High and Predictable Growth Strong
Cash Generation
Afya Limited (Nasdaq: AFYA; B3: A2FY34) (“Afya” or the
“Company”), the leading medical education group and digital health
services provider in Brazil, reported today financial and operating
results for the three and six-month period ended June 30, 2023.
Financial results are expressed in Brazilian Reais and are
presented in accordance with International Financial Reporting
Standards (IFRS).
Second Quarter 2023 Highlights
- 2Q23 Adjusted Net Revenue increased 23.6% YoY to R$712.2
million. Adjusted Net Revenue excluding acquisitions grew 13.5%,
reaching R$654.0 million.
- 2Q23 Adjusted EBITDA increased 21.8% YoY, reaching R$268.2
million, with an Adjusted EBITDA Margin of 37.7%. Adjusted EBITDA
excluding acquisitions grew 9.9%, reaching R$241.9 million, with an
Adjusted EBITDA Margin of 37.0%.
First Half 2023 Highlights
- 1H23 Adjusted Net Revenue increased 24.3% YoY to R$1,421.6
million. Adjusted Net Revenue excluding acquisitions grew 13.5%,
reaching R$1,298.2 million.
- 1H23 Adjusted EBITDA increased 21.9% YoY reaching R$598.4
million, with an Adjusted EBITDA Margin of 42.1%. Adjusted EBITDA
excluding acquisitions grew 11.2%, reaching R$546.1 million, with
an Adjusted EBITDA Margin of 42.1%.
- Cash conversion of 98.9% generating R$566.5 million of cash
flow from operating activities that resulted a solid cash position
of R$741.2 million.
- Almost 282 thousand monthly active physicians and medical
students using Afya’s Digital Services.
Table 1: Financial Highlights For the three months
period ended June 30, For the six months period ended June
30, (in thousand of R$)
2023
2023 ExAcquisitions*
2022
% Chg % Chg ExAcquisitions
2023
2023 ExAcquisitions*
2022
% Chg % Chg ExAcquisitions (a) Net Revenue
712,607
654,325
598,156
19.1%
9.4%
1,422,568
1,299,175
1,164,480
22.2%
11.6%
(b) Adjusted Net Revenue (1)
712,237
653,955
576,079
23.6%
13.5%
1,421,620
1,298,227
1,143,795
24.3%
13.5%
(c) Adjusted EBITDA (2)
268,174
241,876
220,186
21.8%
9.9%
598,373
546,095
490,987
21.9%
11.2%
(d) = (c)/(b) Adjusted EBITDA Margin
37.7%
37.0%
38.2%
-50 bps
-120 bps
42.1%
42.1%
42.9%
-80 bps
-80 bps
*For the three months period ended June 30, 2023, "2023 Ex
Acquisitions" excludes: Glic (April to May, 2023; Closing of Glic
was in May, 2022), and UNIT Alagoas and FITS Jaboatão dos
Guararapes (April to June, 2023; Closing of UNIT and FITS was in
January 2023). *For the six months period ended June 30, 2023,
"2023 Ex Acquisitions" excludes: Alem da Medicina (January &
February 2023; Closing of Alem da Medicina was in March, 2022),
Cardiopapers (January to March 2023; Closing of Cardiopapers was in
April, 2022), Glic (January to May, 2023; Closing of Glic was in
May, 2022), and UNIT Alagoas and FITS Jaboatão dos Guararapes
(January to June, 2023; Closing of UNIT and FITS was in January
2023). (1) Includes mandatory discounts in tuition fees granted by
state decrees and individual/collective legal proceedings and
public civil proceedings due to COVID 19 on site classes
restriction and excludes any recovery of these discounts that were
invoiced based on the Supreme Court decision. (2) See more
information on "Non-GAAP Financial Measures" (Item 07).
Message from Management
In Afya, these results reinforce the success of our strategy, as
evidenced by consistent growth in both operational and financial
results. Notably, our Net Revenue and Adjusted EBITDA have
increased significantly year-over-year, providing us with the
confidence to reaffirm our 2023 guidance.
This quarter was marked by significant increases in Net Revenue
within our three segments and we are delighted to see that the most
significant growth came from our Continuing Education segment with
a robust intake process, and course maturation reflecting a 50%
quarter-over-quarter expansion.
In Digital Health Services, we observed an increase of 28% in
Net Revenue compared to the same quarter of 2022. This result
reinforces the opportunity ahead in Digital Services, and it is
explained by the ramp-up in B2B engagements, with new contracts
with the pharmaceutical industry companies, and the continuous
ramp-up in B2P subscribers, as we will discuss further on.
Afya's core business also delivered outstanding results again,
as we saw higher tickets in Medicine courses, maturation of medical
seats, and the consolidation of UNIT Alagoas and FITS Jaboatão dos
Guararapes acquisition in January 2023.
Building on these achievements, our Afya Day event held this
July marked another significant milestone as we unveiled the
initiation of our rebranding efforts. This strategic move aims to
ensure that our strong results are maximized and connected by an
equally strong brand strategy. Propelling Afya to a high level of
relevance, credibility and growth potential. Additionally, we took
the opportunity to reiterate our strategic direction and articulate
our vision for the forthcoming years.
Underlining these achievements, Afya's remarkable performance
garnered three major awards within the 2nd quarter: "Executivo de
Valor” recognizing Virgilio Gibbon as the top CEO in the Education
Sector, “Valor Econômico's Best Education Company in Innovation",
and another prestigious recognition for being the best Company in
the Education Sector in the "Valor 1000" award.
We are very proud of our business and of what we have achieved
so far, as well as of what we are planning for the future.
