F-1/A 1 a2239191zf-1a.htm F-1/A

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on July 9, 2019.

Registration No. 333-232309


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 1
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Afya Limited
(Exact Name of Registrant as Specified in its Charter)



The Cayman Islands
(State or other jurisdiction of
incorporation or organization)
  8200
(Primary Standard Industrial
Classification Code Number)
  N/A
(I.R.S. Employer
Identification Number)

Alameda Oscar Niemeyer, No. 119, Sala 504
Vila da Serra, Nova Lima, Minas Gerais
Brazil
+55 (31) 3515 7550
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)



Cogency Global Inc.
10 East 40th Street, 10th Floor
New York, NY 10016
(212) 947-7200
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Manuel Garciadiaz
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
(212) 450-4000

 

Francesca Odell
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
(212) 225-2000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

                   If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

                   If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

                   If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

                   If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

                   Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

                   Emerging growth company ý

                   If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o

                   † The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of
Securities to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Aggregate Offering
Price per Class A
common share

  Proposed Maximum
Aggregate Offering
Price(2)

  Amount of
Registration
Fee(3)

 

Class A common shares, par value US$0.00005 per share(1)

  15,805,841   US$18.00   US$284,505,138   US$34,482.02

 

(1)
Includes Class A common shares to be sold upon the exercise of the underwriters' option to purchase additional shares. See "Underwriting."

(2)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)
Calculated pursuant to Rule 457(a) under the Securities Act of 1933, as amended, based on an estimate of the proposed maximum aggregate offering price. A registration fee of US$12,120 was previously paid in connection with the Registration Statement.

                   The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We and the selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 9, 2019

PRELIMINARY PROSPECTUS

13,744,210 Class A Common Shares

LOGO

Afya Limited

(incorporated in the Cayman Islands)

                 This is an initial public offering of the Class A common shares, US$0.00005 par value per share of Afya Limited, or Afya. Afya is offering 11,827,256 of the Class A common shares to be sold in this offering. The selling shareholders identified in this prospectus are offering an additional 1,916,954 Class A common shares. We will not receive any proceeds from the sale of Class A common shares by the selling shareholders.

                 Prior to this offering, there has been no public market for our Class A common shares. It is currently estimated that the initial public offering price per Class A common share will be between US$16.00 and US$18.00. We have applied to list our Class A common shares on the Nasdaq Global Market, or Nasdaq, under the symbol "AFYA."

                 Following this offering, our existing shareholders, including Nicolau Carvalho Esteves and Rosângela de Oliveira Tavares Esteves, or the Esteves Family, and Bozano Educacional II Fundo de Investimento em Participações Multiestratégia, or Crescera, will beneficially own 66.1% of our outstanding share capital, assuming no exercise of the underwriters' overallotment option referred to below. The shares held by the Esteves Family and Crescera are Class B common shares, which carry rights that are identical to the Class A common shares being sold in this offering, except that (i) holders of Class B common shares are entitled to 10 votes per share, whereas holders of our Class A common shares are entitled to one vote per share, (ii) Class B common shares have certain conversion rights and (iii) holders of Class B common shares are entitled to preemptive rights in the event that additional Class A common shares are issued, in order to maintain their proportional ownership interest. As a result, the Esteves Family and Crescera will control approximately 95.1% of the voting power of our outstanding share capital following this offering, assuming no exercise of the underwriters' overallotment option, and will, so long as they control the voting power of our outstanding share capital, effectively control substantially all matters requiring shareholder approval. For further information, see "Description of Share Capital."

                 We are an "emerging growth company" under the U.S. federal securities laws as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, are allowed to provide in this prospectus more limited disclosures than an issuer that would not so qualify. In addition, for as long as we remain an emerging growth company, we will qualify for certain limited exceptions from the Sarbanes-Oxley Act of 2002. See "Risk Factors—Certain Risks Relating to Our Class A Common Shares and the Offering—As a foreign private issuer and an "emerging growth company" (as defined in the JOBS Act), we will have different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies."

                 Investing in our Class A common shares involves risks. See "Risk Factors" beginning on page 30 of this prospectus.

 
  Per Class A
common share
  Total  

Initial public offering price

  US$                US$               

Underwriting discounts and commissions

  US$                US$               

Proceeds, before expenses, to us(1)

  US$                US$               

Proceeds, before expenses, to the selling shareholders(1)

  US$                US$               

(1)
See "Underwriting" for a description of all compensation payable to the underwriters.

                 We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 2,061,631 additional Class A common shares to cover over-allotments, if any, at the initial public offering price, less underwriting discounts and commissions.

                 Neither the U.S. Securities and Exchange Commission nor any state securities commission or any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                 We expect to deliver the Class A common shares against payment in New York, New York on or about                , 2019.

Global Coordinators

BofA Merrill Lynch   Goldman Sachs & Co. LLC   UBS Investment Bank   Itaú BBA

Joint Bookrunners

Morgan Stanley   BTG Pactual   XP Investments



   

The date of this prospectus is                , 2019.


Table of Contents

GRAPHIC


Table of Contents


TABLE OF CONTENTS



 
  Page  

Summary

    1  

The Offering

    18  

Summary Financial and Other Information

    22  

Risk Factors

    30  

Presentation of Financial and Other Information

    66  

Cautionary Statement Regarding Forward-Looking Statements

    75  

Use of Proceeds

    77  

Dividends and Dividend Policy

    78  

Capitalization

    79  

Dilution

    81  

Exchange Rates

    82  

Market Information

    84  

Selected Financial and Other Information

    85  

Unaudited Pro Forma Condensed Consolidated Financial Information

    101  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    114  

Industry

    149  

Regulatory Overview

    162  

Business

    175  

Management

    205  

Principal and Selling Shareholders

    212  

Related Party Transactions

    215  

Description of Share Capital

    218  

Class A Common Shares Eligible for Future Sale

    238  

Taxation

    240  

Underwriting

    245  

Expenses of The Offering

    259  

Legal Matters

    260  

Experts

    260  

Enforceability of Civil Liabilities

    262  

Where You Can Find More Information

    265  

Explanatory Note to the Financial Statements

    266  

Index to Financial Statements

    F-1  



              We and the selling shareholders have not authorized anyone to provide any information or make any representation about this offering that is different from, or in addition to, that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We and the selling shareholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the selling shareholders, the underwriters and any of our or their affiliates have not authorized any other person to provide you with different or additional information. Neither we, the selling shareholders, the underwriters nor any of our or their affiliates are making an offer to sell, or seeking an offer to buy, the Class A common shares in any jurisdiction where the offer or sale is not permitted. This prospectus is being used in connection with the offering of the Class A common shares in the United States and, to the extent described below, elsewhere. This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Class A common

i


Table of Contents

shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

              For investors outside the United States: Neither we, the selling shareholders, any of the underwriters nor any of our or their affiliates have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our Class A common shares and the distribution of this prospectus outside the United States.

              We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.



              Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "Afya" or the "Company," "we," "our," "ours," "us" or similar terms refer to Afya Limited, together with its subsidiaries; all references in this prospectus to "Afya Brazil" refer to Afya Participações S.A. (formerly NRE Participações S.A.); all references in this prospectus to "BR Health" refer to BR Health Participações S.A.; and all references in this prospectus to "Medcel" refer to Guardaya Empreendimentos e Participações S.A., or Guardaya, and its subsidiaries Medcel Editora e Eventos S.A., or Medcel Editora, and CBB Web Serviços e Transmissões On Line S.A., or CBB Web.

              The term "Brazil" refers to the Federative Republic of Brazil and the phrase "Brazilian government" refers to the federal government of Brazil. "Central Bank" refers to the Brazilian Central Bank (Banco Central do Brasil). References in the prospectus to "real," "reais" or "R$" refer to the Brazilian real, the official currency of Brazil and references to "U.S. dollar," "U.S. dollars" or "US$" refer to U.S. dollars, the official currency of the United States.

              The term "combined tuition fees" refers to the sum equal to the total tuition fees charged to undergraduate students, as recorded in the internal management records of Afya Brazil and the companies it acquired in 2018, for the periods indicated. The combined tuition fees information included elsewhere in this prospectus (i) includes data from periods prior to the respective acquisition dates of each of the companies acquired by Afya Brazil in 2018; (ii) was derived from the internal management records of those acquired companies, rather than historical operating information; (iii) is akin to gross tuition fees charged to undergraduate students; (iv) differs from the tuition fees set forth in our financial statements, which are presented as the sum of gross tuition fees charged to undergraduate students, gross tuition fees charged to graduate students and scholarships; and (v) does not represent net revenue as disclosed in our financial statements included elsewhere in this prospectus. Combined tuition fees does not include tuition fees we charge graduate students as graduate courses form a small part of our business (they represent less than 1% of our gross tuition fees). For further information, see "Presentation of Financial and Other Information—Combined Tuition Fees."



      Notice to EEA Investors

              In any EEA Member State that has implemented the Prospectus Directive, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive.

ii


Table of Contents

              This prospectus has been prepared on the basis that any offer of our Class A common shares in any Member State of the European Economic Area ("EEA") (each, a "Relevant Member State"), will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make any offer within the EEA of our Class A common shares which are the subject of this offering may only do so in circumstances in which no obligation arises for Afya or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of our Class A common shares in circumstances in which an obligation arises for us or the underwriters to publish a prospectus for such offer.

              For the purposes of this provision, the expression "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in each Relevant Member State.

      Notice to UK Investors

              In the United Kingdom, this prospectus is only addressed to and directed at qualified investors who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

iii


Table of Contents



SUMMARY

              This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important or relevant to you, and we urge you to read this entire prospectus carefully, including the "Risk Factors," "Business," "Presentation of Financial and Other Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections and our consolidated financial statements, unaudited pro forma consolidated financial information, and the historical audited financial statements of our acquired businesses and the respective notes thereto, included elsewhere in this prospectus, before deciding to invest in our Class A common shares.

Our Value Proposition

              Our mission is to become the reference in medical and healthcare education, empowering students to transform their ambitions into rewarding lifelong learning experiences.

              Medical education has evolved over time. However, until recently, the foundations of how medical schools and educational programs developed, assessed, and disseminated medical education content remained largely static. Increased knowledge of how the human brain functions and processes information has led to a shift towards improved ways to transfer and retain knowledge, to the benefit of today's physicians.

              Physicians are lifelong medical learners that must learn and retain evolving medical knowledge and that face increased competition from their peers. We believe our focused, individualized, and technology-enabled offerings can provide them with a more effective, personalized, and retainable learning experience.

              Our students spend extensive periods of learning time with us. This allows us to gather information on their learning habits that we then apply to their learning experience, making it more effective and efficient and which we believe sets us apart from our peers.

              We are passionate about knowledge and committed to enabling lifelong medical learners reach their full potential. We expect our end-to-end physician-centric ecosystem to benefit students enrolled in our schools and digital platforms, our educators, our residency network (comprised of partner hospitals and clinics), and third-party medical schools that adopt our products and services.

              Since many of our schools are located in geographic regions where medical services are scarce and populations are underserved, our students have a positive social impact on the underprivileged population of those regions through our training programs that provide free medical consultations and treatments. By empowering our students to be lifelong learners, we foster better physicians, improve access to medical care in the regions of Brazil in which we are present, and ultimately help save lives.

Overview

              We are the leading medical education group in Brazil based on number of medical school seats, as published by the Brazilian Ministry of Education, or MEC, as of December 31, 2018, 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, or CME.

              Our innovative methodological approach combines integrated content, interactive learning, and an adaptive experience for lifelong medical learners. Through our educational content and technology-enabled activities, we focus on effective, personalized learning that mirrors one-on-one tutoring.

              We have the largest medical education footprint in Brazil. Our undergraduate and graduate campuses are spread across 12 Brazilian states, and our digital medical platform is available across

1


Table of Contents

Brazil. As of March 31, 2019 and as of December 31, 2018, our network of 14 undergraduate and graduate medical school campuses consisted of 9 operating units (units that have been approved by MEC and that have commenced operations) and 5 approved units (units that have been approved by MEC but that have not yet commenced operations), compared to 4 operating units as of March 31, 2018 and as of December 31, 2017. As of March 31, 2019 and as of December 31, 2018, our network of 1,167 medical school seats consisted of 917 operating seats (seats that have been approved by MEC and that have commenced operations) and 250 approved seats (seats that have been approved by MEC but that have not yet commenced operations), compared to 636 and 420 operating seats as of March 31, 2018 and as of December 31, 2017, respectively. Following our acquisitions in the second quarter of 2019 (see "Business—Our Recent Acquisitions"), our network of medical school seats increased to 1,352 seats, consisting of 250 approved seats and 1,102 operating seats, and to 16 operating campuses. We plan to expand our network by opening the 5 approved campuses we were recently awarded in connection with the "Mais Médicos" program (the Brazilian federal government initiative to reduce shortages of doctors in the most underserved and vulnerable regions of Brazil) by December 31, 2020, taking our total to 23 operating campuses in 12 Brazilian states.

              In addition to health sciences courses, which comprise medicine, dentistry, nursing, radiology, psychology, pharmacy, physical education, physiotherapy, nutrition and biomedicine, we also offer degree programs and courses in other subjects and disciplines across several of our campuses, including undergraduate and post graduate courses in business administration, accounting, law, physical education, civil engineering, industrial engineering and pedagogy. These non-health courses are not part of our core business, although the number of non-health sciences courses we offer has increased as a consequence of our strategic acquisitions in 2018 of multi-disciplinary schools with strong health sciences programs, which are our principal focus. Although non-health courses are not part of our growth strategy, we expect to continue to offer them to the extent they generate local demand. Following our acquisition of Medcel in the first quarter of 2019, we also offer medical preparatory courses and other continuing medical education offerings through our online platform.

              As of March 31, 2019, we had 26,608 enrolled students, compared to 9,323 enrolled students as of March 31, 2018, representing growth of 185.4% for the period. As of December 31, 2018, we had 19,720 enrolled students, compared to 10,164 enrolled students as of December 31, 2017, representing growth of 94.0% for the year.

              Our business model is characterized by high revenue visibility and operating leverage. Over 98% of our historical revenue for the three months ended March 31, 2019 and for the years ended December 31, 2018 and 2017 was comprised of the monthly tuition fees we charge students enrolled in our undergraduate and graduate courses. Following our acquisition of Medcel in the first quarter of 2019, we expect our revenue will be driven primarily by the monthly tuition fees we charge students enrolled in our undergraduate and graduate courses (which represented 80.7% and 88.6% of our total pro forma revenue for the three months ended March 31, 2019 and the year ended December 31, 2018, respectively), and the fees Medcel charges students enrolled in its residency preparatory courses (which represented 19.3% and 11.4% of our total pro forma revenue for the three months ended March 31, 2019 and the year ended December 31, 2018, respectively). In addition, in 2018, approximately 85.6% of Medcel's residency preparatory courses revenue was derived from printed books and e-books, and approximately 14.4% was derived from access to Medcel's digital platform. For further information, see "Unaudited Pro Forma Condensed Consolidated Financial Information" and the unaudited interim consolidated financial statements as of March 31, 2019 and for the period from January 1, 2019 to March 28, 2019 and for the three months ended March 31, 2018 and audited financial statements as of and for the years ended December 31, 2018 and 2017 of Medcel, including the notes thereto, included elsewhere in this prospectus.

              Our ability to execute our business model and strategy, primarily through our acquisitions (which represented approximately 61% and 64% of our total growth in terms of combined tuition fees

2


Table of Contents

and net revenue, respectively, in 2018) and organic growth (which represented approximately 39% and 36% of our total growth in terms of combined tuition fees and net revenue, respectively, in 2018), has led to growth, profitability and cash generation:

    Our net revenue totaled R$144.6 million and R$61.3 million for the three months ended March 31, 2019 and 2018, respectively, representing an increase of 135.8%. Our net revenue totaled R$333.9 million and R$216.0 million in 2018 and 2017, respectively, representing an increase of 54.6%. Our pro forma net revenue totaled R$179.3 million and R$149.0 million for the three months ended March 31, 2019 and 2018, respectively. Our pro forma net revenue totaled R$547.6 million in 2018;

    Medical schools tuition fees represented 71.7% and 63.0% of total combined tuition fees for the three months ended March 31, 2019 and 2018, respectively. Medical schools tuition fees represented 65.5% and 58.6% of total combined tuition fees in 2018 and 2017, respectively;

    Residency preparatory courses and continuing medical education offerings totaled R$34.7 million and R$31.2 million in net revenue for the three months ended March 31, 2019 and 2018, respectively, representing 19.4% and 21.0% of our pro forma net revenue during the respective periods;

    We generated net income of R$49.5 million and R$18.9 million for the three months ended March 31, 2019 and 2018, respectively, representing an increase of 162.4%. We generated net income of R$94.7 million and R$48.5 million in 2018 and 2017, respectively, representing an increase of 95.4%;

    Our Adjusted EBITDA totaled R$67.1 million and R$22.9 million for the three months ended March 31, 2019 and 2018, respectively, representing an increase of 193.0%. Our Adjusted EBITDA totaled R$120.0 million and R$57.3 million in 2018 and 2017, respectively, representing an increase of 109.2%;

    Our Pro Forma Adjusted EBITDA totaled R$90.1 million and R$70.7 million for the three months ended March 31, 2019 and 2018, respectively, representing an increase of 27.4%. Our Pro Forma Adjusted EBITDA totaled R$198.1 million in 2018;

    Our Pro Forma Adjusted Net Income totaled R$74.4 million and R$55.0 million for the three months ended March 31, 2019 and 2018, respectively, representing an increase of 35.3%. Our Pro Forma Adjusted Net Income totaled R$147.8 million in 2018; and

    Our Operating Cash Conversion Ratio was 90.4% for the three months ended March 31, 2019, 83.3% for the three months ended March 31, 2018, 71.7% in 2018 and 70.6% in 2017.

              Quality is a cornerstone of our value proposition. As of May 2019, our average Institutional Concept score, which is measured and published by MEC, and is based on certain institutional planning and development, academic, and management criteria, was 4.4 on a scale of 1 to 5, compared to the Brazilian average of 3.5.

              In 2018, we were also awarded 7 new undergraduate campuses in connection with the "Mais Médicos" program, the largest number awarded to any education group, though two of these awards are currently suspended by court order, as they are the subject of proceedings filed by certain of our competitors against MEC challenging the results of the public procurement for those awards. See "Business—Legal Proceedings—"Mais Médicos" Proceedings."

Market Opportunity

              According to Accenture do Brasil Ltda., or Accenture, the total addressable market for the medical career segment in Brazil was R$16.4 billion as of December 31, 2018, comprised of (i) a

3


Table of Contents

R$10.0 billion medical school market, (ii) a R$1.0 billion residency preparatory courses market, (iii) a R$3.7 billion medical specialization courses market, a (iv) a R$1.6 billion continuing medical education market, each calculated as described in "Industry—Market assessment and forecasts on medical education—Total health education market potential." We estimate we currently capture approximately 2.0% of the total addressable market based on our net revenue for the year ended December 31, 2018. This market encompasses over 700,000 lifelong medical learners in Brazil, comprised of 108,000 medical students, 71,000 students seeking residency preparatory courses, and 76,600 and 454,848 physicians seeking to enroll in specialization courses and CME, respectively.

              Medical education in Brazil benefits from a combination of demographic and social factors, such as the expected increase in the number of people over 65 due to the increase in average life expectancy, as well as the shortage of medical professionals in Brazil, which has resulted in an imbalance between supply and demand. It also benefits from macroeconomic and financial factors, such as the increase in average household income, which has resulted in an increase in demand for medical services and an increase in private and public healthcare spending. Accordingly, we expect the medical education market in Brazil to continue to grow.

              Additionally, given our end-to-end and physician-centric ecosystem, our strong business model, and our reputation for quality, we believe that we are well-positioned to take advantage of the favorable growth dynamics of the medical education market in Brazil. According to Accenture, the total addressable market for medical education is expected to grow at a compound annual growth rate, or CAGR, of 14.1% over the next 5 years, reaching R$31.6 billion by 2023. Including other healthcare education services, the addressable market is expected to grow at a CAGR of 13.6% in the next 5 years, reaching R$64.9 billion by 2023.

Underlying Trends of Medical Education in Brazil

              In addition to a large and underpenetrated total addressable market, we have identified other trends that contribute to the strength of the markets we serve:

    Increased life expectancy and demand for medical services:  The Brazilian population is aging at the fastest rate in its recent history. Average life expectancy is currently 76.2 years, and the number of people over 65 should double from 7% of the total population in 2012 to 14% of the total population in 2033. This has led to, and is expected to continue to drive, increased demand for health care professionals. In addition, private healthcare spending and public healthcare spending in Brazil grew at a CAGR of 14.0% and 11.8%, respectively, from 2010 to 2015, primarily due to an increase in demand for medical services as a result of an aging population and an increase in average household income. These trends have continued since 2015 to date.

    Shortage of medical professionals in Brazil:  There is a shortage of medical professionals in Brazil, primarily due to the uneven socio-economic environment. On average, Brazilian cities with less than 50,000 inhabitants, which corresponds to approximately 90% of all cities in Brazil, have less than 1 physician per 1,000 residents. Brazil is expected to have an average of 3.07 physicians per 1,000 inhabitants by 2028, below the 3.4 average for 2018 of Organization for Economic Cooperation and Development, or OECD, countries.

    Attractive financial incentives:  The medical profession is lucrative. Medical professionals are highly employable, with salaries that are on average more than three times higher than the average salary for other professions such as engineering, nursing and law, and 1.9 to 3.8 times higher than the net present value of engineering, nursing or law programs in Brazil.

4


Table of Contents

 

    Supply and demand imbalance for medical education:  The number of available medical course seats in Brazil is controlled by the MEC, which has limited medical school intakes to current levels until 2023, resulting in a significant imbalance between supply and demand. In the last 3 years, medical schools have on average received five applications per available medical course seat, and four applications per available residency program vacancy, and the number of applications are expected to increase. We believe that graduate courses will gradually become a more popular, high-demand destination for physicians that are not admitted into residency programs.

    CME Expansion:  The growing number of physicians in Brazil and the demand for ongoing education on new medical procedures, drugs, technologies, and developments will continue to drive demand for CME.

    Technological innovation is driving medical education:  The current generation of medical students and professionals require instantly accessible digital content. Over 600,000 biomedical articles have been published globally every year since 2005, and it is critical for lifelong learners to be able to access information and learning methodologies regardless of location and physical availability.

    Limited scope of existing product offerings:  By generally limiting their focus on individual aspects of a student's education cycle, traditional education providers have struggled to build comprehensive student track records and profile databases. Consequently, there is a general lack of integrated platforms that apply accumulated student information to efficiently tailor experiences to, or produce bespoke materials for, the particular needs of each student.

              We believe we are well-positioned to take advantage of this market and its trends, bringing a more effective, personal and diversified service to our students, which will enable us to continue to grow our market share.

Our Products and Services

              We offer the following educational products and services to lifelong medical learners enrolled across our evolving distribution network, as well as to third-party medical schools:

      Medical Schools

    Fully integrated core curricula that we offer our medical school students across all our campuses. Beginning in the second half of 2019, this will be implemented for all incoming medical students; and

    All our medical students have access to our supplemental instructional platforms as part of the internship module of their medical course. Beginning in the first half of 2020, this will be implemented for all incoming medical students.

      Medical Residency Preparatory Courses

    Instructional content in digital format we offer medical students and newly graduated physicians to prepare them for medical residency exams; and

    Supplementary instructional content in digital format we offer third-party medical schools that adopt our services.

      Graduate Courses

    Graduate medical courses we offer our medical school students across all our campuses. These students also have access to some of our supplemental instructional platforms; and

5


Table of Contents

    Supplemental instructional content for different medical specializations we offer individual lifelong medical learners in our graduate courses.

      Other Programs

    Other national core curricula we offer all students across all our undergraduate campuses: healthcare degrees and a subset of non-healthcare degrees, including business and engineering degrees offered by the companies we invested in or acquired.

Key Benefits for our Lifelong Medical Learners

              We believe the end-to-end physician-centric ecosystem we have been developing for our students sets us apart from our peers, as we deliver content and learning activities that are tailored to each student's needs. This contributes to a more interactive and enjoyable learning process for our students, breaking away from a teaching system that we perceive as presenting students with an overwhelming amount of content, unengaging classes and scattered information. We achieve this based on three main pillars: Innovative data-oriented methodology, a cutting-edge platform and state-of-the-art operating environment.

GRAPHIC

      Innovative, Data-oriented Methodology

              Our proprietary methodology to support our students' lifelong medical education is based on the following concepts:

              Standardized medical curricula:    The organization of our medical curricula around interdisciplinary macro-medical topics to guide the development of in-person teaching plans and online learning tools, offering a scalable solution for schools through weekly synchronized content;

6


Table of Contents

              Active learning:    Educational strategy to foster independent, critical and creative student thinking, as well as encourage effective teamwork through case-based problem-solving exercises, debates and small-group discussions;

              Blended learning:    Balanced in-person teaching with technology-assisted activities to improve student and teacher efficiency and results; and

              Adaptive learning:    A personalized instruction and assessment tool that provides training and content tailor made to each student's individual profile. Students can access real-time feedback on areas in which they can improve, effective learning methods and teaching/study plans that are most suitable for them.

