EX-99.1 2 ex99-1.htm EX-99.1

 

 

Afya Limited Announces Second-Quarter and First Half 2022 Financial Results

High and Predictable Growth

Strong Net Income Results

 

Nova Lima, Brazil, August 22, 2022 – Afya Limited (Nasdaq: AFYA) (“Afya” or the “Company”), the leading medical education group and digital health services provider in Brazil, reported today financial and operating results for the three and six-month period ended June 30, 2022 (second quarter 2022). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

Second Quarter 2022 Highlights

§2Q22 Adjusted Net Revenue increased 51.0% YoY to R$576.1 million. Adjusted Net Revenue excluding acquisitions grew 19.0%, reaching R$454.0 million.
§2Q22 Adjusted EBITDA increased 37.1% YoY, reaching R$220.2 million, with an Adjusted EBITDA Margin of 38.2%. Adjusted EBITDA excluding acquisitions grew 3.0%, reaching R$165.5 million, with an Adjusted EBITDA Margin of 36.4%.
§2Q22 Adjusted Net Income increased 83.0% YoY, reaching R$119.2 million, with an EPS growth of 522.2% in the same period.

 

First Half 2022 Highlights

§1H22 Adjusted Net Revenue increased 45.9% YoY to R$1,143.8 million. Adjusted Net Revenue excluding acquisitions grew 14.7%, reaching R$899.3 million.
§1H22 Adjusted EBITDA increased 33.3% YoY reaching R$491.0 million, with an Adjusted EBITDA Margin of 42.9%. Adjusted EBITDA excluding acquisitions grew 2.7%, reaching R$378.4 million, with an Adjusted EBITDA Margin of 42.1%.
§1H22 Adjusted Net Income increased 27.2% YoY, reaching R$286.3 million, with an EPS growth of 90.3% in the same period.
§Cash conversion of 91.0%, with a solid cash position of R$616.3 million.
§~265 thousand monthly active physicians and medical students using Afya’s Digital Services.

 

Table 1: Financial Highlights                      
  For the three months period ended June 30,   For the six months period ended June 30,
(in thousand of R$) 2022 2022 Ex Acquisitions* 2021 % Chg  % Chg Ex Acquisitions   2022 2022 Ex Acquisitions* 2021 % Chg  % Chg Ex Acquisitions
(a) Net Revenue 598,156 476,067 372,374 60.6% 27.8%   1,164,480 919,974 766,725 51.9% 20.0%
(b) Adjusted Net Revenue (1) 576,079 453,990 381,488 51.0% 19.0%   1,143,795 899,289 784,043 45.9% 14.7%
(c) Adjusted EBITDA (2) 220,186 165,457 160,658 37.1% 3.0%   490,987 378,397 368,309 33.3% 2.7%
(e) = (c)/(b)  Adjusted EBITDA Margin 38.2% 36.4% 42.1% -390 bps -570 bps   42.9% 42.1% 47.0% -410 bps -490 bps
                       
*For the three months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: Cliquefarma (only April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (only April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from April to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from April to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from April to June, 2022).
*For the six months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae (from January to March, 2022; Closing of Medicinae was in March, 2021), Cliquefarma (from January to April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (from January to April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from January to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from January to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from January to June, 2022).
(1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction, and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.
(2) See more information on "Non-GAAP Financial Measures" (Item 08).

 

1.Message from Management

This quarter’s results reinforce that our strategy has been successful, marked by the consistent growth of our operational and financial results, with significant increases in net revenue and adjusted EBITDA year over year. Once again, we have successfully concluded our intake process with a 100% of occupancy in all medical schools which enables us to reassure our 2022 guidance. It is also important to highlight that our operational leverage and capital allocation discipline are resulting in a robust net income and EPS expansion even considering the business combinations and the higher interest rates in the period.

 

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With the pandemic finally losing its strength, our students, employees, and partners are again extracting the best from our ecosystem. For the second quarter in a row, we can see our Continuing Education recovery compared to last year. After challenging periods, our practical classes are boosting again, as we’ve invested in an expansion plan that allowed us to double our campuses, launch new courses, and strengthen our intake process.

As presented on Afya´s Q2 earnings release, our digital services results is progressively ramping up. We’re proud that our tools are being able to help physicians’ during their medical journey and, throughout development and new acquisitions, our digital ecosystem is being built with multiple offerings, unlocking new interactions and revenue streams that go beyond the physicians, achieving pharma players, hospitals, labs and drugstores chains, scratching the surface of a total addressable market of R$28.4 billion. The acquisitions we completed this quarter – Cardiopapers and Glic - along with our previous acquisitions completed our 6 pillars, is strengthening the digital services strategy and ecosystem. Since the beginning of the year, we have been disclosing our B2P and B2B figures, breaking down our Digital Service’s net revenue within these two for a better perspective. 

Along with that scenario, the expansion of our offering in the Undergrad segment continues to grow strong, as we’ve successfully consolidated our leadership in medical school seats in Brazil. So far this year, we have increased 200 operating seats with four new Mais Médicos authorized units by MEC, with operations to start in the second semester and 28 new seats from the UniSL Ji-Paraná campus, reaching 2,759 approved seats. Considering potential additional organic and inorganic seats, we have an expected upside to achieve more than 32 thousand undergrad medical students at maturity. We have become highly efficient in operating medical schools and we continue to see opportunities in this area. All this effort means one thing: our medical education business remains, and will continue to be, the cornerstone of our business in the short and middle terms, delivering a highly predicted growth combined with high profitability and cash generation.