1. Key Events in the Quarter:
- Afya announced, on June 2023, that the resolutions set out in
its Notice of Annual General Meeting 2023 were duly passed at its
Annual General Meeting held: (1) the approval and ratification of
Afya’s financial statements as of and for the fiscal year ended
December 31, 2022; (2) the approval of João Paulo Seibel de Faria
as a director of the Company with immediate effect to hold office
for a two year term; (3) the approval of Vanessa Claro Lopes as a
director of the Company with immediate effect to hold office for a
two year term; (4) the approval of Miguel Filisbino Pereira de
Paula as a director of the Company with immediate effect to hold
office for a two year term; and (5) the approval of Marcelo Ken
Suhara as a director of the Company with immediate effect to hold
office for a two year term;
2. Subsequent Events in the quarter
- Afya (Nasdaq: AFYA, B3: A2FY34) announced, on July 2023 the
start of negotiation of its non-sponsored Brazilian Depositary
Receipts (BDRs), with a 1-for-2 stock split, aimed to provide
investment opportunities on Afya for Brazilian investors;
- Afya hosted, on July 2023 its Investor and ESG Day. Attendees
heard from Afya’s business executives the Company's evolution,
business strategy, ESG initiatives, present and future
perspectives. More details on:
https://ir.afya.com.br/afya-day/
- 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 do 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.
3. Full Year 2023 Guidance Reaffirmed
The Company is reaffirming its previously issued guidance for
FY23, which already considered the impact of the increase of the
FG-FIES, as Afya successfully concluded acceptances of new medical
students for the second semester, ensuring 100% occupancy in all of
its medical schools.
Under the new FIES Program (Higher Education Financing Fund)
introduced in 2018, retention is applied to the amount paid by the
Program to cover the delinquency of the financed students. This
retention is allocated to the FG-FIES Fund and the fund cannot be
redeemed or utilized for other purposes without the approval of the
National Fund for the Development of Education (FNDE). There was a
transition rule that capped the retention at certain levels until
2022. From 2023, the limit was lifted, and the retention was
updated according to the delinquency per educational entity for
those FIES students that entered on the amortization phase. For
Afya, the expected impact on the increase of the FG-FIES in 2023 is
R$24 million which was already considered in the 2023 Guidance.
The guidance for FY2023 is defined in the following table:
Guidance for 2023 Adjusted Net Revenue* R$ 2,750 mn ≤
∆ ≤ R$ 2,850 mn Adjusted EBITDA R$ 1,100 mn ≤ ∆ ≤ R$ 1,200 mn
*Includes UNIT Alagoas and FITS Jaboatão dos Guararapes'
acquisitions;Includes the increase of 64 medical seats of Faculdade
Santo Agostinho, in the city of Itabuna;Excludes any acquisition
that may be concluded after the issuance of the guidance.
4. 1H23 Overview
Operational Review
Afya is the only company offering educational and technological
solutions to support physicians across every stage of the medical
career, from undergraduate students in their medical school years
through medical residency preparatory courses, medical
specialization programs and continuing medical education. 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
Software as a Service (SaaS) model, and assisting physicians in
their relationship with their patients.
The Company reports results for three distinct business units.
The first, Undergrad – medical schools, other healthcare programs
and ex-health degrees. Revenue is generated from the monthly
tuition fees the Company charges students enrolled in the
undergraduate programs. The second, Continuing Education –
specialization programs and graduate courses for physicians.
Revenue is also generated from the monthly tuition fees the Company
charges students enrolled in the specialization and graduate
courses. The third is Digital Services – digital services offered
by the Company at every stage of the medical career. This business
unit is divided into Business to Physician (which encompasses
Content & Technology for Medical Education, Clinical Decision
Software, Practice Management Tools & Electronic Medical
Records, Physician-Patient Relationship, Telemedicine, and Digital
Prescription) and Business to Business (which provides access and
demand for the healthcare players). Revenue is generated from
printed books and e-books, which is recognized at the point in time
when control is transferred to the customer, and subscription fees,
which are recognized as the services are transferred over time.
Key Revenue Drivers – Undergraduate Courses
Table 2: Key Revenue Drivers For the six months period
ended June 30,
2023
2022
% Chg
Undergrad Programs MEDICAL SCHOOL Approved Seats
3,163
2,759
14.6%
Operating Seats
3,113
2,481
25.5%
Total Students (end of period)
20,790
17,555
18.4%
Average Total Students
20,806
17,539
18.6%
Average Total Students (ex-Acquisitions)*
18,811
17,539
7.3%
Tuition Fees (Total - R$ '000)
1,262,673
1,001,808
26.0%
Tuition Fees (ex- Acquisitions* - R$ '000)
1,148,822
1,001,808
14.7%
Medical School Gross Avg. Ticket (ex- Acquisitions* -
R$/month)
10,179
9,520
6.9%
Medical School Net Avg. Ticket (ex- Acquisitions* -
R$/month)
8,549
7,853
8.9%
UNDERGRADUATE HEALTH SCIENCE Total Students (end of period)
21,117
20,779
1.6%
Average Total Students
21,389
20,841
2.6%
Average Total Students (ex-Acquisitions)*
19,633
20,841
-5.8%
Tuition Fees (Total - R$ '000)
197,177
170,666
15.5%
Tuition Fees (ex- Acquisitions* - R$ '000)
182,211
170,666
6.8%
OTHER UNDERGRADUATE Total Students (end of period)
24,545
23,945
2.5%
Average Total Students
24,794
24,077
3.0%
Average Total Students (ex-Acquisitions)*
21,569
24,077
-10.4%
Tuition Fees (Total - R$ '000)
155,709
137,464
13.3%
Tuition Fees (ex- Acquisitions* - R$ '000)
134,772
137,464
-2.0%
TOTAL TUITION FEES
Tuition Fees (Total - R$ '000)
1,615,560
1,309,937
23.3%
Tuition Fees (ex- Acquisitions* - R$ '000)
1,465,805
1,309,937
11.9%
*For the six months period ended June 30, 2023, "2023 Ex
Acquisitions" excludes: UNIT Alagoas and FITS Jaboatão dos
Guararapes (January to June, 2023; Closing of UNIT and FITS was in
January 2023).
