EX-99.1 2 dp116947_ex9901.htm EXHIBIT 99.1

Exhibit 99.1

 

Afya Limited Announces Third Quarter and Nine-Month 2019 Financial Results

 

Strong Third Quarter Results Positions the Company to Deliver Second Half 2019 Guidance

 

Nova Lima, Brazil, December 2, 2019 – Afya Limited (Nasdaq: AFYA) (“Afya” or the “Company”), the leading medical education group in Brazil, today reported unaudited financial and operating results for the three- and nine-month periods ended September 30, 2019. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards.

 

3Q19 Key Financial and Operating Highlights

 

·Net Revenue grew by 123.7% year over year (YoY) reaching R$206.7 million, reflecting Afya´s organic growth and acquisitions consolidation.

 

·Medical schools’ tuition fees, which represented 69% of total combined tuition fees, increased 148% YoY, due to the maturation and acquisition of medical school seats and average medical tuition fees raising above inflation indexes.

 

·Adjusted EBITDA of R$80.9 million, up 147.3% YoY, with Adjusted EBITDA margin in the quarter expanding 380 basis points (bps) increased to 39.2% from 35.4% in 3Q18.

 

·Adjusted Net Income of R$72.4 million, up 155.0% YoY.

 

Financial Highlights1              
(in thousand of R$) Third Quarter   Nine Months
  2019 2018 % Chg   2019 2018 % Chg
(a) Net Revenue 206,713 92,426 123.7%   529,784 227,695 132.7%
(b) Pro forma Net Revenue ² 206,713 - -   608,984 - -
(c) Adjusted EBITDA 80,929 32,728 147.3%   203,104 81,361 149.6%
(d) = (c )/(a)  Adjusted EBITDA Margin 39.2% 35.4% + 380 b.p   38.3% 35.7% + 260 b.p
(e) Pro forma Adjusted EBITDA²  80,929 - -   231,290 - -
(f) = (e)/(b)   Pro forma Adjusted EBITDA² Margin 39.2% - -   38.0% - -
(g) Adjusted Net Income 72,403 28,391 155.0%   163,938 71,299 129.9%

1. See more information on "Non-GAAP Financial Measures" (Item 7).

2. Includes the pro-forma results of Medcel, IPEMED and FASA, as if the acquisition had been consummated on January 1, 2019. See more information on "Unaudited Pro Forma Condensed Consolidated Financial Information” (Item 8).

  

CEO Statement

 

“We are pleased to announce our third quarter results, which leaves us in a strong position to deliver the 2H19 guidance we provided last quarter.

 

We have been making significant progress with our strategic initiatives, including the integration of recent acquisitions to derive synergies and become more cost efficient. We remain focused on our M&A strategy and in our goal to acquire 1,000 medical school seats over the next three years. Considering the 232 seats recently added, we are at ~25% of our goal and we continue to explore attractive acquisition targets that would fit in well with our strategy. Moreover, with the acquisitions of IPEC in Marabá and UniRedentor in Itaperuna, Afya is entering into the states of Pará and Rio de Janeiro. To the extent the UniRedentor transaction is consummated, we will acquire a portfolio of complementary graduate programs focused on medical and other healthcare related specializations.

 

We are also excited about our Preparatory Courses & CME and Specialization Programs, whose core products grew 12% versus 1H19. Following our tech development roadmap, we are happy to have just launched our new academic personalized tutoring system to increase student engagement and performance.

 

To conclude, we are the leading medical education company in Brazil and we expect to continue to aim to deliver attractive growth, profitability, cash generation and quality, providing the highest standards

 

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in medical education, with our methodology and technological platform. We believe our business model has been delivered successfully and we expect to enhance our market position and financial performance as a result. We will remain focused on driving the brand forward and aiming to provide value to all of our stakeholders”.

 

1.Second Half 2019 Guidance

 

Afya reaffirms its guidance for the second half of 2019 as provided on September 2, 2019:

 

·2H19 Pro Forma Net Revenues: between R$415 million and R$430 million.