Also, since 2020 we’ve been presenting our ESG evolution and achievements each quarter, and we are proud to say that we’ve been making significant improvements in the environmental, social, and governance agenda, sequentially. One important accomplishment this quarter was the increase in the number of women as board members, which went from 18% to now 27%. Subjects related to climate change, clean energy powering, environmental governance, social impact on vulnerable areas, transparency, compliance, and many others are widely disclosed in our 2021 Sustainability Report.

With another round of high and sustainable growth, our mission remains solid as ever: to become the reference partner of physicians in their journey, through rewarding lifelong experience and an enhanced daily practice through Afya’s digital services. We are very proud of our business and of what we have achieved so far, as well as of what we are planning for the future.

 

2.Key Events in the Quarter:
§CardioPapers acquisition in April, 2022 – CardioPapers is the main medical content and education platform in the Cardiology field, offering courses and books developed by physicians and for physicians, covering all phases of the medical career, aligned with Afya’s overall business strategy.
§Afya announced, on April 2022, that Mr. Paulo Passoni, a board member since May 2021, has submitted his resignation letter as a member of the Board of Directors. Mrs. Maria Tereza Azevedo was appointed as his replacement effective as of April 19th.
§Afya announced, on April 2022, that the resolutions set out in its Notice of Annual General Meeting dated April 12, 2022 were duly passed at its Annual General Meeting held today: (1) the approval and ratification of Afya’s financial statements as of and for the fiscal year ended December 31, 2021; and (2) the approval of the Amended and Restated Memorandum and Articles of Association available at Afya’s website at https://ir.afya.com.br, subject to and with effect from Closing of the transaction disclosed in the Form 13D/A on March 4, 2022, between Esteves Family and Bertelsmann SE & Co. KGaA, accessible at the Company’s website at https://ir.afya.com.br.
§Afya announced, on May 2022, that it was notified of the closing of the transactions where Bertelsmann acquired 6,000,000 Class B common shares of Afya at the purchase price of US$26.90 per share, from Esteves Family. As a result of the closing of the transaction, Bertelsmann and the Esteves family will beneficially own ~57.5% and ~33.1% voting interest, and ~31.0% and ~17.8% of the total shares respectively, in Afya.

 

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§Glic acquisition in May, 2022 - Glic is a free diabetes care and management app solution for physicians and patients that uses technology to improve diabetes education and daily routine practices, connecting users, devices and health providers. This business combination represents Afya´s entering into the physician-patient relationship pillar.

 

3.Full Year 2022 Guidance Reaffirmed

 

The Company is reaffirming its previously issued guidance for FY22 including the successfully concluded acceptances of new medical students for the second semester, ensuring 100% occupancy in all of its medical schools.

 

 

The guidance for FY2022 is defined in the following table:

 
Guidance for 2022 Important considerations
2022  Adjusted Net Revenue is expected to be between R$2,280.0 million – R$2,360.0 million Includes four Mais Médicos units start operating in 2H22;
Includes Ji-Parana acquisition start operating in the 2H22;
Includes Além da Medicina acquisition;
Excludes any acquisition that may be concluded after the issuance of the guidance, such as Cardiopapers and Glic. 
2022 Adjusted EBITDA is expected to be between R$935.0 million - R$1,015 million

 

 

4.1H22 Overview

 

Operational Review

Afya is the only company offering educational and technological solutions to support physicians across every stage of the medical career, from undergraduate students in their medical school years through medical residency preparatory courses, medical specialization programs and continuing medical education. The Company also offers solutions to empower the physicians in their daily routine including supporting clinic decisions through mobile app subscription, delivering practice management tools through a Software as a Service (SaaS) model, and assisting physicians in their relationship with their patients.

The Company reports results for three distinct business units. The first, Undergrad – medical schools, other healthcare programs and ex-health degrees. Revenue is generated from the monthly tuition fees the Company charges students enrolled in the undergraduate programs. The second, Continuing Education – specialization programs and graduate courses for physicians. Revenue is also generated from the monthly tuition fees the Company charges students enrolled in the specialization and graduate courses. The third is Digital Services – digital services offered by the Company at every stage of the medical career. This business unit is divided into Business to Physician (which encompasses Content & Technology for Medical Education, Clinical Decision Software, Practice Management Tools & Electronic Medical Records, Physician-Patient Relationship, Telemedicine, and Digital Prescription) and Business to Business (which provides access and demand for the healthcare players). Revenue is generated from printed books and e-books, which is recognized at the point in time when control is transferred to the customer, and subscription fees, which are recognized as the services are transferred over time.

 

 

 

 

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Key Revenue Drivers – Undergraduate Courses

Table 2: Key Revenue Drivers Six months period ended June 30,
  2022 2021 % Chg
Undergrad Programs      
MEDICAL SCHOOL      
Approved Seats                       2,759                       2,303 19.8%
Operating Seats                        2,481                       2,053 20.8%
Total Students (end of period)                    17,555                    13,390 31.1%
Average Total Students                    17,539                    13,121 33.7%
Average Total Students (ex-Acquisitions)*                    14,616                    13,121 11.4%
Tuition Fees (Total - R$MM)               1,001,808                  665,112 50.6%
Tuition Fees (ex- Acquisitions* - R$MM)                  796,822                  665,112 19.8%
Medical School Gross Avg. Ticket (ex- Acquisitions* - R$/month)                       9,086                       8,448 7.5%
Medical School Net Avg. Ticket (ex- Acquisitions* - R$/month)                       7,853                       7,227 8.7%
UNDERGRADUATE HEALTH SCIENCE      
Total Students (end of period)                    20,779                    14,913 39.3%
Average Total Students                    20,841                    14,513 43.6%
Average Total Students (ex-Acquisitions)*                    14,129                    14,513 -2.6%
Tuition Fees (Total - R$MM)                  170,666                    89,187 91.4%
Tuition Fees (ex- Acquisitions* - R$MM)                    93,337                    89,187 4.7%
OTHER UNDERGRADUATE       
Total Students (end of period)                    23,945                    15,478 54.7%
Average Total Students                    24,077                    14,323 68.1%
Average Total Students (ex-Acquisitions)*                    12,379                    14,323 -13.6%
Tuition Fees (Total - R$MM)                  137,464                    88,489 55.3%
Tuition Fees (ex- Acquisitions* - R$MM)                    78,727                    88,489 -11.0%
TOTAL TUITION FEES      
Tuition Fees (Total - R$MM)               1,309,937                  842,788 55.4%
Tuition Fees (ex- Acquisitions* - R$MM)                  968,886                  842,788 15.0%
       