      Cutting-Edge Platform

              We deliver modern, bespoke verbal and practical teaching. We continuously invest in creating innovative technology-enabled activities and features to enhance our platform. We offer our medical school students doing internships or studying for residency exams the following features through our digital platform:

              Web-portal and in-app communication:    Online platform combining supplementary instructional content and a personalized communication tool for students, through which they can also access our content offline;

              Learning tools:    We have over 5,000 digitally-managed and delivered instructional tools designed by its teachers to address complex learning objectives. Content is organized and tagged by theme and delivered in various formats, including, among others, online classes, podcasts, quizzes, and books, to cater to different learning methods and the preferences of each student. As of March 31, 2019, our learning tools consisted of more than 1,500 video classes, 600 book chapters, 1,400 podcasts, 800 summarized texts and an exam bank of approximately 1,500 questions;

              Assessment tool:    Broad database suite comprising approximately 85 thousand quizzes and problem-solving activities, through which students can choose the subjects they would like to focus on, with additional teacher-led instructional content; and

              Web series:    Pioneering instructional medical web-series, comprised of 12 diagnosis-based recorded classes written and taught by specialist physicians who are also our teachers. The first series covered 50 clinical cases through the discussion of 144 medical macro themes. We plan to release two additional seasons of our medical web-series covering over 100 diseases. As of March 31, 2019, there were 116,081 views and 41,172 unique users of our medical web-series, with a +84% engagement rate.

      State-of-the-Art Operating Environment

              For us, individualized learning should be used not just when offering content or technology-supported activities, but also during in-person encounters. Our professors can use our resources to approach lessons more objectively, focusing on each student's needs:

              Modern teaching facilities:    We have designed our classrooms to engage students in active learning. We rely on cutting-edge didactical equipment and simulation labs and state of the art realistic simulation technologies;

              Medical specializations centers:    Our campuses offer simulation centers and clinics where students can practice primary and secondary care, leveraging the learning process and providing medical assistance to the local population; and

7


Table of Contents

              Practical learning network:    Throughout the internship cycle, our students can access over 50 partner teaching hospitals and clinics, the largest network of any education group in Brazil.

      Evolving Distribution Network

              We believe that an effective end-to-end physician-centric ecosystem goes beyond offering the largest and most complete operating infrastructure to the students enrolled in our campuses and with access to our digital platforms. Through our evolving distribution model, we also expect to empower lifelong medical learners across our growing network of diversified partner teaching hospitals, clinics and third party medical schools by increasing our products and services offerings as we continue to expand our business-to-business, or B2B, capabilities.

Our Competitive Strengths

      Continuous focus on disrupting traditional medical education

    We have an in-depth understanding of medical education and the related issues faced by students in Brazil. As the largest medical education group in Brazil, we are able to identify trends and adapt our services accordingly:

    We have developed a methodological approach to learning that incorporates individualization and technology in both digital and physical format;

    We currently produce content that is centralized, continuously updated and available to all our institutions and students;

    We have the largest operating infrastructure in medical education in Brazil, with more than 50 partner teaching hospitals and clinics and 595 physicians and specialists in our ecosystem;

    We have developed the first instructional medical web-series created globally and have already been working on the second and third seasons;

    We believe we are the first education group in Brazil to offer a fully digital and customized service for medical residency exam preparation; and

    We believe we are the first player to offer supplemental medical education content to third-party institutions through a business-to-business model.

      High quality standards

              Our operating infrastructure and innovative methodological approach has achieved high levels of satisfaction across our medical schools. Through our digital platforms, we monitor our students' learning experience using several criteria and variables. According to Educainsights, our Net Promoter Score, or NPS, a widely known survey methodology that measures the willingness of customers to recommend a company's products and services, was 25 for medical students that graduated more than 5 years ago, 43 for medical students that graduated more than 2 years ago and less than 5 years ago, and 52 for medical students that graduated less than 2 years ago. This gradual improvement in our NPS score shows our continuing commitment to high-quality education and the medical career of our students. Additionally, all of our undergraduate institutions are highly evaluated by MEC, with an average Institutional Score (Conceito Institucional) rating above 4, out of a maximum of 5. See "Regulatory Overview—Regulatory Processes of Post-Secondary Education Institutions—Accreditation of Post-Secondary Education Institutions and Authorization and Recognition of Programs" for further information on the Conceito Institucional.

              In addition, our online medical education platform that offers distance learning residency preparatory courses, we are able to monitor our students' learning experience using several criteria and

8


Table of Contents

variables, including the educational materials they access and use, frequently asked questions, their study hours and schedule, and their attendance record. Furthermore, as a result of the quality of the content and methodology and the differentiated services offered by Medcel, third-party medical schools proactively contact it seeking to adopt Medcel's medical education content to improve their medical students' learning experience and academic scores. As of March 31, 2019, approximately five third-party schools had adopted Medcel's medical education content.

      The nature of our business model

              Attractive financial model:    We have a strong combination of significantly low customer acquisition costs, calculated as the sum of sales and marketing and personnel expenses divided by student additions, which were approximately R$1,300 per student as of December 31, 2018, high occupancy rates of approximately 100% of medical seats in our medical schools as of March 31, 2019 and December 31, 2018, and strong operating cash flow generation of 78.5% and 78.7% as of March 31, 2019 and December 31, 2018, respectively. Student additions are the sum of 543 student enrollments from 2017 to 2018 and 420 graduating student replacements. As of December 31, 2018, our Life Time Value (LTV), calculated as the sum of R$54,396 gross income per student divided by 16.7% (to account for one-sixth of the student base graduating every year), was R$326,376.

              Contracted growth:    We have contracted growth visibility into medical schools that are in the initial six years of operations as a result of the six-year maturation cycle of our medical school seats. This cycle begins when a medical school becomes operational, with a first year medical school class that progresses through the required six years as the next classes begin behind it, and ends when the medical school has six school years of medical students and has therefore reached capacity at maturation (i.e., the maximum number of approved seats). Since the maximum number of medical seats per medical school is set by regulation, the only way to grow our medical school seats, and thus our numbers of enrollments, is through acquisitions or starting new medical schools. As of March 31, 2019, we had 1,167 approved medical school seats. Following our acquisitions in the second quarter of 2019, our network of approved medical school seats increased to 1,352 out of an expected total capacity of 9,654 medical school enrollments by 2025, which gives us visibility as to the growth potential of our revenues over the period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Medical School Regulatory Capacity and Capacity at Maturation."

              End-to-End ecosystem:    Successfully integrating the businesses we invest in or acquire, allows us to offer an end-to-end physician-centric ecosystem. The point of entry of one business unit is the point of exit from another, which increases cross-selling and upselling opportunities.

              Difficult to replicate:    We believe the combination of regulatory barriers, demand and supply imbalance and our end-to-end physician-centric ecosystem are difficult to replicate and that it would take a significant amount of time for competitors to reach the scale of our operation.

              Self-reinforcing network effects of our education cycle:    As we aim to be the trusted content and knowledge partner for lifelong medical learners in Brazil, we have created and have been nurturing an

9


Table of Contents

education cycle that entails differentiation, talented stakeholders and recognition. Our continuous focus on implementing all stages of our cycle has allowed us to continuously expand our footprint.

GRAPHIC

      Extensive M&A track record

              We have extensive capabilities in, and a strong track record of, identifying, negotiating and successfully integrating acquisitions. We have developed an integration model, operated by a dedicated team responsible for analyzing, mapping and integrating the systems of our acquired businesses, that we believe enables us to fully integrate the businesses we acquire in an efficient manner and within 12 months of their acquisition. Our integration model is comprised of four stages:

    Stage 1 (Preliminary Analysis): Preliminary analysis of the available infrastructure, organizational structure and teaching model of the acquired business to identify potential integration issues.

    Stage 2 (Detailed Mapping): Detailed migration diagnosis and mapping of the systems, processes and teaching model of the acquired business to be integrated into our centralized shared-services center and academic model.

    Stage 3 (Integration/Migration): Centralization and migration of the systems and processes into our shared services center and standardization of the teaching model of the acquired business.

    Stage 4 (Ongoing Support): Post migration/integration remote and on-site support and monitoring to stabilize the integrated operations of the acquired business.

10


Table of Contents

              In the first quarter of 2019 and in 2018, we successfully acquired or invested in a total of seven companies, increasing our number of medical schools seats, expanding into new medical education segments and integrating new technologies that allow us to innovate and enhance our value proposition to lifelong medical learners. As of the date of this prospectus, we have fully integrated the operations of three of our acquisitions with our existing business. We are in the process of integrating the operations of our four other acquisitions, the integration of which we expect to complete by May 2020.

              Our limited operating history as a consolidated company and our recent acquisitions entail a number of challenges, such as effectively integrating the operations of any acquired companies with our existing business and managing a growing number of campuses. See "Risk Factors—Certain Risks Relating to Our Business and Industry—We may not be able to identify and acquire new medical higher education institutions or meet our strategic and financial goals in connection with any business acquisition we seek, and difficulties in effectively integrating and managing a growing number of campuses may adversely affect our strategic objectives" and "Risk Factors—Certain Risks Relating to Our Business and Industry—Our limited operating history as a consolidated company, our recent acquisitions and the comparability of our results may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects."

      Purpose driven culture

              Medical education requires a core human value: compassion. As we endeavor to revolutionize medical education in Brazil, we believe that by training and educating better physicians we are helping people and their communities across Brazil. This mission has united families and entrepreneurs, executives and sponsors with over 20 years of knowhow and expertise in the education sector. Our internal satisfaction survey conducted in 2018 showed employee satisfaction levels of 86.3 out of a possible 100, based on several criteria, such as trust in, and a commitment to, our values, leadership satisfaction, work satisfaction, learning and development and active participation in our activities, reinforcing our strong commitment to our mission and purpose.

Our Growth Strategies

              We aim to continue to grow organically and through acquisitions and to generate greater shareholder value by implementing the following strategic initiatives:

      Maturation of current number of authorized medical school seats

              We benefit from contracted growth visibility in our medical schools that are in the initial six years of operations, which we derive from two main sources: (1) the six-year maturation cycle of our medical school seats, which begins when a medical school becomes operational, with a first year medical school class which progresses through the required six years as the next classes begin behind it, and which ends when the medical school has six school years of medical students and has therefore reached capacity at maturation (i.e., the maximum number of approved seats), and (2) new enrollments from our five recently awarded campuses in connection with the "Mais Médicos" program. Since the maximum number of medical seats per medical school is set by applicable regulations, the only way to grow our medical school seats, and thus our number of enrollments, is through acquisitions or starting new medical schools. Assuming full compliance with applicable regulations and that our 5 new "Mais Médicos" campuses mature as expected with 50 medical seats for each campus, we estimate reaching a total medical student base of 9,654 students by 2025. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Medical School Regulatory Capacity and Capacity at Maturation" and "Risk Factors—Certain Risks Relating to Our Business and Industry—The post-secondary education sector is highly regulated, and our failure to comply with existing or future laws and regulations could significantly impact our business."

11


Table of Contents

      Expand our medical residency preparation enrollments base

              Competition for medical residencies should increase as the number of graduating physicians grows and the number of available residency seats remains static. According to Accenture, the number of applicants for medical residency programs is expected to grow at a rate of 13.4% per year through 2022. We plan to continue to grow our medical residency exam preparation student enrollments, leveraging the academic outcome, scalability and learning experience of our digital platform.

      Expand our graduate programs enrollments base

              Due to the shortage of medical residency seats and the growing demand for medical graduate courses, we believe we will be able to expand our current offering in this segment.

              We intend to continue developing our business-to-business strategy by increasing the number of partners and student enrollments through increased marketing and sales effort.

      Cross sell across our existing medical students base

              Because our solutions target the lifelong education journey of medical students, we have identified an opportunity to increase student enrollments at a low marginal cost driven by cross selling opportunities such as increasing the number of former undergraduate students subscribing to our medical residency exam solutions and the number of former undergraduate and/or medical residency students applying to our graduate and CME courses.

      Expand our B2B capabilities

              B2B contracts are effective customer entry points to our products and services. Students are familiar with our platforms, increasing our brand equity and helping us attract more physicians to enroll in preparatory courses, graduate programs and CME products.

      Expand our distribution channels

              We plan to continuously expand our distribution network by increasing our presence in direct and third-party channels, launching graduate courses or CME for third-party continuing medical education hubs (including, but not limited to, hospitals, clinics and other medical schools) to grow our graduate medical footprint, through partnerships with such third-party continuing medical education hubs.

      Leverage infrastructure and extract synergies from acquisitions

              We believe we have been able to successfully integrate our acquisitions into our ecosystem. We plan to implement several measures to improve the profitability of recent acquisitions, including but not limited to:

    Streamlining fee discounts and scholarship policies;

    Integrating operations with our shared-services center;

    Streamlining faculty training in line with our career plan; and

    Integrating teaching models into our academic model.

12


Table of Contents

 

      Continue to selectively pursue M&A opportunities

              We plan to selectively pursue acquisitions that will complement our current medical education services offering and/or enhance our product portfolio, such as digital content platforms, continuing medical education institutions and other medical certification companies, among others. We are currently evaluating possible acquisition opportunities and submit non-binding proposals from time to time. We believe that we have developed a strong capability and track record of acquisitions. In the first half of 2019, we acquired or invested in four companies, which increased our medical school seats by more than 20% over the period. In 2018, we acquired or invested in five companies, which increased our medical school seats by more than 118.3% over the year. Our acquisition of Medcel enabled us to access the medical residency preparation market, and the acquisition of Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda., or IPEMED, enabled us to enter the graduate courses market. Our acquisition strategy is mainly focused on expanding our medical school footprint by adding new institutions to our existing portfolio.

      Enter into new markets

              We believe our end-to-end physician-centric ecosystem is equipped to serve medical students in complementary segments where our innovative methodological, data-driven approach can continue to disrupt traditional vendors and legacy business models. We believe opportunities exist in new sectors and regions of Brazil. In the future, we intend to focus on expanding further into continuing medical education. We may also seek to grow our business by selectively expanding into international markets with similar fundamentals.

      Develop new products

              We plan to continuously evolve our platform and offer solutions that keep up with the growing demands of our students. We have a planned pipeline of new products, including new medical web-series seasons, corporate medical training, new extension health programs, a tutoring suite, a peer-to-peer suite and a virtual reality product.

Our Corporate Structure

      Our Corporate Reorganization

              We are a Cayman Islands exempted company, incorporated with limited liability on March 22, 2019 for purposes of effectuating our initial public offering.

              On March 29, 2019, BR Health (a wholly-owned subsidiary of Crescera that controls Guardaya), and Guardaya (which owns 100% of Medcel Editora and CBB Web) merged into Afya Brazil, resulting in the transfer to Afya Brazil of 100% of Medcel Editora and CBB Web and 15% of União Educacional do Planalto Central S.A., or UEPC, a medical school located in the Federal District.

              Additionally, on June 18, 2019, Afya Brazil acquired an additional 15% interest in UEPC through a contribution by Crescera of its additional 15% interest in UEPC into Afya Brazil's share capital. The purchase price was R$24.5 million. This contribution was conducted as part of our corporate reorganization and pursuant to the terms and conditions of (i) a purchase agreement between BR Health and UEPC's controlling shareholders, which was assigned by BR Health to Crescera on March 25, 2019, and which required Crescera to acquire the 15% interest in UEPC directly from UEPC's controlling shareholders, and (ii) an investment agreement dated March 29, 2019, among Crescera, certain members of the Esteves family, a minority shareholder and Afya Brazil, pursuant to which Crescera agreed to subsequently contribute its additional 15% interest in UEPC into Afya Brazil's share capital in exchange for a certain number of shares in Afya Brazil, to be calculated

13


Table of Contents

at the time of the contribution in accordance with the calculation formula set forth in the investment agreement.

              Prior to the consummation of this offering, the Esteves Family, Crescera, other members of the Esteves family and the other shareholders of Afya Brazil, or the Afya Brazil Minority Shareholder Group, will contribute all of their shares in Afya Participações S.A. (formerly NRE Participações S.A.), or Afya Brazil, to us. In return for this contribution, we will issue 58,485,140 new Class B common shares to Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves and Crescera and 17,370,248 new Class A common shares to the other members of the Esteves family and the Afya Brazil Minority Shareholder Group, in each case in a one-to-28 exchange for the shares of Afya Brazil contributed to us. Until the contribution of Afya Brazil shares to us, we will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments.

              After accounting for the new Class A common shares that will be issued and sold by us in this offering, we will have a total of 87,682,644 common shares issued and outstanding immediately following this offering, 57,929,585 of these shares will be Class B common shares beneficially owned by the Esteves Family and Crescera, and 29,753,059 of these shares will be Class A common shares beneficially owned by investors purchasing in this offering.

      Roll-up transactions

              On June 14, 2019, we concluded the roll-up of the minority shareholders of FASA to Afya Brazil. On June 16, 2019, we concluded the roll-up of the minority shareholders of IESP to Afya Brazil. On June 17, 2019, we concluded the roll-up of the minority shareholders of UNIVAÇO to Afya Brazil.

              The following chart shows our corporate structure, after giving effect to our corporate reorganization and this offering:

GRAPHIC


*
Except for UEPC, all subsidiaries are controlled and/or wholly owned by Afya Brazil.

**
ITPAC Palmas, ITPAC Cametá, ITPAC Cruzeiro do Sul and ITPAC Manacapuru are branches of ITPAC Araguaína and ITPAC Santa Inês and ITPAC Itacoatiara are branches of IPTAN. Campuses for ITPAC Cametá, ITPAC Cruzeiro do Sul, ITPAC Manacapuru, ITPAC Santa Inês and ITPAC Itacoatiara are expected to open by June 2020.

***
RD means RD Administração e Participações Ltda.

14


Table of Contents

****
CIS means Centro Integrado de Saúde de Teresina Ltda.

      Recent Developments

              Afya Brazil expects to enter into in the near-term a purchase agreement with the shareholders of IPEC—Instituto Paraense de Educação e Cultura Ltda., or IPEC, to acquire 100% of IPEC. IPEC is a non-operational postsecondary education institution with governmental authorization to offer on-campus post-secondary undergraduate courses in medicine in the State of Pará. The transaction would be subject to customary closing conditions. The acquisition would contribute approximately 120 medical seats to Afya. The purchase price is expected to be approximately R$108 million. However, there can be no assurance that the parties will enter into a purchase agreement.

Summary of Risk Factors

              An investment in our Class A common shares is subject to a number of risks, including risks related to our business and industry, risks related to Brazil and risks related to the offering and our Class A common shares. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled "Risk Factors" for a more thorough description of these and other risks.

      Risks Relating to Our Business and Industry

    We may not be able to identify and acquire new medical higher education institutions or meet our strategic and financial goals in connection with any business acquisition we seek, and difficulties in effectively integrating and managing a growing number of campuses may adversely affect our strategic objectives.

    Our limited operating history as a consolidated company, our recent acquisitions and the comparability of our results may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects.

    The unaudited pro forma financial information included in this prospectus is presented for illustrative purposes only and may not be indicative of our combined financial condition or results of operations after giving effect to the acquisitions of IPTAN, IESVAP, IESP, FADEP and Medcel, or the Pro Forma Transactions.

    Our revenues are highly concentrated in the tuition fees we charge for our medical courses and other clinical programs, and any economic, market or regulatory factors adversely affecting such medical courses and clinical programs could lead to decreased demand in the medical and clinical courses we offer, which could materially adversely affect us.

    Changes to the rules or delays or suspension of tuition payments made through the Higher Education Student Financing Fund (Fundo de Financiamento ao Estudante do Ensino Superior), or FIES, may adversely affect our cash flows and our business.

    If we lose the benefits of federal tax exemptions provided under the University for All Program (Programa Universidade para Todos), or PROUNI, our business, financial condition and results of operations may be adversely affected.

    An increase in delays and/or defaults in the payment of tuition fees may adversely affect our income and cash flows.

    Any increase in the attrition rates of students in our education programs may adversely affect our results of operations.

15


Table of Contents

      Risks Relating to Brazil

    The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil's political and economic conditions could adversely affect our business and the price of our Class A common shares.

    The ongoing economic uncertainty and political instability in Brazil may adversely affect our business and the price of our Class A common shares.

    Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would adversely affect our business and the price of our Class A common shares.

    Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares.

      Risks Relating to the Offering and our Class A Common Shares

    Our Class A common shares have not previously been traded on any stock exchange and, therefore, an active and liquid trading market for such securities may not develop, which could potentially depress the trading price of our Class A common shares after this offering. If our share price fluctuates after this offering, you could lose a significant part of your investment.

    The Esteves Family and Crescera, our largest group of shareholders, will own 100% of our outstanding Class B common shares, which represent approximately 95.1% of the voting power of our issued share capital following this offering, and will control all matters requiring shareholder approval. The interests of the holders of Class B common shares may differ from those of the holders of Class A common shares purchased in this offering. This concentration of ownership and voting power in the Class B common shares limits your ability to influence corporate matters.

    Our dual class capital structure means our shares will not be included in certain indices. We cannot predict the impact this may have on our share price.

    We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

Corporate Information

              Our principal executive offices are located at Alameda Oscar Niemeyer, No. 119, Sala 504, Vila da Serra, Nova Lima, Minas Gerais, Brazil. Our telephone number at this address is +55 (31) 3515 7550.

              Investors should contact us for any inquiries through the address and telephone number of our principal executive office. Our principal website is www.afya.com.br. The information contained in, or accessible through, our website is not incorporated into this prospectus or the registration statement of which it forms a part.

Implications of Being an Emerging Growth Company

              As a company with less than US$1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart our Business Startups Act of 2012, or

16


Table of Contents

the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

    a requirement to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure;

    an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, in the assessment of our internal control over financial reporting;

    reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and

    exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute arrangements.

              We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than US$1.07 billion in annual revenue, have more than US$700 million in market value of our Class A common shares held by non-affiliates or issue more than US$1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of the requirement to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure in this prospectus and we may choose to take advantage of other reduced reporting burdens in future filings. Accordingly, the information contained herein and the information that we provide to our shareholders may be different than the information you might get from other public companies.

              In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Given that we currently report and expect to continue to report under IFRS, we will not be able to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB.

17


Table of Contents

 


THE OFFERING

              This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our Class A common shares. You should carefully read this entire prospectus before investing in our Class A common shares including "Risk Factors" and our financial statements.

Issuer

  Afya Limited.

Class A common shares offered by us

 

11,827,256 Class A common shares (or 13,888,887 Class A common shares if the underwriters exercise in full their option to purchase additional shares).

Class A common shares offered by the selling shareholders

 

1,916,954 Class A common shares.

Offering price range

 

Between US$16.00 and US$18.00 per Class A common share.

Voting rights

 

The Class A common shares will be entitled to one vote per share, whereas the Class B common shares (which are not being sold in this offering) will be entitled to 10 votes per share.

 

Each Class B common share may be converted into one Class A common share at the option of the holder.

 

If, at any time, the total number of the issued and outstanding Class B common shares is less than 10% of the total number of shares outstanding, then each Class B common share will convert automatically into one Class A common share.

 

In addition, each Class B common share will convert automatically into one Class A common share upon any transfer, except for certain transfers to other holders of Class B common shares or their affiliates or to certain unrelated third parties as described under "Description of Share Capital—Conversion."

 

Holders of Class A common shares and Class B common shares will vote together as a single class on all matters, unless otherwise required by law and subject to certain exceptions set forth in our Articles of Association as described under "Description of Share Capital—Voting Rights."

 

Upon consummation of this offering, assuming no exercise of the underwriters' option to purchase additional shares, (1) holders of Class A common shares will hold approximately 4.9% of the combined voting power of our outstanding common shares and approximately 33.9% of our total equity ownership and (2) holders of Class B common shares will hold approximately 95.1% of the combined voting power of our outstanding common shares and approximately 66.1% of our total equity ownership.

18


Table of Contents

 

If the underwriters exercise their option to purchase additional shares in full, (1) holders of Class A common shares will hold approximately 5.2% of the combined voting power of our outstanding common shares and approximately 35.5% of our total equity ownership and (2) holders of Class B common shares will hold approximately 94.8% of the combined voting power of our outstanding common shares and approximately 64.5% of our total equity ownership.

 

The rights of the holders of Class A common shares and Class B common shares are identical, except with respect to voting, conversion, and transfer restrictions applicable to the Class B common shares, as described above. In addition, holders of Class B common shares are entitled to preemptive rights to purchase additional Class B common shares in the event that additional Class A common shares are issued, upon the same economic terms and at the same price, in order to maintain such holder's proportional ownership interest in us. See "Description of Share Capital" for a description of the material terms of our common shares, and the differences between our Class A and Class B common shares.

Option to purchase additional Class A common shares

 

We have granted the underwriters the right to purchase up to an additional 2,061,631 Class A common shares from us within 30 days of the date of this prospectus, at the public offering price, less underwriting discounts and commissions, on the same terms as set forth in this prospectus.

