.
During the six-month periods ended June 30, 2023 and 2022, the Company carried out non-cash
transactions which are not reflected in the statement of cash flows. The main non-cash transactions were (i) additions and remeasurements
of right-of-use assets and lease liabilities; and (ii) non-cash consideration on business combinations.
Changes in the share-based compensation plan
On July 31, 2023, the People and ESG Committee approved a change in the share-based
compensation plan to retain talents and reinforce the compensation plan. All the holders of stock options granted before July 11, 2022
were offered the possibility to exchange the stock options for a number of Restricted Stock Units (RSUs). The conversion ratios were measured
by the Company considering the fair value for the original plans remeasured at the modification date with no significant increase in fair
value as a result of such modification since the beneficiaries will have the benefit of settling its award for no cash consideration.
Further, the People and ESG Committee also approved a modification in the index rate to the strike prices of its granted stock options.
The result is that strike prices are now adjusted by the Brazilian inflation rate (IPCA) instead of the CDI rate. These changes will be
accounted as modifications in accordance with IFRS 2 and the Company does not expect to have significant impacts on the consolidated financial
statements.
Municipality taxes amnesty program
In August 2023, the Company and the selling shareholders of Unigranrio agreed to settle
a tax proceeding with the municipality of Rio de Janeiro for ISS (municipality tax on services) and Unigranrio entered into a tax amnesty
program on interest and penalties and paid R$14,819 on August 10, 2023. As of June 30, 2023, the Company had an indemnification asset
of R$20,000 and a provision for legal proceedings of R$53,302 for this matter. The Company is still measuring the impacts on the consolidated
financial statements.
***
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