 

·2H19 Pro Forma Adjusted EBITDA Margin: ranging between 38% and 40%.

 

Consequently, Pro Forma Net Revenues for the full year of 2019 is expected to range between R$817 million and R$832 million. Moreover, Pro Forma Adjusted EBITDA for the full year of 2019 is expected to range between R$308 million and R$322 million.

 

Guidance Assumptions:

 

·Maturation of several medical schools is expected to result in a higher enrollment base in 2H vs 1H of each year.

 

·We expect to improve efficiencies and extract synergies from companies acquired in 2Q19 (FASA and IPEMED), which in turn us expected to improve the revenues and margins of FASA and IPEMED in 2H19.

 

·Excludes acquisition of IPEC and any other acquisition that we may conclude in 2H2019.

 

·Eliminates the impact of the adoption of IFRS16 in 2019.

 

Afya already achieved part of the guidance as it recorded Net Revenue of R$206.0 million and Adjusted EBITDA of R$80.6 million in the three-months ended September 30, 2019, if IPEC’s results are excluded.

 

2.Overview of 3Q19 Results

 

Operational Review

 

The Company operates two distinct business units. The first (Business Unit 1 or BU1), is comprised of Undergraduate – 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. The Company also offers Residency Preparatory and Specialization Programs (Business Unit 2 or BU2). Revenue is comprised of fees from these programs.

 

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  Third Quarter
  2019 2018 % Chg
Business Unit 1: Educational Services Segment       
MEDICAL SCHOOL      
Approved Seats                    1,572                   636 147.2%
Operating Seats                     1,222                   636 92.1%
Total Students                    6,388               3,008 112.4%
Tuition Fees (R$MM)              155,341            62,690 147.8%
Medical School Average Ticket (R$/month)                    8,106               6,947 16.7%
UNDERGRADUATE HEALTH SCIENCE      
Total Students                    6,494               2,250 188.6%
Tuition Fees (R$MM)                 26,257            11,928 120.1%
OTHER UNDERGRADUATE       
Total Students                 10,878               3,774 188.2%
Tuition Fees (R$MM)                 44,170            13,185 235.0%
Business Unit 2: Prep Courses & CME and Medical Specialization    
Active Paying Students      
      Prep Courses & CME                    9,854  -  -
     Medical Specialization                     1,803  -  -
Revenue from courses (R$MM)                 39,598  -  -

 

Revenue

 

Revenue & Revenue Mix               
(in thousand of R$) Third Quarter   Nine Months
  2019 2018 % Chg   2019 2018 % Chg
Net Revenue Mix              
    Business Unit-1 176,113 92,426 90.5%   477,631 227,695 109.8%
    Business Unit-2 32,662 0 -   56,033 0 -
    Inter-segment transactions -2,062 0 -   -3,880 0 -
Total Reported Net Revenue 206,713 92,426 123.7%   529,784 227,695 132.7%
Total Pro Forma1 Net Revenue 206,713 - -   608,984 - -
               

 

1.Includes the pro-forma results of Medcel, IPEMED and FASA, as if the acquisition had been consummated on January 1, 2019. See more information on "Unaudited Pro Forma Condensed Consolidated Financial Information” (Item 8).

 

Total Net Revenue for three-months ended September 30, 2019 was R$206.7 million, an increase of 123.7% over the same period of last year. This increase was primarily due to: (i) organic revenue growth, mainly due to the increase of medical school enrollments, (ii) consolidation of the operating results of NOVAFAPI, FADEP and FASA, which were acquired after September 30, 2018 and added 553 medical school seats to our total medical school seats base, and (iii) consolidation of the results of operations of IPEMED and Medcel (BU2).

 

For the nine-months ended September 30, 2019, Net Revenue increased 132.7% to R$529.8 million, compared to R$227.7 million for the nine-months ended September 30, 2018, as a result of the abovementioned factors. Pro-forma Net Revenue was R$609.0 million for the nine-months ended September 30, 2019 (see Pro-forma Net Revenue reconciliation – item 10).