Key Revenue Drivers – Continuing Education and Digital
Services
Table 3: Key Revenue Drivers For the six months period
ended June 30,
2023
2022
% Chg
Continuing Education Medical Specialization &
Others Total Students (end of period)
4,646
3,543
31.1%
Average Total Students
4,710
3,511
34.1%
Average Total Students (ex-Acquisitions)
4,710
3,511
34.1%
Net Revenue from courses (Total - R$ '000)
70,584
47,662
48.1%
Net Revenue from courses (ex- Acquisitions¹)
70,584
47,662
48.1%
Digital Services Content & Technology for Medical
Education Medcel Active Payers Prep Courses & CME - B2P
6,440
12,741
-49.5%
Prep Courses & CME - B2B
6,029
4,909
22.8%
Além da Medicina Active Payers
6,657
7,792
-14.6%
Cardiopapers Active Payers
6,880
4,765
44.4%
Medical Harbour Active Payers
7,002
4,425
58.2%
Clinical Decision Software Whitebook Active Payers
145,744
133,238
9.4%
Clinical Management Tools² iClinic Active Payers
24,957
21,088
18.3%
Shosp Active Payers
3,001
2,264
32.6%
Digital Services Total Active Payers (end of period)
206,710
191,222
8.1%
Net Revenue from Services (Total - R$ '000)
110,930
89,695
23.7%
Net Revenue - B2P
91,284
79,013
15.5%
Net Revenue - B2B
19,646
10,682
83.9%
Net Revenue From Services (ex-Acquisitions¹)
103,841
89,695
15.8%
*For the six months period ended June 30, 2023, "2023 Ex
Acquisitions" excludes: Alem da Medicina (January & February
2023; Closing of Alem da Medicina was in March, 2022), Cardiopapers
(January to March 2023; Closing of Cardiopapers was in April,
2022), Glic (January to May, 2023; Closing of Glic was in May,
2022). (2) Clinical management tools includes Telemedicine and
Digital Prescription features.
Key Operational Drivers – Digital Services
Monthly Active Users (MaU) represents the number of unique
individuals that consumed Digital Services content in each one of
our products in the last 30 days of a specific period.
Total monthly active users reached almost 282 thousand, 6.5%
higher over the same period in the last year.
Monthly Active Unique Users (MUAU) represents the number of
unique individuals, without overlap of users among products, in the
last 30 days of a specific period.
Table 4: Key Operational Drivers for Digital Services - Monthly
Active Users (MaU)
2Q23
2Q22
% Chg YoY
1Q23
4Q22
Content & Technology for Medical Education
24,973
20,739
20.4%
31,549
16,539
Clinical Decision Software
230,338
221,862
3.8%
237,003
221,762
Clinical Management Tools¹
24,880
21,151
17.6%
24,568
20,936
Physician-Patient Relationship
1,782
1,101
61.9%
1,773
1,473
Total Monthly Active Users (MaU) - Digital Services
281,973
264,853
6.5%
294,893
260,710
1) Clinical management tools includes Telemedicine and Digital
Prescription features Includes Shosp, Medicinae and Além da
Medicina starting in 1Q22 and Cardiopapers and Glic starting in
2Q22
Table 5: Key Operational Drivers for Digital
Services - Monthly Unique Active Users (MuaU)
2Q23
2Q22
% Chg QoQ
1Q23
4Q22
Total Monthly Unique Active Users (MuaU) - Digital
Services
251,487
245,396
2.5%
262,137
241,949
1) Total Monthly Unique Active Users excludes non-integrated
companies: Medical Harbour, Medicinae, Shosp, Além da Medicina,
Cardiopapers and Glic
Seasonality
Undergrad’s tuition revenues are related to the intake process
and monthly tuition fees charged to students over the period; thus
does not have significant fluctuations during the semester.
Continuing Education revenues are related to monthly intakes and
tuition fees and do not have a considerable 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 than in the second and third quarters.
Revenue
Adjusted Net Revenue for the second quarter of 2023 was R$712.2
million, an increase of 23.6% over the same period of the prior
year. Excluding acquisitions, Adjusted Net Revenue in the second
quarter increased 13.5% YoY to R$654.0 million, mainly due to
higher tickets in Medicine courses in 8.9% in the semester and the
maturation of medical seats, the Continuing Education performance
and the digital services expansion.
Net Revenue of Continuing Education for the second quarter of
2023 was R$35.6 million, an increase of 49.6%, boosted by student
growth.
Digital services increased 28.2% quarter over quarter, totaling
R$54.1 million. The organic growth is a combination of (a) an
increase in the B2B engagements, increasing B2B Net Revenue by
83.9%, and (b) the expansion of the active payers in the B2P,
mainly in Whitebook, IClinic, Medical Harbour and Cardiopapers.
For the six-month period ended June 30, 2023, Adjusted Net
Revenue was R$1,421.6 million, an increase of 24.3% over the same
period of last year. Excluding acquisitions, Adjusted Net Revenue
in the six-month period increased 13.5% YoY to R$1,298.2
million.