*For the three months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: Cliquefarma (only April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (only April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from April to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from April to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from April to June, 2022).
*For the six months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae (from January to March, 2022; Closing of Medicinae was in March, 2021), Cliquefarma (from January to April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (from January to April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from January to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from January to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from January to June, 2022).

 

 

 

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Key Revenue Drivers – Continuing Education and Digital Services

 

Table 3: Key Revenue Drivers Six months ended June 30,
  2022 2021 % Chg
Continuing Education      
Medical Specialization & Others      
Total Students (end of period)                       3,543                       3,285 7.9%
Average Total Students                       3,511                       3,492 0.6%
Average Total Students (ex-Acquisitions)                       3,511                       3,492 0.6%
Net Revenue from courses (Total - R$MM)                    47,662                    35,272 35.1%
Net Revenue from courses (ex- Acquisitions¹)                    47,662                    35,272 35.1%
Digital Services      
Content & Technology for Medical Education      
Medcel Active Payers      
Prep Courses & CME - B2P                    12,741                    15,670 -18.7%
Prep Courses & CME - B2B                       4,909                       3,173 54.7%
Além da Medicina Active Payers                       7,792                              -    n.a.
Cardio Papers Active Payers                       4,765                              -    n.a.
Medical Harbour Active Payers                       4,425                          875 405.7%
Clinical Decision Software      
Whitebook Active Payers                  133,238                  115,149 15.7%
Clinical Management Tools²      
iClinic Active Payers                    21,088                    14,371 46.7%
Shosp Active Payers                       2,264                       2,305 -1.8%
       
Digital Services Total Active Payers (end of period)                  191,222                  151,543 26.2%
Net Revenue from Services (Total - R$MM)                    89,695                    81,665 9.8%
Net Revenue - B2P                    79,013                    78,724 0.4%
Net Revenue - B2B                    10,682                       2,941 263.2%
Net Revenue From Services (ex-Acquisitions¹)                    74,594                    81,665 -8.7%
(1) For the three months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: Cliquefarma (only April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (only April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from April to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from April to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from April to June, 2022). For the six months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae (from January to March, 2022; Closing of Medicinae was in March, 2021), Cliquefarma (from January to April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (from January to April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from January to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from January to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from January to June, 2022).
(2) Clinical management tools includes Telemedicine and Digital Prescription features. 

 

 

 

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Key Operational Drivers – Digital Services

Monthly Active Users (MaU) represents the number of unique individuals that consumed Digital Services content in each one of our products in the last 30 days of a specific period.

Total monthly active users reached approximately 265 thousand, 13.6% higher over the same period in the last year.

Monthly Active Unique Users (MUAU) represents the number of unique individuals, without overlap of users among products, in the last 30 days of a specific period. Since this concept is being implemented this year, historical metrics of MUAU could not be disclosed.

 

Table 4: Key Operational Drivers for Digital Services - Monthly Active Users (MaU)        
  2Q22 2Q21 % Chg YoY 1Q22 % Chg QoQ
Content & Technology for Medical Education                                              20,739                   18,968 9.3%                 21,464 -3.4%
Clinical Decision Software                                           221,862                181,138 22.5%               218,313 1.6%
Clinical Management Tools¹                                              21,151                   32,968 -35.8%                 19,762 7.0%
Physician-Patient Relationship                                                1,101                            -    n.a                           -    0.0%
Total Monthly Active Users (MaU) - Digital Services                                           264,853                233,074 13.6%               259,539 2.0%
1) Clinical management tools includes Telemedicine and Digital Prescription features
2) Clinical management tools MAU excludes other users other than payors, starting in 1Q22
3) Shosp, Medicinae and Além da Medicina starting in 1Q22
4) Cardiopapers and Glic starting in 2Q22

 

Table 5: Key Operational Drivers for Digital Services - Monthly Unique Active Users (MuaU)
  2Q22
Total Monthly Unique Active Users (MuaU) - Digital Services                                           245,396
1) Total Monthly Unique Active Users excludes non-integrated companies: Medical Harbour, Medicinae, Shosp, Além da Medicina, Cardiopapers and Glic

Seasonality

Undergrad’s and Continuing Education tuition revenues are related to the intake process and monthly tuition fees charged to students over the period thus the Company does not have significant fluctuations during the semester. Digital Services is comprised mostly by Medcel, Pebmed and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality, Medcel’s revenue is concentrated in the first and last quarter of the year, as a result of the enrollments of Medcel’s clients period. The majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results of operations in the first and last quarters of the year compared to the second and third quarters of the year.