 

Revenue Recognition and Seasonality

 

Two seasonality factors affect Afya’s business. The first is associated with the concentration of prep. course revenues in the first and fourth quarters of each year, when new content (books and e-books) is delivered and revenues are recognized. The second is associated with the maturation of several medical schools, which leads to a higher enrollment base in the second half of each year. As a result, in a typical year, the first and fourth quarters are normally the strongest, followed by the third and second quarters, respectively. Finally, the second half of the year is normally stronger than the first half.

 

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Adjusted EBITDA and Proforma Adjusted EBITDA

 

Adjusted EBITDA in three-months ended September 30, 2019 increased 147.3% to R$80.9 million, from R$32.7 million in the three-months ended September 30, 2019, with a margin of 39.2% in the three-months ended September 30, 2019, compared to 35.4% in the three-months ended September 30, 2018, respectively, reflecting operating leverage and synergies obtained from recent acquisitions.

 

For the nine-months ended September 30, 2019, Adjusted EBITDA increased 149.6% to R$203.0 million, compared to R$81.4 million for the nine-months ended September 30, 2018. The Adjusted EBITDA margin was 38.3% and 35.7% for the nine-months ended September 30, 2019 and 2018, respectively. Pro-forma Adjusted EBITDA was R$231.3 million for the nine-months ended September 30, 2019 (see the Adjusted EBITDA and Pro-forma Adjusted EBITDA reconciliation – items 12 and 13)

 

Adjusted Net Income

 

During the three-months ended September 30, 2019, the Company reported Adjusted Net Income of R$72.4 million, compared to R$28.4 million in the three-months ended September 30, 2018, an increase of 155.0%, mainly due to: (i) the synergies captured and margins expansion; (ii) the acquisitions consolidation during this period and (iii) the higher financial income and FX gain associated with the IPO proceeds.

 

For the nine-months period ended September 30, 2019, Adjusted Net Income was R$163.9 million, an increase of 129.9% from the nine-months ended September 30, 2018 (see the Adjusted Net Income reconciliation – item 11).

 

Balance Sheet and Cash Flow

 

Cash and cash equivalents at September 30, 2019 was $993.5 million, compared to $62.3 million at year end 2018, and primarily reflects the proceeds from the IPO.

 

For the nine-month period ended September 30, 2019, Afya reported an adjusted cash generation from operations of R$202.8 million compared to $63.9 million in 9M18.

 

Operating Cash Conversion Ratio for the nine-month period ended September 30, 2019 increased to 108.4% from 84.0% for the nine-month period ended September 30, 2018, mainly due to a higher pre-payment of students in the third quarter and Medcel seasonality (see more on page 2). Due to the seasonality effects, we recommend to analyze the cash conversion metric over longer periods rather than on a quarterly basis.

 

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(in thousand of R$)     Third Quarter   Nine Months
      2019 2018 % Chg   2019 2018 % Chg
(a) Cash flow from operations     121,837 30,450 300.1%   230,647 63,861 261.2%
(b) Payment of lease liabilities1     -10,495 0     -27,811 0  
(c) = (a) + (b) Adjusted cash flow from operations     111,342 30,450 265.7%   202,836 63,861 217.6%
Operations                  
(d) Adjusted EBITDA     80,929 26,912 200.7%   203,104 81,361 149.6%
(e) Non-recurring expenses:     7,728 3,809 102.9%   16,058 5,305 202.7%
 - Integration of new companies 2     893 133 573.0%   4,500 635 608.6%
 - M&A advisory and due diligence  3     289 7 4033.4%   1,388 157 784.1%
 - Expansion projects 4     468 5 10003.2%   1,411 351 302.3%
 - Restructuring Expenses 5     6,078 3,664 65.9%   8,759 4,162 110.5%
(f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses      73,201 23,103 216.8%   187,046 76,056 145.9%
(g) = (c) / (f) Operating cash conversion ratio     152.1% 131.8% 20.3%   108.4% 84.0% 24.5%

(1) Consists of payment of lease liabilities recorded under IFRS 16 as from January 1, 2019.