Table 6: Revenue & Revenue Mix (in thousands of R$)
For the three months period ended June 30, For the six
months period ended June 30,
2023
2023 ExAcquisitions*
2022
% Chg % Chg ExAcquisitions
2023
2023 ExAcquisitions*
2022
% Chg % Chg ExAcquisitions Net Revenue Mix Undergrad
625,264
567,113
533,545
17.2%
6.3%
1,246,240
1,129,935
1,028,940
21.1%
9.8%
Adjusted Undergrad¹
624,894
566,743
511,468
22.2%
10.8%
1,245,292
1,128,987
1,008,255
23.5%
12.0%
Continuing Education
35,624
35,624
23,811
49.6%
49.6%
70,584
70,584
47,662
48.1%
48.1%
Digital Services
54,138
54,007
42,218
28.2%
27.9%
110,930
103,841
89,695
23.7%
15.8%
Inter-segment transactions
-2,419
-2,419
-1,418
n.a
70.6%
-5,186
-5,186
-1,817
185.4%
185.4%
Total Reported Net Revenue
712,607
654,325
598,156
19.1%
9.4%
1,422,568
1,299,175
1,164,480
22.2%
11.6%
Total Adjusted Net Revenue ¹
712,237
653,955
576,079
23.6%
13.5%
1,421,620
1,298,227
1,143,795
24.3%
13.5%
*For the three months period ended June 30, 2023, "2023 Ex
Acquisitions" excludes: Glic (April to May, 2023; Closing of Glic
was in May, 2022), and UNIT Alagoas and FITS Jaboatão dos
Guararapes (April to June, 2023; Closing of UNIT and FITS was in
January 2023). *For the six months period ended June 30, 2023,
"2023 Ex Acquisitions" excludes: Alem da Medicina (January &
February 2023; Closing of Alem da Medicina was in March, 2022),
Cardiopapers (January to March 2023; Closing of Cardiopapers was in
April, 2022), Glic (January to May, 2023; Closing of Glic was in
May, 2022), and UNIT Alagoas and FITS Jaboatão dos Guararapes
(January to June, 2023; Closing of UNIT and FITS was in January
2023). (1) Includes mandatory discounts in tuition fees granted by
state decrees and individual/collective legal proceedings and
public civil proceedings due to COVID 19 on site classes
restriction and excludes any recovery of these discounts that were
invoiced based on the Supreme Court decision. (2) See more
information on "Non-GAAP Financial Measures" (Item 07).
Adjusted EBITDA
Adjusted EBITDA for the three-month period ended June 30, 2023
increased 21.8% to R$268.2 million, up from R$220.2 million in the
same period of the prior year, while the Adjusted EBITDA Margin
decreased 50 basis points to 37.7%. For the six-month period ended
June 30, 2023, Adjusted EBITDA was R$598.4 million, an increase of
21.9% over the same period of the prior year, with an Adjusted
EBITDA Margin decrease of 80 basis points in the same period.
The Adjusted EBITDA Margin reduction is due to: (a) Mix of Net
Revenue, with higher participation of the Digital and Continuing
Education segments, and (b) the consolidation of 4 new Mais Médicos
campuses (operation started on 3Q22) and UNIT Alagoas and FITS
Jaboatão dos Guararapes which are performing better than expected
but still present lower margins when compared to the integrated
companies.
Table 7: Adjusted EBITDA (in thousands of R$)
For the
three months period ended June 30, For the six months period
ended June 30,
2023
2023 Ex Acquisitions*
2022
% Chg % Chg Ex Acquisitions
2023
2023 Ex Acquisitions*
2022
% Chg % Chg Ex Acquisitions Adjusted EBITDA
268,174
241,876
220,186
21.8%
9.9%
598,373
546,095
490,987
21.9%
11.2%
% Margin
37.7%
37.0%
38.2%
-50 bps
-120 bps
42.1%
42.1%
42.9%
-80 bps
-80 bps
*For the three months period ended June 30, 2023, "2023 Ex
Acquisitions" excludes: Glic (April to May, 2023; Closing of Glic
was in May, 2022), and UNIT Alagoas and FITS Jaboatão dos
Guararapes (April to June, 2023; Closing of UNIT and FITS was in
January 2023). *For the six months period ended June 30, 2023,
"2023 Ex Acquisitions" excludes: Alem da Medicina (January &
February 2023; Closing of Alem da Medicina was in March, 2022),
Cardiopapers (January to March 2023; Closing of Cardiopapers was in
April, 2022), Glic (January to May, 2023; Closing of Glic was in
May, 2022), and UNIT Alagoas and FITS Jaboatão dos Guararapes
(January to June, 2023; Closing of UNIT and FITS was in January
2023).
Adjusted Net Income
Net Income for the second quarter of 2023 was R$87.5 million, a
decrease of -17.5% over the same period of the prior year. Net
Income results for the second quarter of 2022 was positively
affected by the increase in operational results, which includes the
recovery of a portion of the prior granted discounts in tuition
fees related to COVID-19
Adjusted Net Income for the second quarter of 2023 was R$ 131.9
million, an increase of 10.7% over the same period of the prior
year mainly due to better operational performance, which was offset
by higher financial expenses, mainly related to the increase in
leverage due to UNIT Alagoas and FITS Jaboatao business combination
and higher interest rates, when compared to the same period of the
prior year. Adjusted Net Income for the six-month period of 2023
was R$ 298.3 million, an increase of 4.2% year over year.
Adjusted EPS reached R$3.20 per share for the six-month period
ended June 30, 2023, an increase of 5.2% year over year, for the
reasons as presented above.