 

Revenue

This quarter the Company recovered R$22.1 million of the mandatory discounts in tuition fees previously granted by individual and collective legal proceedings and public civil proceedings related to COVID-19. As Afya in 2020 and 2021 excluded these mandatory discounts from Adjusted Net Revenue, the recovery of these amounts are not counted for Adjusted Net Revenue in 2022.

 

Adjusted Net Revenue for the second quarter of 2022 was R$576.1 million, an increase of 51.0% over the same period of the prior year. Excluding acquisitions, Adjusted Net Revenue in the second quarter increased 19.0% YoY to R$454.0 million, mainly due to the maturation of medical seats, higher tickets in Medicine courses, and the Continuing Education recovery, which ended the second quarter with a 49.0% increase in net revenue, mainly due to the interruption of the effects of the COVID-19 pandemic.

 

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Digital services also contributed to the Adjusted Net Revenues growth this quarter, increasing 50.1% year over year, and 20.2%, excluding acquisitions. The organic growth is a combination of (a) the start of the B2B engagements, reaching 37 contracts with 20 pharmaceutical industry companies, and (b) the expansion of the active payers in the B2P, mainly in Whitebook and iClinic.

 

For the six-month period ended June 30, 2022, Adjusted Net Revenue was R$1,143.8 million, an increase of 45.9% over the same period of last year. Excluding acquisitions, Adjusted Net Revenue in the six-month period increased 14.7% YoY to R$899.3 million.

 

Table 6: Revenue & Revenue Mix 
(in thousands of R$)   For the three months period ended June 30,   For the six months period ended June 30,
    2022 2022 Ex Acquisitions* 2021 % Chg % Chg Ex Acquisitions   2022 2022 Ex Acquisitions* 2021 % Chg % Chg Ex Acquisitions
Net Revenue Mix                        
Undergrad   533,545 419,865 328,434 62.5% 27.8%   1,028,940 799,535 650,286 58.2% 23.0%
Adjusted Undergrad¹   511,468 397,788 337,548 51.5% 17.8%   1,008,255 778,850 667,604 51.0% 16.7%
Continuing Education   23,811 23,811 15,984 49.0% 49.0%   47,662 47,662 35,272 35.1% 35.1%
Digital Services   42,218 33,809 28,127 50.1% 20.2%   89,695 74,594 81,665 9.8% -8.7%
    Inter-segment transactions   -                1,418 -                1,418 -                   171 n.a. 729.2%   -                1,817 -                1,817 -                   498 264.9% 264.9%
Total Reported Net Revenue   598,156 476,067 372,374 60.6% 27.8%   1,164,480 919,974 766,725 51.9% 20.0%
Total Adjusted Net Revenue ¹   576,079 453,990 381,488 51.0% 19.0%   1,143,795 899,289 784,043 45.9% 14.7%
*For the three months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: Cliquefarma (only April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (only April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from April to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from April to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from April to June, 2022).
                         
*For the six months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae (from January to March, 2022; Closing of Medicinae was in March, 2021), Cliquefarma (from January to April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (from January to April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from January to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from January to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from January to June, 2022).
(1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction, and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.
(2) See more information on "Non-GAAP Financial Measures" (Item 08).

 


Adjusted EBITDA

 

Adjusted EBITDA for the three-month period ended June 30, 2022 increased 37.1% to R$220.2 million, up from R$160.7 million in the same period of the prior year, while the Adjusted EBITDA Margin decreased 390 basis points to 38.2%. For the six-month period ended June 30, 2022, Adjusted EBITDA was R$491.0 million, an increase of 33.3% over the same period of the prior year, with an Adjusted EBITDA Margin decrease of 410 basis points in the same period. The Adjusted EBITDA Margin reduction is due to (a) the Digital segment, mostly in the performance of Medcel in the residency preparatory market, (b) the expansion of the Continuing Education segment, which is still maturing the new campuses, and (c) the increase in expenses in the holding and shared services level.

 

Excluding acquisitions, Adjusted EBITDA for the three-month period ended June 30, 2022 increased 3.0% YoY to R$165.5 million, while the Adjusted EBITDA Margin decreased 570 basis points to 36.4%. For the six-month period, excluding acquisitions, Adjusted EBITDA increased 2.7% YoY to R$378.4 million, while the Adjusted EBITDA Margin decreased 490 basis points to 42.1%, mainly due to the same reasons previously explained.

 

Table 7: Adjusted EBITDA                      
(in thousands of R$) For the three months period ended June 30,   For the six months period ended June 30,
  2022 2022 Ex Acquisitions* 2021 % Chg % Chg Ex Acquisitions   2022 2022 Ex Acquisitions* 2021 % Chg % Chg Ex Acquisitions
Adjusted EBITDA 220,186 165,457 160,658 37.1% 3.0%   490,987 378,397 368,309 33.3% 2.7%
% Margin 38.2% 36.4% 42.1% -390 bps -570 bps   42.9% 42.1% 47.0% -410 bps -490 bps
*For the three months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: Cliquefarma (only April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (only April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from April to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from April to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from April to June, 2022).
*For the six months period ended June 30, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae (from January to March, 2022; Closing of Medicinae was in March, 2021), Cliquefarma (from January to April, 2022; Closing of Cliquefarma was in April, 2021), Medical Harbour (from January to April, 2022; Closing of Medical Harbour was in April, 2021), Shosp (from January to May, 2022; Closing of Shosp was in May, 2021), UNIFIPMoc and FIP Guanambi (from January to May, 2022; Closing of UNIFIPMoc and FIP Guanambi was in June, 2021), UNIGRANRIO, RX PRO, Garanhuns, Além da Medicina, Cardiopapers and Glic (all from January to June, 2022).