(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 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 conneciotn with the organizational restructuring of acquied companies.  

 

3.Subsequent Events

 

Afya Acquires UniRedentor

 

On November 4, 2019 Afya announced the acquisition of UniRedentor, a non-for-profit post-secondary education institution the State of Rio de Janeiro, for a total consideration of R$225M, including R$125M in cash and R$20M payable in five equal installments through June 2024. In 2018, UniRedentor’s gross revenue totaled R$108M. The transaction is subject to antitrust regulatory approval and other precedent conditions. If successfully concluded, this acquisition will contribute 112 medical school seats to Afya, with a potential upside of 44 additional seats already requested to MEC, and will also strengthen Afya’s presence in medical graduation courses.

 

4.Conference Call and Webcast Information

 

When: December 2, 3019 at 11:00 a.m. ET.

 

     
Who:  

Mr. Virgilio Gibbon, Chief Executive Officer

Mr. Luciano Campos, Chief Financial Officer
Ms. Renata Costa Couto, Head of Investor Relations

 

Dial-in: +1-877- 591-8895 (U.S. Toll-Free); +1-339-998-3013 (International). Conference ID: 7059307

 

Webcast: ir.afya.com.br

 

Replay: Available between December 2, 2019 until December 6, 3019, by dialing +1-855-859-3059 (U.S. domestic) or +1-404-537-3409 (International), conference ID: 7059307.

 

5.About Afya Limited (Nasdaq: AFYA)

 

Afya is the leading medical education group in Brazil based on number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners from the moment they join us as medical students through their medical residency preparation, graduation program, and continuing medical education activities. For more information, please visit www.afya.com.br

 

6.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

 

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other than statements of historical fact could be deemed forward looking, including risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain customers; our ability to increase the price of our solutions; our ability to expand our sales and marketing capabilities; 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.

 

We undertake 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. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect our financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled “Risk Factors” in our 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/.

 

7.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, we use Proforma Revenue, Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio information for the convenience of investors, which are non-GAAP financial measures. A non-GAAP financial measure is generally defined as one that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure.

 

We calculate our 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, minus payment of lease liabilities, plus share-based compensation plus/minus non-recurring expenses. We calculate our Pro Forma Adjusted EBITDA as pro forma 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, minus payment of lease liabilities plus share-based compensation plus/minus non-recurring expenses. We calculate Pro Forma Adjusted Net Income as (i) for the nine months ended September 30, 3019 and the year ended December 30, 3018, net income plus amortization of customer relationships and trademark plus/minus tax effect, and (ii) for the nine months ended September 30, 3019, net income plus amortization of customer relationships and trademark, plus depreciation of right-of-use of assets plus interest expense of lease liabilities, minus payment of lease liabilities plus/minus tax effect, plus shared based compensation. We calculate Operating Cash Conversion Ratio as the cash flows from operations, adjusted with payment of lease liabilities divided by Adjusted EBITDA plus/minus non-recurring expenses.

 

We present Adjusted EBITDA, Pro Forma Adjusted EBITDA and Pro Forma Adjusted Net Income because we believe these measures provide investors with a supplemental measure of the financial performance of our core operations that facilitates period-to-period comparisons on a consistent basis. We also present Operating Cash Conversion Ratio because we believe this measure provides investors with a measure of how efficiently we convert our EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, our calculations of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

 

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8.Unaudited Pro Forma Condensed Consolidated Financial Information

 

The unaudited interim pro forma condensed consolidated statement of income for the nine months ended September 30, 3019 is based on the historical unaudited interim consolidated financial statements of Afya, and gives effect of the acquisition of Medcel, IPEMED and FASA by Afya Brazil as if it had been consummated on January 1, 2019. Pro forma adjustments were made to reflect the acquisition of Medcel, IPEMED and FASA by Afya Brazil.