Listing

 

We have applied to list our Class A common shares on the Nasdaq, under the symbol "AFYA."

Use of proceeds

 

We estimate that the net proceeds to us from this offering will be approximately US$185.8 million (or US$219.1 million if the underwriters exercise in full their option to purchase additional shares), assuming an initial public offering price of US$17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering to fund future acquisitions (including at least 1,000 medical school seats) and investments in complementary businesses, products or technologies and for general corporate purposes. See "Use of Proceeds."

 

We will not receive any proceeds from the sale of Class A common shares by the selling shareholders.

Share capital before and after offering

 

As of the date of this prospectus, our authorized share capital is US$50,000, consisting of 1,000,000,000 shares of par value US$0.00005 each. Of those authorized shares, (i) 500,000,000 are designated as Class A common shares, (ii) 250,000,000 are designated as Class B common shares, and (iii) 250,000,000 are as yet undesignated and may be issued as common shares or shares with preferred rights.

19


Table of Contents

 

Immediately after this offering, we will have 29,753,059 Class A common shares outstanding, assuming no exercise of the underwriters' option to purchase additional shares.

Dividend policy

 

The amount of any distributions will depend on many factors, such as our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our board of directors and shareholders. We do not anticipate paying any cash dividends in the foreseeable future.

Lock-up agreements

 

We have agreed with the underwriters, subject to certain exceptions, not to offer, sell, or dispose of any shares of our share capital or securities convertible into or exchangeable or exercisable for any shares of our share capital during the 180-day period following the date of this prospectus. Members of our board of directors and our executive officers, and our principal shareholders, have agreed to substantially similar lock-up provisions, subject to certain exceptions. See "Underwriting."

Directed share program

 

At our request, the underwriters have reserved, at the initial public offering price, up to 1.6% of the Class A common shares offered by us by this prospectus for sale to our directors, officers and certain of our employees and other persons associated with us. The sales will be made by Itau BBA USA Securities, Inc., an underwriter of this offering, through a directed share program. If these persons purchase Class A common shares under the directed share program, the number of Class A common shares available for sale to the general public will be reduced. Any reserved Class A common shares that are not purchased under the directed share program will be offered by the underwriters to the general public on the same terms as the other Class A common shares offered by this prospectus.

Risk factors

 

See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our Class A common shares.

20


Table of Contents

Cayman Islands exempted company with limited liability

 

We are a Cayman Islands exempted company with limited liability. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (i) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (ii) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (iii) directors should not properly fetter the exercise of future discretion; (iv) duty to exercise powers fairly as between different sections of shareholders; (v) duty to exercise independent judgment; and (vi) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq, and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting. In comparison, under the Delaware General Corporation Law, a director of a Delaware corporation owes fiduciary duties to the corporation and its stockholders comprised of the duty of care and the duty of loyalty. Such duties prohibit self-dealing by a director and mandate that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See "Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law."

              Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the option granted to the underwriters to purchase up to an additional 2,061,631 Class A common shares in connection with this offering.

21


Table of Contents



SUMMARY FINANCIAL AND OTHER INFORMATION

              The following table sets forth summary consolidated historical financial data of Afya Brazil as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018 and 2017 and summary unaudited pro forma financial data for the three months ended March 31, 2019 and 2018 and for the year ended December 31, 2018. This summary consolidated historical financial data has been derived from our unaudited interim condensed consolidated financial statements and our audited consolidated financial statements, included elsewhere in this prospectus. The financial results of IPTAN—Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A., or IPTAN, Instituto de Educação Superior do Vale do Parnaíba S.A., or IESVAP, Centro de Ciências em Saúde de Itajubá S.A., or CCSI, Instituto de Ensino Superior do Piauí S.A., or IESP, FADEP—Faculdade Educacional de Pato Branco Ltda., or FADEP, and Medcel are included in our historical results for the periods following the closing of each such transaction, April 26, 2018, April 26, 2018, May 30, 2018, November 27, 2018, December 5, 2018 and March 29, 2019, respectively. See "Presentation of Financial and Other Information."

              The summary unaudited pro forma financial data has been derived from the Unaudited Pro Forma Condensed Consolidated Financial Information included elsewhere in this prospectus. The unaudited pro forma financial information gives effect to our acquisitions of IPTAN, IESVAP, IESP, FADEP and Medcel, as if they occurred as of January 1, 2018 for pro forma statements of income purposes. The pro forma financial information does not reflect other acquisitions prior to the date of acquisition. See "Presentation of Financial and Other Information." The unaudited pro forma condensed consolidated financial information does not purport to represent what our actual consolidated results of operations would have been had the acquisitions actually occurred on the date indicated, nor are they indicative of future consolidated results of operations or financial condition.

              The summary audited consolidated historical financial data and the summary unaudited pro forma consolidated financial data should be read in conjunction with "Presentation of Financial and Other Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Information" and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

22


Table of Contents

The summary audited consolidated historical financial data presented in this prospectus may not be indicative of future performance.

 
  Historical Afya Brazil   Pro Forma(2)  
 
  For the Three Months Ended March 31,  
 
  2019   2019   2018   2019   2019   2018  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 

Income Statement Data

                                     

Net revenue

    37.1     144.6     61.3     46.0     179.3     149.0  

Cost of services

    (14.0 )   (54.4 )   (28.2 )   (15.0 )   (58.4 )   (55.0 )

Gross profit

    23.1     90.2     33.1     31.0     120.9     94.0  

General and administrative expenses

    (8.0 )   (31.2 )   (14.3 )   (11.7 )   (45.5 )   (38.4 )

Other income (expenses), net

    (0.1 )   (0.2 )   0.8     (0.1 )   (0.4 )   0.5  

Operating income

    15.1     58.8     19.6     19.2     75.0     56.1  

Finance income

    1.3     5.2     1.7     1.5     5.7     3.4  

Finance expenses

    (3.1 )   (12.2 )   (1.1 )   (3.3 )   (12.8 )   (9.0 )

Finance result

    (1.8 )   (7.1 )   0.6     (1.8 )   (7.1 )   (5.6 )

Income before income taxes

    13.3     51.7     20.3     17.4     67.8     50.5  

Income taxes expense

    (0.6 )   (2.2 )   (1.4 )   (0.9 )   (3.6 )   (3.3 )

Net income

    12.7     49.5     18.9     16.5     64.2     47.2  

Income attributable to

                                     

Equity holders of the parent

    10.7     41.5     17.5     14.4     56.3     43.8  

Non-controlling interests

    2.0     7.9     1.3     2.0     7.9     3.3  

Earnings per share (R$, unless otherwise indicated)

   
 
   
 
   
 
   
 
   
 
   
 
 

Earnings per share—basic

                                     

Common shares

    5.17     20.13     15.23     5.91     23.04     28.67  

Earnings per share—diluted

                                     

Common shares

    5.07     19.74     15.23     5.81     22.66     28.67  

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

23


Table of Contents

(2)
For a discussion on our acquisitions and our unaudited pro forma condensed consolidated statement of income and related notes, see "Presentation of Financial and Other Information" and "Unaudited Pro Forma Condensed Consolidated Financial Information."
 
  Historical Afya Brazil   Pro Forma(2)  
 
  For the Year Ended December 31,  
 
  2018   2018   2017   2018   2018  
 
  US$ millions(1)
  R$ millions
  US$ millions(1)
  R$ millions
 

Income Statement Data

                               

Net revenue

    85.7     333.9     216.0     140.5     547.6  

Cost of services

    (43.1 )   (168.1 )   (124.1 )   (65.4 )   (254.8 )

Gross profit

    42.6     165.9     91.9     75.1     292.7  

General and administrative expenses

    (18.0 )   (70.0 )   (45.4 )   (40.5 )   (158.1 )

Other income (expenses), net

    0.2     0.6     2.8     (0.4 )   (1.6 )

Operating income

    24.7     96.4     49.3     34.1     133.0  

Finance income

    2.7     10.4     5.2     4.7     18.3  

Finance expenses

    (2.1 )   (8.2 )   (3.6 )   (7.1 )   (27.5 )

Finance result

    0.6     2.3     1.6     (2.4 )   (9.3 )

Income before income taxes

    25.3     98.7     51.0     31.7     123.7  

Income taxes expense

    (1.0 )   (4.0 )   (2.5 )   (1.9 )   (7.5 )

Net income

    24.3     94.7     48.5     29.8     116.2  

Income attributable to

                               

Equity holders of the parent

    22.2     86.4     45.4     26.5     103.2  

Non-controlling interests

    2.2     8.4     3.1     3.3     13.0  

Earnings per share (R$, unless otherwise indicated)

   
 
   
 
   
 
   
 
   
 
 

Earnings per share—basic

                               

Common shares

    13.22     51.51     39.49     12.88     50.20  

Earnings per share—diluted

                               

Common shares

    12.99     50.61     39.49     12.70     49.47  

(1)
For convenience purposes only, amounts in reais for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

24


Table of Contents

(2)
For a discussion on our acquisitions and our unaudited pro forma condensed consolidated statement of income and related notes, see "Presentation of Financial and Other Information" and "Unaudited Pro Forma Condensed Consolidated Financial Information."
 
  Historical Afya Brazil  
 
  As of March 31,   As of December 31,  
 
  2019   2019   2018   2018   2017  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 

Balance Sheet Data:

                               

Assets

                               

Total current assets

    96.5     376.2     34.3     133.5     60.5  

Total non-current assets

    317.3     1,236.5     201.4     784.9     43.1  

Total assets

    413.9     1,612.8     235.7     918.4     103.6  

Liabilities and Equity

                               

Total current liabilities

    57.4     223.7     46.8     182.3     51.9  

Total non-current liabilities

    86.0     335.0     37.4     145.7     4.9  

Total liabilities

    143.4     558.7     84.2     328.1     56.9  

Total equity

    270.5     1,054.1     151.5     590.4     46.8  

Total liabilities and equity

    413.9     1,612.8     235.7     918.4     103.6  

(1)
For convenience purposes only, amounts in reais as of March 31, 2019 and as of December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

Non-GAAP Financial Measures

              This prospectus presents our 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 three months ended March 31, 2018 and the year ended December 31, 2018, net income plus amortization of customer relationships and trademark plus/minus tax effect, and (ii) for the three months ended March 31, 2019, 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. We calculate Operating Cash Conversion Ratio as the cash flows from operations divided by Adjusted EBITDA plus/minus non-recurring expenses.

25


Table of Contents

              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.

      Adjusted EBITDA and Operating Cash Conversion Ratio

 
  For the Three Months
Ended March 31,
  For the Year Ended
December 31,
 
 
  2019   2019   2018   2018   2018   2017  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 
 
  (except percentages)
 

Adjusted EBITDA(2)

    17.2     67.1     22.9     30.8     120.0     57.3  

Operating Cash Conversion Ratio(3)

    90.4 %   90.4 %   83.3 %   71.7 %   71.7 %   70.6 %

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 and for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

(2)
For a reconciliation of our Adjusted EBITDA, see "Selected Financial and Other Information—Reconciliation of Non-GAAP Financial Measures—Reconciliation between Adjusted EBITDA and Net Income."

(3)
For a reconciliation of our Operating Cash Conversion Ratio, see "Selected Financial and Other Information—Reconciliation of Non-GAAP Financial Measures—Operating Cash Conversion Ratio Reconciliation."

      Pro Forma Adjusted EBITDA

 
  For the Three Months
Ended March 31,
  For the Year Ended
December 31,
 
 
  2019   2019   2018   2018   2018  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 

Pro Forma Adjusted EBITDA(2)

    23.2     90.1     70.7     50.8     198.1  

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 and for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

26


Table of Contents

(2)
For a reconciliation of our Pro Forma Adjusted EBITDA, see "Selected Financial and Other Information—Reconciliation of Non-GAAP Financial Measures—Reconciliation between Pro Forma Adjusted EBITDA and Pro Forma Net Income."

      Pro Forma Adjusted Net Income

 
  For the Three Months
Ended March 31,
  For the Year Ended
December 31,
 
 
  2019   2019   2018   2018   2018  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 

Pro Forma Adjusted Net Income(2)

    19.0     74.4     55.0     37.9     147.8  

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 and for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

(2)
For a reconciliation of our Pro Forma Adjusted Net Income, see "Selected Financial and Other Information—Reconciliation of Non-GAAP Financial Measures—Reconciliation between Pro Forma Adjusted Net Income and Pro Forma Net Income."

Operating Data (Historical)

 
  As of
March 31,
  As of
December 31,
 
Educational Level
  2019   2018   2017  

Undergraduate medical degree students

    5,011     4,540     2,070  

Other non-medical undergraduate courses students

    14,410     15,180     8,094  

Total undergraduate students(1)

    19,421     19,720     10,164  

Preparatory courses(2)

    7,187          

Total students

    26,608     19,720     10,164  

Operating campuses

    9     9     4  

Approved campuses(3)

    14     9     4  

Operating medical school seats(4)

    917     917     420  

Approved medical school seats(5)

    1,167     1,167     420  

(1)
Excludes students that have not, by the beginning of the next school semester, paid monthly tuition fees which are due and payable.

(2)
Medcel only. Excludes (i) students that have not paid monthly fees within thirty days of becoming due and payable, and (ii) students that have cancelled their preparatory courses subscription. The information in this table as it relates to Medcel is as of March 31, 2019 only and does not set forth information as of December 31, 2018 and 2017, as we acquired Medcel on March 29, 2019. The information in this table, as it relates to Medcel, is based on data provided to Afya Brazil by Medcel. We believe it is reliable, but it does not form part of our consolidated operating history.

27


Table of Contents

(3)
Approved campuses and approved medical school seats refer to our total number campuses and seats approved by MEC for the periods indicated, whether or not operating. All our operating campuses and medical school seats are also approved campuses and medical school seats, however not all our approved campuses and medical school seats are operating campuses and medical school seats.

(4)
With the acquisition of FASA on April 3, 2019, the number of operating medical school seats increased to 1,102.

(5)
With the acquisition of FASA on April 3, 2019, the number of approved medical school seats increased to 1,352.

Other Data

      Combined Tuition Fees*

              The following table sets forth information that was derived from the internal management records, rather than historical operating information, for Afya Brazil and for each of IPTAN, IESVAP, CCSI, IESP and FADEP from periods prior to the dates of their respective acquisitions by Afya Brazil in 2018, and, as it relates to IPTAN, IESVAP, CCSI, IESP and FADEP, the information in this table is based on data provided to Afya Brazil by such companies. We believe it is reliable, but it does not form part of our consolidated operating history and it does not represent net revenue as disclosed in our financial statements included elsewhere in this prospectus.

 
  For the Three Months
Ended March 31,
  For the Year Ended
December 31,
 
 
  2019   2019   2018   2018   2018   2017  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 
 
  (except percentages)
 

Medical school programs

    29.3     114.2     84.1     95.0     370.2     268.5  

Other undergraduate health sciences programs

    5.8     22.6     23.9     24.7     96.1     87.5  

Other undergraduate programs(2)

    5.8     22.4     25.6     25.4     99.2     102.5  

Total(A)

    40.8     159.1     133.6     145.1     565.5     458.5  

% Medicine(3)

    71.7 %   71.7 %   63.0 %   65.5 %   65.5 %   58.6 %

% Health sciences programs(4)

    85.9 %   85.9 %   80.8 %   82.5 %   82.5 %   77.6 %

*
Combined tuition fees is the sum equal to the total tuition fees charged to undergraduate students, as recorded in the internal management records of Afya Brazil, IPTAN, IESVAP, CCSI, IESP and FADEP for the three months ended March 31, 2019 and 2018 and for the years ended December 31, 2018 and 2017. These internal management records register the number of students at each school and the tuition fees they have been invoiced for each relevant period, and we are required to maintain them and disclose them annually to the MEC. We use these records to calculate our gross revenue for a given period, which we in turn use to calculate our net revenue for purposes of our financial statements. For the three months ended March 31, 2019 and 2018, the total tuition fees charged to students by Afya Brazil were R$159.1 million and R$66.8 million, respectively. For the years ended December 31, 2018 and 2017, the total tuition fees charged to students by Afya Brazil were R$565.5 million and R$220.3 million, respectively. Combined tuition fees does not include tuition fees we charge graduate students as graduate courses form a small part of our business (they represent less than 1% of our gross tuition fees).

We present combined tuition fees because, given our limited operating history and that our historical and pro forma financial information and operational information included elsewhere

28


Table of Contents

    in this prospectus may not be representative of our results and operations as a consolidated company, we believe it may help investors assess the past operating results of IPTAN, IESVAP, CCSI, IESP and FADEP as combined with Afya Brazil. This metric also shows the percentage of revenues we derive from our medicine and health sciences programs, which are our core business. We present combined tuition fees as the sum of gross tuition fees charged to undergraduate students, which differs from the tuition fees set forth in our financial statements, which are presented as the sum of gross tuition fees charged to undergraduate students, gross tuition fees charged to graduate students and scholarships, and from our pro forma net revenue, which is presented as the sum of gross tuition fees charged to students net of cancellations, discounts and taxes, and which also includes revenue from admission fees and income from leases, among others. Although we have not included CCSI in the pro forma financial information included elsewhere in this prospectus, we have included tuition fee data for CCSI in our combined tuition fees information because we believe that excluding it would distort the trend of this metric, which we view as useful in helping investors assess our business. Combined tuition fee data is not available for CCSI for the year ended December 31, 2017 and for the period from January 1, 2018 to May 30, 2018 (the period prior to our acquisition of CCSI). However, the disaggregated data for number of students and monthly tuition fees amounts from CCSI for those periods is available (as CCSI reports this data to the MEC), and to calculate the CCSI data presented in this table for those periods, we multiplied the number of students enrolled at CCSI by the monthly tuition fees amounts charged for those periods. We believe that the underlying data for CCSI is reliable, as we conducted due diligence on CCSI to confirm the accuracy of that information, including engaging an independent specialist firm to verify the data that CCSI reported to the MEC. The past performance of Afya Brazil, IPTAN, IESVAP, CCSI, IESP and FADEP, as reflected in the combined tuition fees information, may not be indicative of our future performance or any future anticipated synergies, future operating efficiencies or cost savings that may result from the Pro Forma Transactions. For further information, see "Presentation of Financial and Other Information—Combined Tuition Fees."

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 and for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

(2)
Represents all non-health sciences undergraduate programs.

(3)
Calculated as medical school programs divided by the Total (A).

(4)
Calculated as the sum of medical school programs and other undergraduate health sciences programs, divided by the Total (A).

29


Table of Contents


RISK FACTORS

              An investment in our Class A common shares involves a high degree of risk. In addition to the other information in this prospectus, you should carefully consider the following risk factors in evaluating us and our business before making an investment decision and purchasing our Class A common shares. In particular, you should consider the risks related to an investment in companies operating in Brazil and Latin America generally, for which we have included information in these risk factors to the extent that information is publicly available. In general, investing in the securities of issuers whose operations are located in emerging market countries such as Brazil, involves a higher degree of risk than investing in the securities of issuers whose operations are located in the United States or other more developed countries. If any of the risks discussed in this prospectus actually occur, alone or together with additional risks and uncertainties not currently known to us, or that we currently deem immaterial, our business, financial condition, results of operations and prospects may be materially adversely affected. If this were to occur, the value of our Class A common shares may decline and you may lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this prospectus, including our financial statements and the related notes thereto. You should also carefully review the cautionary statements referred to under "Cautionary Statement Regarding Forward-looking Statements." Our actual results could differ materially and adversely from those anticipated in this prospectus.

Certain Risks Relating to Our Business and Industry

We may not be able to identify and acquire new medical higher education institutions or meet our strategic and financial goals in connection with any business acquisition we seek, and difficulties in effectively integrating and managing a growing number of acquisitions may adversely affect our strategic objectives.

              We expect to continue to acquire medical higher education institutions as part of our strategy to expand our operations, including through acquisitions that may be material in size and/or of strategic relevance. We cannot assure you that we will continue to be able to identify post-secondary education institutions focused on medicine that provide suitable acquisition opportunities, or to acquire such institutions on favorable terms when necessary.

              In addition, our previous and any future acquisitions involve a number of risks and challenges that may have a material adverse effect on our business and results, including the following:

    the acquisition may not contribute to our commercial strategy or the image of our institution;

    a future acquisition may be subject to approval by Brazil's Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, or CADE) or other regulatory authorities, which may deny the necessary approvals for, or impose conditions or restrictions on, the acquisition;

    we may face contingent liabilities in connection with, among others things, (i) judicial and/or administrative proceedings of the acquired institutions, including civil, regulatory, tax, labor, social security, environmental and intellectual property proceedings, and (ii) financial, reputational and technical issues, including with respect to accounting practices, financial statement disclosures and internal controls, as well as other regulatory matters, all of which may not be sufficiently indemnifiable under the relevant acquisition agreement;

    the acquisition process may require additional funds and/or may be time consuming and the attention of our management may be diverted from their day-to-day responsibilities and our operations;

    our investments in acquisitions may not generate the expected returns, and we may mismanage administrative and financial resources as part of the integration process;

30


Table of Contents

    the business model of the institutions we acquire may differ from ours, and we may be unable to adapt them to our business model or do so efficiently;

    we may not be able to integrate efficiently and successfully the operations of the institutions we acquire, including their personnel, financial systems, distribution or operating procedures;

    certain acquisitions may impact our financial reporting obligations and the preparation of our consolidated financial statements, resulting in delays to such preparation;

    the acquisitions may generate goodwill, the impairment of which will result in the reduction of our net income and dividends, and our financial statements may be affected as a result of the application of our accounting policies to the results of our acquisitions;

    the transfer of management of the target institution resulting from a change of control or corporate restructuring must be notified to the Brazilian Ministry of Education (Ministério da Educação, or MEC) within 60 days from the consummation of the acquisition, and MEC may impose additional restrictions on its reaccreditation; and

    we may be unable to provide the acquired company with the necessary resources to support its operations and if, by the time of the reaccreditation of the acquired company with the MEC, the MEC finds that we have failed to meet any applicable reaccreditation requirements, it may impose additional restrictions or conditions on the reaccreditation of the acquired company.

              We may require additional funds to continue our expansion strategy. If we are unable to obtain adequate financing on favorable terms to complete any potential acquisition and implement our expansion plans, our growth strategy may be materially and adversely affected.

              In addition, we may face significant challenges in the process of integrating the operations of any acquired companies with our existing business, such as the inability to manage a greater number of geographically dispersed employees and create and implement efficient uniform controls, procedures and policies, in addition to the incurrence of high or unexpected integration costs. As of the date of this prospectus, we have fully integrated the operations of three of our acquisitions and are in the process of integrating the operations of four of our acquisitions with our existing business. The anticipated benefits of the acquisitions we may pursue will not be achieved unless we successfully and efficiently integrate the acquired companies into our operations and effectively manage, market and apply our business strategy to them. We may also be unable to integrate faculty and personnel with different professional experience and from different corporate cultures, and our relationship with current and new employees, including professors, may be impaired. In addition, we may face challenges in entering into successful collective bargaining arrangements with unions due to differences in the negotiation procedures followed in the different geographic regions of the acquired companies. If we are not able to manage our expanded operations and these integrations effectively, our business could be materially adversely affected.

Our revenues are highly concentrated in the tuition fees we charge for our medical courses and other health sciences programs, and any economic, market or regulatory factors adversely affecting such medical courses and health sciences programs could lead to decreased demand in the medical and health courses we offer, which could materially adversely affect us.

              A significant portion of our total tuition fees are currently concentrated in the tuition fees we charge for our medical courses and other health sciences programs across our network. For the three months ended March 31, 2019 and for the years ended December 31, 2018 and 2017, 85.9%, 82.5% and 77.6%, respectively, of total combined tuition fees were derived from tuition fees we or our subsidiaries charged for medical courses and other health sciences programs. Therefore, economic, market or regulatory factors affecting either the amount of tuition fees we are able to charge for the

31


Table of Contents

medical courses and health sciences programs we offer or the ability of our students to pay such tuition fees could result in significantly decreased demand for our services, which could materially adversely affect us.

Changes to the rules or delays or suspension of tuition payments made through FIES may adversely affect our cash flows and our business.

              Some of our students finance their tuition fees through the Higher Education Student Financing Fund (Fundo de Financiamento ao Estudante do Ensino Superior, or FIES) created by the Brazilian federal government, and operated through the National Fund for Educational Development (Fundo Nacional de Desenvolvimento da Educação, or FNDE), which offers financing to low-income students enrolled in undergraduate programs in private higher education institutions. As of 2018, we have adhered to the "New FIES," a new federal program aimed at providing student financing. Similar to the FIES, the New FIES provides financial support for low-income students throughout Brazil, in particular in the North, Northeast and Midwest regions. As a result, our exposure to the risks associated with delays in the transfer of monthly tuition payments from the FIES program operated by the Brazilian federal government, which we calculate by dividing the sum of the combined tuition fees financed through FIES by total combined tuition fees, was 11.9%, 13.0% and 5.5% of total combined tuition fees as of March 31, 2019 and as of December 31, 2018 and 2017, respectively.