Table 8: Adjusted Net Income (in thousands of R$)
For the
three months period ended June 30, For the six months period
ended June 30,
2023
2022
% Chg
2023
2022
% Chg Net income
87,537
106,073
-17.5%
205,310
241,015
-14.8%
Amortization of customer relationships and trademark (1)
29,983
18,724
60.1%
54,186
37,007
46.4%
Share-based compensation
6,902
8,652
-20.2%
13,398
11,581
15.7%
Non-recurring expenses:
7,481
(14,302
)
n.a.
25,388
-3,275
n.a. - Integration of new companies (2)
6,282
5,781
8.7%
12,182
9,952
22.4%
- M&A advisory and due diligence (3)
635
594
6.9%
11,674
1,806
546.4%
- Expansion projects (4)
378
677
-44.2%
529
1,279
-58.6%
- Restructuring expenses (5)
556
723
-23.1%
1,951
4,373
-55.4%
- Mandatory Discounts in Tuition Fees (6)
-370
-22,077
-98.3%
-948
-20,685
-95.4%
Adjusted Net Income
131,903
119,147
10.7%
298,282
286,328
4.2%
Basic earnings per share - in R$ (7)
0.92
1.12
-17.8%
2.17
2.55
-14.8%
Adjusted earnings per share - in R$ (8)
1.42
1.27
11.8%
3.20
3.05
5.2%
(1) Consists of amortization of customer relationships and
trademark recorded under business combinations. (2) Consists of
expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant
fees in connection with due diligence services for our M&A
transactions. (4) Consists of expenses related to professional and
consultant fees in connection with the opening of new campuses. (5)
Consists of expenses related to the employee redundancies in
connection with the organizational restructuring of our acquired
companies. (6) Consists of mandatory discounts in tuition fees
granted by state decrees, individual/collective legal proceedings
and public civil proceedings due to COVID 19 on site classes
restriction and excludes any recovery of these discounts that were
invoiced based on the Supreme Court decision. (7) Basic earnings
per share: Net Income/Weighted average number of outstanding
shares. (8) Adjusted earnings per share: Adjusted Net Income
attributable to equity holders of the Parent/Weighted average
number of outstanding shares.
Cash and Debt Position
On June 30, 2023, Cash and Cash Equivalents were R$741.2
million, a decrease of 32.2% over December 31, 2022, due to UNIT
Alagoas and FITS Jaboatão dos Guararapes business combination.
For the six-month period ended June 30, 2023, Afya reported cash
flow from operating activities of R$566.5 million, up from R$450.0
million in the same period of the previous year, an increase of
25.9% YoY, boosted by the solid operational results. Operating Cash
Conversion Ratio was strong once again, achieving 98.9% for the
six-month period ended June 30, 2023, compared to 91.0% in the same
period of the previous year.
On June 30, 2023, Net Debt, excluding the effect of IFRS 16,
totaled R$2,003.6 million. When compared to December 31, 2022 Net
Debt added to R$825 million related to UNIT Alagoas and FITS
Jaboatão dos Guararapes business combination closed on January 2,
2023, the Net Debt reduced R$ 202 million due to the strong Cash
flow from operating activities in the semester.
Table 9: Operating Cash Conversion Ratio Reconciliation
For the six months period ended June 30, (in thousands of
R$)
Considering the adoption of IFRS 16
2023
2022
% Chg (a) Net cash flows from operating activities
537,492
427,916
25.6%
(b) Income taxes paid
28,988
22,101
31.2%
(c) = (a) + (b) Cash flow from operating activities
566,480
450,017
25.9%
(d) Adjusted EBITDA
598,373
490,987
21.9%
(e) Non-recurring expenses:
25,388
-3,275
n.a. - Integration of new companies (1)
12,182
9,952
22.4%
- M&A advisory and due diligence (2)
11,674
1,806
546.4%
- Expansion projects (3)
529
1,279
-58.6%
- Restructuring Expenses (4)
1,951
4,373
-55.4%
- Mandatory Discounts in Tuition Fees (5)
-948
-20,685
-95.4%
(f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses
572,985
494,262
15.9%
(g) = (c) / (f) Operating cash conversion ratio
98.9%
91.0%
790 bps (1) Consists of expenses related to the integration
of newly acquired companies. (2) Consists of expenses related to
professional and consultant fees in connection with due diligence
services for M&A transactions. (3) Consists of expenses related
to professional and consultant fees in connection with the opening
of new campuses. (4) Consists of expenses related to the employee
redundancies in connection with the organizational restructuring of
acquired companies. (5) Consists of mandatory discounts in tuition
fees granted by state decrees, individual/collective legal
proceedings and public civil proceedings due to COVID 19 on site
classes restriction and excludes any recovery of these discounts
that were invoiced based on the Supreme Court decision.
The following table shows more information regarding the cost of
debt for 1H23, considering loans and financing, capital market and
accounts payable to selling shareholders. Afya’s capital structure
remains solid with a conservative leveraging position and a low
cost of debt. Considering the mid guidance for 2023, Afya’s Net
Debt/ Adjusted Ebitda would be 1.7x.
Table 10: Gross Debt and Average Cost of Debt (in millions
of R$)
For the closing of the six months period ended in June
30, Cost of Debt
Gross Debt
Duration (Years)
per year
%CDI*
Loans and financing: Softbank
825
2.9
6.5%
48%
Capital Market
537
4.1
15.5%
114%
Loans and financing: Others
563
1.6
15.5%
114%
Accounts payable to selling shareholders
820
1.0
13.0%
97%
Average
2,745
2.3
11.9%
89%
*Based on the annualized Interbank Certificates of Deposit ("CDI")
rate for the period as a reference: 1H23: ~13.65% p.y.