 

Investor Relations Contact

 

Renata Couto, Head of Investor Relations
Phone: +55 31 3515.7564 | +55 31 98463.3341
E-mail:  renata.couto@afya.com.br

 

9.Financial Tables

 

7

 

Unaudited interim condensed consolidated statements of income and comprehensive income

For the three- and nine-months periods ended September 30, 2019 and 2018

(In thousands of Brazilian reais, except earnings per share)

 

   Three-month period ended  Nine-month period ended
   September 30, 2019  September 30, 2018  September 30, 2019  September 30, 2018
   (unaudited)  (unaudited)  (unaudited)  (unaudited)
             
Net revenue   206,713    92,426    529,784    227,695 
Cost of services   (87,350)   (48,187)   (223,997)   (115,062)
Gross profit   119,363    44,239    305,787    112,633 
                     
General and administrative expenses   (71,260)   (19,421)   (162,078)   (48,267)
Other income, net   520    1,282    890    2,538 
                     
Operating income   48,623    26,100    144,599    66,904 
                     
Finance income   29,652    3,173    37,841    6,797 
Finance expenses   (24,586)   (850)   (54,915)   (2,167)
Finance result   5,066    2,323    (17,074)   4,630 
                     
Share of income of associate   1,043    -      1,963    -   
                     
Income before income taxes   54,732    28,423    129,488    71,534 
                     
Income taxes   (5,748)   (1,477)   (9,702)   (3,138)
                     
Net income   48,984    26,946    119,786    68,396 
                     
Other comprehensive income   -      -      -      -   
Total comprehensive income   48,984    26,946    119,786    68,396 
                     
Income attributable to                    
Equity holders of the parent   46,267    24,343    104,119    62,320 
Non-controlling interests   2,717    2,603    15,667    6,076 
    48,984    26,946    119,786    68,396 
Basic earnings per share                    
Per common share   0.54    0.33    1.21    0.85 
Diluted earnings per share                    
Per common share   0.53    0.33    1.20    0.85 

 

 

 

 

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Unaudited interim condensed consolidated statements of financial position

As of September 30, 2019 and December 30, 2018

(In thousands of Brazilian reais)

 

   September 30, 2019  December 31, 2018
Assets  (unaudited)   
Current assets      
Cash and cash equivalents   993,486    62,260 
Trade receivables   117,516    58,445 
Inventories   2,919    1,115 
Recoverable taxes   8,139    2,265 
Derivatives   129    556 
Restricted cash   12,540    -   
Other assets   10,178    8,859 
Total current assets   1,144,907    133,500 
           
Non-current assets          
Restricted cash   9,319    18,810 
Trade receivables   8,618    5,235 
Related parties   1,759    1,598 
Derivatives   69    663 
Other assets   14,735    10,380 
Investment in associate   50,811    -   
Property and equipment   127,503    65,763 
Right-of-use assets   273,524    -   
Intangible assets   1,325,323    682,469 
Total non-current assets   1,811,661    784,918 
           
Total assets   2,956,568    918,418 
           
Liabilities          
Current liabilities          
Trade payables   17,584    8,104 
Loans and financing   55,967    26,800 
Lease liabilities   35,706    -   
Accounts payable to selling shareholders   158,260    88,868 
Advances from customers   36,737    13,737 
Labor and social obligations   63,638    31,973 
Taxes payable   19,296    6,468 
Income taxes payable   1,225    282 
Dividends payable   1,331    4,107 
Other liabilities   1,973    1,993 
Total current liabilities   391,717    182,332 
           
Non-current liabilities          
Loans and financing   26,225    51,029 
Lease liabilities   246,685    -   
Accounts payable to selling shareholders   204,263    88,862 
Taxes payable   24,086    150 
Provision for legal proceedings   6,533    3,465 
Other liabilities   2,042    2,226 
Total non-current liabilities   509,834    145,732 
Total liabilities   901,551    328,064 
           