 

 

7 
 

 

Adjusted Net Income

Net Income for the second quarter of 2022 was R$106.1 million, an increase of 383.4% over the same period of the prior year. Net Income results were positively affected by (a) the increase in operational results, which includes the recovery of a portion of the prior granted discounts in tuition fees related to COVID-19, and (b) the reduction of financial expenses mainly due to the fx rate difference regarding the Softbank transaction that affected 2Q21. For the six-month period ended June 30, 2022, Net Income increased 78.1%, from R$135.3 million to R$241.0 million.

 

Adjusted Net Income for the second quarter of 2022 was R$ 119.2 million, an increase of 83.0% over the same period of the prior year. Adjusted Net Income for the six-month period of 2022 was R$ 286.3 million, an increase of 27.2% year over year.

 

Our EPS reached R$2.55 per share for the six-month period ended June 30, 2022, an increase of 90.3% year over year, reflecting the increase in our Net Income, and capital allocation discipline executing our businesses combination and three buyback programs in a row.

 

Table 8: Adjusted Net Income              
(in thousands of R$) For the three months period ended June 30,   For the six months period ended June 30,
  2022 2021 % Chg   2022 2021 % Chg
Net income                  106,073                    21,945 383.4%                 241,015             135,293 78.1%
Amortization of customer relationships and trademark (1)                    18,724                    13,667 37.0%                   37,007               27,984 32.2%
Share-based compensation                        8,652                    11,093 -22.0%                   11,581               25,102 -53.9%
Non-recurring expenses: (14,302) 18,404 n.a.   -                 3,275 36,718 n.a.
 - Integration of new companies (2)                       5,781                       4,514 28.1%                     9,952                 7,536 32.1%
 - M&A advisory and due diligence (3)                          594                       1,745 -66.0%                     1,806                 3,556 -49.2%
 - Expansion projects (4)                          677                       2,163 -68.7%                     1,279                 3,390 -62.3%
 - Restructuring expenses (5)                          723                          868 -16.7%                     4,373                 4,918 -11.1%
 - Mandatory Discounts in Tuition Fees  (6) -                  22,077                       9,114 n.a.   -               20,685               17,318 n.a.
Adjusted Net Income 119,147 65,109 83.0%   286,328 225,097 27.2%
               
Basic earnings per share - R$ (7) 1.12 0.18 522.2%   2.55 1.34 90.3%
(1) Consists of amortization of customer relationships and trademark recorded under business combinations.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of  mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction, and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.
(7) Basic earnings per share: Net Income/Average number of shares in the period (ex-treasury).

 

 

Cash and Debt Position

 

Cash and cash equivalents on June 30, 2022, were R$616.3 million, a decrease of 56.7% over the same period in 2021.

 

For the six-month period ended June 30, 2022, Afya reported Adjusted Cash Flow from Operations of R$450.0 million, up from R$343.2 million in the same period of the previous year, an increase of 31.1% YoY, boosted by the solid operational results.

 

Operating Cash Conversion Ratio was strong once again, achieving 91.0% for the six-month period ended June 30, 2022, compared to 103.5% in the same period of the previous year. This decrease was mainly related to (a) an increase in the trade receivables, partially caused by the recovery of the mandatory discounts in tuition fees related to COVID-19 that were invoiced but not yet received, (b) the fact that last year’s cash performance was positively impacted by the recover of the special payment conditions related to the COVID-19 given to our students during 2020, and (c) a decrease in advanced from customers.

 

On June 30, 2022, net debt, excluding the effect of IFRS 16, totaled R$1,483.4 million, compared with net debt of R$582.7 million in the same period in 2021, mainly due to payments related to (a) 7 business combinations and license acquisitions executed in the last 12 months, totaling R$891.3 million; (b) shares repurchase program of R$301.3 million, executed in the last 12 months and (c) investments activities in properties, equipment and intangibles (excluding license acquisitions and goodwill) totaling R$213.4 million in the last 12 months, which were partially offset by the R$738.3 million cash generation from June 30, 2021 through June 30, 2022. The following table shows more information regarding the cost of debt for the second quarter, considering loans and financing, and accounts payable to selling shareholders. It is important to mention that our capital structure remains solid with a conservative leveraging position and a low cost of debt.

 

8 
 

 

 

Table 9: Gross Debt and Average Cost of Debt  
(in R$ MM) For the six months period ended June 30,
      Cost of Debt
  Gross Debt Duration (Years) per year %CDI*
Loans and financing: Softbank 823 3.9 6.5% 59%
Loans and financing: Others 557 1.0 12.9% 115%
Accounts payable to selling shareholders 719 1.4 11.3% 101%
Average    2.3 9.7% 88%
*Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference.
1H22: ~11.02% p.y.

 

Table 10: Operating Cash Conversion Ratio Reconciliation For the six months period ended June 30,
(in thousands of R$) Considering the adoption of IFRS 16 
  2022 2021 % Chg
(a) Cash flow from operations 427,916 320,515 33.5%
(b) Income taxes paid 22,101 22,667 -2.5%
(c) = (a) + (b) Adjusted cash flow from operations 450,017 343,182 31.1%
       
(d) Adjusted EBITDA 490,987 368,309 33.3%
(e) Non-recurring expenses: -3,275 36,718 n.a.
 - Integration of new companies (1) 9,952 7,536 32.1%
 - M&A advisory and due diligence  (2) 1,806 3,556 -49.2%
 - Expansion projects (3) 1,279 3,390 -62.3%
 - Restructuring Expenses (4) 4,373 4,918 -11.1%
 - Mandatory Discounts in Tuition Fees  (5) -20,685 17,318 n.a.
(f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses  494,262 331,591 49.1%
(g) = (c) / (f) Operating cash conversion ratio 91.0% 103.5% -1250 bps
(1) Consists of expenses related to the integration of newly acquired companies. 
(2) Consists of expenses related to professional and consultant fees in connection with due diligence services for M&A transactions.
(3) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(4) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of acquired companies.