Table 11:
Cash and Debt Position (in thousands of R$)
2Q23
FY2022
% Chg
2Q22
% Chg (+) Cash and Cash Equivalents
741,196
1,093,082
-32.2%
616,250
20.3%
Cash and Bank Deposits
17,057
57,509
-70.3%
47,583
-64.2%
Cash Equivalents
724,139
1,035,573
-30.1%
568,667
27.3%
(-) Loans and Financing
1,925,154
1,882,901
2.2%
1,380,540
39.4%
Current
193,660
145,202
33.4%
230,494
-16.0%
Non-Current
1,731,494
1,737,699
-0.4%
1,150,046
50.6%
(-) Accounts Payable to Selling Shareholders
764,595
528,678
44.6%
649,626
17.7%
Current
401,766
261,711
53.5%
203,979
97.0%
Non-Current
362,829
266,967
35.9%
445,647
-18.6%
(-) Other Short and Long Term Obligations
55,045
62,176
-11.5%
69,456
-20.7%
(=) Net Debt (Cash) excluding IFRS 16
2,003,598
1,380,673
45.1%
1,483,372
35.1%
(-) Lease Liabilities
851,845
769,525
10.7%
741,825
14.8%
Current
35,292
32,459
8.7%
28,619
23.3%
Non-Current
816,553
737,066
10.8%
713,206
14.5%
Net Debt (Cash) with IFRS 16
2,855,443
2,150,198
32.8%
2,225,197
28.3%
CAPEX
Capital expenditures consists of the purchase of property and
equipment and intangible assets, including expenditures mainly
related to the expansion and maintenance of our campuses and
headquarters including leasehold improvements, and the development
of new solutions in the digital segment, among others.
For the six-month period ending June 30, 2023, CAPEX went from
R$161.2 million to R$102.2 million, a decrease of 36.6% over the
same period of the prior year.
Table 12: CAPEX (in thousands of R$)
For the six months
period ended June 30,
2023
2022
% Chg CAPEX
102,157
161,218
-36.6%
Property and equipment
56,907
62,266
-8.6%
Intanglibe assets
45,250
98,952
-54.3%
- Licenses
0
24,408
n.a. - Goodwill
0
36,481
n.a. - Others
45,250
38,063
18.9%
ESG Metrics
ESG commitment is an important part of Afya’s strategy and
permeates the Company’s core values. Afya has been advancing year
after year on its core pillars and, since 2021, ESG metrics have
been disclosed in the Company’s quarterly financial results.
On January 2023, Afya announced it is one of 484 companies
across 45 countries and regions to join the 2023 Bloomberg
Gender-Equality Index (GEI), a modified market
capitalization-weighted index that aims to track the performance of
public companies committed to transparency in gender-data
reporting. This reference index measures gender equality across
five pillars: leadership & talent pipeline, equal pay &
gender pay parity, inclusive culture, anti-sexual harassment
policies, and external brand. In addition, for the second time in a
row, Afya was included on the index for scoring above a global
threshold established by Bloomberg to reflect disclosure and the
achievement or adoption of best-in-class statistics and policies,
being 1 of 16 Brazilian companies included in the index this
year.
The 2022 Sustainability Report can be found at:
https://ir.afya.com.br/corporate-governance/sustainability/
Table 13: ESG Metrics
2Q23
2Q22
2022
2021
2020
2019
#
GRI
Governance and Employee
Management
1
405-1
Number of employees
9,795
8,731
8,708
8,079
6,100
3,369
2
405-1
Percentage of female
employees
57%
56%
57%
55%
55%
57%
3
405-1
Percentage of female employees in
the board of directors
36%
27%
40%
18%
18%
22%
4
102-24
Percentage of independent member
in the board of directors
36%
36%
30%
36%
36%
22%
Environmental
4
302-1
Total energy consumption
(kWh)
5,643,324
3,598,250
17,011,842
12,176,966
8,035,845
5,928,450
4.1
302-1
Consumption per campus
122,681
94,691
412,747
385,573
321,434
395,230
5
302-1
% supplied by distribution
companies
58.0%
69.4%
72.4%
91.3%
83.4%
96.2%
6
302-1
% supplied by other sources
42.0%
30.6%
27.6%
8.7%
16.6%
3.8%
Social
8
413-1
Number of free clinical
consultations offered by Afya
168,362
143,236
494,635
341,286
427,184
270,000
9
Number of physicians graduated in
Afya's campuses
18,865
16,998
18,104
16,772
12,691
8,306
10
201-4
Number of students with financing
and scholarship programs (FIES and PROUNI)
10,045
8,783
10,965
7,881
4,999
2,808
11
% students with scholarships over
total undergraduate students
15.1%
14.1%
18.8%
12.9%
13.7%
11.7%
12
413-1
Hospital, clinics and city halls
partnerships
714
449
662
447
432
60
(1) Some factors can influence in the adequate proportionality
analysis of data over the years, such as: climate changes, COVID-19
pandemic effects, seasonalities, number of employees, number of
students, number of active units, among others. (2) "Other sources"
refers to: (a) Derived from renewable sources, such as solar panels
installed in the units; and (b) Derived from the search for
alternative energy options in the market. (3) Starting in 2Q22,
previously disclosed environmental data were updated to consider:
(a) GHG Protocol guidelines improvements, and (b) additional
data-collection criteria refinements. (4) Starting in 2Q22,
previously disclosed social data were updated to consider: (a) the
number of graduated physicians considering all units after its
closing, and (b) partnerships related only to medical schools.
