Afya Limited Announces First-Quarter 2024 Financial Results

NOVA LIMA, Brazil , May 09 /Businesswire/ - Afya Limited (Nasdaq: AFYA; B3: A2FY34) (“Afya” or the “Company”), the leading medical education group and medical practice solutions provider in Brazil, reported today financial and operating results for the three-month period ended March 31, 2024 (first quarter 2024). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

First Quarter 2024 Highlights

1Q24 Net Revenue increased 13.3% YoY to R$804.2 million.
1Q24 Adjusted EBITDA increased 20.5% YoY reaching R$397.9 million, with an Adjusted EBITDA Margin of 49.5%. Adjusted EBITDA Margin increased 300 bps YoY.
1Q24 Net Income increased 76.9% YoY, reaching R$208.3 million, and Adjusted Net Income increased 50.8% YoY, reaching R$251.0 million. With an adjusted EPS growth of 54.4% in the same period.
Operating Cash Conversion ratio of 110.1%, with a solid cash position of R$ 611.1 million.
~334 thousand physicians and medical students in Afya’s ecosystem.

Table 1: Financial Highlights ¹
	For the three months period ended March 31,
(in thousand of R$)	2024	2023	% Chg
(a) Net Revenue	804,239	709,961	13.3%
(b) Adjusted EBITDA ²	397,853	330,211	20.5%
(c) = (b)/(a) Adjusted EBITDA Margin	49.5%	46.5%	300 bps
Net income	208,299	117,772	76.9%
Adjusted Net income	250,966	166,377	50.8%
(1) No acquisitions were made during the period under review, therefore not affecting the comparable period.
(2) See more information on "Non-GAAP Financial Measures" (Item 08).

Message from Management

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

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

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

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

1. Key Events in the Quarter:

On January 24, 2024 the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the increase of 40 medical seats of Faculdades Integradas Padrão (FIP Guanambi), in the city of Guanambi, located in the state of Bahia, which will result in an additional payment of R$49.6 million. With the authorization, Afya reaches 100 medical seats on this campus, and 3,203 total approved seats.
To enhance synergies between Afya’s Content and Technology for Medical Education and Specialization Courses for Physicians, Afya has restructured its structure so that all products and services related to medical education, excluding medical undergraduate courses, are now managed in the same segment. Effective from the first quarter of 2024, entities previously accounted for as Content and Technology for Medical Education (Medcel, Além da Medicina, CardioPapers, and Medical Harbour) within Digital Services are now accounted for in the Continuing Education Segment. Simultaneously, the segment formerly known as Digital Services has been renamed Medical Practice Solutions. Due to changes in operating segments, the segment information as of December 31, 2023 and for the three-month period ended March 31, 2023 have been retroactively adjusted for comparison purposes.

2. Subsequent Event

On, May 2nd 2024, Afya announced that it has entered in a share purchase agreement for the acquisition of 100% of the total share capital of Unidom Participações S.A. (“Unidom”) which encompasses Unidompedro and Faculdade Dom Luiz, both located in the State of Bahia with operations in the cities of Salvador, Luis Eduardo Magalhães, Barreiras and Ribeira do Pombal. The acquisition will add 300 operational medical school seats to Afya in Salvador, one of Brazil's largest cities. The aggregate purchase price (enterprise value) is R$ 660.0 million, the Net Debt will be deducted at the closing date and it will be paid as follows: R$ 347.8 million will be paid in cash at the closing date and R$ 312.2 million will be paid in up to 10 annual installments of R$31.2 million, adjusted by the CDI (Interbank Certificate of Deposit) rate. Afya expects an EV/EBITDA 4.2x at maturity and post synergies (2027). With the acquisition, Afya will achieve 3,503 total approved seats.

3. 2024 Guidance

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

		Guidance for 2024
Net Revenue¹		R$ 3,150 mn ≤ ∆ ≤ R$ 3,250 mn
Adjusted EBITDA		R$ 1,300 mn ≤ ∆ ≤ R$ 1,400 mn
CAPEX²		R$ 220 mn ≤ ∆ ≤ R$ 260 mn
(1) Excludes any acquisition that may be concluded after the issuance of the guidance, notably, the Unidompedro acquisition was not included in the guidance provided
(2) The 2024 Capex guidance does not encompass the earn-out payment in the amount of R$49.6 million related to the 40-seat increase at Faculdades Integradas Padrão (FIPGuanambi).