Equity          
Share capital   17    315,000 
Additional paid-in capital   1,931,047    125,014 
Share-based compensation reserve   9,864    2,161 
Earnings reserves   -      59,807 
Retained earnings   66,119    -   
Equity attributable to equity holders of the parent   2,007,047    501,982 
Non-controlling interests   47,970    88,372 
Total equity   2,055,017    590,354 
           
Total liabilities and equity   2,956,568    918,418 

 

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Unaudited interim condensed consolidated statements of cash flows

For the nine months periods ended September 30, 2019 and 2018

(In thousands of Brazilian reais)

 

  September 30, 2019  September 30, 2018
  (unaudited)  (unaudited)
Operating activities      
Income before income taxes   129,488    71,534 
Adjustments to reconcile income before income taxes          
Depreciation and amortization   50,703    4,177 
Disposals of property and equipment   111    -   
Provision of allowance for doubtful accounts   13,278    5,947 
Share-based compensation expense   9,864    1,536 
Net foreign exchange differences   (13,608)   -   
Loss on derivative instruments   1,181    -   
Accrued interest   14,642    158 
Accrued lease interest   23,337    -   
Share of income of associate   (1,963)   -   
Provision for legal proceedings   (624)   (1,998)
Changes in assets and liabilities          
Trade receivables   (24,688)   (15,879)
Inventories   777    (365)
Recoverable taxes   (5,594)   (2,470)
Other assets   (2,713)   (5,073)
Trade payables   2,985    (2,660)
Taxes payables   5,588    2,440 
Advances from customers   18,521    931 
Labor and social obligations   22,992    13,886 
Other liabilities   (9,597)   (4,427)
Income taxes paid   (4,033)   (3,876)
Net cash flows from operating activities   230,647    63,861 
           
Investing activities          
Acquisition of property and equipment   (41,684)   (12,323)
Acquisition of intangibles assets   (59,644)   (289)
Acquisition of subsidiaries, net of cash acquired   (148,880)   1,289 
Related parties   (161)   (979)
Restricted cash   2,512    -   
Payments of accounts payable to selling shareholders   (27,962)   (16,409)
Net cash flows used in investing activities   (275,819)   (28,711)
           
Financing activities          
Payments of loans and financing   (43,094)   (3,981)
Payments of lease liabilities   (27,811)   -   
Dividends paid   (47,964)   -   
Proceeds from initial public offering   992,778    -   
Share issuance costs   (79,670)   -   
Capital increase   167,628    56,304 
Net cash flows from financing activities   961,867    52,323 
           
Net increase in cash and cash equivalents   916,695    87,473 
Net foreign exchange difference   14,531    -   
Cash and cash equivalents at the beginning of the period   62,260    25,490 
Cash and cash equivalents at the end of the period   993,486    112,963 

 

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10.Reconciliation between Net Revenue and Pro-forma Net Revenue

 

       
       
  Nine months    Nine months 
  2019 Medcel + FASA + IPEMED NR Pre Acq. 2019
  Afya Brazil Historical (1) Afya Brazil Pro Forma
Net Revenue                     529,784                        79,200                                 608,984

 

11.Reconciliation between Net Income and Adjusted Net Income

 

(in thousand of R$)              
  Third Quarter   Nine Months
  2019 2018 % Chg   2019 2018 % Chg
Net income 48,984 26,946 81.8%   119,786 68,396 75.1%
Amortization of customer relationships and trademark (1) 12,058 820 0.0%   25,640 1,367 0.0%
Depreciation of right-of-use of assets (2) 5,104 0 0.0%   13,122 0 0.0%
Interest expense of lease liabilities (3) 8,797 0 0.0%   23,337 0 0.0%
Payment of lease liabilities (4) (10,495) 0 0.0%   (27,811) 0 0.0%
Share-based compensation  7,955 625 0.0%   9,864 1,536 0.0%
Adjusted Net Income 72,403 28,391 155.0%   163,938 71,299 129.9%
               

 

(1) Consists of amortization of customer relationships and trademark recorded under business combinations.