5. Conference Call and Webcast Information
When:
August 28, 2023 at 5:00 p.m. ET.
Who:
Mr. Virgilio Gibbon, Chief Executive
Officer
Mr. Luis André Blanco, Chief Financial
Officer
Ms. Renata Costa Couto, IR Director
Dial-in: Brazil: +55 21 3958 7888
or +55 11 4632 2236 or +55 11 4632 2237 or +55 11 4680 6788 or +55
11 4700 9668
United States: +1 305 224 1968 or +1 309
205 3325 or +1 312 626 6799 or +1 346 248 7799 or +1 360 209 5623
or +1 386 347 5053 or +1 507 473 4847 or +1 564 217 2000 or +1 646
931 3860 or +1 669 444 9171 or +1 669 900 6833 or +1 689 278 1000
or +1 719 359 4580 or +1 929 205 6099 or +1 253 205 0468 or +1 253
215 8782 or +1 301 715 8592
Webinar ID: 987 2513 9496
Other Numbers:
https://afya.zoom.us/u/abiXHObhrF
OR
Webcast:
https://afya.zoom.us/j/98725139496
6. About Afya Limited (Nasdaq: AFYA)
Afya is the leading medical education group in Brazil based on
number of medical school seats. It delivers an end-to-end
physician-centric ecosystem that serves and empowers students to be
lifelong medical learners, from the moment they enroll as medical
students, through their medical residency preparation, graduate
program, and continuing medical education activities. Afya also
offers content and clinical decision applications for healthcare
professionals through its products WhiteBook, Nursebook and Portal
PEBMED. For more information, please visit www.afya.com.br.
7. Forward – Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, which statements involve substantial risks and uncertainties.
All statements other than statements of historical fact could be
deemed forward looking, and include risks and uncertainties related
to statements about our competition; our ability to attract, upsell
and retain students; our ability to increase tuition prices and
prep course fees; our ability to anticipate and meet the evolving
needs of students and professors; our ability to source and
successfully integrate acquisitions; general market, political,
economic, and business conditions; and our financial targets such
as revenue, share count and IFRS and non-IFRS financial measures
including gross margin, operating margin, net income (loss) per
diluted share, and free cash flow. Forward-looking statements by
their nature address matters that are, to different degrees,
uncertain, such as statements about the potential impacts of the
COVID-19 pandemic on our business operations, financial results and
financial position and the Brazilian economy.
The Company undertakes no obligation to update any
forward-looking statements made in this press release to reflect
events or circumstances after the date of this press release or to
reflect new information or the occurrence of unanticipated events,
except as required by law. The achievement or success of the
matters covered by such forward-looking statements involves known
and unknown risks, uncertainties and assumptions. If any such risks
or uncertainties materialize or if any of the assumptions prove
incorrect, our results could differ materially from the results
expressed or implied by the forward-looking statements we make.
Readers should not rely upon forward-looking statements as
predictions of future events. Forward-looking statements represent
management’s beliefs and assumptions only as of the date such
statements are made. Further information on these and other factors
that could affect the Company’s financial results are included in
the filings made with the United States Securities and Exchange
Commission (SEC) from time to time, including the section titled
“Risk Factors” in the most recent Rule 434(b) prospectus. These
documents are available on the SEC Filings section of the investor
relations section of our website at: https://ir.afya.com.br/.
8. Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements,
which are prepared and presented in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board—IASB, Afya uses Adjusted EBITDA and
Operating Cash Conversion Ratio information, which are non-GAAP
financial measures, for the convenience of investors. A non-GAAP
financial measure is generally defined as one that intends to
measure financial performance but excludes or includes amounts that
would not be equally adjusted in the most comparable GAAP
measure.
Afya calculates Adjusted EBITDA as net income plus/minus net
financial result plus income taxes expense plus depreciation and
amortization plus interest received on late payments of monthly
tuition fees, plus share-based compensation plus/minus share of
income of associate plus/minus non-recurring expenses. The
calculation of Adjusted Net Income is net income plus amortization
of customer relationships and trademark, plus share-based
compensation. We calculate Operating Cash Conversion Ratio as the
Cash flow from operating activities, adjusted with income taxes
paid divided by Adjusted EBITDA plus/minus non-recurring
expenses.
Management presents Adjusted EBITDA, because it believes these
measures provide investors with a supplemental measure of financial
performance of the core operations that facilitates
period-to-period comparisons on a consistent basis. Afya also
presents Operating Cash Conversion Ratio because it believes this
measure provides investors with a measure of how efficiently the
Company converts EBITDA into cash. The non-GAAP financial measures
described in this prospectus are not a substitute for the IFRS
measures of earnings. Additionally, calculations of Adjusted EBITDA
and Operating Cash Conversion Ratio may be different from the
calculations used by other companies, including competitors in the
education services industry, and therefore, Afya’s measures may not
be comparable to those of other companies.