(5) Consists of  mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction, and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.

 

 

 

9 
 

 

 

Table 11: Cash and Debt Position          
(in thousands of R$)          
  2Q22 FY2021 % Chg 2Q21 % Chg
(+) Cash and Cash Equivalents 616,250 748,562 -17.7% 1,424,718 -56.7%
Cash and Bank Deposits                47,583                88,487 -46.2%                49,528 -3.9%
Cash Equivalents             568,667             660,075 -13.8%          1,375,190 -58.6%
(-) Loans and Financing 1,380,540 1,374,876 0.4% 1,466,621 -5.9%
Current             230,494             128,720 79.1%             117,679 95.9%
Non-Current          1,150,046          1,246,156 -7.7%          1,348,942 -14.7%
(-) Accounts Payable to Selling Shareholders             649,626             679,826 -4.4%             466,663 39.2%
Current             203,979             239,849 -15.0%             210,350 -3.0%
Non-Current             445,647             439,977 1.3%             256,313 73.9%
(-) Other Short and Long Term Obligations 69,456 72,726 -4.5% 74,138 -6.3%
(=) Net Debt (Cash) excluding IFRS 16 1,483,372 1,378,866 7.6% 582,704 154.6%
(-) Lease Liabilities 741,825 714,085 3.9% 583,545 27.1%
Current                28,619                24,955 14.7%                80,302 -64.4%
Non-Current             713,206             689,130 3.5%             503,243 41.7%
Net Debt (Cash) with IFRS 16 2,225,197 2,092,951 6.3% 1,166,249 90.8%

 

CAPEX

Capital expenditures is consisting of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of our campuses and headquarters including leasehold improvements, and the development of new solutions in the digital segment, among others.

 

For the six-month period ending June 30, 2022, CAPEX went from R$81.0 million to R$161.2 million, an increase of 99.1% over the same period of the prior year, due to higher expenditures related to intangible assets, mainly explained by the R$24.4 million earn-out related to the 28 additional seats of Centro Universitário São Lucas, in Ji-Parana, approved in March, 2022, and the R$ 36.5 million remeasurement of Unigranrio's business combination goodwill.

 

Table 12: CAPEX
(in thousands of R$) For the six months period ended June 31,
  2022 2021 % Chg
CAPEX 161,218 80,957 99.1%
Property and equipment 62,266 58,132 7.1%
Intanglibe assets 98,952 22,825 333.5%
 - Licenses 24,408 - n.a.
 - Goodwill 36,481 - n.a.
 - Others 38,063 22,825 66.8%

 

 

ESG Metrics

ESG commitment is an important part of Afya’s strategy and permeates the Company’s core values. Afya has been advancing year after year on its core pillars and, since 2021, ESG metrics have been disclosed in the Company’s quarterly financial results.

 

 

10 
 

 

In August 2021, Afya assumed a voluntary commitment to have at least 50% women in its management positions by 2030. In addition, Afya announced that it was certificated by Women on Board, an independent initiative whose purpose is to acknowledge, value and promote corporate environments in which women are part of the board of directors. The company voluntarily committed to continuing to have at least two women as board members.

On January 2022, Afya announced that it is one of 418 companies across 45 countries and regions to join the 2022 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. This reference index measures gender equality across five pillars: female leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and pro-women brand. Afya was included on this year’s index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption of best-in-class statistics and policies.

The 2021 Sustainability Report can be found at: https://ir.afya.com.br/ >> Corporate Governance >> Sustainability.

Table 12: ESG Metrics¹³⁴ 2Q22 2Q21 2021 2020 2019
# GRI Governance and Employee Management          
1 405-1 Number of employees 8,731 6,806                8,079                6,100                3,369
2 405-1 Percentage of female employees 56% 55% 55% 55% 57%
3 405-1 Percentage of female employees in the board of directors 27% 18% 18% 18% 22%
4 102-24 Percentage of independent member in the board of directors 36% 36% 36% 36% 22%
    Environmental          
4 302-1 Total energy consumption (kWh)              3,598,250 2,420,443      12,176,966        8,035,845        5,928,450
4.1 302-1 Consumption per campus 94,691 80,681           385,573           321,434           395,230
5 302-1 % supplied by distribution companies 69.4% 90.38% 91.3% 83.4% 96.2%
6 302-1 % supplied by other sources² 30.6% 9.62% 8.7% 16.6% 3.8%
    Social          
8 413-1 Number of free clinical consultations offered by Afya        143,236  93,802  341,286  427,184  270,000
9   Number of physicians graduated in Afya's campuses          16,998           11,893           16,772           12,691             8,306
10 201-4 Number of students with financing and scholarship programs (FIES and PROUNI)             8,783           5,995             7,881             4,999             2,808
11   % students with scholarships over total undergraduate students 14.1% 13.7% 12.9% 13.7% 11.7%
12 413-1 Hospital, clinics and city halls partnerships                449        443                   447                   432                     60
               
(1) Some factors can influence in the adequate proportionality analysis of data over the years, such as: climate changes, COVID-19 pandemic effects, seasonalities, number of employees, number of students, number of active units, among others.
(2) "Other sources" refers to: (a) Derived from renewable sources, such as solar panels installed in the units; and (b) Derived from the search for alternative energy options in the market.
(3) Starting this quarter, previously disclosed environmental data were updated to consider: (a) GHG Protocol guidelines improvements, and (b) additional data-collection criteria refinements.
(4) Starting this quarter, previously disclosed social data were updated to consider: (a) the number of graduated physicians considering all units after its closing, and (b) partnerships related only to medical schools.