              Should (i) the Brazilian federal government terminate or reduce the transfer of monthly payments to our institutions that participate in FIES or New FIES, (ii) the students benefiting from FIES or New FIES fail to meet the requirements for enrollment in the programs or (iii) the Brazilian federal government extend the term to make reimbursements under FIES or New FIES or adversely change their rules, our results of operations and cash flow may be materially adversely affected. We may also experience a decline in revenues and a decline in the number of students at our campuses from the FIES and the New FIES programs.

              Moreover, recent changes to the rules to renew FIES contracts, as well as the shutdown of the system to enter into new student financing agreements, may negatively affect the number of students enrolled in our courses, causing a reduction in our revenues. For more information regarding the changes to FIES contracts, see "Regulatory Overview."

If we lose the benefits of federal tax exemptions provided under the PROUNI program, our business, financial condition and results of operations may be materially adversely affected.

              Some of our students participate in the University for All Program (Programa Universidade para Todos, or PROUNI program). Through the PROUNI program, the Brazilian federal government grants a number of full and partial scholarships to low-income post-secondary education students. As a result of our participation in the PROUNI program, we benefit from certain federal tax exemptions relating to bachelor's and associate's degree programs, such as (i) income tax, (ii) Social Contribution Tax on Gross Revenue (Programa de Integração Social, or PIS), (iii) Social Security Financing Tax on Gross Revenue (Contribuição para o Financiamento da Seguridade Social, or COFINS), and (iv) Social Contribution Tax on Net Profit (Contribuição Social sobre o Lucro Líquido, or CSLL), regarding our revenues from undergraduate and associate programs.

              We may be disqualified from the PROUNI program and lose our tax exemptions if we do not comply with certain requirements, such as providing total or partial scholarships for a percentage of students who paid their tuition in the previous year, granting partial scholarships, submitting to MEC semi-annual records of attendance, achievement and drop-out of students receiving scholarships, among others. See "Regulatory Overview." If we lose our tax exemptions or are unable to comply with other, more stringent requirements that may be introduced in the future, our business, financial condition and results of operations could be materially adversely affected.

32


Table of Contents

              There is a risk that additional changes in tax laws may prohibit, interrupt or modify the use of existing tax exemptions, and we cannot assure that we will fully maintain such tax and other benefits related to PROUNI in the event the tax laws are amended further. Any suspension, accelerated default, repayment or inability to renew our tax exemptions may have an adverse effect on our results of operations. If we lose our tax exemptions and incentives, if we are unable to comply with future requirements or if changes in the law limit our ability to maintain these tax benefits, our business, financial condition, as well as the results of our operations may be significantly and adversely affected.

Our limited operating history as a consolidated company, our recent acquisitions and the comparability of our results may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects.

              Our limited operating history as a consolidated company and recent acquisitions may make it difficult for you to evaluate our business, financial condition, results of operations and prospects. Because the historical and pro forma financial information included elsewhere in this prospectus may not be representative of our results as a consolidated company, investors may have limited financial information on which to evaluate us, their investment decision and our prior performance. Our results of operations for the three months ended March 31, 2019 are not directly comparable to our results of operations for the three months ended March 31, 2018, and our results of operations for the year ended December 31, 2018 are not directly comparable to our results of operations for the year ended December 31, 2017, due to the effects of the Pro Forma Transactions. See "Unaudited Pro Forma Condensed Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Unaudited Supplemental Pro Forma Information For The Year Ended December 31, 2017." Any statistical or operating data, or tuition fees information derived from internal management records included in this prospectus, as it relates to the acquired businesses prior to the dates of their respective acquisitions by Afya Brazil, is based on data provided to Afya Brazil by such companies. We believe such statistical and operating data, as well as such internal management records, is reliable, but such data and records does not form part of our consolidated operating history. Our ability to forecast our future operating results, including revenue, cash flows and profitability, as well as the operational inefficiencies that we may face as we continue to integrate the companies acquired pursuant to the Pro Forma Transactions, is limited and subject to a number of uncertainties. Moreover, past performance is no assurance of future returns.

The unaudited pro forma financial information included in this prospectus is presented for illustrative purposes only and may not be indicative of our combined financial condition or results of operations after giving effect to the Pro Forma Transactions.

              The unaudited pro forma financial information contained in this prospectus is presented for illustrative purposes only, is based on various adjustments, assumptions and preliminary estimates, and may not be indicative of our combined financial condition or results of operations after giving effect to the Pro Forma Transactions. See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information included elsewhere in this prospectus. Our actual financial condition and results of operations after giving effect to the Pro Forma Transactions may not be consistent with, or evident from, our unaudited pro forma financial information. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations after giving effect to the Pro Forma Transactions.

33


Table of Contents

The interests of our management team may be focused on the short-term market price of our Class A common shares, which may not coincide with your interests.

              Our directors and officers, among others, own shares in the Company and are beneficiaries under our stock option plans. We implemented our stock option plan in 2018. Due to the issuance of stock options to members of our management team, a significant portion of their compensation is closely tied to our results of operations and, more specifically to the trading price of our Class A common shares, which may lead such individuals to direct our business and conduct our activities with an emphasis on short-term profit generation. As a result of these factors, the interests of our management team may not coincide with the interests of our other shareholders that have longer-term investment objectives.

              We have approved share-based incentive plans for our managers and employees. Some of these plans provide for the granting of stock options to participants. Once the options have been exercised by the participants, our board of directors will determine whether our capital stock should be increased through the issuance of new shares to be subscribed by participants, or if they will be settled through shares held in treasury. In the event settlement occurs through the issuance of new shares, our shareholders will suffer dilution of their interests in our share capital and in the value of their investments.

              Following the consummation of this offering, we intend to establish a new equity incentive plan, which will govern issuances of equity incentive awards following the closing of this offering. We intend to reserve up to 4% of our common shares for issuance under our equity incentive plan.

              In case of new stock option grants, whether under existing plans or new plans that may be approved by our shareholders at the shareholders' meeting, our shareholders will be subject to additional dilution. For additional information on our stock option plan, see "Management—Compensation of Directors and Officers" for additional information.

An increase in delays and/or defaults in the payment of tuition fees may adversely affect our income and cash flows.

              We depend on the full and timely payment of the tuition we charge our students, including tuition payments we receive through FIES, which is largely outside of our control. An increase in payment delinquency or default by our students may have a material adverse effect on our cash flows and our business, including our ability to meet our obligations. Our allowance for doubtful accounts expenses as a percentage of our net revenues was 2.6%, 2.3% and 1.3% for the three months ended March 31, 2019 and for the years ended December 31, 2018 and 2017, respectively.

Difficulties in identifying, opening and efficiently managing new campuses or in obtaining regulatory authorizations and accreditations on a timely basis as part of our organic growth strategy may adversely affect our business.

              Our organic strategy includes expanding by opening new campuses and integrating them into our educational network. This growth plan creates significant challenges in terms of maintaining our teaching quality and culture, as a result of the complexity and difficulty of effectively managing a greater number of campuses and programs. If we are unable to maintain our current quality standards, we may lose market share and be adversely affected.

              Establishing new campuses poses important challenges and requires us to make significant investments in infrastructure, marketing, personnel and other pre-operational expenses, mainly identifying new sites for lease or purchase. We prioritize identifying strategic sites, negotiating the purchase or lease of properties, building or refurbishing facilities (including libraries, laboratories and

34


Table of Contents

classrooms), obtaining local permits, hiring and training faculty and staff and investing in administration and support.

              We are also required to register our new campuses with MEC, before opening and operating them, as well as having our new programs accredited by MEC in order to issue official degrees and certificates to our students. If we do not succeed in identifying and establishing our campuses in a cost-effective manner or in obtaining such authorizations or accreditations on a timely basis, or if MEC imposes restrictions or conditions on our accreditation requests for new campuses, our business may be adversely affected.

We may not be able to successfully expand our presence and performance in the distance learning segment.

              We may face difficulties in successfully operating our distance learning program and in implementing and investing in the technologies necessary to operate a successful distance learning program, where the technological needs, the expectations of our customers and market standards change rapidly. We have to quickly modify our products and services to adapt to new distance learning technologies, practices and standards. We may be adversely affected if current or future competitors introduce products or service platforms that are superior to those we offer, or if our resources are not adequate to develop and adapt our technological capabilities rapidly enough to maintain our competitive position.

              In addition, the success of our distance learning programs depends on the general population having easy and affordable access to the internet, as well as on other technological factors that are outside of our control. If the internet becomes inaccessible or access costs increase to levels higher than current prices, or if the number of students interested in distance learning educational methods does not increase, we may be unable to successfully implement our distance learning program strategy, which would have an adverse effect on our growth strategy.

We face significant competition in each program we offer and each geographic region in which we operate. If we fail to compete efficiently, we may lose market share and our profitability may be adversely affected.

              We compete with various public and private post-secondary education institutions, including distance learning institutions. Our competitors may offer programs or courses similar to or better than those offered by us, have access to more funds, be more prestigious or well-regarded within the academic community, have more conveniently located campuses with better infrastructure, or charge lower tuition. In addition, on April 5, 2018, MEC issued Ordinance No. 328/18, pursuant to which, among other measures, MEC imposed a five year suspension on the granting of authorizations for the creation of new medical education courses. Accordingly, institutions cannot create and implement new undergraduate medical education courses until April 2023. In the event MEC lifts these restrictions prior to April 2023, this may result in the creation of new medical education courses, which will in turn increase competition and may create greater pricing or operating pressure on us. Accordingly, and to compete effectively, we may be required to reduce our tuition or increase our operating expenses (including our costs per student) in order to retain or attract students or to pursue new market opportunities. Furthermore, we were recently awarded seven new undergraduate campuses as part of the "Mais Médicos" program, all of which are located in remote regions of Brazil. We cannot assure you that there will be sufficient student demand to fill all medical school seats available on such campuses.

              As a result of the foregoing, our revenues and profitability may decrease. We cannot assure you that we will be able to compete successfully against our current or future competitors. If we are unable to maintain our competitive position or otherwise respond to competitive pressures effectively, we may lose our market share, our profits may decrease and we may be adversely affected.

35


Table of Contents

We may not be able to update, improve or offer the content of our existing programs to our students on a cost-effective basis.

              To differentiate ourselves and remain competitive, we must continually update our courses and develop new educational programs, including through the adoption of new technological tools. Updates to our current courses and the development of new educational programs may not be readily accepted by our students or by the market. Also, we may not be able to introduce new educational programs at the same pace as our competitors or at the pace required by the labor market. If we do not adequately modify our educational programs in response to market demand, whether due to financial restrictions, unusual technological changes or otherwise, our ability to attract and retain students may be impaired and we may be materially adversely affected.

If we continue to grow, we may not be able to appropriately manage the expansion of our business and staff, the increased complexity of our software and platforms, or grow in our addressable market.

              We are currently experiencing a period of significant expansion and are facing a number of expansion-related issues, such as the acquisition and retention of experienced and talented personnel, cash flow management, corporate culture and efficacy of internal controls, among others. These issues and the significant amount of time spent on addressing them may result in the diversion of our management's attention from other business issues and opportunities. In addition, we believe that our corporate culture and values are critical to our success, and we have invested a significant amount of time and resources building them. If we fail to preserve our corporate culture and values, our ability to recruit, retain and develop personnel and to effectively implement our strategic plans may be harmed.

              We must constantly update our software, enhance and improve our billing, transaction and other business systems, and add and train new software designers and engineers, as well as other personnel. This process is time intensive and expensive, and may lead to higher costs in the future. Furthermore, we may need to enter into relationships with various strategic partners other online service providers and other third parties necessary to our business. The increased complexity of managing multiple commercial relationships could lead to execution problems that can affect current and future revenues, and operating margins.

              We cannot assure you that our current and planned platform and systems, procedures and controls, personnel and third-party relationships will be adequate to support our future operations. In addition, our current expansion has placed significant strain on management and on our operational and financial resources, and this strain is expected to continue. Our failure to manage growth effectively could seriously harm our business, results of operations and financial condition.

The ability to attract, recruit, retain and develop key personnel and qualified employees is critical to our success and growth. If we lose key personnel, our business, financial condition and results of operations may be adversely affected.

              In order for us to successfully compete and grow, we must attract, recruit, retain and develop the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of our key personnel who have substantial experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace key current personnel who depart with qualified or effective successors. We must continue to hire additional personnel to execute our strategic plans. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. We cannot assure that qualified employees will continue to be

36


Table of Contents

employed, that we will manage them successfully, or that, in the future, we will be able to attract qualified personnel with similar skills and expertise at equivalent cost and retain them.

              We are also dependent upon the ability and experience of a number of our key personnel who have substantial experience with our operations. Many of our key personnel have worked for us for a significant amount of time or were recruited by us specifically due to their industry experience. It is possible that the failure to retain or attract the services of one or a combination of our senior executives or key managers could have a material adverse effect on our business, financial condition and results of operations.

Any increase in the attrition rates of students in our education programs may adversely affect our results of operations.

              We believe that our attrition rates are primarily related to the personal motivation and financial situation of our current and potential students, as well as to socioeconomic conditions in Brazil. Our attrition rate was 18.2% for the year ended December 31, 2018. Significant changes in future attrition rates and/or failure to re-enroll may affect our enrollment numbers, which may have a material adverse effect on our revenues and our results of operations.

We could be adversely affected if we are unable to renegotiate collective bargaining agreements with the labor unions representing our professors and administrative employees or by strikes and other union activity.

              Our payroll costs and expenses account for the majority of the costs of the services and general and administrative expenses, or 66.7%, 65.8% and 65.1% of such costs and expenses for the three months ended March 31, 2019 and for the years ended December 31, 2018 and 2017, respectively. Our faculty and administrative employees are represented by labor unions in the higher education sector and are covered by collective bargaining agreements or similar arrangements determining the number of working hours, minimum compensation, vacations and fringe benefits, among other terms. These agreements are subject to annual renegotiation and may be so modified. We could also be adversely affected if we fail to achieve and maintain cooperative relationships with our professors' or administrative employees' unions or face strikes, stoppages or other labor disruptions by our professors or employees. In addition, we may not be able to pass on any increase in costs arising from the renegotiation of collective bargaining agreements to the monthly tuition fees paid by students, which may have a material adverse effect on our business.

We may be held liable for extraordinary events that may occur at our campuses, which may have an adverse effect on our image and, consequently, our results of operations.

              We may be held liable for the actions of officers, directors, professors or other employees at our campuses, including allegations of noncompliance by officers, directors, professors or other employees with specific legislation and regulations implemented by MEC relating to our programs. In the event of accidents, injuries or other damages affecting students, professors, other employees or third parties at our campuses, we may face claims alleging that we were negligent, provided inadequate supervision or were otherwise liable for the injury. We may also be subject to claims alleging that officers, directors, professors or other employees committed moral or sexual harassment or other unlawful acts. Our insurance coverage may not cover certain indemnifications we may be required to pay, be insufficient to cover these types of claims, or may not cover certain acts or events. We may also not be able to renew our current insurance policies under the same terms. Such liability claims may affect our reputation and harm our financial results. In addition, we may also be subject to legal proceedings by current and/or former students alleging breaches of rights granted by the Brazilian Consumer Protection (Código de Defesa do Consumidor), and to legal proceedings by current and/or former employees alleging breaches of applicable labor laws. Even if unsuccessful, these claims may cause negative publicity, reduce enrollment numbers, increase drop-out rates, entail substantial

37


Table of Contents

expenses and divert the time and attention of our management, materially adversely affecting our results of operations and financial condition.

We may face restrictions and penalties under the Brazilian Consumer Protection Code in the future.

              Brazil has a series of strict consumer protection laws, referred to collectively as the Consumer Protection Code (Código de Defesa do Consumidor). These laws apply to all companies in Brazil that supply products or services to Brazilian consumers. They include protection against misleading and deceptive advertising, protection against coercive or unfair business practices and protection in the formation and interpretation of contracts, usually in the form of civil liabilities and administrative penalties for violations.

              These penalties are often levied by the Brazilian Consumer Protection Agencies (Fundação de Proteção e Defesa do Consumidor, or PROCONs), which oversee consumer issues on a district-by-district basis. Companies that operate across Brazil may face penalties from multiple PROCONs, as well as from the National Secretariat for Consumers (Secretaria Nacional do Consumidor, or SENACON). Companies may settle claims made by consumers via PROCONs by paying compensation for violations directly to consumers and through a mechanism that allows them to adjust their conduct, called a conduct adjustment agreement (Termo de Ajustamento de Conduta, or TAC).

              Brazilian public prosecutors may also commence investigations of alleged violations of consumer rights and require companies to enter into TACs. Companies that violate TACs face potential enforcement proceedings and other potential penalties such as fines, as set forth in the relevant TAC. Brazilian public prosecutors may also file public civil actions against companies who violate consumer rights or competition rules, seeking strict adherence to the consumer protection laws and compensation for any damages to consumers. In certain cases, we may also face investigations and/or sanctions by the CADE, in the event our business practices are found to affect the competitiveness of the markets in which we operate or the consumers in such markets.

Any change or review of the tax treatment of our activities, or the loss or reduction in tax benefits on the sale of books (including digital content) may materially adversely affect us.

              We benefit from Brazilian Federal Law No. 10,865/2004, as amended by Brazilian Federal Law No. 11,033/2004, which establishes a zero rate for PIS and COFINS on the sale of books. The sale of books is also exempt by the Brazilian constitution from Brazilian municipal taxes, Brazilian services tax (Imposto Sobre Serviços, or ISS) and from the Brazilian tax on the circulation of goods, interstate and intercity transportation and communication services (Imposto sobre Operações relativas à Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação, or ICMS). If the Brazilian government or any Brazilian municipality or tax authority or the Brazilian courts decide to change or review the tax treatment of our activities, or cancel or reduce the tax benefit applied on the sale of books (including digital books and e-readers) and/or challenge it, and we are unable to pass any cost increase onto our students, our results may be materially adversely affected.

If we are unable to maintain consistent educational quality throughout our network, including the education materials of our post-secondary education institutions, or keep or adequately train our faculty members, we may be adversely affected.

              Our teaching faculty, including teachers and professors at our post-secondary education institutions, is essential for maintaining the quality of our programs and the strength of our brand and reputation. We promote training in order for our faculty to attain and maintain the qualifications we require and for us to provide updating programs on trends and changes in their areas. Due to shortages in the supply of qualified professors, competition for hiring and retaining qualified

38


Table of Contents

professionals has increased substantially. We cannot assure you that we will succeed in retaining our current professors or recruiting or training new professors who meet our quality standards, particularly as we continue to expand our operations.

              The quality of our academic curricula and the infrastructure of our campuses are also key elements of the quality of the education we provide. We cannot assure you that we will succeed in identifying facilities with adequate infrastructure for our new campuses, develop adequate infrastructure in properties we acquire or have enough resources to continue expanding through acquisitions or development of new projects. In addition, we cannot assure you that we will be able to develop academic curricula for our new programs with the same levels of excellence as existing programs and meeting the standards set forth by MEC. Shortages of qualified professors, adequate infrastructure or quality academic curricula for new programs according to our business model and the parameters set forth by MEC, may have a material adverse effect on our business.

Our business depends on the continued success of the brands of each of our institutions, as well as the "Afya" brand, and if we fail to maintain and enhance recognition of our brands, we may face difficulty enrolling new students, and our reputation and operating results may be harmed.

              We believe that market awareness of our brands has contributed significantly to the success of our business. Maintaining and enhancing our brands is critical to our efforts to grow student enrollments. Failure to maintain and enhance our brand recognition could have a material and adverse effect on our business, operating results and financial condition. We have devoted significant resources to our brand promotion efforts in recent years, but we cannot assure you that these efforts will be successful. If we are unable to further enhance our brand recognition, or if we incur excessive marketing and promotion expenses, or if our brand image is negatively impacted by any negative publicity, our business and results of operations may be materially and adversely affected.

If we are not able to maintain our current MEC evaluation ratings and the evaluation ratings of our students, we may be adversely affected.

              We and our students are regularly evaluated and rated by MEC. If our campuses, programs or students receive lower scores from MEC than in previous years in any of its evaluations, including the IGC (Índice Geral de Cursos), and the Student Performance National Exam (Exame Nacional de Desempenho de Estudantes, or ENADE), we may experience a reduction in enrollments and be adversely affected by perceptions of decreased educational quality, which may negatively affect our reputation and, consequently, our results of operations and financial condition.

              Finally, in the event that any of our programs receive unsatisfactory evaluations, the post-secondary education institution offering the programs may be required to enter into an agreement with MEC setting forth proposed measures and timetables to improve the program and remedy the unsatisfactory evaluation. Noncompliance with the terms of the agreement may result in additional penalties on the institution. These penalties could include, but are not limited to, suspending our ability to enroll students in our programs, denial of accreditation or re-accreditation of our institutions or prohibiting us from holding regular class sessions, all of which can adversely affect our results of operations and financial condition.

We are subject to supervision by MEC and, consequently, may suffer sanctions as a result of noncompliance with any regulatory requirements.

              Brazilian Federal Law No. 10,861/2004, regulated by Decree No. 9,235/2017, implemented the activities of supervision of post-secondary education entities and courses in the Brazilian federal education system. The Secretariat for Regulation and Supervision of Post-Secondary Education, or

39


Table of Contents

SERES, of MEC is responsible for the regular and special supervision of the corresponding courses and programs.

              Regular supervision derives from complaints and allegations by students, parents and faculty members, as well as by public entities and the press. These complaints and allegations involve specific cases of entities with courses showing evidence of irregularities or deficiencies. We are subject to those complaints and representations. Special supervision, on the other hand, may be commenced by MEC itself, based on its post-secondary education regularity and quality standards, and involves more than one course or entity, grouped according to the criteria chosen for the special supervision. These criteria may include unsatisfactory results in the ENADE and the Difference Indicator between Expected and Actual Performance (Indicador de Diferença entre os Desempenhos Observado e Esperado), among other quality indicators, the history of course evaluations by INEP, as well as compliance with specific legal requirements as, for example, the minimum ratio between faculty members with master's or doctorate degrees.

              Administrative irregularities can include, among others: (i) unlicensed or irregular post-secondary courses; (ii) any outsourcing of post-secondary education activities; (iii) the failure to file a re-accreditation or recognition or renewal request with respect to post-secondary education courses within the time periods enacted by MEC pursuant to Decree No. 9,235/2017; and (iv) failure to comply with any penalties imposed by the MEC.

              If MEC concludes, as part of its supervisory activities, that an irregularity constitutes an imminent risk or threat to students or the public interest, it may impose the following measures on the relevant educational institution for a period to be determined by SERES: (i) suspend the admission of new students; (ii) suspend the offering of undergraduate or postgraduate lato sensu courses; (iii) suspend the institution's discretionary ability to, among other things, create new post-secondary courses and establish course curricula, if applicable; (iv) suspend the license to establish new distance learning programs; (v) override any ongoing regulatory requests filed by the institution and prohibit new regulatory requests; (vi) suspend participation in the New FIES; (vii) suspend participation in PROUNI; and (viii) suspend or restrict participation in other federal education programs. The educational institution can contest the MEC's findings by filing motions with MEC or with Brazilian courts.

              Upon completion of the supervisory process and to the extent MEC concludes that there are administrative irregularities, SERES may apply the penalties provided for by Law No. 9,394/1996, namely (i) discontinue courses; (ii) directly intervene in the educational institution; (iii) temporarily suspend the institution's discretionary ability to, among other things, create new post-secondary courses and establish course curricula, if applicable; (iv) disqualify the institution as an educational institution; (v) reduce the number of student vacancies; (vi) temporarily suspend new student enrollments; or (vii) temporarily suspend courses.

The post-secondary education sector is highly regulated, and our failure to comply with existing or future laws and regulations could significantly impact our business.

              We are subject to various federal laws and extensive government regulations by MEC, Conselho Nacional de Educação (National Education Council, or CNE), INEP, FIES and the National Post-secondary Education Assessment Commission (Comissão Nacional de Avaliação da Educação Superior, or CONAES), among others, including, but not limited to Law No. 12,871, of October 22, 2013, which created the "Mais Médicos" program.

              Brazilian education regulations define three types of post-secondary education institutions: (i) colleges, (ii) university centers and (iii) universities. The three categories depend on previous accreditation by MEC to operate. Colleges differ from the other categories with respect to the programs offered, as colleges depend on previous authorization from MEC to implement new

40


Table of Contents

programs, while university centers and universities are not subject to such requirements, except for courses in law, medicine, psychology, nursing and dentistry, which require the prior approval of MEC.

              All accredited educational institutions require the prior approval of MEC to create campuses outside their headquarters. All post-secondary education programs must be recognized by MEC as a requirement, together with registration of the program, to validate the diplomas issued by them. However, pursuant to article 101 of Ordinance No. 23/2017 of MEC, issued diplomas may be valid even if the program is not formally recognized by MEC, so long as the educational institution has filed the request with MEC to certify the program, and the request is pending formal review and approval by MEC. As a result, any failure to comply with legal and regulatory requirements by post-secondary education entities may result in the imposition of sanctions by MEC, as well as damage to the program's reputation.