9. Investor Relations Contact
E-mail: ir@afya.com.br
10. Financial Tables
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 earnings per share)
Three-month period
ended
Six-month period ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net revenue
712,607
598,156
1,422,568
1,164,480
Cost of services
(284,295)
(219,242)
(531,902)
(405,972)
Gross profit
428,312
378,914
890,666
758,508
General and administrative expenses
(249,586)
(207,415)
(482,806)
(385,929)
Other expenses, net
(2,083)
(1,257)
(1,678)
(1,566)
Operating income
176,643
170,242
406,182
371,013
Finance income
23,892
22,874
51,579
47,443
Finance expenses
(114,118)
(83,676)
(238,357)
(164,967)
Finance result
(90,226)
(60,802)
(186,778)
(117,524)
Share of income of associate
3,210
2,201
7,056
6,441
Income before income taxes
89,627
111,641
226,460
259,930
Income taxes expenses
(2,090)
(5,568)
(21,150)
(18,915)
Net income
87,537
106,073
205,310
241,015
Other comprehensive income
-
-
-
-
Total comprehensive income
87,537
106,073
205,310
241,015
Income attributable to
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
Per common share
0.92
1.12
2.17
2.55
Diluted earnings per share
Per common share
0.92
1.12
2.16
2.55
Unaudited interim condensed
consolidated statements of financial position
As of June 30, 2023, and December 31,
2022
(In thousands of Brazilian
reais)
June 30, 2023
December 31, 2022
Assets
(unaudited)
Current assets
Cash and cash equivalents
741,196
1,093,082
Trade receivables
509,520
452,831
Inventories
8,088
12,190
Recoverable taxes
51,505
27,809
Other assets
63,930
51,745
Total current assets
1,374,239
1,637,657
Non-current assets
Trade receivables
42,893
42,568
Other assets
200,448
191,756
Investment in associate
52,669
53,907
Property and equipment
588,178
542,087
Right-of-use assets
759,512
690,073
Intangible assets
4,831,529
4,041,491
Total non-current assets
6,475,229
5,561,882
Total assets
7,849,468
7,199,539
Liabilities
Current liabilities
Trade payables
82,632
71,482
Loans and financing
193,660
145,202
Lease liabilities
35,292
32,459
Accounts payable to selling
shareholders
401,766
261,711
Notes payable
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
Non-current liabilities
Loans and financing
1,731,494
1,737,699
Lease liabilities
816,553
737,066
Accounts payable to selling
shareholders
362,829
266,967
Taxes payable
91,286
92,888
Provision for legal proceedings
202,940
195,854
Other liabilities
27,488
13,218
Total non-current liabilities
3,232,590
3,043,692
Total liabilities
4,403,271
3,949,381
Equity
Share capital
17
17
Additional paid-in capital
2,372,773
2,375,344
Share-based compensation reserve
136,936
123,538
Treasury stock
(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
Total liabilities and equity
7,849,468
7,199,539
Unaudited interim condensed
consolidated statements of cash flow
For the six-month periods ended June
30, 2023 and 2022
(In thousands of Brazilian
reais)
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
138,264
99,089
Write-off of property and equipment
246
2,483
Write-off of intangible assets
259
2,549
Allowance for doubtful accounts
39,086
30,420
Share-based compensation expense
13,398
11,581
Net foreign exchange differences
539
320
Accrued interest
152,404
95,165
Accrued lease interest
49,033
41,392
Share of income of associate
(7,056)
(6,441)
Provision for legal proceedings
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
(56,907)
(62,266)
Acquisition of intangibles assets
(45,250)
(50,267)
Dividends received
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
(67,305)
(53,795)
Proceeds from loans and financing
5,288
-
Payments of lease liabilities
(66,239)
(55,074)
Treasury shares buy-back
(12,369)
(152,317)
Dividends paid to non-controlling
shareholders
(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
Reconciliation between Net Income and Adjusted EBITDA
Reconciliation between Adjusted EBITDA and Net Income
(in thousands of R$)
For the three months period ended
June 30, For the six months period ended June 30,
2023
2022
% Chg
2023
2022
% Chg Net income
87,537
106,073
-17.5%
205,310
241,015
-14.8%
Net financial result
90,226
60,802
48.4%
186,778
117,524
58.9%
Income taxes expense
2,090
5,568
-62.5%
21,150
18,915
11.8%
Depreciation and amortization
72,306
50,702
42.6%
138,264
99,089
39.5%
Interest received (1)
4,842
4,892
-1.0%
15,141
12,579
20.4%
Income share associate
(3,210)
(2,201)
45.8%
(7,056)
(6,441)
9.5%
Share-based compensation
6,902
8,652
-20.2%
13,398
11,581
15.7%
Non-recurring expenses:
7,481
(14,302)
n.a.
25,388
(3,275)
n.a. - Integration of new companies (2)
6,282
5,781
8.7%
12,182
9,952
22.4%
- M&A advisory and due diligence (3)
635
594
6.9%
11,674
1,806
546.4%
- Expansion projects (4)
378
677
-44.2%
529
1,279
-58.6%
- Restructuring expenses (5)
556
723
-23.1%
1,951
4,373
-55.4%
- Mandatory Discounts in Tuition Fees (6)
(370)
(22,077)
-98.3%
(948)
(20,685)
n.a.
Adjusted EBITDA
268,174
220,186
21.8%
598,373
490,987
21.87%
Adjusted EBITDA Margin
37.7%
38.2%
-50 bps
42.1%
42.9%
-80 bps (1) Represents the interest received on late payments of
monthly tuition fees. (2) Consists of expenses related to the
integration of newly acquired companies. (3) Consists of expenses
related to professional and consultant fees in connection with due
diligence services for our M&A transactions. (4) Consists of
expenses related to professional and consultant fees in connection
with the opening of new campuses. (5) Consists of expenses related
to the employee redundancies in connection with the organizational
restructuring of our acquired companies. (6) Consists of mandatory
discounts in tuition fees granted by state decrees,
individual/collective legal proceedings and public civil
proceedings due to COVID 19 on site classes restriction and
excludes any recovery of these discounts that were invoiced based
on the Supreme Court decision.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230828069017/en/
Investor Contact: ir@afya.com.br IR
Website: ir.afya.com.br
Media Contact: Cíntia Moraes Marin
cintia.marin@afya.com.br
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