5.               Conference Call and Webcast Information

When: August 22, 2022 at 5:00 p.m. ET.

Who:  

Mr. Virgilio Gibbon, Chief Executive Officer

Mr. Luis André Blanco, Chief Financial Officer

Dial-in:   Brazil: +55 21 3958 7888 or +55 11 4632 2236 or +55 11 4632 2237 or +55 11 4680 6788 or +55 11 4700 9668

 

United States: +1 312 626 6799 or +1 646 931 3860 or +1 929 205 6099 or +1 301 715 8592 or +1 346 248 7799 or +1 669 444 9171 or +1 669 900 6833 or +1 253 215 8782

 

Webinar ID: 975 9251 2411

 

Other Numbers: https://afya.zoom.us/u/aeeKmxmFd

 

OR

 

Webcast: https://afya.zoom.us/j/97592512411

 

 

 

11 
 

 

 

6.               About Afya Limited (Nasdaq: AFYA)

Afya is the leading medical education group in Brazil based on number of medical school seats. It delivers an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners, from the moment they enroll as medical students, through their medical residency preparation, graduate program, and continuing medical education activities. Afya also offers content and clinical decision applications for healthcare professionals through its products WhiteBook, Nursebook and Portal PEBMED. For more information, please visit www.afya.com.br.

 

7.               Forward – Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, and include risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of students and professors; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and the Brazilian economy.

 

The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company’s financial results are included in the filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled “Risk Factors” in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

 

8.               Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board—IASB, Afya uses Adjusted EBITDA and Operating Cash Conversion Ratio information, which are non-GAAP financial measures, for the convenience of investors. A non-GAAP financial measure is generally defined as one that intends to measure financial performance but excludes or includes amounts that would not be equally adjusted in the most comparable GAAP measure.

 

Afya calculates Adjusted EBITDA as net income plus/minus net financial result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, plus share-based compensation plus/minus share of income of associate plus/minus non-recurring expenses. The calculation of Adjusted Net Income is net income plus amortization of customer relationships and trademark, plus share-based compensation. We calculate Operating Cash Conversion Ratio as the cash flow from operations, adjusted with income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.

 

 

12 
 

 

Management presents Adjusted EBITDA, because it believes these measures provide investors with a supplemental measure of financial performance of the core operations that facilitates period-to-period comparisons on a consistent basis. Afya also presents Operating Cash Conversion Ratio because it believes this measure provides investors with a measure of how efficiently the Company converts EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, calculations of Adjusted EBITDA and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya’s measures may not be comparable to those of other companies.

 

9.               Investor Relations Contact

E-mail: ir@afya.com.br

 

 

 

 

13 
 

 

 

10.            Financial Tables

Unaudited interim condensed consolidated statements of income and comprehensive income
For the three and six-month periods ended June 30, 2022 and 2021
(In thousands of Brazilian reais, except earnings per share)

  Three-month period ended Six-month period ended
  June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Net revenue 598,156  372,374 1,164,480 766,725
Cost of services (219,242)  (144,459) (405,972) (270,951)
Gross profit 378,914 227,915 758,508 495,774
         
General and administrative expenses (207,415) (135,184) (385,929) (265,588)
Other (expenses) income, net (1,257) 113 (1,566) 1,298
         
Operating income 170,242 92,844 371,013 231,484
         
  Finance income 22,874 12,428 47,443 22,250
  Finance expenses (83,676) (80,855) (164,967) (110,534)
Finance result (60,802) (68,427) (117,524) (88,284)
         
Share of income of associate 2,201 2,383 6,441 5,622
         
Income before income taxes 111,641 26,800 259,930 148,822
         
Income taxes expenses (5,568) (4,855) (18,915) (13,529)
         
Net income 106,073 21,945 241,015 135,293
         
Other comprehensive income - - - -
Total comprehensive income 106,073 21,945 241,015 135,293
         
Income attributable to        
  Equity holders of the parent 101,505 17,237 231,115 125,327
  Non-controlling interests 4,568 4,708 9,900 9,966
  106,073 21,945 241,015 135,293
Basic earnings per share        
Per common share 1.12 0.18 2.55 1.34

Diluted earnings per share

Per common share

 1.12 0.18 2.55 1.33

 

14 
 

 

 

Unaudited interim condensed consolidated statements of financial position
As of June 30, 2022, and December 31, 2021
(In thousands of Brazilian reais)

  June 30, 2022   December 31, 2021
Assets (unaudited)    
Current assets      
Cash and cash equivalents 616,250   748,562
Trade receivables 435,120   378,351
Inventories 15,141   11,827
Recoverable taxes 39,223   25,579
Other assets 44,348   42,533
Total current assets 1,150,082   1,206,852
       
Non-current assets      
Trade receivables 31,874   27,442
Other assets 206,421   180,306
Investment in associate 52,080   48,477
Property and equipment 459,564   419,808
Right-of-use assets 678,031   663,686
Intangible assets 4,052,188   3,900,835
Total non-current assets 5,480,158   5,240,554
       