              MEC must authorize our campuses located outside our headquarters before they can start their operations and programs. For further information, see "Regulatory Overview." Distance learning programs, as well as on-campus learning, are also subject to strict accreditation requirements for their implementation and operation. We must comply with all such requirements in order to obtain and renew all authorizations.

              We cannot assure you we will be able to comply with these regulations and maintain the validity of our authorizations, enrollments and accreditations in the future. If we fail to comply with these regulatory requirements, MEC could place limitations on our operations, including cancellation of programs, reduction in the number of positions we offer to students, termination of our ability to issue degrees and certificates and revocation of our accreditation, any of which could adversely affect our financial condition and results of operations.

              We cannot assure you that we will obtain accreditation or re-accreditation of our post-secondary education institutions, or that our courses will receive authorization or re-authorization as scheduled, or that they will have all of the accreditations, re-accreditations, authorizations and re-authorizations required by MEC. The absence of such accreditations and authorizations or any delays in obtaining them could adversely affect our financial condition and results of operations.

              As of the date of this prospectus, two of the seven authorizations awarded to us in 2018 in connection with the "Mais Médicos" program are suspended by court order, as they are the subject of proceedings filed by certain of our competitors against MEC challenging the results of the public procurement for those authorizations. See "Business—Legal Proceedings—"Mais Médicos" Proceedings." We cannot guarantee that the results of these proceedings will be favorable to us and that our competitors will not challenge the results of any other public procurement related to the "Mais Médicos" program. If any of these or other authorizations we obtained in connection with the "Mais Médicos" program are withdrawn or modified by the relevant authorities, we could be adversely affected.

              In addition, we may also be adversely affected by any changes in the laws and regulations applicable to post-secondary education institutions, particularly by changes related to: (1) any revocation of accreditation of private educational institutions; (2) the imposition of controls on monthly tuition payments or restrictions on profitability of private educational institutions; (3) faculty credentials; (4) academic requirements for courses and curricula; (5) infrastructure requirements of campuses, such as libraries, laboratories and administrative support; (6) the "Mais Médicos" Program; and (7) the promulgation by the MEC of new rules and regulations affecting post-secondary education, in particular with respect to distance learning programs. We may be materially adversely affected if we are unable to obtain these authorizations, accreditations and course recognitions in a timely manner, if we cannot introduce new courses as quickly as our competitors or if we are not able to or do not comply with any new rules or regulations promulgated by the MEC.

41


Table of Contents

Our success depends on our ability to operate in strategically located property that is easily accessible by public transportation.

              We believe that urban mobility, inadequate public transportation systems and high transportation costs in many Brazilian cities make the location and accessibility of campuses a decisive factor for students choosing an educational institution. Therefore, a key component of the success of our business consists in finding, renting and/or buying strategically located property that meets the needs of our students. We cannot guarantee that we will be able to keep our current property or acquire new property that is strategically located in the future. In addition, acquisition costs, costs associated with improvements, construction, and repairs of existing properties and rental values for the properties we use might increase in the future and could have a material adverse effect on our business. Finally, due to demographic and socioeconomic changes in the regions in which we operate, we cannot guarantee that the location of our campuses will continue to be attractive and convenient to students.

Failure to protect or enforce our intellectual property and other proprietary rights could adversely affect our business and financial condition and results of operations.

              We rely and expect to continue to rely on a combination of trademark, copyright, patent and trade secret protection laws, as well as confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships to protect our intellectual property and proprietary rights. As of the date of this prospectus, we had no issued patents and one patent application pending in Brazil. We are party to 92 agreements, with third-party authors with respect to educational content. We own 26 trademark registrations. As of March 31, 2019, we owned 104 registered domain names in Brazil. We also have 50 pending trademark applications in Brazil as of the date of this prospectus and unregistered trademarks that we use to promote our brand. From time to time, we expect to file additional patent, copyright and trademark applications in Brazil and abroad. Nevertheless, these applications may not be approved or otherwise provide the full protection we seek. Any dismissal of our "AFYA" trademark application may impact our business. Third parties may challenge any patents, copyrights, trademarks and other intellectual property and proprietary rights owned or held by us. Third parties may knowingly or unknowingly infringe, misappropriate or otherwise violate our patents, copyrights, trademarks and other proprietary rights and we may not be able to prevent infringement, misappropriation or other violation without substantial expense to us.

              Furthermore, we cannot guarantee that:

    our intellectual property and proprietary rights will provide competitive advantages to us;

    our competitors or others will not design around our intellectual property or proprietary rights;

    our ability to assert or enforce our intellectual property or proprietary rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;

    our intellectual property and proprietary rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;

    any of the patents, trademarks, copyrights, trade secrets or other intellectual property or proprietary rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned; or

    we will not lose the ability to assert or enforce our intellectual property or proprietary rights against or to license our intellectual property or proprietary rights to others and collect royalties or other payments.

42


Table of Contents

              If we pursue litigation to assert or enforce our intellectual property or proprietary rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property or proprietary rights, limit the value of our intellectual property or proprietary rights or otherwise negatively impact our business, financial condition and results of operations. If the protection of our intellectual property and proprietary rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused in the marketplace and our ability to attract customers may be adversely affected.

We may in the future be subject to intellectual property claims, which are costly to defend and, if we do not succeed in defending such claims, could harm our business, financial condition and operating results.

              From time to time, third parties may allege in the future that we or our business infringes, misappropriates or otherwise violates their intellectual property or proprietary rights, including with respect to our publications. Many companies, including various "non-practicing entities" or "patent trolls," are devoting significant resources to developing or acquiring patents that could potentially affect many aspects of our business. We have not exhaustively searched patents related to our technology. In addition, the publishing industry has been, and we expect in the future will continue to be, the target of counterfeiting and piracy. We may implement measures in an effort to protect against these potential liabilities that could require us to spend substantial resources. Any costs incurred as a result of liability or asserted liability relating to sales of unauthorized or counterfeit educational materials could harm our business, reputation and financial condition.

              Third parties may initiate litigation against us without warning. Others may send us letters or other communications that make allegations without initiating litigation. We have in the past and may in the future receive such communications, which we assess on a case-by-case basis. We may elect not to respond to the communication if we believe it is without merit or we may attempt to resolve disputes out-of-court by electing to pay royalties or other fees for licenses. If we are forced to defend ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and management personnel, inability to use our current website or inability to market our service or merchandise our products. As a result of a dispute, we may have to develop non-infringing technology, including partially or fully revise any publication that infringes intellectual property rights, enter into licensing agreements, adjust our merchandising or marketing activities or take other action to resolve the claims. These actions, if required, may be unavailable on terms acceptable to us or may be costly or unavailable. If we are unable to obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices, as appropriate, on a timely basis, our reputation or brand, our business and our competitive position may be affected adversely and we may be subject to an injunction or be required to pay or incur substantial damages and/or fees and/or royalties.

              Most of our services are provided using proprietary software and our software is mainly developed by our employees, who assign to us their copyrights over the software. In this regard, though applicable law establishes that employers shall have full title over rights relating to software developed by their employees, we could be subject to lawsuits by former employees claiming ownership of such software. As a result, we may be required to obtain licenses of such software, incurring costs relating to payments of royalties and/or damages and we may be forced to cease the use of such software. If we are unable to use certain of our proprietary software as a result of any of the foregoing or otherwise, this could have a material adverse effect on our business, financial condition and results of operations.

              In addition, we use open source software in connection with certain of our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging the ownership of open source software and/or compliance with open source

43


Table of Contents

license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Some open source software licenses require users who distribute or use open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. Any requirement to disclose our proprietary source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations.

Unfavorable decisions in our legal, arbitration or administrative proceedings may adversely affect us.

              We are, and we, our controlling shareholders, directors or officers may be in the future, party to legal, arbitration and administrative investigations, inspections and proceedings arising from the ordinary course of our business or from nonrecurring corporate, tax, criminal or regulatory events, involving our suppliers, students, faculty members, as well as environmental, competition and tax authorities, especially with respect to civil, tax, criminal and labor claims. We cannot guarantee that the results of these proceedings will be favorable to us or that we have made sufficient provisions for liabilities that may arise as a result of these or other proceedings. Adverse decisions on material legal, arbitration or administrative proceedings may damage our reputation and may adversely affect our results of operations and the price of our Class A common shares.

              In addition, Mr. Nicolau Carvalho Esteves, our chairman and one of our controlling shareholders, is currently party to a public civil proceeding filed by the federal prosecutor's office against Mr. Carvalho Esteves and other individuals in connection with certain irregular administrative acts alleged to have taken place during each of their respective terms as Health Secretary of the State of Tocantins (Secretário de Saúde do Estado de Tocantins) between 2012 and 2014, a position held by Mr. Carvalho Esteves for a period of four months, from March 9, 2012 to July 20, 2012. If Mr. Carvalho Esteves is found liable, he may be subject to penalties, including a three year prohibition on him or any legal entity under his control transacting with public entities or being granted tax incentives/benefits, including Afya. We cannot guarantee that the results of these proceedings will be favorable to Mr. Carvalho Esteves and any adverse decision may (i) damage our reputation, (ii) disqualify us from participating in the PROUNI program, and consequently cause us to lose our current tax incentives/benefits, including with respect to (a) corporate income tax (IRPJ) and CSLL rates, which were at an aggregate effective tax rate of 4% for the year ended December 31, 2018 and which would gradually increase to an aggregate effective tax rate of up to 34%, and (b) PIS and COFINS rates, which are currently zero and which would gradually increase to an aggregate tax rate of up to 3.65%, (iii) result in our suspension from the New FIES program which would prohibit our institutions from enrolling new students that are funded by FIES (for the year ended December 31, 2018, FIES represented 13.0% of our combined tuition fees), and (iv) prevent us from entering into new agreements with public entities located in Brazil, any of which may have an adverse effect on our business, reputation, results of operations and the price of our Class A common shares. For further information, see "Management—Legal Proceedings."

We are currently in the process of obtaining or renewing local licenses and permits, including licenses from the fire department, for some of the real estate we use. Failure to obtain renewals of these licenses and permits on a timely manner may result in penalties, including closures of some of our campuses.

              The use of all of our buildings, including our operational and administrative buildings, is subject to the successful issuance of an occupancy permit (Habite-se), or equivalent certificate, issued by the municipality where the property is located, certifying that the building was constructed in compliance with applicable zoning and municipal regulations. In addition, nonresidential properties are required to have a use and operations license and/or permit, issued by the competent municipality, and a fire department inspection certificate, issued by the fire department, prior to being used regularly.

44


Table of Contents

              We are currently in the process of obtaining and/or renewing these licenses for some of the real estate we use. The absence of such licenses may result in penalties ranging from fines to forced demolition of the areas that were not built in compliance with applicable codes or, in the worst case scenario, the temporary or permanent closure of the campus or branch lacking the licenses and permits to the extent the relevant penalties and fines have not been paid and the licenses and permits have not been obtained following notifications from the relevant authorities. Any penalties imposed, and in particular the forced closure of any of our campuses or branches, may result in a material adverse effect on our business. Moreover, in the event of any accident at our campuses or branches, the lack of such licenses may result in civil and criminal liability, as well as cause the cancellation of insurance policies, if any, for the respective campus or branch and may damage our reputation.

We may not be able to maintain or renew our existing leases.

              We lease substantially all of the properties on our campuses. According to Brazilian lease laws, a lessee has the right to renew existing leases for subsequent terms equal to the original term of the lease. In order for a lessee to enforce this right, the following criteria must be met (i) the non-residential lease agreement must have a fixed term equal to or greater than five consecutive years, or, in the event there is more than one agreement or amendment thereto regarding the same real estate, the aggregate term in such agreement or amendment must be greater than five consecutive years (ii) the lessee must have been using the property for the same purpose for a minimum and continuous period of three years and (iii) the lessee must claim the right of automatic renewal at the most one year and at least six months prior to the end of the term of the lease agreement.

              Lease agreements with terms lasting less than five years are not entitled to a right of renewal and, as a result the lessor has the right to refuse renewal of the lease upon expiration of its term. The lease agreements relating to our campuses generally have terms lasting from five to 20 years and are renewable in accordance with applicable Brazilian lease laws. If we are forced to close any of our campuses due to the termination of a lease agreement and our inability to renew the lease, our business and results of operations may be adversely affected.

              In addition, most of our lease agreements are not registered with the relevant real estate registries. We therefore do not have a right of first refusal over the applicable property in the event of a sale by its landlord and the subsequent purchaser may require that we vacate the property.

Acquisitions of educational institutions, in certain circumstances, must be approved by the Administrative Council for Economic Defense.

              Brazilian legislation provides that acquisitions of educational institutions meeting certain requirements must be approved by Brazil's Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, or CADE) prior to the completion of the acquisition if one of the companies or group of companies involved has gross annual revenues in Brazil of at least R$750.0 million in the year immediately prior to the acquisition and any other party or group of companies involved has gross income of at least R$75.0 million in that same period. As part of this process, CADE must determine whether the specific operation affects the competitiveness of the market in question or the consumers in such markets. CADE may not approve our future acquisitions or may condition approval of our acquisitions on our disposal of some of the operations of the target of the acquisition, or impose restrictions on the operations and commercialization of the target. Failure to obtain approval for future acquisitions or any conditional approvals of future acquisitions may result in expenses that may adversely affect our results of operations and financial condition. As a result of our growth strategy through acquisitions of new entities, we may need additional funds to implement our strategy. Therefore, if we cannot obtain adequate financing to conclude any potential acquisition and implement our expansion plans, our growth strategy will be affected.

45


Table of Contents

Some of the properties that we occupy are owned by companies controlled by one of our controlling shareholders. Therefore, we are exposed to conflicts of interest, since the administration of such properties may conflict with our interests, those of such controlling shareholder and those of our other shareholders.

              Some of the properties we occupy, including properties where some of our campuses are located, are owned and operated by companies controlled by one of our controlling shareholders. Therefore, the interests of our controlling shareholder in the administration of such property may conflict with our interests and those of our other shareholders. For further information, see "Related Party Transactions" and note 8 to our audited consolidated financial statements.

We depend on dividend distributions by our subsidiaries, and we may be adversely affected if the performance of our subsidiaries is not positive.

              We control a number of subsidiary companies that carry out the business activities of our corporate group. Our ability to comply with our financial obligations and to pay dividends to our shareholders depends on our ability to receive distributions from the companies we control, which in turn depends on the cash flow and profits of those companies. There is no guarantee that the cash flow and profits of our controlled companies will be sufficient for us to comply with our financial obligations and pay dividends or interest on shareholders' equity to our shareholders.

              In addition, the Brazilian federal government recently stated that the income tax exemption on the distribution of dividends may be repealed and income tax assessed on the distribution of dividends in the future, and that applicable taxes on the payment of interest on shareholders' equity may be increased in the future. Any repeal of the income tax exemption on the distribution of dividends and any increase in applicable taxes on the payment of interest on shareholders' equity may adversely affect us.

We and our subsidiaries may be held directly or indirectly responsible for labor claims pursuant to contracted services.

              To meet the needs of our students and offer greater comfort and quality in all areas and aspects of our activities, we depend on service providers and suppliers for services such as cleaning, surveillance, telemarketing and security. We may be adversely affected if these third-party service providers and suppliers do not meet their obligations under Brazilian labor laws. In particular, according to Brazilian law we may be liable to the employees of these service providers and suppliers for labor obligations of these service providers and suppliers, and may also be fined by the relevant authorities. If we are held liable for such claims, we may be adversely affected.

We may not be able to pass on increases in our costs by adjusting our monthly tuition fees.

              Our primary source of income is the monthly tuition payments we charge to our students. For the three months ended March 31, 2019, payroll costs and expenses represented 66.7% and utilities expenses (comprised mainly of water, electricity and telephone expenses) represented 1.3% of our total costs and expenses. For the year ended December 31, 2018, payroll costs and expenses represented 65.8%, lease expenses represented 8.5% and utilities expenses, comprised mainly of water, electricity and telephone expenses, represented 1.1% of our total costs and expenses. Personnel costs and expenses, lease values and the cost of electricity are adjusted regularly using indices that reflect changes in inflation levels. If we are not able to transfer any increases in our costs and expenses to students by increasing the amounts of their monthly tuition fees, our operating results may be adversely affected.

46


Table of Contents

If we are not able to attract and retain students, or are unable to do so without decreasing our tuition fees, our revenues may decline.

              The success of our business depends primarily on the number of students enrolled in our programs and the tuition fees that they pay. Our ability to attract and retain students depends mainly on the tuition fees we charge, the convenient locations of our facilities, the infrastructure of our campuses, the quality of our programs as perceived by our existing and potential students. These factors are affected by, among other things, our ability to (i) respond to increasing competitive pressures, (ii) develop our educational systems to address changing market trends and demands from post-secondary education institutions and students, (iii) develop new programs and enhance existing programs to respond to changes in market trends and student demands, (iv) adequately prepare our students for careers in their chosen professional occupations, (v) successfully implement our expansion strategy, (vi) manage our growth while maintaining our teaching quality and (vii) effectively market and sell our programs to a broader base of prospective students. If we are unable to continue to attract new students to enroll in our programs and to retain our current students without significantly decreasing tuition, our revenues and our business may decline and we may be adversely affected.

We are subject to environmental laws and regulations, which may become more stringent in the future and increase our obligations and capital expenditures with respect to their compliance.

              We are subject to several environmental municipal, state and federal laws. Compliance with these laws and regulations is monitored by governmental agencies and bodies that may impose administrative, civil and criminal sanctions on us. Violations of these laws and regulations may result in the imposition of criminal and administrative sanctions, as well as civil liability, seeking redress for alleged environmental damages and damages to third parties. Causing environmental damage may lead to administrative sanctions, which may include, among other consequences, penalties such as fines (ranging from R$50 to R$50 million), revocation of our licenses and authorizations, and the temporary or permanent suspension of our activities. There is no limit to the amount that the courts may award to cover the costs of remediation in the case of civil liability or, if the environmental damage cannot be repaired, the payment of an indemnity. In addition, a claim seeking compensation for environmental damages is not subject to a statute of limitations. The enactment of more stringent laws and regulations or more stringent interpretations of existing laws and regulations may force us to increase our capital expenditures relating to environmental compliance, therefore diverting funds from previously planned investments. These changes could have a material adverse effect on us. Governmental agencies or other authorities may also significantly delay or deny the issuance of permits and authorizations required for our operations, preventing us from making constructions and improvements in our campuses. In addition, the improper disposal of solid waste, as well as accidents resulting from the transportation of such wastes, may give rise to administrative, civil and criminal sanctions. Considering the provision on strict and joint environmental civil liability, the hiring of third parties to provide services for the collection, transportation and final disposal of waste does not exempt us from liability for any environmental damage caused by such third parties.

We may be adversely affected if the government changes its investment strategy in education.

              According to Brazilian Federal Law No. 9,394/1996, as amended, providing education is a duty of the government and of the family, and private education is permitted, in accordance with the terms set forth by the Brazilian constitution and applicable laws and regulations. Certain public institutions may have certain competitive advantages over us in the admissions process, as they do not charge tuition fees and may be perceived to be more prestigious than private institutions, but the limited number of positions available and the competitive nature of the admission process to public institutions significantly restricts access to these institutions by students. However, the Brazilian government may change its policy and increase the competition we face by (i) increasing the level of public investment

47


Table of Contents

in basic education and post-secondary education in general, opening a higher amount of positions and increasing the quality of education offered by public entities; and (ii) shifting resources from institutions that are centers of excellence and research to public post-secondary education institutions. The introduction and extension of affirmative action admission policies by federal and state institutions based on income, race or ethnicity criteria could also heighten the level of competition in the industry. Any policy change affecting the level of public investment in any aspect of the education sector may adversely affect us. As of the date of this prospectus, our management is not aware of any pending policy changes or proposed legislation affecting the level of public investment in the education sector in Brazil.

Government agencies, MEC and third parties may conduct inspections, file administrative proceedings or initiate litigation against us.

              Because we operate in a highly regulated industry, government agencies, MEC or third parties may conduct inspections, file administrative proceedings or initiate litigation for noncompliance with regulations against us or the institutions we purchase. If the results of these proceedings or litigations are unfavorable to us, or if we are unable to successfully defend our cases, we may be required to pay monetary damages or be subject to fines, limitations, injunctions or other penalties. Even if we adequately address issues raised by an inspection conducted by an agency or successfully defend our case in an administrative proceeding or court action, we may have to set aside significant financial and management resources to settle issues raised by these proceedings or to those lawsuits or claims. Administrative proceedings or court actions brought against us may damage our reputation, even if such lawsuits or claims are without merit.

Failure to prevent or detect a malicious cyber-attack on our systems and databases could result in a misappropriation of confidential information or access to highly sensitive information.

              Cyber-attacks are becoming more sophisticated and pervasive. Across our business we hold large volumes of personally identifiable information including that of employees, institutions, customers, students and parents and legal guardians. Individuals may try to gain unauthorized access to our data in order to misappropriate such information for potentially fraudulent purposes, and our security measures may fail to prevent such unauthorized access. A breach of our systems could result in a devastating impact on our reputation, financial condition or student experience. In addition, if we were unable to prove that our systems are properly designed to detect an intrusion, we could be subject to severe penalties and loss of existing or future business.

              Pursuant to the Brazilian Data Protection Law (Lei Geral de Proteção de Dados, or LGPD), security breaches that may result in significant risk or damage to personal data must be reported to the ANPD, the data protection regulatory body, within a reasonable time period. The notice to the ANPD must include: (a) a description of the nature of the personal data affected by the breach; (b) the affected data subjects; (c) the technical and security measures adopted; (d) the risks related to the breach; (e) the reasons for any delays in reporting the breach, if applicable; and (f) the measures adopted to revert or mitigate the effects of the damage caused by the breach.

              Failure to comply with the LGPD may result in formal warnings, public sanctions, the deletion of data, or the suspension of data processing activities. Furthermore, a company may be subject to a fine equal to up to 2% of its gross sales, or the gross sales of its economic group in Brazil, in the preceding fiscal year, excluding taxes, but limited to a total of R$50 million per violation.

48


Table of Contents

Our success depends on our ability to monitor and adapt to technological changes in the education sector and maintain a technological infrastructure that works adequately and without interruption.

              Information technology is an essential factor of our growth. Our information technology systems and tools may become obsolete or insufficient, or we may have difficulties in following and adapting to technological changes in the education sector, particularly in the distance learning segment where the technological needs and expectations of our customers and market standards change rapidly and we must quickly adapt to new distance learning technology, practices and standards. Moreover, our competitors may introduce better products or service platforms. Our success depends on our ability to efficiently improve our current products while developing and introducing new products that are accepted in the marketplace. Additionally, a failure to upgrade our technology, features, content, security infrastructure, network infrastructure, or other infrastructure associated with our platform could harm our business. Adverse consequences could include unanticipated disruptions, slower response times, bugs, degradation in levels of customer support, impaired quality of users' experiences of our educational platform and delays in reporting accurate financial information.

              Our business, particularly our distance learning segment, depends on our information technology infrastructure functioning properly and without interruptions. Several problems regarding our information technology structure, such as viruses, hackers, system interruptions and technical difficulties regarding our satellite transmissions of data, sound and image may have a material adverse effect on us and our business.

              In addition, we face risks associated with unauthorized access to our systems, including by hackers and due to failures of our electronic security measures. These unauthorized entries into our systems can result in the theft of proprietary or sensitive information, including student information, or cause interruptions in the operation of our systems. As a result, we may be forced to incur considerable expenses to protect our systems from electronic security breaches and to mitigate our exposure to technological problems and interruptions.

              The Internet Act (Law No. 12,965/2014) applies only to personal data collected through the Internet, and establishes other principles and rules with respect to the privacy and protection of the personal and behavioral data of internet users. The Internet Act guarantees, among others, the privacy of internet and privately stored communications. Any data processing activity is subject to the data subject's informed, free and express consent.

              Decree No. 8,771/2016, which regulates the Internet Act, requires internet app providers to maintain certain security measures in connection with the storage of personal data, including: (i) strict controls on access to personal data; (ii) authentication safeguards; (iii) detailed data inventories (e.g., date, time and duration of access to the data, identity of the employee that accessed the data and the actions taken), and (iv) use of IT solutions to ensure the data is protected (for example, data encryption or other equivalent protective measures). If we fail to comply with the provisions of the Internet Act, we may be subject to sanctions and penalties, including damages, which will be assessed based on the nature and degree of our non-compliance, among other factors.

              On August 15, 2018, the LGPD came into force. The LGPD regulates the use of personal data in Brazil. The LGPD significantly transformed the data protection system in Brazil and is in line with recent European legislation (the General Data Protection Regulation, or GDPR). The LGPD establishes detailed rules for the collection, use, processing and storage of personal data. It will affect all economic sectors, including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected, both in the digital and physical environment.

49


Table of Contents

              Failure by us to adhere to the LGPD and any additional privacy laws or regulations enacted or approved in Brazil or in other jurisdictions in which we operate could adversely our business, financial condition or results of operations.