(2) Consists of depreciation of right-of-use of assets recorded under IFRS 16 as from January 1, 2019.

(3) Consists of interest expenses of lease liabilities recorded under IFRS 16 as from January 1, 2019.

(4) Consists of payment of lease liabilities recorded under IFRS 16 as from January 1, 2019.

 

 

12.Reconciliation between Net Income and Adjusted EBITDA

 

(in thousand of R$)              
  Third Quarter   Nine Months
  2019 2018 % Chg   2019 2018 % Chg
Net income  48,984 26,946 81.8%   119,786 68,396 75.1%
Net financial result  (5,066) (2,323) 118.1%   17,074 -4,630 -468.8%
Income taxes expense  5,748 1,477 289.2%   9,702 3,138 209.2%
Depreciation and amortization  22,262 772 2783.7%   50,703 4,177 1113.9%
Interest received (1) 3,813 1,421 168.3%   7,728 3,439 124.7%
Payment of lease liabilities (2) (10,495) 0 -   (27,811) 0 -
Share-based compensation  7,955 625 1172.8%   9,864 1,536 542.2%
Non-recurring expenses:              
 - Integration of new companies (3) 893 133 571.4%   4,500 635 608.6%
 - M&A advisory and due diligence (4) 289 7 4028.6%   1,388 157 784.1%
 - Expansion projects (5) 468 5 9736.2%   1,411 351 302.3%
 - Restructuring expenses (6) 6,078 3,665 65.8%   8,759 4,162 110.5%
Adjusted EBITDA 80,929 32,728 147.3%   203,104 81,361 149.6%
Adjusted EBITDA Margin 39.2% 35.4% + 380  b.p   38.3% 35.7% + 260 p.p
Pro Forma Adjusted EBITDA (7) 80,929 - -   231,290 - -
Pro Forma Adjusted EBITDA Margin (7) 39.2% - -   38.0% - -
               

 

(1) Represents the interest received on late payments of monthly tuition fees.

(2) Consists of payment of lease liabilities recorded under IFRS 16 as from January 1, 2019.

(3) Consists of expenses related to the integration of newly acquired companies.

(4) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.

(5) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.

(6) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.

(7) See Pro Forma Adjusted EBITDA Reconciliation to Proforma Net Income.              

 

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13.Reconciliation between Net Income and Pro Forma Adjusted EBITDA

 

(in thousand of R$) 2019 2019     2019
  Afya Brazil Historical (1) Medcel (2) Pro Forma Adjustments FASA + IPEMED EBITDA Pre Acq. Afya Brazil Pro Forma
Net income  119,786 20,044 -5,315 - 134,515
Net financial result  17,074 65 0 - 17,139
Income taxes expense  9,702 1,409 0 - 11,111
Depreciation and amortization  50,703 1,726 5,315 - 57,744
Interest received (3) 7,728 0 0 - 7,728
Payment of lease liabilities (4) -27,811 -228 0 - -28,039
Share-based compensation  9,864 70 0 - 9,934
Non-recurring expenses: 0 0 0 - 0
Integration of new companies (5) 4,500 0 0 - 4,500
M&A advisory and due diligence (6) 1,388 0 0 - 1,388
Expansion projects (7) 1,411 0 0 - 1,411
Restructuring expenses (8) 8,759 0 0 - 8,759
Adjusted EBITDA 203,104 23,086 0 5,100  
Pro Forma Adjusted EBITDA         231,290
           

 

(1) Represents the historical consolidated statement of income of Afya Brazil for the six months ended June 30, 2019.

(2) Represents the historical consolidated statement of income of Medcel for the period from January 1, 2019 to March 28, 2019.

(3) Represents the interest received on late payments of monthly tuition fees.

(4) Consists of payment of lease liabilities recorded under IFRS 16 as from January 1, 2019.

(5) Consists of expenses related to the integration of newly acquired companies.

(6) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.

(7) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.

(8) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.        

 

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