Total assets 6,630,240   6,447,406
       
Liabilities      
Current liabilities      
Trade payables 64,460   59,098
Loans and financing 230,494   128,720
Lease liabilities 28,619   24,955
Accounts payable to selling shareholders 203,979   239,849
Notes payable 16,565   14,478
Advances from customers 92,995   114,585
Labor and social obligations 175,997   131,294
Taxes payable 22,624   26,715
Income taxes payable 21,451   11,649
Other liabilities 8,714   15,163
Total current liabilities 865,898   766,506
       
Non-current liabilities      
Loans and financing 1,150,046   1,246,156
Lease liabilities  713,206   689,130
Accounts payable to selling shareholders 445,464   439,977
Notes payable 52,891   58,248
Taxes payable 94,573   96,598
Provision for legal proceedings 208,667   148,287
Other liabilities 10,410   2,486
Total non-current liabilities 2,675,257   2,680,882
Total liabilities 3,541,155   3,447,388
       
Equity      
Share capital 17   17
Additional paid-in capital 2,375,344   2,375,344
Share-based compensation reserve 105,682   94,101
Treasury stock (304,947)   (152,630)
Retained earnings 862,432   631,317
Equity attributable to equity holders of the parent 3,038,528   2,948,149
Non-controlling interests 50,557   51,869
Total equity 3,089,085   3,000,018
       
Total liabilities and equity 6,630,240   6,447,406

 

 

15 
 

 

Unaudited interim condensed consolidated statements of cash flows
For the six-month periods ended June 30, 2022 and 2021
(In thousands of Brazilian reais)

  June 30, 2022 June 30, 2021
Operating activities (unaudited) (unaudited) 
  Income before income taxes 259,930 148,822
    Adjustments to reconcile income before income taxes    
      Depreciation and amortization 99,089 66,915
      Write-off of property and equipment 2,483 748
      Write-off of intangible 2,549 -
      Allowance for doubtful accounts 30,420 20,509
      Share-based compensation expense 11,581 25,102
      Net foreign exchange differences 320 24,622
      Accrued interest 95,165 34,075
      Accrued lease interest 41,392 29,213
      Share of income of associate (6,441) (5,622)
      Provision for legal proceedings 12,047 4,241
Changes in assets and liabilities    
  Trade receivables (88,472) (34,668)
  Inventories (3,314) (1,026)
  Recoverable taxes (13,644) (4,065)
  Other assets (7,886) (5,256)
  Trade payables 2,952 4,128
  Taxes payables 5,247 1,697
  Advances from customers (31,668) 103
  Labor and social obligations 44,565 32,379
  Other liabilities (6,298) 1,265
    450,017 343,182
  Income taxes paid (22,101) (22,667)
       
  Net cash flows from operating activities 427,916 320,515
       
Investing activities    
  Acquisition of property and equipment (62,266) (58,132)
  Acquisition of intangibles assets (50,267) (22,825)
  Dividends received 2,838 5,771
  Payments of notes payable (7,342) (5,288)
  Acquisition of subsidiaries, net of cash acquired (170,473) (547,529)
  Restricted cash - 4,951
  Net cash flows used in investing activities (287,510) (623,052)
     
Financing activities    
  Payments of loans and financing (53,795) (12,952)
  Issuance of loans and financing - 809,539
  Payments of lease liabilities (55,074) (37,888)
  Treasury shares (152,317) (64,752)
  Proceeds from exercise of stock options - 23,505
  Dividends paid to non-controlling interests (11,212) (10,617)
  Net cash flows from (used in) financing activities (272,398) 706,835
  Net foreign exchange differences (320) (24,622)
  Net increase in cash and cash equivalents (132,312) 379,676
  Cash and cash equivalents at the beginning of the period 748,562 1,045,042
  Cash and cash equivalents at the end of the period 616,250 1,424,718

 

16 
 

 

 

Reconciliation between Net Income and Adjusted EBITDA

 

Reconciliation between Adjusted EBITDA and Net Income
               
(in thousands of R$) For the three months period ended June 30,   For the six months period ended June 30,
  2022 2021 % Chg   2022 2021 % Chg
Net income  106,073 21,945 383.4%   241,015 135,293 78.1%
Net financial result  60,802 68,427 -11.1%   117,524 88,284 33.1%
Income taxes expense  5,568 4,855 14.7%   18,915 13,529 39.8%
Depreciation and amortization  50,702 35,264 43.8%   99,089 66,915 48.1%
Interest received (1) 4,892 3,053 60.2%   12,579 8,090 55.5%
Income share associate (2,201) (2,383) -7.6%   (6,441) (5,622) 14.6%
Share-based compensation  8,652 11,093 -22.0%   11,581 25,102 -53.9%
Non-recurring expenses: (14,302) 18,404 n.a.   (3,275) 36,718 n.a.
 - Integration of new companies (2) 5,781 4,514 28.1%   9,952 7,536 32.1%
 - M&A advisory and due diligence (3) 594 1,745 -66.0%   1,806 3,556 -49.2%
 - Expansion projects (4) 677 2,163 -68.7%   1,279 3,390 -62.3%
 - Restructuring expenses (5) 723 868 -16.7%   4,373 4,918 -11.1%
 - Mandatory Discounts in Tuition Fees  (6) (22,077) 9,114 n.a.   (20,685) 17,318 n.a.
Adjusted EBITDA 220,186 160,658 37.1%   490,987 368,309 33.3%
Adjusted EBITDA Margin 38.2% 42.1% -390 bps   42.9% 47.0% -410 bps

 

(1) Represents the interest received on late payments of monthly tuition fees.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction, and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.

 

 

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