Failure to comply with data privacy regulations could result in reputational damage to our brands and adversely affect our business, financial condition and results of operations.

              Any perceived or actual unauthorized disclosure of personally identifiable information, whether through breach of our network by an unauthorized party, employee theft, misuse or error or otherwise, could harm our reputation, impair our ability to attract and retain our customers, or subject us to claims or litigation arising from damages suffered by individuals. Failure to adequately protect personally identifiable information could potentially lead to penalties, significant remediation costs, reputational damage, the cancellation of existing contracts and difficulty in competing for future business. In addition, we could incur significant costs in complying with relevant laws and regulations regarding the unauthorized disclosure of personal information, which may be affected by any changes to data privacy legislation at both the federal and state levels.

              Companies subject to the LGPD (including our Brazilian operations) are required to comply with the obligations of the LGPD by August 2020. On December 28, 2018, Provisional Measure No. 869/2018, or PM, was enacted, amending certain provisions of the LGPD and creating the National Data Protection Authority, or the ANPD. The PM also extended the deadline for companies to become compliant with the LGPD to August 2020. Failure to comply with the LGPD may result in formal warnings, public sanctions, the deletion of sensitive data, or the suspension of data processing activities. Furthermore, a company may be subject to a fine equal to up to 2% of its gross sales, or the gross sales of its economic group in Brazil, in the preceding fiscal year, excluding taxes, but limited to a total of R$50 million per violation.

Material weaknesses in our internal control over financial reporting have been identified, and if we fail to establish and maintain proper and effective internal controls over financial reporting, our results of operations and our ability to operate our business may be harmed.

              Prior to this offering, we were a private company with limited accounting personnel and other resources to address our internal control over financial reporting and procedures. In addition, we have acquired a number of different companies, each of which must be integrated, including their accounting processes. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.

              In connection with the audit of our consolidated financial statements, we and our independent registered public accounting firm identified material weaknesses as of December 31, 2018. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to our insufficient accounting resources and systems necessary to comply with the reporting and compliance requirements of IFRS and the U.S. Securities and Exchange Commission, or the SEC.

              Since 2018, we have been implementing several measures to remediate these material weaknesses to improve our internal control over financial reporting, including increasing the depth and experience within our accounting and finance team, designing and implementing improved processes and internal controls, and retaining outside consultants with extensive technical expertise. However, we cannot assure you that our efforts will be effective or prevent any future material weakness or significant deficiency in our internal control over financial reporting.

50


Table of Contents

              After this offering, we will be subject to the Sarbanes-Oxley Act, which requires, among other things, that we establish and maintain effective internal controls over financial reporting and disclosure controls and procedures. Under the current rules of the SEC, starting in 2020 we will be required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to assess the effectiveness of our internal controls. Our testing may reveal deficiencies in our internal controls that are deemed to be material weaknesses or significant deficiencies and render our internal controls over financial reporting ineffective. We expect to incur additional expenses and to spend significant management time in complying with these requirements. If we are not able to comply with these requirements in a timely manner, or if we or our management identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our Class A common shares may decline and we may be subject to investigations or sanctions by the SEC, the Financial Industry Regulatory Authority, Inc., or FINRA, or other regulatory authorities.

              In addition, these new obligations will also require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business. These cost increases and the diversion of management's attention could materially and adversely affect our business, financial condition and operation results.

Certain Risks Relating to Brazil

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil's political and economic conditions could harm us and the price of our Class A common shares.

              The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government's actions to control inflation and other policies and regulations have often involved, among other measures, increases or decreases in interest rates, changes in fiscal policies, wage and price controls, foreign exchange rate controls, blocking access to bank accounts, currency devaluations, capital controls and import and export restrictions. We have no control over and cannot predict what measures or policies the Brazilian government may take in the future. We and the market price of our securities may be harmed by changes in Brazilian government policies, as well as general economic factors, including, without limitation:

    growth or downturn of the Brazilian economy;

    interest rates and monetary policies;

    exchange rates and currency fluctuations;

    inflation;

    liquidity of the domestic capital and lending markets;

    import and export controls;

    exchange controls and restrictions on remittances abroad and payments of dividends;

    modifications to laws and regulations according to political, social and economic interests;

    fiscal policy and changes in tax laws;

    economic, political and social instability, including general strikes and mass demonstrations;

    the regulatory framework governing the educational industry;

    labor and social security regulations;

51


Table of Contents

    energy and water shortages and rationing;

    commodity prices;

    changes in demographics, in particular declining birth rates, which will result in a decrease in the number of enrolled students in education in the future; and

    other political, diplomatic, social and economic developments in or affecting Brazil.

              Uncertainty over whether the Brazilian federal government will implement reforms or changes in policy or regulation affecting these or other factors in the future may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on our activities and consequently our operating results, and may also adversely affect the trading price of our Class A common shares. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and our Class A common shares. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Brazilian Macroeconomic Environment."

The ongoing economic uncertainty and political instability in Brazil may harm us and the price of our Class A common shares.

              Brazil's political environment has historically influenced, and continues to influence, the performance of the country's economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.

              The recent economic instability in Brazil has contributed to a decline in market confidence in the Brazilian economy as well as to a deteriorating political environment. In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Brazilian Federal Prosecutor, including the largest such investigation, known as "Operação Lava Jato," have negatively impacted the Brazilian economy and political environment. The potential outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. We cannot predict whether the ongoing investigations will result in further political and economic instability, or if new allegations against government officials and/or executives of private companies will arise in the future.

              In addition, political demonstrations in Brazil over the last few years have affected the development of the Brazilian economy and investors' perceptions of Brazil. For example, street protests, which started in mid-2013 and continued through 2016, demonstrated the public's dissatisfaction with the worsening Brazilian economic condition (including an increase in inflation and fuel prices as well as rising unemployment), and the perception of widespread corruption. Moreover, on October 28, 2018, Jair Bolsonaro won the Brazilian presidential election and took office on January 1, 2019. In this context, we cannot predict which policies the new administration may adopt or change during its term or the effect that any such policies might have on our business and on the Brazilian economy. Any such new policies or changes to current policies may have a material adverse effect on us or the price of our Class A common shares. Furthermore, uncertainty over whether the Brazilian government will implement reforms or changes in policy or regulation in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the securities offered by companies with significant operations in Brazil.

              Any of the above factors may create additional political uncertainty, which could harm the Brazilian economy and, consequently, our business and the price of our Class A common shares.

52


Table of Contents

Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our Class A common shares.

              In the past, Brazil has experienced extremely high rates of inflation. Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation, policies adopted to curb inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian capital markets.

              According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA), which is published by the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, or IBGE), Brazilian inflation rates were 1.5%, 3.7%, 2.9% and 6.3% as of March 31, 2019 and as of December 31, 2018, 2017 and 2016, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government's intervening in the economy and introducing policies that could harm our business and the price of our Class A common shares. In the past, the Brazilian government's interventions included the maintenance of a restrictive monetary policy with high interest rates that restricted credit availability and reduced economic growth, causing volatility in interest rates. For example, the official interest rate in Brazil oscillated from 14.25% as of December 31, 2015 to 6.50% as of December 31, 2018, as established by the Monetary Policy Committee (Comitê de Política Monetária do Banco Central do Brasil, or COPOM). On February 7, 2018, the Monetary Policy Committee reduced the base interest rate (Sistema Especial de Liquidação e Custódia, or SELIC rate) to 6.75% and further reduced the SELIC rate to 6.50% on March 21, 2018. The Monetary Policy Committee reconfirmed the SELIC rate of 6.50% on May 16, 2018 and subsequently on June 20, 2018. As of December 31, 2018, the SELIC rate was 6.50%. The Monetary Policy Committee reconfirmed the SELIC rate of 6.50% on February 6, 2019. As of March 31, 2019, the SELIC rate was 6.50%. Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may continue to trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect us and increase our indebtedness.

Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares.

              The Brazilian currency has been historically volatile and has been devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies. The real depreciated against the U.S. dollar by 32.0% at year-end 2015 as compared to year-end 2014, and by 11.8% at year-end 2014 as compared to year-end 2013. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.9048 per U.S. dollar on December 31, 2015 and R$3.2591 per U.S. dollar on December 31, 2016, which reflected a 16.5% appreciation in the real against the U.S. dollar during 2016. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.308 per U.S. dollar on December 31, 2017, which reflected a 1.5% depreciation in the real against the U.S. dollar during 2017. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.875 per U.S.$1.00 on December 31, 2018, which reflected a 17.1% depreciation in the real against the U.S. dollar during 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.897 per U.S.$1.00 on March 31, 2019, which reflected a 0.6% depreciation in the real against the U.S. dollar during the first three months of 2019. As of July 5, 2019,

53


Table of Contents

the exchange rate for the sale of U.S. dollars as reported by the Central Bank was R$3.8204 per US$1.00. There can be no assurance that the real will not again depreciate against the U.S. dollar or other currencies in the future.

              A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian government to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and harm our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy. These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of the real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.

              On the other hand, an appreciation of the real relative to the U.S. dollar and other foreign currencies may deteriorate the Brazilian foreign exchange current accounts. Depending on the circumstances, either devaluation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as our business, results of operations and profitability.

Infrastructure and workforce deficiency in Brazil may impact economic growth and have a material adverse effect on us.

              Our performance depends on the overall health and growth of the Brazilian economy. Brazilian GDP growth has fluctuated over the past few years, with growth of 3.0% in 2013 but decreasing to 0.5% in 2014, a contraction of 3.5% in 2015, a contraction of 3.3% in 2016, a growth of 1.1% in 2017 and a growth of 1.1% in 2018. Growth is limited by inadequate infrastructure, including potential energy shortages and deficient transportation, logistics and telecommunication sectors, general strikes, the lack of a qualified labor force, and the lack of private and public investments in these areas, which limit productivity and efficiency. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth and ultimately have a material adverse effect on us.

Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, may harm the Brazilian economy and the price of our Class A common shares.

              The market for securities offered by companies with significant operations in Brazil is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging markets, as well as the United States, Europe and other countries. To the extent the conditions of the global markets or economy deteriorate, the business of companies with significant operations in Brazil may be harmed. The weakness in the global economy has been marked by, among other adverse factors, lower levels of consumer and corporate confidence, decreased business investment and consumer spending, increased unemployment, reduced income and asset values in many areas, reduction of China's growth rate, currency volatility and limited availability of credit and access to capital. Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to companies with significant operations in Brazil and resulted in considerable outflows of funds from Brazil, decreasing the amount of foreign investments in Brazil.

              Crises and political instability in other emerging market countries, the United States, Europe or other countries could decrease investor demand for securities offered by companies with significant operations in Brazil, such as our Class A common shares. In June 2016, the United Kingdom had a

54


Table of Contents

referendum in which the majority voted to leave the European Union. We have no control over and cannot predict the effect of the United Kingdom's exit from the European Union nor over whether and to which effect any other member state will decide to exit the European Union in the future. On January 20, 2017, Donald Trump became the President of the United States. We have no control over and cannot predict the effect of Donald Trump's administration or policies. These developments, as well as potential crises and forms of political instability arising therefrom or any other as of yet unforeseen development, may harm our business and the price of our Class A common shares.

Any further downgrading of Brazil's credit rating could reduce the trading price of our Class A common shares.

              We may be harmed by investors' perceptions of risks related to Brazil's sovereign debt credit rating. Rating agencies regularly evaluate Brazil and its sovereign ratings, which are based on a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness metrics and the perspective of changes in any of these factors.

              The rating agencies began to review Brazil's sovereign credit rating in September 2015. Subsequently, the three major rating agencies downgraded Brazil's investment-grade status:

    Standard & Poor's initially downgraded Brazil's credit rating from BBB-negative to BB-positive and subsequently downgraded it again from BB-positive to BB, maintaining its negative outlook, citing a worse credit situation since the first downgrade. On January 11, 2018, Standard & Poor's further downgraded Brazil's credit rating from BB to BB-negative.

    In December 2015, Moody's placed Brazil's Baa3's issue and bond ratings under review for downgrade and subsequently downgraded the issue and bond ratings to below investment grade, at Ba2 with a negative outlook, citing the prospect of a further deterioration in Brazil's debt indicators, taking into account the low growth environment and the challenging political scenario.

    Fitch downgraded Brazil's sovereign credit rating to BB-positive with a negative outlook, citing the rapid expansion of the country's budget deficit and the worse-than-expected recession. In February 2018, Fitch downgraded Brazil's sovereign credit rating again to BB-negative, citing, among other reasons, fiscal deficits, the increasing burden of public debt and an inability to implement reforms that would structurally improve Brazil's public finances. Brazil's sovereign credit rating is currently rated below investment grade by the three main credit rating agencies. Consequently, the prices of securities offered by companies with significant operations in Brazil have been negatively affected. A prolongation or worsening of the current Brazilian recession and continued political uncertainty, among other factors, could lead to further ratings downgrades. Any further downgrade of Brazil's sovereign credit ratings could heighten investors' perception of risk and, as a result, cause the trading price of our Class A common shares to decline.

Certain Risks Relating to Our Class A Common Shares and the Offering

There is no existing market for our common shares, and we do not know whether one will develop to provide you with adequate liquidity. If our share price fluctuates after this offering, you could lose a significant part of your investment.

              Prior to this offering, there has not been a public market for our Class A common shares. If an active trading market does not develop, you may have difficulty selling any of our Class A common shares that you buy. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq, or otherwise or how liquid that market might become. The initial public offering price for the Class A common shares will be determined by negotiations between us, the selling shareholders and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our Class A common shares at prices equal to or greater than the price paid by you in this offering. In addition to the risks described above, the market price of our Class A common shares may be influenced by many factors, some of which are beyond our control, including:

    announcements by us or our competitors of significant contracts or acquisitions;

55


Table of Contents

    technological innovations by us or competitors;

    the failure of financial analysts to cover our Class A common shares after this offering or changes in financial estimates by analysts;

    actual or anticipated variations in our operating results;

    changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates, or changes in the recommendations of any financial analysts that elect to follow our Class A common shares or the shares of our competitors;

    future sales of our shares; and

    investor perceptions of us and the industries in which we operate.

              In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our Class A common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies' securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations. If a market does not develop or is not maintained, the liquidity and price of our Class A common shares could be seriously harmed.

The Esteves Family and Crescera, our largest group of shareholders, will own 100% of our outstanding Class B common shares, which will represent approximately 95.1% of the voting power of our issued share capital following this offering, and will control all matters requiring shareholder approval. This concentration of ownership and voting power limits your ability to influence corporate matters.

              Immediately following this offering, the Esteves Family and Crescera will control our company and will not hold any of our Class A common shares, but will beneficially own 66.1% of our issued share capital (or 64.5% if the underwriters' option to purchase additional Class A common shares is exercised in full) through their beneficial ownership of all of our outstanding Class B common shares, and consequently, 95.1% of the combined voting power of our issued share capital (or 94.8% if the underwriters' option to purchase additional Class A common shares is exercised in full). Our Class B common shares are entitled to 10 votes per share and our Class A common shares, which are the common shares we are offering in this offering, are entitled to one vote per share. Our Class B common shares are convertible into an equivalent number of Class A common shares and generally convert into Class A common shares upon transfer subject to limited exceptions. As a result, the Esteves Family and Crescera will control the outcome of all decisions at our shareholders' meetings, and will be able to elect a majority of the members of our board of directors. They will also be able to direct our actions in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses. For example, the Esteves Family and Crescera may cause us to make acquisitions that increase the amount of our indebtedness or outstanding Class A common shares, sell revenue-generating assets or inhibit change of control transactions that benefit other shareholders. The decisions of the Esteves Family and Crescera on these matters may be contrary to your expectations or preferences, and they may take actions that could be contrary to your interests. They will be able to prevent any other shareholders, including you, from blocking these actions. For further information regarding shareholdings in our company, see "Principal and Selling Shareholders." In addition, for so long as they beneficially own more than two-thirds of our issued share capital, the Esteves Family and Crescera will also have the ability to unilaterally amend Afya's Articles of Association, which may be amended only by special resolution of shareholders (requiring a two-thirds majority vote).

56


Table of Contents

              So long as the Esteves Family and Crescera continue to beneficially own a sufficient number of Class B common shares, even if they beneficially own significantly less than 50% of our outstanding share capital, acting together, they will be able to effectively control our decisions. For example, if our Class B common shares amounted to 15% of our outstanding common shares, beneficial owners of our Class B common shares (consisting of the Esteves Family and Crescera), would collectively control 63.8% of the voting power of our outstanding common shares. If the Esteves Family and Crescera sell or transfer any of their Class B common shares, they will generally convert automatically into Class A common shares, subject to limited exceptions, such as transfers to affiliates, to trustees for the holder or its affiliates and certain transfers to U.S. tax exempt organizations. The fact that any Class B common shares convert into Class A common shares if the Esteves Family or Crescera sell or transfer them means that the Esteves Family and Crescera will in many situations continue to control a majority of the combined voting power of our outstanding share capital, due to the voting rights of any Class B common shares that they retain. However, if our Class B common shares at any time represent less than 10% of the total number of shares in the capital of the Company outstanding, the Class B common shares then outstanding will automatically convert into Class A common shares. For a description of the dual class structure, see "Description of Share Capital."

Class A common shares eligible for future sale may cause the market price of our Class A common shares to drop significantly.

              The market price of our Class A common shares may decline as a result of sales of a large number of our Class A common shares in the market after this offering (including Class A common shares issuable upon conversion of Class B common shares) or the perception that these sales may occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

              Following the completion of this offering, we will have outstanding 29,753,059 Class A common shares and 57,929,585 Class B common shares (or 31,814,690 Class A common shares and 57,929,585 Class B common shares, if the underwriters exercise in full their option to purchase additional shares). Subject to the lock-up agreements described below, the Class A common shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act by persons other than our affiliates within the meaning of Rule 144 of the Securities Act.

              Our shareholders or entities controlled by them or their permitted transferees will, subject to the lock-up agreements described below, be able to sell their shares in the public market from time to time without registering them, subject to certain limitations on the timing, amount and method of those sales imposed by regulations promulgated by the SEC. If any of our shareholders, the affiliated entities controlled by them or their respective permitted transferees were to sell a large number of their Class A common shares, the market price of our Class A common shares may decline significantly. In addition, the perception in the public markets that sales by them might occur may also cause the trading price of our Class A common shares to decline.

              We have agreed with the underwriters, subject to certain exceptions, not to offer, sell or dispose of any shares in our share capital or securities convertible into or exchangeable or exercisable for any shares in our share capital during the 180-day period following the date of this prospectus. Our directors, executive officers and our principal shareholders have agreed to substantially similar lock-up provisions. However, BofA Securities, Inc. may, in its sole discretion and without notice, release all or any portion of the shares from the restrictions in any of the lock-up agreements described above. In addition, these lock-up agreements are subject to the exceptions described in "Underwriting," including the right for our company to issue new shares if we carry out an acquisition or enter into a merger, joint venture or strategic participation.

57


Table of Contents

              Sales of a substantial number of our Class A common shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these lock-up periods, could cause our market price to fall or make it more difficult for you to sell your Class A common shares at a time and price that you deem appropriate.

Our Articles of Association contain anti-takeover provisions that may discourage a third-party from acquiring us and adversely affect the rights of holders of our Class A common shares.

              Our Articles of Association contain certain provisions that could limit the ability of others to acquire our control, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain our control in a tender offer or similar transactions.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common shares and our trading volume could decline.

              The trading market for our Class A common shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no or too few securities or industry analysts commence coverage of our company, the trading price for our Class A common shares would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our Class A common shares or publish inaccurate or unfavorable research about our business, the price of our Class A common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our Class A common shares could decrease, which might cause the price of our Class A common shares and trading volume to decline.

We do not anticipate paying any cash dividends in the foreseeable future.

              We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the operation of our business and future growth. We do not intend to pay any dividends to holders of our Class A common shares. As a result, capital appreciation in the price of our Class A common shares, if any, will be your only source of gain on an investment in our Class A common shares.

Transformation into a public company may increase our costs and disrupt the regular operations of our business.

              This offering will have a significant transformative effect on us. We and our acquired businesses historically have operated as privately-owned companies, and we expect to incur significant additional legal, accounting, reporting and other expenses as a result of having publicly traded Class A common shares. We will also incur costs which we have not incurred previously, including, but not limited to, increased directors' and officers' insurance, investor relations, and various other costs of a public company.

              We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq. We expect these rules and regulations to increase our legal and financial compliance costs and make some management and corporate governance activities more time-consuming and costly, particularly after we are no longer an "emerging growth company." These rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and

58


Table of Contents

we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. This could have an adverse impact on our ability to recruit and bring on a qualified independent board.

              The additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Any of these effects could harm our business, financial condition and results of operations.

Our dual class capital structure means our shares will not be included in certain indices. We cannot predict the impact this may have on our share price.

              In 2017, FTSE Russell, S&P Dow Jones and MSCI announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices to exclude companies with multiple classes of shares of common stock from being added to such indices. FTSE Russell announced plans to require new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders, whereas S&P Dow Jones announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. MSCI also opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from its ACWI Investable Market Index and U.S. Investable Market 2500 Index; however, in October 2018, MSCI announced its decision to include equity securities "with unequal voting structures" in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. We cannot assure you that other stock indices will not take a similar approach to FTSE Russell, S&P Dow Jones and MSCI in the future. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not invest in our stock. It continues to be somewhat unclear what effect, if any, these policies will have on the valuations of publicly traded companies excluded from the indices, but in certain situations they may depress these valuations compared to those of other similar companies that are included. Exclusion from indices could make our Class A common shares less attractive to investors and, as a result, the market price of our Class A common shares could be adversely affected.

The dual class structure of our common stock has the effect of concentrating voting control with the Esteves Family and Crescera; this will limit or preclude your ability to influence corporate matters.

              Each Class A common share, which are the shares being sold in this offering, will entitle its holder to one vote per share, and each Class B common share will entitle its holder to ten votes per share, so long as the total number of the issued and outstanding Class B common shares is at least 10% of the total number of shares outstanding. Due to the ten-to-one voting ratio between our Class B and Class A common shares, the beneficial owners of our Class B common shares (comprised of the Esteves Family and Crescera) collectively will continue to control a majority of the combined voting power of our common shares and therefore be able to control all matters submitted to our shareholders so long as the total number of the issued and outstanding Class B common shares is at least 10% of the total number of shares outstanding.

              In addition, our Articles of Association provide that at any time when there are Class A common shares in issue, additional Class B common shares may only be issued pursuant to (1) a share split, subdivision of shares or similar transaction or where a dividend or other distribution is paid by the issue of shares or rights to acquire shares or following capitalization of profits, (2) a merger, consolidation, or other business combination involving the issuance of Class B common shares as full or

59


Table of Contents

partial consideration, or (3) an issuance of Class A common shares, whereby holders of the Class B common shares are entitled to purchase a number of Class B common shares that would allow them to maintain their proportional ownership interests in Afya (following an offer by us to each holder of Class B common shares to issue to such holder, upon the same economic terms and at the same price, such number of Class B common shares as would ensure such holder may maintain a proportional ownership interest in Afya pursuant to our Articles of Association).

              Future transfers by holders of Class B common shares will generally result in those shares converting to Class A common shares, subject to limited exceptions, such as certain transfers effected to permitted transferees or for estate planning or charitable purposes. The conversion of Class B common shares to Class A common shares will have the effect, over time, of increasing the relative voting power of those holders of Class B common shares who retain their shares in the long term.

              In light of the above provisions relating to the issuance of additional Class B common shares, the fact that future transfers by holders of Class B common shares will generally result in those shares converting to Class A common shares, subject to limited exceptions as provided in the Articles of Association; as well as the ten-to-one voting ratio of our Class B common shares and Class A common shares, holders of our Class B common shares will in many situations continue to maintain control of all matters requiring shareholder approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. For a description of our dual class structure, see "Description of Share Capital—Voting Rights."

We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

              We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (i) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (ii) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (iii) directors should not properly fetter the exercise of future discretion; (iv) duty to exercise powers fairly as between different sections of shareholders; (v) duty to exercise independent judgment; and (vi) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq, and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders (made up of two components) and the director's duties prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See "Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law."

60


Table of Contents

New investors in our Class A common shares will experience immediate and substantial book value dilution after this offering.

              The initial public offering price of our Class A common shares will be substantially higher than the pro forma net tangible book value per share of the outstanding Class A common shares immediately after this offering. Based on an assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover of this prospectus) and our net tangible book value as of March 31, 2019 if you purchase our common shares in this offering you will pay more for your shares than the amounts paid by our existing shareholders for their shares and you will suffer immediate dilution of approximately US$14.37 per share in pro forma net tangible book value. In addition, purchasers of Class A common shares in this offering will have contributed approximately 82.4% of the aggregate price paid by all purchasers of our common shares but will own only approximately 15.7% of our common shares outstanding after this offering. As a result of this dilution, investors purchasing shares in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation. See "Dilution."