4. 1Q24 Overview

Segment Information

The Company has three reportable segments as follows:

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

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

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

Key Revenue Drivers – Undergraduate Programs

Table 2: Key Revenue Drivers	Three months period ended March 31,
	2024	2023	% Chg
Undergrad Programs
MEDICAL SCHOOL
Approved Seats	3,203	3,163	1.3%
Operating Seats ¹	3,153	3,113	1.3%
Total Students (end of period)	22,609	20,822	8.6%
Average Total Students	22,609	20,822	8.6%
Net Revenue (Total - R$ '000)	610,721	528,830	15.5%
Medical School Net Avg. Ticket (R$/month)	9,004	8,466	6.4%
UNDERGRADUATE HEALTH SCIENCE
Total Students (end of period)	24,881	21,660	14.9%
Average Total Students	24,881	21,660	14.9%
Net Revenue (Total - R$ '000)	53,470	52,013	2.8%
OTHER EX- HEALTH UNDERGRADUATE
Total Students (end of period)	28,563	25,043	14.1%
Average Total Students	28,563	25,043	14.1%
Net Revenue (Total - R$ '000)	40,328	40,133	0.5%
Total Net Revenue
Net Revenue (Total - R$ '000)	704,519	620,976	13.5%
(1) The difference between approved and operating seats is 'Cametá'. A campus for which we already have the license but haven't started operations.

Key Revenue Drivers – Continuing Education

Table 3: Key Revenue Drivers	Three months period ended March 31,
	2024	2023	% Chg
Continuing Education ¹
Total Studends (end of period)
Residency Journey - Business to Physicians B2P²	14,693	9,061	62.2%
Graduate Journey - Business to Physicians B2P	13,275	11,857	12.0%
Other Courses - B2P and Business to Business Offerings	21,074	14,598	44.4%
Total Students (end of period)	49,042	35,516	38.1%
Net Revenue (R$ '000)
Business to Physicians - B2P	60,538	53,192	13.8%
Business to Business - B2B	4,877	5,019	-2.8%
Total Net Revenue	65,415	58,212	12.4%
(1) The figure above does not contemplate intercompany transactions
(2) 'Content & Technology for Medical Education' which had been reported in 'Digital Services' table, has been reclassified to 'Continuing Education'

Key Revenue – Medical Practice Solutions

Table 4: Key Revenue Drivers	Three months period ended March 31,
	2024	2023	% Chg
Medical Practice Solutions ¹
Active Payers (end of period)
Clinical Decision	159,183	143,832	10.7%
Clinical Management	31,806	26,621	19.5%
Total Active Payers (end of period)	190,989	170,453	12.0%
Monthly Active Users (MaU)
Total Monthly Active Users (MaU) - Digital Services²	262,717	263,344	-0.2%
Net Revenue (R$ '000)
Business to Physicians - B2P	31,726	28,371	11.8%
Business to Business - B2B	4,847	5,168	-6.2%
Total Net Revenue	36,573	33,540	9.0%
(1) The figure above does not contemplate intercompany transactions
(2) 'Content & Technology for Medical Education' is now being reported in Continuing Education table

Key Operational Drivers – Physicians and Medical Students Ecosystem

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

Table 5: Key Revenue Drivers	Three months period ended March 31,
	2024	2023	% Chg
Physicians and Medical Students positively impacted by Afya ¹
Undergrad (Total Medical School Students - End of Period)	22,609	20,822	8.6%
Continuing Education (Total Students - End of Period)	49,042	35,516	38.1%
Medical Practice Solutions (Monthly Active Users)	262,717	263,344	-0.2%
Ecosystem Outreach	334,368	319,682	4.6%
(1) Ecosystem outreach does not contemplate intercompany figures. Note that there may be overlap in student numbers within the data.

Seasonality

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

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

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

Revenue

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

Table 6: Revenue & Revenue Mix¹
(in thousands of R$)	For the three months period ended March 31,
	2024	2023	% Chg
Net Revenue Mix
Undergrad	704,519	620,976	13.5%
Continuing Education	65,415	58,212	12.4%
Medical Practice Solutions	36,573	33,540	9.0%
Inter-segment transactions	-2,268	-2,767	-18.0%
Total Reported Net Revenue	804,239	709,961	13.3%
(1) No acquisitions were made during the period under review, therefore not affecting the comparable period.

Adjusted EBITDA

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

Table 7: Reconciliation between Adjusted EBITDA and Net Income

(in thousands of R$)	For the three months period ended March 31,
	2024	2023	% Chg
Net income	208,299	117,772	76.9%
Net financ