We may need to raise additional capital in the future by issuing securities, use our Class A common shares as acquisition consideration, or may enter into corporate transactions with an effect similar to a merger, which may dilute your interest in our share capital and affect the trading price of our Class A common shares.

              We may need to raise additional funds to grow our business and implement our growth strategy going forward through public or private issuances of common shares or securities convertible into, or exchangeable for, our common shares, which may dilute your interest in our share capital or result in a decrease in the market price of our common shares. In addition, we may also use our Class A common shares as acquisition consideration or enter into mergers or other similar transactions in the future, which may dilute your interest in our share capital or result in a decrease in the market price of our Class A common shares. Any fundraising through the issuance of shares or securities convertible into or exchangeable for shares, the use of our Class A common shares as acquisition consideration, or the participation in corporate transactions with an effect similar to a merger, may dilute your interest in our capital stock or result in a decrease in the market price of our Class A common shares.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

              Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class A common shares. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, results of operations and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. See "Use of Proceeds."

As a foreign private issuer and an "emerging growth company" (as defined in the JOBS Act), we will have different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies.

              As a foreign private issuer and emerging growth company, we will be subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on

61


Table of Contents

exemptions from certain U.S. rules which will permit us to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.

              We will follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.

              Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we will be subject to Cayman Islands laws and regulations having substantially the same effect as Regulation Fair Disclosure. As a result of the above, even though we are required to file reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.

              The JOBS Act contains provisions that, among other things, relax certain reporting requirements for emerging growth companies. Under this act, as an emerging growth company, we will not be subject to the same disclosure and financial reporting requirements as non-emerging growth companies. For example, as an emerging growth company we are permitted to, and intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Also, we will not have to comply with future audit rules promulgated by the U.S. Public Company Accounting Oversight Board, or PCAOB, (unless the SEC determines otherwise) and our auditors will not need to attest to our internal controls under Section 404(b) of the Sarbanes-Oxley Act. We may follow these reporting exemptions until we are no longer an emerging growth company. As a result, our shareholders may not have access to certain information that they deem important. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual revenues of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common shares that is held by non-affiliates exceeds US$700.0 million as of the prior June 30th, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. Accordingly, the information about us available to you will not be the same as, and may be more limited than, the information available to shareholders of a non-emerging growth company. We could be an "emerging growth company" for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an "emerging growth company" as of the following December 31 (our fiscal year end). We cannot predict if investors will find our Class A common shares less attractive because we may rely on these exemptions. If some investors find our Class A common shares less attractive as a result, there may be a less active trading market for our Class A common shares and the price of our Class A common shares may be more volatile.

62


Table of Contents

As a foreign private issuer, we are permitted to, and we will, rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer's directors consist of independent directors. This may afford less protection to holders of our Class A common shares.

              Section 5605 of the Nasdaq equity rules requires listed companies to have, among other things, a majority of their board members be independent, and to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however, we are permitted to, and we will, follow home country practice in lieu of the above requirements. See "Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law."

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

              In order to maintain our current status as a foreign private issuer, either (a) more than 50% of our Class A common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be U.S. citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we will incur as a foreign private issuer.

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

              Our corporate affairs are governed by our Articles of Association, by the Companies Law (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively less formal nature of Cayman Islands law in this area.

              While Cayman Islands law allows a dissenting shareholder to express the shareholder's view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder's shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation to apply to the Grand Court of the Cayman Islands for a determination of the fair value of the dissenter's shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.

              Shareholders of Cayman Islands exempted companies (such as us) have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are

63


Table of Contents

not obliged to make them available to our shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

              Subject to limited exceptions, under Cayman Islands' law, a minority shareholder may not bring a derivative action against the board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.

United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

              We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.

              Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands and Brazil. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands' judgment in respect of the same matters, and was not obtained in a manner which is contrary to the public policy of the Cayman Islands. In addition, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in reais.

              Most of our assets are located in Brazil. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our Class A common shares, we may not be required to discharge our obligations in a currency other than the real. Under Brazilian exchange control laws, an obligation in Brazil to pay amounts denominated in a currency other than the real may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the Class A common shares.

Our Class A common shares may not be a suitable investment for all investors, as investment in our Class A common shares presents risks and the possibility of financial losses.

              The investment in our Class A common shares is subject to risks. Investors who wish to invest in our Class A common shares are thus subject to asset losses, including loss of the entire value of their investment, as well as other risks, including those related to our Class A common shares, us, the

64


Table of Contents

sector in which we operate, our shareholders and the general macroeconomic environment in Brazil, among other risks.

              Each potential investor in our Class A common shares must therefore determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

    have sufficient knowledge and experience to make a meaningful evaluation of our Class A common shares, the merits and risks of investing in our Class A common shares and the information contained in this prospectus;

    have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in our Class A common shares and the impact our Class A common shares will have on its overall investment portfolio;

    have sufficient financial resources and liquidity to bear all of the risks of an investment in our Class A common shares;

    understand thoroughly the terms of our Class A common shares and be familiar with the behavior of any relevant indices and financial markets; and

    be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

There can be no assurance that we will not be a passive foreign investment company, or PFIC, for any taxable year, which could subject United States investors in our Class A common shares to significant adverse U.S. federal income tax consequences.

              Under the Internal Revenue Code of 1986, as amended (the "Code"), we will be a PFIC for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of "passive income," or (ii) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, "passive income." Passive income generally includes dividends, interest, certain non-active rents and royalties, and capital gains. Based on our current operations, income, assets and certain estimates and projections, including as to the relative values of our assets, including goodwill, which is based on the expected price of our Class A common shares, we do not expect to be a PFIC for our 2019 taxable year. However, there can be no assurance that the Internal Revenue Service (the "IRS") will agree with our conclusion. In addition, whether we will be a PFIC in 2019 or any future year is uncertain because, among other things, (i) we will hold a substantial amount of cash following this offering, which is categorized as a passive asset and (ii) our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our Class A common shares, which could be volatile). Accordingly, there can be no assurance that we will not be a PFIC for any taxable year.

              If we are a PFIC for any taxable year during which a U.S. investor holds Class A common shares, we generally would continue to be treated as a PFIC with respect to that U.S. investor for all succeeding years during which the U.S. investor holds Class A common shares, even if we ceased to meet the threshold requirements for PFIC status. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) compliance with certain reporting requirements. We do not intend to provide the information that would enable investors to make a qualified electing fund election (a "QEF Election") that could mitigate the adverse U.S. federal income tax consequences should we be classified as a PFIC. A "mark-to-market" election may be available, however, if our Class A common shares are regularly traded on a qualified exchange. For further discussion, see "Taxation—U.S. Federal Income Tax Considerations."

65


Table of Contents


PRESENTATION OF FINANCIAL AND OTHER INFORMATION

              All references to "U.S. dollars," "dollars" or "$" are to the U.S. dollar. All references to "real," "reais," "Brazilian real," "Brazilian reais," or "R$" are to the Brazilian real, the official currency of Brazil. All references to "IFRS" are to International Financial Reporting Standards, as issued by the International Accounting Standards Board, or the IASB.

Financial Statements

              Afya, the company whose Class A common shares are being offered in this prospectus, was incorporated on March 22, 2019, as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. Until the contribution of Afya Brazil shares to it prior to the consummation of this offering, Afya will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments.

              We maintain our books and records in Brazilian reais, the presentation currency for our financial statements and also the functional currency of our operations in Brazil. We prepare our annual consolidated financial statements in accordance with IFRS, as issued by the IASB, and unaudited interim condensed consolidated financial statements in accordance with International Financial Reporting Standard No 34—Interim Financial Reporting ("IAS 34"). Unless otherwise noted, Afya Brazil's financial information presented herein as of March 31, 2019 and for the three months ended March 31, 2019 and 2018, and as of and for the years ended December 31, 2018 and 2017 is stated in Brazilian reais, its reporting currency. The consolidated financial information of Afya Brazil contained in this prospectus is derived from Afya Brazil's unaudited interim condensed consolidated financial statements as of March 31, 2019 and for the three months ended March 31, 2019 and 2018, and Afya Brazil's audited consolidated financial statements as of and for the years ended December 31, 2018 and 2017, together with the notes thereto. All references herein to "our financial statements," "our audited consolidated financial information," "our audited consolidated financial statements" and "our unaudited interim condensed consolidated financial statements" are to Afya Brazil's consolidated financial statements included elsewhere in this prospectus.

              This financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

              Following this offering, Afya will begin reporting consolidated financial information to shareholders, and Afya Brazil will not present consolidated financial statements. We also maintain our books and records in Brazilian reais and our consolidated financial statements will be prepared in accordance with IFRS.

              Afya Brazil's and our fiscal year ends on December 31. References in this prospectus to a fiscal year, such as "fiscal year 2018," relate to our fiscal year ended on December 31 of that calendar year.

Acquisitions and Pro Forma Financial Information

      IPTAN and IESVAP

              On January 11, 2018, certain members of the Esteves family, BR Health and Afya Brazil entered into an investment and purchase agreement providing for (a) an initial Afya Brazil capital increase which was paid: (i) by the Esteves family with the contribution of the ownership interest held by the Esteves family in IPTAN and IESVAP in an amount equal to R$11.6 million; and (ii) by BR Health through a cash contribution in an amount equal to R$55.0 million, followed by (b) a sale by the Esteves family to BR Health of shares in Afya Brazil for a purchase price equal to R$37.5 million. The transaction was consummated on April 26, 2018 and the aggregate purchase price was R$200.2 million.

66


Table of Contents

              IPTAN is a post-secondary education institution located in the city of São João Del Rei, in the state of Minas Gerais. It offers on-campus post-secondary undergraduate and graduate education courses in medicine and other academic subjects and disciplines. The audited financial statements of IPTAN as of April 25, 2018 and December 31, 2017 and for the period from January 1, 2018 to April 25, 2018 and for the year ended December 31, 2017, together with the notes thereto, are included elsewhere in this prospectus.

              IESVAP is a post-secondary education institution located in the city of Parnaíba, in the state of Piauí. It offers on-campus post-secondary undergraduate education courses in medicine, dentistry and law. The audited financial statements of IESVAP as of April 25, 2018 and December 31, 2017 and for the period from January 1, 2018 to April 25, 2018 and for the year ended December 31, 2017, together with the notes thereto, are included elsewhere in this prospectus.

      CCSI

              On March 9, 2018, Afya Brazil entered into a purchase agreement with the former controlling entity of CCSI, Associação de Integração Social de Itajuba, or AISI, providing for the acquisition of 60% of CCSI by Afya Brazil and an increase in CCSI's share capital. CCSI is a post-secondary education institution located in the city of Itajubá, in the state of Minas Gerais. It offers on-campus post-secondary undergraduate courses in medicine. The CCSI transaction was consummated on May 30, 2018. The purchase price was R$39 million, of which (i) R$6.0 million was paid by Afya Brazil to AISI in cash on the transaction closing date, (ii) R$9.3 million, related to certain liabilities of AISI (including AISI's portion of CCSI's capital increase totaling R$3.2 million), was paid by Afya Brazil on behalf of AISI on the transaction closing date, (iii) R$13.7 million is payable by Afya Brazil to AISA provided certain conditions are met, and (iv) R$10.0 million is payable by Afya Brazil on behalf of AISI in two equal semi-annual installments from the transaction closing date, adjusted by the IGP-M rate. The amount of the CCSI capital increase was R$8 million, R$4.8 million of which was paid in cash by Afya Brazil.

      IESP

              On November 27, 2018, Afya Brazil entered into a purchase agreement with the former controlling shareholders of IESP, providing for the acquisition of 80% of IESP by Afya Brazil. IESP is a post-secondary education institution located in the city of Teresina, in the state of Piauí. It offers on-campus undergraduate medicine courses and a variety of other on-campus and distance learning post-secondary undergraduate and graduate education programs. The IESP transaction was consummated on November 27, 2018. The aggregate purchase price was R$248.9 million. The initial consideration was R$236.0 million, of which (i) R$129.8 million was paid in cash on the transaction closing date, and (ii) R$106.2 million is payable in three equal installments of R$35.4 million, adjusted by the CDI rate, and due by the end of the first, second and third year from the transaction closing date. The initial consideration was increased following price adjustments of (i) R$4.0 million, related to the cash of IESP, and (ii) R$8.9 million, related to a capital reduction. On June 16, 2019, we concluded the roll-up of the minority shareholders of IESP to Afya Brazil.

              The audited financial statements of IESP as of November 26, 2018 and December 31, 2017 and for the period from January 1, 2018 to November 26, 2018 and for the year ended December 31, 2017, together with the notes thereto, are included elsewhere in this prospectus.

      FADEP

              On December 5, 2018, Afya Brazil entered into a purchase agreement with the former controlling shareholders of FADEP, providing for the acquisition 100% of RD Administração e Participação Ltda., which holds a 89% interest in FADEP, and 11% of FADEP by Afya Brazil. FADEP

67


Table of Contents

is a post-secondary education institution located in the city of Pato Branco, in the state of Paraná. It offers on-campus post-secondary undergraduate and graduate education courses in medicine and other academic subjects and disciplines. The FADEP transaction was consummated on December 5, 2018. The aggregate purchase price was R$133.0 million, of which (i) R$80.1 million was paid in cash on the transaction closing date, and (ii) R$52.8 million is payable in three equal installments of R$17.6 million, adjusted by the SELIC rate, and due semiannually from the transaction closing date. The initial consideration was R$135.6 million and was offset by a price adjustment of R$2.7 million related to the reimbursement of transaction costs.

              The audited financial statements of FADEP as of December 4, 2018 and December 31, 2017 and for period from January 1, 2018 to December 4, 2018 and for the year ended December 31, 2017, together with the notes thereto, are included elsewhere in this prospectus.

              The acquisitions of IPTAN, IESVAP, IESP and FADEP are jointly referred to as the "Pro Forma Transactions" herein.

              The unaudited pro forma condensed consolidated financial information and related notes included elsewhere in this prospectus combine the historical audited consolidated statements of income of Afya Brazil and the statements of income of IPTAN, IESVAP, IESP and FADEP. For a discussion on our unaudited pro forma condensed consolidated financial information and related notes, see "Unaudited Pro Forma Condensed Consolidated Financial Information."

      Medcel

              On March 29, 2019, BR Health (a wholly-owned subsidiary of Crescera that controls Guardaya), and Guardaya (which owns 100% of Medcel Editora and CBB Web) merged into Afya Brazil, resulting in the transfer to Afya Brazil of 100% of Medcel Editora and CBB Web. Medcel offers distance learning residency preparatory courses.

              Medcel's (i) unaudited interim consolidated financial statements as of March 28, 2019 and December 31, 2018 and for period from January 1, 2019 to March 28, 2019 and for the three months ended March 31, 2018, and (ii) audited financial statements as of and for the years ended December 31, 2018 and 2017, together with the notes thereto, are included elsewhere in this prospectus.

      FASA

              On February 12, 2019, Afya Brazil entered into a purchase agreement with the shareholders of Instituto Educacional Santo Agostinho S.A., or FASA, providing for the acquisition of 90% of FASA by Afya Brazil. FASA is a post-secondary education institution with campuses located in the states of Bahia and Minas Gerais. It offers on-campus post-secondary undergraduate courses in medicine. The FASA transaction was consummated on April 3, 2019. The purchase price was R$204.5 million, as adjusted in accordance with the terms of the purchase agreement, and to be paid and further adjusted in accordance with the terms of the purchase agreement. On June 14, 2019, we concluded the roll-up of the minority shareholders of FASA to Afya Brazil.

              We have not included the historical financial statements of FASA in this prospectus because they are not available. Moreover, we believe they would be of limited benefit to investors as two out of FASA's four campuses do not offer medicine courses. These campuses are therefore not part of our business strategy, and we do not believe FASA will be material to our business going forward. However, we have included elsewhere in this prospectus the audited statement of assets acquired and liabilities assumed of FASA as of April 3, 2019, together with the notes thereto.

68


Table of Contents

      IPEMED

              On February 1, 2019, Afya Brazil entered into a purchase agreement for the acquisition of 100% of IPEMED. IPEMED is a post-secondary education institution with campuses located in the states of Bahia, Minas Gerais, Rio de Janeiro and São Paulo and in the Distrito Federal. It focuses on medical graduate programs and will contribute approximately 1,500 students to Afya. The IPEMED transaction was consummated on May 9, 2019. The purchase price was R$97.5 million, to be paid and adjusted in accordance with the terms of the purchase agreement.

Combined Tuition Fees

              The combined tuition fees information included elsewhere in this prospectus was derived from the internal management records, rather than historical operating information, for Afya Brazil and for each of IPTAN, IESVAP, CCSI, IESP and FADEP from periods prior to the dates of their respective acquisitions by Afya Brazil in 2018, and, as it relates to IPTAN, IESVAP, CCSI, IESP and FADEP, the information included elsewhere in this prospectus is based on data provided to Afya Brazil by such companies. We believe it is reliable, but it does not form part of our consolidated operating history and it does not represent net revenue as disclosed in our financial statements included elsewhere in this prospectus.

              Combined tuition fees is the sum equal to the total tuition fees charged to undergraduate students, as recorded in the internal management records of Afya Brazil, IPTAN, IESVAP, CCSI, IESP and FADEP for the three months ended March 31, 2019 and 2018 and for the years ended December 31, 2018 and 2017. These internal management records register the number of students at each school and the tuition fees they have been invoiced for each relevant period, and we are required to maintain them and disclose them annually to the MEC. We use these records to calculate our gross revenue for a given period, which we in turn use to calculate our net revenue for purposes of our financial statements. For the three months ended March 31, 2019 and 2018, total tuition fees charged to students by Afya Brazil were R$159.1 million and R$66.8 million, respectively. For the years ended December 31, 2018 and 2017, total tuition fees charged to students by Afya Brazil were R$565.5 million and R$220.3 million, respectively. Combined tuition fees does not include tuition fees we charge graduate students as graduate courses form a small part of our business (they represent less than 1% of our gross tuition fees).

              Our limited consolidated operating history and recent acquisitions may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects. We experienced rapid and significant expansion in the year ended December 31, 2018 due to the Pro Forma Transactions. Because the historical and pro forma financial information and operational information included elsewhere in this prospectus may not be representative of our results and operations as a consolidated company, investors may have limited financial and operational information on which to evaluate us and their investment decision. See "Risk Factors—Certain Risks Relating to Our Business and Industry—Our limited operating history as a consolidated company, our recent acquisitions and the comparability of our results may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects." We believe the combined tuition fees information included elsewhere in this prospectus may help investors assess the past operating results of IPTAN, IESVAP, CCSI, IESP and FADEP as combined with Afya Brazil. This metric also shows the percentage of revenues we derive from our medicine and health sciences programs, which are our core business. We present combined tuition fees as the sum of gross tuition fees charged to undergraduate students, which differs from the tuition fees set forth in our financial statements, which are presented as the sum of gross tuition fees charged to undergraduate students, gross tuition fees charged to graduate students and scholarships, and from our pro forma net revenue, which is presented as the sum of gross tuition fees charged to students net of cancellations, discounts and taxes, and which also includes revenue from admission fees and income from leases, among others.

69


Table of Contents

              Although we have not included CCSI in the pro forma financial information included elsewhere in this prospectus, we have included tuition fee data for CCSI in our combined tuition fees information because we believe that excluding it would distort the trend of this metric, which we view as useful in helping investors assess our business. Combined tuition fee data is not available for CCSI for the year ended December 31, 2017 and for the period from January 1, 2018 to May 30, 2018 (the period prior to our acquisition of CCSI). However, the disaggregated data for number of students and monthly tuition fees amounts from CCSI for those periods is available (as CCSI reports this data to the MEC), and to calculate the CCSI data presented herein for those periods, we multiplied the number of students enrolled at CCSI by the monthly tuition fees amounts charged for those periods. We believe that the underlying data for CCSI is reliable, as we conducted due diligence on CCSI to confirm the accuracy of that information, including engaging an independent specialist firm to verify the data that CCSI reported to the MEC.

              The past performance of Afya Brazil, IPTAN, IESVAP, CCSI, IESP and FADEP, as reflected in the combined tuition fees information included elsewhere in this prospectus, may not be indicative of our future performance or any future anticipated synergies, future operating efficiencies or cost savings that may result from the Pro Forma Transactions.

Corporate Events

      BR Health Investment in Afya Brazil

              In 2016, BR Health (which merged into Afya Brazil on March 29, 2019) acquired a 30% interest in the share capital of Afya Brazil from certain members of the Esteves family (which has since increased to 41.5% following share capital increases and the subscription of new shares by BR Health). The acquisition was secured by the following guarantees by the Esteves family members (and/or companies controlled by them at the time) in favor of BR Health with respect to certain indemnification obligations of the Esteves family members: (i) a fiduciary assignment of 70% of certain educational services credit rights of IESVAP up to August 2022, (ii) a pledge of shares pursuant to which Nicolau Carvalho Esteves pledged 308,998 common shares owned by him in Afya Brazil, and Rosângela de Oliveira Tavares Esteves pledged 92,859 common shares owned by her in Afya Brazil, valid up to April 2024 and which can be partially released on certain dates subject to certain conditions being met, and (iii) mortgages (hipotecas) over land located in Araguaína and Porto Nacional in the state of Tocantins. Certain of the guarantees were amended in 2018 to cover certain Esteves family indemnification obligations in connection with the IPTAN and IESVAP transactions.

              On March 28, 2019, prior to the merger of BR Health into Afya Brazil, BR Health assigned the guarantees described above to Crescera, and Crescera and the Esteves family renegotiated the guarantees, which will be comprised of: (i) a pledge of shares pursuant to which Rosângela de Oliveira Tavares Esteves pledged 2,497,275 shares owned by her in Univaço Patrimonial Ltda., (ii) mortgages (hipotecas) over land located in Araguaína and Porto Nacional in the state of Tocantins, and (iii) a fiduciary assignment of land located in Parnaíba, in the State of Piauí, and in Palmas, in the State of Tocantins.

      Our Incorporation

              We are a Cayman Islands exempted company, incorporated with limited liability on March 22, 2019 for purposes of effectuating our initial public offering.

      Our Corporate Reorganization

              Prior to the consummation of this offering, the Esteves Family, Crescera, other members of the Esteves family and the Afya Brazil Minority Shareholder Group will contribute all of their shares in Afya Brazil to us. In return for this contribution, we will issue 58,485,140 new Class B common shares

70


Table of Contents

to Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves and Crescera and 17,370,248 new Class A common shares to the other members of the Esteves family and the Afya Brazil Minority Shareholder Group, in each case in a one-to-28 exchange for the shares of Afya Brazil contributed to us. Until the contribution of Afya Brazil shares to us, we will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments.

              After accounting for the new Class A common shares that will be issued and sold by us in this offering, we will have a total of 87,682,644 common shares issued and outstanding immediately following this offering, 57,929,585 of these shares will be Class B common shares beneficially owned by the Esteves Family and Crescera, our largest group of shareholders and 13,744,210 of these shares will be Class A common shares beneficially owned by investors purchasing in this offering.

              On March 29, 2019, BR Health (a wholly-owned subsidiary of Crescera that controls Guardaya), and Guardaya (which owns 100% of Medcel Editora and CBB Web) merged into Afya Brazil, resulting in the transfer to Afya Brazil of 100% of Medcel Editora and CBB Web and 15% of UEPC, a medical school located in the Federal District.

              Additionally, on June 18, 2019, Afya Brazil acquired an additional 15% interest in UEPC through a contribution by Crescera of its additional 15% interest in UEPC into Afya Brazil's share capital. The purchase price was R$24.5 million. This contribution was conducted as part of our corporate reorganization and pursuant to the terms and conditions of (i) a purchase agreement between BR Health and UEPC's controlling shareholders, which was assigned by BR Health to Crescera on March 25, 2019, and which required Crescera to acquire the 15% interest in UEPC directly from UEPC's controlling shareholders, and (ii) an investment agreement dated March 29, 2019, among Crescera, certain members of the Esteves family, certain minority shareholders and Afya Brazil, pursuant to which Crescera agreed to subsequently contribute its additional 15% interest in UEPC into Afya Brazil's share capital in exchange for a certain number of shares in Afya Brazil, to be calculated at the time of the contribution in accordance with the calculation formula set forth in the investment agreement.

      Roll-up transactions

              On June 14, 2019, we concluded the roll-up of the minority shareholders of FASA to Afya Brazil. On June 16, 2019, we concluded the roll-up of the minority shareholders of IESP to Afya Brazil. On June 17, 2019, we concluded the roll-up of the minority shareholders of UNIVAÇO to Afya Brazil.

71


Table of Contents

              The following chart shows our corporate structure, after giving effect to our corporate reorganization and this offering:

GRAPHIC


*
Except for UEPC, all subsidiaries are controlled and/or wholly owned by Afya Brazil.

**
ITPAC Palmas, ITPAC Cametá, ITPAC Cruzeiro do Sul and ITPAC Manacapuru are branches of ITPAC Araguaína and ITPAC Santa Inês and ITPAC Itacoatiara are branches of IPTAN. Campuses for ITPAC Cametá, ITPAC Cruzeiro do Sul, ITPAC Manacapuru, ITPAC Santa Inês and ITPAC Itacoatiara are expected to open by June 2020.

***
RD means RD Administração e Participações Ltda.

****
CIS means Centro Integrado de Saúde de Teresina Ltda.

      Financial Information in U.S. Dollars

              Solely for the convenience of the reader, we have translated some of the real amounts included in this prospectus from Reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars at March 31, 2019, as reported by the Central Bank. See "Exchange Rates" for more detailed information regarding translation of Reais into U.S. dollars and for historical exchange rates for the Brazilian real.

Special Note Regarding Non-GAAP Financial Measures

              This prospectus presents our 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

72


Table of Contents

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 three months ended March 31, 2018 and the years ended December 31, 2018 and 2017, net income plus amortization of customer relationships and trademark plus/minus tax effect, and (ii) for the three months ended March 31, 2019, 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. We calculate Operating Cash Conversion Ratio as the cash flows from operations 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. For a reconciliation of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio to the most directly comparable IFRS measure, see "Selected Financial and Other Information."

Market Share and Other Information

              This prospectus contains data related to economic conditions in the market in which we operate. The information contained in this prospectus concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this prospectus were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this prospectus relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, a report by Accenture commissioned by us, public information and publications on the industry prepared by official public sources, such as the Brazilian Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE, the United Nations Educational, Scientific and Cultural Organization, or UNESCO, the Ministry of Education (Ministério da Educação), or the MEC, the Anísio Teixeira National Institute of Educational Studies and Research (Instituto Nacional de Estudos e Pesquisas Educacionais Anísio Teixeira), or the INEP, as well as private sources, such as Hoper Consultoria and Gismarket, consulting and research companies in the Brazilian education industry, the Brazilian Economic Institute of Fundação Getulio Vargas (Instituto Brasileiro de Economia da Fundação Getulio Vargas), or FGV/IBRE, among others.

              Industry publications, governmental publications and other market sources, including those referred to above, generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we are not aware of any misstatements regarding the market and industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section entitled "Risk Factors." Except as disclosed in this prospectus, none of the publications, reports or other published industry sources referred to in this prospectus were

73


Table of Contents

commissioned by us or prepared at our request. Except as disclosed in this prospectus, we have not sought or obtained the consent of any of these sources to include such market data in this prospectus.

Rounding

              We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

74


Table of Contents


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

              This prospectus contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this prospectus can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others.

              Forward-looking statements appear in a number of places in this prospectus and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including, but not limited to, those identified under the section entitled "Risk Factors" in this prospectus. These risks and uncertainties include factors relating to:

    our ability to implement our business strategy;

    changes in government regulations applicable to the education industry in Brazil, both in the traditional and distance learning segments;

    government interventions in education industry programs, both in the traditional and distance learning segments, that affect the economic or tax regime, the collection of tuition fees or the regulatory framework applicable to educational institutions;

    changes in the financial condition of the students enrolling in our institutions in general and in the competitive conditions in the education industry, both in the traditional and distance learning segments, or changes in the financial condition of our institutions;

    our ability to adapt to technological changes in the educational sector, including in relation to distance learning programs;

    the availability of government authorizations on terms and conditions and within periods acceptable to us;

    our ability to continue attracting and retaining new students;

    our ability to maintain the academic quality of our programs;

    our ability to compete and conduct our business in the future;

    the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors;

    changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes;

    the availability of qualified personnel and the ability to retain such personnel;

    our capitalization and level of indebtedness;

    the interests of our controlling shareholders;

    a decline in the number of students enrolled in our programs or the amount of tuition we can charge;

    changes in labor, distribution and other operating costs;

    our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us;

75


Table of Contents

    general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business;

    fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

    other factors that may affect our financial condition, liquidity and results of operations; and

    other risk factors discussed under "Risk Factors."

              Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

76


Table of Contents


USE OF PROCEEDS

              We estimate that the net proceeds from our issuance and sale of 11,827,256 shares of our Class A common shares in this offering will be approximately US$185.8 million (or US$219.1 million if the underwriters exercise in full their option to purchase additional shares), assuming an initial public offering price of US$17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

              Each US$1.00 increase (decrease) in the assumed initial public offering price of US$17.00 per share would increase (decrease) the net proceeds to us from this offering by approximately US$11.2 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately US$16.2 million, assuming the assumed initial public offering price stays the same.

              We intend to use the net proceeds from this offering to fund future acquisitions (including at least 1,000 medical school seats) and investments in complementary businesses, products or technologies. Any remaining net proceeds will be used for general corporate purposes. We will have broad discretion in allocating the net proceeds from this offering.

              Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including the factors described under "Risk Factors" in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the net proceeds.

              Pending determination of the use of the net proceeds from this offering, we intend to invest them in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

              We will not receive any proceeds from the sale of shares by the selling shareholders.

77


Table of Contents


DIVIDENDS AND DIVIDEND POLICY

              We have not adopted a dividend policy with respect to future distributions of dividends. The amount of any distributions will depend on many factors such as our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our board of directors and, where applicable, our shareholders. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.

Certain Cayman Islands Legal Requirements Related to Dividends

              Under the Companies Law and our Articles of Association, a Cayman Islands company may pay a dividend out of either its profit or share premium account, but a dividend may not be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. According to our Articles of Association, dividends can be declared and paid out of funds lawfully available to us, which include the share premium account. Dividends, if any, would be paid in proportion to the number of common shares a shareholder holds. For further information, see "Taxation—Cayman Islands Tax Considerations."

Certain Brazilian Legal Requirements Related to Dividends

              Our ability to pay dividends is directly related to positive and distributable net results from our Brazilian subsidiaries. See "Risk Factors—Certain Risks Relating to Our Business and Industry—We depend on dividend distributions by our subsidiaries, and we may be adversely affected if the performance of our subsidiaries is not positive." Our Brazilian subsidiaries are required under Federal Law No. 6,404 dated December 15, 1976, as amended, to distribute a mandatory minimum dividend to shareholders each year, which cannot be lower than 25% of their income for the prior year, unless such distribution is suspended by a decision of such subsidiary's shareholders at its annual shareholders' meeting based on a report by its board of directors that such distribution would be incompatible with its financial condition at that time. In addition, if, for any legal reasons due to new laws or bilateral agreements between countries, our Brazilian subsidiaries are unable to pay dividends to Cayman Islands companies, or if a Cayman Islands company becomes incapable of receiving them, we may not be able to make any dividend payments in the future.

              As of the date of this prospectus, Afya Brazil and certain of our subsidiaries and associates are required by their respective by-laws to distribute the following minimum dividends to shareholders: (i) Afya Brazil, ITPAC—Instituto Tocantinense Presidente Antônio Carlos S.A. (ITPAC Araguaína), ITPAC Porto Nacional—Instituto Tocantinense Presidente Antônio Carlos S.A., IESP—Instituto de Ensino Superior do Piauí S.A., IPTAN—Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A., União Educacional do Planalto Central S.A. (UEPC), and Instituto Educacional Santo Agostinho S.A. (FASA)—at least 25% of adjusted net profit in each fiscal year; (ii) Medcel Editora e Eventos S.A. (Medcel) and CBB Web Serviços e Transmissões On Line S.A.—at least 50% of adjusted net profit in each fiscal year; (iii) IESVAP—at least 80% of adjusted net profit in each fiscal year; (iv) UNIVAÇO—at least 90% of adjusted net profit in each fiscal year; (v) Centro de Ciências em Saúde de Itajubá S.A. (CCSI)—at least 2% of net profit in each fiscal year. FADEP, RD Administração e Participações Ltda., Centro Integrado de Saúde de Teresina Ltda., and Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda. (IPEMED) are limited liability companies and their articles of association do not stipulate a mandatory minimum dividend.

              We have not declared or paid any dividends to our shareholders since our incorporation in the Cayman Islands on March 22, 2019. Afya Brazil did not declare or pay any dividends to its shareholders in 2017, in 2018 or in the first three months of 2019. On June 13, 2019, Afya Brazil approved the payment of interim dividends totaling R$38 million (or approximately US$9.8 million) to Afya Brazil shareholders of record on June 13, 2019. The dividend amount was determined based on Afya Brazil's net income for the five months ended May 31, 2019. Neither Afya nor the public shareholders of Afya will be entitled to receive such dividend. The dividend is expected to be paid by the end of 2019.

78


Table of Contents


CAPITALIZATION

              The table below sets forth our total capitalization (defined as long-term debt and total equity) as of March 31, 2019, as follows:

    historical financial information of Afya Brazil, on an actual basis;

    as adjusted to give effect to the (i) contribution of the additional 15% interest in UEPC to Afya Brazil acquired on June 18, 2019 in the amount of R$24.5 million, and (ii) distribution of interim dividends totaling R$38 million (or approximately US$9.8 million) to Afya Brazil shareholders of record on June 13, 2019, which is expected to be paid by the end of 2019; and

    Afya, as further adjusted to give effect to (i) the incorporation of Afya, (ii) the contribution of Afya Brazil to Afya by the shareholders of Afya Brazil, and (iii) the issuance and sale by Afya of the Class A common shares in this offering, and the receipt of approximately US$185.8 million (R$724.0 million) in estimated net proceeds, considering an offering price of US$17.00 (R$66.24) per Class A common share (the midpoint of the range set forth on the cover of this prospectus), after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering, and the use of proceeds therefrom (and assuming no exercise of the underwriters' option to purchase additional shares and placement of all offered Class A common shares).

              You should read this table in conjunction with our consolidated financial statements, unaudited pro forma consolidated financial information, and the historical audited financial statements of our acquired businesses and the respective notes thereto, included elsewhere in this prospectus, with the sections of this prospectus entitled "Selected Financial and Other Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of March 31, 2019  
 
  Afya Brazil, actual   Afya Brazil, as adjusted
for the UEPC
contribution and interim
dividends(2)
  Afya, as further adjusted
for the contribution and
the offering(3)
 
 
  (in millions
of US$)(1)

  (in millions
of R$)

  (in millions
of US$)(1)

  (in millions
of R$)

  (in millions
of US$)(1)

  (in millions
of R$)

 

Long-term debt, excluding current portion(4)

    61.4     239.1     61.4     239.1     61.4     239.1  

Total equity(5)

    270.5     1,054.1     267.0     1,040.6     452.8     1,764.5  

Total capitalization(5)(6)

    331.9     1,293.2     328.4     1,279.7     514.2     2,003.6  

(1)
For convenience purposes only, amounts in reais as of March 31, 2019 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" and "Presentation of Financial and Other Information" for further information about recent fluctuations in exchange rates.

(2)
As adjusted to give effect to the contribution of the additional 15% interest in UEPC acquired on June 18, 2019 in the amount of R$24.5 million, and the distribution of interim dividends totaling R$38 million (or approximately US$9.8 million) to Afya Brazil shareholders of record on June 13, 2019, which is expected to be paid by the end of 2019.

79


Table of Contents

(3)
As further adjusted to give effect to (i) the incorporation of Afya, (ii) the contribution of Afya Brazil to Afya by the shareholders of Afya Brazil, and (iii) the issuance and sale by Afya of the Class A common shares in this offering, and the receipt of approximately US$185.8 million (R$724.0 million) in estimated net proceeds, considering an offering price of US$17.00 (R$66.24) per Class A common share (the midpoint of the range set forth on the cover of this prospectus), after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering, and the use of proceeds therefrom (and assuming no exercise of the underwriters' option to purchase additional shares and placement of all offered Class A common shares).

(4)
Long-term debt consists of non-current loans and financing and lease liabilities.

(5)
Each US$1.00 increase (decrease) in the offering price per Class A common share would increase (decrease) our total capitalization and shareholders' equity by R$11.2 million.

(6)
Total capitalization consists of long-term debt (excluding current portion) plus total equity.

              Other than as set forth above, there have been no material changes to our capitalization since March 31, 2019.

80


Table of Contents


DILUTION

              Prior to the consummation of this offering, the Esteves Family, Crescera, other members of the Esteves family and the Afya Brazil Minority Shareholder Group will contribute all of their shares in Afya Brazil to us. In return for this contribution, we will issue 58,485,140 new Class B common shares to Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves and Crescera and 17,370,248 new Class A common shares to the other members of the Esteves family and the Afya Brazil Minority Shareholder Group, in each case in a one-to-28 exchange for the shares of Afya Brazil contributed to us. Immediately prior to this initial public offering and after the share exchange, the Esteves Family, Crescera, other members of the Esteves family and the Afya Brazil Minority Shareholder Group will hold all of our issued and outstanding shares, and we will hold all of the issued and outstanding shares in Afya Brazil.

              We have presented the dilution calculation below on the basis of Afya Brazil's net tangible book value as of March 31, 2019 because until the one-to-28 contribution of Afya Brazil shares to it, Afya will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments.

              As of March 31, 2019, Afya Brazil had a net tangible book value of R$174.9 million, corresponding to a net tangible book value of R$2.31 per share (after giving effect to the one-to-28 contribution). Net tangible book value represents the amount of total assets less total liabilities, excluding goodwill and other intangible assets, divided by 75,855,388, the total number of Afya Brazil shares outstanding as of March 31, 2019 (after giving effect to the one-to-28 contribution).

              After giving effect to the sale of the Class A common shares offered by us in this offering, and considering an offering price of US$17.00 per Class A common share (the midpoint of the range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value estimated as of March 31, 2019 would have been approximately US$230.6 million, representing US$2.63 per share. This represents an immediate increase in net tangible book value of US$2.04 per share to existing shareholders and an immediate dilution in net tangible book value of US$14.37 per share to new investors purchasing Class A common shares in this offering. Dilution for this purpose represents the difference between the price per Class A common shares paid by these purchasers and net tangible book value per Class A common share immediately after the completion of this offering.

              If you invest in our Class A common shares, your interest will be diluted to the extent of the difference between the initial public offering price per Class A common share (when converted into reais) and the pro forma net tangible book value per Class A common share after accounting for the issuance and sale of new common shares in this offering.

              Because the Class A common shares and Class B common shares of Afya have the same dividend and other rights, except for voting, preemption and conversion rights, we have counted the Class A common shares and Class B common shares equally for purposes of the dilution calculations below.

              The following table illustrates this dilution to new investors purchasing Class A common shares in this offering.

Net tangible book value per share as of March 31, 2019

  US$ 0.59  

Increase in net tangible book value per share attributable to new investors

  US$ 2.04  

Pro forma net tangible book value per share after this offering

  US$ 2.63  

Dilution per Class A common share to new investors

  US$ 14.37  

Percentage of dilution in net tangible book value per Class A common share for new investors

    84.5 %

              Each US$1.00 increase (decrease) in the offering price per Class A common share, respectively, would increase (decrease) the net tangible book value after this offering by US$0.13 per Class A common share and the dilution to investors in this offering by US$0.87 per Class A common share.

81


Table of Contents


EXCHANGE RATES

              The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

              The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was much higher than in previous years. On September 24, 2015, the real fell to its lowest level since the introduction of the currency, at R$4.1949 per US$1.00. Overall in 2015, the real depreciated 47.0%, reaching R$3.9048 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil's political instability, appreciating 16.5% to R$3.2591 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.308 per U.S.$1.00. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.8748 per U.S.$1.00 on December 31, 2018, which reflected a 17.1% depreciation in the real against the U.S. dollar during 2018, primarily as a result of lower interest rates in Brazil, which reduced the volume of foreign currency deposited in Brazil in the "carry trade," as well as uncertainty regarding the results of the Brazilian presidential elections which were held in October 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.897 per U.S.$1.00 on March 31, 2019, which reflected a 0.6% depreciation in the real against the U.S. dollar during the first three months of 2019. The Central Bank has intervened occasionally in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil's balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future.

              The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in Brazilian reais per U.S. dollar. The monthly and annual average rates are calculated by using the average of reported exchange rates by the Central Bank on each day during a monthly period and on the last day of each month during an annual period, respectively. As of July 5, 2019, the exchange rate for the sale of U.S. dollars as reported by the Central Bank was R$3.8204 per US$1.00.

Year
  Period-end   Average(1)   Low(2)   High(3)  

2014

    2.6562     2.3547     2.1974     2.7403  

2015

    3.9048     3.3387     2.5754     4.1949  

2016

    3.2591     3.4833     3.1193     4.1558  

2017

    3.3080     3.1925     3.0510     3.3807  

2018

    3.8748     3.6558     3.1391     4.1879  

Source: Central Bank.

(1)
Represents the average of the exchange rates on the closing of each day during the year.

(2)
Represents the minimum of the exchange rates on the closing of each day during the year.

82


Table of Contents

(3)
Represents the maximum of the exchange rates on the closing of each day during the year.
Month
  Period-end   Average(1)   Low(2)   High(3)  

December 2018

    3.8748     3.8851     3.8285     3.9330  

January 2019

    3.6519     3.7417     3.6519     3.8595  

February 2019

    3.7385     3.7236     3.6694     3.7756  

March 2019

    3.8967     3.8470     3.7762     3.9682  

April 2019

    3.9453     3.8962     3.8345     3.9725  

May 2019

    3.9407     4.0015     3.9344     4.1056  

June 2019

    3.8322     3.8588     3.8234     3.9003  

July 2019 (through July 5, 2019)

    3.8204     3.8275     3.7940     3.8564  

Source: Central Bank.

(1)
Represents the average of the exchange rates on the closing of each day during the month.

(2)
Represents the minimum of the exchange rates on the closing of each day during the month.

(3)
Represents the maximum of the exchange rates on the closing of each day during the month.

83


Table of Contents


MARKET INFORMATION

              Prior to this offering, there has been no public market for our Class A common shares. We cannot assure you that an active trading market will develop for our Class A common shares, or that our Class A common shares will trade in the public market subsequent to this offering at or above the initial public offering price.

84


Table of Contents


SELECTED FINANCIAL AND OTHER INFORMATION

              The following table sets forth selected consolidated historical financial data of Afya Brazil as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018 and 2017 and summary unaudited pro forma financial data for the three months ended March 31, 2019 and 2018 and for the year ended December 31, 2018. This selected consolidated historical financial data has been derived from our unaudited interim condensed consolidated financial statements and our audited consolidated financial statements, included elsewhere in this prospectus. The financial results of IPTAN, IESVAP, CCSI, IESP, FADEP and Medcel are included in our historical results for the periods following the closing of each such transaction, April 26, 2018, April 26, 2018, May 30, 2018, November 27, 2018, December 5, 2018 and March 29, 2019, respectively. See "Presentation of Financial and Other Information."

              The selected unaudited pro forma financial data has been derived from the Unaudited Pro Forma Condensed Consolidated Financial Information included elsewhere in this prospectus. The unaudited pro forma financial information gives effect to our acquisitions of IPTAN, IESVAP, IESP, FADEP and Medcel, as if they occurred as of January 1, 2018 for pro forma statements of income purposes. The pro forma financial information does not reflect other acquisitions prior to the date of acquisition. See "Presentation of Financial and Other Information." The unaudited pro forma condensed consolidated financial information does not purport to represent what our actual consolidated results of operations would have been had the acquisitions actually occurred on the date indicated, nor are they indicative of future consolidated results of operations or financial condition.

              The selected audited consolidated historical financial data and the selected unaudited pro forma consolidated financial data should be read in conjunction with "Presentation of Financial and Other Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Information" and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

85


Table of Contents

The summary audited consolidated historical financial data presented in this prospectus may not be indicative of future performance.

 
  Historical Afya Brazil   Pro Forma(2)  
 
  For the Three Months Ended March 31,  
 
  2019   2019   2018   2019   2019   2018  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$ millions
 

Income Statement Data

                                     

Net revenue

    37.1     144.6     61.3     46.0     179.3     149.0  

Cost of services

    (14.0 )   (54.4 )   (28.2 )   (15.0 )   (58.4 )   (55.0 )

Gross profit

    23.1     90.2     33.1     31.0     120.9     94.0  

General and administrative expenses

    (8.0 )   (31.2 )   (14.3 )   (11.7 )   (45.5 )   (38.4 )

Other income (expenses), net

    (0.1 )   (0.2 )   0.8     (0.1 )   (0.4 )   0.5  

Operating income

    15.1     58.8     19.6     19.2     75.0     56.1  

Finance income

    1.3     5.2     1.7     1.5     5.7     3.4  

Finance expenses

    (3.1 )   (12.2 )   (1.1 )   (3.3 )   (12.8 )   (9.0 )

Finance result

    (1.8 )   (7.1 )   0.6     (1.8 )   (7.1 )   (5.6 )

Income before income taxes

    13.3     51.7     20.3     17.4     67.8     50.5  

Income taxes expense

    (0.6 )   (2.2 )   (1.4 )   (0.9 )   (3.6 )   (3.3 )

Net income

    12.7     49.5     18.9     16.5     64.2     47.2  

Income attributable to

                                     

Equity holders of the parent

    10.7     41.5     17.5     14.4     56.3     43.8  

Non-controlling interests

    2.0     7.9     1.3     2.0     7.9     3.3  

Earnings per share (R$, unless otherwise indicated)

   
 
   
 
   
 
   
 
   
 
   
 
 

Earnings per share—basic

                                     

Common shares

    5.17     20.13     15.23     5.91     23.04     28.67  

Earnings per share—diluted

                                     

Common shares

    5.07     19.74     15.23     5.81     22.66     28.67  

(1)
For convenience purposes only, amounts in reais for the three months ended March 31, 2019 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

86


Table of Contents

(2)
For a discussion on our acquisitions and our unaudited pro forma condensed consolidated statement of income and related notes, see "Presentation of Financial and Other Information" and "Unaudited Pro Forma Condensed Consolidated Financial Information."
 
  Historical Afya Brazil   Pro Forma(2)  
 
  For the Year Ended December 31,  
 
  2018   2018   2017   2018   2018  
 
  US$
millions(1)

  R$ millions
  US$
millions(1)

  R$
millions

 

Income Statement Data

                               

Net revenue

    85.7     333.9     216.0     140.5     547.6  

Cost of services

    (43.1 )   (168.1 )   (124.1 )   (65.4 )   (254.8 )

Gross profit

    42.6     165.9     91.9     75.1     292.7  

General and administrative expenses

    (18.0 )   (70.0 )   (45.4 )   (40.5 )   (158.1 )

Other income (expenses), net

    0.2     0.6     2.8     (0.4 )   (1.6 )

Operating income

    24.7     96.4     49.3     34.1     133.0  

Finance income

    2.7     10.4     5.2     4.7     18.3  

Finance expenses

    (2.1 )   (8.2 )   (3.6 )   (7.1 )   (27.5 )

Finance result

    0.6     2.3     1.6     (2.4 )   (9.3 )

Income before income taxes

    25.3     98.7     51.0     31.7     123.7  

Income taxes expense

    (1.0 )   (4.0 )   (2.5 )   (1.9 )   (7.5 )

Net income

    24.3     94.7     48.5     29.8     116.2  

Income attributable to

                               

Equity holders of the parent

    22.2     86.4     45.4     26.5     103.2  

Non-controlling interests

    2.2     8.4     3.1     3.3     13.0  

Earnings per share (R$, unless otherwise indicated)

   
 
   
 
   
 
   
 
   
 
 

Earnings per share—basic

                               

Common shares

    13.22     51.51     39.49     12.88     50.20  

Earnings per share—diluted

                               

Common shares

    12.99     50.61     39.49     12.70     49.47  

(1)
For convenience purposes only, amounts in reais for the year ended December 31, 2018 have been translated to U.S. dollars using an exchange rate of R$3.8967 to US$1.00, the commercial selling rate for U.S. dollars as of March 31, 2019, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See "Exchange Rates" for further information about recent fluctuations in exchange rates.

87


Table of Contents

(2)
For a discussion on our acquisitions and our unaudited pro forma condensed consolidated statement of income and related notes, see "Presentation of Financial and Other Information" and "Unaudited Pro Forma Condensed Consolidated Financial Information."
 
  Historical Afya Brazil  
 
  As of March 31,   As of December 31,  
 
  2019   2019   2018   2018   2017  
 
  US$
millions(1)

  R$
millions

  US$
millions(1)

  R$ millions
 

Balance Sheet Data:

                               

Assets

                               

Current assets

                               

Cash and cash equivalents

    63.0     245.3     16.0     62.3     25.5  

Trade receivables

    26.3     102.6     15.0     58.4     28.5  

Inventories

    1.0     3.8     0.3     1.1     0.4  

Related parties

                    2.6  

Recoverable taxes

    0.8     3.2     0.6     2.3     1.6  

Derivatives

            0.2     0.6      

Other assets

    5.5     21.4     2.3     8.9     1.8  

Total current assets

    96.5     376.2     34.3     133.5     60.5  

Non-current assets

   
 
   
 
   
 
   
 
   
 
 

Restricted cash

    4.8     18.8     4.8     18.8      

Trade receivables

    2.6     10.3     1.3     5.2     2.3  

Related parties

    0.4     1.7     0.4     1.6     1.0  

Derivatives

            0.2     0.7      

Other assets

    3.5     13.5     2.7     10.4     2.7  

Investment in associate

    6.3     24.5              

Property and equipment

    19.0     74.0     16.9     65.8     32.5